Johnston v. Electrum Partners, LLC et al

Filing 34

OPINION AND ORDER: For the foregoing reasons, Defendants' motion to dismiss Plaintiff's claims is DENIED, and Defendants motion for a stay pending arbitration is GRANTED. The parties are ORDERED to provide joint status updates every 90 days from the date of this Opinion and Order regarding the parallel proceedings in the District of Nevada and any ensuing arbitration. SO ORDERED. (Signed by Judge Katherine Polk Failla on 6/21/2018) (ne)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------X
:
PAMELA JOHNSTON,
:
:
Plaintiff,
:
:
v.
:
:
ELECTRUM PARTNERS LLC and LESLIE :
BOCSKOR,
:
:
Defendants. :
:
------------------------------------------------------ X

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
June 21, 2018
DATE FILED: ______________

17 Civ. 7823 (KPF)
OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge 1:
In January 2016, Plaintiff Pamela Johnston (“Plaintiff” or “Johnston”)
entered into a working relationship with Defendant Electrum Partners LLC
(“Electrum”). The nature and terms of that relationship may be open to
dispute, but the parties agree that the relationship ended by August 2017.
Two months later, in October 2017, Plaintiff brought the instant action
claiming wrongful termination and retaliation under the New York City Human
Rights Law (“NYCHRL”), N.Y. City Admin. Code §§ 8-101 to 8-131. Specifically,
Plaintiff alleges that she was fired after reporting workplace misconduct to
Electrum’s management, including its founder, president, and managing
member, Defendant Leslie Bocskor (“Bocskor,” and together with Electrum,
“Defendants”). In addition, Plaintiff claims that she was terminated after, and

1

Holly Clancy, a rising second-year student at the University of Michigan School of Law
and an intern in my Chambers, provided substantial assistance in researching and
drafting this Opinion.

as a result of, advising Electrum that she had been diagnosed with an
advanced form of cancer.
Defendants have moved to dismiss the complaint or to stay the case
pending arbitration pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C.
§§ 1-16. For the reasons set forth in the remainder of this Opinion, the Court
will stay this litigation pending the results of an existing arbitration proceeding
in Nevada.
BACKGROUND 2
A.

Factual Background
1.

The Parties

Plaintiff is a public relations specialist who resides at and works from a
Manhattan address. (Compl. ¶¶ 2, 5). In furtherance of this business,
Johnston served as President and sole owner of Cloud 12 Group, Inc. (“Cloud
12”), a corporation of which she is also the sole shareholder and principal.
(See Bocskor Decl. ¶ 10; Pl. Opp. 8 (describing Cloud 12 as an “entity that

2

For ease of reference, the Court refers to Defendants’ Memorandum of Law in Support
of Their Motion to Dismiss the Action, or, Alternatively, Stay the Action Pending
Arbitration as “Def. Br.” (Dkt. #22); Plaintiff’s Memorandum of Law in Opposition to
Defendants’ Motion to Dismiss or in the Alternative Stay Arbitration as “Pl. Opp.” (Dkt.
#20); Defendants’ Reply Memorandum of Law in Support of Their Motion to Dismiss the
Action, or, Alternatively, Stay the Action Pending Arbitration as “Def. Reply” (Dkt. #19);
it refers to the transcript of the December 13, 2017 initial pretrial conference as “IPTC
Tr.” (Dkt. #12). In addition, this Opinion draws facts from the Complaint (“Compl.”
(Dkt. #1)), as well as the exhibits Defendants have submitted in support of their motion,
including Defendant Leslie Bocskor’s Declaration in support of Defendants’ motion
(“Bocskor Decl.” (Def. Br., Ex. A (Dkt. #22-1))); the Independent Contractor Agreement
(“ICA” (Def. Br., Ex. B (Dkt. #22-2))); the Demand for Arbitration and attached
Complaint, to which the Court provides citations according to the paragraph numbers
in that document (“Arb. Demand” (Def. Br., Ex. C (Dkt. #22-3))); the New Jersey
Business Gateway Status Report for Cloud 12 Group Inc. (“N.J. Report” (Def. Br., Ex. D
(Dkt. #22-4))); and a copy of Plaintiff’s driver’s license (“Pl. Driver’s License” (Def. Br.,
Ex. G (Dkt. #22-7))).

2

[Plaintiff] controlled”); ICA 7 (indicating Johnston signed as President of Cloud
12)). 3
Electrum began operations on or about January 6, 2014; Bocskor
founded the company, and he continues to act as its president and managing
member. (Bocskor Decl. ¶ 4). The company is incorporated in Nevada, and
operates out of Las Vegas. (See id. at ¶¶ 3, 5). Electrum “provides advisory
services and guidance to individuals and businesses engaged in the medical
and recreational cannabis industries.” (Id. at ¶ 6).
2.

The Independent Contractor Agreement

On January 4, 2016, Cloud 12 and Electrum entered into an
Independent Contractor Agreement (the “ICA” or “Agreement”). (ICA; see also
Pl. Opp. 8). Johnston signed the ICA on behalf of Cloud 12 in her capacity as
President, while Bocskor signed the ICA on behalf of Electrum in his capacity
as Managing Member. (Id. at 7). Per the terms of the ICA, Cloud 12 was to
serve as Electrum’s Director of Marketing until December 31, 2018, at which
point the ICA would terminate. (Id. at 2, 8). Either party could also terminate
the Agreement before that time “for any or no reason” upon 60 days’ notice.

