United States District Court, S.D. New York
LG ELECTRONICS, INC. and LG ELECTRONICS U.S.A., INC., Plaintiffs,
WI-LAN USA, INC. and WI-LAN INC., Defendants.
OPINION AND ORDER
RONNIE ABRAMS, District Judge.
Plaintiffs LG Electronics, Inc. and LG Electronics U.S.A., Inc. (collectively, "LG") seek a stay, pending appeal, of the execution of this Court's judgment compelling arbitration of LG's patent dispute with Defendants Wi-LAN USA, Inc. and Wi-LAN, Inc. (collectively, "Wi-LAN"). For the reasons that follow, LG's motion is denied.
A full account of the underlying dispute and procedural history is detailed in the Court's Opinion and Order of July 21, 2014 ("Opinion"), Op. (Dkt. 50) at 1-4, and the Court assumes the parties' familiarity with the record.
In determining whether to issue a stay pending appeal, courts consider four factors: "(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies." Nken v. Holder, 556 U.S. 418, 434 (2009) (quotation omitted). See also In re World Trade Ctr. Disaster Site Litig., 503 F.3d 167, 170 (2d Cir. 2007). "The party requesting a stay bears the burden of showing that the circumstances justify an exercise of [this] discretion." Nken, 556 U.S. at 433-34.
"The first two factors of [this] standard are the most critical, " id, and bear an inversely proportional relationship to one another, Thapa v. Gonzales, 460 F.3d 323, 334 (2d Cir. 2006). Where the likelihood of success on the merits is significant, less irreparable harm must be shown, and vice versa. Id. In no case, however, is it "enough that the chance of success be better than negligible, " or that there be a mere "possibility of irreparable injury." Nken, 556 U.S. at 434. (quotations omitted). Indeed, at least one court has suggested that a motion for a stay pending appeal must raise "serious questions" where, as here, a district court is asked to review its own order. In re A2P SMS Antitrust Litig., No. 12-CV-2656 (AJN), 2014 WL 4247744, at *2 (S.D.N.Y. Aug. 27, 2014).
I. Likelihood of Success on the Merits
LG raises two arguments in its motion for a stay pending appeal. First, it argues that the Court misapplied Second Circuit precedent, improperly considered cases in which defendants-not plaintiffs-sought arbitration after first pursuing litigation, and, as a result, erroneously concluded that Wi-LAN had not waived its right to arbitration under the parties' patent license agreement ("PLA"). Pls.' Mem. 4-6. Second, it argues that the Court erroneously found the so-called "claim splitting" doctrine inapplicable and impermissibly compelled arbitration even though purportedly identical claims are pending before the District of New Jersey (the "New Jersey Court"). Id. at 7-8. The Court is not persuaded by either argument.
As discussed in the Opinion, courts in this Circuit look to a three-part test to determine whether a party has waived its right to arbitration. Op. 7. This test considers: "(l) the time elapsed from the commencement of litigation to the request for arbitration, (2) the amount of litigation (including any substantive motions and discovery), and (3) proof of prejudice." PPG Indus., Inc. v. Webster Auto Parts, Inc., 128 F.3d 103, 107 (2d Cir. 1997). In its motion, LG principally argues that the Court improperly analyzed the first and third prongs of this test. Pls.' Mem. 4-6.
As to the first prong, "the time elapsed from the commencement of litigation to the request for arbitration, " LG argues that the Court should have considered the four month period of time between the filing of Wi-LAN's complaint and its arbitration demand, and not the shorter, two-week period between LG's motion for summary judgment in the Southern District of Florida (the "Florida Court") and Wi-LAN's demand for arbitration in New York. Pls.' Mem. 4-5. But the Court did consider this four month period. It expressly held, relying on clear Second Circuit precedent, that a four month delay in seeking arbitration is, by itself, insufficient to establish waiver. See Op. 9 (citing Rush v. Oppenheimer & Co., 779 F.2d 885, 887 (2d Cir. 1985) and PPG Indus., 128 F.3d at 108).
The two week period between LG's motion for summary judgment and Wi-LAN's arbitral demand is, moreover, relevant to the question of prejudice, the third prong of the Second Circuit's waiver test, which the Court addresses in more detail below. See Satcom Int'l Grp. PLC v. Orbcomm Int'l Partners, L.P., 49 F.Supp.2d 331, 340 (S.D.N.Y.) aff'd, 205 F.3d 1324 (2d Cir. 1999) ("Sufficient prejudice exists where a party against whom waiver is asserted... delays invoking arbitration rights while the adversary incurs unnecessary delay or expense."). In light of Wi-LAN's assumption that its patent infringement claims fell outside the scope of the PLA, see Op. 10, the relevant delay for the purpose of assessing prejudice is the two-week period between LG's filing of its dispositive motions (which first placed the interpretation of the PLA in dispute) and Wi-LAN's invocation of its arbitral rights, not the four months that "clapsed from the commencement of litigation to the request for arbitration." PPG Indus., 128 F.3d at 107. It was thus appropriate for the Court to consider this shorter period in its Opinion, and to conclude that this two-week delay did not prejudice LG. See Op. 10.
LG displays a fundamental misunderstanding of the Court's discussion of prejudice and waiver in its Opinion. There are two points worth bearing in this respect. First, although courts within this Circuit employ a three-part test to determine waiver, the most important part of this test is its third prong: prejudice. See Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir. 2002) ("The key to a waiver analysis is prejudice."). Second, this test is not an exercise in arid formalism. Instead, it is addressed to the broader question of whether a party has acted inconsistently with its contractual right to arbitrate. See Satcom, 49 F.Supp.2d at 341 ("The touchstone of waiver is the taking of action inconsistent ...