A.K. Ngai, Inc. v. Xu et al
Filing
35
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS AND COMPEL ARBITRATION re 13 Motion to Dismiss and Compel Arbitration. Signed by JUDGE LESLIE E. KOBAYASHI on 03/29/2016. -- HGHK' ;s Motion to Dismiss and Compel Arbitration, filed December 24, 2015, is HEREBY GRANTED IN PART AND DENIED IN PART. It is GRANTED insofar as the Court HEREBY COMPELS arbitration as to Ngai's claims against HGHK and DISMISSES the claims against H GHK. It is DENIED insofar as the Court will not make a determination regarding the claims against the unserved Defendants Du, Mr. Xu, Mrs. Hsu, Fan, Hengdian, and HGDA, given the pending Service Motion. (eps )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
)
Plaintiff,
)
)
vs.
)
)
)
XU YONG’AN aka MR. HSU, a
citizen of and an individual )
residing in the People’s
)
Republic of China, et. al.,
)
)
Defendants.
)
_____________________________ )
A.K. NGAI, INC.,
CIVIL 15-00356 LEK-KSC
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION TO DISMISS AND COMPEL ARBITRATION
Before the Court is Defendant HGHK International Co.,
Ltd.’s (“Defendant” or “HGHK”) Motion to Dismiss and Compel
Arbitration (“Motion”), filed on December 24, 2015.
13.]
[Dkt. no.
A.K. Ngai, Inc. (“Plaintiff” or “Ngai”) filed a memorandum
in opposition on January 26, 2016, and Defendant filed its reply
on February 2, 2016.
[Dkt. nos. 19, 21.]
for hearing on February 16, 2016.
This matter came on
On February 19, 2016, and with
leave of the Court, Ngai filed a Supplemental Memorandum in
Opposition to [13] Defendants’ Motion to Dismiss and Compel
Arbitration Filed December 24, 2015 (“Ngai Supplemental
Memorandum”), and on February 23, 2016, HGHK filed a Supplemental
Reply in Further Support of Motion to Dismiss and Compel
Arbitration, Filed December 24, 2016 [Dkt. 13] (“HGHK
Supplemental Memorandum”).
[Dkt. nos. 23, 26.]
After careful
consideration of the Motion, supporting and opposing memoranda,
and the arguments of counsel, HGHK’s Motion is HEREBY GRANTED IN
PART AND DENIED IN PART.
BACKGROUND
On November 17, 2015, Ngai filed an Amended Complaint
for Damages, Declaratory and Injunctive Relief (“Complaint”)
against Yong’an Xu (“Mr. Xu”), Vivian Hsu (“Mrs. Hsu”), Weiqun Du
(“Du”), Kathy Fan (“Fan”), the Hengdian Group (“Hengdian”), HGHK,
and HGDA Corp.1
[Dkt. no. 9.]
Ngai is a general building
contractor that employs Anthony K. Ngai (“A. Ngai”).
[Id. at
Only HGHK has been properly served in the instant matter.2
¶ 1.]
See dkt. no. 15 (Summons executed by HGHK).3
The instant dispute is over a property located on
1
The Court notes that there appears to be some dispute over
the spelling of certain defendants names, see Mem. in Opp. at 2
n.3 (“Plaintiff refers to Mr. and Mrs. Xu as the Hsus because
Bill Du confirmed the English spelling of Xu as Hsu.”), but no
party has requested that the Court make any changes to the case
caption. The Court will therefore refer to parties consistent
with the case caption.
2
The Court notes that, on March 11, 2016, Ngai filed a
Motion for Alternative Service (“Service Motion”) requesting that
the Court authorize Ngai to effect service on Mr. Xu, Mrs. Hsu,
Du, Fan, and Hengdian through HGHK’s counsel of record. [Dkt.
no. 27.]
3
The Court record shows unexecuted Summonses for Mr. Xu and
Mrs. Hsu, see dkt. nos. 16-17, but there is no indication that
service was attempted on the other named parties.
