Alghanim v. Alghanim et al

Filing 58

MEMORANDUM AND ORDER: For the reasons discussed within, defendants' motion to stay is granted, and this act is stayed as to the moving defendants pending arbitration. (Signed by Judge Naomi Reice Buchwald on 11/28/2011) Copies Mailed By Chambers. (ab)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------X
BASSAM Y. ALGHANIM,
Plaintiff,

09 Civ. 8098 (NRB)
MEMORANDUM AND ORDER

- against KUTAYBA Y. ALGHANIM, et al.,
Defendants.
---------------------------------X
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE

I. Introduction
Defendants

Kutayba

Y.

Alghanim,

Omar

K.

Alghanim,

and

Waleed Moubarak move to dismiss plaintiff Bassam Y. Alghanim’s
First Amended Complaint or, in the alternative, to stay this
action pending arbitration pursuant to 9 U.S.C. §§ 3, 4, and
206.

For the reasons discussed below, defendants’ motion to

stay is granted.
II. Background
A. The Division of the Alghanim Business Empire
According to the First Amended Complaint (the “complaint”),
in the 1970s, Kutayba Y. Alghanim (“Kutayba”) and Bassam Y.
Alghanim

(“Bassam”)

jointly

assumed

empire that their father had founded.

control

of

the

Compl. ¶ 33.

business
In 2007,

following the increased involvement in this business empire of
Omar K. Alghanim (“Omar”), Kutayba’s eldest son, Kutayba and

Bassam began to argue over the future of the family enterprise.
Id. at ¶ 36.

By 2008, their dispute had reached an impasse, and

the

agreed

brothers

to

divide

their

commonly-owned

property,

which had grown over the years to encompass business interests
in Kuwait and elsewhere that were worth billions of dollars.
Id. at ¶¶ 33, 36.

In March 2008, following disagreement over

how to divide this commonly-owned property, Kutayba and Bassam,
the

latter

allegedly

under

pressure

from

Kutayba

and

“high-

ranking Kuwaiti officials,”1 entered into three agreements.

Id.

at ¶¶ 37-38.
First,
“General

on

Points

March
of

12,

2008,

Settlement,”

the

brothers

which

entered

addresses,

into

among

a

other

things, the division of their ownership stake in a commercial
bank.

See First Al-Essa Decl. Ex. A.

This agreement, which

does not contain a dispute-resolution clause, does not figure
prominently in the parties’ submissions.
Second, on March 12, 2008, the brothers entered into a
broader “Agreement” that addresses the overall division of their
commonly-owned

property

(the

“March

12

Agreement”).

This

agreement contains a dispute-resolution clause:
Should any dispute arise in the future between the two
Parties, the final advice, opinion and decision
relating thereto will be issued by his highness Sheikh
Nasser AL [sic] Mohamed Al Ahmed Al Jaber Al Saba.
1

In opposing defendants’ motion, plaintiff does not argue that he entered
into the dispute-resolution clauses at issue because he was coerced or that
he otherwise did not consent to their terms.

2

First Al-Essa Decl. Ex. B ¶ 7.
Third,

on

March

“Memorandum

of

Understanding”

27,

2008,

the

that

brothers

entered

expressly

into

integrates

a

and

explains the General Points of Settlement and March 12 Agreement
(the “MOU”) (and together with the General Points of Settlement
and March 12 Agreement, the “March Agreements”).
out

relatively

more

detailed

terms

that

The MOU sets

address

division of the brothers’ commonly-owned property.2

the

actual

The MOU also

contains a dispute-resolution clause:
[Kutayba] and [Bassam] hereby confirm their agreement
that any dispute arising in the future between us
related to the subject matter of this agreement shall
be finally decided by H.H. Sheikh Nasser Mohammed alAhmed al-Jaber Al-Sabah.
First Al-Essa Decl. Ex. C ¶ 15.
In March 2008, Sheikh Nasser Mohammed al-Ahmed al-Jaber AlSabah served as Prime Minister of Kuwait, as he does to the
present

day.

resolution
Minister

In

clauses
also

addition

to

anticipated

served

as

the
for

witness

role

that

him,

the

for

each

the

dispute-

Kuwaiti

Prime

of

March

the

Agreements, none of which contains a choice-of-law clause.
Since

entering

the

March

Agreements,

Kutayba

and

Bassam

have allegedly remained locked in a bitter dispute over the
division of the commonly-owned property.

2

Compl. ¶ 42.

On December 4, 2009, we granted the application of defendants Kutayba and
Omar to file the MOU under seal, an application to which plaintiff had
consented.

3

B. The Kuwaiti Cases
In connection with this ongoing dispute, Bassam has brought
nine cases in Kuwaiti courts.
suits

seeking

receivership.

to

place

In March 2009, Bassam filed six

commonly-owned

property

into

See First Al-Essa Decl. ¶¶ 5-7.

judicial

All six suits

were dismissed for reasons that do not appear relevant here.
Later in March 2009, Bassam filed two suits seeking (i) an
accounting of the recent profits of Yusuf Ahmed Alghanim and
Sons

W.L.L.

(“Alghanim

(“YAAS”)

and

Industries”),

Alghanim

two

entities

Industries
within

Co.

the

W.L.L.

brothers’

business empire, and (ii) payment of his share of those recent
profits.

See First Al-Essa Decl. Exs. J, L.

2009,

the

in

action

involving

YAAS

(the

On November 2,
“YAAS

Accounting

Action”), the Kuwaiti Court of First Instance dismissed the suit
against

Kutayba

contained

an

jurisdiction.

and

YAAS

because

arbitration

clause

it
and

concluded
that

See First Al-Essa Decl. Ex. K.

it

that
thus

the

MOU

lacked

Its findings were

affirmed on Bassam’s appeal to the Kuwaiti Appellate Court, an
intermediate court of appeal.

See Third Al-Essa Decl. Ex. 1.

As detailed below, Bassam’s ensuing appeal to the Kuwaiti Court
of

Cassation,

the

highest

court

of

appeal,

bears

on

the

resolution of the pending motion.3

3

On November 2, 2009, Bassam abandoned the parallel action involving Alghanim
Industries. See First Al-Essa Decl. Ex. M.

4

Finally in October 2009, Bassam filed one suit seeking a
declaration that he owns 50% of YAAS.
N.

First Al-Essa Decl. Ex.

The Kuwaiti Court of First Instance similarly dismissed the

suit

against

decision

that

Kutayba
the

and

YAAS

Kuwaiti

in

favor

Appellate

Court

of

arbitration,

affirmed

and

a

from

See Fourth

which Bassam has apparently not further appealed.
Al-Essa Decl. ¶ 2.
C. The Email-Hacking Case

On September 22, 2009, Bassam brought suit in this Court.
In the complaint, he alleges that Kutayba, Omar, Waleed Moubarak
(“Waleed”), YAAS, and Alghanim Industries engaged in an emailhacking scheme beginning in July 2008 in which they successfully
endeavored together with others to gain access to his personal
email accounts for the purpose of gaining a strategic advantage
in

the

ongoing

dispute

over

commonly-owned property.

the

division

of

See Compl. ¶ 14.

the

brothers’

Bassam named YAAS

and Alghanim Industries themselves as defendants because they
allegedly made payments to facilitate the email-hacking scheme
Id. at ¶ 91.

at Kutayba and Omar’s direction.

As the complaint

notes, Kutayba is the Chairman, Omar is the Chief Executive
Officer, and Waleed is the Chief Legal Officer of both YAAS and
Alghanim

Industries.

Id.

at

¶¶

23-28.

Bassam

alleges

ten

causes of action against these defendants premised on violation
of the Stored Communications Act, Computer Fraud and Abuse Act,

5

Wiretap Act, and Racketeer Influenced and Corrupt Organizations
Act (“RICO”), as well as common law and state statutory law.
D. The Pending Motion
On July 1, 2010, the parties agreed to the denial without
prejudice

of

defendants’

complaint,

or,

in

the

initial

alternative,

motion
stay

to

this

dismiss
action

the

pending

arbitration in order to permit the parties and this Court to
learn the decision of the Kuwaiti Court of Cassation in the YAAS
Accounting Action before proceeding further.4

See Oral Argument

Tr. 7:3-8:14, July 1, 2010.
On

February

15,

2011,

the

Kuwaiti

Court

of

Cassation

affirmed the decision of the lower courts in the YAAS Accounting
Action and dismissed the suit in favor of arbitration.
Fifth Al-Essa Decl. ¶ 4.

See

It held that the dispute-resolution

clauses in the March Agreements are arbitration clauses that
reflect “the parties wish to resolve by arbitration any future
dispute concerning the subject matter of the MOU.”

Fifth Al-

Essa Decl. Ex. 2 9.

4

Initially, Waleed moved independently from Kutayba and Omar for the same
relief, see Park Decl. ¶ 3, but in subsequent rounds of briefing, these
defendants have made joint submissions. See infra note 5. YAAS and Alghanim
Industries were not movants in the initial motion, are not movants in the
pending motion, and further reference to “defendants” does not include them.
Pursuant to a stipulation of the parties that this Court approved on
January 11, 2010, YAAS and Alghanim Industries have twenty-one days from the
date of this Memorandum and Order to answer, move, or otherwise respond to
the complaint.

6

On

March

9,

2011,

defendants

accordingly

renewed

their

motion, which is now ripe for decision.5
III. Discussion
Chapter 2 of the Federal Arbitration Act (“FAA”), 9 U.S.C.
§§ 201 et seq., implements the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T.
2517

(entered

into

force

Dec. 29,

1970)

(the

“Convention”).

Distilling the requirements of the Convention as ratified and as
enabled

in

Chapter

2,

the

Second

Circuit

has

held

that

a

district court will have jurisdiction to enforce an arbitration
agreement

pursuant

agreement

(1)

arbitration

is
in

to
a

the

Convention

“written

the

where

agreement”;

territory

of

a

that

(2)

arbitration

“provide[s]

signatory

of

for
the

[C]onvention”; (3) is “commercial” in its subject matter; and
(4)

is

not

“entirely

domestic

in

scope.”

Smith/Enron

Cogeneration Ltd. P’ship, Inc., 198 F.3d 88, 92 (2d Cir. 1999).
5

In connection with the pending motion, the parties’ have submitted multiple
rounds of briefing. Any references to these submissions will be abbreviated
as follows: Defendants Kutayba Y. Alghanim and Omar K. Alghanim’s Memorandum
of Law in Support of Their Motion to Dismiss the Amended Complaint or, in the
Alternative, Stay this Action Pending Arbitration (“Defs. Br.”); Memorandum
of Law in Opposition to Defendants’ Motions to Dismiss and/or Stay this
Action Pending Arbitration (“Pl. Opp’n”); Defendants’ Joint Reply Memorandum
of Law in Further Support of Their Motion to Dismiss the Amended Complaint
or, in the Alternative, Stay this Action Pending Arbitration (“Defs. Reply”);
Supplemental Memorandum of Law in Further Opposition to Defendants’ Motions
to Dismiss and/or Stay this Action Pending Arbitration (“Pl. Supp. Br.”);
Defendants’ Joint Supplemental Reply Memorandum of Law in Further Support of
Their Motion to Dismiss the Amended Complaint or, in the Alternative, Stay
this Action Pending Arbitration (“Defs. Supp. Br.”); Second Supplemental
Memorandum of Law in Opposition to Defendants’ Renewed Motion to Dismiss
and/or Stay this Action Pending Arbitration (“Pl. Second Supp. Br.”); and
Defendants’ Joint Response to Plaintiff’s Second Supplemental Memorandum of
Law (“Defs. Second Supp. Br.”).

