Cesca Therapeutics, Inc. v. SynGen, Inc., et al.

Filing 46

ORDER signed by Judge Garland E. Burrell, Jr. on 10/07/15 ORDERING that the 41 Motion to Compel Arbitration is DENIED. (Benson, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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CESCA THERAPEUTICS INC.,

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Plaintiff,

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No. 2:14-cv-02085-GEB-KJN

v.

ORDER DENYING DEFENDANTS’ MOTION
TO COMPEL ARBITRATION

SYNGEN, INC., PHC MEDICAL,
INC., AND PHILIP COELHO,

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Defendants.*
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Defendants SynGen, Inc. (“SynGen”), PHC Medical, Inc.

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(“PHC

Medical”),

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“Defendants”) “move for an order to compel arbitration of all

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claims asserted against all Defendants in the Complaint filed by

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Plaintiff Cesca Therapeutics Inc.” (“Cesca”). (Defs.’ Notice of

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Mot.

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“[t]here are no controlling arbitration provisions applicable to

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this action.” (Pl.’s Opp’n to Defs.’ Mot. to Compel Arbitration

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(“Opp’n”) 6:9, ECF No. 42.)

1:5–6,

ECF

and

No.

41.)

I.

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Coelho

Cesca

(“Coelho”)

opposes

the

(collectively,

motion,

arguing

FACTUAL BACKGROUND

The following factual allegations in Cesca’s Complaint

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Philip

concern this motion.

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*

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The caption has been amended according to the stipulated dismissal of
Defendants Terrence Wolf and Prince Emmanuel. (ECF No. 40.)

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“Cesca

designs,

that

enable

develops,

and

commercializes

medical

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products

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cryopreservation of stem cells and other cellular tissues used in

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research in the practice of regenerative medicine.” (Compl. ¶ 15,

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ECF No. 2.) “Cesca . . . is the surviving entity of a merger

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between ThermoGenesis Corp. [(“ThermoGenesis”)] and TotiPotentRX

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Corporation, which occurred on February 13, 2014.” (Compl. ¶ 3.)

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the

collection,

processing,

and

“Coelho . . . [is a] former employee[] of Cesca who
w[as]

hired

specifically

to

design,

invent

and

develop

new

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products,

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(Compl.

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Chief Executive Officer of Cesca.” (Compl. ¶ 20.) In 2007, Coelho

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and ThermoGenesis entered into an Executive Employment Agreement,

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which contained an arbitration provision. (Compl. ¶ 20, Ex. 1

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§ 11, ECF No. 11.)

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product

¶ 18.)

“On

improvements,

Specifically,

or

about

and

“Coelho

May 1,

inventions
is

2008,

a

founder

ThermoGenesis

for

Cesca.”

and

and

former

Coelho

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terminated Coelho’s employment, and the parties entered into an

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Employment Severance Agreement.” (Compl. ¶ 21.) The Employment

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Severance Agreement contains an arbitration provision. (Ex. 2

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§ 14.5.)

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“On

or

about

May 2,

2008,

ThermoGenesis

and

PHC

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Medical, an entity of which Coelho was President, entered into a

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[C]onsulting [A]greement including a Proprietary Information and

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Confidentiality Agreement wherein PHC Medical agreed, inter alia,

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to provide consulting services to ThermoGenesis as an independent

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contractor.” (Compl. ¶ 22.) The Consulting Agreement contains an

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arbitration

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Information and Confidentiality Agreement contains a “Governing

provision,

(Ex.

3

§ 19),

2

whereas

the

Proprietary

1

Law” section, which states in pertinent part: “Any legal action

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or proceeding relating to this Agreement shall be instituted in a

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state or federal court in Sacramento County, California.” (Ex. A

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in Ex. 3 § 5.1.)

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“On or about October 1, 2009, [ThermoGenesis], Coelho,

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and

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which terminated the Executive Employment Agreement, Employment

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Severance

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[Proprietary Information and Confidentiality] Agreement.” (Compl.

