Sauer v. Lateef Investment Management, LP et al

Filing 43

Order by Hon. Vince Chhabria granting 25 Motion to Compel arbitration and dismissing case.(vclc2S, COURT STAFF) (Filed on 7/28/2016)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

MATTHEW F. SAUER,

Case No. 16-cv-02802-VC

Plaintiff,
v.
LATEEF INVESTMENT MANAGEMENT
LP, et al.,

ORDER GRANTING MOTION TO
COMPEL ARBITRATION AND
DISMISSING CASE
Re: Dkt. Nos. 10, 25

Defendants.

The motion to compel arbitration is granted.
Sauer's dispute with Lateef (and his former colleague, Willson) does not fall within the
provisions of the contracts that exclude certain disputes from arbitration. Reading each contract
as a whole, the exclusions are for disputes about liability incurred by members of the partnership
to third parties while conducting the business of the partnership. This lawsuit involves a dispute
within the partnership, and the contracts require internal disputes to be arbitrated. If the
contracts were interpreted as Sauer suggests — as requiring that any dispute among partners
involving an allegation of gross negligence or intentional violation of the law be litigated in court
— there would have been essentially no point to adopting arbitration agreements in the first
place, because one side to a dispute would almost always (or always) be able to avoid arbitration
by making such an allegation. See Cal. Civ. Code § 1641 ("The whole of a contract is to be
taken together, so as to give effect to every part, if reasonably practicable, each clause helping to
interpret the other."); cf. Rice v. Downs, 203 Cal. Rptr. 3d 555, 565 (Ct. App. 2016), as modified
on denial of reh'g (June 23, 2016), as modified (June 28, 2016), review filed (July 5, 2016).
Sauer's proposed interpretation of the contracts is particularly unreasonable considering the

parties' demonstrated interest in keeping the affairs of the business private. See, e.g., Seventh
Am. & Restated Agmt. Ltd. P'ship Lateef Inv. Mgmt., L.P., Dkt. No. 37-1, § 4.8 (general
confidentiality provision) [hereinafter L.P. Agmt.]; id. § 9.15 ("The arbitration will be conducted
in an expedited manner, designed to preserve the confidentiality of the dispute.").1
Nor are the arbitration provisions unconscionable. Even if it were true (and it does not
seem true, based on the evidence) that Sauer was not given an opportunity to read the arbitration
provisions before he signed these versions of the contracts, he signed multiple prior versions that
included very similar provisions. This belies any argument that Sauer (who is a sophisticated
business person) was somehow forced or tricked into agreeing to arbitration. And absent any
procedural unconscionability, there is no need to inquire whether the arbitration agreement is
substantively unconscionable (although the flaws in the agreement that would go to substantive
unconscionability, if any, seem minor). See Bridge Fund Capital Corp. v. Fastbucks Franchise
Corp., 622 F.3d 996, 1004 (9th Cir. 2010).
Sauer's final contention is that he should not be compelled to arbitrate as to the individual
defendant, Willson, who signed the contracts as trustee of a living trust (rather than in his
personal capacity). But the contracts provide for trustees to be treated as limited partners or
members respectively. See L.P. Agmt., § 4.11; Fifth Am. & Restated Ltd. Liab. Co. Agmt.
Lateef Capital Partners, LLC, Dkt. No. 37-2, § 4.10.
Accordingly, the motion to compel is granted, and the complaint is dismissed.
IT IS SO ORDERED.
Dated: July 28, 2016
______________________________________
VINCE CHHABRIA
United States District Judge

1

Although it's clear that the case must go to arbitration, the contracts are not clear about who is
responsible for deciding the question of arbitrability, because the carveouts Sauer relies on
exclude certain disputes not only from arbitration, but also from the delegation of arbitrability to
the arbitrator. Therefore, arbitrability is for the court to decide. See First Options of Chi., Inc. v.
Kaplan, 514 U.S. 938, 943–44 (1995).

2