Scottrade, Inc. v. Variant Holdings, LLC et al

Filing 41

OPINION MEMORANDUM AND ORDER 17 IT IS HEREBY ORDERED that Defendants Motion to Dismiss or to Compel Arbitration, [Doc. No. 17], is DENIED in toto. Signed by District Judge Henry E. Autrey on 1/31/14. (CLA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
SCOTTRADE, INC.,
Plaintiff,
vs.
VARIANT, INC. and STEPHEN C. WREN,
Defendants.

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) Case No. 4:13CV1710 HEA
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OPINION, MEMORANDUM AND ORDER
This matter is before the Court on Defendant’s Motion to Dismiss or
Compel Arbitration, [Doc. No. 17]. Plaintiff opposes the Motion. For the reasons
set forth below, the Motion is denied..
Facts and Background1
Plaintiff brought this action against Defendants Variant Holdings, LLC,
Variant, Inc and Stephen Wren alleging a breach of contract against Variant
Holdings, (Count I) and a tortious interference with contract against Wren and
Variant, Inc., (Count II). On November 22, 2013, Plaintiff voluntarily dismissed
its claims against Defendant Variant Holdings, LLC, without prejudice. Thus the
only remaining claim is the tortious interference with contract against Wren and
1

The recitation of facts is taken from the pleadings herein and is set forth for the
purposes of Opinion only. The recitation of facts in no way relieves the parties of any necessary
proof of the facts in later proceedings.

Variant, Inc.
Defendants move to dismiss or alternatively to compel arbitration.
Defendants argue that because Plaintiff sued Defendants Variant, Inc and Stephen
Wren for engaging in wrongful conduct on behalf of Variant Holdings, LLC, a
cause of action cannot be maintained against them on a tortious interference
theory. Alternatively, Defendants urge the Court to compel arbitration under an
arbitration provision in the contract between Plaintiff and Variant Holdings, LLC.
Discussion
When ruling on a Federal Rule of Civil Procedure 12(b)(6) motion to
dismiss for failure to state a claim, the Court must take as true the alleged facts and
determine whether they are sufficient to raise more than a speculative right to
relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). The Court does
not, however, accept as true any allegation that is a legal conclusion. Ashcroft v.
Iqbal, 129 S.Ct. 1937, 1949-50 (2009). The complaint must have “‘a short and
plain statement of the claim showing that the [plaintiff] is entitled to relief,’ in
order to ‘give the defendant fair notice of what the . . . claim is and the grounds
upon which it rests.’” Twombly, 550 U.S. at 555 (quoting Fed.R.Civ.P. 8(a)(2))
and then Conley v. Gibson, 355 U.S. 41, 47 (1957), abrogated by Twombly, supra);
see also Gregory v. Dillard’s Inc., 565 F.3d 464, 473 (8th Cir.) (en banc), cert.
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denied, 130 S.Ct. 628 (2009). While detailed factual allegations are not necessary,
a complaint that contains “labels and conclusions,” and “a formulaic recitation of
the elements of a cause of action” is not sufficient. Twombly, 550 U.S. at 555;
accord Iqbal, 129 S.Ct. at 1949. The complaint must set forth “enough facts to
state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570;
accord Iqbal, 129 S.Ct. at 1949; Braden v. Wal-Mart Stores, Inc., 588 F.3d 585,
594 (8th Cir. 2009). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. If the
claims are only conceivable, not plausible, the complaint must be dismissed.
Twombly, 550 U.S. at 570; accord Iqbal, 129 S.Ct. at 1950. In considering a
motion to dismiss under Fed. R. Civ. P. 12(b)(6), “the complaint should be read as
a whole, not parsed piece by piece to determine whether each allegation, in
isolation, is plausible.” Braden, 588 F.3d at 594. The issue in considering such a
motion is not whether the plaintiff will ultimately prevail, but whether the plaintiff
is entitled to present evidence in support of the claim. See Neitzke v. Williams, 490
U.S. 319, 327 (1989). “To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’ ” Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949,(2009) (quoting
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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Thus, “although a
complaint need not include detailed factual allegations, ‘a plaintiff's obligation to
provide the grounds of his entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do.’ ” C.N. v. Willmar Pub. Sch., Indep. Sch. Dist. No. 347, 591 F.3d 624, 62930 (8th Cir.2010) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955).
The Supreme Court of Missouri2 has recently reiterated the elements of a
tortious interference of contract claim. To state
a claim for tortious interference with a contract or business
expectancy, the plaintiff must demonstrate: (1) a contract or a valid
business expectancy; (2) the defendant's knowledge of the contract or
relationship; (3) intentional interference by the defendant inducing or
causing a breach of the contract or relationship; (4) absence of
justification; and (5) damages resulting from defendant's conduct.
Western Blue Print Co., LLC v. Roberts, 367 S.W.3d 7, 19 (Mo. banc
2012). “Absence of justification refers to the absence of a legal right
to justify actions taken.” Id. at 20 (quoting Downey v. McKee, 218
S.W.3d 492, 497 (Mo.App.W.D.2007)). If the defendant has a
legitimate interest, economic or otherwise, in the expectancy the
plaintiff seeks to protect, then the plaintiff must show that the
defendant employed improper means in seeking to further only his or
her own interests. Id. “Improper means are those that are
independently wrongful, such as threats, violence, trespass,
defamation, misrepresentation of fact, restraint of trade, or any other
wrongful act recognized by statute or the common law.” Id. (quoting
Stehno v. Sprint Spectrum, L.P., 186 S.W.3d 247, 252 (Mo. banc