7

The parties do not expressly address whether the disputeresolution clauses in the March Agreements satisfy these four
requirements, but both plaintiff and defendants clearly assume
the applicability of the Convention.
Opp’n 2.

See Defs. Br. 9-10; Pl.

We are similarly satisfied that the Convention applies

and that there exists jurisdiction under Chapter 2 of the FAA.
Defendants

style

their

motion

as

one

to

dismiss

the

complaint or, in the alternative, to stay this action pending
arbitration pursuant to 9 U.S.C. §§ 3, 4, and 206.

Though § 3

is part of Chapter 1 of the FAA it is applicable to cases under
Chapter 2 and the Convention.

See Energy Transp., Ltd. v. M.V.

San Sebastian, 348 F. Supp. 2d 186, 201 (S.D.N.Y. 2004) (noting
Chapter 2 of the FAA does not make “specific reference to the
court's power to stay the action while arbitration proceeds”
before

stating

“[c]onsequently

§ 3

may

be

fully

incorporated

into . . . Chapter 2”); 9 U.S.C. § 208 (“Chapter 1 applies to
actions and proceedings brought under [Chapter 2] to the extent
that [Chapter 1] is not in conflict with [Chapter 2] or the
Convention”).
Section 3 provides in relevant part that a court, “upon
being satisfied that the issue involved in [a] suit . . . is
referable

to

arbitration

under

[a

written

arbitration

agreement], shall on application of one of the parties stay the
trial of the action until such arbitration has been had.”

8

9

U.S.C. § 3.6

Unlike § 3, § 4, which is also part of Chapter 1 of

the FAA, does not appear to have any application here because it
conflicts

with

a

provision

of

Chapter

2,

namely

§ 206.7

Section 206 provides, “[a] court having jurisdiction under this
chapter may direct that arbitration be held in accordance with
the agreement at any place therein provided for, whether that
place is within or without the United States.”

9 U.S.C. § 206.

We emphasize at the outset that defendants do not seek by
way

of

relief

an

order

directing

the

notwithstanding their reliance on § 206.

parties

to

arbitrate,

Rather, defendants ask

this Court to dismiss the complaint, or, in the alternative,
6

The “shall” in § 3 conveys a non-discretionary mandate to stay the action.
See HG Estate, LLC v. Corporacion Durango S.A. De de C.V., 271 F. Supp. 2d
587, 596 (S.D.N.Y. 2003) (noting § 3 “mandates a stay of litigation if ‘the
issue involved is referable to arbitration’”).
7
Section 4 provides in relevant part:
A party aggrieved by the alleged failure, neglect, or refusal of
another to arbitrate under a written agreement for arbitration
may petition [the district court] for an order directing that
such arbitration proceed in the manner provided for in such
agreement. . . .
The court shall hear the parties, and upon
being satisfied that the making of the agreement for arbitration
or the failure to comply therewith is not in issue, the court
shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the agreement. The
hearing and proceedings, under such agreement, shall be within
the district in which the petition for an order directing such
arbitration is filed.”
9 U.S.C. § 4. While the dispute-resolution clauses of the March Agreements
do not actually specify an arbitral forum, the parties in their submissions
appear to interpret them to provide that any arbitration conducted by the
Kuwaiti Prime Minister is to occur in Kuwait. If so, then § 4, which would
require arbitration in the Southern District of New York conflicts with
§ 206.
Such a conflict, pursuant to 9 U.S.C. § 208, renders § 4
inapplicable. See Energy Transport, Ltd. v. M.V. San Sebastian, 348 F. Supp.
2d 186, 201 (S.D.N.Y. 2004) (“‘[i]f the [arbitration] agreement calls for
arbitration outside of the district in which the action is brought, the
limits of § 4 directly conflict with the district court's powers under § 206
and § 208 would render § 4 inapplicable’”) (quoting Jain v. de Mere, 51 F.3d
686, 690 (7th Cir. 1995)).

9

stay this action pending arbitration.

In this case, were we to

dismiss the complaint, we would be inclined to do so without
prejudice to its renewal following the arbitration.

In light of

the “liberal federal policy favoring arbitration agreements” and
the

Second

Circuit’s

preference

for

avoiding

“[u]nnecessary

delay of the arbitral process through appellate review,” we thus
only inquire here whether an interlocutory order granting a stay
of

this

action

is

required

and

do

not

further

consider

Salim Oleochemicals v. M/V Shropshire, 278

dismissing the case.

F.3d 90, 93 (2d Cir. 2002) (internal quotations marks omitted).
In

deciding

whether

to

stay

this

action,

we

have

“essentially four tasks.”

Genesco, Inc. v. T. Kakiuchi & Co.,

Ltd.,

(2d

815

F.2d

determine

840,

whether

844

the

Cir.

parties

1987).

agreed

to

First,

we

“must

arbitrate.”

Id.

Second, if they did agree, then we “must determine the scope of
that agreement.”
asserted,

[we]

Id.
must

Third, “if federal statutory claims are
consider

claims to be nonarbitrable.”
that

some,

but

not

all,

whether
Id.

of

the

Congress

intended

those

Fourth, “if [we] conclude[]
claims

in

the

case

are

arbitrable, [we] must then determine whether to stay the balance
of the proceedings pending arbitration.”

Id.

The parties devote relatively little attention to the first
of these inquiries insofar as it concerns the March Agreements
between Bassam and Kutayba.

With that said, Bassam strongly

10

disputes that Omar and Waleed can compel him to arbitrate his
claims against them on the strength of the March Agreements to
which they are not signatories.
is

the

focus

of

The second of these inquiries

considerable

attention,

however,

with

the

parties arguing over whether the allegations of the complaint
lie within the scope of the dispute-resolution clauses in the
March Agreements.

The third of these inquires has come to focus

on whether the asserted claims, assuming they are “in scope,”
are nonetheless nonarbitrable due to external constraints not
stemming from contractual interpretation.

While plaintiff does

not appear to dispute the proposition that Congress intended to
permit

arbitration

of

his

federal

statutory

claims,

he

maintains, however, that his asserted claims are nonarbitrable
pursuant to Kuwaiti law, which, if applicable, would assertedly
have

consequences

for

his

ability

to

vindicate

his

statutory claims in the foreign arbitral forum.
bearing

on

congressional

intent,

such

concerns

federal

Though not
regarding

arbitral fora have been addressed by the Second Circuit within
the

third

of

these

compelling arbitration.

inquiries

in

the

parallel

context

of

See JLM Indus., Inc. v. Stolt–Nielsen

SA, 387 F.3d 163, 181-82 (2d Cir. 2004) (considering whether
English

law

would

permit

vindication

of

plaintiff’s

federal

statutory claims in the course of the third of these inquiries).

11

Before we can answer the four substantive issues set out
above, however, we must address the question of which body of
law should govern analysis of the March Agreements.
A. Choice of Law
The March Agreements do not include a choice-of-law clause,8
and the parties disagree about which source of law this Court
should adopt in interpreting them and their dispute-resolution
clauses.

Plaintiff argues for Kuwaiti law.

for “federal law.”9

Defendants argue

Both parties agree, however, that their

positions are fully vindicated whether federal law or Kuwaiti
law applies.

See Defs. Br. 11; Pl. Opp’n 5, 6.

We find that

the choice of law is outcome determinative only with regard to
the question of whether Omar and Waleed, the non-signatories to
the March Agreements, can require plaintiff to arbitrate his
claims against them.

See Parts III.B.2.i-ii, infra.

We also

find, however, that we would stay the action against Omar and
Waleed regardless of which source of law applies.
III.E, infra.

See Part

Because the choice of law selection does not

8

As the Seventh Circuit recently observed in a case under the Convention
where the arbitration agreement similarly did not include a choice-of-law
clause, due to “the growing trend to include choice-of-forum and choice-oflaw clauses in sophisticated commercial agreements, there is scant precedent
available suggesting what law should be applied to interpret the substantive
provisions of an agreement that is covered by the Convention but contains no
choice-of-law provision.” Certain Underwriters at Lloyd’s London v. Argonaut
Ins. Co., 500 F.3d 571, 577 (7th Cir. 2007).
9
It is not entirely clear what either of the parties contemplate their
references to “federal law” or, in the alternative, “U.S. law” to signify.
Both parties cite federal case law pertaining to arbitration agreements under
the FAA, however, and we accordingly look to this body of decisions.

12

alter the bottom-line result, we do not need to decide whether
federal law or Kuwaiti law governs interpretation of the March
Agreements.
It bears emphasis, however, that the broader context in
which this choice-of-law question must be considered is that of
the

Convention

and

FAA,

which

contain

governing

presumptions

regardless of whether federal law or Kuwaiti law is adopted.

In

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473
U.S. 614 (1985), a case within the purview of the Convention,
the Supreme Court stated:
[A] court asked to compel arbitration of a dispute is
to determine whether the parties agreed to arbitrate
that
dispute
. . .
by
applying
the
“federal
substantive law of arbitrability, applicable to any
arbitration agreement within the coverage of the Act.”
. . . And that body of law counsels “that questions of
arbitrability must be addressed with a healthy regard
for the federal policy favoring arbitration . . . .
The Arbitration Act establishes that, as a matter of
federal law, 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.”
473 U.S. at 626 (quoting Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24-25 (1983)).

In Moses H. Cone, the

Supreme

as

Court

declaration

of

had
a

described

liberal

the

federal

FAA
policy

“a

congressional

favoring

arbitration

agreements, notwithstanding any state substantive or procedural
policies to the contrary.”

460 U.S. at 24.

13

Further, in Perry

v. Thomas, 482 U.S. 483 (1987), the Supreme Court clarified that
“state

law,

whether

of

legislative

or

judicial

origin,

is

applicable if that law arose to govern issues concerning the
validity,

revocability,

generally.”
Second

and

enforceability

of

contracts

Id. at 492 n. 9 (emphasis in original).

Circuit

has

stated

in

interpreting

Perry

As the
in

the

Convention context, the FAA “preempts state law which treats
arbitration agreements differently from any other contracts.”
Progressive

Cas.

Ins.

Co.

v.

CA

Reaseguradora

Venezuela, 991 F.2d 42, 46 (2d Cir. 1993).

Nacional

De

To the extent that

plaintiff argues that a presumption contrary to that expressed
in the FAA is present in Kuwaiti law and applies when analyzing
the March Agreements, his argument is unavailing.
3

(arguing

narrowly”).

“Kuwaiti

law

construes

See Pl. Opp’n

arbitration

agreements

When interpreting the terms of the March Agreements

pursuant to Kuwaiti law, we only consider that body of Kuwaiti
law

that

“arose

to

govern

issues

concerning

the

validity,

revocability, and enforceability of contracts generally” but not
Kuwaiti law that “treats arbitration agreements differently from
any other contracts.”

14

B. The Agreement to Arbitrate
1. The March Agreements
i. Federal Law
In the March 12 Agreement, Bassam and Kutayba agreed that
“[s]hould any dispute arise in the future between [them], the
final . . . decision relating thereto will be issued by” the
Prime Minister of Kuwait.

First Al-Essa Decl. Ex. B ¶ 7.

In

the MOU, they agreed to submit “any dispute . . . related to
[its]

subject

matter”

Minister of Kuwait.

to

“be

finally

decided”

by

the

Prime

First Al-Essa Decl. Ex. C ¶ 15.

The FAA does not define an arbitration agreement, though it
is clear from its terms and those of the Convention that such an
agreement must be in writing.

