Abrams et al v. Chesapeake Energy Corporation et al

REPLY BRIEF re MOTION to Dismiss Plaintiffs' Amended Complaint

M.D. Pa.June 27, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA ROBERT ABRAMS, et al., Plaintiffs, v. CHESAPEAKE ENERGY CORPORATION, et al., Defendants. ELECTRONICALLY FILED Civil Action No. 4:16-cv-01346-MWB (Judge Matthew W. Brann) DEFENDANT MITSUI E&P USA LLC’S REPLY IN SUPPORT OF ITS MOTION TO DISMISS THE AMENDED COMPLAINT John K. Gisleson (PA62511) john.gisleson@morganlewis.com Matthew H. Sepp (PA85406) matthew.sepp@morganlewis.com MORGAN, LEWIS & BOCKIUS LLP One Oxford Centre Thirty-Second Floor Pittsburgh, PA 15219-6401 Telephone: +1.412.560.3300 Facsimile: +1.412.560.7001 Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 1 of 24 -i- TABLE OF CONTENTS Page INTRODUCTION AND BACKGROUND ............................................................. 1 I. Plaintiffs’ Antitrust Claim Must Be Arbitrated .............................................. 3 II. Plaintiffs’ Declaratory Judgment Claim Should Be Dismissed ................... 11 CONCLUSION ....................................................................................................... 16 Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 2 of 24 -ii- TABLE OF AUTHORITIES Page(s) CASES B-S Steel of Kansas, Inc. v. Texas Indus., Inc., 229 F. Supp. 2d 1209 (D. Kan. 2002) ................................................................... 9 Certain Underwriters at Lloyd’s London v. Westchester Fire Ins. Co., 489 F.3d 580 (3d Cir. 2007) ......................................................................... 14, 15 Children’s Hospital of Philadelphia v. American Arbitration Ass’n, 331 A.2d 848 (Pa. Super. Ct. 1974) .................................................................... 16 Com. ex rel. Kane v. Philip Morris, Inc., 128 A.3d 334 (Pa. Cmwlth. Ct. 2015) ................................................................ 16 Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10th Cir. 1995) .......................................................................... 7, 8 Empire State Ethanol & Energy, LLC v. BBI Int'l, No. 1:08-CV-623 GLS/DRH, 2009 WL 790962 (N.D.N.Y. Mar. 20, 2009)..................................................................................... 8 Estate of Stiles v. Chesapeake Appalachia, L.L.C., 2014 WL 10919559 (Pa. Super. Ct. Jun. 17, 2014) .......................................... 6, 7 In re Currency Conversion Fee Antitrust Litig., 265 F. Supp. 2d 385 (S.D.N.Y. 2003) .............................................................. 8-9 In re Universal Serv. Fund Tel. Billing Practices Litig., 300 F. Supp. 2d 1107 (D. Kan. 2003) ................................................................... 8 Island Peak Ranch, L.L.C. v. FIIK Inv. & Holdings, Inc., No. CIVIL 2:02-CV-562, 2008 WL 2673925 (D. Utah July 7, 2008) .......................................................................................... 9 Third Millennium Techs., Inc. v. Bentley Sys., Inc., No. 03-1145-JTM, 2003 WL 22003097 (D. Kan. Aug. 21, 2003) ....................... 9 OTHER AUTHORITIES AAA Rule R-2 ......................................................................................................... 13 Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 3 of 24 -iii- AAA Rule R-4 ................................................................................................... 13, 14 AAA Rule R-53 ....................................................................................................... 13 Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 4 of 24 INTRODUCTION AND BACKGROUND This is a case of alleged underpayment of oil and gas royalties pursuant to written oil and gas leases. The plaintiffs are dozens of unrelated parties, whose only commonality is that each leased her, his, or its respective rights to oil and gas in north-central Pennsylvania to Defendants Mitsui E&P USA LLC (“MEPUSA”), Chesapeake Appalachia, L.L.C., and Anadarko E&P Company LP (collectively, “Lessee Defendants”). As to MEPUSA, Plaintiffs claim that, as a result of purported antitrust violations and breaches of contract, they were underpaid royalties according to the terms of their respective leases. As confirmed by the allegations in the Amended Complaint, this is fundamentally a contract case governed by the leases.1 The Amended Complaint admits that two of the plaintiffs – Cobblestone Camp, LLC (“Cobblestone”) and JEMSCO Star, LLC (“JEMSCO”) (collectively, “Plaintiffs”) – have leases that contain a mandatory arbitration clause 1 This is one of four related cases pending before this Court. See Abrams v. Chesapeake Energy Corp., No. 16-01343-MWB (Complaint filed on June 28, 2016); Arnold v. Chesapeake Energy Corp., No. 16-01345 (Complaint filed on June 28, 2016); Ahern v. Chesapeake Energy Corp., No. 16-01347-MWB (Complaint filed on June 28, 2016). The four actions are separated into distinct groups of plaintiffs based on common lease terms. Otherwise, the lawsuits are materially identical. Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 5 of 24 2 (the “Leases”)2 and that their breach of contract and accounting claims must be arbitrated. Plaintiffs, however, refuse to initiate a separate arbitration proceeding respective to each Lease – as instructed by the AAA – and instead wish to arbitrate each of their respective disputes together as one arbitration. Plaintiffs admit that consolidation is a procedural issue for arbitrators to decide – that issue will be decided after claim initiation and arbitrator appointment and undisputedly is not before the Court – but they improperly ask the Court to decide whether the AAA may follow its established claim initiation procedure, to override the AAA’s interpretation of its rules and procedures, to prevent MEPUSA from objecting to Plaintiffs’ refusal to follow the AAA’s procedure, and, and to allow them to file a consolidated mass arbitration contrary to the AAA’s procedures. Plaintiffs’ argument contradicts itself and defies binding precedent. Plaintiffs also wish to carve out their antitrust claim from the scope of the arbitration agreement and instead pursue it in court. Plaintiffs argue that they could have brought that claim without the Leases, but admit that both of them hold Leases with Lessee Defendants and, more importantly, allege only Lease-based 2 Other Defendants in this action have identified plaintiffs James and Susan Swingle as also having leases with arbitration clauses. On information and belief following reasonable investigation, MEPUSA does not have any interest in either of those leases. In the event MEPUSA is found to have an interest, MEPUSA includes those leases within the scope of its Motion. Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 6 of 24 3 royalty damages pursuant to leases that contain broad arbitration clauses encompassing all disputes, including those under the antitrust laws. Accordingly, the Court should decline to address the procedural initiation question and compel Plaintiffs to arbitrate the antitrust claim.3 I. Plaintiffs’ Antitrust Claim Must Be Arbitrated. This is not a class action that includes some proposed class members with leases and others without leases. Rather Plaintiffs admit that they are not only lessors of oil and gas rights, but specifically lessors to the Defendants – the underpayment of royalties due to the deduction of post-production costs from the royalties. (Am. Compl., ¶ 145) Plaintiffs also only allege harms affecting their 3 MEPUSA filed motions to dismiss in all four of the related actions identified above in note 1. It appears that an opposition brief was prepared for the Patricia Abrams case (no. 16-01343) and that the plaintiffs in all four actions filed that exact brief in all the cases (the only thing they changed was the caption). As a result, the Opposition (the one filed in this case), reflects factual circumstances and allegations from the Patricia Abrams case as opposed to those in this case. Specifically, the Opposition applies language of the arbitration provisions found in the leases in the Patricia Abrams case instead of arbitration language in the leases at issue in this case. The Opposition also does not indicate that only two plaintiffs are alleged to have leases with arbitration clauses, and instead asserts arbitration- related arguments on behalf of all plaintiffs. It refers to “the more than 200 Leases involved in this action,” which is accurate as to the Patricia Abrams case, but not here (there only are a few dozen). It also cites to the wrong/non-existent paragraphs of the Amended Complaint that was filed in this case. MEPUSA’s motion to dismiss and supporting memorandum accurately represented the facts and allegations of this case and, notwithstanding the erroneous Opposition, MEPUSA accurately represents the facts and allegations of this case in its Reply too. Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 7 of 24 4 royalties under those Leases. (Am. Compl., ¶¶ 7, 171, 237, 238) The antitrust claim therefore necessarily “concern[s] the Lease or performance there under.” (Am. Compl., ¶ 357) The antitrust claim falls squarely within the scope of the arbitration clause and must be arbitrated. Plaintiffs say, without analysis of their Amended Complaint: that their antitrust claim “would be viable and could be maintained in the absence of, and without reference to, the Leases,” labelling it as “independent” of the other claims (Opp. at 3); that the antitrust claim does “not require reference to the underlying contract” (Opp. at 4); and that the “injuries to their business and property interests in Gas Mineral Rights … predated and existed independent of their Leases” (Opp. at 5). Of course, without the Leases, MEPUSA could not produce gas from Plaintiffs’ properties and would have no post-production costs to deduct, while Plaintiffs would have no right to receive – and would not receive – any royalties or lease bonus payments. Equally as fundamentally, Plaintiffs’ Amended Complaint directly contradicts those conclusory assertions and demonstrates that the antitrust claim (and the entire action) concerns the performance and breach of the Leases, all of which are with the Lessee Defendants: • “Plaintiffs hold royalty and other interests under oil and gas leases” (Am. Compl., ¶ 1); Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 8 of 24 5 • “Each of the Plaintiffs, or their respective predecessor(s) in interest, entered into a fully paid up oil and gas lease with Chesapeake Appalachia . . ., pursuant to which the respective Plaintiffs hold royalty interests in the natural gas produced and marketed” (Am. Compl., ¶ 145); • The Lessee Defendants (including MEPUSA) “also hold working interests in each of the oil and gas leases under which Plaintiffs hold their respective royalty interests, as direct or indirect assignees of Chesapeake Appalachia” (Am. Compl., ¶ 3); • MEPUSA obtained the working interest “[i]n return for . . . provid[ing] critical financial support for the conspiracy, acting with knowledge of and with the intent to enable Chesapeake and Anadarko to fully exploit, the anticompetitive and restrictive AMI established pursuant to the 2006 Joint Exploration Agreement” (Am. Compl., ¶ 223); • “As a direct and intended result of the anticompetitive conspiracy in violation of the antitrust laws, the bonuses, royalty rates and royalties paid and payable to Plaintiffs were fixed, calculated and paid in amounts below what they otherwise would have been in a fair and open market” (Am. Compl., ¶ 7) (emphasis added); • “The post-production costs which the Lessee Defendants began to deduct from proceeds received by them at the point of sale in calculating the royalties payable Plaintiffs were based largely (but not entirely) on purported post-production services by Chesapeake affiliates and subsidiaries, in self-dealing, related party transactions” (Am. Compl., ¶ 171) (emphasis added); Moreover, Plaintiffs’ admittedly arbitrable claim for breach of contract (Count VII) (Opp. at 10) predicates both the alleged breach and associated damages on the very same conduct – deduction from Plaintiffs’ royalties of “the costs of gathering, storing, compressing, transporting, and/or marketing” gas that MEPUSA deducted from Plaintiffs’ royalties (Am. Compl., ¶¶ 343, 345) – at the heart of the antitrust claim and its allegedly associated damages (Count I): Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 9 of 24 6 • Through the “initial unlawful acts committed by Defendants in furtherance of their continuing antitrust conspiracy . . ., Defendants have performed acts and engaged in intentional inaction injurious to Plaintiffs, by charging and deducting from Plaintiffs’ royalties artificially inflated gathering fees, within the four years preceding the filing of this action, and on an ongoing basis” (Am. Compl., ¶ 237) (emphasis added); • “Plaintiffs have suffered, and continue to suffer, antitrust injury as a result of Defendants’ conduct because the economic harm they have suffered – the artificial depression of their initial lease signing bonuses, royalty rates and lease terms, and the subsequent loss of royalties due to deductions by the Lessee Defendants of unauthorized or artificially inflated costs for gathering, transportation and other post-production costs – reflects either (a) the anticompetitive impact of the antitrust violations by Defendants with respect to the market for Operating Rights and/or Gathering Services, or (b) the effect of anticompetitive acts in the markets for Operating Rights and/or Gathering Services which were made possible by, and reflect a further consequence and effect of, their earlier successful efforts to foreclose or eliminate competition in the market for Gas Mineral Rights.” (Am. Compl., ¶ 238) (emphasis added). Plaintiffs would have the Court ignore these allegations and view them instead more broadly as holders of oil and gas rights in north-central Pennsylvania. That characterization contradicts their own allegations in the Amended Complaint and defies common sense.4 Plaintiffs get no support from the cases to which they cite. Plaintiffs rely on Estate of Stiles v. Chesapeake Appalachia, L.L.C., 2014 WL 10919559 (Pa. Super. Ct. Jun. 17, 2014), where the plaintiffs sued Chesapeake for alleged 4 It also further highlights that Plaintiffs are strangers to one another and, accordingly, each of the Leases could not have necessarily implied an agreement for any of them to submit their disparate disputes in one arbitration claim. (See, infra, section II.) Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 10 of 24 7 groundwater contamination on their property resulting from operations on a separate property several miles away that the plaintiffs did not own. Chesapeake also happened to lease oil and gas rights from the plaintiffs pursuant to a lease agreement with an arbitration clause. Id. at *1. The court upheld the trial court’s denial of Chesapeake’s motion to compel arbitration, concluding that “the parties to the lease intended that it would apply to operations involving a gas well drilled on” the subject property and to “disagreements which arise between them qua lessor and lessee.” Id. at *5-6. The contamination, however, arose from Chesapeake’s operations on a different property pursuant to a different lease. Because the contamination was unrelated to Chesapeake’s operations under the plaintiffs’ lease, the arbitration clause was inapplicable to the dispute. Unlike in Stiles, the Plaintiffs here claim antitrust conduct relating solely to operations pursuant to their Leases that reduced royalty payments due to them under their Leases. Put simply, the antitrust claim is a disagreement that arises “qua lessor and lessee” concerning calculation of royalties, and the Leases are central, not incidental, to the alleged cause of action, while the underlying gas operations occurred on Plaintiffs’ properties or properties pooled with their properties. Stiles is inapposite. Plaintiffs’ reliance on the other cited cases is misplaced for similar reasons. In Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10th Cir. Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 11 of 24 8 1995), the court observed that arbitration agreements apply to “disputes touching specified provisions of the agreement . . . [and] that have a reasonable factual connection to the contract.” Id. at 1516. In that case, the court found that Coors’s exclusive dealing claim involving Molson’s reciprocal licensing arrangement with Miller was not a “dispute[] touching specified provisions” or that has “a reasonable factual connection” to an unrelated license agreement between Molson and Coors. Id. The Ford, Academy of Medicine, and Parfi cases follow a similar pattern. (Opp. at 4-5)5 In contrast, Plaintiffs here repeatedly allege that the dispute touches upon their Leases. All of these cases stand for the unremarkable basic principle that a claim must fall within the scope of an arbitration provision in order to be subject to it.6 Surely, there are cases in which claims fall outside the scope of an arbitration 5 None of the decisions is by a court in the Third Circuit and the only Pennsylvania (state court) decision is unpublished and non-precedential. 6 Courts have found that antitrust claims do fall within the scope of the arbitration clauses based on conduct within the scope of the contract. See, e.g., Empire State Ethanol & Energy, LLC v. BBI Int'l, No. 1:08-CV-623 GLS/DRH, 2009 WL 790962, at *8 (N.D.N.Y. Mar. 20, 2009) (“Coors is clearly distinguishable from the present case. . . . Empire's antitrust claims clearly touch on the PDA and implicate the parties' rights and obligations thereunder.”); In re Universal Serv. Fund Tel. Billing Practices Litig., 300 F. Supp. 2d 1107, 1125 (D. Kan. 2003) (“Coors does not, as plaintiffs contend, stand for the broad proposition that horizontal price-fixing antitrust claims are not arbitrable per se, but rather that the arbitrability of those claims depends, as with any other claim, upon the scope of the agreement to arbitrate. . . . [H]ere, plaintiffs antitrust claims expressly fall within the scope of the arbitration clause.”); In re Currency Conversion Fee Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 12 of 24 9 provision – such as those cited by Plaintiffs – but Plaintiffs have failed to explain how their antitrust claim could fall outside the scope of their broadly worded arbitration clause here where the alleged antitrust injuries are reduced royalty payments under the Leases or the amount of their bonus payments for signing the Leases. (Am. Compl., ¶¶ 7, 171, 237, 238) And although they argue that “any owners of Gas Mineral Rights in the relevant geographic area who sought to lease such rights would have standing to assert antitrust claims based on the facts alleged in the First Amended Complaint” (Opp. at 5-6), they never explain how that is so when the alleged antitrust conduct and injury involves the Leases Plaintiffs actually entered that confer the rights that Plaintiffs invoke. Again, this is not a Antitrust Litig., 265 F. Supp. 2d 385, 409-10 (S.D.N.Y. 2003) (“In Coors, the Tenth Circuit did not hold that there was a blanket prohibition on the arbitration of horizontal price-fixing claims, but only that the arbitration agreement at issue in that case “cover[ed] antitrust disputes ... provided that those disputes are within the scope of the agreement. . . . [Here,] it is clear that plaintiffs' antitrust claims ‘touch matters’ covered by the cardholder agreements plaintiffs entered into.”); B-S Steel of Kansas, Inc. v. Texas Indus., Inc., 229 F. Supp. 2d 1209, 1227 (D. Kan. 2002) (finding that the arbitration language in that case “covers Plaintiff's antitrust and tort claims. . . . In contrast, in Coors Brewing, the . . . language was not broad enough to cover antitrust claims, the Tenth Circuit held, except with respect to antitrust disputes that were within the scope of the parties' licensing agreement, that is claims where there was a ‘connection between the contract and the antitrust claims.’”); see also Island Peak Ranch, L.L.C. v. FIIK Inv. & Holdings, Inc., No. CIVIL 2:02-CV-562, 2008 WL 2673925, at *15-16 (D. Utah July 7, 2008) (finding that claims of fraud, negligent misrepresentation, breach of contract, and negligence were within scope of arbitration provision); Third Millennium Techs., Inc. v. Bentley Sys., Inc., No. 03-1145-JTM, 2003 WL 22003097, at *5 (D. Kan. Aug. 21, 2003) (same for claims such as breach of fiduciary duty, breach of trust, and tortious interference). Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 13 of 24 10 class action that could potentially encompass owners of Gas Mineral Rights other than Plaintiffs, and each of the Plaintiffs in fact entered a Lease with the Lessee Defendants and received royalties with deductions under that same Lease. Plaintiffs cannot evade their own allegations. Finally, Plaintiffs’ antitrust claim is identical to the antitrust claim asserted in three other materially identical cases filed by lessors in the same geographic region, all of whom hold leases with Lessee Defendants but with slightly different royalty clauses. (See, supra, note 1) The main material difference between the four cases is the nature of the royalty clause; there is a different royalty clause in each case that may affect calculation of the royalty. The other material difference is that two of the four actions allege leases that all contain mandatory arbitration clauses, whereas the other two allege leases without arbitration clauses (the lessors are then broken down into separate groups based on the language of their leases’ royalty provisions). If the alleged antitrust conduct affects all lessors in the geographic region, is unrelated to the Leases, and is not within the scope of any arbitration clauses, then all lessors in the geographic region would have filed one action, not four separate ones based on the terms of the lease royalty provisions or based on whether their leases contained arbitration clauses. The fact that Plaintiffs voluntarily separated their lawsuits based on the specific Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 14 of 24 11 royalty provisions in their Leases demonstrates conclusively that their Leases are fundamental to all of their claims.7 In short, Plaintiffs allege no antitrust injuries independent of the Leases with Defendants; the antitrust claim concerns and relates to the Leases; and the antitrust claim falls within the scope of the arbitration agreement. Plaintiffs must arbitrate their antitrust claim. II. Plaintiffs’ Declaratory Judgment Claim Should Be Dismissed. Plaintiffs admit that the consolidation questions raised in their declaratory judgment claim are not for the Court to decide. (Opp. at 7) Plaintiffs also confirm that they simply are looking to avoid paying the standard AAA filing fees required by the AAA. (Opp. at 8-9) Most importantly, Plaintiffs admit that they retain access to an arbitrator to decide whether their claims may be consolidated. (Opp. at 8-9) Plaintiffs’ sophistic argument to deviate from the AAA’s required procedure does not offer any basis for court intervention or any justification for the exceptional relief they seek. Plaintiffs assert the unremarkable proposition that an arbitrator or arbitrators decides whether claims may be arbitrated through a consolidated arbitration: “Plaintiffs are simply asking the Court to protect their right to have an 7 Again, one would expect that at least one plaintiff among the four cases would be a lessor in the geographic region without a lease with Lessee Defendants. There is none. Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 15 of 24 12 arbitrator or arbitrators (rather than the AAA, as the administrator) decide those questions” concerning consolidation and joinder (Opp. at 7); “Plaintiffs simply seek to be able to present the issue of joinder to the arbitrator(s) for decision” (Opp. at 8); “Plaintiffs believe that they have the right to have the issue of joinder decided by the duly appointed arbitrator(s)” (Opp. at 10). Plaintiffs are right – an arbitrator (or arbitrators) is to render a decision as to whether the claims can be arbitrated together as a consolidated arbitration. And the AAA in fact is providing Plaintiffs with that opportunity. Twisting what is really occurring here, Plaintiffs are wrong in asserting that the AAA and MEPUSA are preventing an arbitrator from deciding the consolidation issue. Rather, Plaintiffs are seeking to force the AAA to deviate from its established procedure of “one contract, one case” before appointment of an arbitrator to decide consolidation: “The AAA has nonetheless informed Plaintiffs that, if Defendants object (which they have indicated they do), the AAA will require Plaintiffs to file separate arbitration demands (and pay the substantial applicable filing fees) for each of the more than 200 Leases involved in this action, before being able to raise the issue of consolidation.” (Opp. at 8-9) (emphasis added) Plaintiffs thus admit both that the AAA “require[s] Plaintiffs to file separate arbitration demands (and pay the substantial applicable filing fees)” and that Plaintiffs have the ability to “raise the issue of consolidation” with the arbitrator(s). Ultimately, Plaintiffs just don’t like the timing of when the Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 16 of 24 13 AAA allows Plaintiffs to “raise the issue of consolidation” – after they “file separate arbitration demands (and pay the substantial applicable filing fees).” But the AAA obviously administers the cases filed in that tribunal and applies its own rules and procedures. Although claiming that there are no AAA rules that permit the AAA to require separate arbitration demands, Plaintiffs admit that “[a]ccording to Rule 2 of the Commercial Rules, parties that invoke the rules ‘thereby authorize the AAA to administer the arbitration.’” (Opp. at 7-8) (emphasis in the original) And Plaintiffs admit Rule R-53 of the Commercial Rules of the AAA “provides that the rules should be ‘interpreted and applied’ by . . . the AAA itself.” (Opp. at 8) (emphasis in the original) And so it follows that the AAA is authorized to administer, interpret, and apply Rule R-4, which prescribes who may submit a claim and how a claim is submitted: “Arbitration under an arbitration provision in a contract shall be initiated by the initiating party (“claimant”) filing with the AAA a Demand for Arbitration . . . .” (emphasis added) The AAA rules thus expressly address claim initiation, and the AAA logically may interpret and apply its own rules. Plaintiffs concede that they each have separate leases, each with an arbitration clause referring solely to “Lessor” and “Lessee” rather than to other parties, so there is nothing manifestly unreasonable or improper about the AAA Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 17 of 24 14 interpreting its rules to require each lessor to file a separate Demand for Arbitration. In apparent recognition of the AAA’s authority, Plaintiffs contacted the AAA to interpret Rule R-4 and to apply it to Plaintiffs’ desired consolidated arbitration before filing even a single arbitration demand. (Opp. at 8-9). Not getting the answer they were looking for (id.), Plaintiffs now argue that the AAA never had the authority to answer their question in the first instance, and they turn to the Court to interpret the AAA rules for the AAA and effectively tell the AAA how it should run its case intake function – even though the AAA is not a party here. Paradoxically, though, Plaintiffs also argue that the Court is not authorized to answer the question: it “is a procedural question for the arbitrator(s), rather than a court . . . to decide.” (Opp. at 9) (first emphasis in the original, second emphasis added) (citing Certain Underwriters at Lloyd’s London v. Westchester Fire Ins. Co., 489 F.3d 580, 584-90 (3d Cir. 2007). Plaintiffs’ admission begs the existential question – what are we doing here? The Westchester Fire decision to which Plaintiffs cite is dispositive. As MEPUSA discussed in its Memorandum in support of its Motion (pp. 12-14), in Westchester Fire, just as here, the parties disagreed on an issue of arbitration procedure that would be decided by an arbitrator. 489 F.3d. at 585. Also as here, the parties disagreed on the more preliminary procedural question of how to Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 18 of 24 15 appoint that arbitrator who would then decide that issue. Id. at 587-88. The court described this as a “chicken or egg” problem, and one that was not proper for a court to get entangled in. Id. at 589. Such underlying disputes on arbitral procedure “are [i]ncluded within the scope of [the] default rule in favor of arbitral resolution.” Id. at 588 (internal quotations omitted) Plaintiffs’ Opposition ignores all of this. And their silence on this issue concedes the point. Plaintiffs take the exceptional position that they do not have to follow the AAA’s required procedures. Rather, they contend that each of the unrelated Lessors entered into unrelated Leases for unrelated properties with the implied intention (and apparently undisclosed, since it is merely implied and not grounded in the Leases) that any arbitration claim made under any of the Leases necessarily would have to be joined with unknown other claims by unknown other claimants under unknown other Leases: “the Pennsylvania Superior Court has held that an agreement to permit consolidation of arbitration proceedings will be implied under the doctrine of necessary implication, because not to do so would injure a party’s right to receive part of the fruits of its contract.” (Opp. at 9) Plaintiffs do not explain how a Lessor would be deprived of the “fruits of its contract” (whatever those inedible “fruits” may be) by submitting an individual arbitration claim – Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 19 of 24 16 there is no explanation.8 If a Lessor is owed royalties (which MEPUSA disputes), the Lessor can file a Demand for Arbitration with the AAA and litigate the claim, asking the arbitrator(s), if a Lessor chooses to do so, to consolidate demands of unrelated Lessors. Consolidation has always been and remains a procedural avenue for Plaintiffs, if and when any of them ever files for arbitration. CONCLUSION For the foregoing reasons, Mitsui E&P USA LLC asks the Court to dismiss Plaintiffs Cobblestone Camp, LLC and JEMSCO Star, LLC’s claims in Counts I, VII, VIII, and IX of the Amended Complaint. Pursuant to the arbitration clauses to which they agreed. 8 Plaintiffs cite to two state court decisions, both unavailing. In Children’s Hospital of Philadelphia v. American Arbitration Ass’n, 331 A.2d 848 (Pa. Super. Ct. 1974), involving several contractors to a single construction job, the “dispute is alleged to involve the allocation of certain responsibilities for safety precautions during construction among four different contractors[. I]t would be difficult, beyond measure, to attempt to arbitrate these allocations in four separate proceedings.” Id. at 850. And Com. ex rel. Kane v. Philip Morris, Inc., 128 A.3d 334 (Pa. Cmwlth. Ct. 2015) did not involve questions of consolidating multiple claims subject to multiple contracts; rather, the trial court ordered “the Commonwealth to participate in a single arbitration, under a single contract, regarding a single dispute.” Id. at 353. Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 20 of 24 17 Dated: June 27, 2017 MORGAN, LEWIS & BOCKIUS LLP By: s/ John K. Gisleson John K. Gisleson (PA62511) john.gisleson@morganlewis.com Matthew H. Sepp (PA85406) matthew.sepp@morganlewis.com One Oxford Centre Thirty-Second Floor Pittsburgh, PA 15219-6401 Telephone: +1.412.560.3300 Facsimile: +1.412.560.7001 Attorneys for Defendant Mitsui E&P USA LLC Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 21 of 24 CERTIFICATE OF WORD COUNT I, John K. Gisleson, hereby certify that this Brief contains 4,220 words and complies with Local Rule 7.8(b)(2). MORGAN, LEWIS & BOCKIUS LLP By s/ John K. Gisleson John K. Gisleson Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 22 of 24 CERTIFICATE OF SERVICE I hereby certify that on June 27, 2017, true and correct copies of the foregoing Defendant Mitsui E&P USA LLC’S Reply in Support of its Motion to Dismiss the Amended Complaint were served on all counsel of record via the Court’s CM/ECF Court Filing System as follows: Thomas S. McNamara, Esquire Indik & McNamara, P.C. 100 South Broad Street, Suite 2230 Philadelphia, PA 19110 Christopher D. Jones, Esquire Griffin, Dawsey, DePaola & Jones, P.C. 101 Main Street Towanda, PA 18848 Taunya M. Rosenbloom, Esquire Law Office of Taunya Knolles Rosenbloom P.O. Box 309 332 South Main Street Athens, PA 18810 Counsel for Plaintiffs Michael J. Gibbens, Esquire Susan E. Huntsman, Esquire Crowe & Dunlevy 500 Kennedy Bldg. 321 S. Boston Ave. Tulsa, OK 74103 John S. Summers, Esquire Hangley Aronchick Segal Pudlin & Schiller One Logan Square 18th & Cherry Streets 27th Floor Philadelphia, PA 19103 Counsel for Access MLP Operating, LLP, Appalachia Midstream Services, LLC, and Williams Partners, LP f/k/a Access Midstream Partners, LP Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 23 of 24 Chena L. Glenn-Hart, Esquire Suzette V. Sims, Esquire John A. Snyder, Esquire McQuaide Blasko, Inc. 811 University Drive State College, PA 16801 Guy S. Lipe, Esquire Vinson & Elkins LLP 1001 Fannin Street Suite 2500 Houston, TX 77002 Counsel for Anadarko Petroleum Corporation, Anadarko E&P Onshore LLC as successor by merger to and f/k/a Anadarko E&P Company LP Daniel T. Brier, Esquire John B. Dempsey, Esquire Myers Brier & Kelly, LLP 425 Spruce Street Suite 200 Scranton, PA 18503 Counsel for Chesapeake Energy Corporation, Chesapeake Appalachia, LLC, Chesapeake Energy Marketing, Inc., and Chesapeake Operating, LLC MORGAN, LEWIS & BOCKIUS LLP By s/ John K. Gisleson John K. Gisleson Case 4:16-cv-01346-MWB Document 76 Filed 06/27/17 Page 24 of 24 UNPUBLISHED OPINIONS Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 1 of 41 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2014 WL 10919559 Only the Westlaw citation is currently available. NON–PRECEDENTIAL DECISION—SEE SUPERIOR COURT I.O.P. 65.37 Superior Court of Pennsylvania. ESTATE OF Carl STILES, Judy Armstrong, and Angelina Fiorentino, Appellee v. CHESAPEAKE APPALACHIA, LLC, Chesapeake Energy Corporation, Nomac Drilling, LLC, Great Plains Oilfield Rental, LLC. and Diamond Y Enterprise, Inc., Appellants. No. 1346 MDA 2012. | Filed June 17, 2014. Appeal from the Order Entered June 27, 2012, In the Court of Common Pleas of Bradford County, Civil Division at No(s): 10–CV–000681. BEFORE: DONOHUE, J., OTT, J., and PLATT, J. * * Retired Senior Judge assigned to the Superior Court. MEMORANDUM BY OTT, J.: *1 Chesapeake Appalachia, LLC, Chesapeake Energy Corporation, Nomac Drilling LLC, Great Plains Oilfield Rental LLC, and Diamond Y Enterprise, Inc., (collectively, “Chesapeake”) appeal from the order entered on June 27, 2012, in the Court of Common Pleas of Bradford County overruling their preliminary objections seeking to compel arbitration of the lawsuit instituted by the Estate of Carl Stiles, Judy Armstrong, and Angelina Fiorentino. Chesapeake claims the trial court erred in construing that the term, “operations,” as used in the arbitration provision of the parties' oil and gas lease, to cover only the lessee's operations on the leased premises and not (as in the present matter) on other lands. See Chesapeake's Brief at 3. After a thorough review of the submissions by the parties, the certified record, and relevant law, we affirm. The facts and procedural history are as follows: At the times relevant to this suit, Plaintiff Carl Stiles, now deceased, resided at the property (“the Property”) located at 479 Quicks Bend Road, Sugar Run, Pennsylvania, with his wife, Plaintiff Judy Armstrong. Armstrong is the mother and biological parent of Plaintiff Angelina Fiorentino, who also resided at the Property. 1 , 2 1 We will refer to Stiles, Armstrong, and Fiorentino collectively as the “Residents.” 2 Armstrong no longer resides at the Property. In 2009, Chesapeake engaged in drilling activities, and owned and operated four natural gas wells in Terry Township, Bradford County. 3 Chesapeake located, drilled, and conducted oil and gas explorations of the wells (“the Wells”) within approximately three miles of the Property and water supply. 3 The Wells were identified as # 831081, # 627644, # 831206, and # 831205. Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 2 of 41 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 On January 12, 2010, Stiles entered into an oil and gas lease (“Lease”) with Chesapeake Appalachia, LLC. 4 Pursuant to the Lease, Chesapeake Appalachia, LLC, acquired an interest in any oil and gas that lay beneath the Property. 5 4 Armstrong and Fiorentino were not parties to the Lease. 5 During this time, Stiles passed away and Armstrong was subsequently named the administratrix for Stiles's estate on February 12, 2012. On October 27, 2010, Armstrong initiated this action by filing a complaint in law and in equity against Chesapeake Appalachia, LLC, Chesapeake Energy Corporation, and Nomac Drilling, Inc. 6 She claimed her water supply was contaminated as a result of negligent actions by Chesapeake with respect to its drilling techniques and materials in relation to the Wells, which were not on the Property. Consequently, she asserted she was exposed to hazardous chemicals and materials, the value of her property went down, and she suffered damages. 6 Chesapeake Appalachia, LLC, is a West Virginia limited liability company. Chesapeake Energy Corporation is an Oklahoma corporation. Nomac Drilling, Inc., a subsidiary of Chesapeake Energy Corporation, is a Pennsylvania corporation with its principal place of business in Oklahoma City, Oklahama. On November 30, 2010, Chesapeake served notice of removal of the case to the United States District Court for the Middle District of Pennsylvania on the basis of federal diversity jurisdiction. Chesapeake also filed a motion to dismiss on December 6, 2010. On January 20, 2011, Armstrong filed a first amended complaint in the district court. The amended complaint added Stiles and Fiorentino as plaintiffs, and non-diverse defendants Great Plains Oilfield Rental, LLC, and Diamond Y Enterprise, Inc. The amended complaint included the following causes of action: (1) the Hazardous Sites Cleanup Act; (2) negligence; (3) negligence per se; (4) private nuisance; (5) strict liability; (6) trespass; and (7) medical monitoring trust funds. The Residents also sought punitive and compensatory damages. *2 On February 10, 2011, Chesapeake filed a motion to strike and a motion to dismiss the amended complaint. On February 18, 2011, the Residents then filed a motion to remand, claiming diversity no longer existed because Great Plains Oilfield Rental, LLC, and Diamond Y Enterprise, Inc., were non-diverse parties. On July 29, 2011, the federal district court (1) granted the Residents' motion to remand, (2) determined Chesapeake's motion to strike and motion to dismiss was moot, and (3) remanded the matter to the trial court. Upon remand, on September 14, 2011, Chesapeake filed a motion to compel arbitration pursuant to 42 Pa.C.S. § 7304(a) and for interim and permanent stay. On November 1, 2011, the Residents filed a memorandum of law in opposition to Chesapeake's motion to compel arbitration and to stay. On June 27, 2012, the trial court entered an order, and concomitant opinion, denying and dismissing Chesapeake's preliminary objections seeking to compel arbitration. This appeal followed. 7 7 On July 20, 2012, the trial court ordered Chesapeake to file a concise statement of errors complained of on appeal pursuant to Pa.R . A.P.1925(b). Chesapeake filed a concise statement on August 9, 2012. The trial court issued a statement pursuant to Pa.R.A.P.1925(a), relying on its June 27, 2012, opinion. Chesapeake's sole issue is as follows: Whether the trial court erred when it concluded that the term “operations,” as used in an arbitration provision in an oil and gas lease, covers only the lessee's operations on the leased premises and not (as here) on other lands, given that the arbitration provision does not so limit “operations” and the Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 3 of 41 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 lease, considered in its entirety, evidences that the parties intended that “operations,” as used in the arbitration provision, includes activities by the lessee that occur on or off the leased premises. See Chesapeake's Brief at 3. Specifically, Chesapeake states that in each count of the complaint, “the Residents allege that they sustained damages as a result of Chesapeake's activities that constitute ‘operations,’ as that term is used in the Lease.” Id. at 8. Chesapeake contends “for purposes of the arbitration provision, there is a dispute ‘concerning ... damages caused by Lessee's operations' and, therefore, the Residents' claims should be submitted to arbitration.” Id. (citation omitted). Moreover, it points to the following two reasons for reversing the court's order: (1) the court's interpretation is inconsistent with the “plain meaning” of the arbitration provision, and as a matter of law, the plain meaning should govern; and (2) the court's interpretation disregards the parties' intent as separately evidenced by the Lease as a whole. Id. at 9–15. We begin with our well-settled standard of review: Our standard of review of a denial of preliminary objections in the nature of a petition to compel arbitration “is limited to determining whether the trial court's findings are supported by substantial evidence and whether the trial court abused its discretion in denying the petition.” Midomo Co., Inc. v. Presbyterian Hous. Dev. Co., 1999 PA Super 233, 739 A.2d 180, 186 (Pa.Super.1999). Where a party to a civil action seeks to compel arbitration of that action, a two-part test is employed to determine if arbitration is required. First, the trial court must determine if a valid agreement to arbitrate exists between the parties. Id. Second, if the trial court determines that such an agreement does exist, it must then determine if the dispute involved is within the scope of the arbitration provision. Id. “The scope of arbitration is determined by the intention of the parties as ascertained in accordance with the rules governing contracts generally.” Henning v. State Farm Mut. Automobile Ins. Co., 2002 PA Super 80, 795, 795 A.2d 994, 996 (Pa.Super.2002), citing, State Farm Mut. Automobile Ins. Co. v. Coviello, 233 F.3d 710, 716 3rd Cir.2000). *3 Pittsburgh Logistics Sys., Inc. v. Prof'l Transp. & Logistics, Inc., 803 A.2d 776, 779 (Pa.Super.2002). The interpretation of any contract is a question of law and this Court's scope of review is plenary. Moreover, “[w]e need not defer to the conclusions of the trial court and are free to draw our own inferences. In interpreting a contract, the ultimate goal is to ascertain and give effect to the intent of the parties as reasonably manifested by the language of their written agreement.” When construing agreements involving clear and unambiguous terms, this Court need only examine the writing itself to give effect to the parties' understanding. This Court must construe the contract only as written and may not modify the plain meaning under the guise of interpretation. Szymanowski v. Brace, 2009 PA Super 218, 987 A.2d 717, 722 (Pa.Super.2009) (quoting Abbott v. Schnader, Harrison, Segal & Lewis, LLP, 2002 PA Super 247, 805 A.2d 547, 553 (Pa.Super.2002) (internal citations omitted)). “The task of interpreting a contract is generally performed by a court rather than by a jury. The goal of that task is, of course, to ascertain the intent of the parties as manifested by the language of the written instrument.” Maguire v. Ohio Casualty Ins. Co., 412 Pa.Super. 59, 602 A.2d 893, 894 (Pa.Super.1992). Humberston v. Chevron U.S.A., Inc., 75 A.3d 504, 509–510 (Pa.Super.2013). “Where the language of the contract is ambiguous, the provision is to be construed against the drafter.” State Farm Fire and Casualty Company v. PECO, 54 A.3d 921, 928 (Pa.Super .2012); see also Standard Venetian Blind Co. v. American Empire Ins. Co., 469 A.2d 563, 566 (Pa.1983). Turning to the first element of the two-part test to determine if arbitration is required, whether a valid agreement to arbitrate exists between the parties, we note the trial court does not address this prong in its June 27, 2012, opinion. Moreover, the record establishes that the only named parties on the Lease are Stiles and Chesapeake Appalachia, LLC. See First Amended Complaint, 1/20/2011, Exhibit C at unnumbered 1. However, we are guided by the following: Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 4 of 41 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 In general, only parties to an arbitration agreement are subject to arbitration. See Cumberland– Perry Area Vocational–Technical School v. Bogar & Bink, 261 Pa.Super. 