Ward v. Goossen et al

Filing 52

ORDER by Judge Thelton E. Henderson granting 40 Defendants' motion to stay proceedings pending appeal. Parties shall file a joint case management statement within fourteen days of the issuance of the mandate. (tehlc3, COURT STAFF) (Filed on 12/22/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ANDRE WARD,
Plaintiff,

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v.
ESTATE OF GOOSSEN, et al.,

Case No. 14-cv-03510-TEH
ORDER GRANTING DEFENDANTS’
MOTION TO STAY PROCEEDINGS
PENDING APPEAL

Defendants.

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Currently before the Court is Defendants’ motion to stay these proceedings pending

United States District Court
Northern District of California

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an appeal of the Court’s Order denying Defendants’ motion to compel arbitration

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(“Arbitration Order”). Pursuant to Civil Local Rule 7-1(b), the Court determines that this

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matter is appropriate for resolution without oral argument. After carefully considering the

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parties’ submissions and the relevant case law, the Court hereby GRANTS Defendants’

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motion, for the reasons set forth below.

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BACKGROUND

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Professional boxer Andre Ward (“Plaintiff”) has brought a civil suit against the

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Estate of Dan Goossen and Goossen Tutor Promotions, LLC (“Defendants”). Compl.

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(Docket No. 1). Plaintiff seeks damages resulting from Defendants’ alleged violation of

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the Muhammad Ali Boxing Reform Act, which, in relevant part, requires promoters to

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make certain financial disclosures to their boxers. Plaintiff also seeks an accounting of

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profits derived from several boxing matches.

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On October 15, 2014, the Court denied Defendants’ motion to compel arbitration,

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finding that the Parties’ Contract, composed of a Promotional Agreement and attached

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Addendum, did not require the arbitration of claims unrelated to the validity and/or

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enforceability of the Contract. Oct. 15, 2014 Arbitration Order (Docket No. 34).

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Defendants’ subsequently appealed the Court’s decision, and filed a motion to stay the

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proceedings pending that appeal. Oct. 31, 2014 Mot. (Docket No. 40). Plaintiff filed his

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opposition on November 14. (Docket No. 45). During a telephonic case management

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conference held on November 17, the Court instructed the parties to submit supplemental

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briefs on the matter, with special attention paid to the question of irreparable harm.

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(Docket No. 46). These supplemental briefs were timely submitted to the Court and are

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considered, along with the parties’ initial submissions, below. (Docket Nos. 47, 49, 51).

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LEGAL STANDARD
A district court’s order denying a motion to compel arbitration does not result in an
automatic stay of the proceedings pending the appeal. Britton v. Co-op Banking Group,

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United States District Court
Northern District of California

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916 F.2d 1405, 1412 (9th Cir. 1990). Instead, the Federal Arbitration Act (“FAA”) allows

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a district court to evaluate the merits of the moving party’s claim, and to grant or deny a

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stay as a matter of discretion, based upon the particular facts of the case. Id. Accordingly,

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the party requesting the stay bears the burden of showing that the case’s circumstances

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justify an exercise of the court’s discretion in granting a stay. Nken v. Holder, 556 U.S.

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418, 433-34 (2009).

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To determine whether the moving party has met its burden, the Ninth Circuit

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adheres to a four-factor test: (1) whether the party has made a strong showing it is likely to

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succeed on the merits; (2) whether the party will be irreparably injured absent a stay; (3)

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whether issuance of a stay will substantially injure the other parties in the proceeding; and

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(4) where the public’s interest lies. Hilton v. Braunskill, 481 U.S. 770, 776 (1987); see

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Steiner v. Apple Computer, Inc., No. 07-4486, 2008 WL 1925197, at *5 (N.D. Cal. Apr.

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29, 2008) (applying the Hilton factors to determine whether to stay litigation pending

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appeal from an order denying a motion to compel arbitration). In weighing these factors,

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courts apply a “sliding scale,” whereby the elements of the test are balanced “so that a

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stronger showing of one element may offset a weaker showing of another.” Leiva-Perez

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v. Holder, 640 F.3d 962, 964 (9th Cir. 2011).

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DISCUSSION

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1. Likelihood of Success or Substantial Legal Question

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In the Ninth Circuit, “the minimum quantum of likely success necessary to justify a

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stay” can be articulated in several ways, including a “reasonable probability,” a “fair

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prospect,” raising “serious legal questions,” or bringing a “substantial case on the merits.”