3

The parties dispute the status of Cloud 12’s incorporation. Plaintiff contends that
“Cloud 12 is organized under the laws of the State of New York, having moved there
when Ms. Johnston relocated to New York.” (Pl. Opp. 11 n.4). Conversely, Defendants
point to Cloud 12’s New Jersey Business Gateway Status Report, along with a printout
of Cloud 12’s New York State Division of Corporations Entity Information, which
together indicate that Cloud 12’s corporate status was revoked on August 16, 2017, for
failure to file an “annual report for 2 consecutive years” (N.J. Report), and that Cloud 12
is not incorporated in New York but rather is registered as a “Foreign Business
Corporation” (Def. Reply, Ex. H). See also N.Y. Bus. Corp. Law § 102(a)(7) (defining
“Foreign corporation,” in part, as “a corporation for profit formed under laws other than
the statutes of this state”). This factual dispute is immaterial to the instant motion.

3

(Id. at 2). Although the ICA allowed the parties to “mutually agree to amend,
append or replace [the Agreement] with one another at any time,” the
Agreement could “not be modified, terminated, waived[,] altered or amended
except in writing, signed by [Cloud 12] and a duly authorized officer of”
Electrum. (Id. at 2, 7).
The ICA specified the duties and responsibilities that Cloud 12 was to
provide Electrum, including tasks involving “Communication Strategies,”
“Competitive Positioning,” and “Executive Reputation.” (ICA 8). Cloud 12
would also provide these services to entities beyond Electrum, including its
subsidiaries, clients, and partners. (Id.) In exchange, Electrum would pay
Cloud 12 “a fee of $8,500 per month,” along with stock options. (Id. at 1).
Bocskor contends, and nothing in the record contradicts, that (i) Johnston
performed all of the work for Cloud 12 that was requested by Electrum, but
(ii) all payments for Johnston’s work under the ICA were made by Electrum to
Cloud 12. (Bocskor Decl. ¶¶ 16-17).
Bocskor further contends that Johnston negotiated the terms of the ICA
with the express purpose of remaining an employee of only Cloud 12 and not
Electrum, so that she could continue to “perform work for other clients
through … Cloud 12, set her own schedule, and control the amount of personal
income she received so as not to adversely affect the financial aid her daughter
was receiving at college.” (Bocskor Decl. ¶ 12). Johnston also understood that
becoming an Electrum employee would require her to relocate to Nevada, a
move that she did not wish to make. (Id. at ¶ 13). Johnston’s bid for Cloud 12
4

to remain an independent contractor to Electrum is borne out by the terms of
the ICA, which terms provide that Cloud 12 would perform services for
Electrum “as an independent contractor,” and that Cloud 12 was “not a
partner, employee or agent of” Electrum. (ICA 2; see also, e.g., id. at 1-2
(providing that Cloud 12 would be reimbursed for certain “pre-approved”
expenses, but not any “equipment, tools, materials, and/or supplies to
accomplish” the services it would provide to Electrum); id. at 2 (providing that
Electrum would not withhold any taxes from its payments to Cloud 12, which
was “solely responsible” for making tax payments)).
Crucial to the instant motion, the ICA included an arbitration provision,
which stated, in relevant part:
Except as otherwise provided in this Agreement, any
and all controversies or claims arising out of or related
to this Agreement or the breach thereof shall be settled
by binding arbitration in Las Vegas, Nevada in
accordance with the rules of the Judicial Arbitration
and Mediation Service (JAMS), and judgment upon the
award rendered may be entered in any court having
jurisdiction. … Nothing in this Paragraph shall prevent
[Electrum] from seeking injunctive relief from the courts
pending arbitration.
(ICA 7). Also relevant to the analysis below, the ICA contained a choice-of-law
clause, providing that the “Agreement shall be construed in accordance with
and governed by the substantive and procedural laws of the State of Nevada,
regardless of its conflict of laws provision.” (Id.).
3.

The Alleged Oral Agreement

Not until August 2017 did any party to the ICA seek in writing to modify
or terminate the Agreement. Plaintiff alleges, nonetheless, that in June 2016,
5

she entered into an oral agreement with Electrum and Bocskor in her
individual capacity to become Senior Vice President of Strategy and Special
Projects for Electrum. (Compl. ¶¶ 20-21, 50). This, Plaintiff argues, made her
an Electrum employee, rather than an independent contractor, and thus no
longer subject to the ICA. (See id. at ¶ 22; Pl. Opp. 2). According to Plaintiff,
she then “became more involved in the day-to-day operations of Electrum” and
was given increased access to Electrum’s financial and management
information. (Pl. Opp. 2-3).
During a conference before the Court in anticipation of the instant
motion, Plaintiff’s counsel stated that when Plaintiff took on the new role at
Electrum in June 2016, “she started getting an additional $3,000 a month.”
(IPTC Tr. 5:9-10). Plaintiff, however, has provided no documentary evidence of
this pay increase, and Plaintiff’s counsel admitted that no written
documentation memorialized Plaintiff’s new responsibilities or increase in pay.
(Id. at 6:24-7:11). Plaintiff’s counsel also admitted that as “a matter of
convenience,” Electrum continued to pay Cloud 12 for Johnston’s services,
rather than Johnston directly. (Id. at 7:18-8:12).
4.

The Termination of the Relationship

The parties do not dispute that Plaintiff’s working relationship with
Electrum ended by August 2017. (Compl. ¶¶ 36-37; Bocskor Decl. ¶ 18).
According to Johnston, this occurred after she reported several instances of
inappropriate sexual behavior by Electrum employees to Bocskor and advised
him that she had been diagnosed with stage four breast cancer. (Compl.
6

¶¶ 26-29). Plaintiff claims that by July 2017, Defendants simply stopped
paying her, and that she was fired when she “expressed alarm” at this
development. (Id. at ¶¶ 36-37).
In contrast, Defendants contend that “[o]n August 5, 2017, following
numerous incidents involving Ms. Johnston and Cloud 12, Electrum provided
written notice to Cloud 12, via Ms. Johnston, that the ICA would terminate” in
60 days. (Bocskor Decl. ¶ 18). According to a Demand for Arbitration that
Electrum filed in Nevada, the “incidents” alleged against Johnston include
engaging in unprofessional conduct that cost Electrum money and clients;
subcontracting work to third parties and surreptitiously billing Electrum for
those subcontracts in violation of the ICA; and disclosing confidential
information to third parties in violation of the ICA. (See generally Arb. Demand
¶¶ 23-43). 4 By Defendants’ account, 20 days after notifying Cloud 12 that
Electrum would terminate the ICA, Cloud 12 ceased performing under the
Agreement. (Bocskor Decl. ¶ 19).
B.

