Epic Advertising v. Asis Internet Services et al

Filing 36

ORDER by Judge Samuel Conti denying 30 Motion to Dismiss (sclc2, COURT STAFF) (Filed on 12/13/2011)

Download PDF
1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 7 8 EPIC ADVERTISING d/b/a AZOOGLEADS.COM, INC., a Delaware corporation, 9 Plaintiff, For the Northern District of California United States District Court 10 v. 11 12 13 ASIS INTERNET SERVICES, a California corporation; and NELLA WHITE, an individual. 14 Defendants. 15 16 17 I. ) Case No. 11-1705 SC ) ) ORDER DENYING DEFENDANTS' ) MOTION TO DISMISS ) ) ) ) ) ) ) ) ) ) ) ) INTRODUCTION Before the Court is a Motion to Dismiss filed by Defendants 18 19 Asis Internet Services ("Asis") and Nella White ("White") 20 (collectively, "Defendants"). 21 Advertising ("Plaintiff") filed an Opposition. 22 ("Opp'n"). 23 reasons, the Court DENIES Defendants' Motion. ECF No. 30 ("Mot."). Defendants did not file a Reply. Plaintiff Epic ECF No. 32 For the following 24 25 26 II. BACKGROUND The Court detailed the background of this dispute in its prior 27 order denying Defendants' first motion to dismiss and does not 28 repeat that background here. ECF No. 28 ("Sep. 29, 2011 Order"). 1 In short, this action involves Plaintiff's attempt to collect on a 2 judgment against Defendants from a prior lawsuit, ASIS Internet 3 Services v. Optin Global, Inc., No. 05-5124 (N.D. Cal.). Plaintiff filed this action on April 7, 2011, asserting state 4 5 law claims for malicious prosecution, tort of another, and 6 fraudulent transfer. 7 2011, Defendants filed their first motion to dismiss, claiming that 8 Plaintiff's 2010 acquisition of non-party Connexus Corporation 9 ("Connexus"), a California corporation, divested the Court of ECF No. 1 ("Compl.") ¶¶ 103-133. On July 14, United States District Court For the Northern District of California 10 diversity jurisdiction. See ECF No. 16 ("Defs.' First MTD"). 11 Court denied Defendants' motion, finding that Plaintiff had 12 established that Connexus was its subsidiary. 13 at 7. The Sep. 29, 2011 Order 14 On October 18, 2011, Defendants filed the instant Motion, 15 arguing that the Court lacks jurisdiction because of an arbitration 16 clause contained in a 2007 settlement agreement between Asis and 17 Connexus (the "Settlement Agreement"). 18 filed an Opposition arguing that the Motion fails for numerous 19 reasons and that the Court should impose sanctions upon Defendants 20 for unreasonably and vexatiously multiplying the proceedings. 21 the following reasons, the Court DENIES Defendants' Motion and 22 DENIES Plaintiff's request for sanctions. Mot. at 2-3. Plaintiff 23 24 III. DISCUSSION 25 A. Defendants' Motion 26 Defendants move to dismiss the instant action for lack of 27 subject matter jurisdiction on the ground that the parties 28 contracted to resolve their disputes exclusively through 2 For 1 arbitration. When an action involves an issue properly governed by 2 an arbitration clause, however, the district court "is not deprived 3 of jurisdiction altogether." 4 No. C 97-0518 FMS, 1997 U.S. Dist. LEXIS 23494, at *5 (N.D. Cal. 5 May 23, 1997). 6 Arbitration Act ("FAA"), "the court shall make an order directing 7 the parties to proceed to arbitration in accordance with the terms 8 of the agreement." 9 Section 3 of the FAA, the court is required to stay, not dismiss, See Nicholson v. Labor Ready, Inc., Rather, pursuant to Section 4 of the Federal See 9 U.S.C. § 4. Additionally, pursuant to See id. § 3. Consequently, United States District Court For the Northern District of California 10 the action pending arbitration. 11 Defendants are not entitled to dismissal of the instant action. 12 Although Defendants do not expressly move to compel 13 arbitration, the gravamen of their Motion is that this dispute is 14 subject to mandatory arbitration under the Settlement Agreement 15 between Asis and Connexus. 16 merits of Defendants' arguments in support of arbitration, the 17 Court will construe the instant Motion as a motion to compel 18 arbitration. 19 No. CV 05-3792-PHX-SMM, 2006 U.S. Dist. LEXIS 56039, at *5-8 (D. 20 Ariz. July 17, 2006) (construing motion to dismiss for lack of 21 subject matter jurisdiction as motion to compel arbitration). 22 ruling on a motion to compel arbitration, the district court's 23 "role is limited to determining whether a valid arbitration 24 agreement exists and, if so, whether the agreement encompasses the 25 dispute at issue." 26 207 F.3d 1126, 1130 (9th Cir. 2000). 