Long v. Miller
Filing
23
ORDER granting 8 Motion to Compel; granting 22 Joint Motion Regarding Continued Sealing regarding sealed documents for 22 JOINT MOTION REGARDING CONTINUED SEALING re 15 Exhibit, 12 Exhibit, 16 Exhibit, 14 Exhibit, 13 Exhibit . Permanent Sealing GRANTED for Document Number(s): 12,13,14,15,16.(Order on continued sealing becomes final on 6/8/2017 unless further timely submissions are filed.) (Written Opinion) Signed by Senior Judge David S. Doty on 5/11/2017. (DLO)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 17-424(DSD/FLN)
Dave Long,
Plaintiff,
v.
ORDER
Jill Miller,
Defendant.
Mark J. Briol, Esq., Scott A. Benson, Esq., and Briol &
Associates, 80 South 8th Street, Suite 3700, Minneapolis, MN
55402, counsel for plaintiff.
Jonathan S. Parritz, Esq., Judah Druck, Esq. and Maslon, LLP,
90 South 7th Street, Suite 3300, Minneapolis, MN 55402, counsel
for defendant.
This matter is before the court upon defendant Jill Miller’s
motion to compel arbitration and to stay proceedings.
Based on a
review of the file, record, and proceedings herein, and for the
following reasons, the motion is granted.
BACKGROUND
This dispute arises from Miller’s business relationship with
plaintiff Dave Long.
The court will recite only those facts and
allegations relevant to the narrow issue presented.
For several
years, the parties were engaged in the business of operating
Medifast, Inc. franchised weight loss clinics in Minnesota and
Wisconsin under the corporate name Minnesota Weight Control, Inc.
(MWC).
Arb. Demand ¶ 1; Compl. ¶ 6.
Long appointed Miller as the
CEO of MWC in 2012 and sold her a ten-percent stake in the company
pursuant to a stock purchase agreement dated August 1, 2012 (SPA).1
Arb. Demand ¶¶ 2, 18.
On October 15, 2012, the parties entered
into an amended and restated shareholder agreement (Shareholder
Agreement) in which Long was appointed sole director of MWC.
Id.
¶ 19.
In 2013, Long formed Washington Weight Control, Inc. (WWC) to
run newly franchised Seattle-area clinics.
Id. ¶ 20; Compl. ¶ 7.
As with MWC, Long serves as WWC’s sole director and Miller as its
CEO.
Arb. Demand ¶ 20.
Long owns seventy percent of WWC and
Miller owns the remaining thirty percent.
Id.; Compl. ¶ 8.
In October 2013, WWC borrowed $1.5 million from Bank of
America to finance its business operations.
Long and Miller personally guaranteed the loan.
Compl. ¶¶ 12, 14.
Id. ¶ 13.
WWC was
only in business a short time, however; it closed all four of its
locations by September 2014 and later filed for bankruptcy.
Id.
¶¶ 16-17.
Id.
¶ 19.
Long then restructured the Bank of America loan.
Under the new loan agreement, Long and Miller were jointly
MWC and Medifast
and severally indebted to Bank of America.
Id.
guaranteed
agreed
Medifast.
the
loan,
and
Arb. Demand ¶ 23.
MWC,
in
turn,
to
indemnify
Long then paid the entire loan amount
1
Miller purchased additional stock in 2014 under a
substantively similar stock purchase agreement. Arb. Demand ¶ 26;
id. Ex. 3. The court will refer to both SPAs collectively.
2
to Bank of America, which meant that Miller directly owed Long her
portion of the debt - $427,848.
Compl. ¶¶ 20-21.
According to the
complaint, Miller has only paid Long $270,000 of that amount and
refuses to pay the remainder.
Id. ¶¶ 22-23.
Long and Miller
nevertheless continued to work together at MWC for nearly two more
years.
On August 12, 2016, Long fired Miller from MWC and demanded
that she forfeit her shares in MWC pursuant to the SPAs.
Demand ¶ 32.
Arb.
On October 19, 2016, Long and MWC filed a demand for
arbitration and statement of claim with the American Arbitration
Association (AAA) seeking declarations that (1) Miller breached her
duties under Minn. Stat. § 302A.361 and was lawfully terminated,
and (2) Long has the right to enforce his stock repurchase rights
and that Miller is obligated to tender her shares to MWC.
Long’s
arbitration demand was consistent with dispute-resolution provision
in the SPAs and the Shareholder Agreement.