Procedural Background
Plaintiff filed the Complaint in this action on October 11, 2017, bringing

claims for wrongful termination, aiding and abetting wrongful termination,

4

The Arbitration Demand indicates that Defendants filed it in Nevada on or around
November 3, 2017. (Arb. Demand 4). Defendants represent that in December 2017,
they initiated a parallel proceeding in the United States District Court for the District of
Nevada to compel Plaintiff to submit to arbitration for “for claims that Defendants have
against her and her company, Cloud 12.” (See Def. Reply 8). Defendants represent
further, that “[s]hould this Court grant Defendants instant Motion to Dismiss or Stay,
Defendants will move the District of Nevada for an order compelling Plaintiff to arbitrate
her claims asserted in this case against Defendants,” and that Defendants have notified
the Nevada court that the instant motion is pending. (Id.).

7

unlawful retaliation, and aiding and abetting unlawful retaliation under
NYCHRL. (Dkt. #1; Compl. ¶¶ 45-64). 5 On November 6, 2017, Defendants
filed a letter with this Court requesting a pre-motion conference to address
their anticipated motion to dismiss the action, or in the alternative, to stay it
pending arbitration. (Dkt. #5). Plaintiff filed a responsive letter on
November 9, 2017 (Dkt. #6), and the Court held the conference on
December 13, 2017 (Dkt. #12). In response to an inquiry from the Court
during the conference, Plaintiff later wrote to the Court to indicate that she did
not intend to amend her complaint (Dkt. #10), and the Court therefore set a
briefing schedule for the instant motion (Dkt. #11). On February 16, 2018,
Defendants filed their motion to dismiss, or alternatively, to stay the action
pending arbitration. (Dkt. #14-15). Plaintiff opposed the motion on March 20,
2018 (Dkt. #16), and Defendants replied to Plaintiff’s opposition on April 3,
2018 (Dkt. #19). 6

5

Although the Complaint alleges violations of the NYCHRL, it does not specify which
sections of that statute provide the bases for Plaintiff’s claims.

6

On April 17, 2018, Plaintiff requested a second pre-motion conference regarding an
anticipated motion to seek expedited discovery. (Dkt. #21). Due to Johnston’s cancer
diagnosis, her counsel sought to have her deposed in order to preserve her testimony
for a future trial or arbitral proceeding. (Id.) Defendants filed a letter opposing the
request on April 20, 2018, which also noted this Court’s individual rule requiring
parties to meet and confer before bringing a discovery dispute to the Court. (Dkt. #23).
Accordingly, on April 23, 2018, the Court directed the parties to meet and confer on the
issue of expedited discovery. (Dkt. #24). Following this directive, the parties proposed a
schedule for expedited discovery (Dkt. #27), which the Court endorsed on May 16, 2018
(Dkt. #28). The Court also issued a Stipulation and Order on that date reflecting the
same. (Dkt. #29).

8

DISCUSSION
A.

Applicable Law
1.

Motions to Stay Litigation Under § 3 of the FAA

The FAA represents a “liberal federal policy favoring arbitration
agreements[.]” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473
U.S. 614, 625 (1985) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24 (1983)). Accordingly, “where the contract contains an
arbitration clause,” the obligation to arbitrate a dispute “should not be denied
unless it may be said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute. Doubts
should be resolved in favor of coverage.” AT&T Techs., Inc. v. Commc’ns
Workers of Am., 475 U.S. 643, 650 (1986) (quoting United Steelworkers of Am.
v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960)).
Pursuant to § 3 of the FAA, where a district court determines that a suit
is referable to arbitration under an arbitration agreement, the court “shall on
application of one of the parties stay the trial of the action until such
arbitration has been had[.]” 9 U.S.C. § 3 (emphasis added). Stated more
particularly, the Court “must stay proceedings if satisfied that the parties have
agreed in writing to arbitrate an issue or issues underlying the district court
proceeding.” WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d Cir. 1997)
(emphasis added) (quoting McMahan Sec. Co. L.P. v. Forum Capital Markets L.P.,
35 F.3d 82, 85 (2d Cir. 1994)). The inquiry into whether such a stay is
appropriate requires the Court to consider:
9

[i] whether the parties agreed to arbitrate; [ii] the scope
of that agreement; [iii] if federal statutory claims are
asserted, … whether Congress intended those claims to
be nonarbitrable; and [iv] if … some, but not all, of the
claims in the case are arbitrable, … whether to stay the
balance of the proceedings pending arbitration.
Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 75-76 (2d Cir. 1998) (citing
Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir. 1987), abrogated
on other grounds by Katz v. Cellco P’ship, 794 F.3d 341 (2d Cir. 2015). Because
Plaintiff does not allege any federal claims and, as discussed below, does not
allege any claims that are not arbitrable, only the first two factors are
discussed in this Opinion.
2.

