We Project Inc. v. Relavistic, LLC et al

Filing 79

Order signed by Judge James S. Gwin on 4/28/2021. The Court DENIES Defendant Ibrahims abstention motion and DENIES Defendant M-Partners arbitration motion re 27 28 (S,KM)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
------------------------------------------------------THE WE PROJECT, INC.,
Plaintiff,
v.
RELAVISTIC, LLC, et al.,
Defendants,
-------------------------------------------------------

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Case No. 1:20-cv-2873
OPINION AND ORDER
[Resolving Docs. 27, 28]

JAMES S. GWIN, UNITED STATES DISTRICT JUDGE:
Defendant Christian Ibrahim has moved to stay this case in view of related pending
Cuyahoga County Court of Common Pleas litigation. 1 Defendant M-Partners has also moved
for an order to compel arbitration and dismiss or stay this case pending arbitration. 2 For the
reasons stated below, the Court DENIES Defendant Ibrahim’s abstention motion and DENIES
Defendant M-Partners’ arbitration motion.
I.

BACKGROUND

The Court has already discussed this case in a previous order. 3 The Court recounts
only the facts most relevant to the pending motions here.
Plaintiff The We Project, Inc., is a Cleveland technology startup that foreign investor
Kawa Junad completely owns. In early 2017, Kawa agreed with Defendant Mike Hamilton
to invest over $10 million into Plaintiff The We Project, Inc. and to hire Hamilton as Plaintiff’s
CEO.

1

Doc. 27.
Doc. 28.
3
Doc. 52.
2

Case No. 1:20-cv-2873
Gwin, J.
In this case, Plaintiff alleges that Defendant Hamilton embezzled Kawa’s investment
in concert with Defendant Ibrahim and other former Plaintiff officers and employees that
Hamilton personally hired for The We Project.
In general, Plaintiff says Defendants cooperated in a scheme to waste and convert
Plaintiff’s money, assets, and opportunities for their own use.
Early in their business relationship, on June 20, 2017, Kawa and Plaintiff entered into
a Support and Services agreement with M-Partners, Inc., a Maryland corporation owned and
operated by Defendant Hamilton. 4 The agreement covered the “starting-up and subsequent
operations of [Plaintiff],” and allowed Plaintiff to use M-Partners’ credit, tangible assets, and
intellectual property to get its business up and running. 5 The parties selected Maryland law
to govern any dispute. 6
The agreement also contained a one-sided arbitration clause, providing that “[a]ny
dispute arising out of or relating to the Agreement or the breach thereof shall, at the sole
option of M-Partners, be submitted to binding arbitration.” 7
On April 22, 2020, after Defendants allegedly defrauded Plaintiff while serving as
Plaintiff officers and employees, Plaintiff brought fiduciary duty claims against Defendants
Hamilton and Ibrahim in Delaware Chancery Court. 8 On June 19, 2020, while the Delaware
suit was pending, Defendants Hamilton and Ibrahim filed their own suit against Plaintiff and
Kawa in the Cuyahoga County Court of Common Pleas. In their lawsuit against Kawa,

4

Doc. 28-1 at 1–4.

Id.
Id.
7
Id.
5
6

8

Doc. 6-1.

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Gwin, J.
Hamilton and Ibrahim claimed that Plaintiff had breached Hamilton and Ibrahim’s respective
employment contracts. 9
On January 12, 2021, Plaintiff voluntarily dismissed the Delaware suit after filing this
case. 10 Hamilton and Ibrahim’s Cuyahoga County suit against Kawa Junad and The We
Project, Inc. is on-going.
On February 8, 2021, Defendant Ibrahim moved this Court to “abstain from
exercising jurisdiction,” “based upon the first-filed doctrine, the prior-pending action
doctrine, the Colorado River abstention doctrine, and Plaintiff’s failure to invoke the removal
statute” in the Cuyahoga County suit. 11 The next day, on February 9, 2021, Defendant MPartners moved to compel arbitration and to stay the case pending arbitration, arguing that
the this case’s claims against M-Partners are covered by the June 2017 Support and Services
agreement. 12 Plaintiff opposes both motions. 13 The Court now takes them up.
II.

ANALYSIS

A. Abstention Motion
1. Colorado River
In Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976),
the Supreme Court recognized that “wise judicial administration” sometimes requires a
district court to abstain from exercising jurisdiction over a dispute already under

