Kawasaki Heavy Industries, Ltd. v. Bombardier Recreational Products, Inc.

Case No. 11-2120 (7th Cir. 2011)
The Seventh Circuit reversed the District Court’s holding regarding Appellants/Defendants’ waiver of arbitration, holding that Appellants had (i) acted consistently with an intent to arbitrate Plaintiffs/Appellees' claims throughout the Texas and Illinois actions and (ii) continually asserted its desire to arbitrate. The Seventh Circuit vacated the District Court’s holding regarding the third parties’ right to participate in the arbitration, holding that the issue was not ripe for review because Appellants had no standing to argue this issue on their behalf.
Procedural context:
Defendants/Appellants appealed from District Court's denial of motion to dismiss or stay claims pending arbitration.
Plaintiffs Kawasaki Heavy Industries, Ltd. and Motors Manufacturing Corp. U.S.A. (collectively, Kawasaki) and defendants Bombardier Recreational Products, Inc. and BRP U.S., Inc. (collectively, BRP) resolved patent litigation through a written settlement agreement. The settlement agreement included the requirement that BRP’s secured lender subordinate its interests in BRP’s patents to the terms of the settlement agreement. The settlement agreement also provided that the parties would submit to arbitration any claims arising under the agreement. BRP failed to obtain the subordination agreement. Kawasaki then sued BRP, the secured lender, and BRP’s attorneys in the U.S. District Court for the Northern District of Texas. After dismissing an appeal in that litigation, Kawasaki brought sued these parties again in the U.S. District Court for the Southern District of Illinois. In this second suit, BRP moved to dismiss Kawasaki’s claims or, in the alternative, stay the claims pending arbitration. The court judge denied BRP’s motion, finding that BRP had waived its right to arbitrate and that the secured lender and BRP’s attorneys did not have a right to participate in the arbitration because they were not parties to the settlement agreement. BRP appealed both of these holdings to the Seventh Circuit.
Flaum, Manion, and Sykes, Circuit Judges for the Seventh Circuit

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