SIDNEY A. FITZWATER, District Judge.
In this action asserting claims related to an alleged misappropriation of copyrighted material from www.HA.com ("HA.com"), defendants Christie's, Inc. and Collectrium, Inc. ("Collectrium") (collectively, "Christie's," unless otherwise indicated) move to dismiss and compel arbitration. Plaintiffs Heritage Capital Corporation, Heritage Auctioneers & Galleries, Inc., Heritage Numismatic Auctioneers, Inc., Heritage Auctions, Inc., Heritage Vintage Sports Auctions, Inc., Currency Auctions of America, Inc., and Heritage Collectibles, Inc. (collectively, "Heritage") oppose the motion and move for a preliminary injunction. Concluding that all of Heritage's claims are arbitrable under the HA.com Website Use Agreement, the court grants Christie's' motion to dismiss and compel arbitration, denies Heritage's motion for a preliminary injunction as moot, as dismisses this action with prejudice by judgment filed today.
Heritage operates HA.com, which hosts sales and auctions of collectibles. Images of the items and detailed descriptions accompany each sale or auction listing, each of which is copyrighted. Heritage maintains previously sold listings on the website, and, as of the filing of its complaint, HA.com hosted more than 8 million original images related to its listings. Those who visit and use HA.com for any reason assent to the Website Use Agreement, which prescribes rules and regulations for use and contains an arbitration clause that governs potential disputes.
Heritage alleges that Christie's downloaded some or all of HA.com's listings using an advanced computer code. Heritage traced this activity to Christie's, and it discovered that some of the listings downloaded from HA.com appeared on the Collectrium website.
Christie's does not deny that Collectrium posted Heritage listing images and descriptions on its website. Instead, Christie's contends that its use does not violate Heritage's copyright for various reasons, including fair use.
Heritage filed the instant lawsuit alleging seven federal and state claims: copyright infringement, under 17 U.S.C. §§ 106 and 501; violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq.; violations of the Digital Millennium Copyright Act, 17 U.S.C. § 1201, et seq.; harmful access by computer, under Tex. Civ. Prac. & Rem. Code Ann. §§ 143.001 and 143.002; trespass; unfair competition; civil conspiracy; and breach of contract.
Christie's moves to dismiss and compel arbitration based on the arbitration clause in the HA.com Website Use Agreement. Heritage opposes the motion and moves for a preliminary injunction enjoining Christie's, inter alia, from posting the allegedly infringing materials.
The court first considers the motion of Christie's to dismiss and compel arbitration of all of Heritage's claims.
Section 2 of the Federal Arbitration Act ("FAA") provides that written agreements to arbitrate controversies arising out of an existing contract "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (citing 9 U.S.C. §§ 3-4) (emphasis in original). When considering a motion to compel arbitration, the court engages in a two-step process. First, the court determines "whether the parties agreed to arbitrate the dispute." Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996) (per curiam) (citation omitted). "This determination involves two considerations: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement." Id. (citations omitted). Second, the court decides "`whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims.'" Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)). "If there is a valid agreement to arbitrate, and there are no legal constraints that foreclose arbitration, the court must order the parties to arbitrate their dispute." Celaya v. Am. Pinnacle Mgmt. Servs., LLC, 2013 WL 4603165, at *2 (N.D. Tex. Aug. 29, 2013) (Fitzwater, C.J.). Because of the strong presumption in favor of arbitration, the party opposing a motion to compel arbitration bears the burden of proving that the agreement is invalid or that the claims are outside the scope of the agreement. Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004).
The court first considers whether there is a valid agreement between the parties to arbitrate.
The Website Use Agreement contains the following provision:
Ds. App. 6 (bold font omitted).
Heritage first contends that the parties have not agreed to arbitrate because, according to Heritage, Christie's maintains that it was not a user of the site that is subject to the Website Use Agreement.
The court need not decide whether Heritage is correct in this respect because, even if the court assumes that Christie's is not a user and therefore not a party to the Website Use Agreement, Christie's can still compel arbitration as if it were a party. In certain situations, a non-signatory to an arbitration agreement can compel a signatory-plaintiff to submit to arbitration under a theory of equitable estoppel. See, e.g., Grigson v. Creative Artists Agency, LLC, 210 F.3d 524, 526-27 (5th Cir. 2000). Relevant here, "equitable estoppel applies when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the nonsignatory." Id. at 527 (emphasis omitted) (quoting MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999), abrogated on other grounds by Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009)). In other words, "a signatory to [an arbitration agreement] cannot . . . `have it both ways': it cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed by the agreement, which contains an arbitration provision, but, on the other hand, deny arbitration's applicability because the defendant is a non-signatory." Id. at 528 (emphasis omitted).
The court concludes that each plaintiff relies on the Website Use Agreement in this action. Six of the plaintiffs' claims are explicitly derived, at least in part, from the Website Use Agreement: Count I (copyright infringement),
Compl. ¶ 104. This incorporates the complaint's previous description of the alleged theft, which is asserted in support of Count II:
Id. at ¶ 72. Accordingly, because each plaintiff asserts at least one claim that relies on the Website Use Agreement, Christie's can compel arbitration as if there were a valid agreement between the parties.