Standard Applicable to Motions Under § 3 of the FAA 7

A court reviewing a motion to stay litigation pending arbitration applies a
summary judgment standard. See Scott v. JPMorgan Chase & Co., No. 13 Civ.
646 (KPF), 2014 WL 338753, at *7 (S.D.N.Y. Jan. 30, 2014), aff’d, 603 F. App’x
33 (2d Cir. 2015) (summary order); Stewart v. Paul, Hastings, Janofsky &
Walker, LLP, 201 F. Supp. 2d 291, 291 n.1 (S.D.N.Y. 2002). Courts must
therefore “consider all relevant, admissible evidence submitted by the parties”
and “draw all reasonable inferences in favor of the non-moving party.” Id.
(citations omitted). “If there is an issue of fact as to the making of the
agreement for arbitration, then a trial is necessary.” Bensadoun v. Jobe-Riat,
316 F.3d 171, 175 (2d Cir. 2003) (citing 9 U.S.C. § 4).

7

Defendants disclaim any intention to move this Court to compel arbitration, as they
have already initiated an action in the District of Nevada to seek such relief. (See Def.
Reply 8).

10

Of note, in this context, “it is proper (and in fact necessary) to consider
extrinsic evidence … , and if the party seeking arbitration has substantiated
the entitlement by a showing of evidentiary facts, the party opposing may not
rest on a denial but must submit evidentiary facts showing that there is a
dispute of fact to be tried.” Fleming v. Crew, No. 16 Civ. 2663 (GHW), 2016 WL
6208570, at *2 (S.D.N.Y. Oct. 21, 2016) (internal quotation marks, citations,
and alterations omitted) (quoting Oppenheimer & Co. v. Neidhardt, 56 F.3d 352,
358 (2d Cir. 1995); BS Sun Shipping Monrovia v. Citgo Petroleum Corp., No. 06
Civ. 839 (HB), 2006 WL 2265041, at *3 n.6 (S.D.N.Y. Aug. 8, 2006)). As this
Court has noted, once the party seeking a stay of judicial proceedings has
proven that a valid arbitration agreement was made, the party opposing the
stay “generally bears the burden of showing the agreement to be inapplicable or
invalid.” Scott, 2014 WL 338753, at *7 (quoting Harrington v. Atl. Sounding Co.,
Inc., 602 F.3d 113, 124 (2d Cir. 2010)).
3.

Choice of Law

The ICA contains a choice-of-law clause stating that the “Agreement shall
be construed in accordance with and governed by the substantive and
procedural laws of the State of Nevada, regardless of its conflict of laws
provision.” Thus, at the outset, the Court must determine whether to look to
state or federal law to resolve the instant motion.
“[T]he Supreme Court has held that the FAA creates a ‘body of federal
substantive law of arbitrability,’” and thus, “even the inclusion in the contract
of a general choice-of-law clause does not require application of state law to
11

arbitrability issues[.]” Doctor’s Assocs., Inc. v. Distajo, 107 F.3d 126, 130-31
(2d Cir. 1997) (quoting Moses H. Cone Mem’l Hosp., 460 U.S. at 24). Such
arbitrability issues encompass those that would impact the “allocation of power
between courts and arbitrators.” Nat’l Union Fire Ins Co. of Pittsburgh, Pa. v.
Belco Petroleum Corp., 88 F.3d 129, 88 F.3d 129, 135 (2d Cir. 1996) (quoting
Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 60 (1995)); see also
Holzer v. Mondadori, No. 12 Civ. 5234 (NRB), 2013 WL 1104269, at *11
(S.D.N.Y. Mar. 14, 2013). These issues include, for instance, “the scope of
issues to be arbitrated[.]” Holzer, 2013 WL 1104269, at *11.
Yet, as another court within this District explained, while courts should
apply federal law to arbitrability issues “specifically directed at arbitration
proceedings,” where the issue is “one of general applicability to contracts,”
such as “whether a third party is bound by a contract,” courts should “honor
the [body of law selected by a] choice-of-law clause[.]” FR 8 Singapore Pte. Ltd.
v. Albacore Maritime Inc., 794 F. Supp. 2d 449, 454 (S.D.N.Y. 2011). Indeed, as
the Supreme Court has made clear, “[n]either [§ 2 nor § 3 of the FAA] purports
to alter background principles of state contract law regarding the scope of
agreements (including the question of who is bound by them),” and thus, “a
litigant who was not a party to the relevant arbitration agreement may invoke
§ 3 if the relevant state contract law allows him to enforce the agreement.”
Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009). Courts within
this Circuit have thus applied state-law principles to determine whether an
arbitration agreement may bind, or be enforced by, nonparties. See, e.g.,
12

Motorola Credit Corp. v. Uzan, 388 F.3d 39, 50-51 (2d Cir. 2004) (applying
Swiss law per choice-of-law clause to determine whether nonsignatory could
compel signatory to arbitrate); Ramasamy v. Essar Global Ltd., 825 F. Supp. 2d
466, 469 (S.D.N.Y. 2011) (applying Texas law per choice-of-law clause to
determine whether nonsignatory could compel signatory to arbitrate); FR 8
Singapore, 794 F. Supp. 2d at 454-59 (applying English law per choice-of-law
clause to determine whether signatory could compel nonsignatory to arbitrate
under alter ego theory).
Because the resolution of Defendants’ motion requires the Court to
determine whether Plaintiff is bound by the ICA’s arbitration agreement, the
Court will apply Nevada law to decide this issue, per the choice-of-law provision
within the ICA. The Court will apply federal law, however, to determine
whether Plaintiff’s claims fall within the scope of the arbitration agreement.
See Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela, 991
F.2d 42, 48 (2d Cir. 1993) (“The issue of an arbitration agreement’s scope is
governed by the ‘federal substantive law of arbitrability[.]’” (quoting Mitsubishi
Motors Corp., 473 U.S. at 626)).
B.

Plaintiff’s Claims Are Arbitrable
Although Plaintiff signed the ICA in her capacity as President of Cloud 12

rather than her personal capacity, Defendants contend that she is nonetheless
bound by its arbitration provision. Plaintiff counters, in the first instance, that
her claims relate to a separate oral agreement, and in the second instance, that
she is not personally bound by the ICA’s arbitration provision. Plaintiff’s
13

arguments are unpersuasive: She agreed to arbitrate under the terms of the
ICA, and the scope of the ICA’s arbitration provision is sufficiently broad to
encompass the claims she now brings.
1.

