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AFS Logistics, LLC v. Cochran

United States District Court, M.D. Tennessee, Nashville Division

November 1, 2017

AFS LOGISTICS, LLC
v.
CHRISTOPHER R. COCHRAN, ALESSANDRO RUSTIONI, and FREIGHTWISE, LLC

          ORDER

          BARBARA D. HOLMES United States Magistrate Judge

         Pending before the Court is Plaintiff's Motion to Compel Arbitration (Docket No. 59). This court has jurisdiction pursuant to 28 U.S.C. § 1332. For the following reasons, Plaintiff's motion is DENIED. Further, the stay of discovery is hereby lifted, and discovery should resume promptly. Within seven (7) days of the date of entry of this order, the parties shall contact Ms. Jeanne Cox, Courtroom Deputy, at either JeanneWCox@tnmd.uscourts.gov or 615-736-5164 to obtain a date and time for a telephonic status conference to reset the dispositive motions deadline and the trial.

         Background

         At the center of this dispute is the claim of Plaintiff AFS Logistics, LLC (“AFS”) that Defendants Christopher Cochran and Alessandro Rustioni, who are former employees of AFS, misappropriated trade secrets of AFS in violation of the Tennessee Uniform Trade Secrets Act (“TUTSA”), which they then used to advance their own company, Defendant FreightWise, L.L.C. Plaintiff filed suit against Defendants on December 2, 2016, seeking injunctive relief and damages based on a number of claims in addition to misappropriation of trade secrets, including copyright infringement, breach of duty of loyalty, conversion, intentional interference with business relations, tortious interference with contract, and conspiracy.[1]

         On August 9, 2017, Plaintiff filed this motion, asking the Court to order Plaintiff's misappropriation of trade secrets claims to arbitration, to be joined with the breach of employment contract claims against Defendants Cochran and Rustioni that were apparently first submitted for arbitration by Plaintiff also in August of 2017. See Docket No. 59 at 3. Plaintiff does not rely on the existence of any agreement with Defendants that directly compels arbitration of the claims in this case. Rather, Plaintiff asserts that the misappropriation of trade secrets claims are within the scope of the arbitration clauses found in the employment agreements with Defendants Cochran and Rustioni, which provide as follows:

18. Arbitration. AFS and [Cochran/Rustioni] agree that any controversy, dispute or claim arising out of, directly or indirectly, or relating to this Contract, or breach thereof, or [Cochran's/Rustioni's] employment or relationship with AFS, will be submitted to binding arbitration in accordance with the rules of the American Arbitration Association. The written determination of the arbitrator will be final, binding and conclusive on the parties. However, the parties may also seek injunctive relief in court for any breach of this Contract. By signing, [Cochran/Rustioni] specifically agrees to the Arbitration provision in Section 18.

(Docket No. 59 at 11 and 16-17). AFS also refers to an arbitration provision in the Business Protection, Confidentiality, Non-Solicitation and Non-Competition Agreement (“Business Protection Agreement”) between AFS and TracBack Solutions Incorporated (of which Defendants Cochran and Rustioni were previously the shareholders), which provides:

9. Governing Law & Arbitration. This Agreement will be construed in accordance with and governed for all purposes by the laws of the State of Tennessee. AFS and TracBack agree that any controversy, dispute or claim arising out of, directly or indirectly, or relating to this Agreement, or breach thereof, will be submitted to binding arbitration in accordance with the Rules of the American Arbitration Association. The written determination of the arbitrator will be final, binding and conclusive on the parties. However, AFS may also seek injunctive relief in court for any breach of this Agreement.

(Docket No. 59 at 21).[2]

         Plaintiff contends that these arbitration clauses broadly require the arbitration of its misappropriation of trade secret claims dispute because those claims arise out of or are related to Plaintiff's employment of or relationship with Defendants Cochran and Rustioni. Plaintiff also maintains that submitting the misappropriation of trade secrets claims to arbitration would be an efficient resolution of the parties' disputes because Plaintiff has already submitted to arbitration its claims against Defendants Cochran and Rustioni for alleged breaches of the employment agreements and the Business Protection Agreement.

         In opposition to Plaintiff's motion, Defendants assert that there is no applicable arbitration agreement for the claims at issue in this case, and no arbitration agreement between Plaintiff and Defendant FreightWise at all. Defendants further argue that, even if the arbitration clauses found in the employment agreements broadly cover the misappropriation of trade secret claims, Plaintiff waived the right to enforce arbitration of those claims by not timely seeking arbitration and, instead, litigating with Defendants.[3]

         In their response to Plaintiff's motion to compel arbitration, Defendants also assert that Plaintiff's breach of contract claims are nothing more than a reconstituted version of the misappropriation of trade secret claims and are therefore preempted under the TUTSA. For that reason, Defendants assert that Plaintiff's breach of contract claims are not arbitrable, and request that the Court preclude Plaintiff from proceeding with arbitration of those claims. Plaintiff had full opportunity to, and did, address this issue in its reply brief. See Docket No. 63.

         The parties have proceeded with litigation of this case since shortly after the filing of the original complaint. Defendants moved to dismiss Plaintiff's original complaint for failure to state a claim. (Docket No. 10). Plaintiff requested, and was granted, an extension of time to respond to the motion to dismiss (Docket Nos. 11 and 14), which it did on February 2, 2017 (Docket Nos. 23 and 24). In the interim, an initial case management conference was held on January 31, 2017, and a case management/scheduling order was entered on February 21, 2017 (Docket No. 28).

         Separately, also on February 2, 2017, Plaintiff moved to amend its complaint (Docket No. 21), which it was granted leave to do (Docket No. 26). Notably, in the motion to amend, Plaintiff neither sought to add breach of contract claims nor suggested that the trade secret claims are inextricably intertwined with the arbitrable breach of contract claims. An amended complaint was filed on February 21, 2017 (Docket No. 27). In response, Defendants filed a motion to dismiss the amended complaint (Docket No. 29). After the parties' extensive briefing on the merits of the motion to dismiss, the Court dismissed seven of Plaintiff's eight claims. See Docket Nos. 56 and 57. Plaintiff also failed to raise the issue of arbitration in its opposition to Defendants' motion to dismiss.

         Several key deadlines have already passed or substantially progressed toward completion in this case. In addition to the April 5, 2017 deadline for motions to amend, a deadline of June 5, 2017 was set for disclosure of experts and expert reports. See Initial Case Management Order at Docket No. 28. Plaintiff filed a motion to extend this deadline, but the motion was untimely under the Court's procedures, provided no explanation of Plaintiff's diligence in attempting to meet the deadline, and therefore failed to establish good cause for extension of the deadline. The requested extension was accordingly denied. See Order at Docket No. 52.

         Although discovery depositions were stayed by the Court's order following the filing of the instant motion (see Docket No. 61), extensive written discovery has been ongoing throughout this case. See Docket Nos. 55 at 2 and 62-2.[4] Discovery disputes have also arisen between the parties, which required resolution by the Court. See Docket Nos. 44, 49, and 52. Multiple settlement discussions have occurred between the parties, including the possibility of mediation of this case. See Docket Nos. 54 and 55. In addition to the initial case management conference, the Court also held case management conferences on July 27 and August 18, 2017 (Docket No. 58). Other judicial time was spent reviewing the parties' reports, for instance regarding case resolution efforts (Docket Nos. 43 and 55), and reviewing and entering orders on uncontested matters, such as ...


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