350, 396 A.2d 433 (Pa.Super .1978) (parties cannot be compelled to arbitrate disputes absent agreement to arbitrate). However, a nonparty, such as a third-party beneficiary, may fall within the scope of an arbitration agreement if that is the parties' intent. Cf. Highmark Inc. v. Hospital Service Association of Northeastern Pennsylvania, 2001 PA Super 278, 785 A.2d 93 (Pa.Super.2001) (third-party beneficiary may enforce arbitration clause even though it is not a signatory to the contract). Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1271 (Pa.Super.2004). Armstrong and Fiorentino could be considered third-party beneficiaries of the Lease either because they resided on the Property or are beneficiaries under Stiles's estate. Therefore, an agreement between the parties arguably existed. Nevertheless, for the reasons that follow, we find the arbitration clause does not encompass the dispute at issue. *4 With respect to the second element of the test, whether, the dispute involved is within the scope of the arbitration provision, we note the Lease provided, in pertinent part: LEASING CLAUSE. Lessor hereby leases exclusively to Lessee all the oil and gas ..., 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. * * * * UNITIZATION AND POOLING. [Stiles] grants [Chesapeake Appalachia, LLC] 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. * * * * DISPOSAL AND INJECTION WELLS. [Stiles] hereby grants to [Chesapeake Appalachia, LLC] the right to drill wells and/or reenter existing wells, including necessary location, roadway and pipeline easements and rights of way, on any part of the Leasehold or lands pooled or unitized therewith for the disposal and/or injection into any subsurface strata ... including, but not limited to wells on the Leasehold or lands pooled or unitized therewith or from properties and lands outside the Leasehold, or lands pooled or unitized therewith, and to conduct all operations as may be required, for so long as necessary and required by [Chesapeake Appalachia, LLC] for purposes as herein provided. * * * * ARBITRATION. In the event of a disagreement between [Stiles] and [Chesapeake Appalachia, LLC] concerning this Lease, performance thereunder, or damages caused by [Chesapeake Appalachia, LLC]'s operations, the resolution of all Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 5 of 41 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 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 [Stiles] and [Chesapeake Appalachia, LLC]. *5 First Amended Complaint, 1/20/2011, Exhibit C at unnumbered 3 (emphasis added). With respect to the substantive allegations raised by the Residents in the original complaint and first amended complaint, the Residents maintained Chesapeake was negligent in the drilling, construction, and operation of the Wells, such that “[m]ethane, ethane and other pollutants and industrial and/or residual waste, was caused to be discharged into or otherwise enter and contaminate the ground and aquifer near and under the [Residents'] home and into the ground water well used and relied upon as their water supply.” See First Amended Complaint, 1/20/2011, at ¶ 26(a); see also Complaint At Law and in Equity, 10/27/2010, at 5. Moreover, in the Residents' opposition to Chesapeake's motion to compel arbitration and to stay, they averred that after executing the Lease, Chesapeake engaged in improper and negligent behavior during their oil and gas exploration and extraction activities on property near [the Residents'] property and which was unrelated to any oil or gas extraction activities on or under Stiles' property that was the subject of the lease. It was [Chesapeake's] actions on the nearby property, with no relation to the Lease between the parties to this action that proximately caused damage to [the Residents'] surface water, subsurface water and property and which are now the basis of the present action. It was not [Chesapeake's] actions resulting from the Lease between Stiles and [Chesapeake] that damaged [the Residents]. Further, nothing in the Lease expressly or reasonably requires that claims for personal injury and property damage from environmental contamination be arbitrated. The Residents' Memorandum of Law in Opposition to Chesapeake's Motion to Compel Arbitration and to Stay, 11/1/2011, at 5–6 (italics in original). In construing the Lease with respect to the Residents' allegations, the trial court found the following: None of [the Residents'] claims allege that the operations which contaminated [the Residents'] water supply arose from operations relating to the Stiles lease, but [Chesapeake's] motion to compel arbitration implicitly suggests that a claim for damages arising from any of its operations must be referred to arbitration, if the party claiming damages has executed a lease containing the arbitration clause in question. There is no need for exegetical analysis of the scope of the arbitration clause. Clearly the parties to the lease intended that it would apply to operations involving a gas well drilled on Plaintiff Stiles's property. Conversely, it is equally clear that the arbitration clause would not apply to damage claims arising from some other operations, e .g., if Defendant Chesapeake Appalachia's corporate jet crashed into a car carrying [the Residents] on a California highway. The trial court holds that the 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 [the Residents'] claims, sounding in trespass, would be viable in the absence of a lease. The lease is wholly incidental to the alleged cause of action. *6 Trial Court Opinion, 6/27/2012, at 3 (italics in original). We agree. As indicated above, Chesapeake argues the parties' intent with respect to “on-premises and off premises ‘operations' “ is evidenced by the language in the leasing clause of the Lease, which precedes the arbitration clause. Specifically, Chesapeake notes the leasing clause references the following rights, given by Stiles as lessor to Chesapeake as lessee: (1) “to explore for, develop, produce, measure, and market production from the Leasehold, and from adjoining lands;” and (2) to “construct pipelines ... for use in the production and transportation of products from the Leasehold or from neighboring lands across the Leasehold[.]” Chesapeake's Brief at 12–13. Chesapeake requests this Court to interpret the Lease broadly, and to read the agreement as a whole, in order to find that the term “operations” includes those acts “on Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 6 of 41 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 the leased premises but also all other operations,” such as those on adjoining or neighboring lands. Id. at 12 (emphasis added). We cannot read the terms of the Lease so broadly as to mandate arbitration for the specific acts alleged in the complaint which sound in tort. We note there is some ambiguity as to the terms “adjoining lands” or “neighboring lands” as used in the Lease. 8 However, it is unclear how a lessor could grant rights to a lessee to engage operations as prescribed in the Lease on “adjoining lands” that he or she does not own. Further, we are required to interpret the Lease against Chesapeake as the drafter. State Farm Fire and Casualty Company, 54 A.3d at 928. Consequently, the trial court did not abuse its discretion in refusing to interpret the Lease to include Chesapeake's operations on land that was three miles away from the Property as such activity fell outside the scope of the arbitration provision of the Lease. 9 8 See State Farm Fire and Casualty Company, 54 A.3d at 928. 9 We note because the parties are at the early stage of the proceedings, if after discovery, it is determined that the contamination resulted from Chesapeake's operations on the Property, then the parties may be bound by the arbitration clause. However, based on the facts so far alleged, there is no evidence to support that conclusion. Lastly, we note that Chesapeake relies on several cases for the principle that arbitration clauses should be given the broadest interpretation. See Chesapeake's Brief at 10. However, we find that these cases are distinguishable from the present matter. For example, Chesapeake relies on Muhlenberg Township School Dist. Authority v. Pennsylvania Fortunato Constr. Co., 333 A.2d 184 (Pa.1975), for the conclusion that “for purposes of [an] arbitration clause, ‘[t]o suffer damage in any manner’ in our opinion is all inclusive' and ‘claims' ... means all claims.’ “ Chesapeake's Brief at 10. However, Chesapeake's interpretation of Muhlenberg Township is misplaced as the arbitration provision in the case specifically provided: 1. Should either party to this Contract suffer damage in any manner because of any wrongful act or neglect of the other party or of anyone employed by him, then he shall be reimbursed by the other party for such damages. 2. Claims under this clause shall be made in writing to the party liable within a reasonable time at the first observance of such damage and not later than the time of final payment, except as expressly stipulated otherwise in the case of faulty work or materials, and shall be adjusted by agreement or arbitration. *7 Muhlenberg Township, 333 A.2d at 186 (quotation marks and footnote omitted). The Pennsylvania Supreme Court rejected the argument that this language applies only to incidents involving injury to persons or property and concluded that “[t]o ‘suffer damage in any manner’ in our opinion is all inclusive and the provision: ‘Claims ... shall be adjusted by agreement or arbitration’ means all claims.” Id. Here, on the other hand, the arbitration provision was not all inclusive and did not encompass all claims where it specifically designated that arbitration could be compelled as to a disagreement regarding “performance thereunder, or damages caused by [Chesapeake Appalachia, LLC]'s operations” on the Property. First Amended Complaint, 1/20/2011, Exhibit C at unnumbered 3. As analyzed above, operations on another individual's property does not fall under the terms of the Lease. Moreover, Chesapeake cites to Ambridge Water Authority v. Columbia, 328 A.2d 498 (Pa.1974) and Smay, supra, for the argument that the arbitration clause was framed in the broadest language and therefore, the scope of the provision was unlimited. Chesapeake's Brief at 10. However, again, these arbitration clauses 10 are different from the arbitration clause at issue because broad language was not used and the ability to compel arbitration was limited to operations on this specific property. Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 7 of 41 Estate of Stiles v. Chesapeake Appalachia, LLC, Not Reported in A.3d (2014) 2014 WL 10919559 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 10 See Ambridge Water Authority, 328 A.2d at 499 (arbitration clause provided: “That any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration [.].”); Smay, 864 A.2d at 1271 (arbitration clause stated: “Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration ... except controversies or Claims relating to aesthetic effect and except those waived as provided for in Subparagraph 4.3.5 [ (Waiver of Claims: Final Payment) ].”) Accordingly, we conclude the trial court did not err in denying Chesapeake's preliminary objections seeking to compel arbitration, as the trial court's findings are supported by substantial evidence and the court did not abuse its discretion in denying the petition. See Midomo Co., Inc., supra. Order affirmed. All Citations Not Reported in A.3d, 2014 WL 10919559 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 8 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Declined to Follow by Katz v. Cellco Partnership, S.D.N.Y., December 12, 2013 2009 WL 790962 Only the Westlaw citation is currently available. United States District Court, N.D. New York. EMPIRE STATE ETHANOL AND ENERGY, LLC, Plaintiff, v. BBI INTERNATIONAL; Mike Bryan, Individually and in his capacity as Chief Executive Officer, Mark Yancey, Individually and in his capacity as Vice President of Project Development, BBI International; Albany Renewable Energy, LLC; Bio–Pro Resources, LLC, on its own behalf and in its capacity as Member Albany Renewable Energy, LLC; Jeff Kistner, Individually and in his capacity as Member of Bio–Pro Resources, LLC, and/or Albany Renewable Energy, LLC; Ed Stahl, Individually and in his capacity as Member of Bio–Pro Resources, LLC, and/or Albany Renewable Energy, LLC, Defendants. No. 1:08–CV–623 (GLS/DRH). | March 20, 2009. West KeySummary 1 Alternative Dispute Resolution Persons Affected or Bound Non-signatories to a Project Development Agreement (PDA) between a biofuels production company and a biofuels consulting company were not entitled to enforce an arbitration clause in the PDA against the production company after the production company initiated suit against the consulting company. The biofuels production company did not know of the existence of the non-signatory defendants either in their capacities as companies or as employees of the companies. Because there was not a relationship between the production company and the non-signatories sufficient to demonstrate that the production company intended to arbitrate disputes with the non-signatories, it would not be reasonable to compel the production company to arbitrate its claims against them. 9 U.S.C.A. § 1. Cases that cite this headnote Attorneys and Law Firms Hiscock, Barclay Law Firm, William A. Hurst, Esq., of Counsel, Albany, NY, for the Plaintiff. BBI International, Mark, Yancey and Mike Bryan, Brown Winick Law Firm, Haley R. Van Loon, Esq., Scott L. Long, Esq., of Counsel, Des Moines, IA, West Firm, PLLC, Yvonne E. Marciano, Esq., of Counsel, Jeff Kistner, Hancock, Estabrook Law Firm, Michael J. Sciotti, Esq., of Counsel, Ed Stahl, Albany Renewable, Energy, LLC, Bio– Pro, Resources, LLC, Hoffmann, Hubert Law Firm, Terrance J. Hoffmann, Esq ., of Counsel, Syracuse, NY, for Defendants. Case 4:16-cv-01346-MWB Document 76-1 iled 06/27/17 Page 9 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 MEMORANDUM–DECISION AND ORDER GARY L. SHARPE, District Judge. I. Introduction *1 Plaintiff Empire State Ethanol and Energy, LLC (“Empire”) brings this action against defendants BBI International (“BBI”), Mike Bryan (“Bryan”), Mark Yancey (“Yancey”), Albany Renewable Energy, LLC (“ARE”), Bio–Pro Resources, LLC (“Bio–Pro”), Jeff Kistner (“Kistner”) and Ed Stahl (“Stahl”), alleging violations of the Sherman and Clayton Acts, as well as various state statutory and common law claims. (See Dkt. No. 17.) Pending are: 1) defendants' motions to compel arbitration and to dismiss under FED. R. CIV. P. 12(b)(6) (See Dkt. Nos. 25, 26, 28); and 2) BBI, Bryan and Yancey's motion for a civil gag order (See Dkt. No. 36 .), in which the remaining defendants join (See Dkt. Nos. 44, 47). For the reasons that follow, the court: 1) grants BBI, Bryan and Yancey's motion to compel arbitration and stays this action as against them in lieu of dismissal; 2) denies ARE, BioPro, Kistner and Stahl's motions to compel arbitration and dismiss, with leave to make a renewed motion for a discretionary stay; and 3) denies the motion for a gag order. II. Background 1 1 The allegations and facts are derived from Empire's amended complaint and the parties' Project Development Agreement, which is incorporated into Empire's amended complaint by reference, and thus properly considered by the court. See Global Network Commc'ns, Inc. v. City of N.Y., 458 F.3d 150, 156–57 (2d Cir.2006). A. Allegations Relevant to the Motion to Dismiss Empire is a New York limited liability company organized for the purpose of constructing and operating an ethanol plant in New York. (See Am. Compl. ¶¶ 5, 19; Dkt. No. 17.) BBI is a Colorado corporation and the leading provider of project development and consulting services in the biofuels industry. Id. at ¶¶ 6–8. In 2006, Empire retained BBI to conduct a study regarding the feasibility of entering the biofuels market in New York (the “FS”). Id. at ¶ 20. In January and July of 2007, BBI issued FS reports which recommended Oneonta, New York as a potential site for an ethanol plant. Id. at ¶ 28. However, BBI never recommended the Port of Albany, New York, which was allegedly a far more desirable site. Id. at ¶ 49. On May 2, 2007, Empire and BBI entered into a Project Development Agreement (“PDA”) under which BBI assumed control of Empire's plant project, then focused on Oneonta. (See Ex. A. to Marciano Declaration; Dkt. No. 25.) The PDA contained an arbitration provision requiring arbitration of “any dispute or controversy arising between the Parties hereto under or relating to [the PDA] or [BBI's] performance or nonperformance of its obligations hereunder.” (See Ex. A. to Marciano Declaration at ¶ 7; Dkt. No. 25.) The PDA also contained a confidentiality provision which required BBI to maintain confidentiality of Empire's proprietary business information. (See Am. Compl. ¶ 35; Dkt. No. 17.) BBI was obligated, inter alia, to “recommend” and “assist” in the selection of contractors and professionals for Empire's project under the PDA, and Empire contends BBI actually made its services contingent on the retention of pre-selected professionals (the “preferred partners”) at set prices. (See id. at ¶¶ 30, 42; Ex. A. to Marciano Declaration at pgs 5–7; Dkt. No. 25.) The PDA could be terminated by BBI on thirty days notice only if it was unable to perform its obligations for sixty days as a direct result of Empire's actions. (See Ex. A. to Marciano Declaration at ¶ 5; Dkt. No. 25.) *2 Unbeknownst to Empire at the time it entered into the PDA, Kistner and Stahl, both high ranking BBI employees, had created Bio–Pro in April of 2007, for the purpose of developing an ethanol plant in New York that would compete Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 10 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 directly with Empire's proposed plant. (See Am. Compl. ¶¶ 29, 70; Dkt. No. 17.) Bio–Pro was created with the knowledge, encouragement and consent of BBI, its CEO, Bryan, and its Vice–President of Project Development, Yancey. Id. at ¶¶ 29, 38. Soon after the PDA was executed, Bryan and Yancey appointed Stahl and Kistner to oversee certain aspects of Empire's project under the PDA, in which capacity they had access to all manner of Empire's confidential information. Id . at ¶ 36, 37, 39. In or around September of 2007, Empire independently determined that the Port of Albany was a more feasible site for the ethanol plant than Oneonta, and proposed a supplemental FS be conducted by BBI. Id. at ¶¶ 50, 53. Empire's requests were met with inexplicable recalcitrance, and on November 7, 2008, Yancey informed Empire that BBI could not perform the supplemental FS because it was focusing on the development of a new technology. Id. at ¶¶ 54–55. Relying on Yancey's representations, which Empire contends were false, Empire conceded to the termination of the PDA. Id. at ¶¶ 56–59. At approximately the same time, the Albany–Rensselaer Port District Commission issued a request for proposals (“RFP”), for the leasing and development of approximately 18 acres of land at the Port of Albany. Id. at ¶ 74. On November 9, 2007, Kistner formed a Delaware company named New York Renewable Energy, LLC, which subsequently became ARE on November 16, 2007. Id. at ¶¶ 60–61. The sole member of ARE was BioPro. Id. at ¶ 13. Stahl and Kistner then submitted an ethanol plant proposal on behalf of ARE using their BBI contact information with BBI's encouragement and consent. Id. at ¶¶ 72–73. ARE's submissions in response to the RFP also identified BBI as a project partner and the preferred partners who had previously been recommended to Empire by BBI as participants in ARE's proposal. Id. at ¶ 84. Many of these same preferred partners inexplicably terminated their relationship with Empire after the cancellation of the PDA. Id. Additionally, much of the research, data and information supporting ARE's submissions was virtually identical to that BBI had previously prepared for Empire under the PDA. Id. ARE was awarded the contract with the Port of Albany on April 1, 2008. Id. at ¶ 3. On June 13, 2008, Empire filed this action. Empire's amended complaint sets forth the following ten claims: 1) violation of § 1 of the Sherman Act; 2) violation of § 2 of the Sherman Act; 3) violation of § 3 of the Clayton Act; 4) violation of N.Y. Gen. Bus. Law §§ 340–347; 5) breach of contract; 6) fraud; 7) tortious interference with contract; 8) tortious interference with prospective contractual relations; 9) breach of fiduciary duties; and 10) piercing the corporate veil. Id. at ¶¶ 97–170. B. Allegations Relevant to the Motion for a Gag Order *3 On August 20, 2008, a press release was purportedly issued by Empire which stated, inter alia: BBI is also expanding their control of the ethanol industry, and now wants to become a producer, by forming their new venture BBI Bio Ventures, LLC. The industry is shifting from corn to cellulosic ethanol production, and BBI is no longer satisfied being just an industry consultant. They now want to develop and operate their own cellulosic ethanol plants, and formed BBI Bio Ventures, LLC, and named Mark Yancey as the CEO. “This expanded market influence now potentially puts BBI in a position in which they can take all of their consulting client's confidential information, business plans, acquired knowledge, business contacts, financial investors, and proposed plant information to take over the industry business model in cellulosic ethanol,” said [Empire's managing member] Von Zwehl. “We tried to amicable [sic] settle this, but they have not even responded. I guess they feel they are above answering to anyone but themselves,” he concludes. (See Marciano Decl. Ex. A; Dkt. No. 36.) Similar press releases were issued on September 5th, 10th, and 22nd of 2008, in which Von Zwehl and Empire's counsel purportedly discussed the merits of Empire's lawsuit; stated that “[i]rrefutable evidence shows BBI did commit a serious breach of integrity and trust;” indicated that BBI was in a position to take its client's sensitive materials for its own uses; and accused BBI of setting up illegal shell companies to build monopoly control in the fuel ethanol market. (See Marciano Decl. Exs. C, D, H; Dkt. No. 36.) Each of these press releases is alleged to have resulted in articles in the Albany Times Union or the Business Review. (See Marciano Decl. Exs. B, E, F, I; Dkt. Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 11 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 No. 36.) Further, defendants contend that Empire gave a lengthy PowerPoint presentation at a press conference which argued Empire's claims, described BBI's wrongful acts and accused BBI officials of perjury. (See Marciano Decl. Ex. G; Dkt. No. 36.) Thereafter this presentation was posted to http://www.bbiconsulting . info/ESE/ESEvBBI_10–Sept– 08_ppt.pdfa website which was not affiliated with BBI in any capacity. Defendants assert that they have attempted to resolve these issues with Empire's counsel without success. III. Discussion A. Defendants' Motion to Dismiss and Compel Arbitration; the Federal Arbitration Act 2 2 The standard of review under FED. R. CIV. P. 12(b)(6), is well established and will not be repeated here. For a full discussion of the standard the court refers the parties to its decision in Dixon v. Albany County Bd. of Elections, No. 1:08–CV–502, 2008 WL 4238708, at *2 (N.D.N.Y. Sept. 8, 2008). “The Federal Arbitration Act [ (“FAA”), 9 U.S.C. § 1, et seq.,] creates a ‘body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.’ “ 3 Pain Webber Inc. v. Bybyk, 81 F.3d 1193, 1198 (2d Cir.1996) (quoting 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)). The Act represents “a strong federal policy favoring arbitration as an alternative means of dispute resolution.” Hartford Accident and Indem. Co. v. Swiss Reinsurance Am. Corp., 246 F.3d 219, 226 (2d Cir.2001). Accordingly, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Mem'l Hosp., 460 U.S. at 24–25. That said “arbitration is [still] a matter of contract[, thus] a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960). 3 Neither party disputes that the arbitration agreement here is governed under the FAA, as the PDA clearly involved interstate commerce. See 9 U.S.C. §§ 1, 2; Allied–Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). *4 The question of “whether an arbitration clause ... applies to a particular type of controversy is for the court.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). “In order to determine whether all or part of the instant action should be sent to arbitration, the Court must conduct the following inquiries: [F]irst, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable, it must then decide whether to stay the balance of the proceedings pending arbitration.” JLM Indus., Inc. v. Stolt–Nielsen SA, 387 F.3d 163, 169 (2d Cir.2004) (quoting Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 75–76 (2d Cir.1998)). Section 3 of the FAA directs courts to enter a stay in a case where the asserted claims are “referable to arbitration.” 9 U.S.C. § 3. In the present instance, the parties do not dispute that the PDA contains an enforceable arbitration clause, and it is seemingly conceded that BBI, Bryan and Yancey may enforce that clause. It is further agreed that the PDA's arbitration clause is a “broad clause,” which covers Empire's third claim under Section 3 of the Clayton Act, its fifth claim for breach of contract, and its seventh claim for tortious interference with contract. However, the parties dispute: (1) whether ARE, Bio–Pro, Kistner and Stahl (collectively the “nonsignatory defendants”) may enforce the arbitration agreement as nonsignatories to the PDA; (2) which of Empire's remaining claims are covered under the PDA's arbitration clause; and (3) the proper disposition of this case while arbitration is pending. The court discusses each of these issues in turn. Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 12 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 1. Parties to the Arbitrable Agreement Initially, the court addresses the extent to which the nonsignatory defendants may invoke the PDA's arbitration clause. In contending that the nonsignatory defendants cannot compel arbitration under the PDA, Empire asserts alternative estoppel is the only theory through which a signatory to an arbitrable agreement may be compelled to arbitration with a nonsignatory, and that this doctrine is not satisfied here. (See Empire Br. at 20–25; Dkt. No. 42.) In response, Kistner and Stahl assert they are entitled to enforce the PDA's arbitration clause as employees of signatory BBIregardless of whether estoppel applies. (Kistner Reply Br. at 5–6; Dkt. No. 44; Stahl Reply Br. at 3–4; Dkt. No. 47.) It is further asserted that ARE and Bio–Pro are entitled to invoke the arbitration clause under the alternative estoppel doctrine or a theory of agency. (See Stahl Reply Br. at 6; Dkt. No. 47.) Initially, the court rejects the nonsignatory defendants' agency argument. It is true that past Circuit decisions have “consistently ... held that employees or disclosed agents of an entity that is a party to an arbitration agreement are protected by that agreement.” Roby v. Corp. of Lloyd's, 996 F.2d 1353, 1360 (2d Cir.1993), cert. denied, 510 U.S. 945, 114 S.Ct. 385, 126 L.Ed.2d 333 (1993). Further, the amended complaint here recites that “[a]t all pertinent times” Kistner and Stahl were “acting within the scope of [their] employment at BBI and in furtherance of BBI's business.” (See Am. Compl. ¶¶ 15, 16; Dkt. No. 17.) Nonetheless, the court notes that Kistner and Stahl are not sued in their capacities as BBI officials, but rather as members of ARE and/or Bio–Pro. 4 In such capacity the nonsignatory defendants may have been acting on BBI's behalf, but it was clearly pursuant to an undisclosed agency relationship, as Empire was never made aware of ARE or Bio–Pro's existence. Nothing in the Circuit's jurisprudence indicates that a nonsignatory to an arbitrable agreement may compel arbitration on the basis of such an undisclosed agency relationship with a signatory, even where there may also be a separate disclosed agency relationship. As such, ARE, Bio–Pro, and Kistner and Stahl as members of these entities, are not entitled to enforce the PDA's arbitration clause based upon an agency or employment relationship with BBI. 4 As such, the court rejects Empire's contention that it is also suing Kistner and Stahl in their capacity as BBI officials, as they have not been named in such capacity, and would clearly be entitled to compel arbitration under Roby to the extent they were. Let this serve as warning that Empire will not be allowed to avoid arbitration with BBI by litigating claims arising out of actions Kistner and Stahl took in their capacities as BBI officials. *5 For similar reasons, the court agrees with Empire's contention that the nonsignatory defendants cannot enforce the PDA's arbitration clause under a theory of alternative estoppel. Alternative estoppel is properly applied where two conditions are met. First, the claims which the nonsignatory seeks to arbitrate must be factually “intertwined” with the contract containing the arbitration clause. See Ross v. Am. Express Co., 547 F.3d 137, 143–44 (2d Cir.2008) (internal quotation marks and citation omitted). Second, “there must be a relationship among the parties of a nature that justifies a conclusion that the party which agreed to arbitrate with another entity should be estopped from denying an obligation to arbitrate a similar dispute with the adversary which is not a party to the arbitration agreement.” Id. at 144 (internal quotation marks and citations omitted). Cases where the Circuit has held that this second prong was satisfied reveal a pattern in which: the promise to arbitrate by [one signatory], the entity opposing arbitration, was reasonably seen on the basis of the relationships among the parties as extending not only to [the other signatory], but also to [a non-signatory related to the latter], an entity that was, or would predictably become, with [the] knowledge and consent [of the party opposing arbitration ], affiliated or associated with [the other signatory] in such a manner as to make it unfair to allow [the party opposing arbitration] to avoid its commitment to arbitrate on the ground that [the non-signatory] was not the very entity with which [the party opposing arbitration] had a contract. Id. at 145–46 (citation omitted; emphasis added; other alterations in original). Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 13 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 Here, the court's discussion infra at Point 2 establishes that the claims asserted by Empire are intertwined with the PDAsatisfying the first prong. However, the existence of some relationship between Empire and the nonsignatory defendants sufficient to demonstrate that Empire intended to arbitrate disputes with these defendants is clearly lacking. See id. at 146. Neither ARE nor Bio–Pro had any operational role under the PDA, or were identified or treated as BBI affiliates thereunder. Indeed, ARE did not even exist when the PDA was entered into, and Bio–Pro had been created mere days earlier. Further, there is no indication in the amended complaint that Empire was aware of, or ever dealt with, ARE and Bio–Pro during the relevant time frame. Correspondingly, Empire is not alleged to have known that Kistner or Stahl were officers of these entities. Thus, it cannot be said that Empire knew the nonsignatory defendants were or would predictably become affiliated with BBI at the time the PDA was executed, such that it would be reasonable to compel Empire to arbitrate its claims against them. “In sum, arbitration is a matter of contract and, contractually speaking, [Empire] did not know [ARE, Bio–Pro or Kistner and Stahl as members of these companies] from Adam.” Id. Accordingly, the court declines to order arbitration of Empire's claims against ARE, Bio–Pro, Kistner or Stahl. 2. Claims Subsumed by the Arbitration Agreement *6 Having determined that only defendants BBI, Bryan and Yancey are entitled to enforce the PDA's arbitration clause, the court next addresses which of Empire's claims against them are subject to arbitration. Where an arbitration clause is broad, as is the case here, a presumption of arbitrability arises and: arbitration of even a collateral matter will be ordered if the claim alleged implicates issues of contract construction or the parties' rights and obligations under it. Moreover, when parties use expansive language in drafting an arbitration clause, presumably they intend all issues that touch matters within the main agreement to be arbitrated. ACE Capital Re Overseas Ltd. v. Central United Life Ins. Co., 307 F.3d 24, 34 (2d Cir.2002) (internal quotation marks and citation omitted). In assessing the arbitrability of a claim, courts must “focus on the allegations in the complaint rather than the legal causes of action asserted.” Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846 (2d Cir.1987) (citation omitted). The presumption of arbitration may be overcome only if “it can be said with positive assurance that an arbitration clause is not susceptible to an interpretation that covers the asserted dispute.” Sprecht v. Netscape Commc'ns Corp., 306 F.3d 17, 35 (2d Cir.2002) (internal quotation marks and citation omitted). a) Empire's Antitrust Claims Empire's first, second, and fourth claims arise under Sections 1 and 2 of the Sherman Act, and Sections 340–347 of the N.Y. GEN. BUS. LAW (collectively the “antitrust claims”), respectively. Defendants contend that these claims must be submitted to arbitration because they “touch upon” the parties rights and obligations under the PDA. (See BBI Br. at 17–21; Dkt. No. 25:8.) Empire counters that its antitrust claims implicate only defendants conspiracy to create a vertical monopoly 5 over the New York bio-fuels market, and are thus independent of the PDA. (See Empire Br. at 12–16; Dkt. No. 42.) 5 “Vertical conspiracies ... involve agreements between competitors at different levels of competition to restrain trade, such as agreements between a manufacturer and its distributors to exclude another distributor from a given product and geographic market.” See, e.g., Crane & Shovel Sales Corp. v. Bucyrus–Erie, Co., 854 F.2d 802, 805 (6th Cir.1988). The court finds the Supreme Court case of Mitsubishi Motors Corp. v. Soler Chryslyer–Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985), and the Second Circuit case of JLM Industries, Inc., 387 F.3d at 163, instructive in resolving this dispute. In Mitsubishi, an automobile dealer in Puerto Rico claimed that Mitsubishi and its affiliate, CISA, had violated the Sherman Act through a vertical conspiracy to divide markets in restraint of trade. Id. at 620. As part of this plan, Mitsubishi had refused to allow the dealer to resell vehicles outside of Puerto Rico that were purchased under an agreement between the parties; had refused to sell parts to the dealer which would enable such resale; and had Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 14 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 attempted to replace its Puerto Rico distributors with a wholly owned distributor. Id. This comprehensive conspiracy implicated matters significantly beyond the sales & distribution agreement between the parties. Nonetheless, the Supreme Court indicated that the First Circuit had properly found the antitrust claims to be within the scope of the agreement's broad arbitration clause, stating “insofar as the allegations underlying the statutory claims touch matters covered by the [contract] the [First Circuit] properly resolved any doubts in favor of arbitrability.” Id. at 624 n. 13. The Court then went on to hold that arbitration of antitrust claims was not against public policy, effectively overruling the Second Circuit case of American Safety Equipment Corp. v. J.P. Maguire & Co., 391 F.2d 821 (1986). 6 Id. at 628–640. 6 While the Mitsubishi Court limited the case's application to international transactions, subsequent decisions have extended its holding to the domestic realm. See, e.g., Hough v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 757 F. Su pp. 283, 286 (S.D.N .Y.1991), aff'd, 946 F.2d 883 (2d Cir.1991). *7 In JLM, the Second Circuit reached a similar result. There, plaintiff JLM traded in the bulk chemical business, and contracted with defendant shipping carriers to transport such chemicals through agreements containing broad arbitration clauses. See JLM, 387 F.3d at 167. JLM contended that the defendants had exploited their market power by, inter alia, fixing contractual shipping rates at an unduly high rate and agreeing not to compete with one another. Id. at 168–69. While recognizing that the plaintiffs' antitrust claims did not implicate “interpretation, construction, or application of any provision” of the contracts, the Circuit nonetheless held the claims to be arbitrable, stating: the evidence supporting JLM's antitrust claims will not focus exclusively “upon the parties' conduct under the terms of the charter.” Rather, ... JLM will try to proffer evidence of a conspiracy which was formed independently of the specific contractual relations between the parties. Nevertheless, JLM asserts that it suffered damages as a result of this conspiracy, and it could not have suffered these damages if it had not entered into the [contracts].” Id. at 173, 175–76. In the present instance, Empire's antitrust claims essentially allege that defendants determined New York was a viable market through the parties' contractual relationship under the PDA, and then used Empire's proprietary information, research and contractors to monopolize the New York ethanol market”depriving Empire of the benefit of its contractual bargain.” (See Am. Compl. ¶¶ 97–111, 121–23; Dkt. No. 17.) As in Mitsubishi and JLM, such allegations do not exclusively focus on the arbitrable agreement. However, they clearly “touch on” and “implicate” the PDA insofar as it obligated BBI to maintain confidentiality over Empire's sensitive information, recommend contractors and generally assist Empire in its ethanol project. Thus, “[t]he cental factual allegations in this case [seemingly] posit that a [monopolistic conspiracy] among the [defendants] undermined legitimate contractual relations between the parties.” Id. at 173. Additionally, as in JLM, Empire's injuries here result from its contractual relations with BBI, since the alleged conspiracy largely came to fruition as a result of work done and access granted under the PDA. Empire nonetheless contends that the Tenth Circuit case of Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10th Cir.1995), requires that its antitrust claims be excluded from arbitration. There, Coors entered into a licensing agreement under which Molson would brew and distribute Coors products. Id. at 1512. As in this case, the agreement between the parties contained a confidentiality clause and a broad arbitration clause. Id. at 1513. Subsequently, Molson and Miller entered into an agreement whereby they would distribute each other's products. Coors then brought suit under the Sherman and Clayton Acts contending, inter alia, that the Miller–Molson alliance would: 1) create a monopoly and 2) result in Miller's access to Coors' confidential information. Id. The Tenth Circuit found that the second issue was arbitrable, but that the first was not because it was “not related to the licensing agreement.” Id. at 1517–18. *8 Coors is clearly distinguishable from the present case. In Coors there was no indication that Miller and Molson actually monopolized the market using confidential information gained through the Molson–Coors licensing agreement, or had conspired to do so. As such, Coors' monopoly claim was distinct from its concerns about Miller's access to Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 15 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 confidential information. The monopoly claim was therefore properly excluded from arbitration, as it did not touch upon the confidentiality provision of the Molson–Coors licensing agreement. Here, contrarily, Empire's antitrust claims explicitly allege that defendants' conspiracy to monopolize the New York ethanol market was realized through their access to Empire's confidential proprietary information under the PDA, and in clear violation of the PDA's confidentiality clause. (See Am. Compl. ¶¶ 97–111, 121–23; Dkt. No. 17.) Thus, Empire's antitrust claims clearly touch on the PDA and implicate the parties' rights and obligations thereunder. Accordingly, in light of the strong policy in favor of arbitration, and resolving any doubts in favor of arbitrability, the court finds that Empire's antitrust claims are arbitrable. 7 See also In re Currency Conversion Fee Antitrust Litigation, 265 F.Supp.2d 385, 409–10 (S.D.N.Y.2003) (rejecting Coors ). 7 The court further finds Empire's reliance on Washburn v. Societe Commerciale de Reassurance, 831 F.2d 149 (7th Cir.1987), unavailing. There the Court refused to compel arbitration of RICO claims where “[t]he litigation d[id] not involve a controversy arising under the agreement itself, but rather a conspiracy in which the conspirators used [the agreement containing the arbitration clause] ... and several other devices ... to” commit fraud. Id. at 151. However, the decision in Washburn was based on an arbitration clause which only covered disputes “with respect to the interpretation of th[e] Agreement or the performance of the respective obligations of the parties under th[e] Agreement.” Id . The arbitration clause at issue in the present case is clearly much broader, covering “any dispute or controversy arising between the Parties hereto under or relating to [the PDA] or [BBI's] performance or nonperformance of its obligations hereunder.” (See Ex. A. to Marciano Declaration at ¶ 7; Dkt. No. 25.) (emphasis added). Here, Empire's antitrust claims relate to the PDA and defendants' obligations thereunder for the reasons stated supra. b) Empire's Tort Claims Empire's sixth, eighth and ninth claims respectively state causes of action for fraud, tortious interference with prospective contractual duties and breach of fiduciary duties. Quoting McMahon v. RMS Elecs., Inc., 618 F.Supp. 189, 191 (S.D.N.Y.1985), Empire contends that its fraud and fiduciary duties claims should not be subject to arbitration because they are “legally distinct from the contractual relationship between the parties,” even if factually related. (See Empire Br. at 16–17; Dkt. No. 42.) Empire further asserts that its tortious interference with prospective contractual relations claim should not be submitted to arbitration “because it alleges that the defendants improperly interfered with plaintiff's prospective economic relations with a third party pursuant to a contract unrelated to the PDA.” Id. at 18. The court rejects these arguments. Initially, the restrictive language Empire relies on from McMahon is derived from the Second Circuit case of Old Dutch Farms, Inc. v. Milk Drivers and Dairy Emp. Local Union No. 584, 359 F.2d 598, 603 (2d Cir.1966), in which the Circuit indicated that “absent a clear, explicit statement in the [contract] directing an arbitrator to hear and determine the validity of tort damage claims by one party against another, it must be assumed that ... the parties did not intend to withdraw such disputes from judicial scrutiny.” However, this narrow approach to the arbitrability of tort claims has been negated in light of subsequent judicial recognition of the utility of arbitration. See, e.g., Interstate Brands Corp. v. Bakery Drivers & Bakery Goods Vending Machs., Local Union No. 550, No. 96 CV 4454(SJ), 1998 WL 19974, at *8 (E.D.N.Y. Jan.20, 1998), aff'd, 167 F.3d 764, 769 (2d Cir.1999). Accordingly, tort claims are currently subject to arbitration if the factual allegations which underlie them touch on issues within the parties' agreement or implicate their rights and obligations thereunderjust as with any other claim. See, e.g., Collins & Aikman Prods. Co. v. Bldg. Sys., Inc., 58 F.3d 16, 23 (2d Cir.1995) (stating “[t]he mere fact that this is a tort claim, rather than one for breach of the Contracts, does not make the claim any less arbitrable”). Thus, with the proper standard illuminated, the court turns to the substance of the tort claims asserted herein. *9 Empire's breach of fiduciary duties claim alleges that the defendants diverted opportunities away from Empire, appointed conflicted employees to Empire's project, and disclosed Empire's confidential information in violation of duties assumed through the parties contractual relationship. (See Am. Compl. ¶¶ 152–62; Dkt. No. 17.) Similarly, Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 16 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 Empire's fraud claim asserts that defendants failed to disclose their conflicts of interests, made misrepresentations while under contract with Empire in order to gain access to Empire's confidential information, and subsequently requested cancellation of the PDA for pretextual reasons. Id. at ¶¶ 131–38. Lastly, the tortious interference with prospective contractual relations claim appears to arise out of Empire's contention that the defendants coerced the “preferred partners” to abandon Empire's project in favor of defendants' project, and used Empire's confidential research and information to support ARE's bid on the port of Albany. Id. at ¶¶ 64–67, 76, 84, 146–51. Each of these claims clearly implicates the PDA as a whole, as well as specific provisions thereunder. All three claims, for example, touch on BBI's purported violation of the PDA's confidentiality clause. See Norcom Elecs. Corp. v. CIM USA Inc., 104 F.Supp.2d 198, 204 (S.D.N.Y.2000) (finding tortious interference claim arbitrable insofar as “the alleged misuse of confidential information relates to the Agreement's confidentiality provision”). Further, while Empire attempts to recast its breach of fiduciary duties claim as “legally distinct” from its contract claims, the amended complaint makes clear that such duties arose predominantly, if not entirely, from the PDA. Empire's fraud claim also relates to the clause in the PDA indicating the conditions under which BBI could cancel the contract, insofar as it is alleged that BBI caused the PDA to be cancelled on a pretext. Finally, the tortious interference with prospective contractual relations claim implicates BBI's duty under the PDA to recommend contractors and professionals to Empire, insofar as the preferred partners were subsequently purloined for defendants' own Port of Albany proposal. Thus, this claim is distinguishable from those Second Circuit decisions proffered by Empire which have held “that a claim for tortious interference with employment contracts does not arise under or relate to a separate sales agreement” containing an arbitration clause. Collins & Aikman Prods. Co., 58 F.3d at 22 (emphasis added; internal quotation marks and citation omitted). Accordingly, the court finds that Empire's tort claims touch upon and relate to the PDA, and are thus arbitrable. 