Meierhenry Sargent LLP v. Williams et al

Filing 78

MEMORANDUM OPINION AND ORDER denying 46 Motion for Reconsideration ; granting 50 Motion to Re-Declare the Scope of the Arbitration Proceedings. Signed by U.S. District Judge Lawrence L. Piersol on 11/27/19. (SKK)

UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH DAKOTA

SOUTHERN DIVISION

MEIERHENRY SARGENT LLP,

CIV. 16-4180

Plaintiff,
MEMORANDUM OPINION AND ORDER

vs.

BRADLEY WILLIAMS and KERRY

WILLIAMS,

DENYING MOTION FOR
RECONSIDERATION AND GRANTING
MOTION TO RE-DECLARE SCOPE OF
ARBITRATION PROCEEDINGS

Defendants.

The Court's interlocutory order granting Plaintiffs motion to stay arbitration until the
Court could rule upon Plaintiffs Motion to Re-Declare the Scope of Arbitration.

That

interlocutory order for stay is on appeal with the Eighth Circuit Court of Appeals. Doc. 72. Still
pending before the Court are Defendants' Motion for Reconsideration, Doc. 46, and Plaintiffs
Motion to Re-Deelare the Scope of Arbitration Proceedings, Doc. 50, which were argued before
the Court on October 23, 2019.

For the following reasons. Defendants' Motion for

Reconsideration is denied and Plaintiffs Motion to Re-Declare the Scope of Arbitration
Proceedings is granted.
BACKGROUND

When the Court stayed this lawsuit and compelled arbitration of Count II in its May 1,

2017, order, there were no counterclaims pending, and the Court retained jurisdiction over the
case. Doc. 14. Defendants presented Plaintiff with their Answer, Affirmative Defenses, and
Counterclaims during the arbitration proceeding. Docs. 18-2; 26 at 6.

On August 23,2017, Plaintifffiled a Motion for Relief fi-om Stay and Motion for Order to

Declare the Scope of the Arbitration Proceedings. Doc. 16. In its motion. Plaintiff requested an
order from the Court determining the arbitrability of Defendants'counterclaims.

On November 20, 2017, the Court issued a memorandum opinion and order granting in

part and denying in part Plaintiffs Motion to Re-Declare the Scope ofthe Arbitration Proceedings.
Doc. 26. In ruling on the arbitrability of Defendants' counterclaims, the Court had to determine

whether or not the counterclaim encompassed matters the parties "reasonably would have thought
a judge, not an arbitrator, would decide." Doc. 26 at 7 (quoting Express Scripts, Inc. v. Aegon

Direct Mktg. Servs., Inc., 516 F.3d 695, 701 (8th Cir. 2008)). The Court ruled that Count IV,

alleging breach of contract. Count IX alleging breach of fiduciary duty, and Count X alleging
negligence were all arbitrable with the exception of allegations of defamation encompassed in
Defendants' breach-of-contract counterclaim. Doc. 26, The Court held that "[ajrbitrators

determining damages against Plaintiff was not reasonably contemplated by the parties when they

entered into the Attorney Fee Contract arbitration clause," and that "the parties would not have
contemplated a separate award of damages against Plaintiff except as an offset against claimed
attorney fees." Doc. 26 at 10.

On December 18, 2017, Defendants filed a notice of appeal of the Court's November 20,
2017, order with the Eighth Circuit Court of Appeals. Doc. 27.

On January 29, 2019, Defendants filed a Motion to Stay Proceedings on Counterclaims

Pending Appellate Proceedings and Arbitration. Doc. 34. Attached as an exhibit to Defendants'
briefin support ofits Motion to Stay is a copy of Defendant's Answer, Affirmative Defenses, and
Counterclaims that was presented to Plaintiff in the arbitration proceedings. Doc. 35-1. The

caption on Defendants' Answer, Affirmative Defenses, and Counterclaims states "IN PRIVATE
ARBITRATION(AS ORDERED BY THE UNITED STATES DISTRICT COURT,DISTRICT
OF SOUTH DAKOTA, SOUTHERN DIVISION, CIV. NO. 16-4180, DOCKET ENTRY 14)".
• Doc. 35-1.

