Abrams et al v. Chesapeake Energy Corporation et al

BRIEF IN SUPPORT of Motion to Compel Arbitration and Stay re MOTION to Compel Arbitration and Stay

M.D. Pa.May 1, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA ROBERT C. ABRAMS, JR., Plaintiffs, v. CHESAPEAKE ENERGY CORPORATION, et al., Defendants. : : : : : : : : : : No. 4:16-cv-01346-MWB MEMORANDUM OF LAW IN SUPPORT OF MOTION TO COMPEL ARBITRATION AND STAY BY DEFENDANTS ACCESS MIDSTREAM PARTNERS, L.P., ACCESS MLP OPERATING, L.L.C., AND APPALACHIA MIDSTREAM SERVICES, L.L.C. John S. Summers Dylan J. Steinberg HANGLEY ARONCHICK SEGAL PUDLIN & SCHILLER One Logan Square, 27th Floor Philadelphia, PA 19301 (215) 496-7007 Michael J. Gibbens (admitted pro hac vice) Susan E. Huntsman (admitted pro hac vice) CROWE & DUNLEVY A Professional Corporation 500 Kennedy Building 321 South Boston Avenue Tulsa, OK 74103-3313 (918) 592-9800 (918) 592-9801 (Facsimile) May 1, 2017 ATTORNEYS FOR WILLIAMS PARTNERS L.P., WILLIAMS MLP OPERATING, LLC, AND APPALACHIA MIDSTREAM SERVICES, L.L.C. Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 1 of 24 i TABLE OF CONTENTS TABLE OF AUTHORITIES ................................................................................. ii PROCEDURAL HISTORY .................................................................................... 3 STATEMENT OF FACTS ...................................................................................... 4 STATEMENT OF QUESTIONS ........................................................................... 5 ARGUMENT ............................................................................................................ 6 I. Standard of Review .......................................................................................... 6 II. The Arbitration Clauses Pled by the Arbitration Plaintiffs are Broad and Cover their Claims against the Access Defendants ............................... 7 III. The Arbitration Should Proceed as Required under the Arbitration Plaintiffs’ Leases ............................................................................................... 9 IV. The Access Defendants May Enforce the Mandatory Arbitration Provisions through Equitable Estoppel .......................................................10 A. Estoppel Applies Under the Close Relationship-Intertwining Test .........11 1. Plaintiffs Have Pled a Close Relationship between the Access Defendants and the Signatories to the Leases ........................................11 2. Plaintiffs’ Claims are Intimately Founded in and Intertwined with the Leases ...................................................................................................12 B. Plaintiffs Have Also Alleged that the Access Defendants Have Engaged in Substantially Interdependent and Concerted Misconduct with the Lessee Defendants ...............................................................................14 V. Alternatively, the Court Should Stay the Arbitration Plaintiffs’ Claims against the Access Defendants while the Arbitrable Claims are Resolved ...........................................................................................................16 CONCLUSION .......................................................................................................17 Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 2 of 24 ii TABLE OF AUTHORITIES Page(s) Federal Cases A.G.K. Sarl v. A.M. Todd Co., No. CIV.A. 07-2727, 2008 WL 724607 (E.D. Pa. Mar. 18, 2008) .............. 12, 14 Berkery v. Cross Country Bank, 256 F. Supp. 2d 359 (E.D. Pa. 2003) .................................................................. 17 Booth v. BMO Harris Bank, N.A., No. CIV.A. 13-5968, 2014 WL 3952945 (E.D. Pa. Aug. 11, 2014) ........ 7, 11, 15 Comrey v. Discover Fin. Servs., Inc., 806 F. Supp. 2d 778 (M.D. Pa. 2011) ................................................................. 17 E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187 (3d Cir. 2001) ............................................................................... 11 Griswold v. Coventry First LLC, 762 F.3d 264 (3d Cir. 2014) ............................................................................... 11 Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013) ................................................................................. 6 Leighton v. Chesapeake Appalachia, LLC, No. 1:13-cv-2018, 2013 WL 6191739 (M.D. Pa. Nov. 26, 2013) ..................... 13 Miron v. BDO Seidman, LLP, 342 F. Supp. 2d 324 (E.D. Pa. 2004) ........................................................ 8, 11, 16 Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) ................................................................................................ 16 Philadelphia Reins. Corp. v. Employers Ins., 61 F. App’x 816 (3d Cir. 2003) .......................................................................... 10 Schmidt v. Skolas, 770 F.3d 241 (3d Cir. 2014) ................................................................................. 5 Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 3 of 24 iii State Cases Dodds v. Pulte Home Corp., 909 A.2d 348 (Pa. Super. Ct. 2006) .................................................................... 11 Federal Statutes Federal Arbitration Act (FAA) 9 U.S.C. §§ 1-16 ......................................................................................... 6, 7, 17 9 U.S.C. § 3 ........................................................................................................... 7 Racketeer Influenced and Corrupt Organizations Act (RICO) 18 U.S.C. §§ 1961-1968 ................................................................. 2, 8, 14, 15, 16 Sherman Act § 1, 15 U.S.C. § 1 ............................................................................... 14 Rules Fed. R. Civ. P. 12(b) .................................................................................................. 3 Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 4 of 24 1 The Access Defendants1 respectfully move the Court to compel Plaintiffs James Swingle, Jr., and Susan Swingle (the “Swingles”), Cobblestone Camp, LLC (“Cobblestone”), and JEMSCO Star, LLC (“JEMSCO”) (collectively, the “Arbitration Plaintiffs”) to arbitrate the entirety of their claims in the arbitrations they agreed to when they signed their leases and to stay any non-arbitrable claims. Plaintiffs admit that some of Cobblestone and JEMSCO’s claims are subject to mandatory arbitration under their individual leases (the “Leases”) with the Lessee Defendants.2 But, seeking to evade both the letter and spirit of those arbitration provisions, the Arbitration Plaintiffs insist that the majority or all of their claims should proceed in this Court irrespective of any parallel arbitration. The Arbitration Plaintiffs take this position while acknowledging that all of their claims arise directly out of the Leases and their relationship with the Lessee Defendants, and when the arbitrations could result in rulings that would eliminate all of the Arbitration Plaintiffs’ claims. Meanwhile, even for the arbitrations they admit must occur, Cobblestone and JEMSCO ask the Court to force a future 1 “Access Defendants” refers to Defendants Williams Partners L.P. f/k/a Access Midstream Partners, L.P. (“Access Midstream”), Access MLP Operating, L.L.C., n/k/a Williams MLP Operating, LLC (“A-MLP”), and Appalachia Midstream Services, L.L.C. (“Appalachia Midstream”). 2 “Lessee Defendants” refers to Anadarko E&P Onshore LLC f/k/a Anadarko E&P Company LP (“Anadarko E&P”), Mitsui E&P USA LLC (“Mitsui E&P”), and Chesapeake Appalachia, L.L.C. (“CALLC”). (Am. Compl. ¶ 3.) Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 5 of 24 2 arbitration organization to allow them to file a joint arbitration, regardless of their Leases or the arbitration association’s rules. Established federal law requires agreements to arbitrate to be interpreted and applied broadly. Under that law, the Court should order that all of the Arbitration Plaintiffs’ claims – including those asserted against the Access Defendants, who are not parties to the Leases – be referred to arbitration. In the alternative, if the Court were to find any of claims of the Arbitration Plaintiffs to be non-arbitrable, the Court should stay proceedings on those claims pending the completion of arbitration proceedings. As demonstrated in the briefing filed by the other defendants, all of the claims arising from the Arbitration Plaintiffs’ Leases – including their antitrust, RICO, 3 and state law claims – are subject to mandatory individual arbitrations. As discussed below, although the Access Defendants are not signatories to the Leases and have assumed no obligations under those Leases, the Arbitration Plaintiffs are equitably estopped from denying the Access Defendants’ consent to participate in the arbitration. Applicable law is clear that, if a non-signatory wishes to arbitrate, it can do so when there is (1) a close relationship between the entities involved; and (2) the claims against the non-signatory are “intimately founded in and 3 Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961- 1968. Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 6 of 24 3 intertwined with the underlying obligations of the contract to which they were not party.” Those circumstances are present here. All of Plaintiffs’ claims, and certainly their damages, are dependent upon and inextricably intertwined with the Leases; Plaintiffs allege that the Access Defendants are closely related to the parties to those Leases and their affiliates; and Plaintiffs allege that the defendants engaged in substantially interdependent and concerted misconduct. Accordingly, the Arbitration Plaintiffs’ claims against the Access Defendants, like their claims against the Lessee Defendants, should be referred to arbitration. PROCEDURAL HISTORY Plaintiffs filed this lawsuit on June 28, 2016 (Dkt. #1), and amended their complaint on January 30, 2017 (Dkt #45). By orders dated February 6 and April 3, 2017 (Dkt. #47 & #49), the Court extended the defendants’ deadline to answer, file motions, or otherwise respond to the Amended Complaint through May 1, 2017. The Court also ordered the parties to submit a case management plan to address the schedule for motions, responses, and associated briefing. On April 28, 2017, the Court entered a case management order (Dkt. #51), pursuant to which the parties will address arbitration-related motions first, before reaching other issues. This order further stays any requirement that the defendants file any other responses to the Amended Complaint, including any motions seeking additional relief under Fed. R. Civ. P. 12(b). As a result, this briefing addresses only arbitration and stay, Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 7 of 24 4 and it does not waive the Access Defendants’ other grounds for dismissal or their defenses as to any of the Plaintiffs, whether Arbitration Plaintiffs or not. Other plaintiff groups have filed and are prosecuting three other lawsuits in tandem with this one, each asserting similar causes of action and following this same schedule.4 STATEMENT OF FACTS5 The complaints filed by all of the plaintiff groups revolve around a single premise – the plaintiffs’ royalties were too low, including because deductions were improperly taken from royalties paid by the Lessee Defendants, breaching their leases. (E.g., Am. Compl. ¶¶ 26-27; PLA AC ¶¶ 29-30; PHA AC ¶¶ 29-30; KEA AC ¶¶ 26-27.) In this case, Cobblestone and JEMSCO admit their breach-of-lease claims are subject to a “mandatory arbitration provision.” (Am. Compl. ¶ 357.)6 The Swingles, in contrast, do not specifically allege whether their Leases include 4 Patricia L. Abrams, et al. v. Chesapeake Energy Corp., et al., No. 4:16-cv-01343- MWB (M.D. Pa.); Paul H. Arnold, et al. v. Chesapeake Energy Corp., et al., No. 4:16-cv-01345-MWB (M.D. Pa.); and Kylie E. Ahern, et al. v. Chesapeake Energy Corp., et al., No. 4:16-cv-01347-MWB (M.D. Pa.). We will refer to the amended complaints filed in these actions as the PLA AC, PHA AC, and KEA AC, respectively. 5 Additional facts, as pled in the Amended Complaint, are set forth in the Argument below. 6 This is also true for all of the plaintiffs in the Patricia L. Abrams (PLA AC. ¶ 320) and Paul H. Arnold cases (PHA AC ¶ 231). Moreover, although not explicitly pled by plaintiffs, it is also true for multiple plaintiffs in the Kylie E. Ahern matter, as well. Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 8 of 24 5 arbitration provisions, but they do allege the existence of their Leases as an essential part of their claims. (Am. Compl. ¶¶ 93 & 145.) As a result, the Court can rely on these Leases without converting this motion into one for summary judgment. Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (“a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss into one for summary judgment” (emphasis in original, internal quotation marks omitted)). The Swingles’ lease is attached hereto as Exhibit “A”. The arbitration provision in the Swingles’ lease is identical to one declared to be a “mandatory arbitration provision[]” in a companion case filed by Plaintiffs’ attorneys. (Compare Ex. A at 3 (ARBITRATION) with PLA AC ¶ 547; see also PLA AC ¶ 546 (referring to this as one of the “mandatory arbitration provisions”).) And yet, the Arbitration Plaintiffs bring their claims in this Court, not arbitration, when those claims are all based on purportedly wrongful deductions under the Leases containing mandatory arbitration provisions. STATEMENT OF QUESTIONS 1. Should the Court compel the Arbitration Plaintiffs to arbitrate all of their claims, including those against the Access Defendants, pursuant to the mandatory arbitration provisions the Arbitration Plaintiffs signed and in the manner outlined by the other defendants? Suggested Answer: YES. Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 9 of 24 6 2. Alternatively, if the Court were to find any of claims of the Arbitration Plaintiffs to be non-arbitrable, should the Court stay the litigation of those claims, pending the arbitration(s) with the Arbitration Plaintiffs that must necessarily occur? Suggested Answer: YES. ARGUMENT I. Standard of Review Where the Court can resolve the issue of arbitration from the face of the Complaint, the Federal Arbitration Act (the “FAA”), 9 U.S.C. §§ 1-16, favors doing so. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 773-74 (3d Cir. 2013). Thus, “when it is apparent, based on the face of a complaint, and documents relied upon in the complaint, that certain of a party’s claims are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under a Rule 12(b)(6) standard without discovery’s delay.” Id. at 776 (internal quotation marks omitted).7 Here, there should be no dispute that the Arbitration Plaintiffs are all subject to the mandatory arbitration provisions referenced in the Amended Complaint and above. The only open issues are which claims are encompassed by those provisions and whether the non-Lessee Defendants may enforce the provisions against the Arbitration Plaintiffs. See 7 The Access Defendants assert that the Court may compel arbitration based on the face of the Complaint. However, if the Court denies this motion, the Access Defendants respectfully request leave to conduct limited discovery and the opportunity to renew their motion and/or continue to a summary proceeding. Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 10 of 24 7 Booth v. BMO Harris Bank, N.A., No. CIV.A. 13-5968, 2014 WL 3952945, at *3 (E.D. Pa. Aug. 11, 2014) (finding 12(b)(6) standard appropriate where plaintiff did not contest the validity of the arbitration provisions but whether the defendants could enforce them). Pursuant to the FAA, “[i]f any suit . . . be brought . . . upon any issue referable to arbitration . . ., the court . . ., upon being satisfied that the issue involved in such suit . . . is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had . . . .” 9 U.S.C. § 3. II. The Arbitration Clauses Pled by the Arbitration Plaintiffs are Broad and Cover their Claims against the Access Defendants All of the claims asserted against the Access Defendants relate to – and only exist – because of the duties owed by the Lessee Defendants under the Leases. As a result, those claims fall within the arbitration provisions of their leases. Those provisions read as follows: For Cobblestone and JEMSCO Any question concerning this lease or performance there under shall be ascertained and determined by three disinterested arbitrators . . . . (Am. Compl. ¶ 357.) For the Swingles ARBITRATION. In the event of a disagreement between Lessor and Lessee concerning this Lease, performance thereunder, or damages caused by Lessee’s operations, the resolution of all such disputes shall Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 11 of 24 8 be determined by arbitration in accordance with the rules of the American Arbitration Association. . . . (Ex. A at 3.) Language like that contained in these provisions “is typically construed broadly to suggest that a given dispute is arbitrable.” Miron v. BDO Seidman, LLP, 342 F. Supp. 2d 324, 330 (E.D. Pa. 2004) (referring to clauses providing for arbitration of all matters “arising under” or “arising out of” a particular agreement). Boiled down to their essence, all of Plaintiffs’ claims – whether against the Lessee Defendants, the Access Defendants, or the other defendants – involve a disagreement between Plaintiffs and the Lessee Defendants “concerning . . . performance [under the Lease]” and are “concerning” the Lease “or performance there under.” Plaintiffs base each of their causes of action on the assertion that their payments under the Leases were lower than they should have been, due to low prices and deductions made for post-production services like gathering. So, for example, Plaintiffs assert that, due to the purported antitrust and RICO conspiracies, there were “arbitrary, excessive and unreasonable deductions for purported gas gathering and transportation costs being deducted in calculating the royalties payable to Plaintiffs”. (Am. Compl. ¶ 28.) Plaintiffs’ state law tort claims against Access Midstream for conversion and civil conspiracy are also based on the purportedly “unauthorized or artificially inflated and unreasonable deductions”. (Am. Comp. ¶ 312; see also id. ¶ 324.) And, this is the same activity Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 12 of 24 9 that forms the basis of Plaintiffs’ claims against the Lessee Defendants for breach of the Leases. [E]ach of the Lessee Defendants has violated the implied covenants of good faith and fair dealing inherent in the leases under which the Plaintiffs hold royalty interests by deducting, or giving effect to the deduction of, purported post-production costs which were and are arbitrary, grossly excessive and unreasonable in amount. (Id. ¶ 27 (emphasis added); see also id. ¶ 313 (stating in the conversion claim, “Plaintiffs were entitled to receive the wrongfully deducted amounts pursuant to their leases”); id. ¶ 324 (claiming conspiracy was to “deprive Plaintiffs of the royalties which they were and are entitled to receive under the respective Leases”).) Thus, as discussed more fully in the briefing of the other defendants, each of the Arbitration Plaintiffs’ claims asserted in this action falls within the ambit of the agreement between that Plaintiff and the Lessee Defendants to arbitrate their dispute. III. The Arbitration Should Proceed as Required under the Arbitration Plaintiffs’ Leases Cobblestone and JEMSCO’s Ninth Cause of Action (Declaratory Judgment) is not asserted against the Access Defendants, as those Plaintiffs seek a declaration as to “who should decide whether they should be permitted to pursue their respective breach of contract claims against the Lessee Defendants . . . in a single arbitration proceeding . . . .” (Am. Compl. ¶ 356 (emphasis added).) However, to Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 13 of 24 10 the extent that this cause of action is asserted against the Access Defendants, it must fail. As shown by the briefing of the other parties, Cobblestone and JEMSCO contractually agreed to individual arbitrations, and the Lessee Defendants have the right to refuse to consent to consolidated arbitration proceedings, and would do so. Philadelphia Reins. Corp. v. Employers Ins., 61 F. App'x 816, 821 n.4 (3d Cir. 2003) (“a district court cannot compel consolidation of arbitration absent an explicit agreement between the parties”). Further, in this case, Cobblestone and JEMSCO are seeking a hypothetical ruling on a consolidated arbitration they have never sought. The Access Defendants join in the other defendants’ briefing and ask that the Court deny the Arbitration Plaintiffs’ request for declaratory relief. IV. The Access Defendants May Enforce the Mandatory Arbitration Provisions through Equitable Estoppel The Access Defendants consent to their participation in the arbitrations under the procedures outlined in the briefs of the other defendants, allowing each individual Arbitration Plaintiff’s claims to be resolved against the defendants in one forum. In these circumstances, where the individual Arbitration Plaintiffs have already agreed to the arbitration, they should not be allowed to prevent the Access Defendants’ consensual participation. Pennsylvania law applies the doctrine of equitable estoppel to compel arbitration when a non-signatory to an arbitration agreement agrees to participate Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 14 of 24 11 in an arbitration. Griswold v. Coventry First LLC, 762 F.3d 264, 271 (3d Cir. 2014) (citing Dodds v. Pulte Home Corp., 909 A.2d 348, 351 (Pa. Super. Ct. 2006)). “Plaintiffs, as signatories to the arbitration agreement, should not be able to avoid the requirement to arbitrate by a non-signatory when the non-signatory wants to arbitrate.” Dodds, 909 A.2d at 352 (emphasis in original) [E]quitable estoppel applies to bind a signatory [the Arbitration Plaintiffs] to arbitrate with a non-signatory [the Access Defendants] at the nonsignatory’s insistence when there is: (1) a close relationship between the entities involved; and (2) a relationship between the alleged wrongs and the nonsignatory’s obligations and duties in the contract. To satisfy the second part of the test, the non-signatory seeking enforcement of an arbitration agreement must show that the claims against them are intimately founded in and intertwined with the underlying obligations of the contract to which they were not a party. Booth, 2014 WL 3952945, at *4 (citing E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 199 (3d Cir. 2001) and Miron, 342 F. Supp. 2d at 333) (alterations and internal quotation marks omitted)). A. Estoppel Applies Under the Close Relationship-Intertwining Test 1. Plaintiffs Have Pled a Close Relationship between the Access Defendants and the Signatories to the Leases Plaintiffs have alleged a close relationship among all of the defendants. Plaintiffs repeatedly allege that the Access Defendants were affiliates of Chesapeake Energy Corporation (the parent of one of the Lessee Defendants, CALLC). (See, e.g., Am. Compl. ¶ 112 (alleging that Chesapeake Energy formed Access Midstream in 2010); id. ¶ 113 (alleging that A-MLP is the operating entity Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 15 of 24 12 for Access Midstream’s gathering business); id. ¶ 114 (alleging that Appalachia Midstream was a direct or indirect subsidiary of Chesapeake Energy); id. ¶ 227 (referring to Appalachia Midstream as an “affiliate[] of Chesapeake”).) To be sure, the Access Defendants strongly dispute the allegations made by Plaintiffs and their failure to recognize the separate corporate existence of each of the Access Defendants.8 Nevertheless, for purposes of determining the arbitrability of causes of action asserted against the Access Defendants, the Arbitration Plaintiffs cannot deny that a close relationship has been alleged. 