NLA-Zirkle arbitration breaks down
NLA claims mediation settlement is invalid and files new suit.
By Geraldine Warner
An arbitration process to resolve a dispute between the Nursery Licensing Association (NLA) and Zirkle Fruit Company of Selah, Washington, has broken down, and both sides are now suing each other.
Last October, the NLA filed a lawsuit against Zirkle Fruit Company alleging that Zirkle had at least 76,300 illegally propagated Scarlet Spur Red Delicious, Super Chief Red Delicious, Pink Lady, and Crimson Gala trees in the company's orchards.
On June 19 this year, both parties signed a settlement agreement at the close of a day-long private mediation session, with Yakima attorney David Thorner as mediator.
The agreement stated that Zirkle would pay the NLA $3 for each infringing tree, except for those on properties that already had infringing trees when Zirkle acquired them.
Rex Stratton, attorney and partner with the NLA, said although the original lawsuit involved only 76,300 trees, he believed Zirkle had almost 1.2 million infringing trees and Zirkle could have faced $25 million in attorneys' fees and damages if the case had gone to trial. Zirkle disputed that number.
Arbitration
A clause of the one-page agreement stated that if the parties could not agree, through further negotiation, on the actual number of trees to be paid for by Zirkle, it would be resolved through arbitration.
Jerry Aiken, attorney for Zirkle, said it soon became apparent that the two sides could not agree upon the most simple of issues and Thorner set an arbitration hearing for July 25. The day before the hearing, the NLA attorneys informed the mediator that they would not attend and would proceed with litigation.
Aiken said as far as he knew, the NLA had no problem with the upcoming arbitration until July 24. "I think they found out their case was not as strong as they thought it was," he speculated.
Stratton said he realized there was a problem with the agreement when it became obvious that the parties had come away from the process with totally different views as to what the agreement meant and what the next steps would be.
"The whole reason we agreed to mediate was we thought Zirkle was going to go forward and work through the issues of infringement on a block by block basis and talk to us," he said.
Stratton told Thorner, the mediator, that because of this, he believed the agreement was invalid and unenforceable.
"There was no common understanding by the parties here. There can be no contract where there is no meeting of the minds, hence no agreement was formed at the completion of the mediation."
But Thorner said the settlement was valid and enforceable and rescheduled the arbitration hearing for August 25.
Trees paid for
Zirkle filed a lawsuit on July 25 in Yakima County Superior Court to compel the NLA to uphold their signed agreement to arbitrate. Bill Zirkle, president of Zirkle Fruit Company, said in a press release that in pre-arbitration evidence, his company had provided paid invoices and cancelled checks supporting its claim that an overwhelming majority of all its trees were licensed.
"It is obvious to us that the NLA has severe data deficiencies and are unable to justify their outrageous claims," Zirkle said. Nurseries were supposedly providing the NLA with the purchase history for Zirkle Fruit and the company had to defend itself from paying $1.5 million on trees it had already paid for in full, he added.
Stratton said from evidence presented by Zirkle Fruit and aerial photography, the NLA did find that some public records were inaccurate and that some of Zirkle's trees that were thought to be infringing were in fact legitimate. However, he still believes the company has a large number of infringing trees.
Injunction
The NLA had the Zirkle suit removed to federal court and in counterclaims alleged that Zirkle violated the agreement by failing to negotiate with the NLA on the number of infringing trees before the arbitration and by failing to provide required documentation 14 days ahead of the arbitration hearing. The countersuit also sought an injunction to stop arbitration from proceeding on August 25 and accuses the mediator of failing to disclose facts that were vital to the NLA's understanding of the terms and conditions of the settlement. It also alleged that Thorner, as mediator, failed to enforce the settlement with respect to negotiations that it claims should have taken place before arbitration, and asked that Thorner be removed as arbitrator, should the court rule that arbitration proceed. The NLA later dropped the complaints against Thorner.
A court hearing was scheduled to take place by phone conference on August 15.
The NLA also filed a new lawsuit in federal court to enforce intellectual property rights against all the property that Zirkle owns, leases, manages or farms. The suit alleges infringement of 44 plant patents and trademarks and claims damages of at least $20 million.
Aiken, attorney for Zirkle, said he still believed the mediated settlement agreement was binding and enforceable, and disagreed with Stratton's statement that there was no common understanding by the parties and thus no contract.
"The agreement's very simple. It's easy to understand, and it's pretty concise as far as what the agreement is and what was to occur. I think they understood what it entailed."
Aiken said it is extremely unusual for an arbitrator or mediator to be named in a lawsuit. "It's very unusual that these mediation agreements aren't fulfilled and the parties don't obey them," he said.