On February 6, 2019, the Eighth Circuit Court of Appeals affirmed the Court's ruling on
the arbitrability ofDefendants'counterclaims. Doc. 36. The court rejected Defendants'argument
that this Court should have ignored the remedies Defendants requested in deciding the arbitrability

question. Doc. 36 at 6. The court stated that "the fee agreement ties arbitration to a particular
remedy available to the firm: recovery of the termination fee," and stated that accordingly, "it is

logical—indeed, necessary—^to determine what the counterclaims seek." Doc. 36 at 6. The court
held that "[i]f what they seek is to reduce or eliminate the money the Willi.amses owe to the firm,
the claims are arbitrable; if they seek something else—like moneyfrom the firm—^they are.not."

Doc. 36 at 6. Despite affirming this Court's holding that damages on Defendant's counterclaims
are arbitrable only as an offset to attorneys' fees claimed by Plaintiff, the Court of Appeals

appeared to characterize, in dicta', this Court's order as allowing damages on Defendants' breachof-contract counterclaim because the Court did not specifically include its limitation on damages

language in the paragraph of its order discussing Defendants' breach-of-contract counterclaim.
This Court reads the footnote as not altering the Court of Appeals' holding that any separate
damages against Plaintiff could only be an offset against claimed attorney fees and nothing more.
On May 14, 2019, after the parties submitted additional briefs upon order of the Court on
Defendants' motion to stay proceedings on counterclaims, the Court denied Defendants' motion.

The Court reasoned that.it was unable to stay counterclaims that had not been filed with the Court.
Doc. 45. The Court was unaware at that time that there were potential statute of limitations
questions on the counterclaims.

On May 22, 2019, Defendants filed a motion asking this Court to reconsider its decision.'
Doc. 46. This motion is presently pending before the Court.
After receiving the Eighth Circuit's mandate,the parties proceeded in arbitration. On May

29,2019,Defendants moved the arbitration panel"for leave to submit a claim for punitive damages

against Plaintiff and to conduct discovery thereon,relative to the arbitrable portions ofDefendants'
counterclaims."

Doc. 52-2. On or around June 5, 2019, Plaintiffs submitted a brief to the

arbitrators in opposition to Defendants' Motion for Punitive Damages on the grounds that it sought
relief that was beyond the scope ofthe arbitration provision as set forth by this Court and affirmed
by the Eighth Circuit. Doc. 52-3. The arbitration panel denied Defendants' motion for leave to
submit a claim for punitive damages on the grounds that it contravened the directives ofthis Court
and the Eighth Circuit Court of Appeals that "[i]f the counterclaims seek to reduce or eliminate
the money the Williamses owe to the firm,the claims are arbitrable; ifthey seek something elselike money from the firm — they are not." Doc. 52-4 at 4-5. The panel noted that this Court
specifically ruled that arbitrators determining damages against Plaintiff was not reasonably
^

Specifically, the Court of Appeals stated that the counterclaims that remain in arbitration generally seek to

establish that the Williamses should pay a lower fee than the firm requested, or no fee at all. The court noted in
footnote 2 that:

The only exception is the breach-of-contract claim, which still seeks damages even though the
district court excised portions of it from the. arbitration. The firm did not file a cross-appeal,
however, and the Williamses argue the court has allowed the parties to arbitrate too little, not
that it has made them arbitrate too much, so we need not decide whether the court erred by
allowing the breach-of-contract claim (or any of the others) to proceed.
Doc. 36 at 6.

contemplated by the parties when they entered into the Attorney Fee Contraet arbitration clause
and that Defendants' elaim for treble damages was not arbitrable. Doc. 52-4 at 4. The panel
eoneluded that if, under this Court's ruling, it is not empowered to eonsider treble damages to be
determined against the Plaintiff, it has no authority to eonsider Defendants' elaim for punitive
damages. Doc. 52-4 at 5.

Defendants requested that the panel clarify its ruling denying Defendants' request for leave
to seek punitive damages. Doc.52-5. Defendants noted that the panel's order states that the district
court"specifically ruled that Arbitrators determining damages against Plaintiff was not reasonably
contemplated by the parties when they entered into the Attorney Fee Contract. . . ." Defendants
requested that this statement be elarified beeause, as Defendants argued, they are entitled to seek
damages against Plaintiffin the arbitration under Counterclaim IV alleging breach of contract and
as an offset against Plaintiff's fee claim under Counterclaims IX and X alleging breach offiduciary
duty and negligence. Docs. 52-5; 52-8.