9

Doc. 49-1.
Doc. 6-3.
11
Doc. 27.
12
Doc. 28.
13
Doc. 43; Doc. 44.
10

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Gwin, J.
consideration in parallel state proceedings. 14 Though abstention is left to the discretion of
the district court, higher courts have repeatedly emphasized Colorado River’s limited scope
against federal district courts’ “virtually unflagging” duty “to exercise the jurisdiction given
them.” 15 In view of federal courts’ duty to decide cases where they enjoy jurisdiction,
abstention is an “extraordinary and narrow” doctrine demanding “the clearest of
justifications.” 16
Before exercising Colorado River abstention discretion, this Court “must first
determine that the concurrent state and federal actions are actually parallel.” 17 Although
parallelism does not require identical state and federal action parties and claims, the two
actions must be based on “the same allegations as to the same material facts.” 18
Further, in assessing parallelism, courts consider only “the issues actually raised in
the state court action, not those that might have been raised.” 19 If the two actions are parallel,
courts then weigh the Colorado River factors to determine whether to abstain from exercising
jurisdiction over the federal action. 20
The Court believes that abstention is inappropriate because the state and federal
actions at issue are not sufficiently parallel.
True, the two lawsuits grow out of the same technology startup relationship between
Plaintiff and Defendants Hamilton and Ibrahim. And the two complaints both allege fraud

See Romine v. Compuserve Corp., 160 F.3d 337, 339 (6th Cir. 1998) (citing Colorado
River, 424 U.S. at 817).
15
Id.
16
RSM Richter, Inc. v. Behr Am., Inc., 729 F.3d 553, 557 (6th Cir. 2013).
17
Romine, 160 F.3d at 339.
18
Id. at 340.
19
Baskin v. Bath Twp. Bd. of Zoning Appeals, 15 F.3d 569, 572 (6th Cir. 1994).
20
Id. at 571–72 (citing Crawley v. Hamilton Cty. Comm’rs, 744 F.2d 28, 31 (6th Cir. 1984)).
14

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schemes.

The state action alleges that Plaintiff and Plaintiff’s owner Kawa defrauded

Defendants Hamilton and Ibrahim and violated their employment agreements. At a high
level of generality, the federal action is the opposite side of the same coin, claiming that it
was actually Defendants Hamilton and Ibrahim who defrauded Plaintiff and Kawa while
serving as Plaintiff employees.
But that is where the similarities end. The state action focuses on Kawa’s arguable
federal technology regulations violations and his breach of Hamilton and Ibrahim’s
employment agreements. 21 By contrast, this federal action alleges a ten-member fraud
scheme under which Defendants abused their authority as Plaintiff officers and employees
to enrich themselves at Plaintiff’s expense and alleges that Defendant Hamilton refused,
despite demand, to give We Project owner Kawa information about the business’s financial
condition.
Notably, legal questions resolved in this case will not shed much light on the
questions raised in state court. The federal action claims neither allege nor require that
Defendants Hamilton or Ibrahim were convicted of the alleged fraud—seemingly the major
state court issue under the employment agreement terms. Nor, conversely, will a state court
finding regarding Kawa’s breach of Hamilton and Ibrahim’s employment contracts establish
that Defendants did or did not defraud and breach their fiduciary duties to Plaintiff, as alleged
here.
The two lawsuits therefore will require the respective presiding courts to resolve
substantially different factual and legal issues. Defendant Ibrahim accordingly has not shown

21

Doc. 49-1 at 10.

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Gwin, J.
that the state action “will be an adequate vehicle for the complete and prompt resolution of
the issues” in this case. 22 Because Ibrahim has not satisfied Colorado River’s requirement
that this Court “will have nothing further to do in resolving any substantive part of the case”
following the state action’s resolution, abstention is inappropriate here. 23

2. The First to File and/or Prior Pending Action Rule
As Plaintiff points out, Defendant Ibrahim’s invocation of the first-to-file rule 24
between a state and federal court is also inappropriate. The Sixth Circuit has stated that the
first-to-file rule applies “when actions involving nearly identical parties and issues have been
filed in two different district courts.” 25 This rule of “comity among federal courts of equal
rank” does not apply in this context. 26

3. Plaintiff’s Failure to Remove the Cuyahoga County Suit
Defendant Ibrahim finally contends that this Court should abstain because Plaintiff
failed to remove the Cuyahoga County suit to this Court. However, Ibrahim does not
identify, and this Court cannot find, authority suggesting that failure to invoke federal
removal jurisdiction in one case justifies federal abstention in another.
And even if a squandered removal opportunity could support abstention, it does not
appear that Plaintiff could have removed the Cuyahoga County suit. The Cuyahoga County

Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 28 (1983).
Id. (citing C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4247 (1978)).
24
The First to file and prior pending action doctrines are synonymous. Ride, Inc. v. Bowshier,
22
23

3:12-cv-271, 2013 WL 1327133, at *2 (S.D. Ohio Mar. 29, 2013).
25
Baatz v. Columbia Gas Transmission, LLC, 814 F.3d 785, 789 (6th Cir. 2016) (emphasis
added) (citing Certified Restoration Dry Cleaning Network, LLC v. Tenke Corp., 511 F.3d
535, 551 (6th Cir. 2007)).
26
Id; Retail Serv. Sys., Inc. v. Mattress By Appointment, LLC, 210 F. Supp. 3d 916, 930 (S.D.
Ohio 2016).
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complaint names an Ohio Plaintiff and Defendant 27 and does not contain any federal
claims. 28