2
Hawai`i Loa Ridge in Honolulu, Hawai`i (“the Property”).4
[Complaint at ¶ 2.]
HGHK is the fee owner of the Property.
[Motion, Declaration of Weiqun Du (“Du Decl.”), Exh. 3 (Warranty
Deed conveying the Property to HGHK).]
Mr. Xu is President and
Chief Operating Officer (“COO”) of Hengdian, which is the sole
owner of HGHK.
[Id. at ¶¶ 7, 11.]
Mrs. Hsu is the COO of the
“import and export arm” of Hengdian, Zhejiang Hengdian Import and
Export Co., Ltd.
¶ 1.]
[Id. at ¶ 10.]
Du is the COO of HGHK.
[Id. at
A. Ngai alleges that he worked with Mr. Xu and Mrs. Hsu to
design the house, and that he made two trips to China to meet
with them about the design.
signed two contracts:
[Id. at ¶¶ 38-41.]
Ngai and Du
one related to the architectural design of
the home, and the other related to the construction of the home.
See Du Decl., Exh. 1 (American Institute of Architects (“AIA”)
Document B102 - 2007) (“Architect Agreement”), Exh. 2 (AIA
Document A101 - 2007) (“Contractor Agreement,” collectively “the
Agreements”); see also Complaint at ¶¶ 34, 49.
Ngai alleges that
its relationship with Mr. Xu and Mrs. Hsu began to unravel
towards the end of construction on the Property, and that it has
not received payment since May 2012.
67.]
[Complaint at ¶¶ 56, 66-
Further, Ngai states that it “received a letter from
counsel for the Hsus, alleging defective design and construction
4
The Property is recorded at the State of Hawai`i, Bureau
of Conveyances as Tax Map Key No. (1) 3-7-016-030. [Complaint at
¶ 2.]
3
of the Hsu Residence” in August 2013.
[Id. at ¶ 73.]
Thereafter, another architect and contractor, David Knox,
inspected and performed “fixes” at the Property before Ngai had a
chance to respond to any report of defects or fix them itself.
[Id. at ¶¶ 74-79.]
According to Ngai, this is a violation of the
Agreements, and is also a misappropriation of Ngai’s “copyrighted
Hsu Residence Building Permit Set and certain other Ngai
copyright protected design(s), plan(s) and specification(s).”
[Id. at ¶ 81.]
Ngai states that HGHK demanded arbitration in November
2013.5
[Id. at ¶ 78.]
Ngai also states, however, that “[t]he
Hsus agreed to participate in mediation” prior to any
arbitration.
[Id. at ¶ 84.]
second demand for arbitration.
On August 29, 2015, HGHK filed a
[Id. at ¶ 85.]
The Complaint seeks declaratory relief against Mr. Xu,
Mrs. Hsu, and Du that:
they are in privity of contract with
Plaintiff; they must participate in any dispute resolution;
because they have sought arbitration through a shell company,
they have waived their right to arbitration; “Ngai’s third-party
subcontractors are not a party to the” the Agreements and are
“not bound by an arbitration provision”; and the Architect
Agreement bars claims and causes of actions arising one year
5
Ngai asserts that “[t]he Hsus also demanded arbitration,
not as themselves, but through their shell company, HGHK,
alleging construction defects.” [Id. at ¶ 78.]
4
after substantial completion of the Property, which occurred on
March 31, 2012 (“Count I”).
Complaint states claims for:
[Id. at ¶¶ 87-90.]
