Sussex et al v. Turnberry/MGM Grand Towers, LLC et al

MOTION for Determination of Non-Arbitrability of Claims Against Non-Signatory Defendants

D. Nev.October 21, 2009

MORRIS PETERSON Steve Morris, No. 1543 Email: sm@morrislawgroup.com Akke Levin, No. 9102 Email: al@morrislawgroup .com Jean-Paul Hendricks, No. 10079 Email: jph@morrislawgroup.com 900 Bank of America Plaza 300 South Fourth Street Las Vegas, Nevada 89101 Telephone: (702) 474-9400 Facsimile: (702) 474-9422 WOOD, SMITH, HENNING & BERMAN LLP Jason C. Gless, No. 8469 Email: jgless@wshblaw.com 7670 West Lake Mead Boulevard, Suite 250 Las Vegas, Nevada 89128 Telephone: (702) 222-0625 Facsimile: (702) 253-6225 12 Attorneys for Defendants 13 1 2 3 4 5 6 7 8 9 10 11 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA 14 15 16 1.7 18 19 20 21 22 23 24 25 26 27 28 MORRIS PETERSON ATLORNEYS AT LAW 100 BANK OF AMERICA PLAZA 300 SOUTH FOURTH STREET LAS VEGAS, NEVADA 89101 702/474-9400 FAX 702/474-9422 MARY ANN SUSSEX; MITCHELL PAE; ) Case No. 2:08-cv-00773-RLH-PAL MALCOLM NICHOLL and SANDY ) SCALISE; ERNESTO VALDEZ, SR. and ) ERNESTO VALDEZ, JR; JOHN HANSON and ELIZABETH HANSON, ) ) Plaintiffs, ) MOTION FOR v. ) DETERMINATION OF NON ) ARBITRABILITY OF CLAIMS TURNBERRY/MGM GRAND TOWERS,) AGAINST NON-SIGNATORY LLC, a Nevada LLC; MGM GRAND ) DEFENDANTS CONDOMINIUMS LLC, a Nevada LLC; ) THE SIGNATURE CONDOMINIUMS, ) LLC, a Nevada LLC; MGM MIRAGE, a ) Delaware Corporation; TURNBERRY/ ) HARMON AVE., LLC, a Nevada LLC; ) and TURNBERRY WEST REALTY, INC.,) a Nevada Corporation, ) Defendants. ) Case 2:08-cv-00773-MMD-PAL Document 60 Filed 10/21/09 Page 1 of 8 1 The defendants hereby move the Court to clarify its order of June 16, 2 2009, to confirm that the non-signatory defendants - MGM Grand 3 Condominiums LLC, The Signature Condominiums LLC, MGM Mirage, 4 Turnberry/Harmon Ave., LLC, and Turnberry West Realty, Inc. (hereinafter the 5 NS5 defendants) - are not compelled to arbitrate plaintiffs’ claims under 6 Section 24.10 of the Purchase and Sale Agreements between the plaintiffs and 7 Turnberry/MGM Grand Towers, LLC who are the parties to the Agreements. 8 The motion is based on the papers and pleadings on file, the attached exhibit, and 9 the following points and authorities. 10 I. INTRODUCTION 11 On July 17, 2008, defendants Turnberry/MGM Grand Towers, LLC 12 (“Turnberry /MGM”) and Turnberry / Harmon Ave., LLC (“Turnberry /Harmon”), 13 together with two former defendants - MGM Grand, Inc. and Turnberry 14 Associates - moved the Court to compel arbitration. See Motion to Compel 15 Arbitration (# 17). This motion was initially denied by the Honorable Peggy A. 16 Leen. Order (#43) and Memorandum of Decision (# 46). On June 16, 2009, this 17 Court “overruled, reversed, and vacated” the order and decision, sustained the 18 moving defendants’ objection, and compelled the Plaintffs to arbitrate their 19 claims. Order (# 59) at 2. 20 On August 31, 2009, the Plaintiffs here and twelve additional 21 claimants filed a demand for arbitration with the American Arbitration 22 Association against Turnberry/MGM, MGM Grand Condominiums LLC, The 23 Signature Condominiums LLC, MGM Mirage, Turnberry/Harmon Ave., and 24 Turnberry West Realty, Inc. (collectively “Defendants” or “respondents in 25 arbitration”). Respondents filed an answering statement on October 9, 2009. The 26 parties have not yet selected an arbitrator. 27 28 MORRIS PETERSON ATTORNEYS AT LAW OO BANK OF AMERICA PLAZA 300 SOUTH FOURTH STREET 2 LAS VEGAS, NEVADA 89101 702/474-9400 FAX 702/474-9422 Case 2:08-cv-00773-MMD-PAL Document 60 Filed 10/21/09 Page 2 of 8 1 IL ARGUMENT 2 A. The Court has Jurisdiction to Decide the Question of Arbitrability. 