Plaintiff filed its opposition to Defendants' request for clarifieation with the panel. Doc.
52-6. Therein, it stated that "the Panel eannot issue a separate award of damages for eonduct
unrelated to establishing a fair fee award. Onee again, anything not relating to determining a fair
fee would be a matter the parties reasonably eontemplated that a judge, not an arbitrator, would
decide." Docs. 52-6 at 3; 52-9.

On or around July 29,2019,the two arbitrators appointed by Defendants found Defendants'
arguments to be persuasive and granted Defendants'motion for elarification. Doc. 52-11. In their
order, the panel ruled that Defendants may be awarded damages against Plaintiffin the arbitration
for Counterclaim IV alleging breaeh of eontract and may be awarded damages as an offset against
Plaintiffs fee claim for Counterclaims IX and X alleging breach offiduciary duty and negligence.
Doe.52-11.

The arbitrator appointed by Plaintiff dissented. Doc. 52-11 at 5. The dissenting arbitrator

eoneluded that the arbitrability of a eounterclaim depends on whether it is properly eharacterized
as damages or a setoff. Beeause the panel was unable at that point to consider the nature of the
claimed damages,the arbitrator stated that he would deny the request for elarifieation as premature.
Doe. 52-11 at 5.

On or around August 1, 2019, Defendants submitted a report for their expert regarding
damages associated with Defendants' counterclaims. Doc. 52-13. Therein,the expert gave several
opinions. First, the expert stated that it was his opinion that Plaintiff breached the Attorney Fee
Contract by failing and refusing to honor the agreed-upon dispute resolution process. Doe. 52-13
at 11. Second, the expert stated that it was his opinion that Plaintiff breached applicable standards
of care for an attorney in his handling of the fee arrangement between the parties. Doc. 52-13 at

12. Third, the expert stated that Plaintiff breached applicable duties of care to Defendants if it
made an unauthorized settlement offer to Dakota Access on March 4, 2016. Doc. 52-13 at 15.

Fourth, the expert opined that the actions of Plaintiff were the direct and proximate cause of
damages to Defendants. Doc. 52-13 at 16. The expert stated that in his opinion, the damages that
Defendants suffered from Plaintiffs alleged breach of contract, negligence, and breach of
fiduciary duties caused Defendant to experience damages based on the easement and land value
ranging from $350,000 to $1,923,755; attorney's fees of $257,000; and capital gains taxes of
$300,000. Doe. 52-13 at 18-20. The expert acknowledged that the panel would not be awarding
damages for Plaintiffs malpractice and breach of fiduciary duty defenses and counterclaims, but
could only consider these damages as an offset to Plaintiffs fee claim. Doc. 52-13 at 20.
On August 8, 2019, Plaintiff filed a Motion to Re-Declare the Scope of Arbitration
Proceedings with this Court. Doc. 50. Therein, Plaintiff argues that the arbitration panel is,

contrary to this Court's directive and that ofthe Eighth Circuit Court ofAppeals,seeking to recover
affirmative damages under Counterclaim IX alleging breach of contract.
On August 30,2019,Plaintifffiled a Motion to Disqualify Arbitrators and a Motion to Stay
Arbitration Proceedings. Docs. 55,56. On September 27,2019,the Court entered an order staying

arbitration until the Court could rule on the pending motion to Re-Declare the Scope ofArbitration
Proceedings, Doc. 68, and on October 23, 2019, held oral argument on Defendants' Motion for
Reconsideration and Plaintiffs Motion to Disqualify Arbitrators and Motion to Re-Deelare the
Scope of Arbitration Proceedings, Doc. 71.

At the hearing, the Court denied Plaintiffs Motion to Disqualify Arbitrators. The Court
did not reach the question of whether the arbitrators should be disqualified. Instead, the Court
ruled that the Court did not have authority to consider that question at this point in the proceedings.

