Element Productions, Inc. v. EditBar, LLC, et al. (Lawyers Weekly No. 12-122-17)
COMMONWEALTH OF MASSACHUSETTS SUFFOLK, ss. SUPERIOR COURT CIVIL ACTION No. 2016-1476 BLS1 ELEMENT PRODUCTIONS, INC. vs. EDITBAR, LLC, STIR FILMS, LLC and MARK HANKEY ORDER ON DEFENDANTS’ MOTION TO STAY ACTION AND COMPEL ARBITRATION (Paper No. 37) Approximately thirteen months after defendants answered the complaint and asserted counterclaims and a third-party claim, defendants now seek to move this case to arbitration. The issue presented is whether defendants, by their active litigation conduct, waived arbitration. For the reasons described below, I find that arbitration is waived and, thus, this motion is denied. BACKGROUND Defendant Mark Hankey was an employee of Element until April 12, 2016. He executed a written employment agreement in 2012 stating that “[a]ny dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof shall be determined by arbitration in Boston, Massachusetts before one arbitrator. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures . . . .” Plaintiff, Element Productions, Inc., commenced this action on May 9, 2016. Element alleges that in 2015, Hankey began secretly aiding Element’s direct competitor, defendant Stir Films LLC, a start-up video production company set up by defendant, EditBar, LLC. Hankey 1 allegedly disclosed Element’s confidential information to Stir Films and worked to assist Stir Films to lure employees from Element to Stir Films. Element alleges that Hankey’s conduct was in violation of his employment agreement. Element also alleges that EditBar and Stir Films aided and abetted Hankey’s breach of fiduciary duty, tortiously interfered with Element’s contract with Hankey, and conspired with Hankey to injure Element, among other claims. Had Hankey timely moved to compel arbitration of Element’s claims such motion would have been allowed. Element does not appear to disagree that its claims against Hankey come within the arbitration provision. Moreover, EditBar and Stir Films contend that they, also, are entitled to arbitration pursuant to the recent decision of the Appeals Court in Silverwood Partners, LLC v. Wellness Partners, LLC, 91 Mass. App. Ct. 856 (2017). In Silverwood, the Court held that a nonsignatory to an arbitration agreement (like EditBar and Stir Films) may compel arbitration when a signatory (Element) raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories (Hankey) to the contract. Element’s argument against enforcement of the agreement to arbitrate is based entirely on the principle of waiver of arbitration by litigation conduct. This principle was recognized by the Supreme Judicial Court in Home Gas Corp. of Massachusetts v. Walter’s of Hadley, Inc. 403 Mass. 772 (1989). Where, under the totality of the circumstances, the party moving to arbitrate has acted inconsistently with […]