B. Arbitration Motion
The Federal Arbitration Act allows a litigant who is party to a pertinent arbitration
agreement to move a federal court to enforce the agreement by “stay[ing] the trial of the
action until such arbitration has been had in accordance with the terms of the agreement.” 29
And the Act requires the federal court to grant the stay motion “save upon such grounds as
exist at law or in equity for the revocation of any contract.” 30
Federal courts look to state law for any applicable contract revocation grounds. 31
Here, the parties chose Maryland law, Defendant M-Partners’ incorporation state, to govern
their arbitration agreement. 32 In moving to compel arbitration, Defendant M-Partners’ asks
the Court ignore the parties’ Maryland law selection in favor of Ohio law because Ohio has
an arguably greater interest in this case’s outcome. However, this argument ignores Sixth
Circuit precedent that “a significantly greater interest in the matter [does] not, on its own,
render the choice of law provision unenforceable.” 33 Accordingly, Maryland law controls.

27

Doc. 49-1 at 3 (identifying Cuyahoga County Plaintiff Ibrahim as a “citizen of Ohio” and
Cuyahoga County Defendant The We Project, Inc., as “a corporation with [its] principal place
of business” in Cleveland, Ohio).
28
Doc. 49-1 at 22–28.
29
9 U.S.C. § 3.
30
9 U.S.C. § 2.
31
Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 667 (6th Cir. 2003) (en banc) (“In
making this [mutuality] determination, we look to Ohio law.”).
32
Doc. 28-1 at 3.
33
Wong v. PartyGaming Ltd., 589 F.3d 821, 832 (6th Cir. 2009) (citing DaimlerChrysler
Corp. Healthcare Benefits Plan v. Durden, 448 F.3d 918, 924 (6th Cir. 2006)).
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Case No. 1:20-cv-2873
Gwin, J.
Under Maryland law, where an arbitration agreement is included in a larger contract
between the parties, the arbitration agreement must be supported by consideration separate
from the consideration supporting the larger agreement. 34 Maryland courts—and federal
courts applying Maryland law—have typically enforced this rule by requiring the parties to
exchange reciprocal arbitration promises. 35
Plaintiff argues that the arbitration agreement here is unenforceable for lack of
mutuality because it does not bind Defendant M-Partners to arbitrate at all, instead providing
that “[a]ny dispute . . . shall, at the sole option of M-Partners, be submitted to binding
arbitration.” 36
The court agrees with Plaintiff that the parties’ arbitration agreement is not supported
by M-Partners’ consideration.
Under Maryland law, “[w]ords of promise which by their terms make performance
entirely optional with the promisor . . . do not constitute a promise” sufficient to provide
contractual consideration. 37 The parties’ arbitration agreement “does not actually bind or
obligate [M-Partners] to anything.” 38 Instead, it merely gives M-Partners sole authority to
determine whether the parties will arbitrate. Though the agreement does require M-Partners

34
35

Cheek v. United Healthcare of Mid-Atlantic, Inc., 835 A.2d 656, 667–69 (Md. 2003).
See id. at 669; Noohi v. Toll Bros., Inc., 708 F.3d 599, 610 (4th Cir. 2013) (applying

Maryland law and finding that “the [arbitration] provision binds only Plaintiffs to arbitration,
and thus lacks mutuality of consideration.”); Aerotek, Inc. v. Obercian, 377 F. Supp. 3d 539,
554 (D. Md. 2019) (“The ERC provision contains no parallel requirement that Aerotek submit
to mediation at Obercian’s request, or a commitment on Aerotek’s part to mandatory
mediation. Because this provision does not bind Aerotek, it lacks consideration.”).
36
Doc. 28-1 at 3.
37
Lillian C. Blentlinger, LLC, v. Cleanwater Linganore, Inc., 173 A.3d 549, 566–67 (Md.
2017).
38
Id. at 566.
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Gwin, J.
to send an arbitration notice, M-Partners is bound to do so only if it first decides to arbitrate. 39
Such “unlimited choice in effect destroys [M-Partners’] promise and makes it merely illusory,”
defeating mutual arbitration agreement consideration. 40
Because the Court finds that the parties’ arbitration agreement is unenforceable for
want of mutual consideration under Maryland law, the Court concludes that none of the
claims now before it should be submitted to arbitration or stayed.
Although the Court has significant doubt whether an arbitration provision requiring
only one party to absorb all arbitration costs and attorney fees irrespective of who wins the
arbitration is unconscionable, the Court declines to answer this now-moot question.
III.

CONCLUSION

For these reasons, the Court DENIES Defendant Ibrahim’s abstention motion and
DENIES Defendant M-Partners’ arbitration motion.
IT IS SO ORDERED.

s/

Dated: April 28, 2021

39
40

James S. Gwin

JAMES S. GWIN
UNITED STATES DISTRICT JUDGE

Doc. 28-1 at 3.

Lillian C. Blentlinger, LLC, 173 A.3d at 567.

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