Zetor North America, Inc., sued Ridgeway Enterprises and its associates for trademark infringement. Years before, Zetor settled a dispute with Ridgeway over similar infringement. The settlement agreement included an arbitration clause, which Ridgeway seeks to enforce. The district court
Zetor was granted a license to use the Zetor mark and promotional materials in the United States. Ridgeway Enterprises
Zetor and Ridgeway had a similar dispute in 2008. Becoming aware of similar tactics, Zetor sent a cease and desist letter. The dispute was resolved by a settlement agreement with an arbitration provision. That provision stated that the parties would "attempt in good faith to resolve any controversy arising out of or relating to this Agreement." If that failed, the controversy would go to mediation "in accordance with American Arbitration Association [sic] or may proceed directly to arbitration."
Under the Agreement, "Ridgeway acknowledge[d] the validity of the mark ZETOR" and "that only Zetor and its authorized resellers and licensees may use the Zetor Mark in advertising, promotional, and sales materials." In paragraph 2, Ridgeway agreed to "permanently cease and desist the use of the ZETOR Mark, except" to describe the compatibility of its products with a Zetor product, subject to several restrictions. Ridgeway also transferred to Zetor a domain name it used, zetorusa.com. Both Zetor and Ridgeway released all claims "that occurred prior to the effective date of this Agreement."
In 2014, Zetor became aware of allegedly trademark-infringing conduct by Ridgeway. Zetor sent another cease and desist letter. Ridgeway did not respond. Zetor sued Ridgeway for trademark infringement and dilution, injury to business reputation, unfair competition, copyright infringement, deceptive trade practices, and civil conspiracy, adding claims as under Arkansas anti-dilution laws, the Arkansas Deceptive Trade Practice Act, and common law. In its answer, Ridgeway included "arbitration and award" in a list of affirmative defenses. However, Ridgeway did not move to compel arbitration until after the case progressed: The parties had completed preliminary discovery and participated in a case-management hearing and settlement conference; Zetor had added defendants
The district court, finding the arbitration provision inapplicable to Zetor's new claims, denied Ridgeway's motion to compel arbitration. It did not address Zetor's argument that the settlement agreement was void due to fraudulent inducement in its formation. Ridgeway appeals.
The contract-interpretation-based denial of a motion to compel arbitration is reviewed de novo.
"[T]he liberal federal policy favoring arbitration agreements requires that a district court," faced with a broad arbitration clause "send a claim to arbitration as long as the underlying factual allegations simply touch matters covered by the arbitration provision."
Here, Ridgeway agreed to "permanently cease and desist" its allegedly infringing use of the Zetor mark. Thus, according to Ridgeway, Zetor's current claims "aris[e] out of or relat[e] to" the Agreement and are bound by the arbitration provision. Ridgeway concludes that "the underlying factual allegations [ ] `touch matters covered by' the arbitration provision."
Ridgeway relies on the 3M case, where this court upheld the enforcement of an arbitration clause because "[e]very claim in Amtex's original complaint fell squarely within the scope of the arbitration clause," and additional claims "include[d] factual allegations regarding" contract terms.
Unlike the 3M case, Zetor's claims have no relation to the terms of the Agreement. Despite the language obliging Ridgeway to "permanently cease and desist" its allegedly infringing use of the Zetor mark, the Agreement resolved an existing dispute; it did not create a relationship between the parties to be governed by the terms of the Agreement. Zetor released its claims arising out of Ridgeway's sales practices, and Ridgeway agreed to cease its conduct. Zetor and Ridgeway each released all claims "that occurred prior to the effective date of [the] Agreement." The Agreement's releases encompass Ridgeway's alleged infringement up to the effective date only. The district court noted any claims covered by the Agreement — arising before the effective date of October 15, 2008 — are time-barred. Zetor does not attempt to revive any of these claims or assert any claim that depends on the existence of the Agreement.
Zetor does not allege Ridgeway violated the terms of the Agreement. While the alleged wrongful conduct is similar to the conduct that led to the Agreement, Zetor's claims rest on independent trademark and copyright grounds, which have no relation to the terms of the Agreement and in no way depend on its existence. This independent alleged violation of Zetor's trademark rights does not "aris[e] out of or relat[e] to" the terms of the Agreement. Because the Agreement covers only conduct that occurred before its 2008 effective date — not the current conduct — Zetor's claims do not "touch matters covered by the arbitration provision."
Ridgeway maintains that the provisions in paragraph 2 of the Agreement create a relationship governing future conduct between the parties. That paragraph, however, requires only that Ridgeway stop its objectionable sales practices, subject to certain exceptions. It does not create a structure of forward-looking rights and obligations enforceable through arbitration.
The plain language of the contract does not apply to wholly independent claims arising several years later. Ridgeway's interpretation of its requirement to cease infringing the Zetor mark would bind the parties — in perpetuity — to arbitrate any dispute about trademark, copyright, and consumer-deception law. As the district court found, this "reading of the Agreement and arbitration clause is patently unreasonable and contrary to the clear and unambiguous language of the contract itself."
The judgment is affirmed.