In addition, the
breach of written contract (“Count
II”); [id. at ¶¶ 91-106;] breach of oral contract (“Count III”);
[id. at ¶¶ 107-10;] fraud, misrepresentation and/or deceit
(“Count IV”); [id. at ¶¶ 111-30;] quasi-contract – quantum meruit
(“Count V”); [id. at ¶¶ 131-36;] copyright infringement (“Count
VI”); [id. at ¶¶ 137-58;] intentional interference with
contractual relations (“Count VII”); [id. at ¶¶ 159-64;]
negligent interference with contractual relations (“Count VIII”);
[id. at ¶¶ 165-67;] intentional interference with prospective
economic advantage (“Count IX”); [id. at ¶¶ 168-71;] negligent
interference with prospective economic advantage (“Count X”);
[id. at ¶¶ 172-75;] defamation (“Count XI”); [id. at ¶¶ 176-79;]
breach of the implied covenant of good faith and fair dealing
(“Count XII”); [id. at ¶¶ 180-83;] and alternatively, alter
ego/pierce the corporate veil (“Count XIII”) [id. at ¶¶ 184-89].
The Complaint seeks:
declaratory judgment on Count I;
compensatory and consequential damages on Counts II and III;
exemplary and punitive damages on Count IV; a preliminary and
permanent injunction, monetary judgment, and award of attorneys’
fees and costs on Count VI; exemplary and punitive damages on
Counts IV, VII, IX, and XI; compensatory and consequential
damages “[o]n all applicable Counts”; damages on all counts that
5
will “fairly and adequately compensate Plaintiff for all of its
injuries, losses, and damages”; pre- and post-judgment interest;
costs, expenses, and attorneys’ fees; and “other and further
relief as the Court may deem proper.”
[Id., Prayer for Relief
¶¶ A-L.]
HGHK argues that the Property was always intended for
its use, and was never designed to be a private residence for
Mr. Xu and Mrs. Hsu.
[Mem. in Supp. of Motion at 5.]
Moreover,
HGHK claims that the Agreements include broad arbitration
clauses, and that the Court should order Ngai to arbitrate all of
its claims and dismiss the Complaint.
[Motion at 2.]
STANDARD
This district court recently stated that:
In determining whether to compel arbitration,
a district court may not review the merits of the
dispute; rather, “the district court’s role is
limited to determining whether a valid arbitration
agreement exists and, if so, whether the agreement
encompasses the dispute at issue. If the answer
is yes to both questions, the court must enforce
the agreement.” Lifescan, Inc. v. Premier
Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th
Cir. 2004) (citing Chiron Corp. v. Ortho
Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th
Cir. 2000)); see also Momot v. Mastro, 652 F.3d
982, 986 (9th Cir. 2011) (“Because arbitration is
fundamentally a matter of contract, the central or
primary purpose of the [Federal Arbitration Act
(“FAA”)] is to ensure that private agreements to
arbitrate are enforced according to their terms.”)
(citations omitted).
The Federal Arbitration Act (“FAA”), 9 U.S.C.
§ 1 et seq., provides that written arbitration
agreements “shall be valid, irrevocable, and
6
enforceable, save upon such grounds as exist at
law or equity for the revocation of any contract.”
9 U.S.C. § 2; see also Kramer v. Toyota Motor
Corp., 705 F.3d 1122, 1126 (9th Cir. 2013) (“With
limited exceptions, the [FAA] governs the
enforceability of arbitration agreements in
contracts involving interstate commerce.”). Under
the FAA, “any doubts concerning the scope of
arbitrable issues should be resolved in favor of
arbitration, whether the problem at hand is the
construction of the contract language itself or an
allegation of waiver, delay, or a like defense to
arbitrability.” Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).
Generally, “the federal policy in favor of
arbitration does not extend to deciding questions
of arbitrability,” that is, the question “who
decides whether a claim is arbitrable.” Oracle
Am., Inc. v. Myriad Group A.G., 724 F.3d 1069,
1072 (9th Cir. 2013) (emphasis omitted).
“[G]ateway questions of arbitrability, such as
whether the parties have a valid arbitration
agreement or are bound by a given arbitration
clause, and whether an arbitration clause in a
concededly binding contract applies to a given
controversy,” are issues for the court and not the
arbitrator to decide. Momot, 652 F.3d at 987
(citing Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79, 83-85 (2002)). But parties may agree to
arbitrate the question of arbitrability. Just as
the arbitrability of the merits of a dispute
depends upon whether the parties agreed to
arbitrate that dispute, so the question ‘who has
the primary power to decide arbitrability’ turns
upon what the parties agreed about that matter.