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Leiva-Perez, 640 F.3d at 967 (quotation marks omitted). Consequently, “[t]o satisfy the

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first Hilton factor, a movant need not show a probability of success on appeal.” Eberle v.

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Smith, No. 07-0120, 2008 WL 238450, at *2 (S.D. Cal. Jan. 29, 2008) (citing C.B.S.

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Employees Fed. Credit Union v. Donaldson Lufkin & Jenrette Sec. Corp., 716 F. Supp.
307, 309-10 (W.D. Tenn. 1989) (explaining that it would be difficult for moving parties to

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United States District Court
Northern District of California

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persuade the trial court that its decision being appealed was wrong and would probably be

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reversed)). Courts alternatively articulate this lower standard as whether “serious legal

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issues” are raised on appeal or if the arbitration motion raises a “substantial question.”

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Abbassi v. INS, 143 F.3d 513, 514 (9th Cir. 1998); Britton, 916 F.2d at 1412. Put another

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way, “district courts properly stay their own orders when they have ruled on an admittedly

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difficult legal question and when the equities of the case suggest that the status quo should

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be maintained.” Protect Our Water v. Flowers, 377 F.Supp.2d 882, 884 (E.D. Cal. 2004)

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(internal citations omitted).

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Defendants argue that their appeal involves “substantial questions” that should be

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resolved by the appellate court. Mot. at 4-6. In particular, Defendants enumerate five such

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“substantial questions”: (1) Whether the presumption of arbitrability applies to the

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interpretation of the Promotional Agreements; (2) Whether the Addendum’s “supremacy

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clause” defeats the presumption of arbitrability; (3) Whether the Addendum’s arbitration

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clause “may fairly be read to preclude” the arbitration of other issues; (4) Whether the

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Contract should be construed against Defendants under California Civil Code § 1654; and

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(5) Whether and to what extent the defamation action filed by Goossen, and now joined by

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the remaining Defendant, has any bearing on Defendants’ Arbitration Motion. Id.

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Regarding Defendants’ first and second “substantial questions,” the Court notes that
Defendants substantially misconstrue, or at the very least misunderstand, the Court’s

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expressed reasons for denying Defendants’ motion to compel arbitration. The Court

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recognizes the legal rules that “any doubts concerning the scope of arbitrable issues should

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be resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr.

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Corp., 460 U.S. 1, 24-25 (1983). However, in arguing that the Court misapplied this rule,

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Defendants quote a sentence from the Court’s Order entirely out of context. While the

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Court did state that “the parties present two different reasonable interpretations of the

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Contract’s applicable arbitration clause,” it did so within the context of explaining that the

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Contract’s latent ambiguity was resolved by the plain language of the Contract before any

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United States District Court
Northern District of California

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presumption of arbitrability could be applied. Order at 7-8. This explanation is not by any

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means hidden within the Court’s Order, as it immediately follows the very passage that

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Defendants quoted in the present Motion.

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In the Arbitration Order, the Court cited E.E.O.C. v. Waffle House, Inc., 534 U.S.

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279, 289 (2002), which explained in no uncertain terms that a court should look first to

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whether the parties agreed to arbitrate the dispute before applying any general policy goals

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favoring arbitration. Id. at 294. The Supreme Court stated: “While ambiguities in the

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language of the agreement should be resolved in favor of arbitration, we do not override

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the clear intent of the parties, or reach a result inconsistent with the plain text of the

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contract, simply because the policy favoring arbitration is implicated.” Id. The Court

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applied these principles in determining that the Addendum’s “supremacy clause” resolved

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any ambiguities in favor of the Addendum’s limited arbitration provision, making the

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application of the general policy favoring arbitration moot in the absence of any persisting

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ambiguity.