2. Plaintiffs’ Claims are Intimately Founded in and Intertwined with the Leases Plaintiffs’ claims are intimately founded in and intertwined with the Leases. Indeed, without the Leases, their claims would not exist. As a signatory to the Leases, each of the Arbitration Plaintiffs “is estopped from avoiding arbitration with a nonsignatory [the Access Defendants] when the claims at issue rely on the terms of the agreement or assume the existence of, arise out of, or relate directly to, the written agreement.” A.G.K. Sarl v. A.M. Todd Co., No. CIV.A. 07-2727, 2008 WL 724607, at *9 (E.D. Pa. Mar. 18, 2008). Plaintiffs specifically and explicitly assert that various Access Defendants benefitted from the very deductions taken under the Leases (and which form the 8 The Access Defendants also will show separately, in any future motion to dismiss, that Plaintiffs have failed to state any plausible claim against any of them. Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 16 of 24 13 basis of their arbitrable claims against the Lessee Defendants). “As a result of . . . the resulting deduction of excessive and artificially inflated post-production costs from Plaintiffs’ royalties . . ., Plaintiffs have directly or indirectly conferred benefits on Defendants.” (Am. Compl. ¶ 375; see also id. ¶¶ 313-14 (noting that “Plaintiffs were entitled to receive the wrongfully deducted amounts pursuant to their leases” but “Defendants collected the amounts wrongfully deducted from Plaintiffs royalties through agreements . . . that resulted in the charges being assessed against Plaintiffs’ royalties by the respective Lessee Defendants”.) And, this purported benefit related directly to the purported breaches of the Leases. (Am. Compl. ¶ 27 (claiming Lessee Defendants breached Leases through the deduction of excessive post-production costs); id. ¶ 345 (same).) The Arbitration Plaintiffs are relying on their Leases to establish their claims against the Access Defendants; they cannot then repudiate the Leases when they would require arbitration. Cf. Leighton v. Chesapeake Appalachia, LLC, No. 1:13- cv-2018, 2013 WL 6191739, *9 (M.D. Pa. Nov. 26, 2013). And, this is the most efficient result. The issue of whether the Arbitration Plaintiffs were overcharged for post-production costs will necessarily be determined as part of the arbitration of their contract claims. A decision by the arbitrator(s) that the Arbitration Plaintiffs were not overcharged could eliminate all of the claims they have asserted in this case. The claims are inextricably intertwined. Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 17 of 24 14 B. Plaintiffs Have Also Alleged that the Access Defendants Have Engaged in Substantially Interdependent and Concerted Misconduct with the Lessee Defendants Courts have also found estoppel where, as here, an arbitrable claim arises from an allegation that a non-signatory has conspired with a signatory. “Estoppel may also apply where the nonsignatory is alleged to have engaged in ‘substantially interdependent and concerted misconduct’ with a signatory other than the plaintiff.” A.G.K. Sarl, 2008 WL 724607, at *10. The Access Defendants also meet this test. The Lessee Defendants and the Access Defendants are all alleged to be part of an antitrust agreement in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. (Am. Compl. ¶ 216; see also id. ¶ 227 (referring to the “agreement, combination and conspiracy among Defendants”); id. ¶ 230 (“Defendants took steps in furtherance of their contract, combination or conspiracy . . . by Access Midstream . . . providing natural gas gathering systems and services, and related natural gas post-production services . . . at supra-competitive prices.”); id. ¶ 237 (referring to the “unlawful acts committed by Defendants in furtherance of their continuing antitrust conspiracy”).) Moreover, although the Lessee Defendants are not named as defendants to the RICO claim, Plaintiffs allege that the Lessee Defendants’ deductions from Plaintiffs’ royalties was part of the “pattern of racketeering activity,” that they were part of the scheme to defraud Plaintiffs, and that they were otherwise part of Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 18 of 24 15 the RICO conspiracy. (Id. ¶¶ 263(a), 266, 295.) Similarly, in the conversion claim against Chesapeake Energy and Access Midstream, Plaintiffs allege that the funds subject to conversion were taken from them by the Lessee Defendants “as part of the coordinated conduct alleged” in the complaint. (Id. ¶¶ 317-18; see also id. ¶ 324 (basing the civil conspiracy claim on this alleged conversion).)9 Based on Plaintiffs’ own allegations, therefore, the leases were “central to the goal of the alleged conspiracy”; without those agreements, the defendants would have no gas to gather or fees to deduct. See Booth, 2014 WL 3952945, at *7 (finding estoppel where “Plaintiff alleges interdependent and concerted conduct by Defendants and the Lenders through the use of their roles in the ACH Network ‘to facilitate payday loans’ . . . [and] the Loan Agreements were central to the goal of the alleged conspiracy: without the Loan Agreements, Defendants would not have loans to facilitate.” (citations omitted)). Very simply, there is no claim asserted by Plaintiffs that is not part of their allegedly vast (albeit implausible) conspiracy involving the Lessee Defendants, their affiliates, and their midstream service provider, Appalachia Midstream, and its affiliates (the other Access Defendants). “Consequently, [the Arbitration] Plaintiffs are equitably estopped from disclaiming Defendants’ right to enforce the arbitration provisions in the . . . Agreements.” Id. 9 Again, the Access Defendants deny these allegations. The test here looks to the allegations in the Amended Complaint, not whether Plaintiffs can prove them. Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 19 of 24 16 V. Alternatively, the Court Should Stay the Arbitration Plaintiffs’ Claims against the Access Defendants while the Arbitrable Claims are Resolved If the Court only finds certain claims arbitrable, the Court should stay the case as to the non-arbitrable claims brought by the Arbitration Plaintiffs. At a minimum, this Court has discretion to stay litigation among the non-arbitrating parties pending the outcome of the arbitration, which “may be advisable.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 n.23 (1983). Some courts have gone further, stating that “the FAA’s requirement that a court stay ‘the trial of the action’ suggests that the proceedings must be stayed in their entirety, even when the action encompasses both arbitrable and non-arbitrable claims.” Miron, 342 F. Supp. 2d at 334 (noting the “substantial overlap in the charges against these various Defendants, particularly with respect to the RICO and civil conspiracy claims” when determining to stay the non-arbitrable claims). Here, a stay is appropriate. It is undisputed that the Arbitration Plaintiffs’ claims against the Lessee Defendants under the Leases are subject to the mandatory arbitration clauses referenced in the Amended Complaint. (See Am. Compl. ¶ 356 (referring to Plaintiffs “respective breach of contract claims against the Lessee Defendants, which are subject to mandatory arbitration”). Moreover, a resolution of the Arbitration Plaintiffs’ claims could result in a ruling (binding on a party to the arbitration) that would eliminate all of those Plaintiffs’ claims – i.e., a ruling that the Arbitration Plaintiffs were not overcharged deductions for post- Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 20 of 24 17 production costs. Given the federal preference for arbitration,10 the provisions of the FAA providing for a stay of the action, and the Arbitration Plaintiffs’ admitted agreement to arbitrate at least the contract claims, the Court should stay any claims of the Arbitration Plaintiffs remaining in this action until the completion of arbitration. See Berkery v. Cross Country Bank, 256 F. Supp. 2d 359, 370 (E.D. Pa. 2003) (“In this case, given that plaintiff’s claims against the other defendants all relate to the relationship between Berkery and CCB and will be impacted by the outcome of the arbitration between Berkery and CCB, the court will stay both the claims against CCB, and those against [the non-arbitration defendants] pending the outcome of the arbitration.”). CONCLUSION Based on Plaintiffs’ own pleading, their claims against the Access Defendants are intertwined with their Lease-based claims, and the Access Defendants are, according to Plaintiffs’ allegations, closely related to the Lessee Defendants. Plaintiffs are attempting to use the Leases to support the very existence of their right to contest the deductions and to support their claims and damages. Under these circumstances, and those noted above, the Arbitration Plaintiffs should be estopped from avoiding the agreement to arbitrate contained in 10 The FAA “establishes a strong federal policy in favor of arbitration. Indeed, ‘federal law presumptively favors the enforcement of arbitration agreements.’” Comrey v. Discover Fin. Servs., Inc., 806 F. Supp. 2d 778, 782 (M.D. Pa. 2011) (citations omitted). Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 21 of 24 18 those very Leases. The Access Defendants, therefore, respectfully urge the Court to compel arbitration of the claims brought against them by the Arbitration Plaintiffs under the procedures outlined by the other defendants. Alternatively, if the Court finds any of claims of the Arbitration Plaintiffs to be non-arbitrable, the Access Defendants move the Court to stay those claims pending the resolution of the arbitrable claims. Dated: May 1, 2017. HANGLEY ARONCHICK SEGAL PUDLIN & SCHILLER By: /s/ John S. Summers John S. Summers Dylan J. Steinberg One Logan Square, 27th Floor Philadelphia, PA 19301 (215) 496-7007 -and- Michael J. Gibbens (admitted pro hac vice) Susan E. Huntsman (admitted pro hac vice) CROWE & DUNLEVY A Professional Corporation 500 Kennedy Building 321 South Boston Avenue Tulsa, OK 74103-3313 (918) 592-9800 (918) 592-9801 (Facsimile) mike.gibbens@crowedunlevy.com susan.huntsman@crowedunlevy.com Attorneys for Williams Partners L.P., Williams MLP Operating, LLC, and Appalachia Midstream Services, L.L.C. Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 22 of 24 CERTIFICATE OF WORD COUNT I, John S. Summers, hereby certify that the text of the foregoing Memorandum of Law in Support of Motion to Compel Arbitration and Stay contains 4,151 words, excluding the caption, Table of Contents, Table of Authorities, signature blocks, and certificates, which is within the 5,000 words as permitted by Local Rule 7.8. /s/ John S. Summers John S. Summers Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 23 of 24 CERTIFICATE OF SERVICE I hereby certify that on this 1st day of May, 2017, I caused the foregoing document to be filed electronically using the Court’s electronic filing system, and that the filing is available to counsel for all parties for downloading and viewing from the electronic filing system. /s/ John S. Summers John S. Summers Case 4:16-cv-01346-MWB Document 54 Filed 05/01/17 Page 24 of 24 EXHIBIT A Case 4:16-cv-01346-MWB Document 54-1 Filed 05/01/17 Page 1 of 5 SULLIVAN COUNTY RECORDER OF DEEDS REGISTER OF WILLS CLERK OF ORPHANS' COURT FRANCINE DOYLE - RECORDER MAIN AND MUNCY STREETS LAPORTE, PA 18626 KELLIE CARPENTER - FIRST DEPUTY Instrument Number - 200802200 Recorded On 8/7/2008 At 2:55:22 PM * Instrument Type - LEASE Invoice Number - 26422 * Grantor - SWINGLE, JAMES JR * Grantee - CHESAPEAKE APPALACHIA * Customer - CHESAPEAKE APPALACHIA * FEES * Total Pages - 4 This is a certification page DO NOT DETACH This page is now part of this legal document. RETURN DOCUMENT TO: CHESAPEAKE APPALACHIA P0 BOX 6070 CHARLESTON, WV 25362 I hereby CERTIFY that this document is recorded in the Recorder's Office of Sullivan County, Pennsylvania. Recorder Of Deeds Register Of Wills Clerk Of Orphans Court (-265 3Z3-7ôO SidlMrn County Court House &It 1894 * - Information denoted by an asterisk may change during the verification process and may not be reflected on this page. 0023E8 STATE WRIT TAX $0.50 JCS/ACCESS TO JUSTICE $10.00 RECORDING FEES $13.00 COUNTY ARCHIVES FEE $2 .00 ROD ARCHIVES FEE $3. 00 TOTAL PAID $28.50 Case 4:16-cv-01346-MWB Document 54-1 Filed 05/01/17 Page 2 of 5 Property Tax Parcel Identification Number: 04-000-.0000 (0.840) and is bounded formerly or currently as follows: On the North by lands of On the East by lands of On the South by lands of On the West by lands of £,/ie. U,-. County Assessment C1ION OF PARCEL NUMBER )OES NOT CERTIFY THE .&N TENTS OF THIS DOCUMENT including lands acquired from Lawrence Rohe and Alverta M. Rohe, husband and wife; Melvin Rohe and Elizabeth S. Rohe, husband and wife, by virtue of deed dated June 5, 1979 and recorded in Deed Book 92, at Page 1147, and described for the purposes of this agreement as containing a total of QQ Leasehold acres, whether actually more or less, and including contiguous lands owned by Lessor. This Lease also covers and includes, in addition to that above described, all land, if any, contiguous or adjacent to or adjoining the land above described and (a) owned or claimed by Lessor, by limitation, prescription, possession, reversion or unrecorded instrument or (b) as to which Lessor has a preference right of acquisition. Lessor agrees to execute any supplemental instrument requested by Lessee for a more complete or accurate description of said land. LEASE TERM. This Lease shall remain in force for a primary term of () years from 12:00 A.M. March 29. 2008(effective date) to 11:59 P.M. March 28. 2013(last day of primary term) and shall continue beyond the primary term as to the entirety of the Leasehold if any of the following is satisfied: (i) operations are conducted on the Leasehold or lands pooled/unitized therewith in search of oil, gas, or their constituents, or (ii) a well deemed by Lessee to be capable of production is located on the Leasehold or lands pooled/unitized therewith, or (iii) oil or gas, or their constituents, are produced from the Leasehold or lands pooled/unitized therewith, or (iv) if the Leasehold or lands pooled/unitized therewith is used for the underground storage of gas, or for the protection of stored gas, or (v) if prescribed payments are made, or (vi) if Lessee's operations are delayed, postponed or interrupted as a result of any coal, stone or other mining or mining related operation under any existing and effective lease, permit or authorization covering such operations on the leased premises or on other lands affecting the leased premises, such delay will automatically extend the primary or secondary term of this oil and gas lease without additional compensation or performance by Lessee for a period of time equal to any such delay, postponement or interruption. If there is any dispute concerning the extension of this Lease beyond the primary term by reason of any of the alternative mechanisms specified herein, the payment to the Lessor of the prescribed payments provided below shall be conclusive evidence that the Lease has been extended beyond the primary term. NO AUTOMATIC TERMINATION OR FORFEITURE. CONSTRUCTION OF LEASE: The language of this Lease (including, but not limited to, the Lease Term and Extension of Term clauses) shall never be read as language of special limitation. This Lease shall be construed against termination, forfeiture, cancellation or expiration and in favor of giving effect to the continuation of this Lease where the circumstances exist to maintain this Lease in effect under any of the alternative mechanisms set forth above. In connection therewith, (i) a well shall be deemed to be capable of production if it has the capacity to produce a profit over operating costs, without regard to any capital costs to drill or equip the well, or to deliver the oil or gas to market, and (ii) the Lessee shall be deemed to be conducting operations in search of oil or gas, or their constituents, if the Lessee is engaged in geophysical andother exploratory work including, but not limited to, activities to drill an initial well, to drill a new well, or to rework, stimulate, deepen, sidetrack, frac, plug back in the same or different formation or repair a well or equipment on the Leasehold or any lands pooled/unitized therewith (such activities shall include, but not be limited to, performing any preliminary or preparatory work necessary for drilling, conducting internal technical analysis to initiate and/or further develop a well, obtaining permits and approvals associated therewith and may include reasonable gaps in activities provided that there is a continuum of activities showing a good faith effort to develop a well or that the cessation or interruption of activities was beyond the control of Lessee, including interruptions caused by the acts of third parties over whom Lessee has no control or regulatory delays associated with any approval process required for conducting such activities). LIMITATION OF FORFEITURE: This Lease shall never be subject to a civil action or proceeding to enforce a claim of termination, cancellation, expiration or forfeiture due to any action or inaction by the Lessee, including, but not limited to making any prescribed payments authorized under the terms of this Leqsa, unless the Lessee has received written notice of Lessor's demand and thereafter fails or refuses to satisfy or provide justification responding to Lessor's demand within 60 days from the receipt of such notice. if Lessee timely responds to Lessor's demand, but in good faith disagrees with Lessor's position and sets forth the reasons therefore, such a response shall be deemed to satisfy this provision, this Lease shall continue in full force and effect and no further damages (or other claims for relief) will accrue in Lessor's favor during the pendency of the dispute, other than claims for payments that may be due under the terms of this Lease. PAYMENTS TO LESSOR. In addition to the bonus paid by Lessee for the execution hereof, Lessee covenants to pay Lessor, proportionate to Lessor's percentage of ownership, as follows: (A) DELAY RENTAL: To pay Lessor as Delay Rental, after the first year, at the rate of five dollars ($5.00) per net acre per year payable in advance. The parties hereto agree that this is a Paid-Up Lease with no further Delay Rental and/or Delay in Marketing payments due to Lessor during the primary term hereof. (B) ROYALTY: To pay Lessor as Royalty, less all taxes, assessments, and adjustments on production from the Leasehold, as follows: OIL: To deliver to the credit of Lessor, free of cost, a Royalty of the equal fifteen percent (15%) part of all oil and any constituents thereof produced and marketed from the Leasehold. GAS: To pay Lessor an amount equal to fifteen percent (15%) of the revenue realized by Lessee for all gas and the constituents thereof produced and marketed from the Leasehold, less the cost to transport, treat and process the gas and any losses in volumes to point of measurement that determines the revenue realized by Lessee. Lessee may withhold Royalty payment until such time as the total withheld exceeds fifty dollars ($50.00). (C) DELAY IN MARKETING: In the event that Lessee drills a well on the Leasehold or lands pooled/unitized therewith that Lessee deems to be capable of production, but does not market producible gas, oil, or their constituents therefrom and there is no other basis for extending PAID-UP OIL & GAS LEASE Lease No. i?5539O 6/07 - PA This Lease made this 29th day of March, 2008, by and between: James Swingle Jr. and Susan Swingle, husband and wife, RR 4 Box 4195 Dushore PA. 18614 hereinafter collectively called "Lessor" CHESAPEAKE APPALACHIA, L.L.C., an Oklahoma limited liability company, 900 Pennsylvania Ave., P. 0. Box 6070, Charleston, WV 25362, hereinafter called "Lessee". W1TNESSETH, that for and in consideration of the premises, and of the mutual covenants and agreements hereinafter set forth, the Lessor and Lessee agree as follows: LEASING CLAUSE. Lessor hereby leases exclusively to Lessee all the oil and gas (including, but not limited to coal seam gas, coalbed methane gas, coalbed gas, methane gas, gob gas, occluded methane/natural gas and all associated natural gas and other hydrocarbons and non-hydrocarbons contained in, associated with, emitting from, or produced/originating within any formation, gob area, mined-out area, coal seam, and all communicating zones), and their liquid or gaseous constituents, whether hydrocarbon or non-hydrocarbon, underlying the land herein leased, together with such exclusive