It is fair to say that the courts favor arbitration agreements and therefore tend to enforce them. Such was not the case, however, in the business divorce matter of EM Medical, LLC. v. Stimwave, LLC. and Andrea Berry, et al. (Mo. App. E.D. 2021)
EM Medical sued Stimwave after the two businesses parted ways in 2018. In sum, EM Medical alleged that Stimwave owed it unpaid commissions and engaged in tortious interference with EM Medical’s employment contracts with certain EM Medical employees. Reading between the lines, it sounds like Stimwave concluded it could sell its product with EM’s employees but without EM.
Stimwave filed a motion to compel arbitration based on a 2016 Agreement that contained, among a lot of other things, an arbitration provision. Some of the other things it included was four separate areas for both parties to sign the agreement.
Stimwave signed the agreement but alas, EM Medical did not. Moreover, EM Medical countered with a less robust contract of its own that Stimwave rejected. Regardless, the two companies continued to do business together for 2.5 years. But acting like you have a contract is not the same as having one.
The lower court denied the motion to compel arbitration, which isn’t actually that surprising. And the Court of Appeals affirmed the lower court’s ruling. That isn’t very surprising either. What is surprising is the length of the opinion and its diligence in setting forth the distinctions between what state law applies to (contract formation) and what the Federal Arbitration Act requires (a strong presumption in favor of arbitration).
Cosgrove Law Group frequently handles business divorce matters along with non-compete and trade secret disputes. It is not uncommon for a purported agreement to arbitrate surfaces in these matters. Food for thought.