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However, the Court recognizes that, while contract interpretation is always a

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difficult endeavor, it is especially complicated here, as the parties’ Contract is composed of

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two poorly-constructed documents, one of which was not even written or negotiated by the

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parties that it bound. Moreover, while there is plentiful case law regarding the state and
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federal policies favoring arbitration, none of these cases address facts similar to the ones at

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hand. In nearly all of those cases, the “ambiguity in the scope of arbitration” referred to

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the language employed by a specific, singular, readily identifiable arbitration clause. Here,

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by contrast, the Court has been presented with two clauses: (1) a broad “Forum Selection”

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provision in the Promotional Agreement, which does not actually mention arbitration, but

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instead incorporates by reference (2) the two paragraphs of the Addendum that require

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arbitration in limited circumstances. Consequently, the Court was not tasked with deciding

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the appropriate definition of an arbitration provision’s wording. Instead, the Court had to

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decide whether an ambiguity or inconsistency existed between two potentially applicable

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provisions, apply the Addendum’s “supremacy clause” to resolve any such inconsistency

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United States District Court
Northern District of California

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or ambiguity in favor of the Addendum, and, most importantly, determine whether this

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resolution precluded the application of the federal policy favoring arbitration.

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While the Court is confident in its ultimate determination, it nonetheless recognizes

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that these issues present substantial questions that bear on the proper application of the

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federal and state policies favoring arbitration. Other parties entering into contracts

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containing statutorily required addenda, parties seeking to form contractual agreements

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through the incorporation of multiple documents, and parties hoping to dispose of potential

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ambiguities through the inclusion of a “supremacy clause,” will likely benefit from any

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clarity that might be provided by the Ninth Circuit upon appeal.

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Having found that these issues constitute a substantial question, the Court does not

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need to address Defendants’ remaining arguments, all of which address portions of the

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Arbitration Order that were secondary to the application of the Addendum’s supremacy

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clause, and therefore merely provided additional support for the Court’s conclusion.

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2. Irreparable Harm to Defendants
After satisfying Hilton’s first factor, the moving party must show that they face

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irreparable harm unless the court issues a stay of the proceedings. Leiva-Perez v. Holder,

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640 F.3d 962, 965 (9th Cir. 2011). In cases where the moving party raises only
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“substantial questions” on appeal, as opposed to demonstrating a “likelihood of success on

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the merits,” the moving party must make an even stronger showing regarding the

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probability of irreparable harm. Steiner, 2008 WL 1925197, at *5. Specifically, the

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moving party must “demonstrate that the balance of hardships under the second and third

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factors tilts sharply in its favor.” Zaborowski v. MHN Gov’t Servs., No. 12-5109, 2013

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WL 1832638, at *2 (N.D. Cal. May 1, 2013) (citing Leiva-Perez, 640 F.3d at 966, 970).

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This analysis will “turn on the facts and circumstances of each case.” Steiner, 2008 WL

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1925197, at *5.

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Because Defendants in this case rely upon the “substantial question” articulation of
the standard, they must make a strong showing of irreparable harm to justify the issuance

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United States District Court
Northern District of California

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of a stay. Id. Further, the irreparable harm analysis must be “individualized” in nature.

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Id. In Defendants’ initial moving papers, they essentially argued that a stay should be

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categorically granted where a party appeals the denial of a motion to compel arbitration.

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See Mot. at 1-2, 7. Such a proposition is contrary to law. Lair v. Bullock, 697 F.3d 1200,

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1214 (9th Cir. 2012) (“In analyzing whether there is a probability of irreparable injury, we

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also focus on the individualized nature of irreparable harm and not whether it is

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‘categorically irreparable.’”). For this reason, the Court ordered the parties to provide

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supplemental briefs on the issue of irreparable harm. (Docket No. 46). The Court now

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finds that Defendants have met their burden in showing a probability of irreparable harm

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absent a stay of these proceedings.

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“Generally, monetary expenses incurred in litigation are not considered irreparable

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harm. However, arbitration is unique in this aspect.” Zaborowski, 2013 WL 1832638, at

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*2 (citing Alascom, Inc. v. ITT North Elec. Co., 727 F.2d 1419, 1422 (9th Cir. 1984)).

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“[I]f defendants are forced to incur the expense of litigation before their appeal is heard,

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the appeal will be moot, and their right to appeal would be meaningless.” Gray v. Golden

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Gate Nat’l Recreational Area, No. 08-0722, 2011 WL 6934433, *3 (N.D. Cal. Dec. 29,

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2011) (internal quotations omitted). While Plaintiff identifies cases where a district court

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denied a stay upon finding that there was no probability of irreparable harm, Opp’n at 3,
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Defendants correctly point out that “[t]hese cases share a common theme in that they focus

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on a comparative analysis between the discovery procedures in the arbitration process at

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issue and the discovery in the civil action.” Defs.’ Supplemental Brief at 3 (Docket No.

