United States District Court, D. Colorado
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For Let's Go Aero, Inc., a Colorado corporation, Plaintiff: Dennis W. Hartley, LEAD ATTORNEY, Dennis W. Hartley, P.C., Colorado Springs, CO; Martin Dean Beier, Thomas M. Haskins, III, Silver & DeBoskey, P.C., Denver, CO.
For Cequent Performance Products, Inc., a Delaware corporation, formerly known as Cequent Towing Products, Inc., Defendant: Matthew John Cavanagh, LEAD ATTORNEY, David Bogdan Cupar, McDonald Hopkins PLC-Cleveland, Cleveland, OH.
RAYMOND P. MOORE, United States District Judge.
This matter is before the Court on Defendant Cequent Performance Products, Inc.'s (" Cequent" ) motion to set aside the default entry (ECF No. 42) and its motion to compel arbitration (ECF No. 29).
For the reasons stated below, the Court GRANTS Defendant's motion to set aside the default entry and GRANTS, in part, Defendant's motion to compel arbitration.
I. RELEVANT BACKGROUND
A. Factual Background
In 2008, Defendant and Plaintiff Let's Go Aero, Inc. (" Let's Go Aero" or " LGA" ) entered into a license agreement (" License Agreement" ) that permitted Defendant to sell certain cargo-management products over which Let's Go Aero claimed to have enforceable intellectual property rights, including patent rights or pending patents. (ECF No. 29-1, License Agreement.) Those products included the: " Pixie," " Silent Hitch Pin," " Gear Cage," " Gear Deck," " Gear Space," " Twin Tube," " Juice Box," and " Gear Bed" (collectively, the " Products" ). (ECF No. 29-1 at 7, License Agreement at Ex. A.) The Products are vehicle cargo-management products.
In 2010, Defendant filed suit against Plaintiff alleging breaches of the License Agreement (the lawsuit is hereinafter referred to as " LGA I" ). (ECF No. 29-2, Compl. in LGA I.) In response, Plaintiff counterclaimed in LGA I and alleged that Defendant's sales of the Products violated Plaintiff's intellectual property rights. (ECF No. 29-3, Am. Countercl. in LGA I.)
In 2012, the parties resolved the LGA I litigation. In resolving the prior dispute, the parties entered into a settlement agreement (" Settlement Agreement" ). (ECF No. 29-4, Settlement Agreement.) The parties' Settlement Agreement contains an arbitration provision. (ECF No. 29-4 at 10, Settlement Agreement ¶ 23.) The arbitration provision provides the following:
In the event of any dispute, claim, question, or disagreement arising from or relating to this [Settlement A]greement or the breach thereof, the [p]arties shall use their best efforts to settle the dispute, claim, question, or disagreement. To this effect, they shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties. If they do not reach such solution within a period of 60 days, then, upon notice by either party to the other, all disputes, claims, questions, or differences shall be finally settled by arbitration administered by the American Arbitration Association
in accordance with the provisions of its Commercial Arbitration Rules. Venue for the arbitration proceedings shall be in Chicago, Illinois, and the arbitration shall be conducted by a single neutral arbitrator.
(ECF No. 29-4 at 10, Settlement Agreement ¶ 23.)
The Settlement Agreement further provides, in pertinent part, that:
(1) " The [p]arties agree that the previously executed License [Agreement] . . . [is] terminated as of the Effective Date, such that neither [p]arty is indebted, obligated, or liable to the other with respect to any claim, demand, or cause of action arising from facts or circumstances prior to the Effective Date." (ECF No. 29-4 at 3, Settlement Agreement ¶ 1.)
(2) " Cequent and [Let's Go Aero] each agree that neither [p]arty owes the other [p]arty any money based on the License [Agreement] . . . as of the Effective Date. Cequent agrees to make a single, up-front payment of $17,500 to [Let's Go Aero] to phase out silent-hitch pins that Cequent has in inventory or on order for commitments with its suppliers or customers as of the Effective Date." (ECF No. 29-4 at 3, Settlement Agreement ¶ 2.)
(3) " Cequent . . . releases [Let's Go Aero] . . . from any claims, demands, actions or causes of action of every kind and description, which [it] has, had, may have, or may have had against [Let's Go Aero]; including, but not limited to, the claims which Cequent asserted or could have asserted in the [LGA I] as well as any right of action which Cequent may have, whether known or unknown, arising from any act or omission by any [Let's Go Aero] or arising from any fact or circumstance occurring prior to the Effective Date." (ECF No. 29-4 at 4, Settlement Agreement ¶ 4.)
(4) " [Let's Go Aero] . . . releases Cequent . . . from any claims [sic] demands, actions or causes of action of every kind and description, which [Let's Go Aero] has, had, may have or may have had against [Cequent]; including, but not limited to, the counterclaims that [Let's Go Aero] asserted or could have asserted in [LGA I] as well as any right of action which [Let's Go Aero] may have, whether known or unknown, arising from any act or omission by [Cequent] or arising from any fact or circumstance occurring prior to the Effective Date." (ECF No. 29-4 at 4-5, Settlement Agreement ¶ 5.)