The Court also ordered the parties to file the emails and drafts of a statute of limitation
tolling agreement that were exchanged between the parties regarding counterclaims against the

Plaintiff. The Court was not aware until the October 23, 2019, hearing that the parties had
discussed and exchanged drafts of a tolling of statute oflimitations on counterclaims.
The communications between the parties regarding tolling of the statute of limitations are
clear. On December 31, 2018, defense counsel emailed plaintiffs counsel stating:

As we wait for the conclusion of appellate proceedings, it would be prudent to
stipulate to a tolling, to the extent necessary, ofany statutes oflimitation applicable

to the Clients' counterclaims. If the counterclaims are not going to be arbitrated,
in whole or in part, they must be filed with the court, and we'd like to avoid the
time and expense of filing the counterclaims with the court only to then request
they be stayed pending the conclusion of the appellate proceedings and/or
arbitration. Do you agree?
On January 23, 2019, in an email to plaintiffs counsel, defense counsel stated that "[i]f my edits
[to a draft tolling agreement] are not acceptable, we will just file the counterclaims as a

precautionary measure with a request to stay them pending the appellate proceedings." Finally,
on January 28, 2019, defense counsel emailed plaintiffs counsel stating:
Your drafts are over complicating this and re-writing the record. All we want is a
simple placeholder on file in case the counterclaims have to be tried in some fashion
in court. We'll just plan to file a motion with the counterclaims and ask that court
proceedings on them be stayed pending conclusion of the appellate and arbitration
proceedings.

After the conclusion of the hearing on October 23, 2019, the Court took Defendants'
Motion to Reconsider and Plaintiffs Motion to Re-Declare the Scope of Arbitration Proceedings
under advisement.

On October 24, 2019, the day following the hearing. Defendants filed a notice of appeal

with the Eighth Circuit Court of Appeals, seeking review ofthis Court's Order, Doc. 68, granting
Plaintiffs Motion to Stay Arbitration Proceedings. Doc. 72.
DISCUSSION

"Generally,'
[t]he filing ofa notice ofappeal... confers jurisdiction on the court ofappeals
and divests the district court ofits control over those aspects ofthe case involved in the appeal.'"

Chambers v. Pennycook, 641 F.3d 898, 903-04 (8th Cir. 2011) (quoting Griggs v. Provident

6
/

Consumer Disc. Co., 459 U.S. 56, 58 (1982)(per curiam)). Because the Motion to Reconsider a
Stay on Proceedings on Defendants' Counterclaims in federal district court and Motion to Re-

Declare the Scope of Arbitration Proceedings are not "aspects of the ease involved in the appeal"
of this Court's order grariting Plaintiffs Motion to Stay Arbitration, the Court retains jurisdiction
to rule on these outstanding motions.
I.

Motion for Reconsideration, Docket 46

Presently pending before the Court is Defendants' motion to reconsider the Court's order
denying Defendants' motion to stay proceedings on eounterelaims. On October 23, 2019, the
Court held oral argument on this motion. At the hearing, the parties stated that throughout the

month of January 2019, they had sought to enter a tolling agreement, but were unable to come to
an agreement. Defendants stated that at the time they filed their motion to stay proceedings on

their eounterelaims, the statute of limitations had not yet passed on their counterclaims. In
response to the Court's order at the motion hearing, the parties submitted the drafts oftheir tolling
agreement along with relevant email communications regarding the parties' negotiations. Docs.
75,76.

In its order denying Defendants' Motion to Stay Proceedings on Counterclaims, the Court
concluded that it was prevented from staying Defendants' counterclaims because they had not been

filed separately as a pleading with,the Court, but rather as an attachment to Defendants' brief in
support of their motion to stay counterclaims. In short, the Court concluded that there were not
counterclaims filed with the Court to be stayed. The Court notes that in addition. Defendants did

not request leave to file their counterclaims. Such a request would have been granted as a matter
of course as there would be no basis to contest such a request. Additionally, the caption on
Defendants' answer was not formatted as a pleading to be filed in this case. The caption read that
the case was "IN PRIVATE ARBITRATION (AS ORDERED BY THE UNITED STATES

DISTRICT COURT,DISTRICT OF SOUTH DAKOTA,SOUTHERN DIVISION,CIV. NO. 164180, DOCKET ENTRY 14."

