SECOND CIRCUIT AFFIRMS DISMISSAL OF LAWSUIT BASED ON ARBITRATION PROVISIONS BUT REFUSES TO ORDER SANCTIONS
Ipcon Collections sued Costco over a dispute regarding a series of agreements in which Costco agreed to sell karaoke systems on a consignment basis on behalf of Ipcon’s predecessor in interest. Costco initiated arbitration and moved to dismiss the lawsuit based on arbitration clauses in the agreements, and for sanctions. The lower court granted Costco’s motion to dismiss in favor of the pending arbitration proceedings and denied its motion for sanctions. The Second Circuit affirmed. The Court of Appeals held that Ipcon’s argument that Costco “never intended to honor” the contracts sounded in fraud in the inducement, and it was up to the arbitrators to decided the merits of such claim. The court also rejected Ipcon’s alternative argument that there had been no “meeting of the minds,” holding that the executed contracts constituted objective evidence of a meeting of the minds. Though finding that Ipcon’s argument was “weak,” the court affirmed the decision not to award Costco sanctions “given the confusing nature of the division of responsibility between courts and arbitrators as to contract formation.” Ipcon Collections, LLC v. Costco Wholesale Corp., No. 11-3944 (2d Cir. Oct. 9, 2012).
This post written by Ben Seessel.
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