Significantly, as discussed more fully below,
binding Circuit precedent requires courts to allow
the arbitrator to determine arbitrability where an
agreement to arbitrate incorporates the rules of
the American Arbitration Association.[6]
6
The district court explained further that, “the Ninth
Circuit recently held in Brennan that incorporation of the
[American Arbitration Association (“AAA”)] rules in an at-will
employment contract constitutes ‘clear and unmistakable’ evidence
(continued...)
7
Pelayo v. Platinum Limousine Servs., Inc., CIVIL NO. 15-00023
DKW-BMK, 2015 WL 9581801, at *11-12 (D. Hawai`i Dec. 30, 2015)
(some alterations in Pelayo).
DISCUSSION
I.
The Agreements and the AAA Rules
The Architect Agreement was signed by Du and A. Ngai on
January 18, 2010.
Section 4.1.1 of the Architect Agreement
states, in pertinent part, “[t]he Owner and Architect shall
commence all claims and causes of action, whether in contract,
tort, or otherwise, against the other arising out of or related
to this Agreement in accordance with the requirements of the
method of binding dispute resolution selected in this Agreement.”
The Architect Agreement also requires that “[a]ny claim, dispute
or other matter in question arising out of or related to this
Agreement shall be subject to mediation as a condition precedent
to binding dispute resolution.”
§ 4.2.1.]
[Architect Agreement at
However, “[i]f the parties do not resolve a dispute
through mediation pursuant to this Section 4.2,” the Architect
Agreement stipulates that arbitration shall be the “method of
binding dispute resolution.”
[Id. at § 4.2.4.]
Section 4.3.1,
the arbitration clause of the Architect Agreement, explains that:
6
(...continued)
that the parties intended to delegate the arbitrability question
to an arbitrator.” Pelayo, 2015 WL 9581801, at *13 (quoting
Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015)).
8
If the parties have selected arbitration as the
method for binding dispute resolution in this
Agreement, any claim, dispute or other matter in
question arising out of or related to this
Agreement subject to, but not resolved by,
mediation shall be subject to arbitration, which
unless the parties mutually agree otherwise, shall
be administered by the American Arbitration
Association in accordance with its Construction
Industry Arbitration Rules in effect on the date
of this Agreement. A demand for arbitration shall
be made in writing, delivered to the other party
to this Agreement, and filed with the person or
entity administering the arbitration.
Finally, § 7.1 states that “[t]his agreement shall be governed by
the law of the place where the Project is located, except that if
the parties have selected arbitration as the method of binding
dispute resolution, the Federal Arbitration Act shall govern
Section 4.3.”
A. Ngai and Du signed the Contractor Agreement on
May 28, 2010.
Section 6.1 of the agreement states that “[t]he
Architect will serve as Initial Decision maker pursuant to
Section 15.2 of AIA document A201-2007,[7] unless the parties
mutually agree in writing to appoint below another individual.”
The parties did not do so.
Further, like the Architect
Agreement, § 6.2 of the Contractor Agreement states that
arbitration, “pursuant to Section 15.4 of the AIA Document A201-
7
Section 15.2.1 of AIA document A201-2007 states, in
pertinent part, “[t]he Architect shall serve as the Initial
Decision Maker, unless otherwise indicated in the Agreement.”
[Motion, Du Decl., Exh. 6 (AIA Document A201 - 2007) (“Doc.
A201”).]
9
2007,” shall be the method of binding dispute resolution for
those claims not resolved through mediation.