rights as may be necessary or convenient for Lessee, at its election, to explore for, develop, produce, measure, and market production from the Leasehold, and from adjoining lands, using methods and techniques which are not restricted to current technology, including the right to conduct geophysical and other exploratory tests; to drill, maintain, operate, cease to operate, plug, abandon, and remove wells; to use or install roads, electric power and telephone facilities, and to construct pipelines with appurtenant facilities, including data acquisition, compression and collection facilities for use in the production and transportation of products from the Leasehold or from neighboring lands across the Leasehold, to use oil, gas, and non-domestic water sources, free of cost, to store gas of any kind underground, regardless of the source thereof, including the injecting of gas therein and removing the same therefrom; to protect stored gas; to operate, maintain, repair, and remove material and equipment. DESCRIPTION. The Leasehold is located in the Township of Forks, in the County of Sullivan, in the Commonwealth of Pennsylvania, and described as follows: Case 4:16-cv-01346-MWB Document 54-1 Filed 05/01/17 Page 3 of 5 this Lease, Lessee shall pay after the primary term and until such time as marketing is established (or Lessee surrenders the I ise) a Delay in Marketing payment equal in amount and frequency to the annual Delay Rental payment, and this Lease shall remain in full force and effect to the same extent as payment of Royalty. SHUT-IN: In the event that production of oil, gas, or their constituents is interrupted and not marketed for a period of twelve months, and there is no producing well on the Leasehold or lands pooled/unitized therewith, Lessee shall thereafter, as Royalty for constructive production, pay a Shut-in Royalty equal in amount and frequency to the annual Delay Rental payment until such time as production is re-established (or lessee surrenders the Lease) and this Lease shall remain in full force and effect. During Shut-in, Lessee shall have the right to rework, stimulate, or deepen any well on the Leasehold or to drill a new well on the Leasehold in an effort to re-establish production, whether from an original producing formation or from a different formation. In the event that the production from the only producing well on the Leasehold is interrupted for a period of less than twelve months, this Lease shall remain in full force and effect without payment of Royalty or Shut-in Royalty. DAMAGES: Lessee will remove unnecessary equipment and materials and reclaim all disturbed lands at the completion of activities, and Lessee agrees to repair any damaged improvements to the land and pay for the loss of growing crops or marketable timber. MANNER OF PAYMENT: Lessee shall make or tender all payments due hereunder by check, payable to Lessor, at Lessor's last known address, and Lessee may withhold any payment pending notification by Lessor of a change in address. Payment may be tendered by mail or any comparable method (e.g., Federal Express), and payment is deemed complete upon mailing or dispatch. Where the due date for any payment specified herein falls on a holiday, Saturday or Sunday, payment tendered (mailed or dispatched) on the next business day is timely. (0) CHANGE IN LAND OWNERS1ffl:: Lessee shall not be bound by any change in the ownership of the Leasehold until furnished with such documentation as Lessee may reasonably require. Pending the receipt of documentation, Lessee may elect either to continue to make or withhold payments as if such a change had not occurred. TITLE: If Lessee receives evidence that Lessor does not have title to all or any part of the rights herein leased, Lessee may immediately withhold payments that would be otherwise due and payable hereunder to Lessor until the adverse claim is fully resolved. LIENS: Lessee may at its option pay and discharge any past due taxes, mortgages, judgments, or other liens and encumbrances on or against any land or interest included in the Leasehold; and Lessee shall be entitled to recover from the debtor, with legal interest and costs, by deduction from any future payments to Lessor or by any other lawful means. CHARACTERIZATION OF PAYMENTS: Payments set forth herein are covenants, not special limitations, regardless of the manner in which these payments may be invoked. Any failure on the part of the Lessee to timely or otherwise properly tender payment can never result in an automatic termination, expiration, cancellation, or forfeiture of this Lease. Lessor recognizes and acknowledges that oil and gas lease payments, in the form of rental, bonus and royalty, can vary depending on multiple factors and that this Lease is the product of good faith negotiations. Lessor hereby agrees that the payment terms, as set forth herein, and any bonus payments paid to Lessor constitute full consideration for the Leasehold. Lessor further agrees that such payment terms and bonus payments are final and that Lessor will not seek to amend or modify the lease payments, seek additional consideration or register any complaint based upon any differing terms which Lessee has or will negotiate with any other lessor/oil and gas owner. PAYMENT REDUCTIONS: If Lessor owns a lesser interest in the oil or gas than the entire undivided fee simple estate, then the rentals (except for Delay Rental payments as set forth above), royalties and shut-in royalties hereunder shall be paid to Lessor only in the proportion which Lessor's interest bears to the whole and undivided fee. UNITIZATION AND POOLING. Lessor grants Lessee the right to pool, unitize, or combine all or parts of the Leasehold with other lands, whether contiguous or not contiguous, leased or unleased, whether owned by Lessee or by others, at a time before or after drilling to create drilling or production units either by contract right or pursuant to governmental authorization. Pooling or unitizing in one or more instances shall not exhaust Lessee's pooling and unitizing rights hereunder, and Lessee is granted the right to change the size, shape, and conditions of operation or payment of any unit created. Lessor agrees to accept and receive out of the production or the revenue realized from the production of such unit, such proportional share of the Royalty from each unit well as the number of Leasehold acres included in the unit bears to the total number of acres in the unit. Otherwise, as to any part of the unit, drilling, operations in preparation for drilling, production, or shut-in production from the unit, or payment of Royalty, Shut-in Royalty, Delay in Marketing payment or Delay Rental attributable to any part of the unit (including non-Leasehold land) shall have the same effect upon the terms of this Lease as if a well were located on, or the subject activity attributable to, the Leasehold. In the event of conflict or inconsistency between the Leasehold acres ascribed to the Lease and the local property tax assessment calculation of the lands covered by the Lease, Lessee may, at its option, rely on the latter as being determinative for the purposes of this paragraph. FACILITIES. Lessee shall not drill a well within 200 feet of any structure located on the Leasehold without Lessor's written consent. Lessor shall not erect any building or structure, or plant any trees within 200 feet of a well or within 25 feet of a pipeline without Lessee's written consent. Lessor shall not improve, modify, degrade, or restrict roads and facilities built by Lessee without Lessee's written consent. CONVERSION TO STORAGE. Lessee is hereby granted the right to convert the Leasehold or lands pooled/unitized therewith to gas storage. At the time of conversion, Lessee shall pay Lessor's proportionate part for the estimated recoverable gas remaining in the well drilled pursuant to this Lease using methods of calculating gas reserves as are generally accepted by the natural gas industry and, and in the event that all wells on the Leasehold and/or lands pooled/unitized therewith have permanently ceased production, Lessor shall be paid a Conversion to Storage payment in an amount equal to Delay Rental for as long thereafter as the Leasehold or lands pooled/unitized therewith is/are used for gas storage or for protection of gas storage; such Conversion to Storage payment shall first become due upon the next ensuing Delay Rental anniversary date. The use of any part of the Leasehold or lands pooled or unitized therewith for the underground storage of gas, or for the protection of storedgas will extend this I ease beyond the primary term as to all rights granted by this Lease, including but not limited to production rights, regardless of whether the production and storage rights are owned together or separately. TITLE AND INTERESTS. Lessor hereby warrants generally and agrees to defend title to the Leasehold and covenants that Lessee shall have quiet enjoyment hereunder and shall have benefit of the doctrine of after acquired title. Should any person having title to the Leasehold fail to execute this Lease, the Lease shall nevertheless be binding upon all persons who do execute it as Lessor. LEASE DEVELOPMENT. There is no implied covenant to drill, prevent drainage, further develop or market production within the primary term or any extension of term of this Lease. There shall be no Leasehold forfeiture, termination, expiration or cancellation for failure to comply with said implied covenants. Provisions herein, including, but not limited to the prescribed payments, constitute full compensation for the privileges herein granted. COVENANTS. This Lease and its expressed or implied covenants shall not be subject to termination, forfeiture of rights, or damages due to failure to comply with obligations if compliance is effectively prevented by federal, state, or local law, regulation, or decree, or the acts God and/or third parties over whom Lessee has no control. RIGHT OF FIRST REFUSAL. If at any time within the primary term of this Lease or any continuation or extension thereof, Lessor receives any bona fide offer, acceptable to Lessor, to grant an additional lease ("Top Lease") covering all or part of the Leasehold, Lessee shall have the continuing option by meeting any such offer to acquire a Top Lease on equivalent terms and conditions. Any offer must be in writing and must set forth the proposed Lessee's name, bonus consideration and royalty consideration to be paid for such Top Lease, and include a copy of the lease form to be utilized reflecting all pertinent and relevant terms and conditions of the Top Lease. Lessee shall have fifteen (15) days after receipt from Lessor of a complete copy of any such offer to advise Lessor in writing of its election to enter into an oil and gas lease with Lessor on equivalent terms and conditions. If Lessee fails to notify Lessor within the aforesaid fifteen (15) day period of its election to meet any such bona fide offer, Lessor shall have the right to accept said offer. Any Top Lease granted by Lessor in violation of this provision shall be null and void. ARBITRATION. In the event of a disagreement between Lessor and Lessee concerning this Lease, performance thereunder, or damages caused by Lessee's operations, the resolution of all such disputes shall be determined by arbitration in accordance with the rules of the American Arbitration Association. All fees and costs associated with the arbitration shall be borne equally by Lessor and Lessee. ENTIRE CONTRACT. The entire agreement between Lessor and Lessee is embodied herein. No oral warranties, representations, or promises have been made or relied upon by either party as an inducement to or modification of this Lease. SURRENDER. Lessee, at any time, and from time to time, may surrender and cancel this Lease as to all or any part of the Leasehold by recording a Surrender of Lease and thereupon this Lease, and the rights and obligations of the parties hereunder, shall terminate as to the part so surrendered; provided, however, that upon each surrender as to any part of the Leasehold, Lessee shall have reasonable and convenient easements for then existing wells, pipelines, pole lines, roadways and other facilities on the lands surrendered. SUCCESSORS. All rights, duties, and liabilities herein benefit and bind Lessor and Lessee and their heirs, successors, and assigns. FORCE MAJEURE. When drilling, reworking, production or other operations hereunder, or Lessee's fulfillment of its obligations hereunder are prevented or delayed by such laws, rules, regulations or orders, or by inability to obtain necessary permits, equipment, services, Case 4:16-cv-01346-MWB Document 54-1 Filed 05/01/17 Page 4 of 5 U material, water, electricity, fuel, access or easements, or by fire, flood, adverse weather conditions, war, sabotage, rebellion, insurrection, riot, strike or labor disputes, or by inability to obtain a satisfactory market for production or failure of purchasers or carriers to take or transport such production, or by any other cause not reasonably within Lessee's control, this Lease shall not terminate because of such prevention or delay, and, at Lessee's option, the period of such prevention or delay shall be added to the term hereof. Lessee shall not be liable for breach of any provisions or implied covenants of this Lease when drilling, production or other operations are so prevented or delayed. SEVERABILITY. If any provision of this Lease is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. COUNTERPARTS. This Lease may be executed in one or more counterpa.rts, each of which will be deemed to be an original copy of this Lease and all of which, when taken together, will be deemed to constitute one and the same agreement. IN Wrl'NESS WHEREOF, Lessor hereunto sets hand and seal. Witness My Commission Expires: COMMONWEALTH OF PENNSYLVANIA Notarial Seal Patncia M. Sanabria, Notary Public Burlington Boro, Bradford County My Commission Expwes Se. 28,2009 Mmbe' enn"Iarir. Absociation of Notaries Document prepared by: Chesapeake Appalachia, LLC., P.O. Box 6070, Charleston, West Virginia 25362-0070 Recorder: Return to Chesapeake Appalachia, L.L.C., Land Dept., P. 0. Box 6070, Charleston, WV 25362-0070 es Swingle Jr. Witness A A A A I (Seal) Susan Swingle Witness (Seal) ACKNOWLEDGMENT STATE OF COUNTY OF On this the o*'-day of M'..&4_ , 2008, before me, the undersigned authority, personally appeared James Swingle Jr. and Suasan Swingle, husband and wife, who, being duly sworn according to law, depose and say that they executed the foregoing instrument for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. (Seal) Signature/Notary Public NamelNotaiy Public (print): â/&L 'Y ñóit Case 4:16-cv-01346-MWB Document 54-1 Filed 05/01/17 Page 5 of 5 UNPUBLISHED OPINIONS Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 1 of 29 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2014 WL 3952945 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. Patricia BOOTH v. BMO HARRIS BANK, N.A., et al. Civil Action No. 13–5968. | Signed Aug. 11, 2014. Attorneys and Law Firms Hassan A. Zavareei, Tycko & Zavareei LLP, Washington, DC, Jeffrey M. Ostrow, Kopelowitz Ostro PA, Ft Lauderdale, FL, John Austin Moore, Steve Six, Stueve Siegel Hanson LLP, Kansas City, MO, Natalie Finkelman Bennett, James C. Shah, Shepherd Finkelman Miller & Shah LLC, Media, PA, for Patricia Booth. Debra Bogo-Ernst, Lucia Nale, Mayer Brown LLP, Chicago, IL, Lisa C. Wood, Marc C. Singer, Saiber, LLC, Florham Park, NJ, Elizabeth Balassone, James R. McGuire, Rita F. Lin, Morrison & Foerster LLP, San Francisco, CA, Marc Durant, Durant & Durant, James T. Moughan, Britt, Hankins & Moughan, Philadelphia, PA, Todd A. Noteboom, Minneapolis, MN, for BMO Harris Bank, N.A., et al. MEMORANDUM SURRICK, District Judge. *1 Presently before the Court is Defendant First International Bank & Trust's Motion to Compel Arbitration (ECF No. 34), Defendant BMO Harris Bank, N.A.'s Motion to Compel Arbitration (ECF No. 40), and Defendant North American Banking Company's Motion to Compel Arbitration (ECF No. 46). For the following reasons, Defendants' Motions will be granted. I. BACKGROUND Plaintiff allegedly obtained three “payday” loans at usurious rates from three online lenders. (See Compl., ECF No. 1.) A payday loan is a small, high fee, short- term loan traditionally made to consumers in anticipation of an upcoming paycheck. (Id. at ¶ 23.) In this case, the payday loans had interest rates of 30%. (Id. at ¶¶ 79, 83.) To obtain a payday loan, a borrower must provide the lender with security for the loan amount by giving the lender a personal check or authorizing the lender to electronically debit the borrower's account. (Id.) On May 30, 2013, Plaintiff obtained a payday loan from One Click Cash by completing an online application. (Id. at ¶ 82.) As part of the transaction, Plaintiff authorized One Click Cash to debit her checking account with Wells Fargo to repay the loan. (Id.) One Click Cash initiated a debit transaction on July 5, 2013. (Id. at ¶ 85.) Plaintiff obtained a second payday loan on July 10, 2013, this time from a different online lender, My Cash Advance, and she again authorized the lender to debit her checking account. (Id. at ¶ 78.) My Cash Advance debited Plaintiff's checking account on July 19, 2013. (Id. at ¶ 81.) Finally, on July 24, 2013, Plaintiff obtained a third payday loan from a third lender, Plain Green. (Id. at ¶ 74.) Plaintiff authorized Plain Green to debit her checking account, and Plain Green initiated a debit transaction on August 2, 2013. (Id. at ¶ 77.) To electronically deposit the loan proceeds and then to initiate the debit transactions of Plaintiff's checking account for repayments, One Click Cash, My Cash Advance, and Plain Green (collectively the “Lenders”) needed access to the Automated Clearing House (“ACH”) Network. (Id. at ¶ 6–7.) 1 The Defendants here are Originating Depository Financial Institutes (“ODFIs”) that are members of and have access to the ACH Network. (Compl. at ¶ 6.) For a fee, Defendants allegedly provided the Lenders with the access they needed to the ACH Network by “originating” the debits and credits on the payday loans. (Id.) Specifically, First International Bank & Trust (“FIB”) originated transactions in connection with the May 30 loan from One Click Cash; BMO Harris Bank, N.A. (“BMO”) originated transactions in connection with the July 10 loan from My Cash Advance; and North American Banking Company (“NABC”) originated transactions in connection with the July 24 loan from Plain Green. (Id. at ¶ ¶ 77, 81, 85.) Plaintiff claims that by providing the Lenders access to the ACH Network, Defendants violated the Racketeering Influenced and Corrupt Organization Act (“RICO”) by knowingly participating in an enterprise's affairs through “collection of unlawful debt.” Defendants allegedly knew that the Lenders were loaning at usurious rates but still allowed them to access the ACH Network. In addition, Plaintiff alleges that Defendants each conspired with the Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 2 of 29 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 Lenders to violate RICO. Lastly, Plaintiff claims that each Defendant violated various Pennsylvania state laws. 1 The ACH Network is a processing system in which financial institutions accumulate ACH transactions throughout the day for later batch processing. The ACH transactions are the credits and debits of funds from a financial account necessary for an exchange between two parties. (Compl.¶ 31.) *2 When Plaintiff obtained each of her payday loans, she signed loan agreements with the Lender that provided the loan (collectively “Loan Agreements”). 