At the hearing. Defendants disputed this Court's characterization of its counterclaims as

not being contained within a pleading. The Court recognizes that Defendants do not submit their
counterclaims as a stand-alone document, but instead offer the counterclaims as part of
Defendants' Answer that had been filed in the arbitration proceedings. The Court's point in citing
.7

these cases in its Memorandum Opinion and Order Denying Defendants' Motion to ;Stay
Proceedings on Counterclaims was to highlight the fact that Defendants' Answer, Affirmative
Defenses, and Counterclaims had not been docketed with the Court. The Court noted Local Rule

5.1(B)(r) which states that "a Notice of Electronic Filing from the court constitutes filing of the
document for all purposes ofthe local rules ofthis court and the Federal Rules ofCivil Procedure."
Defendants filed their Answer, Affirmative Defenses, and Counterclaims as an attachment to their

brief in support of their Motion to Stay Proceedings on Counterclaims and the January 29, 2019,
Notice of Electronic filing generated for this filing (Document No. 35) is entitled

"MEMORANDUM in Support re [34] MOTION to Stay Proceedings on Counterclaims Pending
Appellate Proceedings and Arbitration filed by Bradley Williams, Kerry Williams. (Attachments
#(1)Exhibit Exhibit(sic)- Arbitration Answer) .
Defendants stated in their brief in support of their Motion for Reconsideration that
"[D]efendants' intended by their motion [to stay proceedings on counterclaims], DocArefiVb. 34,
that the Court accept as filed and served on plaintiff, and treat as stayed and tolled, all nonarbitrable

portions of their Answer, Affirmative Defenses, and Counterclaims." Doc. 47. As noted by the
Court in its Memorandum Opinion and Order Denying Defendants' Motion to Stay Proceedings

on Counterclaims, the Court is unable to stay proceedings on counterclaims that have not been
filed with the Court. Nor did Defendants ever seek leave to file their Answer, Affirmative
Defenses and Counterclaims with this Court in their motion to stay, which,the Court noted above,

it would have granted as there would be no basis on which to contest such a motion.

As Defendants well know "the pursuit of arbitration [does] not toll the federal statute of
limitations." Zarecor v. Morgan Keegan & Co., Inc., 801 F.3d 882, 889 (8th Cir. 2015). The

Eighth Circuit Court of Appeals has stated that "there is an accepted procedure for pursuing
arbitration and a lawsuit simultaneously." Id. "A plaintiff may file a suit within the statute of

limitations and then seek a stay of the action pending arbitration: 'Such a course would have

guaranteed that the lawsuit was brought within the limitations period without waiving any right to
arbitration which may have existed.'" Id. (quoting Fonseca v. USG Ins. Servs., 467 Fed.Appx.

260, 261 (5th Cir. 2012)). It became clear to the Court during the October 23, 2019, motions
hearing that Defendants knew at the time they filed their motion to stay that they may soon run
into a statute oflimitations issue on at least one oftheir counterclaims, yet Defendants never filed

their Answer, Affirmative Defenses and Counterclaims with the Court nor sought leave of the
Court to do so. Defendants now argue that the Court treat as filed and served on Plaintiff their

Answer, Affirmative Defenses and Counterclaims when they filed their Motion to Stay. The Court
is unable to do so.

The Court has considered Defendants' Motion for Reconsideration. Having done so, the
Court finds no manifest error oflaw or fact. In addition, there is no new evidence that warrants a

different result than was previously ordered.
II.

Motion to Re-Declare Scope of Arbitration Proceedings, Docket 50

The Supreme Court has held that "arbitration is a matter of contract and a party cannot be
required to submit to arbitration any dispute which he has not agreed so to submit." United
Steelworkers ofAm. v. Warrior & GulfNov. Co.,363 U.S. 574,582(1960). "The question whether

the parties have submitted a particular dispute to arbitration, i.e., the ''question ofarbitrability,^ is
'an issue for judicial determination [ujnless the parties clearly and unmistakably provide
otherwise.'" Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) {qyxotmg AT& T
Techs., Inc. v. Commc'ns Workers, 475 U.S. 643, 649 (1986)); Local 38N Graphic Communc'ns