27 28 Because Plaintiff has addressed the See, e.g., Filimex, L.L.C. v. Novoa Invs., L.L.C., When Chiron Corp. v. Ortho Diagnostic Sys., Inc., Here, Defendants wasted little time preparing their three-page motion with citation to but a single statute, no cases, and barely 3 1 any argument at all. They simply proclaim that Asis was engaged in 2 litigation with Connexus that resulted in the Settlement Agreement 3 prior to the events at issue in the present litigation; that 4 Plaintiff and Connexus merged; and that therefore Plaintiff is 5 bound by an arbitration clause contained in the Settlement 6 Agreement between Asis and Connexus. 7 Code § 1107). 8 Defendants' Motion fails for numerous reasons. Mot. at 2 (citing Cal. Corp. Plaintiff argues, and the Court agrees, that First, the Court found in its September 29, 2011 Order that 9 United States District Court For the Northern District of California 10 Connexus is Plaintiff's subsidiary. Sep. 29, 2011 Order at 7. 11 Plaintiff is not a party to the Settlement Agreement, which was 12 executed in 2007, well before Plaintiff acquired Connexus in 2010. 13 See ECF No. 29 Ex. B ("Settlement Agreement"); Graff Decl. ¶ 12.1 14 Ordinary contract and agency principles govern whether a non- 15 signatory to an arbitration agreement is bound by the agreement. 16 Delmore v. Ricoh Americas Corp., 667 F. Supp. 2d 1129, 1135 (N.D. 17 Cal. 2009). 18 and its subsidiary are legally distinct entities, and a contract 19 under the corporate name of one is not treated as that of both" 20 unless the subsidiary operates as the alter ego of the parent. 21 Nat'l Rural Telecomms. Coop. v. DIRECTV, Inc., 319 F. Supp. 2d 22 1040, 1057 (C.D. Cal. 2003). 23 that Connexus is the alter ego of Plaintiff and have therefore 24 failed to show that Plaintiff is bound by the arbitration 25 agreement. Under California contract law, "a parent corporation Defendants have presented no evidence 26 27 28 1 David Graff ("Graff"), General Counsel for Plaintiff, filed a declaration in support of Plaintiff's opposition to Defendants' first motion to dismiss. ECF No. 18. Graff declares that Plaintiff acquired Connexus in 2010. 4 1 Second, Defendants have presented no argument as to why the 2 instant dispute falls within the scope of the arbitration agreement 3 between Asis and Connexus. 4 all disputes "arising out of, or relating to" the settlement 5 agreement must be resolved by binding arbitration. 6 Agreement ¶ 19. 7 malicious prosecution of a 2005 action against Plaintiff and their 8 alleged efforts to avoid paying the judgment awarded to Plaintiff 9 in that action. The arbitration agreement provides that Settlement The instant dispute concerns Defendants' alleged See Compl. Asis's Settlement Agreement with United States District Court For the Northern District of California 10 Connexus was executed in 2007, well before Plaintiff acquired 11 Connexus in 2010. 12 instant action is related to, or arises out of, a settlement 13 agreement to which Plaintiff was not a party. Defendants offer no explanation of how the 14 Third, this Motion is procedurally improper because it was 15 filed five days after Defendants were required to file a responsive 16 pleading to the Complaint under Federal Rule of Civil Procedure 17 12(a)(4)(A). 18 For the foregoing reasons, Defendants' Motion is DENIED. 19 B. 20 In its Opposition, Plaintiff asks the Court to impose Plaintiff's Request for Sanctions 21 sanctions pursuant to its inherent power or 28 U.S.C. § 1927, which 22 provides that any attorney who "so multiplies the proceedings in 23 any case unreasonably and vexatiously may be required by the court 24 to satisfy personally the excess costs, expenses, and attorneys' 25 fees reasonably incurred because of such conduct." 26 of sanctions under Section 1927 or the Court's inherent power 27 requires a finding of bad faith. 28 Wilderness Soc'y, 421 U.S. 240, 258-59 (1975). The imposition Alyeska Pipeline Serv. Co. v. 5 1 While the Court agrees with Plaintiff that Defendants have 2 made very little effort to establish the merits of their Motion and 3 have come perilously close to submitting a frivolous filing that 4 wastes both Plaintiff's and the Court's time, the Court finds that 5 sanctions are not warranted at this time. 6 reminds Defendants of their obligations under Federal Rule of Civil 7 Procedure 11(b) and cautions Defendants that such barely 8 substantiated filings may be grounds for sanctions in the future. However, the Court 9 United States District Court For the Northern District of California 10 IV. CONCLUSION 11 For the foregoing reasons, the Court DENIES the Motion to 12 Dismiss filed by Defendants Asis Internet Services and Nella White. 13 14 IT IS SO ORDERED. 15 16 17 Dated: December 13, 2011 UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28 6

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?