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PHC

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entered

Agreement,

and

into

a

Mutual

Consulting

Termination

Agreement,

Agreement,

but

not

the

¶ 23.)

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12

Medical

The Mutual Termination Agreement provides in pertinent
part:
The Consulting Agreement (dated May 2, 2008),
the Executive Employment Agreement (to the
extent any provisions survived execution of
the Employment Severance Agreement), the
Employment Severance Agreement (dated May 1,
2008) and any other employment agreements
between [ThermoGenesis] and Coelho, whether
oral or in writing, (collectively, the “Prior
Agreements”) are hereby terminated as of
[October 1, 2009]. [ThermoGenesis] shall have
no further or ongoing obligations to pay any
further sums to [PHC Medical] or Coelho under
the Prior Agreements, except as explicitly
provided for in this Agreement. Neither
Coelho nor [PHC Medical] shall have any
further
or
ongoing
obligations
to
[ThermoGenesis] under the Prior Agreements or
any other agreement, whether written or oral,
between
[ThermoGenesis]
and
Coelho,
or
between [ThermoGenesis] and [PHC Medical],
except as explicitly set forth in this
Agreement.

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(Ex. 4 § 1.)

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The Mutual Termination Agreement’s “Governing Law and

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Venue” section further provides: “Any legal action or proceeding

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relating to this Agreement shall be instituted in a state or
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federal court in Sacramento, County California.” (Ex. 4 § 9.)

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The

Mutual

Termination

Agreement

also

contains

an

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“Entire Agreement” section which states in pertinent part: “This

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Agreement contains the entire agreement and understandings by and

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between the Parties with respect to the subject matter hereof,

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and no representations, promises, agreements or understandings

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concerning

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contained shall be of any force or effect.” (Ex. 4 § 10.)

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such

subject

matter,

written

or

oral,

not

herein

“[F]ollowing his employment with Cesca, Coelho formed
SynGen.” (Compl. ¶ 43.)

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II.

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A.

DISCUSSION

Defendants Coelho and PHC Medical

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Defendants

Coelho

and

PHC

Medical

seek

to

enforce

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arbitration

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ThermoGenesis and PHC Medical, found in the Executive Employment

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Agreement, the Employment Severance Agreement, and the Consulting

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Agreement.

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Arbitration

19

arbitration

provisions

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Termination

Agreement

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arbitration clause survive contract termination when the dispute

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is over an obligation the expired contract arguably created.”

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(Mot. 8:22–28 n.2 (citations omitted).)

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provisions

(Mem.

between

P.&A.

(“Mot.”)

in

ThermoGenesis

Supp.

6:6–10,

ECF

Defs.’

No.

survived
because

of

and

Mot.

41-1.)

the

and

to

Compel

argue

They

October

“[p]arties’

Coelho,

these

2009

duties

Mutual

under

an

Cesca counters, inter alia, that “the intention of the

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parties

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Termination Agreement—to replace the parties’ obligations under

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[the

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Agreement, and the Consulting Agreement] with the obligations set

is

clear

Executive

from

the

Employment

plain

Agreement,

4

language

the

of

the

Employee

Mutual

Severance

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forth in the Mutual Termination Agreement. In particular, the

2

parties . . .

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expressly requiring all disputes under the Mutual Termination

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Agreement to be resolved in state or federal court.” (Opp’n 9:11–

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16.)

indicated

a

desire

to

forego

arbitration

by

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Defendants Coelho and PHC Medical reply, inter alia,

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that Cesca has sued them “over obligations and rights created by

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the

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Agreement, and the Consulting Agreement].” (Reply in Supp. of

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Defs.’ Mot. (“Reply”) 4:17–18, ECF No. 44.) They further respond:

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“If [Cesca] wants to enforce the [Executive Employment Agreement,

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the Employee Severance Agreement, and the Consulting Agreement],

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based on acts or omissions that occurred or rights that accrued

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while these three contracts were in effect, then it must abide by

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the arbitration clauses in these agreements.” (Reply 5:26, 6:1–

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3.)