See 9 U.S.C. § 2 (“[a] written

provision in . . . a contract . . . to settle by arbitration a
controversy thereafter arising out of such contract . . . shall
be valid”); Convention Art. II(1) (“shall recognize an agreement
in

writing”).

writing.
include

The

Convention

moreover

requires

a

signed

Convention Art. II(2) (“‘agreement in writing’ shall
an

arbitral

clause

in

a

contract

or

an

arbitration

agreement, signed by the parties or contained in an exchange of
letters”); Kahn Lucas Lancaster, Inc. v. Lark Int’l Ltd., 186
F.3d

210,

217

(2d

Cir.

1999),

partially

abrogated

on

other

grounds by Sarhank Group v. Oracle Corp., 404 F.3d 657, 660 n. 2
(2d

Cir.

2005)

(construing

the

15

“agreement

in

writing”

requirement to mean that an arbitration clause is enforceable
only if found in a signed writing or an exchange of letters).
Such a written provision need not refer to “arbitration” or
include the words “final” or “binding.”

See McDonnell Douglas

Fin. Corp. v. Pa. Power & Light Co., 858 F.2d 825, 830-31 (2d
Cir. 1988) (noting “[i]t is, in our estimation, irrelevant that
the

contract

language

in

question

does

not

employ

the

word

‘arbitration’ as such” or term the third-party decision maker’s
“conclusions ‘final’ or ‘binding’”).
Thus, applying federal law, the dispute-resolution clauses
of the March 12 Agreement and MOU, both of which Bassam and
Kutayba signed, are plainly arbitration clauses.
ii. Kuwaiti Law
The same conclusion is reached applying Kuwaiti law.

In

its recent decision in the YAAS Accounting Action, the Kuwaiti
Court

of

Cassation,

Kuwait’s

highest

tribunal,

resolved

the

issue when it held that the dispute-resolution clauses in the
March Agreements are arbitration clauses.
Whereas these two articles have unequivocally and
clearly disclosed the parties’ intent to refer any
dispute arising between them in the future concerning
the termination and dissolution of their partnership
to H.H. Sheikh Nasser Mohammed al-Ahmad al-Jaber AlSabah for passing a final and binding decision, not
for conciliating between them or bringing the two
viewpoints closer, and suggesting solutions leaving
the decision of taking them into consideration or not
to the sole discretion of the parties; rather, the
parties have agreed that His Highness decides between

16

them by issuing a decision binding on the parties even
if both or one of the parties are not happy with such
decision, said agreement could only be interpreted
that the parties wish to resolve by arbitration any
future dispute concerning the subject matter of the
MOU.
Fifth Al-Essa Decl. Ex. 2 8-9.10
2. The Non-Signatories
i. Federal Law
Whether
Agreements,

Omar
can

and

Waleed,

require

non-signatories

plaintiff

to

to

arbitrate

the
his

March
claims

against them presents a closer question and one on which federal
law and Kuwaiti law yield different results.
Pursuant to federal law, in the particular context of the
Convention, the fact that non-signatories did not sign a written
arbitration agreement “does not foreclose the application of the
well-established

contract

and

agency

principles

under

which

nonsignatories sometimes can be obligated by, or benefit from
agreements signed by others.”
Arts,

Ltd.,

signatory

974

F.

defendants

signatory plaintiff).

Supp.

Borsack v. Chalk & Vermilion Fine

293,

could

301

compel

See also

(S.D.N.Y.

1997)

arbitration

(finding

against

non-

Cargill Intern. S.A. v. M/T

Pavel Dybenko, 991 F.2d 1012, 1020 (2d Cir. 1993) (suggesting
that were a non-signatory found to be a third-party beneficiary
“it

10

may

be

proper

for

the

district

court

to

enforce

Kuwaiti Court of Cassation, Decision No. 155/2010, Feb. 15, 2011.

17

the

arbitration agreement against [a signatory]”).

Thus the fact

that Omar and Waleed are non-signatories to the March Agreements
does not by itself foreclose their resort to arbitration.
Non-signatories seeking to compel a signatory to arbitrate
a dispute find support in the Second Circuit in the principle of
equitable estoppel, which requires a two-part inquiry.

First,

“a careful review of ‘the relationship among the parties, the
contracts they signed . . . , and the issues that had arisen’
among them [must] disclose[] that ‘the issues the nonsignatory
is seeking to resolve in arbitration are intertwined with the
agreement

that

the

estopped

party

has

signed.’”

Ragone

v.

Atlantic Video at Manhattan Center, 595 F.3d 115, 126-27 (2d
Cir. 2010) (quoting Choctaw Generation Ltd. P'ship v. Am. Home
Assurance

Co.,

271

F.3d

403,

406

(2d

Cir.

2001)).

Second,

“‘there must be a relationship among the parties of a nature
that

justifies

a

conclusion

that

the

party

which

agreed

to

arbitrate with another entity should be estopped from denying an
obligation to arbitrate a similar dispute with the adversary
which is not a party to the arbitration agreement.’”

Id. at 127

(quoting Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354,
359 (2d. Cir. 2008)).
The first of these inquiries addresses “intertwinedness.”
Here,

the

complaint

does

not

materially

distinguish

between

signatory defendant Kutayba and non-signatory defendants Omar

18

and Waleed pleading the ten counts of the complaint against all
three.

In what the Second Circuit has acknowledged is a “fact-

specific” inquiry, see JLM Indus., Inc. v. Stolt-Nielsen SA, 387
F.3d 163, 178 (2d Cir. 2004), this fact distinguishes the cases
to

which

plaintiff

principally

analogizes.

See

Denney

v.

Jenkens & Gilchrist, 412 F. Supp. 2d 293, 299 (S.D.N.Y. 2005)
(causes of action alleged against signatory and non-signatory
defendants were not identical); Stechler v. Sidley, Austin Brown
&

Wood,

L.L.P.,

382

F.

Supp.

2d

580,

591

(S.D.N.Y.

2005)

(signatory and non-signatory defendants “played different and
distinct roles in the alleged conspiracy”).
the

complaint

does

distinguish

between

To whatever extent
Kutayba,

Omar,

and

Waleed, such differentiation is muted by its allegation that
“[i]n taking the actions complained of . . . [d]efendants acted
in concert with each other” and “[i]n so doing, each was the
agent of the other and each is responsible for all the actions
of the others in furtherance of their conspiracy.”

Compl. ¶ 29.

In this case, whether the claims against Omar and Waleed
are

sufficiently

intertwined

for

the

purpose

of

equitable

estoppel is thus effectively the same question as whether the
identical claims against Kutayba are within the scope of the
March Agreements.

See JLM, 387 F.3d at 178 (finding the claims

against

non-signatories

“undeniably

relevant

contracts

“as

where

. . .

19

intertwined”
already

noted”

with

the

the

same

claims

were

clauses).
question

found

to

be

within

the

scope

of

arbitration

See also Ragone, 595 F.3d at 128 (“there is . . . no
that

the

subject

matter

of

the

dispute

between

[plaintiff] and [signatory defendant] is factually intertwined
with

the

dispute

defendant].

between

[plaintiff]

and

[non-signatory

It is, in fact, the same dispute”).

As discussed

in Part III.C.1, it is clear that the issues that Kutayba is
seeking to resolve in arbitration are within the scope of the
March Agreements.

“Intertwinedness” thus exists.

The second of these inquiries addresses the relationship
between plaintiff and the non-signatories vis-a-vis the March
Agreements.

We find both Ross v. American Express Co., 547 F.3d

137 (2d Cir. 2008) and Ragone v. Atlantic Video at Manhattan
Center, 595 F.3d 115 (2d Cir. 2010) particularly instructive
here because they illuminate the factors at issue.

In Ross, the

Second Circuit found that plaintiffs, who entered into credit
card

agreements

with

Visa,

Mastercard,

and

Diners

Club

(the

“Issuing Banks”) that contained arbitration clauses, were not
estopped

from

refusing

to

arbitrate

claims

relating

to

the

subject matter of those agreements against defendant American
Express.
of

While finding it “indisputable that the subject matter

the

dispute

subject

matter”

clauses,

see

between

id.

of
at

the

the

parties

contracts

146,

the

. . .

containing

Second

20

is

Circuit

related
the
held

to

the

arbitration
that

“the

further necessary circumstance of some relation between Amex and
the plaintiff’s sufficient to demonstrate that the plaintiffs
intended to arbitrate this dispute with Amex is utterly lacking
here.”

Id.

A competitor, rather than a corporate affiliate, of

the Issuing Banks, “Amex did not sign the [contracts], it [was]
not mentioned therein, and it had no role in their formation or
performance.”

Id.

See also id. at 148 (“a complete stranger to

the plaintiffs’ [contracts,] [Amex] did not sign them, it is not
mentioned

in

them,

and

it

performs

no

function

whatsoever

relating to their operation”).
Following Ross, in Ragone the Second Circuit found that
plaintiff, a make-up artist whose employment with a television
production company was subject to an arbitration agreement, was
estopped from refusing to arbitrate her sexual harassment claims
against ESPN, a cable sports television news service and client
of her employer against whom she also brought sexual harassment
claims.

See 595 F.3d at 126-28.

The Second Circuit noted that

“ESPN is not mentioned in the arbitration agreement, or in any
other document relating to [plaintiff’s] initial employment that
is contained in the record” and that “therefore [this is] not a
case where ESPN is ‘linked textually’ to [plaintiff’s] claims.”
Id. at 127 (quoting Choctaw, 271 F.3d at 407).

Nevertheless,

the Second Circuit, found that “as set forth in [the] complaint,
it is plain that when [plaintiff] was hired by [her employer],

21

she understood ESPN to be, to a considerable extent, her coemployer.”

Id.

Expressly contrasting Ross, the Second Circuit

implicitly emphasized that ESPN was far from a stranger to the
arbitration agreement that the plaintiff was fully aware applied
to an employment relationship in which ESPN would necessarily be
and was in fact thoroughly involved.

Id. at 127-28.

Unlike in Ross, Omar is far from a “stranger” to the March
Agreements.

As plaintiff alleges, Omar’s rise in the business

empire gave rise to the dispute that led the brothers to divide
their commonly-owned property.

See Compl. ¶ 36.

As plaintiff

also alleges, Omar is the Chief Executive Officer of two of the
entities

within

Industries.

that

business

See id. at ¶¶ 26-27.

empire,

YAAS

and

Alghanim

As an heir to Kutayba, Omar

is also interested in the division of the brothers’ commonlyowned property, a self-evident fact that plaintiff implicitly
acknowledges in the complaint and of which he was certainly
See id. at ¶ 86 (noting “[d]efendants

aware in March 2008.
[Kutayba]

and

[Omar]

stood

to

benefit

the

most

from

this

scheme”).

As in Ragone, though Omar is not “‘linked textually’”

to the March Agreements, 595 F.3d at 127, at the time plaintiff
entered into them, he was aware that Omar shared substantially
in Kutayba’s interest in them and would continue to do so during
their performance.

In fact, plaintiff acknowledges that his

dispute over performance of the March Agreements is as much with

22

Omar as Kutayba.
[Omar]

have

See Compl. ¶ 77 (“[d]efendants [Kutayba] and

illegally

accessed

and

recorded

[p]laintiff’s

litigation and business strategy with the respect to the multibillion

dollar

disputes

between

them”).

