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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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 13 RACKWISE, INC., a Nevada Corporation, 16 ORDER RE: MOTION TO COMPEL ARBITRATION AND TO STAY ACTION Plaintiff, 14 15 CIV. NO. 2:17-797 WBS CKD v. GUY ARCHBOLD, an individual, Defendant. 17 18 ----oo0oo---Defendant Guy Archbold moves to compel arbitration and 19 20 to stay this action pending arbitration based on Subscription 21 Agreements signed by plaintiff Rackwise, Inc. and certain 22 investors.1 23 (“FAA”), if there is an issue that is referable to arbitration (Docket No. 21.) Under the Federal Arbitration Act 24 1 25 26 27 28 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).) 1 1 under an arbitration clause, the court “shall on application of 2 one of the parties stay the trial of the action until such 3 arbitration has been had in accordance with the terms of the 4 agreement . . . .” 5 burden to show (1) the existence of a written arbitration 6 agreement between the parties and (2) the arbitration agreement 7 encompasses the dispute. 8 785 F.3d 1320, 1323 (9th Cir. 2015); see Attia v. The Neiman 9 Marcus Grp., Inc., Case No. SA CV 16-0504-DOC (FFMx), 2016 WL 10 A party seeking to compel arbitration has the Ashbey v. Archstone Prop. Mgmt., Inc., 9150570, at *3 (C.D. Cal. Oct. 18, 2016). 11 As to the first prong, a contractual right to 12 arbitration generally “may not be invoked by one who is not a 13 party to the agreement.” 14 742, 744 (9th Cir. 1993). 15 and Triple R-F entered into the Subscription Agreements.2 16 Defendant purportedly signed these agreements on Rackwise’s 17 behalf in his corporate capacity, not in his individual capacity, 18 and defendant does not dispute that he is not a party to the 19 Subscription Agreements. 20 Rackwise to arbitrate this dispute on this basis. 21 v. Azure, 22 F.3d 351, 356 (1st Cir. 1994) (“[A] person signing a 22 contract only in a corporate capacity . . . does not thereby 23 become a party to the agreement.”). 24 25 26 27 28 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 2 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. 2 1 state contract law allows the litigant to enforce the agreement.” 2 Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1128 (9th Cir. 3 2013). 4 Subscription Agreements, (Subscription Agreement at 16), the 5 court looks to New York contract law to determine if defendant 6 can compel arbitration as a non-party. Because New York law governs the terms of the 7 Defendant argues that equitable estoppel and the third- 8 party beneficiary doctrines permit him, as a non-party to the 9 Subscription Agreements, to compel Rackwise to arbitrate this 10 dispute. However, defendant cites no New York cases or cases 11 interpreting New York contract law regarding the application of 12 equitable estoppel or the third-party beneficiary doctrine, and 13 does not explain how New York law permits him to compel 14 arbitration here under either theory. 15 meet his burden of establishing that he can compel arbitration 16 against Rackwise as a non-party to the Subscription Agreements. 17 Because defendant has not met his burden to show that Thus, defendant fails to 18 there was an arbitration agreement between the parties or that he 19 has standing as a non-party to compel arbitration, the court need 20 not address the second prong and will not compel arbitration. 21 Because the court will not compel arbitration, the court will 22 also not stay this case pending arbitration. 23 court will deny defendant’s Motion. 24 Accordingly, the IT IS THEREFORE ORDERED that defendant’s Motion to 25 compel arbitration and to stay action pending arbitration (Docket 26 No. 21) be, and the same hereby is, DENIED. 27 Dated: August 8, 2017 28 3

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