Opinion
No. 3-030 / 02-836.
Filed April 30, 2003.
Appeal from the Iowa District Court for Scott County, GARY D. McKENRICK, Judge.
A company appeals the district court's issuance of injunctive relief pursuant to the terms of a contract. AFFIRMED.
Henry G. Neuman, Roni N. Halabi, and Craig A. Levien of Betty, Neuman McMahon, L.L.P., Davenport, for appellant.
Robert V. P. Waterman, Jr., and Brian M. Kuethe of Lane Waterman, Davenport, and Matthew A.C. Zapf of Goldberg Kohn of Chicago, Illinois, for appellee.
Heard by SACKETT, C.J., and ZIMMER and VAITHESWARAN, JJ.
The district court enjoined the respondents from disclosing proprietary information. On appeal, they contend the district court lacked authority to issue an injunction. We disagree and affirm.
I. Background Facts and Proceedings
A consumer credit reporting agency known as Credit InfoNet, Inc. (CIN) entered into a five-year marketing agreement with ExpressClose.com, a company that provides lenders access to information over the internet. CIN furnished credit and mortgage lien information to Express, which, in turn, marketed CIN's services to the lenders. Express was ultimately sold to the Radian Group.
We will refer to the respondents as Express.
After the sale, CIN learned that Express was planning to supplement or replace its services with those of a competitor. CIN petitioned for injunctive relief and obtained an ex parte temporary injunction. Express responded by moving to vacate the ruling, stay the proceedings, and compel arbitration. Following an evidentiary hearing, the district court determined that it had the jurisdiction and power to impose injunctive relief notwithstanding an arbitration clause in the marketing agreement. The court reaffirmed the injunction and this appeal followed.
II. Arbitrability of Request for Injunctive Relief
Express argues CIN's request for injunctive relief was subject to mandatory arbitration. The arbitrability of a particular claim is a legal question resolved by interpretation or construction of the parties' contract. State v. State Police Officers Council, 525 N.W.2d 834, 836 (Iowa 1994). We ask whether: A) there is a valid arbitration agreement and B) the controversy alleged is embraced by that agreement. Lewis Cent. Educ. Ass'n v. Lewis Cent. Comm. Sch. Dist., 559 N.W.2d 19, 21 (Iowa 1997).
A. Valid Arbitration Agreement. The parties do not dispute that the marketing agreement contains a valid arbitration provision. The provision mandates arbitration of "[a]ny controversy or claim between or among the parties hereto, including but not limited to those arising out of or related to this Agreement or any agreements or instruments relating hereto or delivered in connection herewith. . . ." The clause also states, "[a]ny controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s)." Finally, the clause provides that "[t]he institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party . . . to submit the controversy or claim to arbitration if any other party contests such action for judicial relief."
B. Scope of Arbitration Agreement. The fighting issue is whether CIN's petition for injunctive relief falls within the scope of the arbitration provision, subjecting the issue of the right to injunctive relief to arbitration. Express contends it does. The company points to: 1) the all-encompassing language of the arbitration provision, 2) a rule authorizing arbitrators to order injunctive relief, and 3) the absence of language explicitly authorizing "judicial" injunctive relief. We are not persuaded by these arguments.
First, the arbitration clause cannot be read in isolation. See Hartig Drug Co. v. Hartig, 602 N.W.2d 794, 797-98 (Iowa 1999) (stating, in interpreting contracts, we do not read particular words and phrases in isolation and effect should be given to the language of the entire contract according to its commonly accepted and ordinary meaning). An injunction clause in the marketing agreement expressly authorizes CIN to obtain "injunctive relief, without the necessity of a bond," for violation of the confidentiality provision of the agreement. CIN's petition seeks relief for Express's claimed breach of the confidentiality provision.
Second, the existence of a rule authorizing injunctive relief in the arbitration setting does not foreclose such relief from a court. See Commerical Arbitration Rule R-36(c) (2002), promulgated by American Arbitration Association. Specifically, the rule states, "[a] request for interim measures addressed by a party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate or a waiver of the right to arbitrate." Id. Finally, the injunction clause and surrounding language plainly and unambiguously envision judicial injunctive relief, notwithstanding the absence of an express reference to courts. "Injunction" is defined as "[a] court order prohibiting someone from doing some specified act or commanding someone to undo some wrong or injury." See Black's Law Dictionary 784 (6th ed. 1990). The definition itself, therefore, contemplates judicial relief. The arbitration clause also states the remedies "shall be in addition to all other remedies available at law or in equity, including, damages, costs and reasonable attorney fees." The reference to remedies at "law and equity" clearly is a reference to judicial, not arbitration remedies. See Black's Law Dictionary 540 (6th ed. 1990).
Available atwww.adr.org/index2.1.jsp.
Precedent cited by Express does not mandate a different conclusion. In Manion v. Nagin, 255 F.3d 535, 539 (8th Cir. 2001), the Eighth Circuit Court of Appeals affirmed the district court's denial of injunctive relief on the ground that there was no "qualifying contractual language" permitting it. The court defined "qualifying contractual language" as "language which provides the court with clear grounds to grant relief without addressing the merits of the underlying arbitrable dispute." Manion, 255 F.3d at 539.
Assuming without deciding that Manion should be viewed as persuasive authority, the "qualifying contractual language" predicate has been satisfied. The marketing agreement expressly authorizes injunctive relief for a breach or threatened breach of the confidentiality provision. The agreement also sets forth an acknowledgment by Express "that the damages to be suffered by CIN as a result of such a breach would be immediate and irreparable and would necessitate such injunctive relief." This concession obviates the need to delve into the merits of the parties' dispute beyond what is required to determine whether there is a threatened breach of the confidentiality provision.
We conclude CIN's petition to enjoin the disclosure of confidential or proprietary information does not fall within the ambit of the arbitration clause. Therefore, the district court had authority to consider CIN's petition.
III. Temporary Injunction
After concluding it had authority to issue an injunction, the district court found there was sufficient information to establish a probability that a breach of the confidentiality provision had occurred or was threatened. Based on this finding, the court enjoined Express from disclosing confidential information to a competitor or potential competitor of CIN.
We find no abuse of discretion in this ruling. See Max 100 L.C. v. Iowa Realty Co., Inc., 621 N.W.2d 178, 180 (Iowa 2001). The marketing agreement provides that CIN "shall be entitled" to injunctive relief in the event of a "breach or threatened breach" of the confidentiality provision contained in the marketing agreement. That provision requires Express to
treat as trade secrets of CIN any information obtained concerning plans, schemes, systems, policies, methods, products information, ideas, systems and/or clients of CIN . . . as well as all products and information developed jointly by EXPRESS and CIN, or independently by CIN during the term of this Agreement.
The provision prohibits Express from disclosing this information "in whole or in part to any person, firm or corporation for any reason or purpose."
Express conceded it was negotiating with another credit service provider "to supplement and/or replace CIN should Express choose to . . . ." Although its president maintained the company had not disclosed confidential information to this new provider and would not have to do so to convert Express customers to an alternate credit provider, the principals of CIN disputed this assertion. They pointed out that, although the names of lenders were generally in the public domain, the names of the particular lenders CIN serviced were not. One of the principals stated that its competitor could easily draw clients away from CIN if it were privy to CIN's client base. In light of this evidence, the district court did not abuse its discretion in determining that Express, at a minimum, threatened to breach the confidentiality provision, justifying injunctive relief.
Express raises other arguments concerning the scope of the injunction. We find these arguments unnecessary to address or without merit and affirm the district court's ruling in its entirety.