Given

the

known

identity of interests between Kutayba and Omar, Omar’s position
alongside his father in the business empire, and the fact that
Omar previously stood and continues to stand at the heart of the
dispute between plaintiff and Kutayba over their commonly-owned
property, it is equitable to estop plaintiff from refusing to
arbitrate against Omar because of his “knowledge that [he] would
extensively

treat

with

[Omar]”

Agreements.

in

implementing

the

March

595 F.3d at 128.

While Waleed is certainly not a “stranger” to the March
Agreements,

having

played

a

“role

in

their

formation

[and]

performance,” 547 F.3d at 146, there are no allegations in the
complaint

to

suggest

that

plaintiff

would

reasonably

have

believed when he entered the March Agreements with Kutayba that
he was agreeing to arbitrate disputes that might arise with
Waleed.

While Waleed did advise Kutayba during the negotiation

of the March Agreements, it is unclear whether plaintiff was
contemporaneously

aware

of

this

fact.

See

Park

Decl.

¶ 6.

Plaintiff certainly knew, however, of Waleed’s position as the
Chief Legal Officer of YAAS and Alghanim Industries, see Compl.
at ¶ 26-27, and more significantly became aware of his ongoing

23

role as Kutayba’s attorney with regard to the performance of the
March Agreements and the disputes that have arisen from their
implementation.
and

[Omar]’s

See Compl. ¶ 78 (stating Waleed, “[Kutayba]’s

legal

counsel

. . .

improperly

used

the

stolen

information in conducting negotiations and litigation against
[plaintiff] and [in] dealing with the outside counsel retained
to represent [p]laintiff”).

Nonetheless, unlike Omar, Waleed is

not Kutayba’s son and his involvement in the broader disputes
concerning the March Agreements is only as an agent.
Though the principle of equitable estoppel does not aid
Waleed, the principal of agency does permit him to arbitrate
against plaintiff.

The Second Circuit has recently acknowledged

that it “remains an open question” whether non-signatories may
compel arbitration pursuant to any theory aside from equitable
estoppel.

Ross, 547 F.3d at 143 (citing Astra Oil Co., Inc. v.

Rover Navigation, Ltd., 344 F.3d 276, 279 n. 2 (2d Cir. 2003)).
Until this question is resolved, however, “‘[c]ourts in this and
other

circuits

consistently

have

held

that

employees

or

disclosed agents of an entity that is a party to an arbitration
agreement

are

protected

by

that

agreement.’”

Campaniello

Imports, Ltd. v. Saporiti Italia, S.p.A., 117 F.3d 655, 668 (2d
Cir. 1997) (quoting Roby v. Corp. of Lloyd's, 996 F.2d 1353,
1360 (2d Cir. 1993)).

Waleed’s involvement in implementing the

March Agreements and in the alleged execution of the email-

24

hacking scheme stems entirely from his position as counsel on
behalf of Kutayba and is a sufficient basis for his resort to
arbitration.

See Compl. ¶ 87 (describing Kutayba and Omar as

Waleed’s “superiors” and the latter’s activities in the emailhacking scheme as conducted “as counsel” for Kutayba and Omar).
See also Washington v. William Morris Endeavor Entm’t, L.L.C.,
No. 10 Civ. 9647 (PKC), 2011 WL 3251504, at *9 (S.D.N.Y. July
20,

2011)

(permitting

non-signatory

employees

to

compel

arbitration in part due to their status as employees and citing
Campaniello); Hamerslough v. Hipple, No. 10 Civ. 3056 (NRB),
2010 WL 4537020, at *2-3 (S.D.N.Y. Nov. 4, 2010) (finding nonsignatory directors to be agents of their corporation who could
compel arbitration and citing Roby).
Waleed

is

not

a

disclosed

agent

Plaintiff’s argument that

with

respect

to

the

March

Agreements is difficult to understand given his allegations that
Waleed acted as Kutayba’s counsel in their implementation.

See

Compl. ¶ 78.11
Pursuant to federal law, therefore, plaintiff cannot avoid
arbitrating against Omar and Waleed.12

11

We agree with defendants that agency is also relevant to buttressing Omar’s
ability to compel arbitration. See Defs. Reply 18-19.
12
To the extent that plaintiff argues that Omar’s and Waleed’s participation
in the alleged email-hacking scheme forecloses their access to equitable
relief, his argument is without merit. See JLM, 387 F.3d at 171 (noting “our
determination of the arbitrability of the claims asserted by [plaintiff] does
not in any way rest upon the strength of those claims”).
Furthermore, we
find unconvincing plaintiff’s argument that Omar is barred from compelling
arbitration because of positions adopted in proceedings before the Kuwaiti

25

ii. Kuwaiti Law
We

now

Defendants

consider
have

this

same

consistently

issue

argued

under
that

Kuwaiti

the

law.

successive

decisions of the Kuwaiti courts in the YAAS Accounting Action
support

their

position

that

non-signatories

arbitration pursuant to Kuwaiti law.
25; Second Nasser Decl. ¶ 32.

may

compel

See, e.g., Defs. Br. 24-

In the most recent decision, the

Kuwaiti Court of Cassation addressed the status of YAAS with
respect to the March Agreements in the following passage:
The fact that YAAS has a legal personality does not
preclude, since it is composed of two partners, the
claimant and the second defendant, and is managed by
both partners, that it is a constituent element of the
partnership which the parties agreed to terminate via
arbitration and therefore YAAS constitutes with the
other elements of the partnership the subject of the
arbitration and are not third parties to it.
Fifth Al-Essa Decl. Ex. 2 9-10.13
holding

to

provide

that

Defendants interpret this

“Bassam’s

claims

against

YAAS--which

itself was not a signatory to the March 12 Agreement or the MOU-are within the scope of the parties’ agreements to arbitrate
because

the

relatedness

controversies
Plaintiff,
defendants’
Decl.

is

through

the

his

parties,

Fifth

close.”

Al-Essa

expert

characterization

¶¶ 10-14.

of

We

of
find

contracts

and

Decl.

¶ 6(c).

vigorously

disputes

Ms.

Ali,

the

holding.

defendants’

See

Third

Ali

interpretation

Stock Exchange that relate to the obligations pursuant to the March
Agreements of entities within the business empire. See Pl. Supp. Br. 10-11.
13
Kuwaiti Court of Cassation, Decision No. 155/2010, Feb. 15, 2011.

26

unpersuasive.

As plaintiff argues, it seems clear that the

Kuwaiti Court of Cassation based its finding on the fact that
YAAS forms part of the subject matter of the March Agreements,
see Third Ali Decl. ¶ 12, not because of any “relatedness of the
parties, contracts and controversies.”

Because Omar and Waleed

are not the subject matter of the March Agreements, the YAAS
Accounting Action provides no support for their argument that
they can rely on the March Agreements.
Without the decisions of the Kuwaiti courts in the YAAS
Accounting Action, defendants are left without any substantial
authority to sustain the premise that Omar and Waleed, as “third
parties” to the arbitration clauses may require plaintiff to
arbitrate against them pursuant to Kuwaiti law.
In

contrast,

plaintiff

summons

authority

that

non-

signatories cannot compel arbitration pursuant to Kuwaiti law.
Article 173 of the Civil and Commercial Procedure Code states,
“[a]rbitration may not be established, save in writing.”

See Pl. Opp’n 28 (citing Article 173 for

Al-Samdan Decl. Ex. E.
this

proposition).

provides,

First

Article

“[c]ontracts

only

203

of

benefit

parties and their successors.”

the
or

Civil
harm

Code

the

in

turn

contracting

First Ali Decl. Ex. D.

It

appears clear on the basis of a treatise on Kuwaiti law that an
“arbitration clause shall not be obligatory for other parties

27

who did not accept it.”

First Ali Decl. Ex. E.14

the

relevant

converse,

which

is

here,

also

Significantly,

seems

true.

In

another treatise on Kuwaiti law, the authors state, “[i]t is
. . . permissible to join a third party or ha[ve] their joinder
approved if the arbitration agreement does not permit this and
First Ali Decl. Ex. J 130.15

the joined person accepts.”
The

most

difficult

hurdle

for

defendants

to

overcome,

however, is the holding of the Kuwaiti Court of Cassation in the
YAAS Accounting Action itself.

It is implicit in this holding

that if YAAS was not a constituent element of the arbitration
agreement, then it would be a third party to the arbitration
agreement.

Defendants Omar and Waleed do not persuasively argue

why they are not third parties to the arbitration agreement or
why, as third parties, they may nonetheless compel arbitration.
While

this

conclusion

appears

to

make

the

choice

of

governing law outcome determinative at least with respect to
Omar

and

Waleed,

as

discussed

in

Part

III.E,

we

find

that

plaintiff’s claims against them should be stayed in any event
pending arbitration of his claims against Kutayba regardless of
what law applies.

14

AZMI ABDEL FATTAH ATTIYA, QANOON AL TAHKIM AL KUWAITI (1st ed. 1990).
SAID AHMED MOHAMMED & ABDUL SATAR AL MULLAH, AL TAHKIM AL ADI IN ISLAMIC SHARIA
KUWAITI LAW (1st ed. 1998).
15

28

AND

C. The Scope of the Agreement to Arbitrate
1. Federal Law
We now consider whether plaintiff’s claims are within the
scope of the arbitration clauses in the March Agreements, first
answering this question under federal law.

In Louis Dreyfus

Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218,
224 (2d Cir. 2001), the Second Circuit established a standard
approach

“[t]o

determine

whether

a

particular

dispute

falls

within the scope of an agreement's arbitration clause”:
First, recognizing there is some range in the breadth
of arbitration clauses, a court should classify the
particular clause as either broad or narrow. . . .
Next, if reviewing a narrow clause, the court must
determine whether the dispute is over an issue that is
on its face within the purview of the clause, or over
a collateral issue that is somehow connected to the
main agreement that contains the arbitration clause.
. . . Where the arbitration clause is narrow, a
collateral matter will generally be ruled beyond its
purview. . . . Where the arbitration clause is broad,
there arises a presumption of arbitrability and
arbitration of even a collateral matter will be
ordered if the claim alleged implicates issues of
contract construction or the parties' rights and
obligations under it.
Id. (internal citations and quotation marks omitted).
An arbitration clause covering “‘[a]ny claim or controversy
arising

out

of

or

relating

paradigm of a broad clause.”

to

th[e]

agreement,’”

arbitration

clause

“the

Collins & Aikman Prods. Co. v.

Bldg. Sys., Inc., 58 F.3d 16, 20 (2d Cir. 1995).
“[a]n

is

covering

29

claims

Furthermore,

‘relating

to’

a

contract is broader than a clause covering claims ‘arising out
of’ a contract.”

Int’l Talent Group, Inc. v. Copyright Mgmt.,

Inc., 629 F. Supp. 587, 592 (S.D.N.Y. 1986).

See also Genesco,

Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 845, 848 (2d Cir.
1987) (arbitration clause covering “[a]ny controversy arising
out of or relating to this contract”
one

covering

“[a]ll

claims

and

was “even broader” than

disputes

of

whatever

nature

arising under this contract”).
Where

an

arbitration

clause

is

broad,

the

resulting

“presumption of arbitrability . . . is only overcome if it may
be said with positive assurance that the arbitration clause is
not susceptible of an interpretation that covers the asserted
dispute.”

WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d

Cir. 1997) (internal quotation marks omitted).

This principle

reflects the fact that the FAA articulates “a strong federal
policy favoring arbitration as an alternative means of dispute
resolution,” Hartford Accident & Indem. Co. v. Swiss Reinsurance
Am.

Corp.,

“applies
Paramedics

246

with

F.3d

219,

particular

Electromedicina

226
force

(2d

Cir.

in

Comercial,

2001),

which

international
Ltda.

v.