8 8 Empire's final cause of action seeks to pierce the corporate veil of ARE and Bio–Pro to reach Kistner and Stahl individually. As the court has found that none of these entities are entitled to enforce the PDA's arbitration clause, it need not address the arbitrability of this claim. 3. Status of the Litigation while Arbitration is Pending Defendants seek dismissal of those claims held to be arbitrable and a stay pending arbitration as to the remaining claims. (See BBI Br. at 17–21; Dkt. No. 25:8, Stahl Br. at 6–7; Dkt. No. 28:3.) Contrarily, Empire contends that the court should stay those claims found to be arbitrable and proceed with litigation as to the remainder. (See Empire Br. at 1, 8 n. 9, 19, 25; Dkt. No. 42.) *10 Some courts in this Circuit have held that dismissal is appropriate where all claims asserted against a defendant are arbitrable, as is the case for BBI, Bryan and Yancey. See, e.g., Perry v. N.Y. Law School, No. 03 Civ. 9221(GBH), 2004 WL 1698622, at *4 (S.D.N.Y. July 28, 2004). See also, e.g., Choice Hotels Intern., Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709–10 (4th Cir.2001). However, this approach is inconsistent with Section 3 of the FAA, 9 U.S.C. § 3, which instructs district courts to “stay proceedings if satisfied that the parties have agreed in writing to arbitrate an issue or issues underlying the district court proceeding.” McMahan Sec. Co. v. Forum Capital Mkts. L.P., 35 F.3d 82, 85 (2d Cir.1994). Accordingly, the court stays this action as to BBI, Bryan and Yancey pending arbitration of the claims asserted against them. See Halim v. Great Gatsby's Auction Gallery, 516 F.3d 557, 561 (7th Cir.2008) (“[T]he proper course of action when a party seeks to invoke an arbitration clause is to stay the proceedings rather than to dismiss outright.”); Lloyd v. Hovensa, LLC, 369 F.3d 263, 268–69 (3d Cir.2004) (same); McCaddin v. Se. Marine Inc., 567 F.Supp.2d 373, 385 (E.D.N.Y.2008) (same). Contrarily, the nonsignatory defendants are not entitled to a Section 3 stay or dismissal, since they are not parties to the PDA. See Citrus Mktg. Bd. of Isr. v. J. Lauritzen A/S, 943 F.2d 220, 224–25 (2d Cir.1991). Further, while the court has the discretionary power to order a stay where the issues in the case are germane to those in arbitration, see Sierra Rutile Ltd. v. Katz, 937 F.2d 743, 750 (2d Cir.1991), the nonsignatory defendants have not established their entitlement to such relief. A defendant seeking a discretionary stay must demonstrate “to the satisfaction of the court that he ha[s] not taken Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 17 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 nor will [he] take any steps to hamper the progress of the arbitration proceeding, that the arbitration may be expected to conclude within a reasonable time, and that such delay as may occur will not work undue hardship.” Nederlandse Erts–Tankersmaatschappij, N.V. v. Isbrandtsen Co., 339 F.2d 440, 441 (2d Cir.1964); see also Citrus Mktg. Bd. of Isr ., 943 F.2d at 225. The nonsignatory defendants have not attempted to satisfy, or even acknowledged, these requirements. As such, the court declines to stay this action as against them while arbitration is pending, though the court will permit a renewed motion on the issue. B. Defendants' Motion for a Gag Order Finally, defendants assert that a civil gag order is warranted here because “a reasonable likelihood” exists that Empire's media disclosures will prejudice their right to a fair trial and damage their business interests. As such, they seek an order “(1) prohibiting Plaintiff and its attorney from further communicating with representatives of the media, or with any person or entity whom Plaintiff or its attorney knows or would have reason to know might disseminate information to the public or media; [and] (2) requiring Plaintiff to take all steps necessary to remove from the internet its prior media disclosures, press releases and presentations.” (See BBI Gag Brief at 1–2; Dkt. No. 36:6.) While the motion has been mooted in large part as to BBI, Bryan, and Yancey, the court will nonetheless address it to the extent it remains pertinent as to ARE, Bio–Pro, Kistner and Stahl. *11 Prior restraints on pretrial publicity, such as those sought here, “are the most serious and the least tolerable infringement on First Amendment rights” which have historically been viewed as “presumptively unconstitutional.” Neb. Press Ass'n v. Stuart, 427 U.S. 539, 558–59, 96 S.Ct. 2791, 49 L.Ed.2d 683 (1976). The Supreme Court has indicated that such restraints are permissible only upon evidence that: (1) “the nature and extent of pretrial news coverage” would impair the defendant's right to a fair trial; (2) “other measures would be [un]likely to mitigate the effects of unrestrained pretrial publicity;” and (3) “a restraining order would [effectively] operate to prevent the threatened danger.” Id. at 562; see also United States v. Salameh, 992 F.2d 445, 446–47 (2d Cir.1993). Where a gag order is sought against an attorney, the defendant must show that the attorney's statements present a “substantial likelihood of materially prejudicing an adjudicative proceeding.” Gentile v. State Bar of Nev., 501 U.S. 1030, 1075, 111 S.Ct. 2720, 115 L.Ed.2d 888 (1991); see also Salameh, 992 F.2d at 446–47; 22 N.Y.C.R.R. § 1200.38. Defendants cannot satisfy these standards. First, Empire's counsel has averred that he did not make the statements attributed to him in the media, (See Hurst Decl. at ¶ 4; Dkt. No. 41:1.), and the court's attempt to view the offending “bbiconsulting” website revealed that it is no longer available to the public. Thus, it would appear that many of the concerns underlying the motion have been resolved or are groundless. Further, the court is not convinced that the four press releases and attendant articles to which defendants object have resulted in such pervasive tainting of the jury pool that Empire and its counsel should be prohibited from all future media contact. “[P]retrial publicity—even pervasive, adverse publicity—does not inevitably lead to an unfair trial.” Stuart, 427 U.S. at 554. Indeed, “[t]his may come as a surprise to lawyers and judges, but it is simply a fact of life that matters which interest them may be less fascinating to the public generally.” See United States v. Haldeman, 559 F.2d 31, 41 (D.C.Cir.1976). Defendants have presented no evidence that the limited media attention of which they complain has or will reach a large number of potential jurors, or risks creating a general bias in favor of Empire. As such, the court finds that the sweeping prior restraints defendants seek here—which would prohibit even nonprejudicial discussion— are clearly unjustified. See Bailey v. Sys. Innovation, Inc., 852 F.2d 93 (3d Cir.1988); CBS Inc. v. Young, 522 F.2d 234, 238–40 (6th Cir.1975) (both finding court orders prohibiting all discussion of a case unconstitutional). The court also notes that the requested gag order is inappropriate because the defendants have failed to establish that alternatives would be insufficient to protect their right to a fair trial. See Salameh, 992 F.2d at 447. “Through voir dire, ... a court can identify those jurors whose prior knowledge of the case would disable them from rendering an impartial verdict.” Press–Enterprise Co. v. Superior Court of Cal., 478 U.S. 1, 15, 106 S.Ct. 2735, 92 L.Ed.2d 1 (1986). This protection is not easily negated, as the Fourth Circuit has explained: Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 18 of 41 Empire State Ethanol and Energy, LLC v. BBI Intern., Not Reported in F.Supp.2d (2009) 2009 WL 790962 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 *12 Our belief that voir dire will protect [defendant's] right to an impartial jury rests on a number of grounds. First we observe that “there is somewhat of a tendency to ‘frequently overestimate the extent of the public's awareness of news....' “ Secondly, even potential jurors aware of the coverage ... are not disqualified from sitting so long as they can set aside their impressions and adjudge the case on the basis of the evidence presented at trial. In re Application & Affidavit for a Search Warrant, 923 F.2d 324, 329 (4th Cir.1991) (citation omitted). In the present instance the court is similarly convinced that defendants' fair trial rights can be preserved through careful jury selection. Accordingly, defendants' motion for a civil gag order is denied. IV. Conclusion WHEREFORE, for the foregoing reasons, it is hereby ORDERED that BBI, Bryan and Yancey's motion to compel arbitration (Dkt. No. 25.) is granted and the action is stayed as against these defendants under 9 U.S.C. § 3 in lieu of dismissal; and it is further ORDERED that ARE, Bio–Pro, Kistner and Stahl's motions to compel arbitration and dismiss (Dkt.Nos.26, 28.) are denied, with leave to make a renewed motion for a discretionary stay; and it is further ORDERED that the motion for a civil gag order (Dkt. No. 36.) is denied; and it is further ORDERED that the Clerk of the Court provide a copy of this Order to the parties by regular mail. IT IS SO ORDERED. All Citations Not Reported in F.Supp.2d, 2009 WL 790962 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01346-MW Document 76-1 Filed 06/27/17 Page 19 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2008 WL 2673925 Only the Westlaw citation is currently available. United States District Court, D. Utah, Central Division. ISLAND PEAK RANCH, L.L.C., a Limited Liability Company, Todd B. Crosland, Doug K. Anderson, Val Gibson, Individuals, and Brent Davies, Trustee for Crosland Development, Plaintiffs, v. FIIK INVESTMENT AND HOLDINGS, INC., Edgar M. Bias, Dennis Cope, Wells Fargo Bank, Kevin Kaufman, John Sterns, R.J. Rieger, Charles Covell, Partner Bank, Ad, John Hogle, Comision Central De Energia, Green Gables Management, and John Does 1–10, Defendant. Civil No. 2:02–CV–562. | July 7, 2008. Attorneys and Law Firms Matthew George Grimmer, R. Stephen Marshall, Z. Ryan Pahnke, J. Mark Gibb, Nolan T. Leishman, Durham Jones & Pinegar, Salt Lake City, UT, Tom D. Branch, Draper, UT, for Plaintiffs. FIIK Investment and Holdings, pro se. Edgar M. Bias, pro se. Dennis Cope, pro se. John Sterns, pro se. John Hogle, pro se. Green Gables Management, pro se. James S. Jardine, Elaina M. Maragakis, Ray Quinney & Nebeker, Salt Lake City, UT, for Defendant. FINDINGS OF FACT AND CONCLUSIONS OF LAW DEE BENSON, District Judge. *1 This matter came before the Court for a bench trial on May 5–6, 2008. Plaintiffs Douglas Anderson and Todd Crosland, individually and representing Island Peak Ranch, LLC, were present at the trial and were represented by counsel, J. Mark Gibb, Matthew G. Grimmer, and Z. Ryan Pahnke, of Durham, Jones & Pinegar, and Tom D. Branch, of Tom D. Branch, LLC. Defendant Wells Fargo Bank (“Wells Fargo”) was present at trial, through its representative, and was represented by counsel, James S. Jardine and Liesel W. Stevens, of Ray Quinney & Nebeker. Having considered the parties' proposed findings of fact and conclusions of law, the relevant law, and the evidence presented at trial, the Court issues the following findings of fact and conclusions of law. Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 20 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 PROPOSED FINDINGS OF FACT 1. The limited issue at trial was whether there is an agreement containing an arbitration provision encompassing Plaintiffs' claims against Wells Fargo in connection with Wells Fargo's motion to compel arbitration. Parties 2. Plaintiffs Todd Crosland and Doug Anderson are residents of Utah. 3. Plaintiff Island Peak Ranch, LLC (“Island Peak”), is a Utah limited liability company that was formed prior to the events of this case. Trial Testimony of Todd Crosland, Transcript at 37 (“Crosland at ____”.) 1 Crosland and Anderson each own 50% of the interest in Island Peak and are co-managing members. (Id. at 29.) 1 The trial testimony of all witnesses at trial will be designated herein as “Crosland at ____” or “Anderson at ____,” etc. 4. Defendant FIIK Investment and Holdings, Inc. (“FIIK”) was an entity used by defendant Bias and other individual defendants to promote an investment opportunity to Plaintiffs Crosland, Anderson and Island Peak in 2000. FIIK's offices were located in Houston, Texas. To date, FIIK has not been served in this case. 5. Defendant Edgar Bias was a principal in and apparently the CEO of FIIK. (Crosland at 29.) 6. Defendant Wells Fargo Bank, N.A. is a national banking organization with offices in Houston, Texas and Salt Lake City, Utah. Initial Contacts Between FIIK and Plaintiffs 7. According to Plaintiffs' Amended Complaint, Crosland and Anderson were solicited to invest cash via a proposed investment contract with FIIK. FIIK sought investors to fund a $50 million pool of funds which FIIK would then use to engage in “treasury trades” involving discounted purchases of secure-government issued securities that would offer high investment yields to pool investors. (Amended Complaint, ¶ 49.) 8. On May 25, 2000, Plaintiff Crosland invested an initial $300,000 with FIIK. (Id.; Crosland at 30.) 9. On or around June 1, 2000, FIIK reported to Crosland that he had earned a 50% return on this investment, or an additional $150,000. (Amen. Complt. at ¶ 51; Crosland at 31–32.) FIIK then advised Crosland of an additional investment opportunity for a larger amount of $1,500,000 at an even higher return. (Amen. Complt. at ¶ 52; Crosland at 32–33, 36.) 10. At some point after learning of the new investment opportunity, Crosland contacted Anderson to invite him to consider participating in the new investment with FIIK. (Crosland at 35, 37; Anderson at 141.) *2 11. Over the next few weeks, Crosland and Anderson had communications with FIIK representatives about the investment opportunity. As part of these communications, Plaintiffs discussed with Bias and others the nature and circumstances of the FIIK checking account at a Wells Fargo branch in Houston, Texas, into which their funds would be placed and how that account was to operate. (Crosland at 33–34, 38, 40–41; Anderson at 144–45.) Specifically, FIIK proposed that Plaintiffs place their investment in a checking account in the name of FIIK on which Plaintiffs would be Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 21 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 signers. In contrast, Plaintiff Anderson wanted an investment account under their sole control. (Anderson at 144–45.) These discussions were only with representatives of FIIK; Plaintiffs had no contact with Wells Fargo prior to June 21, 2000. (Crosland at 34; DeBesse at 236.) 12. On June 19, 2000, FIIK sent a letter to Crosland and Anderson promising a 100% return on their proposed investment within 30 banking days. (Trial Exhibit FF; Crosland at 39–40, 43; Anderson at 143.) Despite this remarkable proposed return, Plaintiffs believed that their investment would not be at risk. (Anderson at 143.) 13. Bias invited Crosland and Anderson to Houston, Texas to meet FIIK's agents in person and to participate in the establishment of a new bank account into which the Island Peak investment would be wired and held. (Amen. Complt. at ¶ 54; Trial Exhibit J.) 14. Crosland and Anderson flew from Salt Lake City to Houston on June 20, 2000. They met with Bias and other FIIK agents for dinner and discussed the terms of the proposed investment. (Crosland at 38, 41–42; Anderson at 148–49.) They also discussed the establishment of an account with Wells Fargo. (Anderson at 148–49.) 15. On June 20, 2000, Bias by himself opened a checking account, Account XXXXXX213 (the “213 Account”) in the name of FIIK at the Post Oak Branch. (Trial Exhibit D.) In the block labeled, “Agreement: Authorized Signer”, it provides that “I understand that, under this program, at my request or the request of the Bank, disputes must be resolved by an arbitration.” (Id.) The 213 Account is governed by the terms and conditions set out in the Texas Business Disclosure brochure. (Trial Exhibit E.) The Wells Fargo officer who opened the 213 Account was Stacy Massi. (Trial Exhibit D; DeBesse at 240.) Plaintiffs' Visit to the Wells Fargo Post Oak Branch on June 21, 2000 16. On the morning of June 21, 2000, Crosland and Anderson went to the Post Oak Branch of Wells Fargo, in Houston, Texas. There they met with Tom DeBesse, the Store Manager of the Post Oak Branch. There is a conflict in the testimony as to what was said and what was done in this meeting. For reasons set out below, it is not necessary for the Court to resolve that conflict in this trial. 17. The allegations of the Amended Complaint (Trial Exhibit J) regarding the discussions and actions on the 213 Account have been placed in evidence by Defendant Wells Fargo as a judicial admission. The following are specific allegations in the Amended Complaint on which Wells Fargo seeks judicial admission: *3 a. Plaintiffs allege in their Amended Complaint that DeBesse provided them with an account opening agreement, which they then completed. (Id. at ¶ 64.) With the completion of the account opening agreement, the account was opened and assigned the 213 account number (the “213 Account”). 2 (Id. at ¶ 65.) ] 2 This allegation conflicts with the documentary evidence that the 213 Account was opened the prior day by Bias alone. (Tr. Exhibit B.) b. Plaintiffs' Amended Complaint alleges that Anderson and Crosland were “joint signers on the Island Peak/FIIK Account ...” (Am.Complt., ¶ 168.) c. Plaintiffs' Amended Complaint alleges that “Crosland, Anderson and Island Peak have performed all conditions, covenants and obligations required by them in accordance with the terms and conditions of the deposit agreement with Wells Fargo Texas.” (Id . at ¶ 169.) 18. At trial, Plaintiffs Crosland and Anderson testified that they discussed with DeBesse having a restricted checking account in the name of FIIK in which there would be a two signature requirement for any withdrawal of funds and that they were to be made authorized signers on that account. (Crosland at 41, 48, 104; Anderson at 231–32.) Both testified Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 22 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 that DeBesse told them that such an arrangement was possible and that he would assist in the account. (Crosland at 48; Anderson at 151–52.) Plaintiffs did not see the 213 Account Application form or fill out any paperwork for the 213 Account at that time. (Crosland at 58–59; Anderson at 153, 227.) They were told they would be sent signature cards for that account via federal express. (Crosland at 50–51.) Crosland and Anderson testified that they did not ask for or take with them any documentation relating to the 213 Account. (Crosland at 50–53, 57; Anderson at 153–55, 178.) 19. Anderson testified that they understood when they left Houston that they would be subject to the terms and conditions governing the 213 Account. (Anderson at 178.) 20. DeBesse testified that the owner of a checking account, FIIK in the case of the 213 Account, could authorize additional signers on the account. (DeBesse at 250.) Plaintiffs understood that FIIK had to authorize the addition of their names as signers on the account. (Anderson at 227–28.) Multiple signatures could be added to a checking account, if authorized by the account owner. (DeBesse at 241–42, 250.) 21. There is no record that FIIK ever provided written authorization to Wells Fargo to add Crosland and Anderson as authorized signers on the 213 Account. 22. Crosland testified that Bias was present during their meeting with DeBesse. According to Crosland, Bias explained to DeBesse their proposal that the account be restricted by a dual-signature requirement and the Bank agreed. (Crosland at 46, 48.) 23. DeBesse testified that he recalled meeting Crosland and Anderson and discussing with them whether a two signature account could be opened and that he explained to them that such a requirement could not be enforced by the Bank. (DeBesse at 239–40.) DeBesse testified that his response was consistent with the Bank's policy, as described in the Texas Business Disclosure (Tr. Exhibit E) at page 9: *4 The Bank's Liability To You ... The Bank will have no responsibility for reviewing the number or combination of signatures on an Item drawn against your account. This means that if you have indicated that more than one signature is required in connection with an Item drawn on your account, the Bank will have no liability to you if a transaction is conducted on or through your account contrary to the signature requirements you have specified, provided at least one of the required signatures appears on the Item. (DeBesse at 241.) 