Advanced Bodycare Solutions v. Thione International

Advanced Bodycare Solutions, LLC (Advanced Bodycare) (plaintiff) entered into a licensing agreement with Thione International, Inc. (Thione) (defendant). The contract provided Advanced Bodycare with exclusive marketing and distribution rights for Thione’s nutrition supplements and free-radical testing kits. Advanced Bodycare ordered a quantity of the products and found that many of the testing kits were defective. Thione admitted to a manufacturing flaw and shipped replacement units but did not send enough to replace the defective kits. Advanced Bodycare considered this failure to be a breach of contract. The licensing agreement stated that in the event of a dispute that could not be resolved within 30 days, the parties agreed to hold a meeting and attempt negotiation in good faith. If within 60 days of meeting, the dispute had not been settled, the parties were to submit to nonbinding arbitration or mediation with a mutually agreed-upon independent arbitrator or mediator. Only if the dispute was still unresolved could a party initiate legal action. Advanced Bodycare filed suit in federal district court over the kit dispute, and Thione moved to stay the proceeding pending arbitration under the Federal Arbitration Act (FAA). The district court denied Thione’s motion, and Thione filed an interlocutory appeal with the court of appeals.