GE

policy

disputes.”
Med.

Sys.

Info. Techs., Inc., 369 F.3d 645, 654 (2d Cir. 2004).
Still, arbitration under the FAA “is a matter of consent,
not coercion.”

Stolt-Nielsen S.A. v. AnimalFeeds International

Corp., 130 S. Ct. 1758, 1773 (2010) (internal quotation marks

30

omitted).
policy

Thus, “[w]hile the FAA expresses a strong federal

in

enacting

favor
the

of

FAA

arbitration,
‘was

to

make

the

purpose

of

arbitration

Congress

in

agreements

as

enforceable as other contracts, but not more so.’”

JLM Indus.,

Inc.

Cir.

v.

Stolt-Nielsen

SA,

387

F.3d

163,

171

(2d

2004)

(quoting Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel, 346
F.3d

360,

364

(2d

Cir.

2003))

(emphasis

and

brackets

in

original).
Finally,

“‘[i]n

determining

whether

a

particular

claim

falls within the scope of the parties' arbitration agreement, we
focus on the factual allegations in the complaint rather than
the legal causes of action asserted.’”

Oldroyd v. Elmira Sav.

Bank, F.S.B., 134 F.3d 72, 77 (2d Cir. 1998) (quoting Genesco,
815 F.2d at 846).
touch

matters

“‘If the allegations underlying the claims

covered

by

the

parties'

contracts,

then

those

claims must be arbitrated, whatever the legal labels attached to
them.’”

JLM, 387 F.3d at 172 (quoting Oldroyd, 134 F.3d at 77).

The arbitration clauses of the March Agreements are broad.
The March 12 Agreement speaks of “any dispute aris[ing] in the
future between” the brothers.

First Al-Essa Decl. Ex. B ¶ 7.

The MOU in turn speaks of “any dispute arising in the future
between [the brothers] related to the subject matter of this
agreement.”

First Al-Essa Decl. Ex. C ¶ 15.

We agree with

plaintiff that the context of the March 12 Agreement and MOU

31

must be considered in interpreting the former’s reference to
“any dispute.”

See Pl. Opp’n 22-23.

The arbitration clause of

the MOU, however, is itself broad and so plaintiff’s claims are
presumptively within its scope.
The following allegations in the complaint are particularly
relevant to assessing whether the arbitration clauses can be
interpreted to encompass plaintiff’s claims:
This
is
a
case
of
brotherly
betrayal
through
industrial espionage designed to steal attorney-client
privileged communications.
In the midst of a bitter
family battle between [p]laintiff and his brother
. . . over the break-up of their multi-billion dollar
business empire, [d]efendants embarked upon a covert
program of industrial espionage designed to undermine
[p]laintiff’s position and gain an unfair advantage in
the ongoing negotiations and legal proceedings.
Compl. ¶ 1.
As
a
result
[of
securing
real-time
access
to
plaintiff’s strategic planning and legal advice],
[d]efendants were able to derail the negotiations,
assert and maintain their control over the brothers’
joint assets and use them for their own benefit, and
continue their strategy of trying to force [p]laintiff
to take less than his fair share of the brothers’
joint assets by denying him access to his assets and
income.
Compl. ¶ 14.
Plaintiff and [d]efendant Kutayba have been embroiled
in a contentious and acrimonious dispute over the
division of their assets ever since the [March
Agreements]
were
entered
into.
As
a
result,
[p]laintiff was required to engage lawyers in the
United States and Kuwait to protect [p]laintiff’s
interests and to represent him in negotiations with
Kutayba . . . . In the course of the negotiations and
in preparation for the possibility of litigation with

32

respect to the brothers’ underlying business disputes,
[p]laintiff repeatedly consulted his attorneys . . .
exchang[ing]
numerous
privileged
communications
regarding
the
strategy
to
be
followed
in
the
negotiations and litigation and the legal advice
regarding various aspects of the dispute. Almost all
of this legal advice was sent to and received by
[p]laintiff
at
his
. . .
email
addresses
that
[d]efendants Kutayba and Omar caused to be hacked into
. . . .
Compl. ¶¶ 42-44.
[Defendants and their agents] formed an associationin-fact . . . for the common and continuing purpose of
implementing their scheme to steal [p]laintiff’s
emails and the information contained in them, which
were used by Kutayba and Omar to assert and maintain
control of the joint assets belonging to [p]laintiff
and Kutayba.
Compl. ¶ 83.
The unlawful conduct of [d]efendants . . . has caused
[p]laintiff very substantial damages in an amount to
be proven at trial.
Not only has [p]laintiff been
required
to
expend
large
amounts
of
money
to
investigate the wrongdoing and attempt to protect his
confidential
communications,
but
it
has
allowed
[d]efendants Kutayba and Omar to assert and illegally
maintain control over the brothers’ joint assets,
parry all of his efforts to obtain his assets and
income and deprived him of the value of the legal
advice for which he paid substantial sums.
This has
enabled Kutayba and Omar to prolong their campaign of
wrongfully barring [p]laintiff from the use and
enjoyment of his assets and is allowing them to
continue their wrongful use of [p]laintiff’s assets
for their benefit.
The losses [p]laintiff is
sustaining by reason of that campaign of obstruction
and self-dealing are in the many hundreds of millions
of dollars.
Compl. ¶ 113.
Against this backdrop, plaintiff argues that his claims do
not

relate

to

the

subject

matter
33

of

the

March

Agreements,

asserting that these claims “neither implicate construction of
the

[March

Agreements]

nor

present

questions

respecting

parties[’] rights and obligations under [them].”

Pl. Opp’n. 22

(internal quotation marks and citations omitted).
plaintiff’s

argument,

the

complaint’s

the

Contrary to

allegations

clearly

implicate the rights and obligations of the brothers pursuant to
the March Agreements and so squarely relate to their subject
matter.

Plaintiff does not challenge defendants’ claim that the

“disputes” and “litigation” to which he refers throughout the
complaint are “directly related to the division of his family’s
business

and

assets,

[March] Agreements.’”
represents

which

is

the

‘subject

Defs. Br. 6-7 n. 6.

plaintiff’s

“fair”

share

of

matter’

of

the

Regardless of what
the

commonly-owned

property, see Compl. ¶ 14, the share to which he is legally
entitled

is

that

set

in

the

March

Agreements,

which,

as

plaintiff acknowledges, govern “the division of the brothers’
empire.”

Id. at ¶ 38.

The email-hacking scheme, pursuant to

plaintiff’s allegations, is therefore easily comprehended as a
coordinated endeavor to deny him his rights under the March
Agreements.

Moreover, in connection with each of his ten causes

of action, plaintiff includes among his losses “the consequences
flowing

from

the

disclosure

strategic legal advice.”
167, 172, 177, 183, 195.

of

privileged

and

confidential

Id. at ¶¶ 121, 131, 145, 155, 162,
Assessing whether the compensatory

34

damages

that

result

from

these

consequences

amount

to

“many

hundreds of millions of dollars,” id. at ¶ 113, as plaintiff
asserts, necessarily requires consideration of the terms of the
March

Agreements

plaintiff

is

that

alone

entitled

and

determine
thus

the

assets

value

of

plaintiff’s

attempts

to

recast

the

to

which

allegedly compromised legal positions.
In

his

submissions,

plaintiff

his

complaint by claiming that “the significant part of [his] injury
. . . did not even have a relationship to business” because it
“principally [consisted of] the invasion of privacy by stealing
[plaintiff’s]
medical

personal

matters.”

disingenuous

at

emails

Pl.

concerning

Opp’n

best.

25.

Viewing

family,

This

the

health

and

representation

complaint

in

the

is
most

favorable light to plaintiff, concern over the harm wrought by
disclosure of such personal information is at best subsidiary
and,

in

the

afterthought.
these

email

context

of

all

the

allegations,

largely

an

See, e.g., Compl. ¶ 46 (“[p]laintiff also used
addresses

to

conduct

other

confidential

correspondence, including with respect to his medical and health
matters
things”).

and

personal

financial

transactions,

among

other

Only two causes of action even raise disclosure of

personal information and only do so after listing plaintiff’s
loss

of

counsel.”

“confidential

and

privileged

Id. at ¶¶ 175, 181.

35

communications

with

Plaintiff further suggests that his claims lie outside the
scope of the arbitration clauses because defendants’ conspiracy
arose independently from the contracts into which he and Kutayba
entered.

However, “a conspiracy which was formed independently

of the specific contractual relations between the parties” may
prove within an arbitration clause’s scope.

JLM, 387 F.3d at

175 (emphasis in original).
In

JLM,

as

plaintiff

argues,

the

alleged

conspiracy

occurred prior to the formation of the contracts that contained
arbitration
contracts,

clauses
which

and

the

impacted

Second

the

Circuit

price

term

emphasized

in

those

directly

gave

rise to plaintiff’s asserted damages and which is not the case
See id. at 167-68, 175.

here.

In finding that the conspiracy

was “in scope,” however, JLM relied heavily on Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), a
case

that

it

perceived

to

have

also

dealt

“with

a

broad

arbitration clause and the question of its applicability to a
dispute

resting

on

factual

allegations

which

concern

matters

beyond the making of a particular contract between the parties
and the performance of its terms.”
that

the

alleged

conspiracy

in

387 F.3d at 175.
Mitsubishi

had

Noting

similarly

“implicated matters well beyond those relating to the [relevant]
contract,” 387 F.3d at 173, the Second Circuit in JLM relied on
the

Supreme

Court’s

observation

36

in

“quite

persuasive

dictum”

that

“‘insofar

as

the

allegations

underlying

the

[federal

statutory] claims touch matters covered by the [contract], the
. . . Court of Appeals properly resolved any doubts in favor of
arbitrability.’”
13).

Id. (quoting Mitsubishi, 473 U.S. at 624 n.

In Mitsubishi, the conspiracy at issue only arose after

the relevant contract was entered into and did not therefore
influence that contract’s terms, which is precisely the case
here.16

In

light

of

JLM’s

reliance

on

Mitsubishi,

JLM’s

background premise that independent conspiracies may lie within
the

scope

of

arbitration

clauses

is

best

interpreted

to

encompass the facts of this case.
Apparently appreciating the consequences of his complaint,
plaintiff

pursues

a

rather

radical

course,

stating

in

his

submissions that “he will not seek any damages in this action
that depend upon the existence of the [March Agreements] and
[agrees] to so stipulate.”
¶¶ 4-7.

Pl. Opp’n 28.

See also Bassam Decl.

As defendants argue, however, a plaintiff may not so

amend his complaint through his motion papers.

See Wright v.

Ernst & Young L.L.P., 152 F.3d 169, 178 (2d Cir. 1998).
Plaintiff finally falls back on a “conclusory allegation
that he did not intend for the arbitration clause[s] in [the
16
In Mitsubishi, in 1979, a manufacturer, its affiliate, and a distributor
entered into agreements to purchase and distribute cars.
473 U.S. at 617.
In 1981, the distributor attempted to arrange for transshipment of cars that
it was obliged to purchase, but the manufacturer and its affiliate refused
permission.
Id. at 617-18.
This refusal and the reasons given for it
provided the basis for the distributor’s antitrust allegations. Id. at 620.

37

March Agreements] to encompass [his asserted claims].”
134 F.3d at 77.

See Bassam Decl. ¶ 3.

Oldroyd,

As in Oldroyd, however,

here plaintiff “provides no basis for such a narrow construction
of his agreement to arbitrate.”
note,

“[i]t

extrinsic

is

well

evidence

134 F.3d at 77.

established

in

order

to

that

a

court

determine

the

As defendants
may

not

meaning

admit
of

an

unambiguous contract,” Omni Quartz, Ltd. v. CVS Corp., 287 F.3d
61, 64 (2d Cir. 2002).

