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Orbital ATK, Inc. v. Heckler & Koch GmbH

United States District Court, D. Minnesota

September 8, 2017

Orbital ATK, Inc. and Alliant Techsystems Operations LLC, Plaintiffs,
v.
Heckler & Koch GmbH, Defendant.

          Daniel Gilbert Morris, Esq., Erin Brooke Sheppard, Esq., William T. O'Brien, Esq., and Dentons U.S. LLP, Michael A. Rosow, Esq., Thomas H. Boyd, Esq., and Winthrop and Weinstine, PA, counsel for plaintiffs.

          David Jacob Ginsberg, Esq., George David Ruttinger, Esq., and Crowell & Moring LLP, Mark P. Hodkinson, Esq. and Heley, Duncan & Melander, PLLP, Minneapolis, Minnesota, counsel for defendant.

          ORDER

          David S. Doty, United States District Court Judge

         This matter is before the court upon defendant Heckler & Koch GmbH's motion to dismiss or stay proceedings and to compel arbitration. Based on a review of the file, record, and proceedings herein, and for the following reasons, the court grants the motion in part.

         BACKGROUND

         This contract dispute arises out of Heckler & Koch's (H&K) alleged failure to deliver twenty XM25 weapons systems and certain intellectual property to plaintiff Orbital ATK, Inc. (ATK).[1] H&K and ATK entered into a cooperation agreement on October 8, 1994, under which both parties agreed to cooperate in pursuing a contract with the United States Army for the XM25 weapons program. Compl. ¶ 16. Subsequently, ATK entered into several prime contracts with the Army for work on the XM25 weapons systems. Id. ¶ 17. Pursuant to the cooperation agreement, ATK entered into subcontracts with H&K to assist with ATK's obligations under the prime contracts. Id. ¶ 18.

         On September 29, 2005, ATK and H&K entered into a teaming agreement for the OICW Weapons System (Teaming Agreement), which superseded the cooperation agreement.[2] Id. ¶ 20; See O'Brien Decl. Ex. A. The parties agreed, among other things, that if the Army would award ATK a prime contract for work on the XM25 weapons program, ATK would award a subcontract to H&K. Compl. ¶ 22.

         The Teaming Agreement contains an arbitration provision that states in relevant part: “Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, but specifically excluding Subcontract Disputes ... shall be determined by arbitration administered by the International Centre for Dispute Resolution in accordance with its International Arbitration Rules.” O'Brien Decl. Ex. A § 8.05. The parties further agreed that: “Notwithstanding anything ... to the contrary, any claims, controversies or disputes concerning the performance, validity or enforceability of any Subcontract negotiated under the Agreement shall be resolved in accordance with the applicable disputes provision of such Subcontract.” Id. § 8.04. Additionally, the Teaming Agreement provides that the agreement could be terminated by the non-defaulting party if the defaulting party fails to cure, within thirty-days of written notice, a material breach of the Teaming Agreement or a subcontract. Id. Art. 5 h, i. If ATK terminated the Teaming Agreement, H&K was required to grant ATK a non-exclusive license for intellectual property owned by H&K to “enable ATK independently to perform or have performed by others all Subcontract requirements that [H&K] was obligated to perform under the Subcontract.” Id. § 7.06a.

         On March 24, 2011, the Army awarded a prime contract to ATK to begin the engineering and manufacturing development phase of the XM25 weapons program. Compl. ¶ 25. In anticipation of being awarded a government contract, on February 1, 2011, pursuant to the Teaming Agreement, ATK awarded H&K a subcontract under which H&K agreed to deliver twenty-five final design XM25 weapon systems to ATK Id. ¶¶ 26, 31-32; see O'Brien Decl. Ex. B.

         The subcontract incorporated general terms and conditions that provided for resolving disputes through informal and formal mediation but not arbitration. See O'Brien Decl. Ex. B at 8; id. Ex. C § 1.7. The subcontract further provided to ATK a property interest in all technical work product, inventions, and works of authorship developed by H&K in its work under the subcontract and required H&K to deliver, disclose, or assign such property to ATK. Id. Ex. C. § 1.14.

         ATK alleges that H&K failed to deliver the XM25 weapons systems in breach of the subcontract. Attempts at informal mediation failed, and, on December 2, 2016, ATK terminated the subcontract due to H&K's alleged default. Compl. ¶¶ 46-50. On December 8, 2016, ATK, pursuant to the terms of the Teaming Agreement, sent a thirty-day cure notice to H&K. Id. ¶ 51. Because H&K allegedly failed to cure the breach within thirty days, ATK terminated the Teaming Agreement on January 26, 2017. Id. ¶¶ 52-53.

         On January 26, 2017, ATK filed suit against H&K alleging that H&K breached the subcontract by failing to deliver the XM25 weapon systems and failing to participate in a formal mediation process. Additionally, ATK claims H&K breached the subcontract and Teaming Agreement by failing to transfer intellectual property to ATK. ATK also seeks a declaratory judgment that (1) the Teaming Agreement requires that H&K grant ATK a non-exclusive license in H&K's intellectual property and (2) the subcontract requires that H&K immediately deliver technical work product and inventions related to the XM25 program. H&K now moves to compel arbitration, arguing that the dispute is subject to the Teaming Agreement's arbitration clause.

         DISCUSSION

         I. ...


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