24. DeBesse testified that he had no recollection of Bias being part of the meeting or of adding Plaintiffs as signers to a FIIK account on that day. (DeBesse at 237, 239–40, 243.) He also did not recall arranging for any signature cards to be sent to Plaintiffs via federal express, nor did he see any need to do so since signature forms were available at the time in the Bank. (DeBesse at 243–44.) 25. The Texas Business Disclosure (the “Account Agreement”) (Tr. Exhibit E), the account agreement referenced in the Account Application and applicable to the 213 Account, provides in two places for arbitration at the election of either party. First, on page 8 in the “General” section, it states: “Under this program, at the request of you or the Bank, disputes must be resolved by an arbitration proceeding before a neutral arbitrator. If arbitration is requested, you do not have the right to a jury or court trial to resolve the dispute.” Second, on pages 60–61, the Account Agreement repeats that “either of us may submit a dispute to binding arbitration at any reasonable time notwithstanding that a lawsuit or other proceeding has been commenced” and sets out in detail the terms regarding resolution of disputes by arbitration. 26. The Account Agreement defines a “dispute” broadly as: Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 23 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 any unresolved disagreement between you and the Bank that relates in any way to accounts or services described in this brochure, or to your use of any staffed banking location, Bank ATM, or any other method you may use to access the Bank. It includes any claim that arises out of or is related to these accounts, services or related agreements. Account Agreement at 60 (Tr. Exhibit E). 27. By its terms, the Account Agreement applies to the “owner(s) and, where applicable, each authorized signer of a business deposit account ...” (Id. at 7.) 28. The Account Agreement further provides that “[y]our use of your account or a related service, including a balance inquiry or any other communication with the Bank about your account, will show your consent to this Agreement.” (Id. at 7.) 29. Plaintiffs testified that they faxed a letter to DeBesse, Trial Exhibit 4, on June 22, 2000. (Crosland at 105–06; Anderson at 210.) However, Plaintiffs did not produce a copy of that letter with a fax legend showing that it had been faxed. (Crosland at 107–08; Anderson at 225.) DeBesse testified that he has no recollection of receiving the letter. (DeBesse at 248.) He also testified that if he had received such a letter, he would have responded because it contained incorrect information. (DeBesse at 248–50.) Plaintiffs did not seek or receive any written response from Wells Fargo to their letter. (Anderson at 226.) *5 30. One or more days after visiting Houston, Anderson and Crosland received signature cards for what they recall was the 213 Account, then signed and sent them via federal express to the Wells Fargo Post Oak Branch in Houston. (Crosland at 92–93; Anderson at 176–77.) Crosland and Anderson sent the signature cards back in their capacities as co-managers of Island Peak Ranch, LLC. (Crosland at 93; Anderson at 155–56.) Plaintiffs did not keep a copy of the signature cards they testified they signed and sent back to the Post Oak Branch. (Anderson at 177, 226.) 31. A federal express package from Anderson and Crosland was received in the Houston Post Oak branch by a bank officer, Stacy Massi. Ms. Massi testified that upon receiving some signer cards for a FIIK account from Anderson and Crosland via Federal Express, she brought the signature cards to the attention of Edgar Bias of FIIK Investment and Holdings, Inc., who told her that he would not authorize having Crosland and Anderson added as authorized signers but would take care of the issue himself. She does not recall which account the proposed signature cards related to. At that point Ms. Massi took no further action. (Massi at 299.) 32. Crosland and Anderson did not request or obtain written confirmation from Wells Fargo that they had been added as authorized signers to the 213 Account. (Crosland at 94, 100.) There was no evidence at trial that Crosland and Anderson were added as authorized signers on the 213 Account prior to the time the monies were transferred out of the 213 Account on July 6, 2000. Opening of the 236 Account 33. On June 21, 2000, while they were in the Post Oak Branch, Crosland and Anderson opened a savings account at the Post Oak Branch, which was assigned account number XXXXXXX236 (the “236 Account”). (Crosland at 55, 58–59; Anderson at 158.) Anderson testified that DeBesse asked him and Crosland to open a savings account “to establish a relationship” with the bank via this account. (Anderson at 156.) Plaintiffs testified that they planned to transfer their profit from the FIIK investment into the savings account from the 213 Account. (Crosland at 55; Anderson at 157.) DeBesse testified that they may have opened the 236 Account as a result of his suggestion that because the Bank couldn't Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 24 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 enforce a two signature requirement on the 213 Account, this was an alternative method for handling the issue. (DeBesse at 242–43.) 34. Plaintiffs testified that they had not planned to open a savings account when they went to Houston and that it was opened at the Bank's suggestion. (Crosland at 56–57; Anderson at 156.) However, it seems clear that Plaintiffs would not have opened the 236 Account in Houston, Texas but for their interest in the potential FIIK investment. (Anderson at 157.) 35. The application for the 236 Account (Tr. Exhibit L), which was signed by Crosland and Anderson as joint owners, states: “I have received a copy of your applicable account agreement and Use of Information brochure and I agree to be bound by them.” *6 36. The “applicable account agreement” referenced in the 236 Account application is the Wells Fargo Consumer Account Agreement (Trial Exhibit Z). On page 4, that agreement states: Please note: This Agreement contains the terms of the dispute resolution program to be followed in the event of a dispute between you and the Bank. These terms are set forth in the Consumer Account Fee and Information Schedule in the section entitled “Resolving Disputes: Arbitration Agreement.” Please read them carefully. Under this program, at the request of you or the Bank, disputes must be resolved by an arbitration proceeding before a neutral arbitrator. If arbitration is requested, you do not have the right to a jury or court trial to resolve the dispute. (Id.) The Wells Fargo Texas Consumer Account Fee and Information Schedule is Trial Exhibit Y. 37. On page 35, the Consumer Account Fee and Information Schedule provides, in part, as follows: Additional Terms Applicable to Texas Accounts Resolving Disputes: Arbitration Agreement ... you agree that by opening or maintaining a deposit account with the Bank or by accepting a service from the Bank described in this brochure ... that any dispute between us, regardless of when it arose, will be settled using the following procedures ... A dispute is any unresolved disagreement between you and the Bank that relates in any way to accounts or services described in this brochure, or to your use of any staffed banking location, Bank ATM, or any other method you may use to access the Bank. It includes any claim that arises out of or is related to these accounts, services or related agreements. (Id.) 38. Plaintiffs received a copy of Exhibits Y and Z. (Crosland at 59–60; Anderson at 159.) Plaintiffs understood they had agreed to be bound by these account terms. (Crosland at 59–60; Anderson at 160.) Opening of the 202 Account 39. On June 21, 2000, Crosland and Anderson flew back to Salt Lake City, Utah. That afternoon they went to the Main Street Branch of Wells Fargo where they met with Michael Brussock, a private banker, and opened a Wells Platinum checking account at Wells Fargo in the name of Island Peak Ranch, LLC. (Crosland at 63–64, 66; Anderson at 160–62.) That account was assigned the account number XX–XXXXX202 (the “202 Account”). Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 25 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 40. As of this point in time on June 21, 2000, Plaintiffs had not decided whether to use Island Peak Ranch, LLC as the entity to make their investment with FIIK. (Crosland at 44, 57.) In addition, Anderson wanted to make one last ditch effort to persuade Bias to allow them to place their investment in the 202 Account instead of the 213 Account. (Anderson at 147, 165.) That effort was unsuccessful. This fact is important because it suggests that when they were in Houston meeting with DeBesse, Plaintiffs had not finally committed to place their funds in the 213 Account. 41. Plaintiffs ultimately used the 202 Account to collect their $1.2 million and transfer it into the 213 Account as part of having the investment made by Island Peak Ranch, LLC. (Crosland at 118; Anderson at 179–80.) *7 42. Island Peak had other existing accounts from which it could have transferred the funds to the 213 Account. (Anderson at 160–61.) Therefore, it appears that the only reason for Island Peak opening the 202 Account was either to try to persuade FIIK to use that account instead of the 213 Account for the investment or else to otherwise facilitate the FIIK investment. 43. Crosland and Anderson testified that while they were in Houston, DeBesse had given them the name of Michael Brussock to see in Salt Lake City to set up the 202 Account. (Crosland at 50–51, 63; Anderson at 160, 222.) 44. Crosland and Anderson recall signing an application form to open the 202 Account. (Crosland at 67, 70; Anderson at 163.) However, no copy of that original application exists. 45. A copy of the Wells Platinum Account application for the 202 Account in the name of Island Peak Ranch, LLC, signed by Crosland and Anderson and dated in October 2000, was admitted as Trial Exhibit CC. Crosland and Anderson testified that they signed that application. (Crosland at 65, 68; Anderson at 162.) Anderson believed that application was signed in connection with adding Elene Kontgis as a signer on that account. (Anderson at 162.) 46. Michael Brussock testified that the application form signed by Crosland and Anderson in October 2000 (Tr. Exhibit CC) is the same form he would have used to open the 202 Account in June 2000. (Brussock at 289.) A clean copy of that form was admitted as Trial Exhibit BB. Crosland and Anderson testified that they have no basis to think that the application form they signed in June 2000 to open the 202 Account was not in the form of Trial Exhibit BB. (Crosland at 70; Anderson at 163.) 47. The application form for the 202 Account (Tr. Exhibit BB) contains an Acknowledgement of a stipulation to the Comprehensive Dispute Resolution Program, as described in the Wells Platinum Account Disclosure Statement and the Credit Card Disclosure Statement. In addition, the form signed by Crosland and Anderson dated October 2000, Trial Exhibit CC, contains the same Acknowledgement. 48. Michael Brussock testified that the Wells Platinum Account Disclosure Statement, Trial Exhibit EE, was the form in use in 2000 and applicable to the 202 Account. (Brussock at 290–91.) Brussock testified that either he or his assistant always provided the Disclosure Statement to customers when opening a new account. (Brussock at 291.) The bank was required by federal law to provide account disclosures and terms to the account owner whenever a new account was opened. (DeBesse at 247.) 49. The Wells Platinum Account Disclosure Statement provides as follows: [Y]ou agree that by opening or maintaining a Wells Platinum Account with us or by accepting a service from us described in this brochure ... that any dispute between you and us, regardless of when it arose, will be settled, at the option of you or us, using the following [arbitration] procedures ... A “dispute” is any unresolved disagreement between you and us that relates in Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 26 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 any way to accounts or services described in this brochure, or to your use of any of our staffed banking locations, our ATMs, or any other method you may use to access us. *8 (Tr. Exhibit EE at 4.) 50. Plaintiffs testified that in their meeting with Brussock they asked about the status of the 213 Account and that he pulled up a computer screen that showed a two signature restriction on the 213 Account. (Crosland at 78–79, 118–19; Anderson at 223.) Brussock has no recollection of that transpiring. (Brussock at 291.) At this time, Plaintiffs would not have received let alone signed and sent back the signature cards relating to the 213 Account. 51. As suggested evidence of their alleged oral agreement with the Bank, Plaintiffs introduced Trial Exhibit 14 which is an electronic record of Wells Fargo showing that a two signature restraint was placed on the 213 Account late on the afternoon of June 21, 2000, apparently by a Wells Fargo employee by the name of Corwin Higley, located in Salt Lake City. The electronic record does not show any authorized signer other than the account owner, FIIK through Edgar Bias. (Higley at 136–37.) Anderson has no recollection of ever meeting Higley. (Anderson at 230.) Higley has no recollection, understanding or explanation as to how that restraint might have been added. (Higley at 137–39.) 52. As evidenced by the account applications for the 202 and 236 accounts and accompanying account agreements signed by Plaintiffs on June 21, 2000, and by the testimony of Mr. DeBesse, Wells Fargo includes arbitration provisions in all its account agreements. (DeBesse at 250.) Plaintiffs' Decision To Make The Investment and Written Investment Agreement 53. On June 22, 2000, Plaintiffs received a letter addressed to Island Peak Ranch, LLC confirming the terms of the proposed agreement. (Tr. Exhibit H.) The letter was a factor in the Plaintiffs' decision to proceed with the investment. (Crosland at 82.) By this date, Plaintiffs had decided to make their investment in the name of Island Peak Ranch, LLC. (Crosland at 83; Anderson at 167.) 54. On June 22, 2000, on behalf of Island Peak Ranch, LLC, Crosland and Anderson signed the Private Placement Memorandum and Confidentiality Agreement, and attached Escrow Agreement, reflecting the terms of their investment agreement with FIIK. (Tr. Exhibit B; Crosland at 83; Anderson at 167.) In the Escrow Agreement, where the 213 Account is identified as the account into which Island Peak is to transfer the investment funds, Anderson wrote in by hand “Joint Signature” and listed the names of Bias, Crosland and Anderson. (Anderson at 175.) This appears to be the only written indication of an agreement for the 213 Account, and it purports to be between FIIK and Island Peak. However, there is no copy of the Escrow Agreement with Bias's signature on behalf of FIIK. (Crosland at 91; Anderson at 175.) 55. The Escrow Agreement which is part of Trial Exhibit B contradicts Plaintiffs' allegations of an oral agreement since Plaintiffs also contend that it was pursuant to that written Escrow Agreement that they were to be made authorized signers by FIIK and to have a two signature requirement placed on the 213 Account. *9 56. Island Peak transferred the S1.2 million from the 202 Account to the 213 Account on June 23, 2000. (Crosland at 99.) 57. FIIK withdrew the $1.2 million from the 213 Account on July 6, 2000. Online Access to the 213 Account 58. Wells Fargo presented the following evidence relating to Crosland's electronic application for online access to the 213 Account: Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 27 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 59. Trial Exhibit W reflects a copy of screen shot of a computer screen of data from a Wells Fargo electronic database showing the following: (1) that plaintiff Todd Crosland made an electronic application on June 23, 2000 for online access to the 213 Account; and (2) that Mr. Crosland's application was processed and approved on July 14, 2000, which included his being made an authorized signer on the 213 Account and being given online access to that account. (Dep. of Rhonda Sharp at p. 73:19–76:15.) The application contains Crosland's phone numbers and email address but the address and EIN number belong to FIIK. (Crosland at 97.) 60. Crosland recalls having initiated the electronic application for on-line access to the 213 Account. (Crosland at 95.) While his testimony is vague on the point, Crosland testified that on June 23, 2000, as a result of discussions with Anderson on the need to monitor the 213 account, he believes that “he made an application electronically to have online access to the 213 account.” (Crosland at 96–97; Anderson at 179.) 61. Plaintiffs suggested at trial that someone else, such as FIIK, made the electronic application reflected in Trial Exhibit W. However, since FIIK already had access to the 213 Account, that suggestion lacks plausibility and Plaintiffs suggested no other plausible explanation for someone other than Crosland making the application. 62. At the time he made the electronic application for online access, Crosland thought he was an authorized signer on the 213 Account. (Crosland at 98–99.) 63. On July 14, 2000, pursuant to the electronic application, Wells Fargo made Crosland an authorized signer on the 213 Account and gave him online access to that account. (Tr. Exhibit W; Graham at 302.) 64. On or after July 14, 2000, pursuant to his June 23, 2000 application for on-line access to the 213 Account, Crosland was given access to the 213 Account. (Crosland at 124; Anderson at 179.) 65. As set forth in the Amended Complaint, Plaintiffs allege the following causes of action against Wells Fargo: fraud; negligent misrepresentation; breach of contract—account agreement; and negligence. CONCLUSIONS OF LAW Burden of Proof 1. The party seeking to compel arbitration, in this case Wells Fargo, has the burden of demonstrating the existence of an enforceable agreement to arbitrate. 4 Am.Jur.2d Alternative Dispute Resolution § 98; ASW Allstate Painting & Construction Co., Inc. v. Lexington Ins. Co., 188 F.3d 307 (5th Cir.1999); McCoy v. Blue Cross and Blue Shield of Utah, 20 P.3d 901 (Utah 2001). This determination is a matter of state contract law and the burden is a preponderance of the evidence. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); Nuhn v. Broadbent, 507 P .2d 371, 372 (Utah 1973). *10 2. Where Wells Fargo has established the existence of agreements containing arbitration provisions, the burden is on Plaintiffs to establish that the dispute falls outside the scope of the arbitration provision. Martin Domke on Commercial Arbitration, § 15:5 (3d ed.2007). In light of the strong federal policy favoring arbitration, there is a presumption in favor of disputes coming within the scope of the particular arbitration provision. Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983); Armijo v. Prudential Insurance Co. of America, 72 F.3d 793, 797 (10th Cir.1995). “[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Armijo, 72 F.3d at 798 (citing Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 474 U.S. 614, 626 (1985)). Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 28 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 3. The party opposing arbitration has the burden of showing “compelling proof” that the arbitration clause at issue was not intended to cover the parties' dispute. Bernstein v. Shearson/American Exp. Inc., 1987 WL 16964 (S.D.N.Y.1987) (plaintiff failed to meet burden of showing “compelling proof” that the arbitration clause contained in a transaction account's customer agreement was not intended to cover disputes arising out of a separate deposit account); see also Ketchum v. Almahurst Bloodstock IV, 685 F.Supp. 786 (D.Kan.1988) (“When an arbitration clause is broad, ‘any claim that falls within its scope will be considered arbitrable absent compelling proof to the contrary.. Proof to the contrary requires language that is clear and unambiguous.’ ”); Strauss, Inc. v. United Food and Commercial Workers Union, 503 F.Supp.2d 567 (E.D.N.Y.2007) (same); and International Union of Elevator Constructors v. Nat'l Elevator Industry, Inc., 772 F.2d 10 (2d Cir.1985) (same). 4. Thus, Plaintiffs had the burden at trial of producing “compelling proof” that the arbitration provisions for the 236 and 202 Accounts, as well as for the 213 Account, do not encompass the parties' dispute in this matter. As set forth below, Plaintiffs did not meet their burden. The Arbitration Provision in the 236 Account Agreement Encompasses the Parties' Dispute. 5. On June 21, 2000, as part of their plan to invest with FIIK, Plaintiffs Crosland and Anderson opened the 236 Savings Account, the applicable account agreement which includes a broad arbitration provision “applicable to Texas accounts.” 6. It is undisputed that the 236 Account is governed by a binding arbitration provision. The language of that arbitration clause is broad. It defines “dispute” as any disagreement between the customer and the Bank that “relates in any way to accounts or services ... or to [the] use of any staffed banking location, Bank ATM or any other method” of accessing the bank. “Dispute” further includes “any claim that rises out of or is related to these accounts, services or related agreements.” (Tr. Exhibit Y at p. 35.) *11 7. The disputes in this case, including Plaintiffs' claim that Wells Fargo breached an agreement to impose a two signature requirement on the 213 Account, relate to accounts or services provided by Wells Fargo and the use of a staffed banking location, i .e., the Houston Post Oak Branch. In addition, in light of the opening of the 236 Account in connection with Plaintiffs' consideration of the FIIK investment, the 236 Account is related to the Plaintiffs' claims about the 213 Account 8. One factor in considering whether two accounts are related is whether the agreements are executed closely in time and by the same parties. Consolidated Brokers Ins. Services, Inc. v. Pan–American Assurance Co., 427 F.Supp.2d 1074, 1082 (D.Kan.2006). Crosland and Anderson completed the application for the 236 Account on the same day they also claim they became signers and obtained a restraint agreement on the 213 Account. Plaintiffs testified that they opened the 236 Account to establish a relationship with the bank and to eventually transfer the profit from the 213 Account into the 236 Account. 