[Executive

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A

Employment

district

Agreement,

“court’s

the

role

Employee

under

the

Severance

[Federal

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Arbitration] Act is . . . limited to determining (1) whether a

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valid agreement to arbitrate exists and, if it does, (2) whether

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the agreement encompasses the dispute at issue.” Chiron Corp. v.

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Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)

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(citations omitted). Moreover, “[u]nless the parties clearly and

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unmistakably

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parties agreed to arbitrate is to be decided by the court, not

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the arbitrator.” AT & T Technologies, Inc. v. Commc’ns Workers of

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Am., 475 U.S. 643, 649 (1986).

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“In
‘place

provide

otherwise,

deciding

arbitration

these

agreement

the

question

questions,
on
5

equal

of

whether

federal

courts

footing

with

the

must
other

1

contracts.’” Samson v. NAMA Holdings, LLC, 637 F.3d 915, 924 (9th

2

Cir. 2011) (quoting E.E.O.C. v. Waffle House, Inc., 534 U.S. 279,

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293 (2002)). “Thus, [t]o evaluate the validity of an arbitration

4

agreement,

federal

5

principles

that

6

(alteration in original) (citations and internal quotation marks

7

omitted).

8

courts

govern

Further,

should

the

apply

formation

“[a]rbitration

ordinary
of

state-law

contracts.”

provisions

can

Id.

survive

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expiration of an agreement where (1) ‘the dispute is over a

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provision of the [prior] agreement’ and (2) the parties have not

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indicated a desire to forego arbitration either ‘expressly or by

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clear implication.’” Thelen Reid Brown Raysman & Steiner LLP v.

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Marland, 319 F. App’x 676, 678–79 (9th Cir. 2009) (quoting Nolde

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Bros. v. Local No. 358, Bakery & Confectionery Workers Union,

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AFL-CIO, 430 U.S. 243, 255 (1977)).

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The Mutual Termination Agreement controls here. Coelho,

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PHC Medical, and ThermoGenesis (Cesca’s predecessor) terminated

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the

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Agreement, and the Consulting Agreement by subsequently entering

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into the Mutual Termination Agreement. (Ex. 4 § 1.)

Executive

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Employment

Further,

the

Agreement,

Mutual

the

Termination

Employee

Severance

Agreement

supersedes

22

the

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those arbitration provisions no longer control the proper forum

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for

25

Agreement’s

26

section

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Medical]

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[ThermoGenesis]

prior

agreements’

this

arbitration

litigation.

Specifically,

“Termination

provides

in

shall

have

of

Prior

pertinent

under

provisions,

any
the

Prior
6

Mutual

Agreements

part:

further

the

“Neither

or

and

ongoing

Agreements

and

therefore,

Termination
Obligations”

Coelho

nor

[PHC

obligations
or

any

to

other

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agreement, whether written or oral, between [ThermoGenesis] and

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Coelho, or between [ThermoGenesis] and [PHC Medical], except as

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explicitly

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Additionally,

the

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clause,

in

6

pertinent

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agreement . . . .

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understandings concerning [the] subject matter[ hereof], written

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or oral, not herein contained shall be of any force or effect.”

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(Ex. 4 § 10.) Thus, the integration clause provides that the

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Mutual Termination Agreement governs the parties’ obligations.1

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See Granite Rock Co. v. Teamsters Union Local No. 890, No. C 12-

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02974 MEJ, 2012 WL 5877494, at *4–5 (N.D. Cal. Nov. 20, 2012)

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(finding

15

clause

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earlier collective bargaining agreement, where the integration

17

clause “provide[d] that the parties will not be bound by any

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previous contracts, and that [the later collective bargaining

19

agreement] constitute[d] the entire agreement of the parties”).

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Thus, the Mutual Termination Agreement, which does not require

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arbitration, controls the proper forum for this litigation.

