November 04, 2014 Practice Points

Preliminary Injunctive Relief Issued Despite Exclusive Arbitration Agreement

By Brian Farkas

In EMC Corp. v. LeBlanc, 14-CV-12524-IT, 2014 WL 3943032 (D. Mass. Aug. 11, 2014), the district court held that it had the power to issue preliminary injunctive relief despite an agreement between the parties stating that arbitration was the parties’ sole remedy and referencing rules that gave the arbitrator power to decide issues of arbitral jurisdiction.

EMC is a technology company that designs, manufactures and sells information storage systems for large-scale high-technology environments. LeBlanc worked for EMC twice—once from 1999 through 2005 and then again from 2012 until May 2014. Upon resigning from EMC the second time, LeBlanc went to work for Pure Storage, one of EMC’s top competitors.

EMC’s request for a preliminary injunction alleged that LeBlanc was soliciting some of the EMC’s customers and was using EMC’s confidential information in the process. EMC asked the district court to enjoin LeBlanc from “directly or indirectly soliciting or attempting to solicit the business of” two major EMC customers.

EMC requires employees such as LeBlanc to enter into an employment agreement at the start of their employment. That agreement provides that:

[B]inding arbitration shall be the sole and exclusive remedy for resolving any individual Legal Dispute… arising out of or relating to your employment by the Company… provided, however, that you or the Company may file and pursue litigation in a court proceeding for temporary, preliminary and permanent injunctive relief, or for declaratory judgment…. Any such arbitration shall be conducted pursuant to the Company’s arbitration policy….

EMC’s separate arbitration policy provides that “[t]he rules governing the procedures for discovery and the conduct of the arbitration hearing shall be those found in the then current JAMS Employment Arbitration Rules and Procedures...” The JAMS Employment Arbitration Rules and Procedures, in turn, provide that “[j]urisdictional and arbitrability disputes ... shall be submitted to and ruled on by the Arbitrator.... [T]he Arbitrator has the authority to determine jurisdiction and arbitrability issues as a preliminary matter.”

LeBlanc moved to dismiss on the grounds that the JAMS Rules reserve all questions of arbitrability to the arbitrator. Thus, he argued, an arbitrator must decide whether EMC’s claims for preliminary relief must be arbitrated.

Judge Indira Talwani disagreed, stating that the question whether parties agreed to arbitrate a dispute is generally a question for the court. Here, the court noted that EMC’s arbitration policy provides only that the JAMS Rules govern “the procedures for discovery and the conduct of the arbitration hearing.” The threshold question of arbitrability does not fall within either of these categories. For that reason, the court—not an arbitrator—must determine whether the parties agreed to arbitrate this dispute.

The court also noted that the employment agreement allows EMC or its employee to “file and pursue litigation in a court proceeding for temporary, preliminary and permanent injunctive relief” (the Carve-Out). The arbitration policy provides that “[a]ny damage claims related to the subject matter of such litigation will, however, be submitted to arbitration.” LeBlanc argued that the only way to harmonize the Arbitration Policy with the Carve-Out “is to allow the parties to seek equitable relief in court only to the extent that it aids the arbitration process rather than circumvents it.”

The district court again disagreed, stating: “It is perfectly consistent with the language of the Arbitration Policy, given the Carve-Out, for this court to consider whether EMC is entitled to preliminary injunctive relief needed to preserve the status quo until the parties arbitrate this matter.” The court further stated that whether it did or did not issue a preliminary injunction “would not hinder an arbitrator’s ability to resolve the underlying dispute.” The court then issued a separate opinion denying EMC’s request for preliminary injunctive relief. EMC Corp. v. Jeremy LeBlanc, 14-CV-12524-IT, 2014 WL 3943091 (D. Mass. Aug. 11, 2014). But the key point is that it retained the right to decide that request on its merits.

Keywords: alternative dispute resolution, litigation, preliminary injunction, exclusive remedy, jurisdiction

Brian Farkas is with Goetz Fitzpatrick LLP in New York, New York.

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