9. As a result, and under the guiding federal law, Plaintiffs cannot show that the 236 and 213 Accounts are not related. Accordingly, the 236 Account arbitration provision governs the parties' dispute over the 213 Account. See also Safer v. Nelson Financial Group, Inc., 422 F.3d 289, 296 (5th Cir.2005) (“In determining whether two agreements are related, ‘it is well-settled that several writings executed by the same parties substantially at the same time and relating to the same subject-matter may be read together as forming the parts of one transaction.’ “ (citing Bailey v. Hannibal & St. J. R.R. Co., 84 U.S. 96 (1872)); and ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1462 (10th Cir.1995) (holding that a dispute arising out of an agreement that lacked an arbitration clause was still subject to arbitration based on the broad arbitration provision contained in other agreements relating to the same joint venture). Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 29 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 10. Accordingly, the broad arbitration provision in the 236 Account agreement governs the parties' dispute in this matter. Consolidated Brokers Ins. Services, Inc. v. Pan–American Assurance Co., 427 F.Supp.2d at 1082; ARW Exploration Corp. v. Aguirre, 45 F.3d at 1462. 11. Plaintiffs contend that because they opened the 236 Account in their own personal names, Island Peak is not bound by the 236 Account Agreement. However, Plaintiffs testified that on June 21, 2000, they had not decided in which name to make the investment and that they planned to transfer the profits from the investment into the 236 Account. In addition, “[i]t is well established in the law that a principal is liable for the acts of [its] agent within the scope of the agent's authority, irrespective of whether the principal is disclosed or undisclosed.” Wasatch Oil & Gas, L.L.C. v. Reott, 163 P.3d 713, 729 (Utah App.2007); Thomson CSF, S.A. v. American Arbitration Ass'n, 64 F.3d 773, 776 (2d Cir.1995) (“A nonsignatory party may be bound to an arbitration agreement is so dictated by the ‘ordinary principles of contract and agency.’ ”). Thus, Island Peak is bound by the actions of Crosland and Anderson, including their agreement to arbitrate in the 236 Account. The Arbitration Provision in the 202 Account Agreement Also Encompasses the Parties' Dispute. *12 12. The arbitration provision in the 202 Account agreement, which contains the same definition of “dispute” as the 236 Account agreement, governs the parties' dispute for the same reasons set forth above. Crosland and Anderson opened the 202 Account in the name of Island Peak first to try to persuade FIIK to use that account for the investment and, when that failed, to facilitate the FIIK investment by collecting the funds in that account before transferring them to the 213 Account. 13. Plaintiffs' claims in this case thus come within the arbitration provision for the 202 Account (Tr. Exhibit EE at 4) because Plaintiffs allege they were using other services or accounts of Wells Fargo, they were using the staffed banking facility at the Post Oak Branch, and because the 202 Account agreement was closely related to the parties' agreement regarding the 213 Account. 14. Accordingly, the broad arbitration provision in the 202 Account agreement governs the parties' dispute in this matter. Consolidated Brokers Ins. Services, Inc. v. Pan–American Assurance Co., 427 F.Supp.2d at 1082; ARW Exploration Corp. v. Aguirre, 45 F.3d at 1462. Plaintiffs Arc Bound By the Terms and Conditions of the 213 Account. 15. Even though the arbitration provisions of the 202 and 236 Accounts encompass this dispute which resolves the question of arbitration in this case, the Court also considers Wells Fargo's arguments that the arbitration provision of the 213 Account applies. Wells Fargo contends that the account agreement of the 213 Account applies in this case on three theories: (1) that Plaintiffs have conceded the point as a matter of judicial estoppel; (2) that Plaintiffs' claims depend on the existence of an agreement relating to the 213 Account which as a matter of logical necessity comes within the account's terms and conditions including the arbitration provision; and, (3) Plaintiff Crosland's electronic application for online access to the 213 Account, which Wells Fargo granted, and Crosland's subsequent access to that account. Judicial Estoppel 16. As set forth above, Plaintiffs allege in their Amended Complaint that they “have performed all conditions, covenants and obligations required by them in accordance with the terms and conditions of the deposit agreement with Wells Fargo Texas.” (Amen .Complt, ¶ 169.) Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 30 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 12 17. Plaintiffs are bound by the allegations of their Amended Complaint and cannot take a contrary position at trial. See Upstate Shredding, LLC v. Carloss Well Supply Co., 84 F.Supp.2d 357 (N.D.N.Y.2000) (plaintiffs, whose complaint alleged a breach of the terms and conditions of an express warranty, could not oppose defendant's motion to compel arbitration based on an arbitration provision in the warranty contract: “In short, the plaintiffs cannot have it both ways. They cannot rely on the contract, when it works to their advantage, and repudiate it when it works to their disadvantage.”); and Bellefonte Ins. Co. v. Argonaut Ins. Co., 757 F.2d 523, 616, m. 10 (2d Cir.1985) (“A party's assertion of fact in a pleading is a judicial admission by which it normally is bound through the course of the proceeding.”). As a result of their judicial admission, Plaintiffs cannot now avoid the “conditions, covenants and obligations” of the Texas Business Disclosure including its arbitration provision. *13 18. Thus, Plaintiffs are bound by their allegation that they complied with the account agreement for the 213 Account, the Texas Business Disclosure and its terms, and therefore have agreed to the arbitration provision of that Disclosure as a matter of law. Arbitration as a Matter of Logical Necessity 19. Plaintiffs' claims are premised on the existence of an agreement with Wells Fargo to allow them to become authorized signers on the 213 Account and to impose a two signature requirement on that account. As discussed above, this claim arises from the written agreement between FIIK and Island Peak in the Escrow Agreement of Exhibit B on how they proposed to establish the 213 Account and the required written authorization by the account owner, FIIK, of Plaintiffs as authorized signers and for a two signature restraint to be placed on the account. 20. Plaintiffs cannot succeed on their claims in this case without establishing the alleged agreement on how the 213 Account was to be operated, which necessarily triggers the associated account agreement and its arbitration provision. 21. Thus, as a logical necessity, Plaintiffs' claims cannot succeed without coming within the arbitration provision. On the basis of that circumstance, the Court finds that the only way Plaintiffs' claims can proceed to full and complete adjudication is in arbitration. Crosland's Application for Online Access for the 213 Account and his Access to the Account. 22. Separate from the issue of whether there was an agreement by Plaintiffs on June 21, 2000, the evidence establishes that Plaintiff Crosland's online application for access to the 213 Account and his subsequent access to the account constituted an acceptance of the account terms and conditions. Crosland testified that at the time he made the electronic application, he thought he was an authorized signer on the 213 Account, and thus presumably assumed he would subject to the terms and conditions of the agreement. (Crosland at 98–99.) 23. Under the terms of the Texas Business Disclosure agreement governing the 213 Account, Crosland's “use of [the] account or a related service, including a balance inquiry or any other communication with the Bank about your account, will show your consent to this Agreement.” (Trial Exhibit E at 7.) 24. Crosland's application for online access to the 213 Account and his subsequent access to that account clearly constitute “use of [the] account” and “communication with the Bank about [the] account.” See Fahey v. U.S. Bank Nat. Ass'n, No. 4:05CV01453 FRB, 2006 WL 2850529 (E.D.Mo. Sept. 29, 2006), in which the plaintiff filed suit against defendant alleging negligence and violations of the Fair Credit Reporting Act. Plaintiff opposed the bank's motion to compel arbitration on the grounds that there was no proof he was actually an account holder with U.S. Bank and no copy of an application or other document bearing his signature. The court compelled arbitration, stating: Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 31 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 13 *14 Plaintiff's argument that U.S. Bank must submit an application or other document bearing his signature in order to prove the existence of an agreement is not compelling. The evidence submitted by U.S. Bank shows that the two credit card accounts in question were issued to both plaintiff and his former wife as co-obligors, that the terms, including the arbitration clause, were provided to plaintiff and his former wife. It is further clear that both of the cards were used. The use of the cards amounts to acceptance of the terms of the cardholder agreements. Id. at *2 (emphasis added); see also Grasso v. First USA Bank, 713 A.2d 304, 308–09 (Del.Super.1998) (credit card holder accepted cardholder agreement's terms and conditions by using the credit card). 25. Plaintiffs' use of the 213 Account by accessing it amounts to acceptance of the account's terms and conditions. For this reason, Plaintiffs are bound by the Texas Business Disclosure agreement's arbitration provision. It is Not Necessary for the Court to Rule On the Existence of an Alleged Oral Agreement for a Two–Signature Restraint on the 213 Account During Phase I of Trial. 26. Plaintiffs spent a considerable amount of time during trial testifying and presenting argument about the existence of an oral agreement for a two-signature restraint on the 213 Account. Such testimony and argument are irrelevant to the purpose of Phase I, which was limited to determining whether the parties agreed to arbitrate their dispute. Plaintiffs cannot prevail in Phase I by proving the existence of a contract that did not include an agreement to arbitrate. Rather, Wells Fargo prevails if it establishes the existence of an agreement to arbitrate. See ¶¶ 1–3 above. 27. Thus, whether or not Wells Fargo and Plaintiffs agreed to place a two-signature restraint on the 213 Account has no bearing on whether they agreed to arbitrate. See Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc., 486 F.3d 989 (7th Cir.2007) (on Nissan's motion to compel arbitration, issue was whether parties agreed to arbitrate, not whether M'Lady could prove the terms of an oral agreement that did not include an agreement to arbitrate). Accordingly, this Court does not find it necessary to rule on the existence of Plaintiffs' alleged oral agreement. 28. Even if Plaintiffs' oral agreement theory is considered on the merits, however, it fails because the foundation of Plaintiffs' claim is their written Escrow Agreement with FIIK (Tr. Exhibit B) in which they wrote “Joint Signature” next to the 213 Account designation as the account into which they would transfer the investment funds. The proposed authorization of them as signers and their desire to have a two signature restraint on the account both required written documentation. Thus, any agreement between Plaintiffs and Wells Fargo would have to have been in writing. Plaintiffs' Motion to Reconsider Part of Order Denying Wells Fargo's Motion to Dismiss or Stay and to Compel Arbitration *15 29. On May 1, 2008, Plaintiffs filed a Motion for Reconsideration of Part of this Court's Order Denying Wells Fargo's Motion to Dismiss or Stay and to Compel Arbitration dated October 25, 2005. That motion seeks reconsideration of the part of the October 25, 2000 Order (“Order”) that stated: The Court further find that if a contract exists, the arbitration provision contained in Wells Fargo's consumer account/deposit agreement applies to all of the claims raise by the Plaintiffs in this lawsuit, although this finding is without prejudice to Plaintiffs to move for reconsideration in the future. Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 32 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 14 30. The Amended Complaint contains four causes of action-fraud, negligent misrepresentation, breach of contract, and negligence. All three arbitration provisions—for the 202, 213 and 236 Accounts—contain broad language that would encompass “tort” claims as well as contract claims. Moreover, all four claims focus on the alleged agreement relating to the 213 Account. 31. The federal policy favoring arbitration counsels that the arbitration provisions should be construed broadly, and when done so in this case encompass all of the claims against Wells Fargo in the Amended Complaint. 32. Plaintiffs have the burden of establishing by compelling proof the inapplicability of the arbitration provisions in question to Plaintiffs' claims. Ketchum v. Almahurst Bloodstock IV, 685 F.Supp. 786 (D.Kan.1988); Telectronics Pacing Systems, Inc. v. Guidant Corp., 143 F.3d 428 (8th Cir.1998). 33. The two cases relied upon by Plaintiffs in their motion are: Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10th Cir.1995) and Altresco Philippines, Inc. v. CMS Generation Co., 111 F.3d 140, 1997 WL 186257 (10th Cir.1997). Both cases are inapposite. First, at issue in Coors Brewing was whether certain antitrust claims were governed by an arbitration clause covering “any dispute” arising from the “implementation, interpretation, and enforcement” of a licensing agreement. The court held that the arbitration provision covered only those antitrust disputes that were related to the agreement. Likewise, the court in Altresco stated that “arbitration should be compelled ‘unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.’ “ Altresco, 111 F.3d at *3, quoting United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83 (1960). The Altresco court held that the arbitration provisions at issue covered plaintiffs' claims arising from related contracts, but not plaintiffs' claim for intentional interference of an unrelated contract. 34. The evidence presented at trial establishes that the three accounts in question were opened by Plaintiffs with Wells Fargo at approximately the same time to facilitate their FIIK investment. Thus, the three account agreements are related to Plaintiffs' claims in this case. *16 35. The arbitration provisions in the 236 and 202 Account Agreements are very broad. (See Findings of Fact, ¶¶ 36 and 48.) Since Plaintiffs have not offered “compelling proof” that the parties did not intend these provisions to apply to their dispute, arbitration must be compelled. 36. Even if the burden rested on Wells Fargo to establish “compelling proof” that the applicable arbitration clauses pertaining to the 236, 202, and 213 Accounts were not intended to cover the parties' dispute, the evidence is sufficient for the Court to find that “compelling proof” has not been offered to show that the arbitration provisions do not encompass the parties' dispute in this matter. Accordingly, the parties' dispute is subject to arbitration. CONCLUSION Based on all of the foregoing, the Court hereby ORDERS as follows: 1. Defendant Wells Fargo's Motion to Compel Arbitration is granted. 2. This matter is stayed pending completion of the arbitration. All Citations Not Reported in F.Supp.2d, 2008 WL 2673925 Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 33 of 41 Island Peak Ranch, L.L.C. v. FIIK Inv. and Holdings, Inc., Not Reported in F.Supp.2d... 2008 WL 2673925 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 15 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 34 of 41 Third Millennium Technologies, Inc. v. Bentley Systems, Inc., Not Reported in F.Supp.2d... 2003 WL 22003097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2003 WL 22003097 Only the Westlaw citation is currently available. United States District Court, D. Kansas. THIRD MILLENNIUM TECHNOLOGIES, INC., Plaintiff, v. BENTLEY SYSTEMS, INC., et al., Defendants. No. 03–1145–JTM. | Aug. 21, 2003. Attorneys and Law Firms Russell S. Jones, Jr., Shughart Thomson & Kilroy, PC, Kansas City, MO, Anthony F. Rupp, Shughart Thomson & Kilroy, Overland Park, KS, for Plaintiff. Terence J. Thum, Bryan Cave LLP, Kansas City, MO, for Defendant. MEMORANDUM AND ORDER BOSTWICK, Magistrate J. *1 The court now considers a Motion to Compel Arbitration and to Dismiss or Stay Proceedings Pending Arbitration (Doc. 4) filed by defendants Bentley Systems, Inc. (Bentley), Warren Winterbottom, and George Church. Plaintiff Third Millennium Technologies (3MT) filed a response (Doc. 8), and the defendants filed a reply. (Doc. 10.) 3MT also submitted a motion for oral argument on the matter. (Doc. 9.) Defendants' motion is GRANTED, and Plaintiff's motion is DENIED, for reasons set forth herein. BACKGROUND Plaintiff Third Millennium Technologies (3MT) was a reseller of Bentley software products for several years. (Doc. 5 at 3.) In 1998, Bentley and 3MT entered into an agreement, the MicroStation Value Added Reseller (MVAR) Agreement, that purported to define their business relationship. See id. exh. A, MVAR Agreement at 1. The MVAR Agreement included a broad arbitration clause. See MVAR Agreement ¶ 11.11. In 1999, the parties entered into a Bentley Integrator Agreement, which specifically referenced the MVAR agreement and amended some provisions thereof. (Doc. 5 exh. A, Integrator Agreement ¶ 5.) Both the MVAR Agreement and the Integrator Agreement granted 3MT the right to sell and service Bentley software products, established a compensation plan, and defined both parties' obligations under the relationship. (Doc. 5 exh. A.) Contemporaneous with execution of the Integrator Agreement, Bentley acquired roughly a 20% interest in 3MT, as well as the right to name a representative to 3MT's board of directors. (Doc. 5 at 4.) While their relationship may have had pleasant beginnings, it apparently began to sour by early 2002. (Doc. 3 ¶ 16.) Ultimately, the parties could not agree on new terms, and the Integrator Agreement was allowed to expire in January, 2003. (Doc. 5 at 5.) 3MT brought the present action alleging that among other things, Bentley's conduct during the course of the relationship amounted to a breach of fiduciary duty, breach of trust, and tortious interference with business relationships. (Doc. 3.) Defendants filed the instant motion seeking to enforce the arbitration provision contained in Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 35 of 41 Third Millennium Technologies, Inc. v. Bentley Systems, Inc., Not Reported in F.Supp.2d... 2003 WL 22003097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 the MVAR agreement. Defendants ask that the present action be stayed or dismissed, and that the court issue an order compelling 3MT to arbitrate according to the terms of the arbitration agreement. (Doc. 4 at 1.) MAGISTRATE'S AUTHORITY TO STAY PROCEEDINGS AND COMPEL ARBITRATION A magistrate may rule on non-dispositive matters. See 28 U.S.C. § 636(b)(1)(A). The district courts that have considered the nature of an order to stay proceedings pending arbitration and to compel arbitration have concluded that these are non-dispositive orders. Torrance v. Aames Funding Corp., 242 F.Supp.2d. 862, 865 (D.Or.2002); Herko v. Metro. Life Ins. Co., 978 F.Supp. 141, 142 n. 1 (W.D.N.Y.1997); see also Touton, S.A. v. M.V. Rizcun Trader, 30 F.Supp.2d 508, 509 (E.D.Pa.1998) (staying proceedings pending arbitration is not injunctive relief under 28 U.S.C. § 636(b)(1)(A)). In Herko, the court discussed the matter in detail and concluded that, because the parties must return to the district court to have the arbitration award confirmed, modified, or vacated under 9 U.S.C. §§ 9–11, the district court retains jurisdiction even during the arbitration. Herko, 978 F.Supp. at 142 n. 1. Accordingly, the order to stay proceedings and compel arbitration was non-dispositive and within the magistrate's authority. See id. *2 Like Herko, the arbitration clause in the MVAR Agreement allows either party to have the arbitration award confirmed in a federal district court under 9 U.S.C. § 9. See MVAR Agreement ¶ 11.11 (“the judgment upon the award rendered by the arbitrators shall be enforceable in any court of competent jurisdiction.”). See also P & P Industries, Inc. v. Sutter Corp., 179 F.3d 861, 866–68 (10 th Cir.1999). Furthermore, 9 U.S.C. §§ 10 and 11 authorize any party to proceed in federal district court to have the arbitration award vacated or modified. Under all these circumstances, the district court retains authority to review the arbitration award once arbitration has been completed. The Tenth Circuit used virtually the same rationale as Herko to conclude that “a stay of a federal suit pending arbitration is not a final order under 28 U.S.C. § 1291.” Pioneer Props., Inc. v.. Martin, 776 F.2d 888, 891 (10 th Cir.1985). Like Herko, the Tenth Circuit based its holding on the fact that the federal courts retained authority to review the arbitration award under 9 U.S.C. § 10. Id. Although Pioneer Properties did not deal directly with a magistrate's authority to stay proceedings or compel arbitration, its reasoning was virtually identical to Herko, and clearly confirms that orders to stay proceedings and compel arbitration are non-dispositive because they do not terminate all proceedings in the federal courts. 1 Therefore, a federal magistrate judge does have authority to rule on a motion to stay proceedings and compel arbitration, since this amounts to a non-dispositive pre-trial matter. 