Specifically, the SPAs
provide:
Any disputes (of whatever kind or nature, whether in law
or in equity) arising out of, relating to or concerning
the
validity,
specific
enforcement,
breach,
or
interpretation of this Stock Purchase Agreement shall be
submitted to binding arbitration before a single
arbitrator which proceedings shall be held in Hennepin
County, Minnesota.
Arb. Demand Exs. 23 ¶ 7.10.
The Shareholder Agreement likewise
provides:
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Any disputes (of whatever kind or nature, whether in law
or in equity) arising out of, relating to or concerning
the
validity,
specific
enforcement,
breach,
or
interpretation of this Agreement shall be submitted to
binding arbitration before a single arbitrator.
Id. Ex. 1 ¶ 7.2.
All three agreements further state that the
arbitration
“shall
be
Commercial
Arbitration
Association.”
conducted
Rules
pursuant
of
the
to
the
then-current
American
Arbitration
Id.; id. Exs. 2 & 3 ¶ 7.10.
The arbitration is
ongoing and is currently in the discovery phase.
On February 8, 2017, Long filed this suit against Miller
seeking the remaining $157,848 owed on the Bank of America debt
under
the
theories
contribution.
of
statutory,
implied,
and
equitable
Long also seeks a declaration that Miller’s home in
Coon Rapids should be exempted from homestead protection so that he
may use her interest in that home to collect on any judgment.
Miller now moves to compel arbitration and for a stay.
Long
maintains that proceeding in court is appropriate because the
documents relating to the Bank of America loan do not contain an
arbitration provision.
DISCUSSION
In deciding whether to compel arbitration under the Federal
Arbitration Act, the court considers:
“(1) whether there is a
valid arbitration agreement and (2) whether the particular dispute
falls within that agreement.”
Faber v. Menard, Inc., 367 F.3d
4
1048, 1052 (8th Cir. 2004).
The threshold question, however, is
whether the arbitrator or the court has the authority to decide
whether a particular dispute is subject to arbitration.
“The
question whether the parties have submitted a particular dispute to
arbitration ... is ‘an issue for judicial determination [u]nless
the parties clearly and unmistakably provide otherwise.” Howsam v.
Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (quoting AT&T
Techs., Inc. v. Commc’n Workers, 475 U.S. 643, 649 (1986)).
The
Eighth Circuit Court of Appeals has held that an agreement to
arbitrate that mandates arbitration consistent with the AAA’s rules
“constitutes a clear and unmistakable expression of the parties’
intent to leave the question of arbitrability to an arbitrator.”
Fallo v. High–Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009); see
also N. Am. Composites Co. v. Reich, No. 15-3537, 2016 WL 471353,
at *1-2 (D. Minn. Feb. 5, 2016) (“[W]here, as here, the parties
explicitly incorporate the AAA rules of arbitration, the parties
have delegated the question of arbitrability to the arbitrator.”);
Barkl v. Career Educ. Corp., No. 10-3565, 2010 WL 4979231, at *2
(D. Minn. Dec. 2, 2010) (“Where an agreement to arbitrate mandates
arbitration in accordance with the [AAA] Rules, the parties to the
agreement have clearly and unmistakably agreed to assign the
question
of
arbitrability
to
the
instance.”).
5
arbitrator
in
the
first
Here, the court finds that the question of arbitrability must
be determined by the arbitrator notwithstanding the absence of an
arbitration clause in the Bank of America loan documents.
In the
SPAs and Shareholder Agreement, the parties agreed to arbitrate at
least some of their disputes.
They also agreed to incorporate the
AAA rules into their dispute resolution, which evinces their intent
to reserve the question of arbitrability to the arbitrator.
Under
these circumstances, whether the instant dispute falls within the
scope of the broadly worded arbitration clauses in the SPAs and
Shareholder
Agreement
is
an
issue
reserved
solely
for
the
arbitrator.
See Principal Life Ins. Co. v. Caremark PCS Health,
LLC, 56 F. Supp. 3d 1013, 1019 (S.D. Iowa 2014) (referring the
question
of
arbitrability
to
the
arbitrator
under
similar
circumstances).
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.
The motion to compel arbitration and to stay proceedings
[ECF No. 8] is granted;
2.
This
matter
is
stayed
pending
completion
of
the
arbitration or a determination by the arbitrator that the issue is
not subject to arbitration;
3.
The joint motion regarding continued sealing [ECF No. 22]
is granted; and
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4.
The following documents shall remain sealed until such
time as the court rules otherwise:
ECF Nos. 12, 13, 14, 15, and
16.
Dated: May 11, 2017
s/David S. Doty
David S. Doty, Judge
United States District Court
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