2 All the Loan Agreements contain arbitration provisions. First, the loan application and loan agreement with One Click Cash contains the following arbitration provision: 2 Although Plaintiff did not attach the Loan Agreements to the Complaint, Defendants provided them as exhibits attached to declarations that were made by individuals who had access to the Lender's records of customer loan agreements. We can consider these documents at this stage because they are integral to and explicitly relied upon in the Complaint: Plaintiff references the terms of the Loan Agreements throughout the Complaint and cites to Defendants' exhibits throughout her oppositions. In re: Burlington Coat Factory Securities Litig., 114 F.3d 1410, 1426 (3d Cir.1997) (stating documents that are integral to or explicitly relied upon in the complaint may be considered on a motion to dismiss without converting the motion into one for summary judgment). In addition, Plaintiff does not challenge the “validity and scope” of the arbitration provisions in the Loan Agreements. (Pl.'s FIB Resp.5–6; Pl.'s BMO Resp. 5; Pl.'s NABC Resp. 5) “We” or “Us” are SFS, Inc. dba OneClickCash and its directors, officers, employees, authorized representatives, agents and successors in interest acting within the scope of their authority. .... If any dispute arises that We cannot resolve to your satisfaction, You and We hereby agree that we shall arbitrate that dispute in accordance with the terms of this Arbitration Provision. .... The word “dispute” and “disputes” are given the broadest possible meaning and include, without limitation and whether past, present or future: (a) all claims, disputes or controversies arising from or relating directly or indirectly to the signing of this Loan Agreement, including the validity and scope of this Arbitration Provision, or any claim, dispute, or controversy relating to the interpretation, applicability, enforceability or formation of this Loan Agreement, including, but not limited to any claim that all or any part of this Loan Agreement or this Arbitration Provision is void, voidable, invalid or unenforceable; (b) all federal or state law claims arising from or relating directly or indirectly to this Loan agreement ...; (c) all counterclaims, cross-claims and third party claims; (d) all common law claims, based upon contract, tort, fraud, or other intentional torts; (e) all claims based upon a violation of any state or federal constitution, statute or regulation ...; (g) all claims asserted by You individually against Us, and/or any of our agents, consultants, or servicers and/or any of their employees, directors, officers, shareholders, managers, members, parents, subsidiaries, or any affiliated entities (hereinafter collectively referred to as “related third parties” ) ... (One Click Cash Agmt., Lin Decl. Ex. 1A, ECF No. 35 (emphasis added).) FIB originated the transactions related to the One Click Cash Loan Agreement. Next, the loan agreement with My Cash Advance similarly reads: [T]he words “dispute and “disputes” are given the broadest possible meaning and include without limitations (a) all claims, disputes, or controversies arising from or relating directly or indirectly to the signing of this Arbitration Provision, the validity and scope of this Arbitration Provision and any claim or attempt to set aside this Arbitration Provision; (b) all federal or state law claims, disputes or controversies, arising from or relating directly or indirectly to the Loan Agreement ... (c) all counterclaims, cross- claims and third-party claims; (d) all common law claims, based upon contract, tort, fraud, or other intentional torts; ... (g) all claims asserted by You individually against Us and/or any of Our employees, agents, directors, officers, shareholders, governors, managers, members, parents company or affiliated Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 3 of 29 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 entities (hereinafter collectively referred to as “related third parties”) ... (emphasis added) *3 .... YOU AND WE WOULD HAVE HAD A RIGHT OR OPPORTUNITY TO LITIGATE DISPUTES THROUGH A COURT AND HAVE A JUDGE OR JURY DECIDE THE DISPUTES BUT HAVE AGREED INSTEAD TO RESOLVE DISPUTES THROUGH BINDING ARBITRATION. (emphasis in original) (My Cash Advance Agmt., Raines Decl. Ex. 5, ECF No. 41.) BMO originated the transactions related to the My Cash Advance Agreement. Finally, the loan agreement with Plain Green reads: You and we ... agree that any Dispute ... will be resolved by Arbitration. .... [T]he terms “we,” “our,” and “us” mean Lender, Lender's affiliated companies, the Tribe, Lender's servicing and collection representatives and agents, and each of their respective agents, representatives, employees, officers, directors, members, managers, attorney, successors, predecessors, and assigns. .... [T]he term Dispute is to be given its broadest possible meaning and includes, without limitation, all claims or demands (whether past, present, or future) ... based on any legal or equitable theory (contract, tort, or otherwise) and regardless of the type of relief sought.... A Dispute includes by way of example and without limitation, any claim based upon tribal, federal or state constitution, statute, ordinance, regulation, or common law, and any issue concerning the validity, enforceability, or scope of this Agreement or this Agreement to Arbitrate. (Plain Green Agmt., Schwingler Decl. Ex. 1, ECF No. 46 (emphasis added).) NABC originated the transactions related to the Plain Green Agreement. Defendants have each filed a Motion to Compel Arbitration under the above arbitration provisions. FIB's Motion was filed on December 11, 2013 (FIB's Mot., ECF No. 34), BMO's Motion was filed on December 13, 2013 (BMO's Mot., ECF No. 40), and NABC's Motion was filed on December 24, 2013 (NABC's Mot., ECF No. 46). Plaintiff responded to FIB's Motion on January 21, 2014 (Pl.'s Resp. FIB, ECF No. 50) and to BMO's Motion and NABC's Motion on January 30, 2014 (Pl.'s Resp. BMO, ECF No. 53; Pl.'s Resp. NABC, ECF No. 54). On February 2, 2014, FIB filed a Reply. (FIB's Reply, ECF No. 56.) On February 20, 2014, BMO and NABC also filed Replies. (BMO Reply, ECF No. 62; NABC's Reply, ECF No. 58.) The parties have continued to file notices of supplemental authority. II. LEGAL STANDARD The applicable legal standard for a motion to compel arbitration depends upon the facts and circumstances of the case. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 776 (3d Cir.2013). “[W]hen it is apparent, based on the face of a complaint, and documents relied upon in the complaint, that certain of a party's claims are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under a Rule 12(b) (6) standard without discovery's delay.” Id.; Somerset Consulting, LLC v. United Capital Lenders, LLC, 832 F.Supp.2d 474, 482 (E.D.Pa.2011). Here, the Loan Applications indicate that Plaintiff agreed to arbitrate disputes with the Lenders. Plaintiff does not contest the validity of the arbitration provisions in the Loan Applications. Rather, she claims that Defendants cannot enforce the arbitration provisions. The Rule 12(b)(6) standard is appropriate. *4 Under this standard, the District Court must “accept all factual allegations in the complaint as true and give the pleader the benefit of all reasonable inferences that can be fairly drawn therefrom.” Fed.R.Civ.P. 12(b)(6). The court cannot accept conclusory allegations. Fowler v. UPMC Shadyside, 578 F.3d 203, 210–11 (3d Cir.2009). Viewing the facts in this light, a motion to compel arbitration will be granted “only where there is no genuine issue of fact concerning the formation of the agreement to arbitrate .” Kirleis v. Dickie, McCamey & Chilcote, P. C., 560 F.3d 156, 159 (3d Cir.2009) (internal quotation marks omitted). III. DISCUSSION Pursuant to the Federal Arbitration Act (“FAA”), arbitration clauses in contracts that involve commerce are “valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. This establishes a strong Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 4 of 29 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 federal policy favoring arbitration. Moses H. Cone Mem ‘l Hosp. v. Mercy Constr. Corp, 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). However, a dispute is not automatically submitted to arbitration upon the demand of a party to the dispute. Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584 F.3d 513, 523 (3d Cir.2009). First, a court must determine that there is an agreement to arbitrate. Id. “Because an arbitrator's authority derives solely from the parties' agreement to submit their disputes to arbitration, a party cannot be compelled to submit a dispute to arbitration unless it has agreed to do so.” Invista S.a.r.l. v. Rhodia, S.A., 625 F.3d 75, 84 (3d Cir.2010) (quotation omitted); see also Guidotti, 716 F.3d at 771. Here, Plaintiff did not contract with Defendants but with the Lenders who are not parties to this action. However, this does not mean Defendants cannot enforce the arbitration provisions in the Loan Agreements because “non-signatories may be bound to arbitration agreements under certain very limited circumstances.” Rhodia, 625 F.3d at 84. There are five theories upon which non-signatories can be bound: (1) incorporation by reference; (2) assumption; (3) agency; (4) veil-piercing/ alter ego; and (5) estoppel. Id. Defendants argue that agency and estoppel are applicable to this case. In addition, Defendants argue that they can enforce the arbitration provisions as third-party beneficiaries to the Loan Agreements. Plaintiff responds that the arbitration provisions should not be enforced because the Loan Agreements are illegal and Defendants have unclean hands. 3 3 FIB and NABC argue that based on the language of the Loan Agreements, the issue of arbitrability should be decided by an arbitrator. “The Court will not assume that a party has agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that it did so.” Sarl v. A.M. Todd Co., No. 07–2727, 2009 WL 2526432, at *4 (E.D.Pa. Aug.18, 2009) (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83–84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002)). Here, there is no agreement between Plaintiff and Defendants, and Defendants as “non- signator[ies] cannot be bound to arbitrate unless [they are] bound under traditional principles of contract and agency law to be akin to a signatory of the underlying agreement.” Rhodia, 625 F.3d at 84. Therefore, even if the issue of arbitrability must be submitted to the arbitrator under the language of the Loan Agreements, we still must first determine whether Defendants are bound by and can enforce the arbitration provisions. See Aluminium Bahrain B.S.C. v. Dahdaleh,–F. Supp.2d-, No. 8–299, 2014 WL 1681494, at *8 (W.D.Pa. Apr.28, 2014) (determining whether non-signatory could enforce arbitration agreement before determining whether the parties agreed to arbitrate arbitrability). A. Equitable Estoppel 4 4 Plaintiff claims that under Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009), “[a] non-signatory to an arbitration agreement can only compel parties to arbitrate under the FAA when ‘the relevant state contract law allows him to enforce the agreement.’ ” (Pl.'s Resp. FIB 19; Pl.'s Resp. BMO 15; Pl.'s Resp. NABC 16 (all quoting Arthur Andersen, 556 U.S. at 632).) Plaintiff claims that the relevant contract law here is the law of the tribal nations where the Lenders are based, as set out in the choice of law provisions of the Loan Agreements. Yet, Plaintiff does not claim there is a conflict between Pennsylvania law and the applicable tribal law. Instead, she argues that Defendants' estoppel argument fails because Defendants have not established whether estoppel is available under the applicable tribal law. Plaintiff's argument is misguided. The choice-of-law question is relevant only to the extent that the foreign law conflicts with the law of the forum. Berg Chilling Sys., v. Hall Corp., 435 F.3d 455, 462 (3d Cir.2006) (“According to conflicts of laws principles, where the laws of the two jurisdictions would produce the same result on the particular issue presented, there is a ‘false conflict,’ and the Court should avoid the choice-of- law question.” (citations omitted)). And when foreign law is at issue, “it is incumbent upon the parties to carry both the burden of raising the issue that foreign law may apply in an action, and the burden of adequately proving foreign law to enable the court to apply it in a particular case.” Mzamane v. Winfrey, 693 F.Supp.2d 442, 469 (E.D.Pa.2010) (citing Bel– Ray Co., Inc. v. Chemrite Ltd., 181 F.3d 435, 440 (3d Cir.1999)). When the parties do not satisfy these burdens, the law of the forum applies. Id.; see also Walter v. Neth. Mead N.V., 514 F.2d 1130, 1137 n. 14 (3d Cir.1975) (concluding that although the law of the Netherlands ostensibly applied, where a party did not conclusively establish the foreign law, the court should assume it is consistent with the law of the forum). Plaintiff has not alleged that any true conflict exists, and according to FIB and NACB, no Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 5 of 29 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 conflict does exist because the applicable tribal law allows estoppel. In addition, FIB and BMO state that the FAA-not tribal law-applies to the arbitration provisions in the One Click Cash and My Cash Advance Loan Agreements. It is clear that the parties have not carried their burden of proving the tribal law such that we can apply here. We therefore will apply Pennsylvania law to the extent that it, and not the FAA, is applicable. We note that this outcome is consistent with the parties' submissions to this Court. Although Plaintiff appears to be making a choice-of-law argument, all of Plaintiff's claims and arguments in opposition to Defendants' Motions other than the choice-of-law argument assume that Pennsylvania law applies. Defendants also agreed to the application of Pennsylvania law. Thus, it appears that the parties have agreed that Pennsylvania law applies. We will not disturb that agreement. See USA Mach. Corp. v. CSC, Ltd., 184 F.3d 257, 263 (3d Cir.1999) (assuming without deciding that Pennsylvania law governed diversity suit where parties agreed on choice of law). There are two theories of equitable estoppel that can bind a non-signatory to an arbitration clause. E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 199 (3d Cir.2001). First, “[e]stoppel can bind a nonsignatory to an arbitration clause when that non-signatory has reaped the benefits of a contract containing an arbitration clause.” Rhodia, 625 F.3d at 85. The purpose of this is to “prevent a non-signatory from embracing a contract, and then turning its back on the portions of the contract, such as an arbitration clause, that it finds distasteful.” Peltz ex rel. Estate of Peltz v. Sears Roe Buck, 367 F.Supp.2d 711, 719 (E.D.Pa.2005). Second, equitable estoppel applies to bind a signatory to arbitrate with a non-signatory at the nonsignatory's insistence when there is: (1) a “close relationship between the entities involved[;]” and (2) “[a] relationship [between] the alleged wrongs [and] the nonsignatory's obligations and duties in the contract[.]” E.I. DuPont de Nemours & Co., 269 F.3d at 199. “To satisfy the second part of the test, the non-signatory seeking enforcement of an arbitration agreement must show that the claims against them are ‘intimately founded in and intertwined with’ the underlying obligations of the contract to which they were not a party. Miron v. BDO Seidman, LLP, 342 F.Supp.2d 324, 333 (E.D.Pa.2004) (quoting E.I. DuPont de Nemours & Co., 269 F.3d at 199). The second theory of equitable estoppel applies to this case. 1. Close Relationship Between the Entities *5 Determining whether a close relationship exists between the entities involved requires “examin[ing] the relationship of the alleged wrong to the nonsignatory's obligations and duties in the contract.” Miron, 342 F.Supp.2d at 333 (internal citations omitted). “[N]on- signatories ... can enforce an [arbitration] agreement when there is an obvious and close nexus between nonsignatories and the contract or the contract parties” such that it “is the signing parties' intent” to hold that party to the arbitration provision. Dodds v. Pulte Home Corp., 909 A.2d 348, 351 (Pa.Super.Ct.2006). Here, a close relationship exists between Defendants, the parties to the Loan Agreements, and the Loan Agreements themselves because Defendants' role in processing the debits and credits related to Plaintiff's loans was set out in the Loan Agreements, and Plaintiff agreed to arbitrate disputes with parties other than the Lender. In both the One Click Cash and Plain Green Agreements, Plaintiff agreed to provisions authorizing the Lender's “agents” or other listed types of third-parties to debit Plaintiff's bank account through the ACH Network for re-payment of her loans. The One Click Cash Agreement listed “authorized representatives,” and the Plain Green Agreement listed “representatives” and “affiliates.” The language of the Loan Agreements reveals that Plaintiff also consented to arbitrate with not only the signatory Lenders, but also related parties. Specifically, under the One Click Cash Loan Agreement, Plaintiff agreed to arbitrate all claims against One Click Cash's “agents,” “servicers,” or “affiliated entities.” (One Click Cash Agmt.) Similarly, Plaintiff agreed to arbitrate any dispute with Plain Green's “servicing and collection representatives and agents” under the Plain Green Loan Agreement. (Plain Green Agmt.) Having agreed to arbitrate with undefined agents and servicers or servicing representatives, and likewise having agreed that agents and third-parties, such as representatives, could perform the ACH transactions related to the Loan Agreements, it would be inequitable for Plaintiff to avoid arbitration with those same agents and third-parties that obviously have a nexus to Plaintiff and the Loan Agreements. FIB and NABC originated the ACH transactions that were referenced and anticipated by the Loan Agreements, which were integral to the functioning of the loan. Therefore, FIB and NABC are closely related to the entities involved such that the parties intended for Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 6 of 29 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 claims against them to fall within the scope of the arbitration provisions. Indeed, other courts on similar facts have found a sufficiently close relationship to compel arbitration under an estoppel theory. See Riley v. BMO Harris Bank, N.A., No. 13–1677, 2014 WL 3725341, at *6 (D.D.C. July 29, 2014); Graham v. BMO Harris Bank, N.A., No. 13–1460 (D.Conn. July 16, 2014); Moss v. BMO Harris Bank, N.A., No. 13–5438, 2014 WL 2565824, at *5– 6 (E.D.N.Y. June 9, 2014). In each of these cases, banks that processed ACH transactions for payday lenders were found to be intimately connected to the signatory plaintiffs who entered into broad arbitration agreements with the payday lenders. The signatory plaintiffs were not permitted to deny the foreseeability of having to arbitrate with the banks. *6 The same result is warranted with regard to BMO. The My Cash Advance Loan Agreement contains an ACH Authorization whereby Plaintiff authorized My Cash Advance and any “assignee” to initiate electronic fund transfers from Plaintiff's account. The ACH Authorization also refers to the “network.” While this is a narrower ACH authorization than the other Loan Agreements, the authorization still suggests that the debit could be performed by a third party. In addition, the My Cash Advance Loan Agreement contains a broad arbitration provision, providing for arbitration of disputes asserted against “agents” of My Cash Advance or “affiliated entities.” (My Cash Advance Agmt.) The combined effect of these provisions again creates an obvious close nexus between BMO and the parties to the Loan Agreement, such that the parties intended to hold BMO to the arbitration agreement. BMO originated the ACH debits anticipated in the Loan Agreement, and the parties to the Loan Agreement-by agreeing to arbitrate with affiliated entities-agreed to arbitrate with an undefined, expansive class of entities conducting business with My Cash Advance. Defendants have established that a close relationship exists. They should be permitted to enforce the arbitration provisions in the Loan Agreements. 2. Claims Intertwined with Contract Obligations Claims are intertwined with an arbitration agreement when the signatory's claims “rely on the terms of the agreement or assume the existence of, arise out of, or relate directly to, the written agreement.” Sarl v. A.M. Todd Co., No. 07–2727, 2008 WL 724607, *9 (E.D.Pa. Mar.18, 2008). Here, all of Plaintiff's claims rely on the terms of the Loan Agreements being illegal because of allegedly usurious interest rates. Each claim is premised on the idea that Defendants, by giving the Lenders access to the ACH Network to originate debits and credits related to the Loan Agreements, were involved in the collection of unlawful debts. Thus, the natural conclusion is that Plaintiff's claims are intertwined with the Loan Agreements that contain both the usurious interest rates and the arbitration provisions. Bannett v. Rankin, 331 F.Supp.2d 354, 360 (E.D.Pa.2004) (finding the defendants had standing to compel arbitration “[b]ecause all of [the][p]laintiff's claims make reference to or presume the existence of the partnership agreements and relate directly to those agreements”); see also Sarl, 2008 WL 724607, at *9–10 (E.D.Pa. Mar.18, 2008) (finding that the plaintiffs were estopped from avoiding arbitration because claim that non-signatory breached the contract relied upon the contract). Plaintiff argues that her claims are not “intertwined” with the Loan Agreements because she has not alleged that Defendants violated duties or obligations under the Loan Agreement. Plaintiff's argument is misguided. The relevant question is whether the claims at issue rely or depend on the terms of the agreement. Bannett, 331 F.Supp.2d at 360; Miron, 342 F.Supp.2d at 333 (“The plaintiff's actual dependence on the underlying contract in making out the claim against the nonsignatory defendant is therefore always the sine qua non of an appropriate situation for applying equitable estoppel.” (emphasis in original) (quotations omitted)). Contrary to Plaintiff's assertion, her claims do actually depend on the Loan Agreements: her statutory and common law claims specifically rely on the terms of the Loan Agreements being illegal. *7 Further evidence of this dependence is found in Plaintiff's allegations of concerted misconduct between Defendants and the Lenders. See Sarl, 2008 WL 724607, at * 10 (quoting Grigson v. Creative Artist Agency L.L. C., 210 F.3 d 524, 527 (5th Cir.2000) (“Estoppel may also apply where the nonsignatory is alleged to have engaged in ‘substantially interdependent and concerted misconduct’ with a signatory other than the plaintiff.”)). Plaintiff alleges interdependent and concerted conduct by Defendants and the Lenders through the use of their roles in the ACH Network “to facilitate payday loans.” (See Compl. ¶¶ 107, 124, 141.) More importantly, the Loan Agreements were central to the goal of Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 7 of 29 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 the alleged conspiracy: without the Loan Agreements, Defendants would not have loans to facilitate. Because Plaintiff's entire case depends on the contents of the loan agreements, which Defendants allegedly knew about, we find that the claims are sufficiently intertwined with the Loan Agreements. 5 Consequently, Plaintiffs are equitably estopped from disclaiming Defendants' right to enforce the arbitration provisions in the Loan Agreements. 6 5 As noted above, courts in other jurisdictions facing nearly identical facts to those before us have found the plaintiffs to be equitably estopped from denying similar arbitration provisions. Those courts found the loan agreements to be intertwined with the plaintiffs' claims. Those cases are persuasive. Riley, 2014 WL 3725341, at *5; Graham v. BMO Harris Bank, N.A., No. 13–1460 (D.Conn. July 16, 2014); Moss, 2014 WL 2562824, at * 5–6; Elder v. BMO Harris Bank, N.A., No. 13–3043, 2014 WL 1429334, at *1 (D.Md. Apr.11, 2014). 6 Because we found that equitable estoppel applies, we need not determine whether Defendants are third- party beneficiaries of the Loan Agreements or agents of the Lenders. B. Legality of the Loan Agreements and Unclean Hands Plaintiff also argues that the Court should not enforce the arbitration provisions because they are contained within allegedly illegal Loan Agreements. Plaintiff fails to recognize that we do not have authority to decide that issue. Plaintiff's argument attacks the legality of the entire Loan Agreement-not the individual arbitration provisions. The Supreme Court established in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445–446, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006), that “unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance.” Accordingly, we will leave the determination of the legality of the Loan Agreements to the arbitrator. 