Mattson Obtained The Stay Of Litigation Against Applied Material's Lawsuit Despite Not Having Arbitration Agreement With Applied Material.
Preliminarily, our next case, Mattson Technology, Inc. v. Applied Material, Inc., A165378 (1/5 11/1/23) (Burns, Jackson, Simons), is somewhat confusing to read. Mattson is designated as plaintiff and appellant in the case heading, though Applied, which is designated as defendant and respondent, sued Mattson and Mattson's former employee Lai. We'll refer to Applied as plaintiff. Applied sued its former employee Lai and his new employer Mattson for misappropriating trade secrets, and also sued Lai for breach of his employment contract with Applied.
Mattson and Applied Material are head-on competitors. Applied accused Lai of downloading confidential information, wiping his phone, and lying about whether he had Applied confidential information when he left Applied's employment.
Lai successfully moved to compel arbitration with Applied based on his arbitration agreement with Applied. The trial court denied Mattson's efforts to arbitrate against Applied, because Mattson was not a party to the arbitration agreement. (In this respect, the case is factually similar to Waymo LLC v. Uber Techs, Inc., 252 F.Supp.3d 954 (2017)). Also, the trial court denied Mattson's request to stay litigation against Applied pending the arbitration with Lai, on the ground that the litigation against Applied was severable from Applied's arbitration and contract with Lai.
The Court of Appeal reversed the denial of the request for a stay pending arbitration with Lai. "The party seeking severance under Code of Civil Procedure section 1281.4 has the burden of proving its claim is independent from the arbitrable matter." Applied did not meet its burden. Applied's claims against Mattson and Lai were not independent, because the claims depended on proof of misappropriation of trade secrets.
COMMENT: The case shows that under some circumstances, Cal. Code of Civ. Proc. 1281.4, which is the basis for a mandatory stay pending arbitration, makes it possible for a party to obtain a stay pending an arbitration, though it is not a party to that arbitration.
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