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TracFone Wireless, Inc. v. Simply Wireless, Inc.

United States District Court, S.D. Florida, Miami Division

November 22, 2017

TRACFONE WIRELESS, INC., Plaintiff,
v.
SIMPLY WIRELESS, INC., a Virginia corporation, d/b/a SHOPCELLDEALS, and SIMPLY WIRELESS OF MIAMI, INC., a Florida corporation, Defendants.

          ORDER DENYING MOTION TO ENJOIN ARBITRATION AND GRANTING IN PART MOTION TO STAY AND PLACING CASE IN CIVIL SUSPENSE

          Federico A. Moreno, Judge

         Plaintiff is requesting that this Court enjoin an arbitration proceeding where Defendants Simply Wireless of Miami, Inc., and Simply Wireless, Inc. of Virginia, along with additional parties, filed a myriad of claims. TracFone maintains that arbitration is inconsistent with this Court's prior orders and could interfere with this Court's jurisdiction. This Court previously compelled three of TracFone's claims to arbitration, which TracFone chose not to pursue in arbitration. Although TracFone did not file an arbitration demand on those claims, the Defendants availed themselves of the arbitral forum by filing their own claims there. TracFone claims they are not entitled to do so, their claims are not arbitrable, and the resolution of those claims could interfere with this Court's jurisdiction over TracFone's remaining claims here.

         Under the arbitration agreement between TracFone and Simply Wireless of Miami, Inc., the arbitrator has the authority to examine the arbitration demand and decide on the scope of the proceeding before him. This Court will not step into the arbitrator's role to examine whether the claims are properly raised in that proceeding, and certainly, this Court will not enjoin the arbitrator from fulfilling his duties. Because the arbitrator has set a final hearing in late February 2018, this Court deems it appropriate to enter a brief stay to allow the parties to arbitrate. Following the conclusion of the arbitration, the Court will adjudicate TracFone's claims in this case.

         THIS CAUSE came before the Court upon Plaintiffs Motion to Enjoin the Arbitration (D.E. 134), filed on June 9, 2017 and Defendant's Motion to Stay (D.E. 168) filed on September 5, 2017.

         THE COURT has considered the motions, responses, oral argument, the pertinent portions of the record, and being otherwise fully advised in the premises, it is ADJUDGED that the motion to enjoin the arbitration is DENIED and the motion to stay the litigation is GRANTED in part. The Court temporarily stays the case pending resolution of the arbitration in February 2018.

         I. Background

         On January 26, 2017, this Court compelled arbitration of three claims in TracFone's Second Amended Complaint. Counts 5-7 of TracFone's Second Amended Complaint alleged fraud in the inducement of the Transition Agreement (Count 5), breach of the Transition Agreement (Count 6), and unjust enrichment (Count 7). Counts 5-7 named all Defendants, Simply Wireless, Inc., Mobile Now, Inc, ("Simply Wireless Virginia entities"), and Simply Wireless, Inc. of Miami. These were the only counts in the complaint as to Simply Wireless, Inc. of Miami, who had an arbitration agreement with TracFone. The other Defendants, the Simply Wireless Virginia entities, did not have an arbitration agreement. The Court adopted Magistrate Judge O'Sullivan's recommendation applying the doctrine of equitable estoppel[1] and compelling arbitration on these three counts between TracFone, Simply Wireless of Miami, Inc. and the non-signatories to the arbitration agreement, the Simply Wireless Virginia entities. Neither side objected to this recommendation and the Court compelled arbitration of the Second Amended Complaint's Counts 5-7.