7 7 Plaintiff attempts to claim that she is challenging the validity of the arbitration provisions by alleging that the arbitration provisions are linked to illegal ACH Authorizations. In essence, Plaintiff contends that before we can compel arbitration, we must determine whether the ACH Authorizations were illegal, and thus whether there is a possibility the arbitration agreements were also illegal because of their relation to the ACH Authorizations. We reject this argument. Plaintiff has not identified any facts that suggest the ACH Authorizations were illegal. Plaintiff's argument that Defendants have unclean hands fails for a similar reason. Plaintiff contends that Defendants aided and abetted the illegal Loan Agreements, and thus they have unclean hands and should not be permitted to benefit from the doctrine of equitable estoppel. Again, Plaintiff is not specifically attacking the arbitration provision, but Defendants actions with regard to the Loan Agreement as a whole. This is again an issue for the arbitrator because any challenge to the validity of the entire contract must go to the arbitrator. In re A2P SMS Antitrust Litig. ., 972 F.Supp.2d 465, 482 (S.D.N.Y.2013) (stating that “in contesting the application of equitable estoppel, Plaintiffs still must discuss why Defendants' hands are unclean with regard to the ‘making of the agreement to arbitrate’ ” (quoting Buckeye, 546 U.S. at 446)). As such, Plaintiff's arguments concerning the legality of the Loan Agreements and Defendants' alleged unclean hands do not affect Defendants' ability to enforce the arbitration provisions. IV. CONCLUSION *8 For the foregoing reasons, Defendants' Motions to Compel Arbitration will be granted. In addition, Plaintiff's claims will be dismissed because all the claims in the Complaint are subject to arbitration as provided in the Loan Agreements. Seus v. John Nuveen & Co., Inc., 146 F.3d 175, 179 (3d Cir.1998) (“If all the claims involved in an action are arbitrable, a court may dismiss the action instead of staying it.”). An appropriate Order follows. ORDER AND NOW, this 11th day of August, 2014, upon consideration of Defendant First International Bank & Trust's Motion to Compel Arbitration (ECF No. 34), Defendant BMO Harris Bank, N.A.'s Motion to Compel Arbitration (ECF No. 40), and Defendant North American Banking Company's Motion to Compel Arbitration (ECF No. 46), and all papers submitted in support thereof and in opposition thereto, it is ORDERED as follows: Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 8 of 29 Booth v. BMO Harris Bank, N.A., Not Reported in F.Supp.3d (2014) 2014 WL 3952945 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 1. Defendant First International Bank & Trust's Motion to Compel Arbitration (ECF No. 34), Defendant BMO Harris Bank, N.A.'s Motion to Compel Arbitration (ECF No. 40), and Defendant North American Banking Company's Motion to Compel Arbitration (ECF No. 46) are GRANTED. 2. Defendant BMO Harris Bank, N.A.'s Motion to Sever (ECF No. 38), Motion to Transfer (ECF No. 39), and Motion to Dismiss (ECF No. 42) are DENIED as moot. 3. Plaintiff's Complaint is DISMISSED without prejudice and the Clerk of Court is directed to close this matter. IT IS SO ORDERED. All Citations Not Reported in F.Supp.3d, 2014 WL 3952945 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 9 of 29 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Distinguished by GGNSC Equity Holdings, LLC v. Breslin, M.D.Pa., October 27, 2014 2013 WL 6191739 Only the Westlaw citation is currently available. United States District Court, M.D. Pennsylvania. Michael L. LEIGHTON and Nancy A. Leighton, Plaintiffs v. CHESAPEAKE APPALACHIA, LLC, et al., Defendants. Civil No. 1:13–CV–2018. | Nov. 26, 2013. Attorneys and Law Firms Tate J. Kunkle, Napoli Bern Ripka & Associates LLP, W. Steven Berman, New York, NY, William S. Berman, Napoli Bern Ripka, LLP, Marlton, NJ, for Plaintiffs. Jesse R. Pierce, Nugent D. Beaty, Jr., Pierce & O'Neill, LLP, Houston, TX, Daniel T. Brier, Myers Brier & Kelly, LLP, Scranton, PA, for Defendants. MEMORANDUM WILLIAM W. CALDWELL, District Judge. I. Introduction *1 Plaintiffs, Michael L. Leighton and Nancy A. Leighton, filed this suit in state court, seeking damages and declaratory relief arising from Defendants' natural-gas drilling operations near Plaintiffs' property, operations commonly known as “fracking.” Defendants removed the case here on the basis of diversity jurisdiction. Defendants are Chesapeake Appalachia, LLC (“Chesapeake Appalachia”); Chesapeake Energy Corporation (“Chesapeake Energy”); Nomac Drilling, LLC; and Schlumberger Technology Corporation. 1 1 Defendants say that Plaintiffs incorrectly identified Schlumberger Technology Corporation as “Schlumberger Technology Corporation d/b/a/ Schlumberger Well Services.” (Defs.' Mot. n. 2). Plaintiffs leased their land to Chesapeake Appalachia for the purpose of extracting the natural gas, and the Lease has an arbitration clause. We are considering Defendants' motion to compel arbitration and to stay the case while the arbitration proceeds. One of the issues presented is whether defendants, Chesapeake Energy, Nomac, and Schlumberger, as nonsignatories to the Lease, can require the signatory plaintiffs to arbitrate the claims they have against these defendants. II. Standard of Review The parties rely on different standards of review in arguing the merits of the motion to compel. Defendants contend they can establish their right to arbitrate Plaintiffs' claims by the allegations of the complaint and the provisions of the Lease. They therefore bring their motion to compel under Fed.R.Civ.P. 12(b) (6). Rule 12(b)(6) deals with the legal sufficiency of the complaint by focusing on its factual allegations and, as relevant here, examining the Lease, because Plaintiffs' complaint contains a breach-ofcontract claim based on that document. Guidotti v. Legal Helpers Debt Resolution, LLC, 716 F.3d 764, 772 (3d Cir.2013) (on a Rule 12(b)(6) motion, the court looks at the complaint and authentic documents if the claims are based on those documents). On the other hand, Plaintiffs maintain the motion should be evaluated under Fed.R.Civ.P. 56, which deals with motions for summary judgment and allows consideration of evidence that goes beyond the pleadings and supporting documents. Id. (citing Rule 56(c)). Guidotti tells us how to proceed. First, if the defendants can satisfy the Rule 12(b)(6) standard, then the parties should be sent to arbitration without further proceedings. Guidotti, 716 F.3d at 773–74. However, “if the complaint and its supporting documents are unclear regarding the agreement to arbitrate,” id. at 776, the motion to compel must be denied pending development of a factual record. Id. at 774. Similarly, even if “the complaint and incorporated documents facially establish arbitrability,” id., if the plaintiff, in opposing the motion, presents evidence “sufficient to place the agreement to arbitrate in issue,” id. at 776, the motion to compel should not be granted. Id. at 774. At that point, the parties are entitled to discovery on the question of arbitrability, id. at 776, and the issue should be decided under the Rule 56 summary- judgment standard, not the motion-to-dismiss standard. Id. at 774. ase 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 10 of 29 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 *2 We thus start with the standard of review for a Rule 12(b)(6) motion. Under Rule 12(b)(6), “[w]e ‘accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.’ ” Byers v. Intuit, Inc., 600 F.3d 286, 291 (3d Cir.2010) (quoted case omitted). As noted, this inquiry also includes examining the Lease because Plaintiffs base their breach-of-contract claim on the Lease. With this standard in mind, we set forth the background to this litigation, as Plaintiffs allege it. III. Background Plaintiffs are the owners of real property located in Granville Summit, Bradford County, Pennsylvania (the “Property”). (Compl.¶ 2). On August 15, 2008, they entered into an “Oil & Gas Lease” with defendant Chesapeake Appalachia so that Chesapeake Appalachia could “obtain the legal right to drill on or near Plaintiffs' Property and extract natural gas from Plaintiffs' Property.” (Id.). The Lease was for a five-year term, beginning on August 15, 2008. (Doc. 19–1, ECF p. 3, Lease, Ex. A to Defs.' Motion). It contained the following pertinent provisions. (Each plaintiff is the “Lessor” and Chesapeake Appalachia is the “Lessee.”) First, the Lease allowed Chesapeake Appalachia to search and drill for natural gas on Plaintiff's Property: Leasing Clause. Lessor hereby leases exclusively to Lessee all the oil and gas ... underlying the land herein leased, together with such exclusive rights as may be necessary or convenient for Lessor, at its election, to explore for, develop, produce, measure, and market production from the Leasehold, and from adjoining lands, using methods and techniques which are not restricted to current technology, including the right to conduct geophysical and other exploratory tests; to drill, maintain, operate, plug, abandon, and remove wells; ... (Id.). An Addendum to the Lease required Chesapeake Appalachia to correct any damage to Plaintiffs' water supply. The Addendum's “Water Damage Clause” provided as follows: In the event any activity carried on by Lessee pursuant to the terms of this lease damages, disturbs, or injures Lessor's potable water well or source located on these leased premises, Lessee shall at its sole cost and expense use its best efforts to correct any such damage, disturbance or injury. (Id., ECF p. 6). Finally, the Lease contained an arbitration clause, providing: Arbitration. In the event of a disagreement between Lessor and Lessee concerning this Lease, performance thereunder, or damages caused by Lessee's operations, the resolution of all such disputes shall be determined by arbitration in accordance with the rules of the American Arbitration Association. All fees and costs associated with the arbitration shall be borne equally by Lessor and Lessee. (Id., ECF p. 4). *3 Plaintiffs allege that Chesapeake Appalachia and Nomac are “wholly owned and operated subsidiaries and/ or divisions of Defendant Chesapeake Energy.” (Compl.¶ 14). Defendant Schlumberger is a Texas corporation. (Id. ¶ 22). Chesapeake Appalachia, Nomac and Chesapeake Energy engage in “fracking” or “hydraulic fracking” activity, which includes drilling, building and operating wells, and producing, processing and transporting natural gas. (Id. ¶ 18). Schlumberger engages “in the business of providing an array of fracking-related natural gas well services to oil and gas drillers across the United States,” including Chesapeake Appalachia, Nomac and Chesapeake Energy. (Id . ¶ 25). Chesapeake Appalachia owned two wells, the Morse 3H Gas Well, and the Morse 5H Gas Well, (id. ¶ 16), which were “in close proximity” to the Property, (id. ¶ 48), located about one-half mile from Plaintiffs' residence and water supply well. (Id. ¶ 35). Chesapeake Appalachia and Chesapeake Energy owned, designed, constructed and operated the wells. (Id. ¶¶ 36 and 37). Nomac “carried out fracking related drilling, cementing, perforating, squeezing and other well servicing activities at the Wells.” (Id. ¶ 38). Schlumberger “carried out drilling, ase 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 11 of 29 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 cementing, perforating, squeezing and other fracking- related well servicing activities at the Wells.” (Id. ¶ 39). In or about July 2010, Defendants 2 began constructing the wells and continued their construction through November 2011. (Id . ¶¶ 42 and 49). In November 2011, Defendants, either individually or jointly, “conducted remedial perforations and cement squeeze operations” on the Morse 5H well. (Id. ¶ 50). In May 2012, Defendants, either individually or jointly, were performing remedial activities at the Morse 5H well when “squeeze perforations ... were exposed to formation pressures, allowing contaminants ... to escape from the well bore for as many as 7 days.” (Id. ¶ 51). The remedial activities were required because Defendants had negligently constructed the wells. (Id. ¶ 52). The construction violated industry standards. (Id. ¶ 53). 2 “Defendants” refers to all four defendants. (Compl.¶ 29). Before the gas wells were drilled, “on or about May 25, 2011, defendant Chesapeake Appalachia conducted pre-drill sampling of Plaintiffs' water supply.” (Id. ¶ 46). The sampling showed Plaintiffs' water supply to be of good quality. (Id. ¶ 47). In May 2012, following the escape of contaminants, the Pennsylvania Department of Environmental Protection and Chesapeake Appalachia took groundwater samples from the Property. (Id. ¶¶ 54 and 58). The samples showed substantial increases in the levels of methane, ethane, propane, iron, and manganese. (Id. ¶¶ 57–63). The groundwater located at the Property had also “drastically changed in clarity and color, it had a foul odor and contained noticeable levels of natural gas.” (Id. ¶ 55). Additionally, “[w]ater drawn from Plaintiffs' groundwater supplies had also become flammable and surface water running through the creek on [the] Property had begun bubbling.” Id. 3 3 Chesapeake Appalachia attempted some remedial measures. In or about June 2012, it installed a temporary water treatment system that made the water safe for residential uses, “but not for drinking.” (Id. ¶ 67). In or about June 2012, it installed a “sub-slab air insertion system into Plaintiffs' basement to keep the natural gas from infiltrating Plaintiffs' Property at dangerous and explosive levels.” (Id. ¶ 68). *4 The complaint presents eight causes of action. In the first seven, all Defendants are named. The first cause of action alleges Defendants violated the Pennsylvania Hazardous Sites Cleanup Act (HSCA), 35 Pa. Stat. Ann. § 6020.101 et seq., by “caus[ing] the spill, release and/or discharge of ‘hazardous substances' “ as defined in the HSCA. (Compl.¶ 78). The second cause of action alleges negligence in the manner in which Defendants drilled, owned, and operated the wells. The third cause of action alleges negligence per se because Defendants violated several Pennsylvania statutes and regulations applicable to their activity. The fourth cause of action alleges private nuisance. The fifth cause of action alleges strict liability for abnormally dangerous and ultra-hazardous activities. The sixth cause of action alleges trespass. The seventh cause of action alleges a claim for “inconvenience and discomfort.” The eighth cause of action is for breach of contract and names only Chesapeake Appalachia. Plaintiffs allege Chesapeake Appalachia breached the Lease in the following ways: (1) it failed to drill, construct and install the wells to minimize effects on the Property; (2) it failed to restore the Property and water supply to their pre-drilling condition; and (3) it failed to conduct its operations in accordance with the laws of Pennsylvania and regulations promulgated by the Pennsylvania Department of Environmental Protection. In their prayer for relief, Plaintiffs seek damages in the form of the costs of remediating the Property, other compensatory damages, punitive damages, and an injunction requiring Defendants to stop the activity that was contaminating the Property. IV. Discussion A. The Scope of the Arbitration Clause Covers Plaintiffs' Claims Under either federal or state law, arbitration will be required if: (1) there is a valid agreement to arbitrate; and (2) the dispute comes within the scope of the agreement. Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir.2009); Pisano v. Extendicare Homes, Inc., 77 A.3d 651, ––––, 2013 WL 4046673, at *2 (Pa.Super.Ct.2013). 4 4 Defendants assert that no decision has to be made about whether the Federal Arbitration Act, 9 U.S.C. ase 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 12 of 29 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 §§ 1–16, or state arbitration law controls because the law is the same. Plaintiffs cite both federal and state cases. In these circumstances, we also make no decision as to which law controls. Plaintiffs do not argue there is no agreement to arbitrate (at least as to Chesapeake Appalachia, a signatory to the Lease) but do dispute that their claims come within the scope of the agreement. Defendants argue that the arbitration clause covers the Plaintiff's claims because it is expansive, requiring arbitration of disputes “concerning this Lease,” “performance” under the Lease, or “damages caused by Lessee's operations.” Defendants argue that Plaintiffs' claims fall within these provisions since all of them arise from Chesapeake Appalachia's operations authorized by the Lease. As further support, they note that under federal and state law, courts will find that a dispute comes within the scope of an arbitration clause “unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Century Indem. Co. v. Certain Underwriters at Lloyds, 584 F.3d 513, 524 (3d Cir.2009) (quoted Supreme Court case omitted). See also Callan v. Oxford Land Dev., Inc., 858 A.2d 1229, 1233 (Pa.Super.Ct.2004). *5 We agree with Defendants that Plaintiffs' claims are within the scope of the arbitration agreement. As they assert, the clause covers disagreements broadly worded to include disagreements about performance under the Lease and Chesapeake Appalachia's operations. See Roman v. Chesapeake Appalachia, LLC, No. 11–CV–1614, 2012 WL 2076846, at *4 (M.D. Pa. June 28, 2012) (observing that the same arbitration clause was broadly written, although dealing with a different type of claim). We add that the clause requires arbitration of “all such disputes.” Since Plaintiffs' claims are based on Defendants' drilling activities, they come within the scope of the arbitration clause, as either disputing Defendants' performance or damages resulting from their operations. In reaching this conclusion, we recognize that Plaintiffs rely on language in Pennsylvania cases saying that “arbitration agreements are to be strictly construed and such agreements should not be extended by implication.” Pisano, supra, 2013 WL 4046673, at *9. The Pennsylvania Superior Court has acknowledged that this language is in “tension” with the language we quoted above, that a dispute should be construed as being covered by the arbitration agreement unless it can be “said with positive assurance” that it is not. The superior court said the solution is to look to state law on contract construction and to interpret the clause to give effect to the parties' intent as manifested by the contractual language. Callan, supra, 858 A.2d at 1233. Here, the contractual language establishes that Plaintiffs' claims are covered by the arbitration clause. Cf. Callan, 858 A.2d at 1233 (in sending a case to arbitration, noting that “ ‘all’ contract disputes does mean ‘all’ contract disputes”). The result is the same under federal law. “The FAA instructs courts to refer to principles of applicable state law when determining the existence and scope of an agreement to arbitrate.” Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir.2005). “Under Pennsylvania law ... the scope of [an] arbitration [agreement] ‘is determined by the intention of the parties as ascertained in accordance with the rules governing contracts generally.’ ” State Farm Mut. Auto. Ins. Co. v. Coviello, 233 F.3d 710, 716 (3d Cir.2000) (quoted case omitted). Plaintiffs make the following arguments that their claims are not within the scope of the arbitration clause. First, they argue that the Lease “is simply an instrument that created an agreement between the Plaintiff and defendant Chesapeake Appalachia and outlined responsibilities of each party to the other,” (Doc. 20, ECF p. 7, Pls.' Opp'n Brief), while their claims “fall well outside the parameters of the Lease” and are “extraneous” to it. (Id.). This argument fails because it just says in another way that the Lease is a contract, but without acknowledging that it contains an arbitration clause which also governs the relationship between the parties. *6 Second, Plaintiffs argue that the arbitration agreement is inapplicable because the damages did not arise from activities performed on the Property. Instead, the damages arose from wells on land in close proximity to the Property, but not on it. They principally rely on Armstrong v. Chesapeake Appalachia, LLC, No. 10–CV– 0681, (Pa. Common Pleas Ct.—Bradford Cnty. June 27, 2012) (unpublished disposition), in support. 