Cooper v. Bolton et al

Filing 59

ORDER and REASONS - Presently before the Court are various motions, including one seeking to compel Plaintiff to submit the claims asserted herein to arbitration. See Rec. Docs. 7, 18, 32 and 34. IT IS ORDERED that Defendants' motion to compel a rbitration 7 is GRANTED IN PART and DENIED IN PART. IT IS ORDERED that Plaintiff's motion to strike 18 is GRANTED for purposes of the Court's consideration of Defendants' motion. IT IS ORDERED that the motion to strike 34 is GR ANTED for purposes of the Court's consideration of the Defendants' motion to compel arbitration. IT IS ORDERED, on the showing made, that Constellation's motion 32 is GRANTED to the extent that Plaintiff's claims against it are DISMISSED WITHOUT PREJUDICE. IT IS FURTHER ORDERED that, if Plaintiff desires to proceed further with his claims against Constellation, he must seek leave, no later than twenty (20) days from the entry of this Order and Reasons, to file an amending and superseding complaint remedying the pleading deficiencies, as stated within document. Signed by Judge Kurt D. Engelhardt on 8/26/2013. (cbs)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

SEAN C. COOPER

CIVIL ACTION

VERSUS

NO. 12-2934

GEORGE BOLTON,
WESTEND CAPITAL MANAGEMENT, LLC,
CHRISTEN HARDY and CONSTELLATION
INVESTMENT CONSULTING CORPORATION

SECTION "N" (3)

ORDER AND REASONS
Presently before the Court are various motions, including one seeking to compel
Plaintiff to submit the claims asserted herein to arbitration. See Rec. Docs. 7, 18, 32 and 34. The
Court rules on the motions as set forth herein.
Background
This action is related to another pending before the Court, i.e., Civil Action Number
12-2572. Both matters assert claims regarding Plaintiff’s, Sean C. Cooper’s, July 31, 2012
expulsion as a member of Defendant WestEnd Capital Management, L.L.C. (“WestEnd”), and
related, subsequent events. As also set forth in the August 26, 2013 Order and Reasons entered in
the action,1 George Bolton Holdings, LLC (“Bolton”), Robert Gustave Ozag (“Ozag”), and Plaintiff
entered into a “First Amended and Restated Operating Agreement” (“Operating Agreement”) for

1

See Civil Action No. 12-2572, Rec. Doc. 53.
1

WestEnd, as its Members and Managers, on or about September 15, 2009.2 Section 4.9 (c) of the
Operating Agreement provides that the managers may expel Ozag, Plaintiff, or Bolton from
WestEnd only upon unanimous consent of all Managers other than the Manager being expelled and
only if such Manager’s relationship with WestEnd is terminated for cause.3
Almost three years later, on or about July 31, 2012, Ozag and Bolton voted to expel
Cooper from WestEnd.4 On August 3, 2012, George Bolton hand delivered a letter to Plaintiff,
notifying him that he had been expelled from WestEnd on the basis of allegations of conduct
constituting “cause,” as defined by the Operating Agreement, and that he had been banned from
WestEnd’s business premises.5
Later that month, on August 25, 2012, WestEnd filed a “Verified Petition for a
Temporary Restraining Order and Preliminary Injunction and Permanent Injunctive Relief” against
Plaintiff in the Civil District Court for the Parish of Orleans, State of Louisiana.6 Judge Lloyd
Medley entered a temporary restraining order that same day.7 On September 4 or 5, 2012, the TRO
was extended until September 14, 2012, when it apparently expired.8 Thereafter, on October 22,

2

See Rec. Doc. 7-2.

3

Id., p. 10 of 33.

4

See August 3, 2012 Letter (Rec. Doc. 1-1).

5

Id.

6

See Verified Petition (Rec. Doc. 1-3, pp. 1-7 of 17), WestEnd Capital Management,
LLC v. Sean Cooper," Civil Action No. 2012-8341, Civil District Court, Parish of Orleans, State of
Louisiana.
7

See Order dated August 25, 2012 (Rec. Doc. 1-3, pp. 14-16 of 17).

