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Mitschele v. Municipal Parking Services

United States District Court, D. Minnesota

April 30, 2019

Fred Mitschele; Jason Mitschele; and Michael Minor, Plaintiffs,
v.
Municipal Parking Services; Travis Carter; Joseph Caldwell; Mark Evenstad; Richard C. Gage; Thomas G. Hudson; Tony Jacobson; Kurt Lange; Thomas Lowe; Robert G. Parish; and Robert Samson, Defendants.

          ORDER

          David S. Doty, Judge.

         This matter is before the court upon defendant Municipal Parking Systems' (MPS) motion to compel arbitration. Based on a review of the file, record, and proceedings herein, and for the following reasons, the court grants the motion.

         BACKGROUND

         This contract dispute arises out of MPS' alleged failure to abide by the terms of the parties' agreements regarding the use of plaintiffs' patented parking meter technology and related shareholder rights.

         I. Parties

         MPS is a Minnesota Corporation that sells parking meters and other parking enforcement technologies to businesses and municipalities.[1] Compl. ¶¶ 9, 22. Plaintiffs Fred Mitschele, Jason Mitschele, and Michael Minor are Canadian citizens. Id. ¶ 4. Plaintiffs collectively own patented solar-powered parking meter technology invented by Fred Mitschele. Id. ¶ 1. Plaintiffs' parking meter technology incorporates digital cameras, internet connectivity, touchscreen user interface, and other digital and wireless features to facilitate parking payment options and enforcement. Id. ¶ 21.

         II. The Original Agreements

         On April 1, 2010, plaintiffs agreed to sell forty-nine percent of their interest in the parking meter technology to MPS (the Original Agreement). Id. MPS, in exchange, agreed to make monthly royalty payments and to pay $300 for each new parking meter it installed using plaintiffs' technology. Id. MPS also agreed to share a percentage of its monthly net operating income or five percent of any third-party investment with plaintiffs, provided it achieved certain sales figures. Id. MPS further agreed to give plaintiffs a percentage of common stock and an option to purchase a percentage of its private placements on a pro-rata basis. Id. In addition, MPS agreed to bind any future third-party investors to certain terms and to copy plaintiffs on all correspondence relating to plaintiffs' parking meter technology. Id. ¶¶ 26, 35, 52, 65.

         The Original Agreement provided that “[a]ny dispute arising under this [a]greement shall be determined by arbitration [sic] shall be determined by a single arbitrator.” Cassady Decl. Ex. 1 ¶ 4. The Original Agreement further provided that the “arbitration shall be initiated and conducted in accordance with the provisions of the Commercial Arbitration Act of British Columbia” and that it “shall be construed under the laws of British Columbia, Canada and ... that any dispute shall be resolved [sic] arbitration as set forth herein.” Id. ¶¶ 4, 9 (emphasis removed).

         The parties amended the Original Agreement twice thereafter. Id. Ex. 2; Ex. 4. Neither amendment altered the Original Agreement's arbitration provision. See id. Ex. 2 ¶ 13; Ex. 4 ¶ 8.

         On March 12, 2012, plaintiffs agreed to license their remaining fifty-one percent interest in the parking meter technology to MPS, in exchange for, among other things, a $2, 000, 000 CDN payment and the right to periodically conduct third-party audits of MPS' revenues (the Patent License). Id. Ex. 3 ¶ 12; Compl. ¶ 46. Under the Patent License, MPS further agreed to maintain plaintiffs' patent portfolio in good standing, market the patents, and place a patent identifier on each parking meter that it sold. Compl. ¶¶ 58-64. The Patent License provided that “[a]ny breach of this Agreement shall be subject to the notice and cure provisions set forth in the [Original Agreement] including the arbitration provision ....” Cassady Decl. Ex. 3 ¶ 30.

         On October 12, 2012, the parties consolidated the Original Agreement and its amendments and the Patent License into a Binding Letter Agreement. Id. Ex. 5. The Binding Letter Agreement is “governed by the laws of the Province of British Columbia” and expressly states that “the dispute resolution procedures set out in the [Original Agreement] shall apply ....” Id. ¶ 30. The Binding Letter Agreement further provides that in the event of any conflict between it and the previous agreements “the terms of the Binding Letter Agreement shall govern.” Id. ¶ 29.

         III. The Shareholder and Stock Redemption Agreements

         On October 16, 2012, Fred Mitschele and Jason Mitschele entered into an agreement with MPS regarding, among other things, their stock voting rights and obligations and the sale and purchase of MPS transfer stock (the Shareholder Agreement). Id. Ex. 6. The Shareholder Agreement also allowed Fred Mitschele and Jason Mitschele, as MPS shareholders, to select a member of MPS' board of directors until MPS purchased the remaining fifty-one percent interest in plaintiffs' parking meter technology. Id. ¶ 6.1. The Shareholder Agreement provides that the parties must “submit to the jurisdiction of the federal and state courts located within the geographic boundaries of [sic] the Hennepin County, Minnesota for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement ....” Id. ¶ 7.4. The parties also agreed “not to commence any suit, action or other proceeding arising out of ... this Agreement except in the federal and state courts located within the geographic boundaries of Hennepin County, Minnesota, and ... waive any claim that it is not subject personally to the ...


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