5 5 Armstrong is attached to Plaintiffs' opposition brief as Ex. A. ase 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 13 of 29 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 In Armstrong, as here, the plaintiffs were suing Chesapeake Appalachia for damage to their property from the defendant's natural-gas drilling operations on land adjoining the property. Chesapeake Appalachia moved to compel arbitration based on a clause materially identical to the one in the instant case. Denying the motion, the court said that the lease was intended to apply only “to operations involving a gas well drilling on [the plaintiff's] property.” (Doc. 21–1, ECF p. 4). Armstrong is distinguishable. The plaintiffs there brought only tort claims. Here, in contrast, Plaintiffs have, in addition to tort claims, sued for breach of the Lease. In doing so, they have alleged that their Property and water supply were damaged by Defendants' operations on nearby land. Thus Plaintiffs have themselves alleged that the Lease applies to activities on adjoining land. 6 6 This position is supported by the language of the Lease itself which gives Chesapeake Appalachia the right, among other things, to “explore, develop, produce, measure, and market production from the [Property], and from adjoining lands.” (Doc. 19–1, ECF p. 3) (emphasis added). Again relying on Armstrong, Plaintiffs argue the arbitration clause does not apply to their claims because the clause was intended to apply to disagreements between the parties in their capacities as lessor and lessee. As the court in Armstrong reasoned: [T]he arbitration clause, which identifies the principals as “Lessor” and “Lessee”, was intended by the parties to govern disagreements which arise between them qua lessor and lessee. That is not the case here. All of Plaintiffs' claims, sounding in trespass, would be viable in the absence of a lease. The lease is wholly incidental to the alleged causes of action. (Doc. 21–1, ECF P. p. 4). We disagree with this reasoning. The court does not explain why the tort claims are not disagreements that have arisen between the parties in their capacities as lessor and lessee. The court is essentially saying that the arbitration clause cannot cover tort claims. But an arbitration clause can cover such claims. See Roman, supra, 2012 WL 2076846, at *4; Callan, supra, 858 A.2d at 1233. Having decided that the claims come within the scope of the arbitration clause, we turn to the parties' arguments on whether Defendants can enforce the clause against Plaintiffs. B. Enforceability of the Arbitration Clause All the defendants move to compel Plaintiffs to arbitrate their claims even though only Chesapeake Appalachia is a signatory to the Lease. The nonsignatory defendants, Chesapeake Energy, Nomac, and Schlumberger, assert they can require Plaintiffs to arbitrate based on theories of agency and equitable estoppel. Before we get to Defendants' arguments, however, we will address Plaintiffs' position that none of Defendants can insist on arbitration, even Chesapeake Appalachia, because “arbitration clauses are not enforced ‘when, as here, a plaintiff also has claims arising from the same set of facts against several defendants who are not bound by an arbitration agreement,’ ” (Doc. 20, ECF p. 10, Pls.' Opp'n Br.). This is a quotation from the undersigned's opinion in Scott v. LTS Builders LLC, No. 10–CV–0581, 2011 WL 6294490, at *5 (M.D.Pa. Dec. 5, 2011) (Caldwell, J.). If Scott applies here, we need not address Defendants' reliance on agency or equitable estoppel. We can deny the motion to arbitrate, even as to the signatory Chesapeake Appalachia. *7 Scott does not apply here. In Scott, we denied a motion to compel arbitration, but the facts were materially different. Only one defendant, the signatory to the arbitration agreement, sought arbitration, and there were ten other defendants, with five of those insisting that the claims against them be resolved in court.2011 WL 6294490, at *5. Relying on School District of Philadelphia v. Livingston–Rosenwinkel, P.C., 690 A.2d 1321 (Pa.Commw.Ct.1997), we ruled that sending the case against the signatory to arbitration would not satisfy Pennsylvania's public policy of enforcing arbitration agreements “as a means of promoting swift and orderly disposition of claims” Id. (quoting Livingston– Rosenwinkel, 690 A.2d at 1322–23). As that case noted, it would result in litigating the same claims twice and in a “ ‘protracted, piecemeal disposition of the dispute.’ ” Id. (quoting Livingston–Rosenwinkel, 690 A.2d at 1323). Here, on the other hand, all Defendants are moving for ase 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 14 of 29 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 arbitration, so a public policy against duplicative and piecemeal disposition of disputes is not implicated. We thus turn to Defendants' arguments for arbitration. 1. Agency–Type Relationship It is apparent that Chesapeake Appalachia as a signatory to the arbitration agreement can enforce it against Plaintiffs. Defendants argue that the nonsignatories to the arbitration agreement can also enforce it because Plaintiffs allege the nonsignatory defendants were the agents of Chesapeake Appalachia, carrying out the latter's obligations under the Lease. Defendants cite in support Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir.1993); Amato v. KPMG LLP, 433 F.Supp.2d 460 (M.D.Pa.2006); and Weiner v. Pritzker, 2001 WL 1807929 (Pa. Common Pleas Ct.—Phila. Cnty.). In making this argument, Defendants rely on “traditional agency theory,” Pritzker, 7 F.3d at 1121, as in material part they quote in support of their argument the following language from Pritzker: “Because a principal is bound under the terms of a valid arbitration agreement, its agents, employees, and representatives are also covered under the terms of such agreements.” Id. We do not believe that Plaintiffs have alleged that the nonsignatory defendants are agents of Chesapeake Appalachia in connection with the latter's natural-gas operations. However, another portion of Pritzker does support Chesapeake Energy's and Nomac's right to arbitrate Plaintiffs' claims against them. 7 7 Since Chesapeake Energy and Nomac can compel arbitration, we only state why the allegations about Schlumberger do not establish it was Chesapeake Appalachia's agent. One of the elements of agency is the principal's control of the undertaking. Walton v. Johnson, 66 A.3d 782, 787 (Pa.Super.Ct.2013). Plaintiffs' allegations are insufficient to establish that Chesapeake Appalachia controlled Schlumberger. In Pritzker, the plaintiff trustees of a pension plan had entered into cash management agreements with Merrill Lynch, Pierce, Fenner & Smith, Inc. (MLPF & S). The agreements contained arbitration clauses. 7 F.3d at 1112. Belinda P. Stewart, a financial consultant employed by MLPF & S, advised about, and made, purchases for the plan. Id. Merrill Lynch Asset Management, Inc. (MLAM) was the custodian of the assets. Id. at 1113. MLAM and MLPF & S were wholly-owned subsidiaries of Merrill Lynch & Co., Inc. Id. at 1112. The trustees sued over Stewart's unauthorized purchase of certain assets for the plan. Id. at 1112. Defendants moved to compel arbitration. In relevant part, the Third Circuit ruled that the trustees had to arbitrate their claims against Stewart because as an employee of MLPF & S she was an agent of the company and hence bound by the arbitration clause in the agreements “[u]nder traditional agency theory.” Id. at 1121. *8 In regard to MLAM, the court of appeals ruled that “analogous reasons” supported arbitration of the claims against it, describing MLAM as the “corporate sister of MLPF & S.” Id. at 1122. It was significant that MLAM had to perform certain services in connection with the accounts and that it and MLPF & S were subsidiaries of Merrill Lynch & Co., Inc. Id. Citing Isidor Palewonsky Associates, Inc. v. Sharp Properties, Inc., 998 F.2d 145 (3d Cir.1993), the court stated “that arbitration agreements may be upheld against non-parties where the interests of such parties are directly related to, if not congruent with, those of a signatory.” Pritzker, 7 F.3d at 1122. It then concluded that the claims against MLAM had to go to arbitration because the trustees' “own theory of liability demonstrate[d] that MLAM's interests are directly related to, if not predicated upon, MLPF & S' conduct.” Id. at 1122. The court of appeals summarized as follows: “Where the parties to [a valid arbitration] clause unmistakably intend to arbitrate all controversies which might arise between them, their agreement should be applied to claims against agents or entities related to the signatories.” Id. at 1122. Pritzker indicates that Chesapeake Energy and Nomac can enforce the arbitration agreement against Plaintiffs. Plaintiffs allege that Chesapeake Appalachia and Nomac are “wholly owned and operated subsidiaries and/or divisions of Defendant Chesapeake Energy.” (Compl.¶ 14). 8 Chesapeake Appalachia, Chesapeake Energy and Nomac are thus related entities. 9 Additionally, since Chesapeake Energy and Nomac are alleged to have engaged in the conduct with Chesapeake Appalachia that damaged Plaintiffs' Property, their interests are directly related to those of Chesapeake Appalachia, the signatory. It follows that Chesapeake Energy and Nomac, as nonsignatories, can enforce the arbitration agreement against the plaintiff signatories. ase 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 15 of 29 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 8 Defendant Schlumberger is alleged to be a Texas corporation. (Id. ¶ 22). Plaintiffs do not allege any relationship to the other defendants. 9 We note that Defendants' “Corporate Disclosures” are consistent with Plaintiffs' allegations except that none of the entities is a division of any other. Defendants affirm that Chesapeake Appalachia is a wholly-owned subsidiary of Chesapeake Energy. Nomac is “ultimately owned by Chesapeake Operating, Inc., a wholly-owned subsidiary” of Chesapeake Energy. (Doc. 25). 2. Equitable Estoppel Since Defendants have not established that Plaintiffs must arbitrate their claims against Schlumberger under an agency theory, we address their argument based on equitable estoppel. Defendants argue that equitable estoppel requires Plaintiffs to arbitrate their claims against them. Nonsignatories to an arbitration agreement can rely on equitable estoppel to compel signatories to arbitrate. Miron v. BDO Seidman, LLP, 342 F.Supp.2d 324, 333 (E.D.Pa.2004). 10 10 In E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, SAS, 269 F.3d 187, 201– 02 (3d Cir.2001), the Third Circuit observed that the doctrine existed but did not apply it there because a signatory was attempting to use it to compel a nonsignatory to arbitrate, when the doctrine only applies in the opposite circumstances. In the instant case, Defendants rely on Bannett v. Hankin, 331 F.Supp.2d 354 (E.D.Pa.2004). Bannett contains the following language concerning estoppel of a signatory: [N]onsignatories to an arbitration agreement have standing to compel arbitration against a signatory and the signatory is estopped from avoiding arbitration with a nonsignatory when the issues which the nonsignatory wants to resolve are intertwined with the agreement that the signatory signed. [citations omitted]. This theory applies when a signatory to the written agreement must rely on the terms of the agreement to assert its claims against the nonsignatory such that the signatory's claims make reference to or presume the existence of the written agreement, or the signatory's claims arise out of and relate directly to the written agreement. [citations omitted]. *9 Id. at 359–60 (brackets added) (footnote omitted). Defendants argue that this standard is satisfied here because Plaintiffs allege the nonsignatory defendants' conduct was pursuant to the Lease and that they were acting jointly with Chesapeake Appalachia, a signatory to the Lease. According to Defendants, this makes the issues presented in this case intertwined with the Lease and directly related to the Lease. Thus, Plaintiffs are estopped from not honoring their commitment to arbitrate. We disagree. A fuller presentation of the standard to be employed can be found in In re: Humana Inc. Managed Care Litigation, 285 F.3d 971 (11th Cir.2002), where the Eleventh Circuit stated that allowing a nonsignatory to compel arbitration under an estoppel theory is based on fairness. Id. at 876. More specifically, estoppel applies when the signatory relies on the agreement containing the arbitration clause to establish his claim against the nonsignatory, and then repudiates the agreement when it would require arbitration. Id. “The plaintiff's actual dependance on the underlying contract in making out the claim against the nonsignatory defendant is therefore always the sine qua non of an appropriate situation for applying equitable estoppel.” Id. See also Miron, supra, 342 F.Supp.2d at 333 (quoting In re Humana ). In the instant case, Plaintiffs are not relying on the Lease to establish their claims against the nonsignatory defendants, Chesapeake Energy, Nomac and Schlumberger. Nowhere in their complaint do they allege that a provision of the Lease entitles them to relief against these defendants. Instead, their claims against these defendants are statutory and common-law ones, claims they can assert against the nonsignatories independently of the Lease. Plaintiffs are alleging a claim for breach of the Lease, but only against Chesapeake Appalachia. Since Plaintiffs are not relying on the provisions of the Lease to make their claims against the nonsignatory defendants, fairness does not dictate that they be estopped from litigating their claims against them in court and requiring them to go to arbitration instead. V. Further Discovery ase 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 16 of 29 Leighton v. Chesapeake Appalachia, LLC, Not Reported in F.Supp.2d (2013) 2013 WL 6191739 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 At this point, we should order Plaintiffs to arbitrate their clams against defendants, Chesapeake Appalachia, Chesapeake Energy and Nomac while staying judicial proceedings involving Schlumberger. See Amato, supra, 433 F.Supp.2d at 492 (granting stay of judicial proceedings against defendants not subject to arbitration) (citing Berkery v. Cross Country Bank, 256 F.Supp.2d 359, 370 (E.D.Pa.2003)); Sew Clean Drycleaners & Launders, Inc. v. Dress For Success Cleaners, Inc., 903 A.2d 1254, 1258 (Pa.Super.Ct.2006) (under state law a court action against the party not subject to the arbitration agreement should have been stayed pending the resolution of the arbitration proceedings). However, Guidotti instructs us to allow a period of discovery to determine if Defendants can show that Schlumberger was an agent of Chesapeake Appalachia. Guidotti, 716 F.3d at 774. If so, the claims against Schlumberger should also be arbitrated. A period of discovery on whether Chesapeake Energy and Nomac can satisfy a traditional agency status would also be appropriate, as well as discovery on facts that would support whether this case involves interstate commerce and hence that the FAA controls arbitrability of the claims. 11 11 Two of my colleagues have ruled that an oil-and- gas lease is not part of interstate commerce. See Eisenberger v. Chesapeake Appalachia, LLC, No. 09– CV–1415, 2010 WL 457139, at*2 (M.D.Pa. Feb. 4, 2010) (Caputo, J.); Ulmer v. Chesapeake Appalachia, LLC, No. 08–CV–2062 (M.D.Pa. Jan. 16, 2009) (Jones, J.). Other courts disagree. See Sonda v. Chesapeake Appalachia, LLC, No. 12–CV–0103, 2012 WL 5471763, at *2 (N. D.W.Va. Nov. 9, 2012); Heller v. TriEnergy, Inc., No. 12–CV–0045, 2012 WL 2740870, at *11 (N.D.W.Va. July 9, 2012); Alexander v. Chesapeake Appalachia, LLC, 839 F.Supp.2d 544, 550 (N.D.N.Y.2012). *10 We will issue an appropriate order. ORDER AND NOW, this 26th day of November, 2013, it is ORDERED that: 1. Defendants' motion (Doc. 5) to compel arbitration is stayed. 2. The parties are granted ninety (90) days to conduct discovery on the following: (1) whether Schlumberger is an agent of Chesapeake Appalachia under Pennsylvania agency principles; (2) whether Chesapeake Energy and Nomac can also be agents; and (3) whether this case involves interstate commerce. 3. The parties shall thereafter have thirty days to file briefs on the impact of the discovery on the law to be applied and whether the discovery alters our conclusion that Plaintiffs and Chesapeake Appalachia, Chesapeake Energy, and Nomac should proceed to arbitration and that the claims against Schlumberger should be stayed pending resolution of the arbitration proceedings. All Citations Not Reported in F.Supp.2d, 2013 WL 6191739 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. ase 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 17 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2008 WL 724607 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. A.G.K. SARL v. A.M. TODD COMPANY, et al. Civil Action No. 07-2727. | March 18, 2008. Attorneys and Law Firms Stephen R. Bolden, Fell & Spalding, Phila, PA, Ben Whaley LeClercq, Charleston, SC, for A.G.K. Sarl. John W. Allen, Kathryn D. Soulier, Varnum Riddering Schmidt & Howlett LLP, Kalamazoo, MI, Joseph G. Derespino, Derespino & Dougher PC, Philadelphia, PA, for A.M. Todd Company, et al. MEMORANDUM AND ORDER McLAUGHLIN, District Judge. *1 The plaintiff has filed suit on contract and non-contract grounds against the defendants, two corporations and an individual. The plaintiff alleges that it shipped vanilla beans to the defendants or one of the corporate defendants' subsidiaries in early 2004, but neither the defendants nor the subsidiary ever paid for the beans. In 2005, the plaintiff filed an arbitration proceeding against the subsidiary. The plaintiff claimed that it and the subsidiary had a contract for the sale of vanilla that included an arbitration clause. The plaintiff withdrew from the arbitration proceeding in February 2007, just before the final hearing was scheduled to occur, citing concerns that the subsidiary was judgment-proof and a sham corporation. A few months after the arbitration proceeding terminated, the plaintiff brought this suit. This suit seeks to hold the defendants liable in three distinct ways: first, the plaintiff alleges that the corporate veil of the subsidiary should be pierced to hold the defendants liable for the subsidiary's liabilities; 1 second, the plaintiff alleges that one or more of these defendants are directly liable as parties to the contract with the plaintiff; and third, the plaintiff alleges that the defendants are directly liable under two non-contract theories- conversion and unjust enrichment. Under all of these theories, the plaintiff seeks to pierce the corporate veil of one of the corporate defendants in order to hold the other two defendants liable. 1 The plaintiff alleges both a corporate-veil-piercing theory and an alter ego theory. This Court has recognized that these theories, though similar, are not identical. Brown v. Astro Holdings, Inc., 385 F.Supp.2d 519, 524 & n. 3 (E.D.Pa.2005). The distinctions between these two theories are not material to the Court's decision here. The Court will therefore sometimes refer to piercing the corporate veil when it also means to include the plaintiff's alter ego theories. The defendants have filed a Motion to Dismiss, or in the Alternative to Change Venue. The defendants argue that the plaintiff is estopped from filing suit here and from taking various factual positions here because it previously brought and abandoned arbitration proceedings in which it took contrary positions. They argue further that this Court lacks jurisdiction over this dispute because of the arbitration clause. Additionally, the motion argues that the plaintiff does not plead piercing the corporate veil with enough specificity, and that venue is proper only in the Southern District of New York because New York was the agreed-upon situs of the arbitration and would be the location of any appeal from an arbitration judgment. The Court will grant the motion. The Court finds that all matters in this suit are arbitrable, but it will stay, rather than dismiss, the case. The plaintiff consented to arbitrate its claims when it brought and prosecuted the arbitration proceeding against the defendants' subsidiary. Although the defendants did not sign the arbitration agreement, they have standing to enforce the arbitration agreement against the plaintiff. The plaintiff cannot bring any claims here that purport to pierce the subsidiary's veil, before it first establishes the subsidiary's liability in arbitration. To the extent that the plaintiff tries to hold the defendants directly liable under the contract that includes the arbitration clause, the plaintiff must arbitrate such claims. Finally, under the liberal federal policy favoring arbitration, the Court finds that the scope of the plaintiff's consent to arbitrate is broad enough to cover all of the claims that the plaintiff raises here, even its non-contract Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 18 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 claims, because the factual allegations necessary to prove these claims are so intertwined with one another. Having found the claims in this suit arbitrable, the Court stays these proceedings pending arbitration. I. Facts A. Legal Standard *2 A motion to stay a suit in favor of arbitration is treated as a motion for summary judgment because the Court must decide the question of whether the parties have agreed to submit the dispute to arbitration. Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 & n. 9 (3d Cir.1980). Although the defendants do not ask this Court to compel arbitration, they do ask this Court to find that this suit was improperly brought because the plaintiff's claims are subject to binding arbitration. Tr. Oral Arg. at 34, 56-57. The summary judgment standard, therefore, applies to the present motion. The Court will view the facts in the light most favorable to the plaintiff. 