         TracFone did not pursue counts 5-7 in arbitration. Instead, Simply Wireless of Miami, Inc., Simply Wireless, Inc. (Virginia), along with additional parties, Wireless Partners North, Inc., and Wireless Partners South, Inc., filed an Arbitration Demand on March 14, 2017. The demand references the 2011 Agreement between Simply Wireless of Miami, Inc., and TracFone, which contained the arbitration provision. The arbitration demand contained the following claims: (1) Breach of Contract (Failure to Pay Reimbursements), Sales, Residual Commissions, and Credits); (2) Open Account (Failure to Pay Reimbursements, Sales, and Credits); (3) Breach of Contract (Related to the August 6, 2015 Payment for Wireless Telephones with Purchased Airtime); (4) Breach of Contract (Related to July 10, 2015 Voided Airtime; (5) Breach of Contract (The QVC Show); (6) Breach of Contract (Airtime Blackout); (7) Breach of Contract (Arbitration Provision); (8) Fraud and/or Fraud in the Inducement (Related to Purchase of Airtime); (9) Fraud (Related to Voided Airtime); (10) Fraud (Related to Product Cancellation); (11) Conversion (Voided Airtime); (12) Tortious Interference (TV Networks); (13) Unjust Enrichment (alternative to express contract claims); and (14) Contract Implied in Fact. As noted, TracFone did not file the arbitration demand and therefore, the scope of the demand was not limited to TracFone's claims that the Court had compelled to arbitration. This arbitration demand gave rise to TracFone's Motion to Enjoin Arbitration under the All Writs Act, 28 U.S.C. §1651.

         TracFone's motion argues the Court should enjoin the arbitration because it infringes on the Court's jurisdiction. The Defendants assert the arbitrator should decide the scope of the arbitration, not the Court. In so arguing, the Defendants assert this Court's order merely compelled arbitration of those three counts, but did not limit their ability to file their own claims in arbitration. Defendants are seeking the Court stay this litigation because the arbitrator has provided a February 2018 final hearing date.

         II. Analysis

         The pending motions involve two federal statutes, the All Writs Act, 28 U.S.C. § 1651(a), and the Federal Arbitration Act, 9 U.S.C. § 1. TracFone seeks to enjoin the arbitration under the All Writs Act and Defendants seek to stay the litigation under the Federal Arbitration Act. The options before the Court are to enjoin the arbitration, stay the litigation, or allow both the arbitration and litigation to proceed. Given the strong federal policy in favor of arbitration, this Court declines to enjoin the arbitration, and will briefly stay the case pending the parties' completion of the arbitration proceeding in February 2018.

         A. Motion to Enjoin Arbitration

          The All Writs Act, 28 U.S.C. § 1651(a), allows federal courts to "issue all writs necessary or appropriate in aid of their respective jurisdictions. . .." It allows courts to "safeguard not only ongoing proceedings, but potential future proceedings, as well as already-issued orders and judgments." Liberty Mut. Ins. Co. v. Aventura Eng'g & Const. Corp., 534 F.Supp.2d 1290, 1324 (S.D. Fla. 2008) (quoting Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1109-10 (11th Cir. 2004)). An injunction under the All Writs Act differs from a traditional injunction because it "must simply point to some ongoing proceeding, or some past order or judgment, the integrity of which is being threatened by someone else's action or behavior." Klay, 376 F.3d at 1100. Notably, "[proceedings in other courts that involve the same facts as already issued judgments and orders, or that could result in the issuance of an inconsistent judgment, threaten the jurisdiction of the district court enough to warrant an injunction." Id. at 1104. The All Writs Act is "a residual source of authority to issue writs that are not otherwise covered by the statute. Where a statute specifically addresses the particular issue at hand, it is that authority, and not the All Writs Act, that is controlling." Id. at 1100.

         Defendants urge this Court to enjoin the arbitration because the Simply Wireless Virginia entities are not parties to the arbitration agreement, and this Court only compelled arbitration of three counts between TracFone and the Defendants. In so ruling, however, this Court did not limit the scope of the arbitration to TracFone's three claims, and certainly, the Court's order did not limit the Defendants from filing their own claims in arbitration. The petitioners in arbitration bring different causes of action, for different harms, and involve additional parties that are not in this case. ...


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