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Vivint, Inc. v. Northstar Alarm Services, LLC

United States District Court, D. Utah

July 3, 2018

VIVINT, INC., a Utah corporation, Plaintiff,
v.
NORTHSTAR ALARM SERVICES, LLC, a Utah limited liability company, Defendant.

          MEMORANDUM DECISION AND ORDER DENYING MOTION TO BIFURCATE TRIAL

          JILL N. PARRISH UNITED STATES DISTRICT COURT JUDGE.

         I. INTRODUCTION

         Plaintiff Vivint, Inc. asks the court to bifurcate the trial into two phases. In the first phase, the parties would litigate Vivint's first cause of action. Vivint, in connection with that cause of action, seeks a declaration that Defendant NorthStar Alarm Services, LLC is bound by a settlement agreement that Vivint entered into with Vision Security, LLC-a non-party that sold many of its assets to NorthStar. If NorthStar is bound by the settlement agreement, Vivint contends that a number of instances where NorthStar used “improper sales tactics” will be subject to binding arbitration. Thus, according to Vivint, the court and the parties will save time and resources if there is a determination as to whether NorthStar is bound by the settlement agreement at the outset. But Vivint has waived its right to arbitration, so whatever issues were subject to arbitration will nevertheless be tried in court. And thus it is not convenient, expeditious, or economical to resolve Vivint's first cause of action at the outset. Vivint's motion to bifurcate is therefore denied.

         II. BACKGROUND

         In late 2014, Vivint and Vision, two alarm companies, were embroiled in litigation. But instead of going to trial, they entered into a settlement agreement. Under the settlement agreement, Vision agreed to pay Vivint $1.6 million and, importantly, both parties agreed that they would be prohibited from using “Improper Sales Tactics.” An example of an improper sales tactic: a Vision employee tells a Vivint customer that Vivint has gone out of business and is unable to monitor the customer's alarm system.

         The settlement agreement provides a mechanism for resolving disputes when one party claims that the other used improper sales tactics. If one party alleges that the other “engaged in Prohibited Conduct [i.e., used an improper sales tactic] for a customer . . . the Parties shall submit the matter to the binding Arbitration Proceeding which is set forth in the attached Exhibit 3 which is expressly incorporated herein by reference.”

         Exhibit 3 is a four-page document that outlines the arbitration procedures to which the parties agreed. A party commences arbitration by filing a “Notice of Violation.” The notice would include information such as a description of the improper sales tactic, the identity of the employee that used the improper sales tactic, and the date on which the employee used the improper sales tactic. In response, the other party could either admit or deny the alleged violation. If the violation is contested, the parties would then provide information to an arbitrator who, after conducting an investigation, would issue a written ruling. This entire process takes a matter of weeks, as opposed to the months, if not years, that it would take to resolve a civil action.

         Vivint and Vision also agreed that the settlement agreement would be binding on their successors, assignees, and affiliates. Specifically, the settlement agreement provides, “This Agreement and the terms hereof shall be binding on the successors, assignees, and affiliates of each Party. Neither Party may avoid the effect, obligations, or rights of this Agreement by assigning, renaming, reconstituting, or re-characterizing their business in any fashion.”

         In early 2015, shortly after Vivint and Vision executed the settlement agreement, Vision entered into an asset purchase agreement with NorthStar, another alarm company. Vision transferred the majority of its customer accounts, about 8, 000, to NorthStar; Vision retained about 1, 500 accounts. NorthStar acquired all of Vision's furniture, fixtures, and equipment. And NorthStar acquired Vision's office leases in Orem, Utah, and Tempe, Arizona.

         In late 2015, Vivint sued NorthStar in state court. NorthStar promptly removed the action to federal court. Vivint amended its complaint shortly thereafter. Vivint, in its amended complaint, alleges that NorthStar has engaged in a campaign to damage Vivint's reputation and steal its customers. Vivint alleges six causes of action: (1) declaratory relief, (2) deceptive trade practices, (3) violation of the Lanham Act, (4) unfair competition, (5) intentional interference with customer contracts, and (6) injunctive relief. Vivint explains that in the event it does not prevail on its first cause of action, it has pled the remaining five “in the alternative.”

         Vivint, under its first cause of action, seeks a declaration that NorthStar is bound by the terms of the settlement agreement to the same extent as Vision based on the successor-liability doctrine. Vivint explains that it attempted to initiate arbitration, per the terms of the settlement agreement, by serving a notice of violation on NorthStar. But NorthStar stated that it was not bound by the settlement agreement and refused to submit to binding arbitration.[1]

         In late 2016, Vivint filed a motion for partial summary judgment on its first cause of action. Vivint contended that there were no genuine disputes of material fact and that NorthStar was bound by the terms of the settlement agreement as a matter of law. The court, however, held that there were disputes of material fact and therefore denied the motion.

         In late 2017, Vivint filed a motion to bifurcate. Vivint argues that it will save time to bifurcate the trial into two phases. In the first phase, the parties would litigate whether NorthStar is bound by the settlement agreement. If NorthStar is, Vivint believes that certain issues can be sent to arbitration. Specifically, there are instances where NorthStar is alleged to have used improper sales tactics that supposedly fall under the settlement agreement's arbitration clause. So those instances could be tried in front of an arbitrator, as opposed to the court. NorthStar opposes the motion.

         III. ...


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