2 2 On a motion for summary judgment, a court must view the evidence and draw reasonable inferences therefrom in the light most favorable to the party opposing summary judgment. See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is proper if the pleadings and other evidence on the record “show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). Parts of the Court's decision rest on the relationship between the plaintiff's claims and the arbitration clause that the Court rules is applicable. The Court has relied on the complaint in construing the relationship between the plaintiff's claims and the arbitration clause. The determination does not rely on any facts that are in dispute. The Court draws the following facts from three sources: the complaint, the papers filed in the earlier arbitration, and the parties' papers regarding the motion to dismiss. The Court will not set forth all of the details of the parties' dealings because many are not relevant to the disposition of the present motion. B. The Complaint The plaintiff, A.G.K. Sarl (“AGK”), is a vanilla bean exporting company based in the Comoros, an island nation located between Madagascar and mainland Africa. AGK is owned and directed by Amine Kalfane, a citizen of the Comoros. Defendant A.M. Todd Company (“A .M. Todd”) is a Michigan company, while defendant Zink and Triest Company (“ZTC”) is a Delaware corporation and has its principal place of business in Montgomeryville, Pennsylvania. Defendant Henry W. Todd, Jr. (“Todd”), a citizen of Pennsylvania, is a director of ZTC and of A.M. Todd. The corporate defendants are engaged in the food additives and flavorings business. Compl. ¶¶ 1-4. The defendants began purchasing large quantities of vanilla from the plaintiff in the 1990s. AGK would act as purchasing agent for the defendants, with ZTC always serving as the consignee on the contract. ZTC frequently provided down payments to AGK to finance vanilla production. By 1996, ZTC was buying nearly all of AGK's vanilla output. Compl. ¶¶ 6-9. In the fall of 2003, AGK and the defendants entered into an agreement that AGK would sell a large quantity of vanilla to the defendants. Todd urged AGK to buy up as much vanilla as possible-more than AGK would have otherwise. In September 2003, the defendants advanced $3 million to AGK toward its 2003 vanilla crop. AGK borrowed a large additional sum in order to procure as much vanilla as possible. Todd told AGK that, because of global vanilla shortages, the price for vanilla would be $575 per kilogram for high quality vanilla. AGK sold all of its vanilla output to the defendants, turning down several other offers to buy its vanilla. Nearly all of the defendants' correspondence with AGK was on ZTC letterhead. Compl. ¶¶ 11-12, 14-16, 18, 20. *3 The parties reached agreement on all significant terms of the sale by the end of 2003. One shipment of vanilla was to include 17 tons of vanilla beans at a cost of $570 per kilogram (“Tranche 1”). The remaining vanilla was to be sold on consignment, with ZTC negotiating the best price possible with the ultimate customer, between $500 and $510 per kilogram. This remaining vanilla included a shipment of more than six tons (“Tranche 2”) and several additional shipments of about 6.5 tons (“the airway bills”). Compl. ¶ 22. The defendants created Zink and Triest International (“ZTI”) before 2001 to be the nominal buyer in Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 19 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 such vanilla contracts. ZTI is an “offshore” “dummy” corporation organized under the laws of Mauritius. It is a wholly owned subsidiary of one or more of the defendants. At all relevant times, ZTI had no existence apart from the defendants, was grossly undercapitalized, did not engage in arms-length transactions or corporate formalities, and was operated by the defendants “solely as a shell, artifice and façade with the attempted purpose of unjustly limiting Defendants' exposure in contracts with foreign parties.” Compl. ¶¶ 23-25. On January 14, 2004, after AGK had finished acquiring, preparing, packing, and readying the vanilla for shipment, it received a document (“Contract 11204”) on ZTI letterhead, signed by Todd on behalf of ZTI. ZTC is listed as the consignee. 3 Contract 11204 “memorializes some of the terms of the agreement the parties had previously reached, and unilaterally claims to modify other terms, such as payment and acceptance terms.” AGK did not sign the document and used it only as a formality for customs purposes. Contract 11204 specifies the quantity and price of the beans to be sold. Tranche 1, weighing 17,750.05 kilograms, would be sold for $570 per kilogram. Tranche 2, weighing 6,975.15 kilograms, would be sold at a price to be determined. The document recites that payment for Tranche 1, less the $3 million advance, will be due “immediately upon payment by Z & T's customer.” Tranche 2 is specified to be on consignment. Compl. ¶ 28-30. 4 3 The complaint states that “the insurance clause refers to Zink and Triest [ZTC] as the buyer,” but this characterization is inaccurate. Contract 11204 refers to ZTI as the buyer. Compl. ¶ 30; Ex. A to the Compl. 4 AGK attaches a copy of Contract 11204 as Exhibit A to its complaint. The complaint does not, however, mention the arbitration clause, the contents of which the Court will discuss in Section I.C. below. The defendants had approved samples of the vanilla that was sent in Tranche 1 and Tranche 2. The beans left the Comoros on January 14, 2004, and arrived in Philadelphia on January 15, 2004. The market price for vanilla was dropping as the beans arrived in Philadelphia. Although it is industry standard for the consignee or buyer to notify the seller within two to three days of any problems with a shipment, ZTC did not mention any problem with the quality of Tranche 1 until eight weeks later on March 9, 2004, one day after a cyclone in Madagascar destroyed a large portion of ZTC's stock and caused liquidity problems for ZTC. Compl. ¶¶ 32-34, 39, 47-49. Unbeknownst to AGK at the time, the ultimate customer for the vanilla was Coca-Cola, which had tested and approved samples of the beans. The defendants unilaterally gave Coca-Cola extra time to inspect the beans. Even after ZTC expressed concerns about the quality of the beans, ZTC sent AGK additional payments in April 2004 totaling $1.7 million. ZTC's CFO, Brian Scott, e-mailed AGK indicating that the defendants intended to pay the balance owed. Compl. ¶¶ 44, 45, 50, 53-55. *4 AGK sent Tranche 2 to the defendants on January 29, 2004, and it arrived in Philadelphia on January 30, 2004. On or about February 6, 2004, the plaintiff sent the defendants two shipments on consignment. These shipments, known as the airway bills, were listed as AWB 1473878 (2,149 kilograms of vanilla) and AWB 90134704 (4,400 kilograms of vanilla). The parties had agreed that these shipments would be treated in the same manner as Tranche 2, that is, to be sold on consignment for at least $500 per kilogram. On February 24, 2004, the defendants informed AGK that these three shipments required “restorative measures” in order to be suitable for sale. AGK agreed to these measures. Compl. ¶¶ 41, 42, 46. The defendants ultimately claimed that Coca-Cola had rejected the shipment. The defendants never paid for any of the vanilla beyond the advances described above. They kept the beans and asserted that they were attempting to mitigate damages by mixing the beans that AGK had shipped with other beans, and then selling the mixture. Compl. ¶¶ 56, 57. As of April 2005, ZTC is no longer operating. A.M. Todd has taken over all of its accounts and functions. As of April 8, 2005, all payments for vanilla bought from ZTC were to be made to A.M. Todd. Compl. ¶ 58. AGK advances three types of claims. Counts 1, 2, and 3 refer to Tranche 1, while counts 4, 5, and 6 refer to the three subsequent shipments, Tranche 2 and the airway bills. First, counts 1 and 4 contend that the parties had an oral contract, partially memorialized by certain faxes, that the defendants breached. 5 The parties had agreed that Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 20 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 the defendants would purchase all of the plaintiff's 2003 vanilla output. AGK repeats its earlier contention that Contract 11204 incorporated some of the parties' agreed- upon terms but unilaterally changed others, especially payment terms. AGK reiterates that the defendants had a duty to inspect and reject the vanilla promptly if it were defective. Compl. ¶¶ 60-63, 86-99. 5 The complaint does not mention ZTI in the counts praying for relief, instead referring mostly to “Defendants” and occasionally to “Zink and Triest” (what the Court has called ZTC). AGK acknowledged in its brief and at oral argument, however, that proving ZTI's liability may be necessary for some of its claims. Pl's Br. at 34-36; Tr. Oral Arg. at 38-39. Second, counts 2 and 5 claim that if Contract 11204 was a valid contract, then the defendants breached that contract. The defendants had a duty to inspect and reject the vanilla promptly if it were defective. Once they accepted the beans but refused to pay for them, the defendants converted the beans to their own use. If the beans were not defective on arrival but later became defective, then the defendants breached their duty by failing to store the vanilla properly and/or by unilaterally giving Coca-Cola extra time to test the product. If the beans were never defective, then AGK should not have had to bear the risk that Coca-Cola would reject the beans solely to get a better price elsewhere. The plaintiff emphasized at oral argument that it asserts that ZTC is directly liable to AGK as the consignee in Contract 11204. Compl. ¶¶ 67-71, 103-09; Tr. Oral Arg. at 21-22. Finally, counts 3 and 6 allege that, if the Court finds no contract, then the defendants have been unjustly enriched because AGK acquired a large amount of vanilla at the defendants' behest and as their purchasing agent, and the defendants retained the vanilla that AGK shipped. The defendants had a duty to inspect and reject the vanilla promptly if it were defective. Instead, they have retained the vanilla and have not paid for it. Compl. ¶¶ 75-82, 113-20. *5 On all counts, the plaintiff argues that the defendants should be treated as a single entity or ZTC's veil should be pierced to hold A .M. Todd and Todd liable. Compl. ¶¶ 64-65, 72-73, 83-84, 100-01, 110-11, 121-22. C. The Arbitration On March 10, 2005, AGK brought an arbitration proceeding against ZTI before the International Division of the American Arbitration Association (“AAA”) in New York, demanding more than $23.6 million in compensatory damages plus punitive damages. The arbitration complaint invoked the arbitration clause in Contract 11204: “[i]n the event of disputes Arbitration Rules of the American Arbitration Association in New York will apply.” ZTI brought a counterclaim for the $4.7 million that it had advanced to AGK, plus certain additional costs. Ex. A at cover page, 2, 62; Ex. B; Ex. MM at 9-10 . 6 6 Unless otherwise noted, references to lettered exhibits refer to exhibits to the defendants' motion. References to numbered exhibits refer to exhibits to the plaintiff's opposition. In early 2006, AGK attempted to join the defendants as respondents in the arbitration, arguing that ZTI's corporate veil should be pierced. ZTI opposed the joinder of these additional parties, arguing that the defendants were separate from ZTI and were not signatories to the contract. On July 6, 2006, the arbitrators issued a Partial Award denying AGK's request because joining new parties so late in the proceedings would unfairly deny those parties the opportunity to participate in choosing the arbitrators and the rules of the arbitration. The arbitrators explicitly did not rule on the merits of whether the arbitration panel would have jurisdiction over the defendants or on whether the corporate veil should be pierced to hold the defendants liable for ZTI's debts. The arbitrators did suggest that AGK could bring a separate arbitration proceeding against the defendants to resolve these issues. Ex. GG; Ex. HH; Ex. FF; Ex. OO. On February 2, 2007, the plaintiff sent a letter to the arbitration panel and to ZTI, stating that it had resolved to withdraw from the arbitration because it had discovered that ZTI was judgment-proof and a shell corporation. The letter states that Todd had contacted AGK urging it to drop the suit because ZTI had no assets. AGK also states that any judgment against ZTI will be unenforceable because ZTI no longer exists. In the face of AGK's withdrawal, ZTI dropped its counterclaim. The arbitrators terminated the arbitration proceeding on February 28, 2007. A final oral hearing had been scheduled for February 26, 2007. The parties agreed at oral argument that the termination was without prejudice. Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 21 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 Ex. W; Pl's Ex. 3 distributed at oral arg.; Ex. BB; Tr. Oral Arg. at 20-21, 43. D. The Defendants' Motion to Dismiss and the Plaintiff's Opposition In their motion to dismiss, the defendants argue that the Court should dismiss the plaintiff's complaint because: (1) AGK is judicially estopped from arguing that the arbitration clause does not govern the parties' transaction because AGK brought and for two years participated in arbitration; (2) the Court lacks subject matter jurisdiction because the arbitration clause is valid; (3) the complaint's allegations of veil-piercing are insufficient; and (4) venue is improper. In the alternative, the defendants argue that (5) the Court should stay these proceedings until AGK obtains an arbitration award against ZTI; (6) the Court should transfer these proceedings to the Southern District of New York; or (7) AGK should be required to plead more specifically. Def's Br. at 4. *6 The plaintiff opposes each of these positions, arguing that it may go forward with all of its claims. AGK argues that it is not estopped from pleading in the alternative and states that it may proceed against the defendants notwithstanding its prior arbitration against ZTI. It calls that arbitration a “mistake.” Pl's Br. at 29, 34. A few additional relevant facts came to light as part of the parties' motion papers. In particular, AGK provided documents that explain further why it withdrew from the arbitration proceeding. The defendants deny the conclusion that ZTI was, in fact, judgment-proof or a shell corporation at the relevant times. They do not dispute, however, that the following events occurred. After filing the arbitration, AGK's counsel, Eric Sossah, a French attorney, investigated ZTI's finances and corporate information. As a result of this investigation, which included traveling to Mauritius, Sossah concluded that ZTI was a “nameplate” company, with no physical presence apart from a corporate depository that provided a Mauritius mailing address. Aff. of Eric Sossah, Ex. 20, ¶¶ 8-16, 21. To substantiate its position that ZTI was judgment- proof by the time the arbitration terminated, the plaintiff submitted an e-mail from ZTI's counsel (also defense counsel here) to AGK's counsel stating that ZTI's “assets ... are dwindling rapidly and its cash balances are approaching absolute zero.” The exhibit does not appear to contain the date of the e-mail, but the plaintiff's brief represents that the e-mail was sent on November 29, 2006. Ex. 17. II. Discussion The Court's decision proceeds in seven parts, holding that: (1) the framework of the Federal Arbitration Act (“FAA”) applies to this case; (2) AGK has demonstrated its consent to arbitrate at least its claims against ZTI by bringing the AAA proceeding; (3) the defendants can enforce AGK's agreement to arbitrate against AGK; (4) because AGK's claims against ZTI are arbitrable, any claims that purport to pierce ZTI's veil are likewise arbitrable; (5) any claims that rely specifically on Contract 11204, whether pleading that it is the governing contract or that it memorializes some but not all of the parties' intentions, are arbitrable; (6) the plaintiff's claims for unjust enrichment and conversion, brought against the defendants directly, must be sent to arbitration because they plausibly relate to the subject matter of the agreement to arbitrate; and (7) the FAA requires the Court to stay the case. A. The Federal Arbitration Act The FAA, 9 U.S.C. §§ 1-16, governs all contracts that rely on a written arbitration clause and concern interstate or foreign commerce. 9 U.S.C. §§ 1, 2. If a court finds that a given dispute falls under a valid arbitration clause, then the court must stay court proceedings pending arbitration (9 U.S.C. § 3) and compel arbitration (9 U.S.C. § 4) if a party requests such relief. Under the FAA, questions of whether the parties formed an agreement to arbitrate at all are governed by state contract law. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). “Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (internal quotations omitted). The FAA mandates that the arbitration clause is valid and enforceable to the same extent that any other contractual provision would be. An arbitration clause cannot be invalidated except on the basis of generally applicable contract principles, such as fraud or unconscionability. 9 U.S.C. § 2; see also Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 22 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 (1996) (“By enacting § 2, ... Congress precluded States from singling out arbitration provisions for suspect status, requiring instead that such provisions be placed upon the same footing as other contracts.” (internal quotations omitted)). 7 7 If the party challenges the arbitration clause in particular-not the contract as a whole-on the basis of such a principle, then the court can decide the clause's validity. In contrast, if the party challenges the contract as a whole on the basis of such a principle, then the court must not decide the question but must instead submit the issue to the arbitrator. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967). *7 Once it is established that an arbitration clause exists and that the FAA applies, federal law governs the scope of an arbitration clause. The FAA embodies a liberal policy favoring arbitration. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Any ambiguity as to whether a particular grievance falls within the ambit of an arbitration clause must be resolved in favor of arbitration. AT & T, 475 U.S. at 650. “An order to arbitrate should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” So long as a party's claim of arbitrability is “plausible,” an arbitrator, not a court, must interpret the contract. Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 55 (3d Cir.2001) (internal quotations omitted). The FAA applies to the present facts. The parties do not directly address whether the FAA applies. The plaintiff does not mention the FAA in its brief at all, while the defendants refer to it only in passing. The Court finds, however, that both FAA requirements have been met. First, the arbitration clause in Contract 11204 is written. The fact that Contract 11204 was never signed by AGK does not remove the contract from the FAA's ambit. The FAA does not require a signature. See Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846 (2d Cir.1987). 8 Second, no one disputes that the transaction at issue is international, with the vanilla beans shipped from the Comoros to Philadelphia. 8 Where lawmakers have wished to indicate that a law applies only when the contract with the arbitration clause has been signed, they have done so explicitly. See Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 448-49 (3d Cir.2003) (holding that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which has been incorporated into U.S. law, is applicable only when both parties have signed a contract or series of letters agreeing to arbitration). B. AGK Agreed to Arbitrate Its Claims By Bringing the AAA Arbitration Ordinarily, the Court would engage in an inquiry into whether Contract 11204 satisfied the contract principles of offer, acceptance, meeting of the minds, and so forth. 9 AGK argues that it never agreed to arbitrate any disputes with ZTI or the defendants because it never agreed to Contract 11204. It does not argue that the arbitration clause specifically is invalid. Instead, it argues that it never agreed to several key terms in Contract 11204, that its shipment of the vanilla beans did not constitute acceptance of Contract 11204, and therefore that Contract 11204 did not represent the parties' true agreement. 9 The parties disagree about which state's law should apply, but neither points out a relevant difference between Pennsylvania law (favored by the plaintiff) and New York law (favored by the defendants). Both parties freely cite to federal cases applying federal law, as well. New York and Pennsylvania law both support the Court's ruling, which is based on generally applicable principles of consent and waiver. Therefore, the Court does not conduct a choice of law analysis. In this case, however, the Court need not conduct an inquiry into whether or not Contract 11204 was validly formed because AGK manifested its consent to arbitrate by bringing the AAA arbitration. Although a party usually indicates its intent to arbitrate by signing a contract that includes an arbitration clause, it can also indicate its consent by bringing and prosecuting an arbitration proceeding. A party may also waive any objection to arbitration by not raising it early enough. United Indus. Workers, Local No. 16 v. Gov't of the V.I., 987 F.2d 162 (3d Cir.1993). In United Industrial Workers, the United States Court of Appeals for the Third Circuit held that Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 23 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 by demanding arbitration and fully participating in arbitration, represented by counsel, the plaintiff union demonstrated its unmistakable intent to arbitrate the dispute. Id. at 168. The court went on to cite approvingly a case from the United States Court of Appeals for the Seventh Circuit that stated that “[t]he party initiating the arbitration has made a decision that the dispute is arbitrable.” Id. (citing Int'l Ass'n of Machinists & Aerospace Workers, Lodge No. 1777 v. Fansteel, Inc., 900 F.2d 1005, 1009 (7th Cir.1990)). The United Industrial Workers court noted that its decision to hold the union to the arbitration clause could also be understood as stating that the union had waived any right to object to arbitration. The court cited other circuits approvingly for the proposition that by submitting a matter to arbitration, a party waives the right to object to the arbitrability of a dispute. United Indus. Workers, 987 F.2d at 168-69. *8 This common sense principle finds support in both New York and Pennsylvania state law. In Merrill Lynch, Pierce, Fenner & Smith Inc. v. Chan, 38 A.D.3d 355, 832 N.Y.S.2d 182, 183 (N.Y.App.Div.2007), the respondent challenged the results of an arbitration on the grounds that the arbitrator lacked authority to hear the case. The court rejected this challenge because the respondent had himself brought the arbitration proceeding. In Weinmann v. Meehan, 428 Pa.Super. 