(5) " The releases in paragraphs 1, 4, and 5 do not (and are not intended to) release or waive any claim, demand, action, or cause of action arising from the unlawful use of the other's intellectual property occurring after the Effective Date." (ECF No. 29-4 at 5, Settlement Agreement ¶ 6.)
(6) The " Effective Date" of this [Settlement] Agreement is January 28, 2012." (ECF No. 29-4 at 2, 9, Settlement Agreement at 1, 8.)
B. Procedural Background
In this matter, the operative complaint (" Complaint" ), filed on July 31, 2014, alleges that Defendant's sales of certain Products and other conduct violate Plaintiff's rights. ( See ECF No. 15.)
On September 17, 2014, Defendant moved to " compel arbitration and to administratively close this case, or in the alternative, to stay proceedings under 9 U.S.C. § 3 pending the outcome of arbitration" (" Motion to Compel Arbitration" ). (ECF No. 29 at 1.) In the Motion to Compel Arbitration, Defendant later asks that the Court grant its motion to compel arbitration and stay the proceedings in this matter. (ECF No. 29 at 11.) Defendant moves to compel arbitration on the basis that Plaintiff's claims, in their entirety, are covered by the arbitration provision in the parties' Settlement Agreement.
(ECF No. 29 at 1-2.) Plaintiff opposes the Court's compelling arbitration. (ECF No. 38.) Plaintiff opposes the Motion to Compel Arbitration on the basis that its Complaint " is explicit that the misconduct alleged in this case occurred after the parties settled the prior lawsuit on January 28 [sic] 2012." (ECF No. 38 at 1 (emphasis in original).) Further, Plaintiff opposes the Motion to Compel Arbitration on the basis that the Court lacks authority to compel arbitration because the parties agreed to arbitrate in a particular forum, Chicago, Illinois, and only a district court in that forum has authority to compel arbitration. (ECF No. 38 at 13.)
Also on September 17, 2014, Defendant moved to " stay discovery and continue the Court's September 16, 2014, Minute Order (ECF #28), the scheduling obligations by that order, and the October 16, 2014, Scheduling Conference until after the Court decides Cequent's pending motion to compel arbitration (ECF #29)." (ECF No. 30 at 1.) On September 25, 2014, Magistrate Judge Hegarty granted Defendant's motion to stay discovery and pretrial scheduling as follows: " The proceedings of this case are stayed temporarily pending resolution of the Defendant's pending motion to compel arbitration." (ECF No. 33 at 1.)
On October 23, 2014, Plaintiff moved for the entry of default against Defendant for failure to answer or serve another response within the time permitted by the Federal Rules of Civil Procedure or the Court's orders. (ECF No. 40 at 2-3.) On October 24, 2014, the Clerk of the Court entered default against Defendant. (ECF No. 41.) Later on October 24, 2014, Defendant moved to set aside the Clerk of the Court's entry of default. (ECF No. 42.) Plaintiff opposes Defendant's motion to set aside the entry of default. (ECF No. 44.)
On December 12, 2014, Plaintiff notified the Court that a related proceeding involving the same parties and legal issues is presently before the United States District Court for the Northern District of Illinois (" Illinois Action" ) in which Defendant petitioned that court to compel arbitration. (ECF No. 45 at 1; ECF No. 45-1 at 1.) The Illinois Action, to the Court's knowledge, is presently stayed. (ECF No. 45 at 1.)
II. LEGAL STANDARDS
A. Setting Aside an Entry of Default
The Court " may set aside an entry of default for good cause. . . ." Fed.R.Civ.P. 55(c). The principal factors in determining whether a defendant has met the good cause standard are (1) whether the default was the result of culpable conduct of the defendant; (2) whether the plaintiff would be prejudiced if the default should be set aside; and (3) whether the defendant presents a meritorious defense. Pinson v. Equifax Credit Info. Servs., Inc., 316 F.App'x 744, 750 (10th Cir. 2009) (unpublished) (citation omitted); Hunt v. Ford Motor Co., 65 F.3d 178 (10th Cir. 1995) (unpublished) (citation omitted). The Court may consider other factors as well. Guttman v. Silverberg, 167 F.App'x 1, 4 (10th Cir. 2005) (unpublished) (citation omitted). Setting aside a default entry is addressed to the sound discretion of the Court. Nikwei v. Ross Sch. of Aviation, Inc., 822 F.2d 939, 941 (10th Cir. 1987).
The good cause required for setting aside an entry of default " poses a lesser standard for the defaulting party than the excusable neglect which must be shown for relief from judgment under Fed.R.Civ.P. 60(b)." Dennis Garberg & Assocs., Inc. v. Pack-Tech Int'l Corp., 115 F.3d 767, 775 n.6
(10th Cir. 1997) (citation omitted). The preferred disposition of any case is upon its merits and not through default. See Gomes v. Williams, 42 ...