Conference/IBTv. St. Louis Post-Dispatch, LLC,638 F.3d 824, 826(8th Cir. 2011)(citing United
Steelworks of Am., 363 U.S. at 649). As stated in this Court's order compelling arbitration,

questions of arbitrahility are matters within this Court's exclusive jurisdiction as the parties'
arbitration clause did not provide otherwise. Doc. 14 at 9. The Court again exercised its exclusive

jurisdiction to determine "questions of arbitrahility" when it issued its November 20, 2017, order
declaring some of counterclaims, which Defendants had presented in arbitration, as being

arbitrable, while ruling that other counterclaims were not arbitrable because they fell outside the
scope ofthe arbitration agreement entered into by and between the parties. Doc. 26.
Defendants argue that "[rjecognizing its motion seeks to change the November 20, 2017,

Order by adding limits to it that were expressly stated as to certain Counterclaims but not
Counterclaim IV,plaintiffasks the Court to rule on the merits ofevidence and arguments presented
in arbitration, preclude the arbitrators from considering or ruling on defendants' damages for
Counterclaim IV, and disallow any 'claims for unethical conduct.'" Doc. 53 at 9-10.

The Eighth Circuit Court of Appeals has already concluded that the issue of affirmative

damages on the Defendants' breach-of-contract counterclaim is not an issue relating to the merits
of that claim, but rather is an issue relating to the arbitrability of that claim. Doc. 36 at 6. While

the court acknowledged that arbitrability generally does not depend on the remedy sought because
arbitration clauses are often silent about available remedies,the court stated that this case is unique

because the fee agreement ties arbitration to a particular remedy available to the firm: recovery of
the termination fee. Id. Accordingly, whether the parties have submitted to arbitration a claim for

affirmative damages that exceeds the. termination fee claimed by Plaintiff is a question of
arbitrability within this Court's exclusive jurisdiction.
Defendants contend that Plaintiffs motion is essentially a motion to reconsider.

Defendants argue that in its November 20,2017, order, this Court permitted arbitration of Counts

IX and X alleging breach of fiduciary duty and negligence, and specifically limited damages
recoverable to those that offset.Plaintiffs fee claim. Defendants claim that this Court's order

permitting arbitration of Count IV alleging breach of contract (other than portions of its seeking
defamation)did not specifically limit damages recoverable to those that offset Plaintiffs fee claim.
Defendants note that the Court's order was affirmed on appeal and argue that a footnote in the

decision by the Court of Appeals in which the court, in dicta,,appeared to characterize this Court's
order as allowing Defendants to arbitrate an affirmative claim for damages under their breach of
contract counterclaim.

The Court disagrees with Defendants' characterization ofPlaintiffs motion as a motion to

reconsider. It is true, as Defendants' argue, that in its opinion the Court omitted discussion of

damages recoverable for the breach-of-contract counterclaim, either as affirmative relief or as an
offset to Plaintiffs termination fee claim. However, the Court clearly held that "[ajrbitrators

determining damages against Plaintiff was not reasonably contemplated by the parties when they
entered into the Attorney Fee Contract arbitration clause," and stated that damages are recoverable

only "as an offset against claimed attorney fees." Doc. 26 at 10. The Court's decision was
affirmed on appeal. On appeal,the Court ofAppeals concluded that the language ofthe arbitration

clause requires arbitration only of disagreements about the termination fee, not disputes arising
out ofor "based on" a fee dispute. Doc.26 at 6. Accordingly, the Court of Appeals held that "[i]f
what [the Williamses] seek is to reduce or eliminate the money[they] owe to the firm,the claims
10

are arbitrable; if they seek something else—^like moneyfrom the firm—they are not." Doc. 36 at
6.

Given that this Court has already held that a claim of damages exceeding the termination
fee owed in this case is inconsistent with the parties' agreement, the arbitration panel lacks

jurisdiction over such a claim. See Klay v. UnitedHealthgroup, Inc., 316 F.3d 1092, 1112(11th
Cir. 2004)(citing Int'I Ass'n ofMachinists &Aerospace Workers v. Texas Steel Co.,639 F.2d 279,

281 (5th Cir. 1981)("'Arbitrahility' is said to involve the jurisdiction of the arbitration panel...

.")). The next question the Court must address, then, is what remedies it has to enforce its order
and jurisdiction over any affirmative-damages claim arising from Defendants' breach-of-eontract
counterclaim.