582, 631 A.2d 684 (Pa.Super.1993), the appellants argued that the arbitration award against them was invalid because they, as directors and not shareholders of the corporation at issue, did not fall within the relevant arbitration clause. Stating that “the parties by their conduct may assent to have a matter resolved by a particular tribunal,” the court held that the appellants could not challenge the arbitration because when the appellee had previously brought suit in court, the appellants had successfully argued that the matter was arbitrable. Id. at 686; cf. 42 Pa. Cons.Stat. § 7314(a)(1)(v) (in statutory arbitration scheme, the court shall vacate an arbitration award where there was no agreement to arbitrate, no court had previously stayed litigation or compelled arbitration, and the party asking the court to vacate the order had raised the issue of an agreement to arbitrate before the arbitrators). Having brought an arbitration proceeding against ZTI and prosecuted that action for two years, AGK has manifested its consent to arbitrate those claims. It is immaterial that the above cited cases, unlike the instant case, concern motions to vacate a final arbitration judgment. In all cases, the central question is whether the party opposing arbitration has already expressed its consent to arbitrate. The instant case squarely implicates the policy rationales behind United Industrial Workers, Merrill Lynch, and Weinmann, as well as an earlier, similar case, Teamsters Local Union No. 764 v. J.H. Merritt & Co., 770 F.2d 40, 42 (3d Cir.1985). To allow a party to bring arbitration, abandon it just before its conclusion-no matter for what reason-and then bring federal suit arguing that no valid arbitration clause existed would introduce unfair and inefficient incentives. AGK is therefore estopped from asserting that it did not agree to arbitrate. Alternatively formulated, AGK has waived any objection to arbitration on the grounds that it did not consent. Whether or not bringing the arbitration was a “mistake,” as AGK now states, is immaterial under the framework of United Industrial Workers. Instead, it is the act of bringing and prosecuting the arbitration- regardless of motivation-that manifests the plaintiff's consent to arbitration and therefore binds the plaintiff to arbitrate. The extraordinary remedy of judicial estoppel, in contrast, is not applicable here. Judicial estoppel is an equitable doctrine intended to protect the integrity of the judicial process by preventing parties from deliberately changing positions according to the exigencies of the moment. It should be applied only to prevent a miscarriage of justice, and the court must give the accused party a chance to explain the inconsistency in its positions. Krystal Cadillac- Oldsmobile GMC Truck, Inc. v. General Motors Corp., 337 F.3d 314, 319-20 (3d Cir.2003). *9 “[S]ome aggravating factor, and not mere inconsistency, is necessary for the application of judicial estoppel.” Chao v. Roy's Const., Inc., ---F.3d ----, 2008 WL 540245, at *11 n. 5 (3d Cir. Feb.29, 2008) (quoting New Hampshire v. Maine, 532 U.S. 742, 751, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001)) (internal quotations omitted). Several factors play a role in a court's determination of whether judicial estoppel is appropriate. First, a party's later position must be clearly inconsistent with its earlier position. Second, courts inquire whether the party has persuaded the earlier court to adopt that party's earlier position. Third, courts inquire whether the party seeking to assert the inconsistent position would gain Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 24 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 an unfair advantage if not estopped. The court may also consider other factors in balancing the equities, for instance, whether the initial position was a mistake. New Hampshire, 532 U.S. at 749-51, 753 (internal citations omitted); see also Montrose Med. Group Participating Savings Plan v. Bulger, 243 F.3d 773, 780-81 (3d Cir.2001). The United States Court of Appeals for the Third Circuit has held that the presence of bad faith is relevant to the court's determination. Krystal, 337 F.3d at 319-20. In view of these factors and on this record, the Court cannot find that AGK has abused the judicial process. The arbitration panel never adopted the claims to which the defendants seek here to bind the plaintiff. Although the arbitration panel issued interim rulings that may have accepted certain of the positions that the plaintiff took in that proceeding, the panel never reached the merits of AGK's claims against ZTI and therefore did not accept or adopt those theories of liability. C. The Defendants Can Enforce AGK's Agreement to Arbitrate Although they were not signatories to the arbitration agreement, the defendants can enforce the arbitration agreement against AGK. Under certain circumstances, a nonsignatory to an arbitration agreement can enforce that agreement against a signatory. 10 This is so despite the fact that arbitrability is a matter of contract, ordinarily resting on the agreement of the parties. 10 AGK protests that it is not a “signatory” because it never signed Contract 11204. The Court has found, however, that AGK consented to arbitrate by bringing the arbitration proceeding, so AGK is a signatory for purposes of this analysis, in that it is a party that directly agreed to arbitrate. The United States Court of Appeals for the Third Circuit has noted with approval that courts have bound a signatory to arbitrate with a nonsignatory “at the nonsignatory's insistence because of the close relationship between the entities involved, as well as the relationship of the alleged wrongs to the nonsignatory's obligations and duties in the contract ... and [the fact that] the claims were intimately founded in and intertwined with the underlying contract obligations.” E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 199-200 (3d Cir.2001) (internal quotations omitted). On this theory, the signatory is estopped from avoiding arbitration with a nonsignatory when the claims at issue rely on the terms of the agreement or assume the existence of, arise out of, or relate directly to, the written agreement. Bannett v. Hankin, 331 F.Supp.2d 354, 359-60 (E.D.Pa.2004) (citing Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir.2000); MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.1999); McBro Planning & Dev. Co. v. Triangle Elec. Const. Co., Inc., 741 F.2d 342 (11th Cir.1984); Domke on Commercial Arbitration § 13:8 (2003)). *10 Estoppel may also apply where the nonsignatory is alleged to have engaged in “substantially interdependent and concerted misconduct” with a signatory other than the plaintiff. Grigson, 210 F.3d at 527 (quoting MS Dealer, 177 F.3d at 947). Here, nearly all of the factual allegations supporting the plaintiff's claims are allegations that AGK would have had to have proven in the arbitration in order to prevail against ZTI. In particular, the allegations of wrong-doing are nearly identical. Only the allegations of the corporate relationships among the defendants and ZTI and of the identities of the parties that formed the contract would have been inapplicable to the arbitration proceeding. In fact, AGK attempted to put those relationships at issue even after the arbitration panel ruled against the joinder of the defendants. Ex. PP. The second test for applying estoppel is also satisfied. To the extent that ZTI has some existence separate from the defendants, AGK alleges “substantially interdependent and concerted misconduct” among ZTI and the defendants. This suit presents the unusual circumstances that the parties seeking to enforce the arbitration agreement have not conceded that the claims against them are arbitrable and that the subsidiary of those parties in fact argued in arbitration that those parties were not subject to the arbitration clause. These facts do not change the Court's conclusions that the plaintiff has agreed to arbitration and that the defendants have standing to enforce that agreement. They do, however, raise interesting issues for resolution in the first instance by the arbitration panel. The Court does not express any view as to any issues other than those decided here. Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 25 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 D. AGK Cannot Sue on a Piercing the Veil Theory Without First Arbitrating ZTI's Liability The Court finds that if a party has an arbitration agreement with a subsidiary, that party cannot sue the subsidiary's parent in federal court on a piercing the veil theory without first obtaining an arbitration judgment that the subsidiary is liable. 11 As a result, all of the plaintiff's claims that rely on piercing ZTI's veil are arbitrable, in whatever counts of the complaint they appear. 11 To the extent that AGK is correct that ZTI has no separate corporate existence apart from the defendants, AGK could be said to be contending that its contractual partners were really the defendants all along. If that were so, then the defendants would be parties to Contract 11204 and therefore to the arbitration clause. When the plaintiff is obligated to arbitrate its disputes with a subsidiary, allowing the plaintiff to sue the parent directly would allow the plaintiff to bypass the requirement that arbitrators, not a court, rule on whether the subsidiary is liable. This outcome would frustrate the federal policy favoring arbitration. 12 12 Case law supports the analogous proposition that, in the interest of avoiding inconsistent legal determinations, a court may stay non-arbitrable claims against a parent so that arbitrable claims against the subsidiary may be arbitrated first. As the Supreme Court has stated, the trial court has discretion to issue a stay as to a litigant that is not a party to an arbitration agreement. Moses H. Cone, 460 U.S. at 21 n. 23. For instance, in Sam Reisfeld & Son Import Co. v. S.A. Eteco, 530 F.2d 679 (5th Cir.1976), the United States Court of Appeals for the Fifth Circuit held that where the charges against parent companies of the arbitrating party “were based on the same operative facts and were inherently inseparable from the claims against [the subsidiary],” the trial court had discretion to stay the claims against the parent pending arbitration against the subsidiary. As the court explained, “[i]f the parent corporation was forced to try the case, the arbitration proceedings would be rendered meaningless and the federal policy in favor of arbitration effectively thwarted.” Id . at 681. The parties cite several cases in their briefs and in oral argument regarding whether a party can sue a parent under a piercing the veil theory before obtaining a judgment that the subsidiary is liable. These cases do not address the central issue at hand. There may be situations in which there is no arbitration clause and a plaintiff can pursue the parent directly on a piercing the veil theory, without first separately showing the subsidiary's liability. See, e.g., Brown v. Astro Holdings, Inc., 385 F.Supp.2d 519 (E.D.Pa.2005). None of the cases cited by the parties, however, concerned a situation in which the plaintiff was obligated to arbitrate its disputes with the subsidiary but brought suit only against the parent, and the Court has found no such cases. *11 The plaintiff protests that it would be unreasonable to expect it to proceed to judgment in an arbitration against a judgment-proof entity incorporated in an asset- protection jurisdiction. The Court disagrees. If AGK had won in arbitration against ZTI, it could then have sued the defendants on a piercing the veil theory to enforce that judgment. The parties could then have litigated the issue of whether that veil-piercing suit fell under the arbitration clause. If AGK had lost in arbitration against ZTI, AGK readily agrees that it would not be able to bring at least some of the claims alleged in the instant suit. Tr. Oral Arg. at 18, 38, 40-41. The arbitrators themselves suggested a potential solution to AGK's claim that it should not be forced to pursue arbitration against ZTI without any prospect of being able to hold a non-judgment-proof entity liable. In their decision denying AGK's request to join the defendants as respondents in the arbitration, the arbitrators contemplated that a separate arbitration panel could have determined whether or not any claims by AGK against the defendants were arbitrable. Ex. OO ¶ 23; Tr. Oral Arg. at 31. E. The Plaintiff Must Arbitrate All Claims That Rely on Contract 11204 Based on a similar analysis, any claims that rest on or require interpreting Contract 11204 are also arbitrable. Once a court has determined that an agreement to arbitrate exists, it should find a particular dispute arbitrable “unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Medtronic, 247 F.3d at 55 (internal quotations omitted). A party's claim that a particular dispute is arbitrable Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 26 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 need be only “plausible” for the court to hold that an arbitrator should decide the question. Id. Moreover, in determining whether a claim falls within the scope of the arbitration agreement, the Court must focus on “the factual underpinnings of the claim rather than the legal theory alleged in the complaint.” Id. The Court must give effect to the arbitration clause's breadth. The contract reads: “[i]n the event of disputes Arbitration Rules of the American Arbitration Association in New York will apply.” This clause is not fatally ambiguous, as the plaintiff urges. This is a broad arbitration clause, at least plausibly encompassing all disputes that relate to the subject matter of the contract. The plaintiff argues that ZTC is directly liable under Contract 11204 as the named consignee in that contract. Arbitration is mandatory for those claims. If the plaintiff is going to rely on Contract 11204 for recovery, then it cannot avoid the enforcement of the arbitration clause that Contract 11204 contains. The plaintiff's direct contract claims, counts 2 and 5, must therefore be arbitrated. 13 13 The plaintiff urges that its complaint includes the non- contract claim of conversion. Although there is no separate count of conversion, the plaintiff uses the term “converted” in counts 2, 4, and 5. Compl. ¶¶ 69, 91, 97, 107. To the extent that these counts articulate non-contract conversion claims, the Court's analysis in Section II.F. below applies. Counts 1 and 4 allege that the plaintiff had an oral contract with the defendants. In count 1, which concerns Tranche 1, the plaintiff alleges that “ ‘Contract’ 11204 ... incorporates some of the parties['] agreement on terms ..., while unilaterally changing other terms ....” The plaintiff makes a similar allegation with respect to Tranche 2 in count 4. The plaintiff also alleges that the parties had agreed to treat the airway bills the same as Tranche 2 and that the plaintiff would sell the defendants its entire 2003 vanilla output. Because both counts 1 and 4 require adjudication of the meaning of Contract 11204 and to what extent its terms reflected the parties' intentions, these counts must be arbitrated. Compl. ¶¶ 60, 87, 22, 86. F. The Plaintiff Must Arbitrate All Claims Related to the Subject Matter of Contract 11204 *12 The Court concludes that the scope of the plaintiff's consent to arbitrate is broad enough to encompass all of its claims, including the unjust enrichment claims in counts 3 and 6. The plaintiff argues that because counts 3 and 6 articulate a completely non-contract claim against the defendants, they should not be affected by AGK's previous arbitration against ZTI. In particular, AGK urges that the defendants are liable directly, not through ZTI, for keeping the vanilla beans rather than returning them to AGK. Because Contract 11204 purports to set forth the terms under which AGK shipped the vanilla, however, these claims, too, must be submitted to an arbitrator. Under Medtronic, the factual allegations on which a claim rests, not the claim's legal label, determine whether the claim is arbitrable. Medtronic, 247 F.3d at 55; cf. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. ., 473 U.S. 614, 625 n. 13, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) ( “[I]nsofar as the allegations underlying the statutory claims touch matters covered by the enumerated articles, the Court of Appeals properly resolved any doubts in favor of arbitrability.”). Where separate tort claims arise out of the same facts as the breach of contract claim, a broadly worded arbitration provision covers such claims. Although the United States Court of Appeals for the Third Circuit does not appear to have addressed this particular aspect of the scope of an arbitration clause, other courts have held unjust enrichment and conversion claims to be arbitrable. See, e.g., U.S. Claims, Inc. v. Saffren & Weinberg, LLP, Civ. No. 07-0543, 2007 WL 4225536, at *7 (E.D.Pa. Nov.29, 2007); RCM Techs., Inc. v. Brignik Tech., Inc., 137 F.Supp.2d 550, 556 (D.N.J.2001); cf. Brayman Const. Corp. v. Home Ins. Co., 319 F.3d 622, 625-26 (3d Cir.2003). G. The Court Will Stay the Case The defendant moves for this Court to dismiss the case, or in the alternative to stay proceedings pending arbitration. The Court will stay the case. Under the FAA, if a suit is brought on an issue “referable to arbitration under an agreement in writing for such arbitration,” then “the court ... shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 27 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” 9 U.S.C. § 3. The United States Court of Appeals for the Third Circuit has held that the FAA leaves no discretion to dismiss a fully arbitrable case instead of granting a stay, if a party has requested a stay. Lloyd v. Hovensa, LLC, 369 F.3d 263, 269 (3d Cir.2004). 14 As the Lloyd court notes, even where all claims in a case are arbitrable, a district court retains many roles, including the ability to confirm, vacate, or modify the ultimate arbitration order. Id. at 270 (citing FAA, 9 U.S.C. §§ 9-11); see also Cortez Byrd Chips, Inc. v. Bill Harbert Const. Co., 529 U.S. 193, 201-02, 120 S.Ct. 1331, 146 L.Ed.2d 171 (2000) (stating that any court with the power to stay a suit pending arbitration would have the power to confirm, vacate, or deny any ultimate arbitration award, regardless of whether the arbitration occurred in that court's district). 14 The defendants are not in default in proceeding with arbitration. “Default” for the purpose of § 3 is generally treated as synonymous with having waived the right to arbitrate by actively litigating the case in court. Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 217-18 (3d Cir.2007). *13 Lloyd concerned a case in which a party moved for a stay, but the district court instead dismissed the case. Here, the defendants would prefer a dismissal, but have moved for a stay in the alternative. The question arises whether this factor would allow the court to dismiss instead of staying the case. District courts in this circuit have uniformly held post-Lloyd that when a litigant moves for a stay even as part of a motion in the alternative, Lloyd 's mandate applies. See, e.g., Bloom v. Jersey City Mun. Utils. Auth., No. 06-CV-3526, 2008 WL 360986, at *6 (D.N.J. Feb. 8, 2008) (ruling on motions for summary judgment, motions to dismiss, and a motion to stay by only one of multiple defendants, the court has no choice but to stay); U.S. Claims, 2007 WL 4225536, at *14 (ruling on a motion to dismiss or in the alternative to stay the suit, the court has no choice but to stay); Griffen v. Alpha Phi Alpha, Inc., No. Civ. A. 06-1735, 2007 WL 707364, at *9 (E.D.Pa. Mar.2, 2007) (same). On the other hand, when a party has moved for a dismissal but has not moved for a stay, some courts have ruled that Lloyd does not apply and therefore that a dismissal is available if all claims in the suit are arbitrable. See, e.g., Rhodia Inc. v. Bayer Cropscience Inc., No. Civ. 04-6424, 2007 WL 3349453, at *5 (D.N.J. Nov.7, 2007). 15 15 If a party that is not subject to arbitration applies for a stay, the court has the discretion but not the obligation to stay the litigation as to that party, in order to allow other claims in a suit to go to arbitration first. See Moses H. Cone, 460 U.S. at 21 n. 23. This Court has ruled that the defendants can enforce the arbitration agreement against the plaintiff even though they are not signatories to the arbitration agreement. This principle, therefore, does not apply here. The Court need not decide whether a stay is mandatory here because even if a stay were not mandatory under the FAA, the Court would exercise its discretion to stay the case pending arbitration because the Court retains many roles in connection with an arbitration. Even if some but not all of the claims in this case were arbitrable, the Court would stay the entire case pending arbitration because the factual bases for all of the claims are so intertwined with one another. The fact that arbitration was previously commenced but never concluded does not change the Court's finding that a stay is warranted. 16 16 The Supreme Court encountered a case in which arbitration proceedings had been suspended in Mitsubishi Motors, 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444, in which the Court found the dispute in question arbitrable. The district court had stayed its own proceedings pending arbitration in Japan that subsequently halted when one party filed for bankruptcy. Id. at 623 n. 12. The question of how the district court should handle the stay in the face of the halted arbitration proceedings was not, however, before the Supreme Court. The Court does not reach the defendants' other arguments in support of its motion to dismiss. An appropriate Order follows. ORDER AND NOW, this 18th day of March, 2008, upon consideration of the defendants' Motion to Dismiss, or in the Alternative to Change Venue (Docket No. 12), Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 28 of 29 Sarl v. A.M. Todd Co., Not Reported in F.Supp.2d (2008) 2008 WL 724607 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 12 the plaintiff's opposition thereto, the defendants' reply thereto, and the parties' supplemental submissions, and following oral argument held on November 1, 2007, IT IS HEREBY ORDERED that the motion to dismiss or stay is GRANTED, and that the motion to change venue is DENIED as MOOT, for the reasons stated in the accompanying memorandum. IT IS FURTHER ORDERED that these proceedings are STAYED until further notice by the Court. The parties shall report back to the Court within 90 days of the entry of this Order as to the status of this matter. All Citations Not Reported in F.Supp.2d, 2008 WL 724607 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01346-MWB Document 54-2 Filed 05/01/17 Page 29 of 29