3 “The question whether the parties have submitted a particular 4 dispute to arbitration, i.e., the ‘question of arbitrability,’ is ‘an issue for judicial 5 determination [u]nless the parties clearly and unmistakably provide otherwise.” 6 Howsarn v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (quoting AT&T Techs., 7 Inc. V. Cornrnc’s. Workers, 475 U.S. 643, 649 (1986)) (emphasis added); accord 8 Carpenters 46 N. Cal. Counties Conference Bd. v. Zcon Builders, 96 F.3d 410, 414 (9th 9 Cir. 1996) (citing to Steelworkers v. Warrior & GulfNavigation Co., 363 U.S. 574, 582- 10 83 (1960) (“The question of whether the parties agreed to arbitrate is to be decided 11 by the court, not the arbitrator”); see also 9 U.S.C. § 4 (“If the making of an 12 arbitration agreement is at issue, the court shall proceed summarily to the trial 13 thereof”) (emphasis added). This is because “arbitration is a matter of contract 14 . . . .“; an arbitrator only has authority to decide a dispute if the parties agreed that 15 he or she has the authority to do so. Howsarn, 537 U.S. at 83. 16 Here, the parties to the arbitration agreement did not clearly and 17 unmistakably provide” that the arbitrator could decide issues of arbitrability, nor 18 did the NS5 defendants otherwise permit the arbitrator who remains to be 19 selected - to do so. Thus the issue is properly before the Court. 20 B. There Are No Principles of Contract or Agency Law Requiring the Non-signatory Defendants to Arbitrate Plaintiffs’ Claims Against 21 Turnberry/MGM. 22 Non-signatories to an arbitration agreement cannot be compelled to 23 defend against claims in arbitration except under principles of contract and agency 24 law. Corner v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006); Letizia v. Prudential 25 Bache Sec., Inc., 802 F.2d 1185, 1187 (9th Cir. 1986). Although courts have 26 recognized five principles to compel non-signatories to arbitrate their claims - 27 i.e., ‘1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter 28 MORRIS PETERSON ATTORNEYS AT LAW 00 BANK OF AMERICA PLAZA 300 SOUTH FOURTH STREET 3 LAS VEGAS, NEVADA 89101 702/474-9400 FAX 702/474-9422 Case 2:08-cv-00773-MMD-PAL Document 60 Filed 10/21/09 Page 3 of 8 1 ego; and 5) estoppel,” Corner, 436 F.3d at 1101 - none of these principles apply 2 here. 3 Only defendant/respondent in arbitration Turnberry/MGM is a 4 party to the Condominium Unit Purchase and Sale Agreements (PSAs) that 5 contain the arbitration agreement. Motion to Compel Arbitration (# 17), Ex. C 6 thereto at 1. None of the NS5 defendants is incorporated into the arbitration 7 agreement by reference, nor has any NS5 defendant assumed obligations under 8 the PSA. Plaintiffs do not allege that the NS5 defendants are each others agents, 9 nor do they plead facts to support alter ego allegations.1 Although the Plaintiffs 10 will likely argue - as the KJH plaintiffs have done in the related state court case 11 that the NS5 defendants are estopped from refusing to submit to arbitration, this 12 argument fails for several reasons. 13 1. The NS5 Defendants Did Not Knowingly Exploit the PSAs. 14 Estoppel requires the “knowing exploitation” of the agreement in 15 which the arbitration agreement appears. Corner, 436 F.3d at 1101 (internal citation 16 omitted). Like the appellant in Corner, Plaintiffs cannot meet this ‘insurmountable 17 hurdle.. .