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Setty v. Shrinivas Sugandhalaya LLP

United States District Court, W.D. Washington, Seattle

June 21, 2018

BALKRISHNA SETTY, individually and as general partner of Shrinivas Sugandhalaya Partnership with Nagraj Setty, and SHRIVINAS SUGANDHALAYA BNG LLP Plaintiffs,
v.
SHRINIVAS SUGANDHALAYA LLP and R. EXPO USA, INC., Defendants.

          ORDER

          The Honorable Richard A. Jones United States District Judge

         This matter comes before the Court on Defendant Shrinivas Sugandhalaya's (“SS Mumbai”) motion to dismiss or stay in favor of arbitration. Dkt. # 59. Plaintiffs oppose the motion. Dkt. # 65. Defendant R. Expo (USA), Inc. (“R. Expo”) does not oppose arbitration but requests severance if the Court decides to grant SS LLP's motion. Dkt. # 64. For the reasons that follow, the Court DENIES Defendant's motion.

         I. BACKGROUND

         Mr. K.N. Satyam Setty formed an incense manufacturing and distribution partnership in India. Dkt. # 1 (Complaint) at ¶ 16. Mr. Setty's sons, Balkrishna and Nagraj Setty, continued the partnership after their father passed. Id. The sons signed a Partnership Deed agreeing to manufacture the incense and split the profits equally. Dkt. # 60-1. The Partnership Deed included an arbitration clause, stating:

All disputes of any type whatsoever in respect of the partnership arising between the partners either during the continuance of this partnership or after the determination thereof shall be decided by arbitration as per the provision of the Indian Arbitration Act, 1940 or any statutory modification thereof for the time being in force.

Id.

         In 2014, the sons started their own companies, irrespective of the Partnership, and “control of the manufacturing of incense products was effectively transferred from the Partnership to its partners, ” Balkrishna and Nagraj Setty. Dkt. # 1 (Complaint) at ¶ 51. Mr. Balkrishna Setty's company is Shrinivas Sugandhalaya (BNG) LLP (“SS Bangalore”), located in Bangalore. Id. at ¶¶ 52, 53. Mr. Nagraj Setty's company is Shrinivas Sugandhalaya LLP (“SS Mumbai”), located in Mumbai. Id. at ¶¶ 54, 55. Mr. Balkrishna Setty claims that he and his brother are now competitors rather than partners. Id. at ¶ 58.

         Plaintiffs claim that SS Mumbai misrepresented where it manufactured its incense-by putting Bangalore on the packaging rather than Mumbai-in an effort to confuse customers about the quality of the product. Id. at ¶¶ 85, 86. Plaintiffs also accuse SS Mumbai of interfering in Plaintiffs' business by sending cease and desist letters that claim SS Bangalore is infringing on Defendants' trade dress rights. Id. at ¶ 108. Plaintiffs further claim that SS Mumbai fraudulently obtained trademark registrations for the mark and design of its incense. Id. at ¶ 122.

         SS Mumbai is now before the Court seeking dismissal or stay in proceedings because it claims that Plaintiffs must bring their claims in arbitration-pursuant to the Partnership Deed-and not in this forum. Dkt. # 59.

         II. LEGAL STANDARD

         Because the Federal Arbitration Act (“FAA”) requires courts to “direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed, the FAA limits court involvement to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (internal quotations omitted). The party opposing arbitration bears the burden of showing that the agreement is not enforceable. See Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 91-92 (2000); Rodriguez de Quijas v. Shearson/American Exp., Inc., 490 U.S. 477, 483 (1989).

         Regarding the first prong, “arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1126 (9th Cir. 2013) (citing United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)). Generally, the contractual right to compel arbitration “may not be invoked by one who is not a party to the agreement and does not otherwise possess the right to compel arbitration.” Id.

         Regarding the second prong, “[t]he scope of an arbitration agreement is governed by federal substantive law.” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999). If a contract contains an arbitration clause, there is a presumption that the dispute is arbitrable. AT & T Techs., Inc. v. Comm'ns Workers of America, 475 U.S. 643, 650 (1986). In that case, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Simula, 175 F.3d at 719.

         III. ...


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