Section 15.4 of
Document A201 explains that,
[i]f parties have selected arbitration as the
method for binding dispute resolution in the
Agreement, any Claim subject to, but not resolved
by, mediation shall be subject to arbitration
which, unless the parties mutually agree
otherwise, shall be administered by the American
Arbitration Association in accordance with its
Construction Industry Arbitration Rules in effect
on the date of the Agreement. A demand for
arbitration shall be made in writing, delivered to
the other party to the Contract, and filed with
the person or entity administering the
arbitration. The party filing a notice of demand
for arbitration must assert in the demand all
Claims then known to that party on which
arbitration is permitted to be demanded.
Like the Architect Agreement, § 13.1 of Document A201 states that
“[t]he Contract shall be governed by the law of the place where
the Project is located except that, if the parties have selected
arbitration as the method of binding dispute resolution, the
Federal Arbitration Act shall govern Section 15.4.”
Both the Architect Agreement and the Contractor
Agreement are therefore governed by the FAA, and both incorporate
the AAA rules.
II.
The Transfer to DPR
While HGHK contends that “the Arbitration Clauses
incorporate AAA’s rules,” [Reply at 5,]
Ngai argues that “the
parties unambiguously agreed to transfer jurisdiction from AAA to
[Dispute Prevention & Resolution, Inc. (“DPR”)] in December 2013,
10
and have since mutually acted under the terms of that agreement
by agreeing to mediate under DPR Mediation Rules, and proceeding
for the last six months under the DPR Arbitration Rules” [Ngai
Suppl. Mem. at 4].
Ngai’s assertions are incorrect.
The procedural history of the alternative dispute
resolution in this case is as follows.
Pursuant to the
Agreements, HGHK filed a Demand for Arbitration with AAA.
[Motion, Declaration of Sarah M. Love (“Love Decl.”), Exh. 13
(HGHK Demand for Arbitration, dated 10/31/13) (“Demand”).]
On
December 19, 2013, the parties agreed that the Demand would be
“forthwith transferred to the jurisdiction of” DPR.
[Id., Exh.
14 (“Stipulation to Transfer Action to Dispute Prevention &
Resolution”) (“Stipulation”)].
The Stipulation did not mention
the rules that would apply to the arbitration, and it noted that
“[t]he parties do not waive and specifically reserve any and all
claims and defenses.”
[Id.]
Before proceeding to arbitration,
and pursuant to the Agreements, the parties engaged in mediation
with DPR and used the DPR Mediation Rules.
See Ngai Suppl. Mem.,
Exh. 2 (email from DPR Case Manager Coleen Tasaka to the parties’
counsel, dated 4/2/14, explaining how mediation will proceed,
including the use of the DPR Mediation Rules).
Believing that
mediation had reached an impasse, “HGHK filed its Statement of
Claims to advance arbitration.”
See Reply at 2; see also Ngai
Suppl. Mem., Exh. 4 at 2-3 (email from DPR Case Manager
11
Kelly Bryant to parties’ counsel, dated 9/2/15, indicating that
HGHK’s counsel, Harvey Lung, Esq., sent a letter on August 28,
2015 with suggested arbitrators).
On September 8, 2015, DPR
placed the arbitration in abeyance “pending further direction
from the court.”
See Ngai Suppl. Mem., Exh. 4 at 1 (email from
Kelly Bryant, dated 9/9/15, informing the parties’ counsel that
the arbitration would be put in abeyance) (“9/9/15 Email”).
This district court previously considered whether DPR
rules apply to an arbitration that, per the relevant agreement,
was to be conducted by AAA according to AAA rules.
In Hawaiian
Telcom Communications, Inc. v. Tata America International Corp.,
Civil No. 10-00112 HG-LEK, 2010 WL 2594482 (D. Hawai`i, May 24,
2010),8 the Court observed that
[t]he Arbitration Clause states that any dispute:
shall be finally settled by binding
arbitration in accordance [with the] rules
and procedure for commercial arbitration of
the American Arbitration Association (AAA) at
the office of the AAA located in Honolulu,
Hawaii (or such other arbitration
organization located in Honolulu on which the
parties may mutually agree) and with Hawaii
Revised Statutes § 658A.