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set

found

forth

Mutual
the

part:

later

in

this

Termination

“Entire

“This
[N]o

Agreement.”

Agreement’s

Agreement”

Agreement

“extinguishe[d]

bargaining

Plaintiff’s

promises

§ 1.)

provides
the

in

entire

agreements

agreement’s

arbitration

4

integration

section,

contains

representations,

collective

(Ex.

or

integration

rights

under”

Moreover, even if the court assumes that this dispute

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is

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contend, the parties here have expressly indicated a desire to

25

forego

26

Employee

over

provisions

arbitration.
Severance

of

The

the

prior

Executive

Agreement,

and

agreements,

Employment
the

as

Defendants

Agreement,

Consulting

Agreement

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1

28

In turn, the Mutual Termination Agreement cites the Proprietary
Information and Confidentiality Agreement. (Ex. 4 § 3.)

7

the

1

contain

2

Agreement contains its own “Governing Law and Venue” section. As

3

stated

4

instead provides that “[a]ny legal action or proceeding relating

5

to this Agreement shall be instituted in a state or federal court

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in Sacramento County, California.” (Ex. 4 § 9.) Thus, the Mutual

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Termination Agreement “indicate[s] a desire to forego arbitration

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either expressly or by clear implication.” See Thelen Reid Brown

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Raysman & Steiner LLP, 319 F. App’x at 678–79 (citation and

10

arbitration

above,

provisions,

this

section

does

but

not

the

Mutual

require

Termination

arbitration

and

internal quotation marks omitted).

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Thus, Defendants Coelho and PHC Medical cannot compel

12

arbitration

13

Employee Severance Agreement, or the Consulting Agreement, since

14

the

15

agreements, and it does not contain an arbitration provision.

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Therefore, their motion is denied.

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Mutual

B.

under

the

Executive

Termination

Employment

Agreement

Agreement,

supersedes

those

the

prior

Defendant SynGen

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Both parties agree that “SynGen is not a signatory to

19

the arbitration agreements at issue.” (Mot. 9:11–12; Opp’n 9:20–

20

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SynGen.”).) Defendant SynGen argues that even though it is not a

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signatory to the Executive Employment Agreement, the Employee

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Severance

24

arbitration agreement with Cesca, Cesca must submit its claims

25

against

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agency theory. (Opp’n 9:13–21, 10:26–28, 11:19–23.)

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28

(“[T]here

is

no

Agreement,

SynGen

to

agreement

the

is

arbitrate

Consulting

arbitration

“[A]rbitration

to

a

under

matter

between

Agreement,

an

of

or

equitable

contract

Cesca

any

other

estoppel

and

a

and

or

party

cannot be required to submit to arbitration any dispute which he
8

1

has not agreed so to submit.” AT & T Technologies, Inc., 475 U.S.

2

at 648 (citations omitted).

3

Here, Cesca and SynGen have not agreed to arbitrate.

4

Further, SynGen’s arguments, based on an equitable estoppel or

5

agency theory, rely on the existence of an underlying arbitration

6

agreement, which the court has held does not exist. See, e.g.,

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Creative Telecomms., Inc. v. Breeden, 120 F. Supp. 2d 1225, 1240

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(D.

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agents, employees, and representatives the benefit of arbitration

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agreements entered into by their principals . . . .” (emphasis

11

added)); JSM Tuscany, LLC v. Superior Court, 193 Cal. App. 4th

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1222, 1238 (2011) (“For the doctrine [of equitable estoppel] to

13

apply, the claims plaintiff asserts against the nonsignatory must

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be dependent upon, or founded in and inextricably intertwined

15

with, the underlying contractual obligations of the agreement

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containing the arbitration clause.” (emphasis added) (citation

17

and internal quotation marks omitted)).

Haw.

18

1999)

(“Federal

courts

have

consistently

afforded

Therefore, SynGen’s motion is denied.

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III.

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CONCLUSION

For the stated reasons, Defendants’ motion to compel

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arbitration is DENIED.

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Dated:

October 7, 2015

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