8

See Order dated September 5, 2012 (Rec. Doc. 1-3, p. 13 of 17).
2

2012, WestEnd filed a motion to dismiss the state court action with prejudice.9 An order of
dismissal was entered later that day.10
Prior to dismissing its state court action, WestEnd commenced an arbitration
proceeding, on September 26, 2012, by filing a “Demand for Arbitration Before JAMS,” requesting
a hearing in San Francisco, California, as well as a “Statement of Claim.”11 On October 22, 2012,
Plaintiff filed an objection to the arbitration proceeding. On December 12, 2012 Plaintiff
commenced this action by filing a “Complaint for Declaratory Judgment.”12 The motions presently
before the Court ultimately followed.
I. Motion to Compel Arbitration (Rec. Doc. 7)
With this motion, Defendants George Bolton, WestEnd Capital Management, LLC,
George Elliman, and Christen Hardy (“Defendants”), seek to require Plaintiff, as a party and
signatory to the abovementioned Operating Agreement, to arbitrate the claims asserted herein, as
part of a JAMS arbitration proceeding presently pending between WestEnd, George Bolton
Holdings, LLC, Gustave R. Ozag, as claimants, and Plaintiff, as respondent.13 Plaintiff opposes the
motion, in part because Defendants Bolton (in his individual capacity), Elliman, and Hardy are not

9

See “Motion to Dismiss” dated October 22, 2012 (Rec. Doc. 14-2).

10

See Order dated October 22, 2012 (Rec. Doc. 14-3).

11

See Rec. Docs. 14-4 and 14-5.

12

See Rec. Doc. 1.

13

See First Amended Statement of Claim and Statement of Claim, WestEnd Capital
Management, LLC, et al., v. Sean C. Cooper, JAMS Arbitration Case No. 1100071836 (Rec. Docs.
14-4 and 14-5).
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signatories to the Operating Agreement.14
Under applicable law, as Defendants contend, a party to an arbitration agreement,
under certain circumstances, may be equitably estopped from litigating claims against persons who
are not parties to the arbitration agreement and, moreover, required to arbitrate those claims.
Specifically, as explained by the Fifth Circuit in Brown v. Pacific Life Ins. Co., 462 F.3d 384, 398
(5th Cir. 2006):
Although arbitration is a matter of contract that generally
binds only signatories, a party to an arbitration agreement may be
equitably estopped from litigating its claims against non-parties in
court and may be ordered to arbitration. [Grigson v. Creative Artists
Agency, LLC, 210 F.3d 524, 526 (5th Cir. 2000)] (citing MS Dealer
Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.1999)). In
Grigson, we held that a non-signatory to an arbitration agreement can
compel arbitration: (1) when the signatory to a written agreement
containing an arbitration clause must rely on the terms of the written
agreement in asserting its claims against a non-signatory; or (2) when
the signatory raises allegations of substantially interdependent and
concerted misconduct by both the non-signatory and one or more
signatories to the contract. Id. at 527. [] “[T]he result in Grigson and
similar cases makes sense because the parties resisting arbitration had
expressly agreed to arbitrate claims of the very type that they asserted
against the nonsignatory.” Bridas S.A.P.I.C. v. Gov't of Turkm., 345
F.3d 347, 361 (5th Cir. 2003).
Given the equitable nature of the remedy, however, the decision whether to order such arbitration
is one committed to the discretion of the district court. Brown, 462 F.3d at 398-99; Grigson, 210
F.3d at 527-28; see also Hill v. GE Power Systems, Inc., 282 F.3d 343, 349 (5th Cir. 2002).
Furthermore, even if a court declines to compel arbitration of claims asserted against non-