As to the issue of the applicable rules and
procedure, this arguable could mean one of two
things. First, it could mean that the parties
agree to use the AAA Commercial Rules AND to hold
8
The Findings and Recommendation of the magistrate judge
was adopted by Hawaiian Telcom Communications, Inc. v. Tata
America International Corp., Civil No. 10-00112 HG-LEK, 2010 WL
2594495 (D. Hawai`i June 24, 2010).
12
the arbitration at AAA’s office in Honolulu or in
any other arbitration organization’s office
located in Honolulu upon which the parties
mutually agree. In other words, the parties can
agree to hold the arbitration in a Honolulu
location other than AAA’s office, but they must
use the AAA Commercial Rules. Second, it could
mean that the parties agree to use the AAA
Commercial Rules in AAA’s Honolulu office OR, if
they mutually agree to another arbitration
organization located in Honolulu, then they will
use that organization’s rules and procedure in
addition to its office. This Court must determine
whether these two possible interpretations render
the Arbitration Clause ambiguous.
Hawaiian Telcom, 2010 WL 2594482, at *8 (emphasis in original).
Under Hawai`i law, “[a] contract is ambiguous when its terms are
reasonably susceptible to more than one meaning.
As a general
rule, the court will look no further than the four corners of the
contract to determine whether ambiguity exists.”
Hawaiian Ass’n
of Seventh-Day Adventists v. Wong, 130 Hawai`i 36, 45, 305 P.3d
452, 461 (2013) (citations omitted).
The Court in Hawaiian
Telcom concluded:
In this Court’s view, one must strain the wording
of the Arbitration Clause to apply the second
possible interpretation. The Arbitration Clause
is not reasonably subject to the second possible
interpretation when read in the context of the
entire Master Services Agreement. A plain reading
of the section supports the first possible
interpretation. This Court therefore finds that
the Arbitration Clause requires that the parties’
arbitrations must be conducted pursuant to the AAA
Commercial Rules, regardless of which arbitration
organization conducts the arbitration. To change
the applicable rules would require an amendment of
the Master Services Agreement and a waiver of the
use of the AAA Commercial Rules. Under § 16.12,
such action requires a written agreement signed by
13
the parties’ authorized representatives.
Mr. Portnoy and Mr. Holman reached the agreement
to use DPR’s office in a series of correspondence,
and they did not reduce the agreement to as signed
writing. The agreement therefore did not
effectuate a waiver of the use of the AAA
Commercial Rules in favor of the use of DPR’s
rules. Thus, the Court FINDS that DPR must
administer the parties’ arbitration pursuant to
the AAA Commercial Rules.
Hawaiian Telcom, 2010 WL 2594482, at *9 (emphasis in original).
Here, like in Hawaiian Telcom, the terms of the
Agreements are unambiguous.
Section 4.3.1 of the Architecture
Agreement states that any arbitration will be governed by the AAA
Construction Industry Arbitration Rules, and § 15.4 of Document
A201, which applies to the Contractor Agreement, says the same.
The Stipulation transferred jurisdiction over the Agreements from
AAA to DPR.
It did not in any way mention “a waiver of the use
of the AAA” rules.
See id.
Moreover, the Agreements state that
they “may be amended only by written instrument signed by both
Owner and Architect.”
See Architect Agreement at § 9.1;
Contractor Agreement at § 9.1.
Ngai’s argument that the
Stipulation, as well as the use of DPR rules in mediation, prove
that the parties agreed to use DPR Arbitration Rules is therefore
not supported by the record.
Further, Ngai’s assertion that the
parties have been proceeding the “last six months under the DPR
Arbitration Rules,” [Ngai Suppl. Mem. at 4,] is, at best,
misleading, considering that Ngai’s own exhibits show that the
arbitration has been held in abeyance since September 2015.
14
See
9/9/15 Email; see also Mem. in Opp. at 22 (“Recognizing the
Court’s sole province in making arbitrability determinations, DPR
has refrained from proceeding with that arbitration until
arbitrability issues are resolved.”).
