Audio Visual Concepts, Inc. v. Smart
Technologies, ULC, et al., Civil No. 11-1551 (JAG-CVR) (D.
P. R. 2011), addresses the issue of the staging or sequencing the
resolution of disputes pending in an international arbitration on
the one hand and in courts of law on the other. Paintiff sought a
preliminary injunction to stop its termination as the distributor
of Smart Technologies' products in the Puerto Rico. Plaintiff
alleged a violation of the Puerto Rico Dealer's Act and sued in
federal court. Smart Technologies moved to stay the action in favor
of arbitration. The operative agreement provided for mandatory
arbitration in Calgary, Canada under Canadian Law. The plaintiff
dismissed the arbitration provision as a boilerplate contract of
adhesion to circumvent the provision of the Puerto Rican law.
The District Court (delegating the decision to a Magistrate
Jude) stayed the litigation in favor of the arbitration route.
Noteworthy points for international practice discussed in the
First, the arbitration clause in the operative agreement could
have been described as a broad or general one, providing for
arbitration for any and all disputes arising out of or related to
the Agreement. The Court rejected the argument that it was mere
Second, the Court found that "federal law preempts the
direct application of section 278b-2, the Puerto Rico Dealer's
Act as choice of law in the instant case, as well as upon the
parties' agreement in the contract executed between them which
provides for application of the laws of Canada to the arbitration
issues hereunder". In particular, the Court found that the FAA
preempted any reading of Puerto Rico's Dealer's Act that
would tend to negate or limit as against public policy any
arbitration clause that provide for arbitration of controversies
outside of Puerto Rico or under foreign law. It is unclear from the
decision whether the Court believed the parties' contract was
preempted by federal arbitration law.
Third, the Court exercised its sound disretion and directed that
the case be stayed pending the outcome of the arbitral
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