DKS, Inc. v. Corporate Business Solutions, Inc. et al

Filing 64

MEMORANDUM AND ORDER signed by District Judge Morrison C. England, Jr on 8/11/16 ORDERING that Defendants' MOTION to Compel Arbitration (ECF No. 53 ) is STRICKEN and Plaintiffs' MOTION to Strike the MOTION to Compel Arbitration and request for sanctions (ECF No. 57 ) is GRANTED in part and DENIED in part. (Mena-Sanchez, L)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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DKS, INC., et al.,

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No. 2:15-cv-00132-MCE-DB

Plaintiffs,
v.

MEMORANDUM AND ORDER

CORPORATE BUSINESS
SOLUTIONS, INC., et al.,
Defendant.

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This case arises from a dispute between Plaintiff DKS INC. (“DKS”) and its

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business consultant, Defendant Corporate Business Solutions (“CBS”). Presently before

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the Court is Defendants’ second Motion to Compel Arbitration and Plaintiffs’ Motion to

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Strike Defendants’ Motion to Compel and Request for Sanctions. ECF Nos. 53 and 57.

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For the following reasons, Defendants’ Motion is STRICKEN and Plaintiffs’ Motion is

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GRANTED in part.

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BACKGROUND

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DKS contracted with CBS to receive business consultation services. Defendant
Oliver Sintobin (“Sintobin”), CBS’s employee, acted as DKS’s primary consultant.
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Sintobin’s conduct allegedly gave rise to the claims at issue in this action. After the

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Complaint was filed, Defendants filed a Motion to Compel Arbitration. ECF No. 11.

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The arbitration clause (“Clause”) in the contract between DKS and CBS states:

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“Client and CBS expressly agree all disputes of any kind between the parties arising out

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of or in connection with this Agreement shall be submitted to binding arbitration which

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would be administered by the American Arbitration Association.” ECF No. 11-1. This

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Court denied Defendants’ first Motion to Compel for two reasons. ECF No. 32. First,

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Sintobin’s actions “were drastically different from what was presented in the contract,”

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and DKS therefore was “not able to give honest assent to the contract.” Id. Second,

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because Plaintiffs seek damages caused by conduct “that had nothing to do with the

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promises outlined in the parties’ contract[,]” the claims fell outside the scope of the

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Clause. Id. Defendants appealed this Court’s denial of their motion to compel, and that

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appeal is currently awaiting a decision from the Ninth Circuit. See ECF No. 34. The

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Court declined to stay the case in the meantime. ECF No. 47.

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In March of this year, Plaintiffs filed their FAC. ECF No. 51. Instead of replying to

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the FAC, Defendants filed another Motion to Compel Arbitration. ECF No. 53. Currently

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before this Court are this latest Motion to Compel and Plaintiffs’ subsequently filed

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Motion to Strike. ECF No. 57. Plaintiffs argue that Defendants’ current Motion is merely

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an attempt to delay the proceedings, and thus additionally request that the FAC’s claims

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be deemed admitted and monetary sanctions be imposed on Defendants’ counsel. Id.

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DISCUSSION

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Defendants’ current Motion to Compel Arbitration is frivolous for three reasons:

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(1) it is a copy-and-paste of the original motion to compel that was already denied; (2) it

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fails to address how the FAC alters the significance of the Clause in the current dispute;

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and (3) Defendants’ appeal of the first motion is still pending before the Ninth Circuit.

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Defendants’ current Motion to Compel Arbitration is a regurgitation of the same

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arguments made in their previous Motion to Compel Arbitration (ECF No. 11). The only

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non-formatting and non-grammatical difference is that the new Motion includes a section

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and argument that was previously included in Defendants’ reply papers for the previous

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motion. See ECF No. 57-3 (redlining the differences between the two motions to compel

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arbitration). This Court already considered that argument. Other than this structural

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difference, Defendants fail to distinguish the motions.

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Moreover, Defendants’ current Motion to Compel Arbitration does not address the

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only relevant circumstance that could potentially alter the germaneness of the Clause:

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the FAC’s new claims. However, since Defendants’ first motion was denied, Plaintiffs

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have moved to add new claims that, “allege[] facts even further from the reach of the

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contract that contains the arbitration clause.” ECF No. 57. The claims add four more

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parties, none of which are parties to the contract that contains the Clause. The FAC

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expands the allegations of Sintobin’s extra-contractual theft, which falls outside the

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scope of the Clause. See ECF No. 32 (“[T]he causes of action are for the damage

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incurred by Plaintiff as a result of Defendants’ extra-contractual actions.”). Plaintiffs also

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seek to include new tort claims that do not implicate the Clause. Accordingly, the FAC

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does not change the reasoning on which arbitration was originally denied. See id.

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Finally, Defendants’ re-filing of the current Motion, while simultaneously awaiting a

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decision on their appeal of their first and identical motion, demonstrates a bad-faith

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attempt to delay this dispute. The Ninth Circuit was fully briefed on the arguments to

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compel arbitration. That appeal remains pending, but Defendants’ most recent Motion

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regurgitates the same arguments as their first motion while providing no explanation as

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to why this Court’s decision should change. Accordingly, Plaintiffs accurately

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characterize the current Motion as a naked attempt to delay the proceedings.

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Defendants’ second Motion to Compel Arbitration is therefore STRICKEN and Plaintiffs’

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Motion to Strike the motion to compel arbitration GRANTED.

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Plaintiffs’ request for sanctions, however, is DENIED. Although Defendants have

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wasted the Court’s time by filing the instant Motion, it declines to impose sanctions on

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the current record. Instead, Defendants are explicitly admonished that frivolous, bad

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faith conduct—of which the instant Motion is a prime example—will not be tolerated in

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the future. The Court will not hesitate to impose serious sanctions if Defendants persist

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in pursuing such litigation tactics.

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CONCLUSION
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For these reasons, Defendants’ Motion to Compel arbitration (ECF No. 53) is

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STRICKEN and Plaintiffs’ Motion to Strike the motion to compel arbitration and request

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for sanctions (ECF No. 57) is GRANTED in part and DENIED in part.

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IT IS SO ORDERED.
Dated: August 11, 2016

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