Auad Services, LLC v. Publishers Circulation Fulfillment, Inc.

Background

Auad Services, LLC sued Publishers Circulation Fulfillment, Inc. in New York state court. Auad alleged that Publishers Circulation Fulfillment, Inc. improperly terminated a delivery services agreement without the required notice and withheld payments for delivery services. Auad asserted claims for breach of contract, interference with contract, conversion, and fraud, seeking $375,000 in damages.

Publishers Circulation Fulfillment, Inc. removed the case to federal court based on diversity jurisdiction. It answered the complaint and asserted counterclaims. The parties had entered into two substantially similar agreements under which Auad would distribute newspapers and other publications in certain areas of New Jersey for Publishers Circulation Fulfillment, Inc.

Both agreements contained identical arbitration provisions requiring binding arbitration of “[a]ll disputes” concerning the agreements’ interpretation, application, enforcement, or breach. The agreements also provided for costs and reasonable attorneys’ fees when a party failed to proceed with arbitration, unsuccessfully challenged an arbitration award, or failed to comply with an award.

Arbitration ruling

The court applied the Federal Arbitration Act, a federal law requiring enforcement of qualifying agreements to arbitrate. It considered whether the parties agreed to arbitrate and whether their dispute fell within the arbitration clause.

The court found uncontradicted evidence that the parties signed the agreements and agreed to arbitration. It also found that the arbitration clause was broad and covered Auad’s claims because those claims relied on the agreements’ terms and obligations. Auad did not oppose the motion or dispute the agreements’ enforceability.

The court therefore granted Publishers Circulation Fulfillment, Inc.’s motion to compel arbitration of both Auad’s claims and the counterclaims asserted in the answer. It also stayed the federal case while arbitration proceeded.

Fees and costs

The court held that the agreements’ fee-shifting provision applied because Auad had failed to proceed with arbitration. The court provisionally granted Publishers Circulation Fulfillment, Inc.’s request for attorneys’ fees and costs incurred in bringing the motion to compel arbitration. The amount was left to be determined after the company submitted evidence of its hours and hourly rates within 21 days after the arbitration panel’s final award.

Disposition

The motion to compel arbitration and stay the proceedings was granted. Publishers Circulation Fulfillment, Inc. was awarded attorneys’ fees and costs in an amount to be determined. The parties were also directed to update the court on the arbitration’s status by March 31, 2023.