Rackwise, Inc. v. Archbold

Filing 58

ORDER signed by Senior Judge William B. Shubb on 8/8/2017 DENYING 21 Defendant's Motion to Compel Arbitration and to Stay Action. (Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo----

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RACKWISE, INC., a Nevada
Corporation,

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ORDER RE: MOTION TO COMPEL
ARBITRATION AND TO STAY ACTION

Plaintiff,

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CIV. NO. 2:17-797 WBS CKD

v.
GUY ARCHBOLD, an individual,
Defendant.

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----oo0oo---Defendant Guy Archbold moves to compel arbitration and

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to stay this action pending arbitration based on Subscription

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Agreements signed by plaintiff Rackwise, Inc. and certain

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investors.1

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(“FAA”), if there is an issue that is referable to arbitration

(Docket No. 21.)

Under the Federal Arbitration Act

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The Subscription Agreements state, in part: “The
parties hereto agree to submit all controversies to the exclusive
jurisdiction of FINRA Arbitration in accordance with the
provisions set forth below and understand that (a) arbitration is
final and binding on the parties [and] (b) the parties are
waiving their rights to seek remedies in court . . . .” (Def.’s
Mot., Ex. 2 (“Subscription Agreement”) at 16 (Docket No. 21-2).)
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under an arbitration clause, the court “shall on application of

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one of the parties stay the trial of the action until such

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arbitration has been had in accordance with the terms of the

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agreement . . . .”

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burden to show (1) the existence of a written arbitration

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agreement between the parties and (2) the arbitration agreement

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encompasses the dispute.

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785 F.3d 1320, 1323 (9th Cir. 2015); see Attia v. The Neiman

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Marcus Grp., Inc., Case No. SA CV 16-0504-DOC (FFMx), 2016 WL

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A party seeking to compel arbitration has the

Ashbey v. Archstone Prop. Mgmt., Inc.,

9150570, at *3 (C.D. Cal. Oct. 18, 2016).

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As to the first prong, a contractual right to

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arbitration generally “may not be invoked by one who is not a

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party to the agreement.”

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742, 744 (9th Cir. 1993).

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and Triple R-F entered into the Subscription Agreements.2

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Defendant purportedly signed these agreements on Rackwise’s

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behalf in his corporate capacity, not in his individual capacity,

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and defendant does not dispute that he is not a party to the

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Subscription Agreements.

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Rackwise to arbitrate this dispute on this basis.

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v. Azure, 22 F.3d 351, 356 (1st Cir. 1994) (“[A] person signing a

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contract only in a corporate capacity . . . does not thereby

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become a party to the agreement.”).

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Britton v. Co-Op Banking Grp., 4 F.3d
Here, Rackwise, Rackwise Funding II,

Therefore, defendant cannot compel
See McCarthy

“[A] litigant who is not a party to an arbitration
agreement may invoke arbitration under the FAA if the relevant
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A statement of claims previously was filed on behalf of
Rackwise in FINRA arbitration (Docket No. 21-4); however, counsel
for both parties indicated that FINRA declined to arbitrate that
dispute.
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state contract law allows the litigant to enforce the agreement.”

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Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1128 (9th Cir.

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2013).

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Subscription Agreements, (Subscription Agreement at 16), the

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court looks to New York contract law to determine if defendant

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can compel arbitration as a non-party.

Because New York law governs the terms of the

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Defendant argues that equitable estoppel and the third-

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party beneficiary doctrines permit him, as a non-party to the

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Subscription Agreements, to compel Rackwise to arbitrate this

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dispute.

However, defendant cites no New York cases or cases

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interpreting New York contract law regarding the application of

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equitable estoppel or the third-party beneficiary doctrine, and

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does not explain how New York law permits him to compel

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arbitration here under either theory.

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meet his burden of establishing that he can compel arbitration

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against Rackwise as a non-party to the Subscription Agreements.

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Because defendant has not met his burden to show that

Thus, defendant fails to

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there was an arbitration agreement between the parties or that he

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has standing as a non-party to compel arbitration, the court need

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not address the second prong and will not compel arbitration.

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Because the court will not compel arbitration, the court will

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also not stay this case pending arbitration.

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court will deny defendant’s Motion.

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Accordingly, the

IT IS THEREFORE ORDERED that defendant’s Motion to

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compel arbitration and to stay action pending arbitration (Docket

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No. 21) be, and the same hereby is, DENIED.

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Dated:

August 8, 2017

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