See Defs. Reply 8 n. 6.

Plaintiff’s

subjective intent, as articulated in his submissions, regarding
the

scope

of

the

arbitration

clauses

is

extrinsic

evidence,

resort to which is inappropriate because the arbitration clauses
unambiguously encompass his claims.
While plaintiff fails to rebut the presumption that his
claims are encompassed within the broad arbitration clauses, we
need not rely on this presumption to reach our conclusion.

We

find, as a matter of straightforward contract interpretation,
that the complaint’s allegations relate to the subject matter of
the

March

Agreements

and

thus

are

within

the

scope

of

the

arbitration clauses.
2. Kuwaiti Law
Plaintiff’s
Kuwaiti law.

claims

are

equally

“in

scope”

pursuant

to

Article 173 of the Kuwaiti Civil and Commercial

Code provides:

38

The subject matter of the dispute shall be
in the agreement on arbitration . . . even
arbitrator is authorized to compromise
conciliation, otherwise the arbitration
deemed null and void.
First Al-Samdan Decl. Ex. E.

specified
when the
and hold
shall be

Interpreting this provision, the

Kuwaiti Court of Cassation has held:
[A]greements to arbitrate may be made regarding any
disputes which arise out of the implementation of a
contract in which case state courts cannot hear such
disputes.
Therefore, the courts shall not be
competent to examine disputes that the parties agreed
to submit to arbitration. This means that arbitration
is an exceptional means of recourse, limited to the
will of the parties.
First Nasser Decl. Ex. 14.17

It has further clarified that the

subject matter need not be “specified in a special or designated
manner” and that “it suffices to establish the premises within
which the conflict takes places [rather than] the particular
aspects

of

provided.”

conflict

for

which

the

arbitration

First Al-Samdan Decl. Ex. K.18

condition

is

In “discerning the

contractual intent” of the parties to an agreement to arbitrate,
however, the Kuwaiti Court of Cassation has made it clear that a
court’s “interpretation [must] hold[] to the contract’s text and
. . . not stray outside [its] explicit, comprehensive meaning.”
First Ali Decl. Ex. M.19
Finally,
Kuwaiti
17
18
19

Court

in
of

analyzing

an

Cassation

agreement
has

stated

to

arbitrate,

that

“litigants’

Kuwaiti Court of Cassation, Decision No. 132/1996, Nov. 4, 1996.
Kuwaiti Court of Cassation, Decision No. 441/1998, Feb. 1, 1999.
Kuwaiti Court of Cassation, Decision No. 157/1993, Dec. 19, 1993.

39

the

orientation of the case does not restrict nor prevent the court
from assimilating the case with its realities” and furthermore
“affording the proper orientation to it based [on] what the
court realizes in terms of [the] facts of the case [is] the
application
interpret

of

the

this

law.”

First

seemingly

Nasser

broad

Decl.

15.20

Ex.

statement

to

We

encourage

consideration of factual allegations as opposed to the legal
framework in which parties arrange such allegations.
Here, there is no dispute between the parties that the
specified

“subject

“implementation

of

matter”
the

of

the

[March

Agreements’]

brothers’ commonly-owned property.”
Al-Samdan

Decl.

¶ 47

(“the

arbitration

clauses

division

matter

of

the

See First

Pl. Opp’n 16.

subject

of

is

the

Agreements . . . is the division of family assets”).

[March]
In light

of the principles of Kuwaiti law discussed above, we agree with
the defendants’ assertion that the claims are within the scope
of

the

arbitration

clauses

pursuant

to

Kuwaiti

law

“for

substantially the same reasons that a court applying federal law
would reach that conclusion.”

Defs. Br. 19.

The parties agreed

to arbitrate disputes related to the subject matter of the March
Agreements, and as discussed above, plaintiff’s claims are so
related.

Plaintiff’s position to the contrary is simply an ipse

dixit without persuasive force.
20

See Pl. Opp’n 16.

Kuwaiti Court of Cassation, Decision No. 690/2005, Mar. 19, 2005.

40

D. The Arbitrability of the Asserted Claims
1. Federal Law
We now must decide whether, notwithstanding the fact that
plaintiff’s claims are within the scope of the March Agreements’
arbitration clauses, those claims are nonetheless nonarbitrable
as

a

matter

of

law.

In

the

Second

Circuit,

“if

federal

statutory claims are asserted, [courts] must consider whether
Congress intended those claims to be nonarbitrable.”

Oldroyd v.

Elmira Sav. Bank, FSB, 134 F.3d 72, 75-76 (2d Cir. 1998).

It

appears

of

that

plaintiff’s

courts

federal

Shearson/American

have

expressly

statutory

Exp.,

Inc.

claims
v.

found

at

to

arbitrable.

be

McMahon,

482

least

U.S.

two

220,

See
224

(1987) (civil RICO); TravelClick, Inc. v. Open Hospitality Inc.,
No. 04 Civ. 1224 (RJH), 2004 WL 1687204, at *5 n. 4 (S.D.N.Y.
July 27, 2004) (Computer Fraud and Abuse Act).
not

found

Stored

any

precedent

Communications

plaintiff

does

not

regarding

Act
appear

and
to

whether

Wiretap

Act

challenge

While we have

claims
are
the

under

the

arbitrable,
proposition.

Instead, plaintiff advances two separate arguments to support
the conclusion that the claims are nonarbitrable.

Both of these

arguments turn on the interpretation of Kuwaiti law.
2. “Kuwaiti Law” Argument #1
Plaintiff first argues that the Convention as ratified and
enacted through Chapter 2 of the FAA bars arbitration of the

41

asserted
Kuwaiti

claims
law.

because
Therefore,

they

are

plaintiff

nonarbitrable
contends

that

pursuant

to

defendants’

motion must be denied because:
(1) the “differences” sought to be arbitrated are not
“capable of being settled by arbitration” pursuant to
Article II(1) of the New York Convention; and (2) the
arbitration clause is “inoperative” and/or “incapable
of being performed” in this case for purposes of
Article II(3) of the [New York] Convention.
Pl. Opp’n 15.

See also Pl. Opp’n 2, 3, 5.

Plaintiff’s argument turns on the interpretation of the
Convention’s text, Article II(1) of which provides:
Each Contracting State shall recognize an agreement in
writing under which the parties undertake to submit to
arbitration all or any differences which have arisen
or which may arise between them in respect of a
defined legal relationship, whether contractual or
not, concerning a subject matter capable of settlement
by arbitration.
Convention Art. II(1).

In turn, Article II(3) provides:

The court of a Contracting State, when seized of an
action in a matter in respect of which the parties
have made an agreement within the meaning of this
article, shall, at the request of one of the parties,
refer the parties to arbitration, unless it finds that
the said agreement is null and void, inoperative or
incapable of being performed.
Convention Art. II(3).
The

weight

of

precedent

squarely

refutes

plaintiff’s

position that foreign law should be applied to determine whether
“a subject matter [is] capable of settlement by arbitration”
pursuant to Article II(1).

In Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 639 n. 21 (1985), the
42

Supreme Court noted, “[w]e do not quarrel with the Court of
Appeals'

conclusion

that

Art.

II(1)

of

the

Convention

. . .

contemplates exceptions to arbitrability grounded in domestic
law.”

See also In re U.S. Lines, Inc., 197 F.3d 631, 639 (2d

Cir. 1999); Lindo v. NCL (Bahamas), Ltd., 652 F.3d 1257, 1266
(11th Cir. 2011).
While some uncertainty appears to persist as to whether
domestic or foreign law governs whether an arbitration agreement
is “inoperative or incapable of being performed” pursuant to
Article

II(3),

we

find

that

the

most

persuasive

authority

supports the use of domestic law for the rule of decision.
Rhone

Mediterranee

Compagnia

Francese

Di

Assicurazioni

In
E

Riassicurazoni v. Lauro, 712 F.2d 50, 53 (3d Cir. 1983), the
Third Circuit found “that an agreement to arbitrate is ‘null and
void’

only

(1)

when

it

is

subject

to

an

internationally

recognized defense such as duress, mistake, fraud, or waiver
. . . or (2) when it contravenes fundamental policies of the
forum state” and so domestic law.
the

phrase

“null

and

void”

in

Though expressly addressing
its

conclusion,

the

Third

Circuit’s interpretation seems intended to address the entirety
See id.

of Article II(3).

While this district and others in

the Second Circuit have previously endorsed the Third Circuit’s
interpretation

of

Shipping

Ltd.

Co.,

Article
v.

II(3),

Rosseel,

43

see
N.V.,

Oriental
609

F.

Commercial
Supp.

75,

and
78

(S.D.N.Y. 1985); Apple & Eve, LLC v. Yantai North Andre Juice
Co., Ltd., 610 F. Supp. 2d 226, 229 (E.D.N.Y. 2009), the Second
Circuit

does

not

appear

to

have

addressed

the

question.

Nonetheless, even in the absence of controlling authority, we
find Rhone persuasive.

But see Bautista v. Star Cruises, 396

F.3d 1289, 1301-04 (11th Cir. 2005) (finding “an insufficient
basis

from

arbitrated

which

“plaintiff’s

in

to

the

conclude

that

Philippines”

non-arbitrability

but

this

dispute

nonetheless

argument

[premised

cannot

be

entertaining
on

Filipino

law] as one founded in Article II(3)’s final phrase, ‘incapable
of being performed’”).
Even if the contrary approach that plaintiff advances and
Bautista were to govern here, the outcome would not change.

As

discussed below, we do not agree with plaintiff’s position that
the asserted claims are nonarbitrable pursuant to Kuwaiti law.
2. “Kuwaiti Law” Argument #2
Plaintiff next argues that when “statutory” claims are at
issue in an arbitration to be conducted overseas, the question
arises whether a plaintiff can be compelled to arbitrate those
statutory claims.

He asserts that well-established case law

forbids compelling arbitration of his statutory claims because
pursuant to Kuwaiti law those claims are nonarbitrable and so
incapable of being vindicated in the arbitral forum.
Supp. Br. 9-10.

44

See Pl.

The

leading

Mitsubishi,

where

case
the

regarding
Supreme

the

issue

Court

of

vindication

addressed

concerns

is

over

whether a plaintiff would be able to vindicate federal antitrust
claims in the arbitral forum of Japan.
19.

See 473 U.S. at 637 n.

Once assured that “American” law would provide the rule of

decision, the Supreme Court noted, “so long as the prospective
litigant effectively may vindicate its statutory cause of action
in the arbitral forum, the statute will continue to serve both
its

remedial

and

deterrent

function.”

Id.

at

637.

In

a

footnote, the Supreme Court further observed:
[W]e [need not] consider now the effect of an arbitral
tribunal's failure to take cognizance of the statutory
cause of action on the claimant's capacity to
reinitiate suit in federal court. We merely note that
in the event the choice-of-forum and choice-of-law
clauses operated in tandem as a prospective waiver of
a party's right to pursue statutory remedies for
antitrust violations, we would have little hesitation
in condemning the agreement as against public policy.
Id.

Though dicta, this discussion of vindication in Mitsubishi

was long ago recognized in the Second Circuit as the basis for
inquiring into whether an agreement to arbitrate overseas would
act as a prospective waiver of federal statutory claims.