The Parties Agreed to Arbitrate
a.

Plaintiff Fails to Create a Triable Issue of Fact as to
Whether the Parties Entered into a Separate Oral
Agreement

Plaintiff’s principal ground for opposing Defendants’ motion for a stay
provides “that the [Complaint] alleges a wholly separate and independent oral
contract of employment [and the] parties did not agree to arbitrate issues
arising under that contract.” (Pl. Opp. 1). Yet in the face of the clear language
of the ICA, submitted by Defendants in connection with this motion, Plaintiff
has not provided so much as an affidavit to support her position. Plaintiff has
thus failed to satisfy her burden to “submit evidentiary facts showing that there
is a dispute of fact to be tried.” Oppenheimer, 56 F.3d at 358.
Plaintiff relies solely on her pleading in asserting that the Court should
conduct a trial to determine the existence vel non of the subsequent oral
agreement. (See Pl. Opp. 2-6 (describing factual history as presented in
Complaint)). This is a far cry from the evidentiary submissions that the Second
Circuit has required to establish a triable issue of fact. See, e.g., Filho v. Safra
Nat’l Bank of N.Y., 489 F. App’x 483, 485-86 (2d Cir. 2012) (summary order)
(finding triable issue of fact as to whether plaintiff entered into arbitration
agreement based on plaintiff’s affidavit and defendant’s failure to establish that
it delivered agreement to plaintiff); Interbras Cayman Co. v. Orient Victory
14

Shipping Co., S.A., 663 F.2d 4, 6-7 (2d Cir. 1981) (per curiam) (holding that
affidavits sufficed to raise genuine issue of fact on whether party entered
arbitration agreement); Interocean Shipping Co. v. Nat’l Shipping & Trading
Corp., 462 F.2d 673, 676 (2d Cir. 1972) (concluding that answer denying
existence of arbitration agreement, supported by affidavits and exhibits,
sufficed to warrant trial on making arbitration agreement). There is, therefore,
no triable issue concerning the existence of an agreement separate and apart
from the ICA.
b.

Plaintiff Is Bound by the ICA

The Court next considers Plaintiff’s obligations under the ICA. Because
Plaintiff signed the ICA in her capacity as President of Cloud 12, she argues
that the claims she now brings are in her individual capacity and not subject to
the arbitration provision of the ICA. See generally Matter of Estate of Kern, 107
Nev. 988, 991-92 (1991) (discussing personal liability for contracts signed in
corporate as opposed to personal capacity). Defendants advance three theories
to rebut this argument, arguing that Plaintiff is bound to the agreement under
theories of agency, estoppel, and alter ego.
In analyzing these theories under Nevada law, the Court is guided by the
decision in Truck Insurance Exchange v. Palmer J. Swanson, Inc. (“Swanson”),
124 Nev. 629 (2008). There, the Supreme Court of Nevada recognized that
“nonsignatories to arbitration agreements” may be “required to arbitrate under
theories of incorporation by reference, assumption, agency, alter ego, and
estoppel.” Id. at 631. And indeed, in opposing Defendants’ proffered grounds
15

for binding her to the terms of the ICA, Plaintiff relies solely on a factual
comparison to Swanson. As discussed below, Plaintiff’s reliance is misplaced.
In Swanson, an insurance company had entered into several agreements
with a California law firm “for the performance of legal services in California, all
containing mandatory arbitration provisions.” 124 Nev. at 631. The insurance
company later proposed an expansion of these services into Nevada, and a 50%
owner of the California firm agreed to undertake the expansion by forming a
separate Nevada law firm, of which he would be the sole owner. Id. at 632.
The owner agreed with the insurance company to an hourly rate identical to
that charged by the California firm, but this agreement was never reduced to
writing. Id.
After billing disputes arose between the insurance company and both the
California and Nevada firms, the Nevada firm filed suit. 124 Nev. at 632. The
insurance company moved to compel arbitration based on the arbitration
clause in its agreements with the California firm, arguing that “the Nevada
firms are one and the same.” Id. The Supreme Court of Nevada rejected the
insurance company’s arguments based on theories of estoppel, alter ego, and
unclean hands, instead holding that “the evidence in the record was not
sufficient to compel the Nevada firm to participate in arbitration as a
nonsignatory[.]” Id. at 638. The instant case has meaningfully different facts.
i.

Agency

Defendants argue first that Johnston’s “status as President of Cloud 12
subjects her to the purview of the ICA’s arbitration clause.” (Def. Br. 8).
16

Plaintiff retorts that she is not a signatory to the ICA and does not seek to bring
her claims under that agreement, and that the authorities on which
Defendants rely are therefore inapposite. (Pl. Opp. 12-13). Johnston does not,
however, dispute that she is an officer, and seemingly the sole officer, of Cloud
12. (Pl. Opp. 8 (“Johnston does not deny that Electrum and Cloud 12, an
entity that she controlled, entered into the ICA on January 4, 2016.”); see also
ICA 7 (showing Johnston’s signature as the President of Cloud 12)).
As the Supreme Court of Nevada has articulated, “[a] nonsignatory ‘may
be bound to an arbitration agreement if so dictated by the ordinary principles
of contract and agency.’” Swanson, 124 Nev. at 634 (quoting Thomson-CSF.
S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995)). “An agency
relationship results when one person possesses the contractual right to control
another’s manner of performing the duties for which he or she was hired.”
Hamm v. Arrowcreek Homeowners’ Ass’n, 124 Nev. 290, 299 (2008). The
Nevada Supreme Court has recognized that where, as here, a “non-signatory
party is an employee of the signatory corporation” and the underlying dispute
involves that relationship, “there is a uniform federal rule, founded on general
state law principles of agency: [if] a principal is bound under the terms of a
valid arbitration clause, its agents, employees, and representatives are also
covered under the terms of such agreements.” Tallman v. Eighth Jud. Dist. Ct.,
131 Nev. Adv. Op. 71 (2015) (en banc) (internal quotation marks and citation
omitted) (denying writ of mandamus directing district court to vacate orders