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47). In other words, the cases cited by Plaintiff found a lack of irreparable harm where the

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proposed arbitration included substantial discovery and motions practice such that

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continuing to litigate in federal court would have resulted in little to no loss of time and

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money. See, e.g., Guifu Li v. A Perfect Franchise, Inc., No. 10-1189, 2011 WL 2293221,

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at *4 (N.D. Cal. June 8, 2011) (finding no irreparable harm where the defendants would

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incur discovery costs “regardless of the outcome of [the stay] motion” because the
arbitration agreement allowed “adequate opportunity to conduct discovery.”); Morse v.

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United States District Court
Northern District of California

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Servicemaster Global Holdings, Inc., No. 10-0628, 2013 WL 123610, at *4 (N.D. Cal. Jan.

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8, 2013) (finding that defendants’ litigation expenses pending appeal did not constitute

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irreparable harm because “the parties would have experienced lesser but still substantial

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burdens in the arbitration process defendants prefer.”) (emphasis added); R&L Ltd. Invs.

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Inc. v. Cabot Inv. Props., LLC, No. 09-1525, 2010 WL 3789401, at *2 (D. Ariz. Sept. 21,

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2010) (stating that the parties’ arbitration agreement called for a process of arbitration

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“which require[d] the parties to engage in much of the same disclosure and document

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exchanges as the Federal Rules of Civil Procedure”). Defendants have adequately

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distinguished these cases.

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Unlike in the cases cited by Plaintiff, the arbitration procedure proposed by

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Defendants and outlined in Title 4 of the California Code of Regulations, section 227, is a

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streamlined process. Importantly, there is no formal discovery, law and motion practice,

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or other pre-trial hearings. See 4 CCR § 227. The party requesting arbitration submits a

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written request for arbitration to the commission. Id. at (a). The request must specify

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three dates of availability for arbitration within the next 90 days. Id. at (a)(7). Within five

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days of receipt of the request, the commission must then serve the request and any

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accompanying documents on the other party and provide that party with an opportunity to

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respond. Id. at (b). Ten days prior to the hearing, the parties exchange a list of the
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evidence they expect to present at the hearing, including a witness list. Id. at (d). Next,

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the arbitration hearing may not exceed four hours, unless extended by the arbitrator, but in

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any event may not exceed six total hours. Id. at (e). Finally, the arbitrator is required to

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submit a written decision within 45 days of the matter’s submission. Id. at (g).

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Accordingly, the maximum time between the submission of a request for arbitration and

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the issuance of a written decision is 135 days.

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The contrast, in time and expense, between the arbitration process as described by

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Defendants and the process of litigation in federal court is substantial. The Court cannot

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rely upon the mere possibility that Defendants will nonetheless incur discovery expenses
as a result of the separate defamation action pending between the parties, as Plaintiff

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United States District Court
Northern District of California

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contends in his initial opposition. Opp’n at 4. The Court will not speculate on the extent

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of discovery needed in that case, and has been provided no information that would allow

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the Court to determine whether the parties will reach the discovery phase in that matter

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during the pendency of the appeal of this Court’s Arbitration Order. The Court therefore

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agrees with Defendants that “if this matter is not stayed, and the Ninth Circuit reverses the

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[Arbitration] Order, all litigation efforts expended in the interim will have been wasted,

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and the speed, economy, and specialized nature of the arbitration procedure claimed to be

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operative by Defendants will have been lost.” Defs.’ Supplemental Brief at 4-5.

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The Court finds no support for Plaintiff’s suggestion that Defendants must

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demonstrate that they face dire financial hardship, such as bankruptcy, in order to meet the

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irreparable harm standard. See Pl.’s Supplemental Resp. at 3. As noted by Defendants,

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courts have found a probability of irreparable harm in similar situations even where the

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moving party had vast financial resources. Defs.’ Supplemental Reply at 4 (citing Murphy

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v. DirecTV, Inc., No. 07-6465, 2008 WL 8608808, at *3 (C.D. Cal. July 1, 2008) (holding

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that litigation expenses pending appeal from denied motion to compel arbitration

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constituted irreparable harm to DirecTV, Inc.); Jones v. Deutsche Bank AG, No. 04-5357,

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2007 WL 1456041, at *2 (N.D. Cal. May 17, 2007) (same as to Deutsch Bank AG); Winig

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v. Cingular Wireless LLC, No. 06-4297, 2006 WL 3201047, at *2 (N.D. Cal. Nov. 6,

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2006) (same as to Cingular Wireless, LLC)).