See

Roby v. Corp. of Lloyd’s, 996 F.2d 1353, 1364-66 (2d Cir. 1993)
(adopting

Mitsubishi

dicta

but

finding

English

law

permitted

vindication of federal statutory claims).21

21

We note that plaintiff largely refers to vindication of his “statutory” as
opposed to “federal” and “state” statutory causes of action. See Pl. Supp.
Br. 9-10. In Mitsubishi, the Supreme Court did not expressly specify whether

45

In subsequent cases of the Supreme Court and the Second
Circuit interpreting Mitsubishi, three principles have emerged
that are of particular relevance here.

First, where there is

uncertainty over whether federal statutory law will apply in a
foreign arbitral forum and whether foreign law, if applied, will
prevent vindication of federal statutory claims, the resistance
of plaintiffs to arbitration on that basis is premature.

See

Vimar Seguros y Reaseguros, SA v. M/V Sky Reefer, 515 U.S. 528,
539-41 (1995) (noting “[t]he relevant question . . . is whether
the

substantive

forum]

will

law

reduce

to

be

applied

[defendant’s

[in

the

obligations]

foreign
below

arbitral
what

[the

federal statute] guarantees” and emphasizing “mere speculation
that the foreign arbitrators might apply [foreign] law which,
depending on the proper construction of [the federal statute],
might reduce [defendant’s] legal obligations, does not in and of
itself lessen liability under [that statute]”); JLM Indus., Inc.
v. Stolt-Nielsen SA, 387 F.3d 163, 181-82 (2d Cir. 2004) (citing
Vimar Seguros and finding vindication rationale premature).
Second,

concerns

over

the

anticipated

ability

(or

lack

thereof) of foreign arbitrators to apply federal statutory law
do not provide grounds for avoiding arbitration.

In JLM, the

it was addressing federal or both federal and state statutory claims.
See
473 U.S. at 636-37.
Because Mitsubishi definitely addressed vindication of
at least federal statutory claims, we will assume that it applies to federal
statutory claims alone. Plaintiff has not cited any precedent suggesting an
alternative interpretation.
In any event, this assumption does not impact
the outcome.

46

Second Circuit reiterated “the imperative” that it perceived in
both

Mitsubishi

and

Vimar

Seguros

“of

avoiding

the

‘disparage[ment of] the authority or competence of international
forums for dispute resolution.’”

387 F.3d at 182 (quoting Vimar

Seguros, 515 U.S. at 537) (brackets in original).
Third, the burden of showing that a federal statutory claim
is incapable of vindication lies with the litigant seeking to
avoid

arbitration.

Randolph,

531

See

U.S.

79,

Green
90

Tree

(2000)

Fin.

Corp.-Alabama

v.

(citing

Mitsubishi

and

examining the record to determine whether evidence existed to
support

plaintiff’s

claim

that

arbitration

costs

effectively

prevented her from vindicating federal statutory claims); Guyden
v. Aetna, Inc., 544 F.3d 376, 386-87 (2d Cir. 2008) (citing
Mitsubishi

and considering whether an arbitration agreement’s

discovery

terms

prevented

statutory

claims

but

plaintiff

finding

from

plaintiff

evidence that her fears are well-founded”).
plaintiff

in

Ragone

that

“a

federal

vindicating
“has

federal

introduced

no

The dicta cited by
court

will

compel

arbitration of a statutory claim only if it is clear that ‘the
prospective

litigant

effectively

may

vindicate

its

statutory

cause of action in the arbitral forum,’ such that the statute
under which its claims are brought ‘will continue to serve both
its

remedial

and

deterrent

function,’”

47

does

not

alter

the

allocation of this burden.

595 F.3d at 125 (quoting Mitsubishi,

473 U.S. at 637).
In this case, as in Mitsubishi, it appears that federal
statutory

law

would

statutory

claims.

govern
In

the

Article

arbitration
66,

the

of

plaintiff’s

Kuwaiti

Civil

Code

provides, “[o]bligations arising from unlawful business shall be
governed by the laws of the country in which the act giving rise
to

the

obligation

took

place.”

First

Nasser

Decl.

Ex

3.

Experts on both sides agree that federal statutory law would
provide the rule of decision in the arbitration, although each
side would like us to draw a different conclusion therefrom.
Citing this provision, Ms. Ali, plaintiff’s expert, asserts that
the

Kuwaiti

plaintiff’s

Prime
claims

Minister
pursuant

would
to

be

federal

obliged
statutory

to

arbitrate

law

because

these claims, which Ms. Ali characterizes as “crimes and or tort
committed in the US,” are ones “which Kuwaiti law recognizes as
subject to US law.”

First Ali Decl. ¶ 28(d).22

Similarly citing

this provision, Dr. Nasser, defendants’ expert, asserts, “[i]f
the dispute in question relates to a tort and such tort took
place in [a] foreign country, the Kuwaiti judge or arbitrator
would apply the laws of that foreign jurisdiction.”

22

Second

For this reason, Ms. Ali argues that “[i]t is inconceivable that the Prime
Minister of Kuwait” has agreed to arbitrate the statutory claims. First Ali
Decl. ¶ 28(d). Pursuant to Mitsubishi and the second of the three principles
that emerge from its progeny, however, we refuse to disparage the ability of
a foreign arbitrator to interpret and apply federal statutory law.

48

Nasser Decl. ¶ 28.

See also Second Al-Samdan Decl. ¶¶ 37-38.

To the extent that Dr. El-Kosheri, plaintiff’s expert, disputes
this conclusion, his argument is unsupported.

See Second El-

Kosheri Decl. ¶ 20.
Notwithstanding

plaintiff’s

agreement

that

federal

statutory law applies, he nonetheless argues for two seemingly
independent reasons that he would not be able to vindicate his
statutory claims because Kuwaiti law makes them nonarbitrable.
Pursuant to Vimar Seguros, we find plaintiff’s arguments as to
how

the

Prime

Minister

of

Kuwait

or

Kuwaiti

courts

will

interpret Kuwaiti law speculative and premature at least as to
his “public order” rationale.

Moreover, we find all of his

arguments lacking in substantive merit.
i. Public Order
Plaintiff argues that Article 173 of the Kuwaiti Civil and
Commercial Procedures Code forbids arbitration of claims that
allege

“intentional

criminal
original).

misconduct.”

tortious
Pl.

conduct”
Supp.

or

Br.

4,

raise
6

“issues

of

(emphasis

in

The heated dispute between the parties on this point

concerns the scope of the concept of “public order” in Kuwaiti
law.

Article 173 states, “[a]rbitration may not be held in the

matters where a compromising conciliation [or ‘solh’] may not be
reached.”

First Al-Samdan Decl. Ex. E.

In turn, Article 554 of

the Kuwaiti Civil Code provides, “[r]econciliation [or ‘solh’]

49

is not possible in matters related to public order, but it is
possible regarding financial rights arising therefrom.”
Ali Decl. Ex. D.23

First

With regard to the meaning of “public order,”

among the materials submitted by plaintiff are excerpts of a
treatise on Kuwaiti law, which observes:
There is no doubt that the issues related to the
foundations of the state’s political, economical,
social and moral systems are considered Public Order
issues.
Because these foundations are developed by
society . . . the idea of public order evolves.
First Ali Decl. Ex. E.24

Further explicating this abstract and

fluid concept of public order, this treatise later continues:
According
to
the
doctrine
of
the
contemporary
procedural
jurisprudence,
we
should
distinguish
between issues related to the public order in nature
to be excluded from the scope of arbitration because
they are of interest to the public order, and issues
that touch the public order.
As the lat[t]er should
not be excluded from the scope of arbitration at
first, yet they should be excluded if a violation to a
certain
prescriptive
provision
occurred
and
was
related to the public order.
. . .
There are some issues related in nature to the public
order whereas there is no need to find out whether
there is a particular provision related to the public
order that has be[en] violated or not.
These issues
are of interest to the public order because they aim
to protect the high interests of the society.
For
23

Plaintiff argues that Article 554’s exception regarding “financial rights
arising” from matters related to public order contemplates an initial
adjudication of liability in those matters. See Second Ali Decl. ¶¶ 23-25.
It is not clear that plaintiff’s interpretation is correct; however,
defendants do not squarely address this particular contention in discussing
the exception, see Third Nasser Decl. ¶¶ 16-19, and because we find that the
claims do not relate to public order, we do not base our decision on this
somewhat ambiguous provision.
24
AZMI ABDEL FATTAH ATTIYA, QANOON AL TAHKIM AL KUWAITI (1990).

50

example, the issues
status, and crimes.
Id.

of

status,

capacity,

personal

On what acts constitute “crimes,” this treatise finally

explains, “[t]he crimes where arbitration is not permitted mean
the actions that are prohibited by the Criminal Law.”
There
involve

is

no

“issues

suggestion

of

status,

here

that

capacity,

the

[or]

Id.

asserted
personal

claims
status.”

Therefore, the asserted claims may relate to the public order
pursuant to Article 554 only if (i) they implicate issues that
“touch”
violated

the
that

public

order

relates

to

and
the

a

prescriptive

public

order

provision

or

(ii)

they

is
are

crimes articulated in Kuwaiti law.
With regard to the first inquiry, we agree with plaintiff
that civil claims may relate to public order.
5; Second Ali Decl. ¶ 11.

See Pl. Supp. Br.

Ms. Ali quotes facially supportive

language from a passage in the treatise discussed immediately
above that provides that arbitration is not permitted for a
“dispute

that

arises

from

violating

a

human

right

individual over the integrity of his body[] or
right that protects [an individual’s] privacy.”
Ex. E.

See Second Ali Decl. ¶ 15.

of

an

violating a

First Ali Decl.

The only underlying right,

however, to which Ms. Ali directs this Court is “the prohibition
on ‘[s]olh’ in the case of liability relating to future torts as
set forth in [A]rticle 254 of the [Kuwaiti] Civil Code,” which

51

“prohibition is a matter of [p]ublic [o]rder.”

Second Ali Decl.

¶ 17 (emphasis in original).
Article

254

of

the

Kuwaiti

Civil

Code

provides,

“[a]ny

agreement signed prior to the occurrence of the illegal act that
has the effect of exonerating liability arising from the tort,
either in whole or in part will be void.”

First Ali Decl. Ex.

D.

inherently

Arbitration,

however,

does

not

involve

exoneration of liability and the March Agreements do not purport
to limit any substantive rights.
procedural
persuasive.

rights

is

akin

to

Ms. Ali’s argument that losing
exonerating

liability

See Second Ali Decl. ¶ 31 n. 5.

is

not

Beyond Article

254, Ms. Ali references no other support for her argument.
With regard to the second inquiry, we initially emphasize
that any argument that as a matter of federal or state statutory
law the Kuwaiti Prime Minister would be obliged to determine the
existence of a crime or assess criminal liability in arbitrating
plaintiff’s

civil

claims

Kosheri Decl. ¶¶ 9-13.

is

unsupportable.

See

Second

El-

Pursuant to federal and state statutory

law, the issues raised in plaintiff’s causes of action are not,
in the words of a treatise quoted by Dr. El-Kosheri, within
“‘the exclusive jurisdiction of the criminal justice system.’”
Second El-Kosheri Decl. ¶ 10.
We further find that the only Kuwaiti penal provision that
plaintiff cites does not support his position.