17

compelling arbitration of employees’ claims against former employer and its
associates).
That same principle holds here. Because Johnston signed the ICA as
Cloud 12’s President and Bocskor signed as Electrum’s Managing Member,
both individuals signed as representatives of their respective corporations and
may be bound to its terms. Plaintiff does not deny that she thereafter
performed work for Electrum on Cloud 12’s behalf under the contract. And
Plaintiff’s current claims are inextricably bound up in that relationship.
Indeed, the ICA is the only agreement between the parties substantiated by the
record. Binding Johnston to the ICA, including its arbitration provision, thus
accords with traditional principles of agency law. See Roby v. Corp. of Lloyd’s,
996 F.2d 1353, 1360 (2d Cir. 1993) (“Courts 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.” (collecting
cases)).
ii.

Estoppel

Next, Defendants contend that under an estoppel theory, Johnston
should not be able to avoid the arbitration provision of the Agreement, as she
“directly benefited from the ICA.” (Def. Br. 10). While Plaintiff argues that any
direct benefit Johnston received derived from the alleged oral agreement rather
than the ICA (Pl. Opp. 12), the Court has already rejected that argument. What
is more, Plaintiff cannot deny that she directly benefited from the ICA.

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“Under a theory of estoppel, ‘[a] nonsignatory is estopped from refusing
to comply with an arbitration clause when it receives a ‘direct benefit’ from a
contract containing an arbitration clause.’” Swanson, 124 Nev. at 636
(alteration in original) (quoting Int’l Paper v. Schwabedissen Maschinen &
Anlagen, 206 F.3d 411, 418 (4th Cir. 2000)). Under this theory,
“nonsignatories have been held to arbitration clauses where the nonsignatory
‘knowingly exploits the agreement containing the arbitration clause despite
having never signed the agreement.’” Comer v. Micor, Inc., 436 F.3d 1098, 1101
(9th Cir. 2006) (alternation in original) (quoting E.I. DuPont de Nemours & Co. v.
Rhone Poulenc Fiber & Resin Intermediates, 269 F.3d 187, 199 (3d Cir. 2001));
accord MAG Portfolio Consultant, GMBH v. Merlin Biomed Grp. LLC, 268 F.3d 58,
61 (2d Cir. 2001). Such knowing exploitation of an agreement includes
“enforce[ment of] the terms” or “otherwise [ ] tak[ing] advantage of them.”
Comer, 436 F.3d at 1102.
The record confirms that Cloud 12 — of which Plaintiff was the sole and
controlling member — received payment for Plaintiff’s services from Electrum,
which it would then distribute to Plaintiff. 8 Moreover, Plaintiff does not dispute
Bocskor’s contention that she negotiated the terms of the ICA to benefit her
personally. (See Bocskor Decl. ¶¶ 12 (“[S]he did not want to be an employee

8

Though Plaintiff’s Complaint makes no mention of the ICA or a relationship between her
and Electrum prior to June 2016, at the conference before this Court preceding the
instant motion her counsel stated that “[t]here was a prior independent contractor
relationship, not with Ms. Johnston, with a company that she operated” and that
several aspects of her compensation remained consistent before and after June of 2016.
(IPTC Tr. 2:22-24, 3:23-5:12).

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because she wanted to be able to . . . control the amount of personal income
she received so as not to adversely affect the financial aid her daughter was
receiving at college.”), 13 (providing that Plaintiff “did not want to move to Las
Vegas,” which would have been required had she been an employee of
Electrum)).
To be sure, Plaintiff has specifically eschewed claims for breach of
contract under the ICA. Cf. Lennar Reno, LLC v. Macedo, No. 65510, 2015 WL
7432106, at *2 (Nev. Nov. 18, 2015) (unpublished disposition) (finding
nonsignatory obtained direct benefit from contract containing arbitration
clause where claim was predicated on that contract). As noted, however, she
has produced zero evidence substantiating a second oral agreement. As such,
the Court may only interpret Plaintiff’s claims as arising from the relationship
with Electrum and Bocskor that was memorialized in the ICA. Cf. Swanson,
124 Nev. at 637 (holding that nonsignatory directly benefited from separate
agreement with signatory rather than written agreement containing arbitration
clause). That relationship produced direct economic and personal benefits to
Plaintiff, and she is therefore estopped from denying her obligation to arbitrate
disputes within the scope of the ICA.
iii.

Alter Ego

Finally, Defendants argue that Johnston is bound to the terms of the ICA
on an alter ego theory. (Def. Br. 10-12). To be bound to an arbitration
provision under such a theory, the following circumstances must hold:
[i] The corporation must be influenced and governed by
the person asserted to be its alter ego[;] [ii] [t]here must
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be such unity of interest and ownership that one is
inseparable from the other; and [iii] [t]he facts must be
such that adherence to the fiction of [a] separate entity
would, under the circumstances sanction a fraud or
promote injustice.
Ecklund v. Nev. Wholesale Lumber Co., 93 Nev. 196, 197 (1977) (quoting
McCleary Cattle Co. v. Sewell, 73 Nev. 279, 282 (1957)). The record here
establishes each of the three elements.
First, Plaintiff does not deny that she was the sole member and President
of Cloud 12, “an entity that she controlled[.]” (Pl. Opp. 8). Nevada courts have
found such influence over a company sufficient to satisfy the first prong of the
alter ego analysis. See, e.g., Mosa v. Wilson-Bates Furniture Co., 94 Nev. 521,
523 (1978) (finding sufficient influence over company where individual “was the
sole investing and directing force”); Carson Meadows Inc. v. Pease, 91 Nev. 187,
191 (1975) (finding sufficient influence over company where “as president
[individual] governed the corporate enterprise”); Caple v. Raynel Campers, Inc.,
90 Nev. 341, 343-44 (1974) (finding sufficient influence over company where
individual was “sole investor and stockholder[ and] the only person with
direction and control”), abrogated on other grounds by Ace Truck & Equip.
Rentals, Inc. v. Kahn, 103 Nev. 503 (1987). Despite Plaintiff’s contestations to
the contrary, given her complete ownership of and control over Cloud 12, this
case is readily distinguishable from Swanson, where the nonsignatory seeking
to avoid arbitration was a mere 50% owner of the firm that signed the
arbitration provision. 124 Nev. at 636.