Having concluded that Christie's may invoke the Website Use Agreement's arbitration clause, the court must determine whether the agreement covers Heritage's claims. Heritage contends that (1) the arbitration clause does not apply to claims it brings against users,
The court applies federal law to decide whether the dispute in question falls within the scope of an arbitration agreement. See, e.g., Graves v. BP Am., Inc., 568 F.3d 221, 222-23 (5th Cir. 2009) (per curiam). Under federal law, the court "resolve[s] doubts concerning the scope of coverage of an arbitration clause in a contract in favor of arbitration." Neal v. Hardee's Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990). Arbitration should not be denied "unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue." Id. (citations and internal quotation marks omitted). "This strong presumption in favor of arbitration applies with even greater force when the parties include a broad arbitration clause." Sharifi v. AAMCO Transmissions, Inc., 2007 WL 1944371, at *2 (N.D. Tex. June 28, 2007) (Fitzwater, J.) (internal quotation marks omitted). And the court's inquiry "is not guided by the legal labels attached to the plaintiffs' claims; rather, it is guided by the factual allegations underlying those claims." Harvey v. Joyce, 199 F.3d 790, 795 (5th Cir. 2000).
Because the arbitration provision at issue here applies to "any claim, dispute, or controversy," Ds. App. 6, it is a broad arbitration clause. See In re Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 755 (5th Cir. 1993) ("We have held that arbitration clauses containing the `any dispute' language, such as the one presently before us, are of the broad type."). The agreement's use of "in connection with" language, Ds. App. 6, also indicates that the clause is broad. Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd., 239 F.3d 1061, 1067 (5th Cir. 1998) (holding that clause requiring arbitration of "[a]ny dispute, controversy or claim arising out of or in relation to or in connection with [an agreement]" was undoubtedly "broad" in scope). "The Fifth Circuit has held that when parties include a broad arbitration clause in their agreement, they `intend the clause to reach all aspects of the relationship.'" Sharifi, 2007 WL 1944371, at *3 (quoting Pennzoil, 239 F.3d at 1067). Broad arbitration clauses "`are not limited to claims that literally arise under the contract, but rather embrace all disputes having a significant relationship to the contract regardless of the label attached to the dispute.'" Id. (quoting Pennzoil, 139 F.3d at 1067).
Heritage first maintains that the Website Use Agreement, which "governs Your use of this Website," Ds. App. 5, implicitly excludes the claims it brings. According to Heritage, "the purpose of the Website Use Agreement is regulation of the conduct of website users, not Heritage." Ps. Br. 5. Heritage therefore maintains that it cannot be considered "any claimant other than a consumer," who would trigger the arbitration clause. Ds. App. 6. And it posits that a holding that the arbitration clause encompasses Heritage's claims would subject any claim that it brings against a consumer to the arbitration provision, while claims brought by consumers would be resolved in state court, a result that Heritage contends makes no sense. Heritage therefore concludes that the arbitration clause "covers claims that a website user might have `with Heritage,'" but excludes possible claims by Heritage against users. Ps. Br. 10.
The court concludes that the arbitration clause encompasses claims brought by Heritage. The clause states that "any claim, dispute, or controversy in connection with Heritage and its affiliates shall . . . for any claimant other than a consumer . . . be presented in confidential binding arbitration[.]" Ds. App. 6. Because claims brought by Heritage are in connection with Heritage and its affiliates, and Heritage is a claimant other than a consumer of HA.com, the arbitration clause explicitly encompasses these claims.
Moreover, the agreement instructs the court to construe the clause "in the broadest possible terms[.]" Id. As noted above, the court construes broad arbitration clauses to reach all aspects of the relationship and all claims connected to it, necessarily including claims where Heritage is a plaintiff. See Sharifi, 2007 WL 1944371, at *3. Likewise, the court will not, as Heritage suggests, infer an exception to a broad arbitration clause. Any exception must be explicitly detailed in the agreement. See Commc'n Workers of Am., AFL-CIO v. Tyco Power Sys., Inc., 2003 WL 22271904, at *3 (N.D. Tex. Sept. 2, 2003) (Fitzwater, J.) (noting that provision that specifically provided that certain claims shall not be subject to arbitration created exception to otherwise broad arbitration clause). The text contains no such exception here, and the court therefore concludes that the arbitration clause unambiguously covers claims brought by Heritage against users.
Heritage also contends that two of its claims—Count I for copyright infringement and Count VI for unfair competition—are not arbitrable because their subject matters are outside the scope of the agreement.
Heritage maintains that the court should stay the case, rather than dismiss it, as Christie's requests.
When the court determines that all claims in a lawsuit are arbitrable, the court must stay the suit pending arbitration. See 9 U.S.C. § 3. "This rule, however, was not intended to limit dismissal of a case in the proper circumstances. The weight of authority clearly supports dismissal of the case when all of the issues raised in the district court must be submitted to arbitration." Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) (emphasis in original). When, as here, "[t]he only possible role the Court could have would be to review the arbitration award once the proceedings are concluded[,]" the court should dismiss rather than stay. SGC Health Grp., Inc. v. Eclinicalworks, LLC, 2016 WL 2595109, at *2 (N.D. Tex. May 4, 2016) (Lynn, C.J.). Because the court has concluded that all of Heritage's claims are arbitrable, the court grants the motion to dismiss.
For the reasons explained, the court grants the motion to dismiss and compel arbitration of Christie's and denies as moot Heritage's motion for a preliminary injunction, Heritage's motion for leave to supplement its reply with a declaration, and the motion of Christie's to stay discovery. The court dismisses this action with prejudice by judgment filed today.