14

Plaintiff additionally argues that arbitration is precluded because of WestEnd’s
October 22, 2012 dismissal with prejudice of its then pending litigation in Louisiana state court
against Plaintiff. This contention is rejected for the reasons set forth in the Court’s August 26 , 2013
Order and Reasons (Rec. Doc. 53) in Civil Action No. 12-2572.
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signatories, it may nevertheless stay litigation of the claims whilst arbitration between the signatories
to the arbitration agreement is ongoing. Hill, 282 F.3d at 349.
Applying these principles here, the Court concludes, on the showing made, that the
Grigson test appears satisfied relative to at least certain of the claims Plaintiff urges against
Defendants in his original complaint. Specifically, Counts 2-6 all allege misconduct by Defendants
Hardy, Elliman, and Bolton resulting directly in Plaintiff’s wrongful expulsion from WestEnd, at
the behest of Bolton and Ozag, on or about July 31, 2012.15 Significantly, Plaintiff’s alleged
misconduct purportedly providing the basis for that expulsion is the subject of pending arbitration
between Plaintiff, WestEnd, and WestEnd members George Bolton Holdings, LLC and Gustave R.
Ozag.16 Further, according to Plaintiff, Defendant Hardy, WestEnd’s Chief Compliance Officer, and
Defendant Elliman, a WestEnd salesperson, acted within the course and scope of their employment
at all material times; alternatively, WestEnd allegedly ratified all of Hardy’s and Elliman’s
conduct.17 Additionally, although Bolton is not signatory to WestEnd’s Operating Agreement, in his
individual capacity, he is the sole member of George Bolton Holdings, LLC, which is. Finally, even
the August 3, 2012 letter purporting to expel Plaintiff as a WestEnd member is signed by “George
Brown Bolton,” rather than George Bolton Holdings, LLC.
Plaintiff’s complaint seemingly is not limited, however, to conduct allegedly resulting
in his expulsion from WestEnd. Rather, he also asserts claims – including the malicious prosecution

15

See Complaint (Rec. Doc. 1).

16

See First Amended Statement of Claim and Statement of Claim, WestEnd Capital
Management, LLC, et al., v. Sean C. Cooper, JAMS Arbitration Case No. 1100071836 (Rec. Docs.
14-4 and 14-5).
17

See Complaint (Rec. Doc. 1), ¶13.
5

claim asserted against WestEnd and Hardy in Count 1–premised upon the state court suit filed
against him by WestEnd, and Hardy’s verification of the allegations of the state court petition.
Significantly, the state court petition avers alleged post-expulsion conduct by Plaintiff, rather than
the pre-expulsion conduct at issue in the pending JAMS arbitration proceeding.
Lastly, Plaintiff’s amended complaint (Rec. Doc. 12) alleges statements regarding
Plaintiff made by Defendant Hardy solely in the context of a custody proceeding regarding her
minor child’s residency. It is not apparent to the Court that these allegations satisfy either aspect
of the Grigson test.
Considering all of the foregoing, IT IS ORDERED that Defendants’ motion to
compel arbitration (Rec. Doc. 7) is GRANTED IN PART and DENIED IN PART. Specifically,
the motion is GRANTED to the extent that Plaintiff is ordered to pursue his claims premised upon
Defendants’ alleged conduct ostensibly resulting “directly in Plaintiff's wrongful expulsion from
WestEnd.” Given that the Grigson test is met relative to these claims, and that their inclusion within
the pending JAMS arbitration proceeding should be feasible, if Plaintiff desires to pursue them, the
Court will order the relief requested by Defendants.
The motion is DENIED, however, with respect to Plaintiff’s claims premised upon
the state court suit filed against him by WestEnd, and Hardy’s verification of the allegations of the
state court petition. The motion likewise is DENIED as to Plaintiff’s allegations, in his amended
complaint, regarding Hardy’s statements in the course of the state child custody proceeding. As
explained above, and as urged by the defendants in the related action, No. 12-2572, the material
facts constituting the subject matter of the state court suit differ from those involved in the pending
arbitration proceeding. The same is true with respect to the allegations made in Plaintiff’s amended

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complaint in this action.18 Furthermore, given that a hearing in the pending JAMS arbitration
proceeding is scheduled to be held in November 2013, inclusion of these claims in that proceeding,
absent agreement by the parties, likely would be problematic.19 Under these circumstances, the
Court does not find application of the equitable remedy authorized in Grigson appropriate.
II.

