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Information Systems Audit And Control Association, Inc. v. Telecommunication Systems, Inc.

United States District Court, N.D. Illinois, Eastern Division

June 23, 2017

INFORMATION SYSTEMS AUDIT AND CONTROL ASSOCIATION, INC., a California Corporation, Plaintiff,
v.
TELECOMMUNICATION SYSTEMS, INC., a Maryland Corporation, and COMTECH TELECOMMUNICATION CORP., a Delaware Corporation, Defendants.

          MEMORANDUM OPINION AND ORDER

          Joan B. Gottschall United States District Judge

         Plaintiff Information Systems Audit and Control Association, Inc. ("ISACA") has sued defendants Telecommunication Systems, Inc. and Comtech Telecommunications Corp. (together, "TCS"), [1] alleging that TCS breached a contract between the parties. TCS has moved to dismiss the complaint and to compel arbitration of the dispute. See ECF No. 37. For the reasons discussed below, the motion is granted insofar as it seeks to compel arbitration but denied insofar as it seeks dismissal.

         Background

         According to its complaint, ISACA is a nonprofit association that develops global standards and practices for use in industries such as information technology, risk management, and cyber security. In 2013, ISACA began to develop an online program for training and certifying cybersecurity professionals. In 2014, ISACA entered into a Cybersecurity Content Development and Licensing Agreement (“the Agreement”) with TCS according to which TCS was to create for ISACA, on a work-for-hire basis, a cybersecurity certification and training platform that offered online courses, examinations, and practice exercises. ISACA alleges that TCS breached the Agreement by, among other things, failing to produce work of adequate quality; failing to complete its work on time; using ISACA's intellectual property in developing products with third parties; and distributing products to third parties containing ISACA's intellectual property.

         ISACA initially filed a two-count complaint against TCS. Count I sought a declaratory judgment stating, inter alia, that ISACA owns the materials in question. Count II sought a preliminary and permanent injunction requiring, inter alia, TCS to turn the materials over to ISACA and to refrain from delivering the materials to third parties. ISACA subsequently amended its complaint to include several additional causes of action against one of these third parties-Cybrary, Inc. (“Cybrary”), a cybersecurity training company to whom TCS allegedly distributed materials incorporating ISACA's intellectual property and trademarks, which Cybrary uses in certain of its online course offerings.

         TCS argues that the Agreement requires that the parties' dispute be resolved through arbitration. Specifically, TCS relies on section 25.19 of the Agreement, which states:

Without prejudice to either Party's right to seek equitable relief (including, but not limited to, injunction) from a Court of competent jurisdiction, any dispute arising out of or related to this Agreement or the breach thereof that cannot be resolved by negotiation, shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) …. Claims for interim, injunctive, or other emergency relief may be arbitrated pursuant to this Section.

Agreement § 25.19, Compl. Ex. 1, ECF No. 1. TCS therefore argues that ISACA's claims should be dismissed and referred to arbitration.

         Discussion

         The Federal Arbitration Act (FAA) provides that “[a] written provision in any … contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction … 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. Under the FAA, “arbitration may be compelled if the following three elements are shown: a written agreement to arbitrate, a dispute within the scope of the arbitration agreement, and a refusal to arbitrate.” Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005). There is no dispute that the first and third elements are present here. The parties join issue solely over whether ISACA's claims fall within the scope of the arbitration clause.[2]

         A. Arbitrability of the Issue of Arbitrability

         A threshold question, not addressed by either of the parties, is whether the arbitrability of their dispute is to be determined by the court or by an arbitrator. Both parties apparently assume that the issue is one for the court to decide. It is true as a general matter that “[c]ourts, not arbitrators, are charged with deciding ‘gateway matters, such as whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy.'” Wis. Local Gov't Prop. Ins. Fund v. Lexington Ins. Co., 840 F.3d 411, 414-15 (7th Cir. 2016) (quoting Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003)). This is not so, however, where the parties have “clearly and unmistakably” indicated their intention that disputes concerning arbitrability be decided by an arbitrator. See, e.g., AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986) (“Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.”); Int'l Med. Grp., Inc. v. Am. Arbitration Ass'n, Inc., 312 F.3d 833, 842 (7th Cir. 2002) (same).

         Here, the arbitration provision states that “any dispute arising out of or related to this Agreement or the breach thereof that cannot be resolved by negotiation, shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association.” Agreement ¶ 25.19. The American Arbitration Association's (“AAA's”) Commercial Arbitration Rules expressly state that the issue of arbitrability is to be decided by an arbitrator. See Am. Arbitration Ass'n Commercial Arbitration Rules & Mediation Procedures, Rule R-7(a) (“The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.”). Although the Seventh Circuit has yet to address the issue, the vast majority of courts have held that an agreement to arbitrate in accordance with the AAA's Rules clearly indicates the parties' intention to let an arbitrator determine whether their dispute is arbitrable. See, e.g., Cequent Performance Prods., Inc. v. Let's Go Aero, Inc., No. 14 C 8457, 2016 WL 4036754, at *6 (N.D. Ill. July 28, 2016) (“Given this AAA requirement that the arbitrator decide ‘the arbitrability of any claim, ' district courts in this circuit (and courts of appeals in other circuits, including the 1st, 2d, 5th, 8th, 9th, 11th, and Federal Circuits) have consistently held that a clause requiring arbitration according to AAA Rules requires the arbitrator to resolve arbitrability disputes.”) (citing cases).

         Nevertheless, since neither of the parties has contended that the issue of arbitrability should be decided by the arbitrator, the court shall address the issue. Cf. Wagner v. Discover Bank, No. 12-CV-02786-MSK-BNB, 2014 WL 128372, at *5 n.5 (D. Colo. Jan. 13, 2014) (“The Court recognizes that the question of arbitrability of Mr. Wagner's TCPA claims arguably falls within the arbitration agreement because it implicates the scope of the agreement. Under the plain language of the agreement, either party could have elected to arbitrate the question of arbitrability. But because neither party has represented that they have elected to arbitrate this issue, the Court proceeds to address it here.”); Smith v. EquiFirst Corp., 117 F.Supp.2d 557, 559 n.4 (S.D.Miss. 2000) (addressing the ...


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