The Court CONCLUDES that
the parties must use AAA rules in any arbitration conducted
pursuant to the Agreements.
III. The Proper Parties to the Arbitration
The Agreements both contain valid, broad, arbitration
clauses that encompass the claims in the Complaint, and the
Agreements must be enforced.9
*12 (citations omitted).
See Pelayo, 2015 WL 9581801, at
HGHK, the only party on which service
has been effected, brought this Motion on its own behalf.10
Ngai
9
HGHK contends that all claims are subject to arbitration.
See Mem. in Supp. of Motion at 19-25. Ngai argues that “even if
Defendants did not waive their rights to arbitration, and even if
all of the Defendants were deemed subject to arbitration, certain
claims would remain subject to judicial decision, namely the
Copyright Infringement claims.” See Mem. in Opp. at 35. Ngai,
thus, argues that, absent any of its other arguments, only Count
VI is not encompassed by the arbitration clauses in the
Agreements. The Court addresses the issue of Count VI infra.
10
Both the “of counsel” section of the Motion and the title
itself use the word “Defendants.” See Motion at 1. On February
2, 2016, HGHK’s counsel filed an Errata to Defendants’ [sic]
Motion to Dismiss and Compel Arbitration [Dkt. 13], Filed
12/24/15 (“Errata”). [Dkt. no. 20.] The Errata explains that
HGHK’s counsel only had authority to accept service of process of
the First Amended Complaint for HGHK, and that use of
“Defendants” “was a clerical error.” [Errata at 2-3.] The Court
therefore rejects Ngai’s argument that, “[b]y demanding dismissal
of this action in order to pursue arbitration, all Defendants
should be deemed to have conceded to the existence of an
enforceable contract containing an agreement to arbitrate.”
(continued...)
15
argues that “[b]efore the parties can proceed to try their
dispute in arbitration or otherwise, this Court must make a
determination of the arbitrability of claims, namely which
Defendants are parties to the Architect and Construction
Contracts and the arbitration clauses Defendants cite in their
Motion.”11
[Mem. in Opp. at 21.]
This Court has determined,
however, that the Agreements incorporate AAA rules, and therefore
the Court CONCLUDES that the arbitrator must determine issues of
arbitrability, including the proper parties to the arbitration.12
10
(...continued)
[Mem. in Opp. at 5.]
11
Ngai argues that it “cannot be forced into arbitration
with HGHK, who it has no agreement with at all, let alone forced
into arbitration with HGHK alone, while being barred from suing
other Defendants.” [Mem. in Opp. at 4.] Although not necessary
to the instant Order, the Court notes that HGHK is likely an
undisclosed principal. Du signed both the Architect Agreement
and the Contractor Agreement. Further, “[c]ourts have held that
nonsignatories to arbitration agreements may be bound by the
agreement under ordinary contract and agency principles.”
Britton v. Co-op Banking Group, 4 F.3d 742, 745 (9th Cir. 1993).
While Ngai argues that “Bill Du never, at any time, told Ngai
that he was signing any of the Contracts as a representative of
HGHK,” [Mem. in Opp. at 18,] it is undisputed that Du is the COO
of HGHK [Du Decl. at ¶ 1]. Even if Ngai did not know that Du was
the COO of HGHK, under Hawai`i law, “the undisclosed principal
may sue.” Smith v. Lilienthal, 40 Haw. 117, 119 (1953).
12
Ngai repeatedly argues that Du, Mr. Xu, and Mrs. Hsu have
waived their right to arbitrate because only HGHK has moved to
compel arbitration. See, e.g., Mem. in Opp. at 32 (“Even if they
could demand arbitration at this time, the Hsus and Bill Du
waived their right to demand arbitration by their obstinate
refusal to abide by their Contracts and denial . . . that they
are in privity of contract with Ngai.”). Du, Mr. Xu, and Mrs.
Hsu have not been served, and the Court will not address any
(continued...)