Plaintiff's Motion to Strike (Rec. Doc. 18)
Presently before the Court, filed pursuant to Rule 12(f) of the Federal Rules of Civil

Procedure, is Plaintiff's motion to strike Exhibit B (Rec. Doc. 7-3) to Defendants' Motion to Compel
Arbitration, which is a petition filed in Medlock Harbison, Jr., v. WestEnd Capital Management,
LLC, Civil Action No. 2012-10570, Civil District Court, Parish of Orleans, State of Louisiana.
Because the relevance, if any, of the Harbison petition to Defendants' motion to compel arbitration
is not apparent, IT IS ORDERED that Plaintiff's motion to strike (Rec. Doc. 18) is GRANTED for
purposes of the Court's consideration of Defendants' motion.
III.

Defendants' Motion to Strike (Rec. Doc. 34)
Defendants' motion asks the Court to strike the first two arguments in Plaintiff's Sur-

Reply (Rec. Doc. 31), regarding WestEnd's alleged hiring of Tectus Management Services , LLC,
a private security company, following Plaintiff's expulsion. Defendants maintain Plaintiff's
assertions are inaccurate, immaterial, and calculated to prejudice. On the showing made, IT IS
ORDERED that the motion (Rec. Doc. 34) is GRANTED for purposes of the Court's consideration
of the Defendants' motion to compel arbitration.

18

See Rec. Doc. 12.

19

The Court notes that Defendants' motion seeks to compel Plaintiff to arbitrate his
claims in the pending JAMS arbitration proceeding, JAMS Case No. 1100071836, rather than
merely requesting arbitration. See Rec. Docs. 7, p. 1; 7-1, pp. 3, 18.
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IV. Defendant Constellation Investment Consulting Corp.’s Motion to Dismiss (Rec. Doc. 32)
With its motion, Defendant Constellation Investment Consulting Corporation
(“Constellation”) seeks dismissal of two of Plaintiff’s claims – Count 2 for defamation and Count
5 for conspiracy – insofar as they are alleged against it. As set forth in Constellation’s motion,
Plaintiff alleges only that WestEnd hired Constellation to examine its books and records prior to
Plaintiff's termination, and that Constellation's employee, Greg Farrington, communicated to Hardy,
Bolton, Elliman, and Gustave Ozag that Plaintiff was "crazy," and should be expelled as a member
of WestEnd. See Complaint (Rec. Doc. 1) at ¶¶ 19, 59, 73.
Rule 8 requires that complaints provide a “short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. Proc. 8(a)(2). Although a complaint does
not need “detailed factual allegations, . . . more than labels and conclusions are necessary, and a
formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007) (internal citations and quotations omitted). Similarly, in evaluating
motions to dismiss, courts “are not bound to accept as true a legal conclusion couched as a factual
allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986); see also Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009)(“tenet that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions.”). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’
devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at
557). Finally, "where the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged – but it has not ‘show[n]' – "that the pleader is
entitled to relief.'" Iqbal, 556 U.S. at 678 (quoting Fed. Rule Civ. Proc. 8(a)(2)).
Applying these principles here, Plaintiff’s defamation claim, as presently alleged

8

against Constellation, asserts only a statement of opinion and, thus, lacks requisite factual
allegations. His conspiracy claim likewise is deficient in that no concerted action or agreement
among co-conspirators is alleged. Accordingly, IT IS ORDERED, on the showing made, that
Constellation’s motion is GRANTED to the extent that Plaintiff’s claims against it are DISMISSED
WITHOUT PREJUDICE. IT IS FURTHER ORDERED that, if Plaintiff desires to proceed
further with his claims against Constellation, he must seek leave, no later than twenty (20) days from
the entry of this Order and Reasons, to file an amending and superseding complaint remedying the
pleading deficiencies identified herein. The amending and superseding complaint must include all
of the allegations from Plaintiff’s original and first amended complaints (Rec. Docs. 1 and 12) on
which he continues to rely, as well as his additional allegations. If Plaintiff cannot, or does not,
cure these deficiencies by timely amendment, the Court shall, upon motion by Constellation, order
that the dismissal of Plaintiff’s claims against it be with prejudice.
New Orleans, Louisiana, this 26th day of August 2013.

_________________________________
KURT D. ENGELHARDT
United States District Judge

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