52

“Law No. 9 of

2001 Regarding the Abuse of Telephones And Wiretapping Devices,”
which both Ms. Ali and Dr. El-Kosheri reference, see First Ali
Decl. ¶ 28(e); First El-Kosheri Decl. ¶ 40, and which provides
for prison sentences, certainly appears to be a criminal law.
However,

the

law,

based

on

its

title

and

content,

appears

limited to the abuse and wiretapping of spoken communications
over the telephone alone.25

Contrary to Ms. Ali’s implication,

see First Ali Decl. ¶ 28(e), and plaintiff’s simple assertion,
see Pl. Opp’n 15 n. 11, we find that the law is not facially
applicable to the email-hacking scheme.26
Thus plaintiff has not demonstrated that his claims relate
to public order.

25

The law’s title, “Regarding the Abuse of Telephones And Wiretapping
Devices,” does not suggest so broad a scope that would naturally encompass an
entire swath of electronic communications but rather refers to a physical
device used for spoken communications.
First Ali Decl. Ex. L.
The law’s
content appears even more strongly to counsel for a narrow interpretation.
While the law does refer to “any method of telephonic communications,” which
is somewhat ambiguous, it also discusses the use of wiretapping devices “to
record or transmit conversations made using a communications device” and the
erasure and destruction of “any recordings” illicitly made.
Id.
The law
also regulates the transmittal of “[i]nternational calls from and to the
state of Kuwait.” Id.
26
We note that this conclusion does not alter the consensus of the parties
and this Court that federal statutory law would govern in any arbitration in
Kuwait.
While Article 66 of the Kuwaiti Civil Code provides that
“[o]bligations arising from unlawful business shall be governed by the laws
of the country in which the act giving rise to the obligation took place” it
qualifies this statement with the assertion, “[h]owever, the provision of the
preceding paragraph shall not apply to incidents taking place abroad and
which are lawful in Kuwait even [though] they were considered unlawful in the
country in which they took place.” First Nasser Decl. Ex. 3. We interpret
this article to provide that Kuwaiti law must affirmatively make certain
conduct lawful for the article’s exception to apply and assume that email
hacking is not so blessed.

53

ii. Future Torts
Plaintiff

next

argues

that

arbitration of future torts.
part,

Article

173

Article

173

does

See Pl. Supp. Br. 6.

provides,

“[a]greement

may

not

permit

In relevant
be

made

on

arbitration in a specific dispute and on arbitration in all
disputes arising from the implementation of a certain contract.”
First

Al-Samdan

Decl.

Ex.

E.

Both

parties

agree

that

the

arbitration clauses of the March Agreements are of the latter
permissible
statements

variety.
and

Stripping

cross-references,

away

layers

plaintiff

of

conclusory

essentially

argues

that a future tort cannot qualify as a dispute arising from the
implementation

of

a

certain

contract.

In

support

of

this

position, plaintiff relies on Ms. Ali’s statement:
[A]n agreement [to arbitrate all disputes that arise
from
the
performance
of
a
specific
contract]
necessarily refers to the disputes arising from
performance
of
contractual
obligations
of
[the]
specific contract because agreements to arbitrate must
relate to disputes arising from an existing legal
relationship relating to a financial interest capable
of disposition, in this case contractual.
These do
not include crimes or torts, as these are not disputes
that arise from the performance of contractual
obligations of a specific contract, but rather from
violations of the law and duty of care imposed by the
law.
Prior to the occurrence of a crime or a tort,
the parties have no legal relationship relating to a
financial interest arising from the tort or the crime
that can be the subject matter of [an] arbitration
agreement.
First Ali Decl. ¶ 10.

Ms. Ali does not cite any authority for

her conclusion that future torts are nonarbitrable.

54

Article 173 does not require or even appear to encourage
such

an

interpretation.

arbitration

agreement

For

instance,

specify

“[t]he

dispute” that it will govern.

it

provides

subject

matter

that

an

of

the

First Al-Samdan Decl. Ex. E.

Requiring identification of the subject matter of the dispute
appears to invite arbitration of any dispute that both pertains
to

that

subject

implementation
underlying

of

cause

matter
the
of

and

can

relevant

action.

A

be

said

contract,
future

to

arise

regardless

tort

that

from

of

the

frustrates

performance of a contract seems to be no less a dispute arising
from implementation of the contract than a disagreement over
that contract’s terms.

Ms. Ali, however, ascribes a definition

to “arising” that would restrict the scope of disputes as a
matter of law to causes of action based in contract alone.
interpretation
arbitration

would

agreements

appear

to

encourage

through

artful

pleading

avoidance
of

Her
of

contract

claims as tort claims, a possibility that further weighs against
plaintiff’s position, which appears artificially constraining.
Ms. Ali’s citation to Article 254 of the Civil Code, see
First Ali Decl. ¶ 10, for the proposition that future torts are
nonarbitrable is equally unavailing.

As already discussed at

pages 51 to 52, we reject plaintiff’s argument that arbitration
of future torts violates Article 254.

55

Accordingly, plaintiff has failed to carry his burden of
showing

that

pursuant

to

his

federal

Kuwaiti

law

statutory
and

so

claims

cannot

be

are

nonarbitrable

vindicated

in

the

all

of

arbitral forum.27
E. The Stay of This Action Pending Arbitration
Pursuant

to

both

federal

law

and

Kuwaiti

plaintiff’s claims against Kutayba are arbitrable.

law

Accordingly,

a stay of these claims pursuant to 9 U.S.C. § 3 is required.
Pursuant to Kuwaiti law, however, Omar’s and Waleed’s status as
non-signatories renders plaintiff’s claims against them outside
the arbitration clauses of the March Agreements.

We therefore

must decide whether to exercise this Court’s inherent power to
manage

its

docket

pending arbitration.

and

also

stay

these

nonarbitrable

claims

See Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 20 n. 23 (1983) (observing “[i]n some
cases, of course, it may be advisable to stay litigation among
the

non-arbitrating

parties

pending

the

outcome

of

the

arbitration. That decision is one left to the district court
. . . as a matter of its discretion to control its docket”).
See also WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 76 (2d Cir.
27

In addition to the theories of public order and future tort, plaintiff also
argues that the Kuwaiti Prime Minister would have to refrain from arbitrating
the asserted claims because they lie outside his permitted jurisdiction
pursuant to Kuwaiti law.
See Pl. Supp. Br. 6.
This argument, however, is
little more than an assertion that pursuant to Kuwaiti law plaintiff’s claims
are outside the scope of the arbitration clauses in the March Agreements.
See Second Ali Decl. ¶ 32(b); Second El-Kosheri Decl. ¶¶ 16-18.
For the
reasons discussed above, that premise does not withstand analysis.

56

1997)

(staying

suit

pending

arbitration

and

noting

“district

courts . . . may stay a case pursuant to the power inherent in
every court to control the disposition of the causes on its
docket with economy of time and effort for itself, for counsel,
and for litigants”) (internal quotation marks omitted).
In the context of a stay pending arbitration, the Second
Circuit has held that the movant must demonstrate that a stay is
merited.
“there

See id.

are

issues

The movant must initially establish that
common

to

the

arbitration

and

the

court

proceeding,” and that “those issues will be finally determined
by

arbitration.”

American

Shipping

Line,

Inc.

v.

Massan

Shipping Indus., Inc., 885 F. Supp. 499, 502 (S.D.N.Y. 1995)
(citing Sierra Rutile Ltd. v. Katz, 937 F.2d 743, 750 (2d Cir.
1991)).

If this requirement is met, then “the moving party

[must show] that [it] will not hinder the arbitration, that the
arbitration will be resolved within a reasonable time, and that
such delay that may occur will not cause undue hardship to the
Id. (citing Sierra, 937 F.2d at 750).

non-moving parties.”

A

stay is “particularly appropriate” where it “promote[s] judicial
economy,
results.”

avoidance

of

confusion

and

possible

inconsistent

Birmingham Assocs. Ltd. v. Abbott Labs., 547 F. Supp.

2d 295, 302 (S.D.N.Y. 2008).
Here,

the

claims

against

Kutayba,

Omar,

and

Waleed

are

largely identical, and the judicial economy achieved in awaiting

57

the resolution of issues in arbitration may prove considerable.
More

specifically,

collateral

in

estoppel

the

has

Second

long

Circuit,

been

the

applied

doctrine

to

of

arbitrator’s

decisions, see Goldstein v. Doft, 236 F. Supp. 730 (S.D.N.Y.
1964), aff'd, 353 F.2d 484 (2d Cir. 1965), cert. denied, 383
U.S. 960 (1966) (finding collateral estoppel applicable where
defendant was not a party to arbitration proceedings in which
plaintiff was given a full opportunity to litigate issues), and
the effects of foreign arbitration are no less preclusive than
See Weizmann Inst. of Sci. v. Neschis,

domestic arbitration.

421 F. Supp. 2d 654, 676-683 (S.D.N.Y. 2005) (finding plaintiffs
collaterally

estopped

from

re-litigating

arbitration proceedings in Lichtenstein).
thus

be

able

determinations

to

defensively

to

deploy

collaterally

decided

favorable

plaintiff

litigating the same issues in this action.

in

Omar and Waleed may

any

estop

issue

arbitral
from

re-

See Orange Chicken,

L.L.C. v. Nambe Mills, Inc., No. 00 Civ. 4730 (AGS), 2000 WL
1858556, at *9 (S.D.N.Y. Dec. 19, 2000) (“binding arbitration of
the

claims

[between

signatories

arbitration

clause]

will

likely

to

a

contract

provide

containing

significant

an

insight

into, if not actually resolve, the [related] claims asserted in
this action” between a signatory and non-signatories).

See also

Argus Media Ltd. v. Tradition Fin, Servs. Inc., No. 09 Civ. 7966
(HB), 2009 WL 5125113, at *3 (S.D.N.Y. Dec. 29, 2009) (“numerous

58

courts have held that where arbitrable and non-arbitrable claims
arise

out

of

the

same

set

of

facts,

a

stay

usually

is

appropriate because the arbitration may decide the same facts at
issue in the litigation”).
Moreover, there is also no indication that Omar and Waleed
will impede the progress of any arbitration and similarly no
indication that the arbitration itself will not proceed in a
reasonable time.

Finally, a stay does not create undue hardship

for plaintiff.
With that said, under the precedent of the Second Circuit,
“[a] stay may provide that [a plaintiff] may move to vacate the
stay if [a defendant] impedes the arbitration process, or if the
arbitration

does

not

conclude

WorldCrisa, 129 F.3d at 76.

within

a

reasonable

time.”

This Court expects that the parties

will in good faith proceed to arbitration, and plaintiff may
seek an order vacating this stay should defendants hinder the
expeditious commencement and completion of arbitration.

59

IV. Conclusion

For the reasons discus
is

granted,

and

this

act

above, defendants' motion to stay
is

stayed

as

to

the

moving

defendants pending arbitration.

Dated:

New York, New York
November 28, 2011

vvd
UNITED STATES DISTRICT JUDGE

60

Order have been mail

Copies of the foregoing Memorandum
this date to the following:
iff
John
, Esq.
Jeffrey
, Esq.
Timothy G. Nelson, Esq.
Skadden,
, Slate, Meagher &
4 Times
New York, NY 10036

om L.L.P.

Michael Zweiback, Esq.
Nixon Peabody L.L.P.
555 West Fifth Street, 46th
Los Anoeles, CA 90013
Attorneys for Defendants

Kutayba Y. Alghanim and Omar :E<::Alghanim:

F. Schwed, Esq.

S. Weisberg, Esq.

stopher R. Fenton, Esq.
Shearman & Sterling L.L.P.
599 Lexington Avenue
New York, NY 10022
for Defendant
Waleed Moubarak:
H. Park, Esq.
Barry Junker, Esq.
& Jensen L.L.P.
630 Third Avenue
New York, NY 10017

61

on