“ because the NS5 defendants “did not seek to enforce the terms of the 18 {PSAs], nor otherwise to take advantage of them.” Id. at 1102. The NS5 defendants 19 are merely defending against Plaintiffs’ claims, which ignore and plead around the 20 PSAs. Cornpare Int’l Paper v. Schwabedissen Maschinen & Anlagen, 206 F.3d 411, 418 21 (4th Cir. 2000) (non-signatory buyer was estopped from refusing to arbitrate under 22 23 1 Plaintiffs’ complaint does not plead any facts or conduct to support any 24 of the conclusory allegations made against the NS5 defendants, Compi. (# 14), 25 ¶ 21, and would not sustain against a motion to dismiss for failure to state a claim. In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1410-11 (9th Cir. 1996) (affirming 26 dismissal of claims under Fed. R. Civ. P. 9(b)); G.K. Las Vegas Lirnited P’ship v. 27 Sirnon Prop. Group, Inc., 460 F. Supp. 2d 1246, 1258 (D. Nev. 2006) (dismissing plaintiff’s securities fraud claim under NRS 90.570 for failure to plead particular MORRIS PETERSON facts pertaining to individual defendants). ATTORNEYS AT LAW 00 BANK OF AMERICA PLAZA 300 SOUTH FOURTH STREET 4 LAS VEGAS, NEVADA 89101 702/474-9400 FAX 702/474-9422 Case 2:08-cv-00773-MMD-PAL Document 60 Filed 10/21/09 Page 4 of 8 1 the contract that he sued on). The mere fact that the Sussex motion to compel 2 arbitration recites a number of PSA terms in the fact section does not mean that the 3 moving defendants argued, relied on, or took advantage of these terms. Accord 4 Goldman v. KPMG LLP, 173 Cal. App. 4th 209, 218, 92 Cal. Rptr. 3d 534, 541 (2009) 5 (distinguishing between making a reference to an agreement with an arbitration 6 clause and relying on its terms); compare Int’l Paper, 206 F.3d at 418 (“a party may 7 be estopped.. . when he has consistently maintained that other provisions of the same 8 contract should he enforced to benefit him”) (emphasis added). 9 2. The NS5 Defendants Did Not Consent to Defend Against Plaintiffs’ Claims in Arbitration. 10 By joining in Turnberry/MGM’s motion to compel Plaintiffs to 11 arbitrate, defendant Turnberry/Harmon did not consent to submit to arbitration. 12 13 The moving defendants only sought an order compelling the Plaintiffs to arbitrate under their agreement to which they and only Turnberry/MGM are the parties, 14 and asked the Court to stay the judicial proceedings. Motion to Compel 15 Arbitration (# 17) at 21. Compare, that a stay may be ‘advisable. . . among the 16 nonarbitrating parties pending the outcome of the arbitration.’ Moses H. Cone 17 18 Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 20 n. 23 (1983) (emphasis added). 19 3. Only TurnberrylHarmon Joined in the Motion to Compel 20 Arbitration. 21 Even assuming joining in a motion to compel arbitration can pull a 22 non-signatory defendant into arbitration, Turnberry/Harmon is the only present 23 defendant/respondent in arbitration who joined in the motion to compel 24 arbitration, Motion to Compel Arbitration (# 17) at 1, and why shouldn’t it?2 The 25 complaint is based on a contract that is subject to an arbitration with 26 27 2 Plaintiffs mistakenly suggest elsewhere that all NS5 defendants joined in Turnberry/MGM’s motion to compel arbitration. See, e.g., Demand for 28 Arbitration, Ex. A hereto, at 2 (exhibits to Demand omitted). MORRIS PETERSON ATTORNEYS AT LAW 00 BANK OF AMERICA PLAZA 300 SOUTH FOURTH STREET 5LAS VEGAS, NEVADA 89101 702/474-9400 FAX 702/474-9422 Case 2:08-cv-00773-MMD-PAL Document 60 Filed 10/21/09 Page 5 of 8 1 Turnberry/MGM. Turnberry/Harmon did not contract with plaintiffs, yet they 2 sued this entity on the contract. By joining with the defendant that is subject to 3 arbitration to compel the plaintiffs to arbitrate against the Seller under the PSA 4 does not turn a third party into a co-Seller and thus subject to arbitrate under 5 Section 24.10. By asking the Court to compel the plaintiffs to arbitrate under their 6 contract with the proper party does not make an improperly named defendant a 7 contracting party. AT&T Techs., Inc. v. Commc’s. Workers, 475 U.S. 643, 648 (1986) 8 (holding that arbitration “is a matter of contract and a party cannot be required to 9 submit to arbitration any dispute which he has not agreed so to submit) (internal 10 citation omitted). None of the other non-signatory defendants joined in the 11 motion, id., and therefore none of them can be estopped on that basis. 