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Accordingly, the Court finds that Defendants have made a strong showing of
irreparable harm should a stay not be issued in these proceedings.

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3. Prejudice to the Plaintiff
The third Hilton factor is “generally concerned with undue loss or destruction of

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evidence stemming from a delay.” Ontiveros v. Zamora, No. 08-0567, 2013 WL 1785891,

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at *5 (E.D. Cal. Apr. 25, 2013). There is no reason to believe that evidence will be lost in
this case should the Court issue a stay, and Plaintiff does not make an argument to this

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United States District Court
Northern District of California

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effect. Instead, Plaintiff contends that the issuance of a stay will cause him injury because

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it “would extend the period during which he lacks critical information for negotiation in

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the specialized marketplace for top-flight professional matches.” Opp’n at 7.

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Consequently, Plaintiff argues that he would remain at a significant disadvantage in

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negotiating fights because he would be denied the financial disclosures to which he is

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entitled under the Muhammad Ali Act. Id.

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Plaintiff’s argument lacks the necessary support to overcome the probability of

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irreparable harm facing Defendants should a stay be denied, as Plaintiff has not explained

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how or to what extent the absence of these disclosures disadvantages him in negotiation.

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See Eberle, 2008 WL 238450, at *3 (“When a defendant appeals an order refusing to

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compel arbitration, the general disadvantage to plaintiff caused by delay of proceedings is

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usually outweighed by the potential injury to defendant from proceeding in district court

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during pendency of appeal.”). Further, Defendants are correct in pointing out that

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Plaintiff’s argument assumes the merits of his case, and is therefore circular in logic. See

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Defs.’ Supplemental Brief at 7. The Court has, at this early stage in the proceedings, no

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evidentiary basis to support the legal claims underlying Plaintiff’s lawsuit, and is therefore

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hesitant to rely solely upon these bare allegations in denying Defendants’ motion to stay.

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Finally, even if the Court assumes the truth of Plaintiff’s unproven allegations, any

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prejudice resulting from a delay in the proceedings will be minimal given the Ninth

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Circuit’s briefing schedule in this case, which provides for the appeal to be fully briefed

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within the next few months. See Murphy, 2008 WL 8608808, at *3 n. 2 (noting that a

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delay pending appeal did not justify denial of motion to stay where the “Ninth Circuit has

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already issued a briefing schedule under which all briefing will be completed by the end of

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the year”). Conversely, Defendants would likely incur substantial discovery expenses in

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that same period of time should the case proceed in federal court.
Accordingly, the Court finds that the balance of equities tips sharply in Defendants’

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favor, as Defendants’ demonstrated probability of irreparable harm sufficiently outweighs

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United States District Court
Northern District of California

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any potential harm posed to Plaintiff by the Court’s stay of the proceedings.

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4. The Public Interest

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Finally, the Court finds that “[t]he policy underlying the FAA is to promote judicial

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efficiency and economy. Thus, contrary to public policy, judicial resources will be wasted

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if this case proceeds all the way to trial, only for the Court to later discover that the case

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should have proceeded through arbitration.” Zaborowski, 2013 WL 1832638, at *3.

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Additionally, “[t]he speed and efficiency of ADR are the foundation for a strong federal

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policy favoring arbitration over litigation, which would be contravened by requiring the

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parties to litigate while the appeal is pending.” Pokorny v. Quiztar, Inc., No. 07-0201,

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2008 WL 1787111, at *2 (N.D. Cal. Apr. 17, 2008). While the Court recognizes Plaintiff’s

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asserted public interest in “protecting professional boxers and preventing exploitative

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business practices,” Opp’n at 8, this public interest is far more limited than the general

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public interest in promoting arbitration and preserving judicial resources. Accordingly,

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the Court finds that the public interest weighs in favor of granting a stay.

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CONCLUSION
For the foregoing reasons, the Court GRANTS Defendants’ motion to stay these

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proceedings pending the appeal of the Court’s October 15, 2014 Arbitration Order. The

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parties shall file a joint case management statement no later than fourteen days after the

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Ninth Circuit has issued its mandate on the pending appeal.

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IT IS SO ORDERED.

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Dated: 12/22/14

_____________________________________
THELTON E. HENDERSON
United States District Judge

United States District Court
Northern District of California

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