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Second, for similar reasons, Plaintiff has such a “unity of interests” with
Cloud 12 that she is “inseparable” from the company. Ecklund, 93 Nev. at 197.
In making such a determination, Nevada courts consider “factors like
co-mingling of funds, undercapitalization, unauthorized diversion of funds,
treatment of corporate assets as the individual’s own, and failure to observe
corporate formalities.” Polaris Indus. Corp. v. Kaplan, 103 Nev. 598, 601 (1987)
(citing N. Arlington Med. Building, Inc. v. Sanchez Constr. Co., 86 Nev. 515, 522
n. 8 (1970)). Defendants point out that documents from the State of New
Jersey suggest that as of November 17, 2017, Cloud 12 had failed to file an
annual corporate report for two consecutive years, resulting in the revocation of
its charter on August 16, 2017. (See N.J. Report). 9 Defendants have also
produced a copy of Plaintiff’s driver’s license, which bears the same address as
Cloud 12’s address of record. (Compare id., with Pl. Driver’s License). And
Plaintiff’s own pleading confirms that she continues to “liv[e] at and work[] out
of” the same address. (Compl. ¶ 5).
Plaintiff does not dispute the accuracy of these records, which together
suggest a disregard of corporate formalities. See Caple, 90 Nev. at 344 (finding
unity of interest where “corporation had no apparent independent business
operation and existed solely for the purpose of conducting [individual’s]
personal business”); Fusion Capital Fund II, LLC v. Ham, 614 F.3d 698, 701
(7th Cir. 2010) (applying Nevada law and finding unity of interest where

9

That two-year period includes the date of the ICA’s execution, on January 4, 2016.

22

corporation did not maintain necessary corporate documentation and was
headquartered in members’ residence); cf. JSA, LLC v. Golden Gaming, Inc.,
No. 58074, 2013 WL 5437333, at *6 (Nev. Sept. 25, 2013) (unpublished
disposition) (finding observance of corporate formalities where corporation
undertook all steps required of a limited liability company under state law).
Third, releasing Plaintiff from the arbitration provision in the ICA in these
circumstances would “promote injustice.” Ecklund, 93 Nev. at 197. This final
element does not require proof of “actual fraud”; rather, “[i]t is enough if the
recognition of the two entities as separate would result in an injustice.”
Kaplan, 103 Nev. at 601. Nor does this element require “that a corporation was
set up as a sham at its inception.” Brown v. Kinross Gold U.S.A., Inc., 531 F.
Supp. 2d 1234, 1243 (D. Nev. 2008) (construing Nevada law). Here, adhering
to the corporate form would allow Plaintiff to subvert the ICA’s arbitration
provision, which sought to encompass “any and all controversies or claims
arising out of or related to th[e] Agreement” (ICA 7), while at the same time
allowing her to reap the benefits for which she had bargained as Cloud 12’s
principal. See Brown, 531 F. Supp. 2d at 1243 (holding that using corporate
identity to “circumvent and defeat” contractual provisions constituted sufficient
injustice to support alter-ego theory). Thus, Plaintiff is bound to the ICA,
including its arbitration provision, under each of the three theories that
Defendants advance.

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2.

Plaintiff’s Claims Fall Within the Scope of the Arbitration
Agreement

The Court now considers whether Plaintiff’s claims fall within the scope
of the ICA’s arbitration provision, and to do this it applies federal law. See
Progressive Cas. Ins. Co., 991 F.2d at 48 (“[A]s a matter of federal law, any
doubts concerning the scope of arbitrable issues should be resolved in favor of
arbitration[.]” (quoting Mitsubishi Motors Corp., 473 U.S. at 626)). In
determining “whether a particular dispute falls within the scope of an
agreement’s arbitration clause,” a court first determines whether the clause is
broad or narrow. Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc.,
252 F.3d 218, 224 (2d Cir. 2001). “Where the arbitration clause is broad,
‘there arises a presumption of arbitrability[.]’” Id. at 224 (quoting Collins &
Aikman Prods. Co. v. Bldg. Sys., Inc., 58 F.3d 16, 23 (2d Cir. 1995)). This
presumption may only be “overcome if ‘it may be said with positive assurance
that the arbitration clause is not susceptible of an interpretation that covers
the asserted dispute,’” and any “[d]oubts should be resolved in favor of
arbitration.” WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d Cir. 1997)
(quoting Associated Brick Mason Contractors of Greater N.Y., Inc. v. Harrington,
820 F.2d 31, 35 (2d Cir. 1987)).
The arbitration provision at issue here, which encompasses “any and all
controversies or claims arising out of or relating to [the] Agreement” (ICA 7), is
“classically broad.” Mehler v. Terminix Int’l Co. L.P., 205 F.3d 44, 49 (2d Cir.
2000) (describing as “classically broad” a clause providing arbitration for “any
controversy or claim between [the parties] arising out of or relating to” the
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contract (alteration in original)). As such, the presumption in favor of
arbitration applies, and Plaintiff has provided no alternative reading of the
provision that would wrest her claims — which stem from her working
relationship with a counterparty to the ICA and its founder and managing
member — from its grasp.
That Plaintiff alleges wrongful discharge and unlawful retaliation rather
than breach of the ICA is of no moment. “In 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.” Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 846 (2d Cir.
1987). Plaintiff’s claims “relat[e] to” her relationship with Electrum and
Bocskor, which by all accounts began with the ICA. See Oldroyd, 134 F.3d at
74-77 (arbitration clause in employment contract applicable to “[a]ny dispute,
controversy or claim arising or in connection with this Agreement”
encompassed retaliatory discharge claim). Her claims are thus within the
scope of the ICA’s arbitration provision.
3.