16
See Pelayo, 2015 WL 9581801, at *12.
IV.
The Copyright Claim (Count VI)
Ngai argues that, no matter the specific circumstances
of this dispute, Count VI “would remain subject to judicial
decision.”
[Mem. in Opp. at 35.]
Count VI states, inter alia:
Under the terms of Ngai’s Architect Contract, as a
material term of the contract and as a matter of
Copyright Law, the owner does not acquire a
license to use and is not entitled to use Ngai’s
instruments of service, including, without
limitation, Ngai’s designs, plans, specifications,
technical drawings, renderings, 3D videos etc.,
and other or copyrightable works, in whole or in
part, for the Hsu Residence for any purpose
whatsoever, unless and until the owner has paid
Ngai, in full, for the design fees for said works,
which the owner(s) of the Hsu Residence have not
done.
[Complaint at ¶ 147.]
Other district courts in the Ninth Circuit
have concluded that copyright claims are subject to arbitration
where an “arbitration clause is broad enough to encompass Lanham
Act claims and other intellectual property claims.”
BioD, LLC v.
Amnio Tech, LLC, No. 2:13-cv-1670-HRH, 2014 WL 268575, at *5 (D.
Ariz. Jan. 24, 2014) (some citations omitted) (citing
Valueselling Assocs., LLC v. Temple, Case No. 11-56229, 2013 WL
12
(...continued)
argument regarding waiver of their right to compel arbitration at
this time. See, e.g., Travelers Cas. & Sur. Co. of Am. v.
Brenneke, 551 F.3d 1132, 1135 (9th Cir. 2009) (“A federal court
is without personal jurisdiction over a defendant unless the
defendant has been served in accordance with Fed. R. Civ. P. 4.”
(citations and quotations marks omitted)).
17
2350473, at *1 (9th Cir. May 30, 2013)).13
Given that Count VI
is directly tied to an alleged breach of the Architect Agreement,
and given the breadth of the arbitration clause in the Architect
Agreement, the Court CONCLUDES that Count VI can be arbitrated.
All of the claims in the Complaint are therefore
subject to arbitration, and the Court HEREBY COMPELS arbitration
as to Ngai’s claims against HGHK and DISMISSES the claims against
HGHK.
See, e.g., Lexington Ins. Co. v. Centex Homes, 795 F.
Supp. 2d 1084, 1090 (D. Hawai`i 2011) (“A stay, however, is not
mandatory and the court may alternatively dismiss those claims
that are subject to arbitration.” (some citations omitted)
(citing Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc.,
368 F.3d 1053, 1060 (9th Cir. 2004))).
CONCLUSION
On the basis of the foregoing, HGHK’s Motion to Dismiss
and Compel Arbitration, filed December 24, 2015, is HEREBY
GRANTED IN PART AND DENIED IN PART.
It is GRANTED insofar as the
Court HEREBY COMPELS arbitration as to Ngai’s claims against HGHK
and DISMISSES the claims against HGHK.
13
It is DENIED insofar as
Moreover, “[u]nder the FFA, ‘any doubts concerning the
scope of arbitrable issues should be resolved in favor of
arbitration, whether the problem at hand is the construction of
the contract language itself or an allegation of waiver, delay,
or a like defense to arbitrability.’” Marriott Ownership
Resorts, Inc. v. Flynn, Civil No. 14-00372 JMS-RLP, 2014 WL
7076827, at *5 (D. Hawai`i Dec. 11, 2014) (quoting Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.
Ct. 927, 74 L. Ed. 2d 765 (1983)).
18
the Court will not make a determination regarding the claims
against the unserved Defendants Du, Mr. Xu, Mrs. Hsu, Fan,
Hengdian, and HGDA, given the pending Service Motion.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, March 29, 2016.
/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
A.K. NGAI, INC. VS. XU YONG’AN, ET AL.; CIVIL 15-00356 LEK-KSC;
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
DISMISS AND COMPEL ARBITRATION
19
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