2

The parties do not dispute that the substantive law of Missouri applies in this diversity
of citizenship case.
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2006)). Moreover, “[a]n action for tortious interference with a
business expectancy will lie against a third party only.” Zipper v.
Health Midwest, 978 S.W.2d 398, 419 (Mo.App.W.D.1998). “Where
the individual being sued is an officer or agent of the defendant
corporation, the officer or agent acting for the corporation is the
corporation for purposes of tortious interference.” Id.
Farrow v. Saint Francis Medical Center, 407 S.W.3d 579, 602 (Mo. 2013).
Defendants argue that because Plaintiff has alleged that Wren controlled
both Variant, Inc. and Variant Holdings, and that Wren was the only known
owner, officer or employee of either, there can be no tortious interference claim
against them because one cannot tortiously interfere with a contract to which that
person or entity is a party.
Plaintiff argues that this claim is brought against Wren and Variant, Inc.
based not on actions taken on behalf of Variant, LLC, rather on individual and
independent actions. Indeed, Plaintiff alleges that both Defendants intentionally
interfered with Variant Holdings, LLC’s performance under the License
Agreement by causing Variant Holdings to enter into a separate agreement with
Variant, Inc. Clearly, the Motion to Dismiss should be and, therefore, will be
denied.
Alternatively, Defendants urge the Court to stay this action and compel
arbitration. Admittedly, there is an arbitration provision in the contract between

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Plaintiff and Variant Holdings, LLC. Defendants Wren and Variant, Inc. are not
signatories to the contract which contains the arbitration clause. Defendants
argue, however, that because the issues are inextricably intertwined with the
contract between Plaintiff and Variant Holdings, Plaintiff should be required to
arbitrate with them. Defendant’s argument does not survive under Missouri law.
The Supreme Court of Missouri in Dunn Industrial Group, Inc. v. Lafarge
Corp., 112 S.W.3d 421 (Mo.2003), found a third party guarantor could not be
bound by an agreement to arbitrate in a construction contract to which it was not a
signatory, where the contract to which it was a signatory did not incorporate the
arbitration provision of the construction contract. Id. at 435. The court noted,

[a]rbitration is a matter of contract, and a party cannot be required to
arbitrate a dispute that it has not agreed to arbitrate. As such, a
guarantor who is not a signatory to a contract containing an
arbitration clause is generally not bound by the arbitration clause.
However, in a majority of state courts, including Missouri, due to the
strong federal policy in favor of arbitration, arbitration agreements are
enforced against guarantors or sureties where the arbitration
agreement is incorporated by reference into the guaranty or
performance bond.

Id.
Defendants argue Plaintiff should be estopped from disclaiming the

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obligation to arbitrate because its claims are inextricably intertwined with any
claims Plaintiff might bring against Defendants and because Defendants are
associated with Variant Holdings, LLC. The Dunn court considered a similar
argument and rejected outright the idea that a nonsignatory could be bound to an
arbitration agreement under an estoppel theory. In distinguishing cases in which
arbitration agreements were enforced on a theory of estoppel, the court stated,
[t]hese cases, which held that arbitration between a signatory and
nonsignatory was required based on an estoppel theory, are, however,
distinguishable from the instant case. In those cases, signatories to
contracts containing an arbitration agreement were estopped from
avoiding arbitration with nonsignatories when the issues the
nonsignatories were seeking to resolve in arbitration were *913
intertwined with the agreement signed by the signatory. Conversely,
in this case, LaFarge, a signatory to the construction contract seeks to
compel Dunn, a nonsignatory, to arbitrate its claims ... under the
guaranty. A party cannot be required to arbitrate a dispute that it has
not agreed to arbitrate. Dunn is not a signatory to a contract
containing an arbitration clause. At no point did Dunn indicate a
willingness to arbitrate any disputes with Lafarge.

Id. at 436. The court also found the estoppel cases were based on actions
inextricably intertwined with the contract containing the arbitration agreement, not
the collateral contract sought to be enforced. Id. at 436–37.
The Missouri court rejected the idea that inextricability of facts permitted
the court to compel arbitration where the nonsigning party had not agreed to

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arbitration in some way in its own right.
The Court is not required to compel Plaintiff to arbitrate its claims against
these Defendants. Plaintiff did not agree in writing or otherwise to arbitrate
claims with them and cannot be compelled to do so. Bank of America, N.A. v.
UMB Financial Services, Inc. Bank of America, N.A. v. UMB Financial Services,
Inc., 618 F.3d 906, 912- (8th Cir 2010).
Conclusion
Defendants have failed to demonstrate that Plaintiff cannot state a claim
against them under a theory of tortious interference with contract. The Motion to
Dismiss is, therefore, denied. Because Defendants are not signatories to the
arbitration provision in the contract between Plaintiff and Variant Holdings, LLC,
they cannot compel Plaintiff to arbitrate its claim.
Accordingly,
IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss or to
Compel Arbitration, [Doc. No. 17], is DENIED in toto.
Dated this 31st day of January, 2014.

_______________________________
HENRY EDWARD AUTREY
UNITED STATES DISTRICT JUDGE
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