The Arbitration Agreement Is Not Void Under Nevada Law

Arbitration provisions subject to the FAA “shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. Plaintiff argues that the arbitration
provision within the ICA is unenforceable under Nevada law. (Pl. Opp. 14-16).
Specifically, Plaintiff points to Nevada Revised Statute § 597.995, which states
that “an agreement which includes a provision which requires a person to
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submit to arbitration any dispute arising between the parties to the agreement
must include specific authorization for the provision which indicates that the
person has affirmatively agreed to the provision.” Although Plaintiff does not
state as much, the Court presumes that Plaintiff seeks to invalidate the
arbitration clause because it is not accompanied by such a specific
authorization. Any such argument fails.
In Doctor’s Associates, Inc. v. Casarotto, the Supreme Court explained
that “[b]y enacting § 2” of the FAA, “Congress precluded States from singling
out arbitration provisions for suspect status, requiring instead that such
provisions be placed ‘upon the same footing as other contracts.’” 517 U.S. 681,
687 (1996) (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 511 (1974)).
The Court thus held that “[c]ourts may not . . . invalidate arbitration
agreements under state laws applicable only to arbitration provisions.” Id.
Accordingly, the Court held that the FAA “displace[d]” a Montana statute that
“directly conflict[ed]” with § 2 because it “condition[ed] the enforceability of
arbitration agreements on compliance with a special notice requirement not
applicable to contracts generally.” Id. (discussing Mont. Code Ann. § 27-5114(4)).
The Nevada statute at issue similarly “conditions the enforceability of
arbitration agreements on compliance with a special [authorization]
requirement not applicable to contracts generally.” Casarotto, 517 U.S. at 687.
The Court therefore may not invalidate the arbitration provision at issue under
Nevada Revised Statute § 597.995, as the FAA displaces the applicability of
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that law to the ICA’s provisions. Although the Nevada Supreme Court has not
yet had the opportunity to consider whether the FAA displaces § 597.995, see
Fat Hat, LLC v. DiTerlizzi, 385 P.3d 580 n.1 (Nev. 2016) (table opinion) (while
construing § 597.995, noting that the court was not faced with a challenge to
its applicability under Casarotto), one court within the District of Nevada has
considered the issue and arrived at the same conclusion that the Court reaches
today, see JusTours, Inc. v. Bogenius Grp. LLC, No. 17 Civ. 0078 (GMN) (CWH),
2017 WL 3671285, at *4 (D. Nev. Aug. 25, 2017) (refusing to invalidate
arbitration provision under § 597.995 in light of Casarotto). Thus, Plaintiff’s
bid to invalidate the ICA’s arbitration provision under § 597.995 fails.
C.

This Case Will Be Stayed
Defendants urge this Court to dismiss this action pursuant to Rubin v.

Sona International Corp., and only in the alternative seek to stay the case. See
457 F. Supp. 2d 191, 198 (S.D.N.Y. 2006) (“Where all of the issues raised in the
Complaint must be submitted to arbitration, the Court may dismiss an action
rather than stay proceedings.”) (cited in Def. Br. 12-13). This argument fails to
acknowledge the Second Circuit’s more recent precedent that “recognize[d] the
impetus for a rule permitting dismissal,” but “conclude[d] that the text,
structure, and underlying policy of the FAA mandate a stay of proceedings
when all of the claims in an action have been referred to arbitration and a stay
requested.” Katz v. Cellco P’ship, 794 F.3d 341, 347 (2d Cir. 2015) (emphasis
added); see e.g., Virk v. Maple-Gate Anesthesiologists, P.C., 657 F. App’x 19, 20
(2d Cir. 2016) (summary order) (vacating district court’s order granting motion
27

to compel arbitration and dismissing complaint where motion sought either
stay or dismissal, and stating that “the district court lacked discretion to
dismiss … under Katz as well as the plain language of 9 U.S.C. § 3”); Abel v. All
Green Bldg. Servs. of N.Y. LLC, No. 16 Civ. 8522 (JPO), 2017 WL 5468764, at *2
(S.D.N.Y. Nov. 14, 2017) (finding claims arbitrable but denying motion to
dismiss and staying litigation pending arbitration); Consol. Precision Prods.
Corp. v. Gen. Elec. Co., 15 Civ. 8721 (PKC), 2016 WL 2766662, at *7 (S.D.N.Y.
May 12, 2016) (“The FAA’s directive” as interpreted in Katz “that a court ‘shall’
stay the action pending arbitration limits a district court’s inherent authority to
manage its own docket.”).
Accordingly, the Court denies Defendants’ motion to dismiss and instead
stays this action pending arbitration of the parties’ claims.
CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss Plaintiff’s
claims is DENIED, and Defendants’ motion for a stay pending arbitration is
GRANTED. The parties are ORDERED to provide joint status updates every 90
days from the date of this Opinion and Order regarding the parallel proceedings
in the District of Nevada and any ensuing arbitration.
SO ORDERED.
Dated:

June 21, 2018
New York, New York

__________________________________
KATHERINE POLK FAILLA
United States District Judge

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