Lothan Van Hook DeStefano Arch. LLC v. SB Yen Mgm’t. Group, Inc., No. 18 C 275, Slip Op. (N.D. Ill. Dec. 10, 2018) (Lee, J.).
Judge Lee denied defendants’ Fed. R. Civ. P. 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction, but granted defendants’ motion to compel mediation and arbitration, and stayed this architectural copyright case pending such proceedings.
Noting the complexity of determining whether a claim was based in contract or copyright, the Court noted that the Seventh Circuit had squarely addressed the present situation in Nova Design Build, Inc. v. Grace Hotels, LLC, 652 F.3d 814, 816 (7th Cir. 2011), holding that the issue comes down to whether there is truly a dispute over validity and infringement (a copyright claim) or ownership (a contract claim). Where there is a copyright claim, the federal courts have jurisdiction, even if ownership is also challenged by a party. Because plaintiffs sought an injunction to prevent further copyright infringement, the Court had subject-matter jurisdiction.
Mediation & Arbitration
The agreement at issue required that the parties engage in mediation before taking any contractual dispute to arbitration, unless the parties mutually agreed otherwise. Because the mediation and arbitration clause included all claims “arising out of or relating to” the agreement, it included contractual ownership disputes and copyright infringement claims arising from the plans that were made and exchanged pursuant to the agreement. And when claims subject to arbitration are intertwined with claims against non-parties, courts favor staying the district court action pending arbitration. That was especially true here where all of the parties and claims were interrelated, even if they were not all subject to mediation and arbitration. The Court therefore, compelled mediation and arbitration, and stayed the district court case pending those proceedings.