1 Contrary to some other circuits, the Tenth Circuit has ruled that a magistrate lacks authority to remand a case to a state court because this has the effect of terminating all proceedings in federal court and is, thus, dispositive. First Union Mortgage Corp. v. Smith, 229 F.3d 992, 996 (10 th Cir.2000). In so holding, the circuit court concluded that a remand order was a final order under 28 U.S.C. § 1291. The court notes that this is contrary to Herko's conclusion that magistrates do have authority to remand a case to state court. See Herko, 978 F.Supp. at 142 n. 1. Although Herko is inconsistent with Tenth Circuit law regarding a magistrate's authority to remand to state courts, Herko is consistent with Pioneer Properties regarding the non- dispositive nature of orders to stay proceedings and compel arbitration under the Federal Arbitration Act. Accordingly, Herko is persuasive in the instant case, particularly in light of its striking consistency with Pioneer Properties. STANDARD FOR DECIDING THIS MOTION In deciding a motion to stay proceedings and a motion to compel arbitration, the court follows a procedure similar to that used in ruling on a motion for summary judgment. Phox v. Atriums Mgmt. Co., 230 F.Supp.2d 1279, 1282 (D.Kan.2002); Klocek v. Gateway, Inc., 104 F.Supp.2d 1332, 1336 (D.Kan.2000). As the parties seeking to compel arbitration, the defendants bear the initial burden of showing that they are entitled to arbitration. Phox, 230 F.Supp. at 1282. If the Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 36 of 41 Third Millennium Technologies, Inc. v. Bentley Systems, Inc., Not Reported in F.Supp.2d... 2003 WL 22003097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 defendants satisfy this requirement, then the burden shifts to 3MT to show a genuine issue for trial, as provided under 9 U.S.C. § 4. See id. Although Section 4 of the FAA calls for a hearing (and perhaps a jury trial) when the parties disagree over whether there is an agreement to arbitrate, or whether one party has failed to comply with the agreement, 2 9 U.S.C. § 4, the courts that have interpreted this language have adhered to traditional requirements for hearings and juries. Hence, a court need not hold a hearing when the issues involve only questions of law. Cincinnati Gas & Elec. Co. v. Benjamin F. Shaw Co., 706 F.2d 155, 159 (6 th Cir.1983); Int'l Union of Operating Eng'rs, Local Union No. 139 v. Carl A. Morse, Inc., 529 F.2d 574, 581 (7 th Cir.1976). Similarly, the party opposing arbitration can't obtain a jury trial without producing some evidence upon which a jury could find for him. See Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5 th Cir.1992). Since Kansas considers the interpretation of unambiguous contract terms to be a question of law, Reimer v. Waldinger Corp., 265 Kan. 212, 214, 959 P.2d 914, 916 (1998), a hearing will only be required if 3MT raises genuine issues of material fact regarding whether the parties agreed to arbitrate the claims 3MT raises in this suit. 2 Section 4 of the FAA provides, “If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof. 9 U.S.C. § 4. Here, neither party disputes the making of the arbitration agreement. (Doc. 5 at 4; Doc. 8 at 1.) Instead, they dispute whether 3MT has failed to comply with the arbitration provision based on differing interpretations of the scope of the agreement to arbitrate. (Doc. 5 at 2; Doc. 8 at 1.). Accordingly, they disagree on the “failure, neglect, or refusal to perform the same.” 9 U.S.C. § 4; Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191 (7 th Cir.1987). ENFORCEABLE AGREEMENT TO ARBITRATE *3 In order to be enforceable, any agreement to arbitrate must be in writing. 9 U.S.C. § 2. The court finds that MVAR Agreement ¶ 11.11 constitutes a written agreement between Bentley and 3MT to arbitrate disputes “arising under or related to” the MVAR Agreement. (MVAR Agreement ¶ 11.11.) Although the FAA does not require that agreements to arbitrate be signed, the fact that both parties signed the MVAR Agreement provides further evidence that they assented to, and intended to be bound by, the terms of the agreement, including the arbitration clause. 3 (Doc. 4 exh. A, MVAR Agreement at 14.) Furthermore, paragraph 1 of the Integrator Agreement specifically stated, “The MVAR Agreement, as amended and supplemented by this agreement, comprises the ‘Bentley Integrator Agreement.” ’ (Doc. 5 exh. A, Integrator Agreement ¶ 1). Accordingly, the court further finds that the parties incorporated the MVAR Agreement, including the arbitration clause, into the subsequent Integrator Agreement. 4 Thus, the court finds that Bentley and 3MT entered into a written agreement to arbitrate disputes arising under or related to the MVAR Agreement and the Integrator Agreement. Furthermore, the court finds nothing in the arbitration clause that would otherwise render it unenforceable. See Shankle v. B–G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1234 (10 th Cir.1999); Cole v. Burns Intern. Sec. Services, 105 F.3d 1465, 1482 (D.C.Cir.1997). 3 The MVAR was actually executed on behalf of a company called CADD Concepts, which later became 3MT by way of a simple name change. (Doc. 5 exh. B, CADD Concepts Corporation Certificate of Amendment to Articles of Incorporation.) 4 Although 3MT stipulates to the conclusion that the Integrator Agreement incorporated the MVAR (Doc. 8 at 3 (“3MT and Bentley entered into a Bentley Integrator Agreement, which amended and supplemented but otherwise incorporated the MVAR Agreement” ) (emphasis added)), 3MT later contradicts itself by arguing that the Integrator Agreement did not incorporate the MVAR Agreement. See id. at 10 (“the Integrator Agreement did not incorporate the MVAR Agreement into the [Integrator Agreement]”) (emphasis added). The latter interpretation directly contradicts the plain language of the Integrator Agreement ¶ 1, as quoted above in the main body of the text. To the extent that it makes any difference in determining the issues of Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 37 of 41 Third Millennium Technologies, Inc. v. Bentley Systems, Inc., Not Reported in F.Supp.2d... 2003 WL 22003097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 arbitrability, the court rejects 3MT's latter contention, and concludes that the Integrator Agreement did incorporate the MVAR Agreement, as amended and supplemented by the remainder of the Integrator Agreement. SCOPE OF ARBITRATION In order to complete the inquiry under sections 3 and 4 of the FAA, the court must determine whether the disputes at issue fall within the scope of the arbitration provision. See 9 U.S.C. §§ 3–4. Because federal policy favors arbitration, any ambiguities regarding the scope of the agreement to arbitrate should be resolved in favor of arbitration. Mastrobuono v. Shearson Lehman Hutton, Inc. 514 U.S. 52, 62, 112 S.Ct. 1212, 1218, 131 L.Ed.2d 76 (1995); Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983); Williams v. Imhoff, 203 F.3d 758, 764 (10 th Cir.2000). Moreover, disputes concerning “whether an arbitration clause in a concededly binding contract applies to a particular type of controversy is for the court” to decide. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 592, 154 L.Ed.2d 491 (2002). The arbitration clause contained at MVAR ¶ 11.11 has a broad scope, reaching not only those disputes “arising under” the MVAR, but also those disputes, controversies or claims “related to” the agreement. MVAR ¶ 11.11. See P & P Industries, Inc. v. Sutter Corp., 179 F.3d 861, 871 (10 th Cir.1999), citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 398, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967). The court has already determined that the arbitration provision in the MVAR was incorporated into the Integrator Agreement. Accordingly, any causes of action springing from those agreements would fall within the scope of the arbitration clause. *4 In determining just how broadly to construe the agreement to arbitrate, the court is mindful that “[w]here two or more instruments are executed by the same parties at or near the same time in the course of the same transaction and concern the same subject matter, they will be read and construed together to determine the intent, rights, and interests of the parties.” In re Villa West Associates, 146 F.3d 798, 803 (10 th Cir.1998) (applying Kansas law); see also City of Arkansas City v. Anderson, 242 Kan. 875, 883, 752 P.2d 673, 679 (1988). In this case, the Stock Purchase Agreement (Doc. 5 exh. B), whereby Bentley obtained an approximately 20% ownership interest in 3MT, was dated the same day as the Integrator Agreement. Similarly, the Shareholders Agreement (Doc. 5 exh. C), whereby Bentley obtained a seat on the 3MT board of directors, was also dated the same day as the Integrator Agreement. Furthermore, the Stock Purchase Agreement expressly stated that both the Shareholder Agreement and the Integrator Agreement had to be effective before the parties became obligated under the Stock Purchase Agreement. (Stock Purchase Agreement ¶ 5.01(b)-(c).) Finally, the Shareholders Agreement specifically acknowledged the existence of the MVAR Agreement and the Integrator Agreement, and granted Bentley rights to terminate those agreements under certain circumstances. (Shareholders Agreement ¶ 5(b).) Taking all these facts together, the court finds that the Integrator Agreement, the Shareholders Agreement, and the Stock Purchase Agreement were all sufficiently related to one another such that any cause of action stemming from any of these agreements would satisfy the “related to” language in the arbitration clause, thereby requiring such disputes to be arbitrated. Indeed, both the timing and the language of the Integrator Agreement, the Stockholders Agreement, and the Shareholders Agreement show that these agreements were part of a common, coordinated business arrangement between 3MT and Bentley. They were not independent contracts, wholly disconnected with each other; instead, they were all part of an orchestrated, negotiated deal where the execution and validity of one agreement was premised on the prior execution and validity of other agreements between the parties. See, e.g. Stock Purchase Agreement ¶ 5.01(Stock Purchase Agreement subject to condition that parties entered into both the Shareholders Agreement and the Integrator Agreement). Mindful of the Supreme Court's admonition that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration,” Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 3353, 87 L.Ed.2d 444 (1985), the court finds that any claims associated with any of these agreements relate to the Integrator Agreement, and are therefore subject to the MVAR arbitration provision that was fully incorporated into the Integrator Agreement. Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 38 of 41 Third Millennium Technologies, Inc. v. Bentley Systems, Inc., Not Reported in F.Supp.2d... 2003 WL 22003097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 Claims Against Bentley *5 Turning now to the actual claims raised by 3MT against Bentley, the court concludes that all these claims are rooted in the business relationships between 3MT and Bentley that were created by the MVAR Agreement, the Integrator Agreement, the Shareholders Agreement, and the Stock Purchase Agreement. (Doc. 3.) Although the claims are mostly framed as torts and other non-contractual causes of action, that is not sufficient to remove them from the broad scope of the arbitration clause. See Via Fone, Inc. v. Western Wireless Corp. 106 F.Supp.2d 1147, 1150–51 (D.Kan.2000). 3MT argues strongly against this conclusion, citing Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511 (10 th Cir.1995) and AWF Hedged, Ltd. v. Kidder, Peabody & Co., 1994 WL 446782 (10 th Cir.1994). The court finds both of those cases distinguishable. First, Coors dealt with application of a broad arbitration agreement to general antitrust claims. See Coors, 51 F.3d at 1515. The Tenth Circuit concluded that construing the arbitration agreement to encompass antitrust claims that were not related to the underlying contract would have the absurd result of permitting “every brewer in America ... [to] bring an antitrust action against Molson” except Coors. Id. at 1516. The court further reasoned that a broad reading of a general arbitration clause might require the parties thereto to arbitrate unrelated tort claims, such as assault. See id. Accordingly, the court concluded that the arbitration clause only applied to antitrust claims related to the underlying licensing agreement. See id. Unlike Coors, the claims here arise from the Shareholders Agreement, which gave Bentley a seat on the 3MT board of directors. Although 3MT correctly states that its claims are based on the Kansas common law regarding duties of corporate directors (Doc. 8 at 7), Bentley's seat on the 3MT board was acquired directly through the Shareholders Agreement. This is quite different from Coors, where the antitrust claims arose under general antitrust law, and had nothing to do with the specific business dealings between the parties. Here, 3MT would have no claims against Bentley had 3MT not entered into the Shareholders Agreement, thereby giving Bentley a seat on the 3MT board. Having already concluded that the Shareholders Agreement is related to the Integrator Agreement, 3MT's claims are thus subject to the Integrator Agreement's arbitration provision. Next, 3MT relies on AWF for the proposition that “if the tort claim would exist without proof of the contract containing the arbitration clause, the claim did not arise out of the agreement, and arbitration could not be compelled.” (Doc. 8 at 14 (citing AWF, 1994 WL 446782 at *2).) 3MT misinterprets the Tenth Circuit's opinion in AWF. In deciding that case, the circuit court mentioned a case from the Seventh Circuit, where that court concluded that one could not avoid an otherwise valid arbitration clause by suing in tort. 5 See id. The Tenth Circuit went on to explain that the determinative factor in the Seventh Circuit's decision was that the tort “required proof of breach of contract as an ‘essential element.” ’ See id. (quoting Rao v. Rao, 718 F.2d 219, 225 (7th Cir.1983)). All this discussion, however, was mere dictum. The Tenth Circuit decided AWF on the grounds that the arbitration clause was so narrowly written, it could not possibly be read to encompass the disputes at issue there. See AWF, 1994 WL 446782 at *2. Indeed, there was no underlying contract between the parties in AWF, see id. at *1; on the contrary, the agreement to arbitrate was between the defendant and a non-party, and the defendant was trying to impute the arbitration agreement to the plaintiff. See id. Accordingly, the unique factual scenario in AWF, combined with the fact that the statements on which 3MT relies are dicta, makes AWF unpersuasive, if not completely inapplicable. 5 From the context of the Tenth Circuit's opinion, it appears that the court may have been distinguishing a case that one of the parties relied upon in its arguments. Claims Against Winterbottom and Church Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 39 of 41 Third Millennium Technologies, Inc. v. Bentley Systems, Inc., Not Reported in F.Supp.2d... 2003 WL 22003097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 *6 Thus far, this discussion has focused on 3MT and Bentley, both of whom were parties to the arbitration agreement. By contrast, neither side cited authorities or discussed in any detail the propriety of compelling arbitration of claims against Winterbottom and Church, neither of whom were actual signatories to any of the relevant agreements. For sake of completeness, the Court will address that issue. While it is undisputed that parties cannot be forced to arbitrate absent a written agreement to do so, 9 U.S.C. § 2, there are important exceptions to that rule. The Tenth Circuit has acknowledged at least two exceptions where nonsignatories are permitted to enforce arbitration agreements: 1) third-party beneficiaries to the contract containing the arbitration agreement, and 2) agents of a signatory to the arbitration agreement. See Gibson v. WalMart Stores Inc., 181 F.3d 1163, 1170 n. 3 (10 th Cir.1999). In support of that proposition, the Tenth Circuit cited Arnold v. Arnold Corp.—Printed Communications for Bus., 920 F.2d 1269 (6 th Cir.1990), wherein that court said “if appellant can avoid the practical consequences of an agreement to arbitrate by naming nonsignatory parties as [defendants] in his complaint, or signatory parties in their individual capacities only, the effect of the rule requiring arbitration would, in effect, be nullified.” Id. at 1281 (internal quotation marks and citations omitted). Arnold went on to note that other circuits had consistently found that nonsignatories could be bound by an arbitration agreement based on agency principles. See id.; see also Thomson– CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773, 777 (2d Cir.1995); Lee v. Chica, 983 F.2d 883, 886–87 (8 th Cir.1993); Letizia v. Prudential Bache Securities, Inc., 802 F.2d 1185, 1187–88 (9 th Cir.1986); Ketchum v. Almahurst Bloodstock IV, 685 F.Supp. 786, 793 (D.Kan.1988). Finally, Arnold concluded that where all the “alleged wrongful acts relate to the nonsignatory defendants' behavior as officers and directors or in their capacities as agents” of a party to the arbitration agreement, those claims were also governed by the agreement to arbitrate. Id. at 1282; see also Hodge Bros. v. DeLong Co., 942 F.Supp. 412, 419 (W.D.Wis.1996). A review of 3MT's complaint quickly reveals that every allegation against Winterbottom and Church is based on their actions as agents and officers of Bentley. (Doc. 3 ¶ 3 (“At all times relevant hereto Winterbottom acted as an agent, representative or deputy of Bentley”); id. ¶ 4 (“At all times relevant hereto Church acted as an agent, representative or deputy of Bentley”); id. ¶ 12 (“The actions taken by the Bentley Representative on the 3MT board were taken at the direction of Bentley, and they have acted in all respects and at all times as representatives, deputies and agents for and on behalf of Bentley, and Bentley is responsible for their acts and omissions”).) Having already found that the claims against Bentley were within the scope of the arbitration agreement, the court finds that those same claims asserted against Winterbottom and Church as Bentley's agents are also subject to arbitration. *7 As an alternative basis for the same conclusion, the court finds that compelling arbitration of the claims against Winterbottom and Church is reasonable under the test used in Ketchum v. Almahurst Bloodstock IV, 685 F.Supp. 786 (D.Kan.1988). In Ketchum, the court permitted arbitration of claims against a nonsignatory affiliate of a party to the arbitration agreement when 1) the party consented to arbitration, 2) the claims against the nonsignatory were identical to those against the party to the arbitration agreement, 3) the claims against the nonsignatory arose from the same transaction as those against the party to the arbitration agreement, and 4) the claims against the nonsignatory were within the scope of the arbitration agreement. See id. at 793–94. By joining in the motion to compel arbitration (Doc. 4), Winterbottom and Church have clearly consented to arbitration. A review of the amended complaint (Doc. 3) shows that 3MT's claims against Winterbottom and Church easily satisfy the remaining three requirements. Accordingly, 3MT's claims against Winterbottom and Church may be brought under the arbitration agreement with Bentley. CONCLUSION In sum, the court finds that the defendants have satisfied their burden under sections 3 and 4 of the FAA, 9 U.S.C. § 3–4, as well as under the summary judgment-like standards set forth in Phox v. Atriums Mgmt. Co., 230 F.Supp.2d 1279, 1282 (D.Kan.2002) and Klocek v. Gateway, Inc., 104 F.Supp.2d 1332, 1336 (D.Kan.2000). That burden then shifted to 3MT Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 40 of 41 Third Millennium Technologies, Inc. v. Bentley Systems, Inc., Not Reported in F.Supp.2d... 2003 WL 22003097 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 to show a genuine issue for trial. Phox, 230 F.Supp. at 1282. An issue is “genuine” if sufficient evidence exists on each side “so that a rational trier of fact could resolve the issue either way.” Adler v. Wal–Mart Stores, Inc., 144 F.3d 664, 670 (10 th Cir.1998) (citations omitted). Here, neither side disputes the fact that the parties agreed to arbitrate. The only issue involves the scope of arbitration. Since the arbitration provision at issue here requires arbitration of all disputes that “relate to” the Integrator Agreement, the only way that a jury could find that the parties did not agree to arbitrate the claims that 3MT brings here is if the jury concludes that the Shareholders Agreement was completely independent of and unrelated to the Integrator Agreement. Based on both the timing and the express provisions contained in the Shareholders Agreement, the Stockholders Agreement, and the Integrator Agreement, no rational jury could conclude that the Shareholders Agreement was unrelated to the Integrator Agreement. Accordingly, there is no genuine issue for trial, and the court may decide the matter on the briefs. Although 3MT has requested oral argument on this motion, that would not be helpful. Both parties have fully briefed the disputed issues raised by the motion to compel arbitration and to stay further proceedings in this case. There is nothing 3MT could argue that would undo the effect of the express provisions in the relevant agreements, which demonstrate that the agreements were all related as part of a common business transaction. *8 IT IS THEREFORE ORDERED that the defendants' motion (Doc. 4) is GRANTED, and all proceedings in this matter shall be STAYED pending arbitration of the claims presently asserted by 3MT. IT IS FURTHER ORDERED that the parties shall proceed to arbitration in accordance with the provisions of the arbitration clause. IT IS FURTHER ORDERED that this court shall retain jurisdiction to review, modify, or vacate any arbitration awards, should any party choose to seek such action as permitted by the Federal Arbitration Act. IT IS FURTHER ORDERED that the parties shall file a joint status report, not less than once every six (6) months, regarding the progress of the arbitration. IT IS FURTHER ORDERED that 3MT's Motion for Oral Argument (Doc. 9) is DENIED. All Citations Not Reported in F.Supp.2d, 2003 WL 22003097 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 4:16-cv-01346-MWB Document 76-1 Filed 06/27/17 Page 41 of 41