12 4. Plaintiffs are Estopped from Arguing Estoppel. 13 A party seeking an equitable remedy must come into Court with clean 14 hands, or the equitable remedy may be refused. United States v. Ga.-Pac. Co., 421 15 F.2d 92, 103 (9th Cir. 1970). Plaintiffs hands are not clean. Plaintiffs specifically 16 attempted to defeat arbitration on the basis of the NS5 defendants non-signatory 17 status. See Opposition to motion to compel arbitration (# 22) at 2 n. 2 (arguing that 18 “Defendants fail. . . to show that all Defendants are even parties to the contract 19 and subject to the arbitration clause”). As Plaintiffs argued there: 20 . . . even if the arbitration provision were enforceable. . . the provision could only be enforced by Turnberry/MGM. . . and Plaintiffs’ claims against the 21 otherfive Defendants . . . would nevertheless proceed in this Court because they are not subject to any arbitration clause. See Tracer Research, Inc. v. 22 Nat’l Envtl. Servs. Co., 42 F.3d 1292, 1294 (9th Cir. 1994). 23 Id. (emphasis added).3 24 ______________________ 25 This is not the only showing of Plaintiffs’ attempt to avoid arbitration. 26 Plaintiffs’ complaint pleads around the PSA (and the arbitration provision it contains) by asserting tort claims. See Amended Federal Class Action Complaint 27 (# 14) at 1-2. And although the complaint names the NS5 defendants, Plaintiffs 28 fail to plead a single fact to support their conclusory allegations against them. Id. MORRIS FETERSON at 8-10 (91 21). ATTORNEYS AT LAW )OO BANK OF AMERICA PLAZA 300 SOUTH FOURTH STREET LAS VEGAS, NEVADA 89101 702/474-9400 FAX 702/474-9422 Case 2:08-cv-00773-MMD-PAL Document 60 Filed 10/21/09 Page 6 of 8 1 Plaintiffs cannot now claim that their claims against the other five 2 Defendants [should not] proceed in this Court [even though] they are not subject 3 to any arbitration clause.’ 4 III. CONCLUSION 5 The Court should exercise its jurisdiction and discretion to 6 determine that the Plaintiffs’ claims against Turnberry/MGM are not subject to 7 arbitration against third parties. 8 MORRIS PETERSON 9 10 By: 11 Akke LèVffi, No. 9102 12 Jean-Paul Hendricks, No. 10079 900 Bank of America Plaza 13 300 South Fourth Street Las Vegas, Nevada 89101 14 WOOD, SMITH, HENNING & BERMAN LLP 15 Jason C. Gless, No. 8469 7670 West Lake Mead Blvd., Suite 250 16 Las Vegas, Nevada 89128 17 Attorneys for Defendants 18 19 20 21 22 23 24 25 26 27 28 MORRIS FETERSON ATTORNEYS AT LAW 00 BANK OF AMERICA PLAZA 300 SOUTH FOURTH STREET LAS VEGAS, NEVADA 89101 702I47494Q0 FAX 702/474-9422 Case 2:08-cv-00773-MMD-PAL Document 60 Filed 10/21/09 Page 7 of 8 1 CERTIFICATE OF SERVICE 2 Pursuant to Fed. R. Civ. P. 5(b) and Section IV of District of Nevada 3 Electronic Filing Procedures, I certify that I am an employee of MORRIS 4 PETERSON, and that the following documents were served via electronic service: 5 MOTION FOR DETERMINATION OF NON-ARBITRABILITY OF CLAIMS 6 AGAINST NON-SIGNATORY DEFENDANTS 7T0: 8 Robert B. Gerard Norman Blumenthal Ricardo R. Ehmann Blumenthal & Nordrehaug Gerard & Associates 2255 Calle Clara 10 2840 So. Jones Blvd. - Bldg. D, Suite 4 La Jolla, California 92037 Las Vegas, Nevada 89146 norm@bamlawlj.com 11 rgerard@gerardlaw.com rehmann@gerardlaw.com Attorneys for Plaintiff 12 Robert Feilmeth 13 University of San Diego Law School 5998 Alcala Park 14 San Diego, California 92110 cpil@sandiego.edu 15 Attorneys for Plaintiff16 17 DATED this ______day of ( Z(LZ< ,2009. 18 19 20 21 22 23 24 25 26 27 28 MORRIS PETERSON AFFORNEYS AT LAW )OO BANK OF AMERICA PLAZA 300 SOUTH FOURTH STREET 8 LAS VEGAS, NEVADA 89101 702/4749400 FAX 702/474-9422 Case 2:08-cv-00773-MMD-PAL Document 60 Filed 10/21/09 Page 8 of 8