As noted by the Eighth Circuit Court of Appeals in its February 6, 2019, opinion, federal
courts do not have general supervisory authority over ongoing arbitration proceedings. Doe. 36 at

3 (citing 9 U.S.C. § 16 (listing various orders a district court might issue in connection with an
arbitration)). However,the Coxut of Appeals had already affirmed this Court's authority to enjoin
the Williamses from arbitrating some of their counterclaims. Doc. 36 at 4-5, presumably because

"questions of arbitrability" are "issue[s] for judicial determination [ujnless the parties clearly and
unmistakably provide otherwise," Howsam,537 U.S. at 83 (citation omitted).
Additionally, the All Writs Act, 28 U.S.C. § 1651(a), provides that "[t]he Supreme Court
and all courts established by Act of Congress may issue all writs necessary or appropriate in aid

of their respective jurisdictions and agreeable to the usages and principles of law." Although the
All Writs Act does notindependently confer subject-matterjurisdiction on federal courts,Syngenta

Crop Protection,Inc. v. Henson,537 U.S. 28,31 (2002),it does "authorize a federal court 'to issue
such commands ... as may be necessary or appropriate to effectuate and prevent the fiustration of
order its has previously issued in its exercise ofjurisdiction otherwise obtained,'" Penn. Bureau

ofCorr. V. Marshals Serv., 474 U.S. 34, 40 (1985). "The All Writs Act invests a court with a

power essentially equitable and, as such, not generally available to provide alternatives to other,
adequate remedies at law." Clinton v. Goldsmith, 526 U.S. 529,537(1999); see also Chamber v.
Cassady. For example,"[wjhere a statute specifically addresses the particular issue at hand, it is
that authority, and not the All Writs Act, that is controlling." Carlisle v. United States, 517 U.S.
416,429(1996)(citation omitted).
11

In Klay v. United Healthgroup, Inc., the Eleventh Cireuit Court of Appeals concluded that
the district court abused its discretion in enjoining arbitration on claims that it had previously ruled
were nonarbitrable. 376 F.3d 1092, 1111-1113 (11th Cir. 2004). The court reasoned that the
district court's arbitration order, in designating certain claims as nonarbitrable, simply held that
the plaintiffs could not be compelled to arbitrate them, not that the parties were prohibited from
arbitrating those claims. Id. at 1112. The court concluded that by purporting to proceed with the
arbitration of nonarbitrable claims, the defendant was not circumventing the court's arbitration
order, but was "instead merely engaging in a pointless, fiuitless exercise." Id. The court stated
further that ifan issue is nonarbitrable, the arbitrators lack jurisdiction over it. Id. The court stated

that "[i]t is precisely because arbitrating nonarbitrable claims is such a pointless endeavor that it
does not threaten or undermine either the district court's existing order or its jurisdiction over the

pending cases." Id. at 1113. The court noted that if defendants obtained an award from the
arbitrators on nonarbitrable claims, plaintiffs had an adequate remedy at law under 9 U,S.C. §
10(a)(4) which permits a federal district court to vacate an arbitration award "where the arbitrators
exceeded their powers." Id. at 1113. The court held that "[cjonsequently, the court was not

empowered to enjoin arbitration ofthe nonarbitrable claims under the All Writs Act." Id.
The Court finds Klay to be distinguishable from the circumstances present in this case.
First, this Court's November 20, 2017, order, specifically enjoined the Williamses from raising
certain counterclaims in arbitration and its ruling was affirmed on appeal. Doc. 36 at 2("The

district court . . ..issued an order dividing the counterclaims into two categories; those the
Williamses could raise in arbitration and those they could not."). Accordingly, proceeding to
arbitrate claims which the Court enjoined from arbitration directly circumvents and undermines
the Court's order. More importantly, however,the Court has serious concerns over whether it has
any other remedies at law to protect its jurisdiction over a claim of affirmative damages arising
from Defendants' breaeh-of-eontraet counterclaim. In his report, Defendants' expert opined that
Plaintiff breached the fee agreement and breached the applicable standard of care for an attorney

representing defendants, and that Plaintiffs actions were the legal cause of Defendants' damages
which, based on the easement and land value,included damages estimated ranging from $350,600
to $1,923,755; attorneys' fees of$257,000; and capital gains taxes of$300,000. Doe. 52-13 at 18-

20. Any damages award by the arbitration panel would necessarily encompass damages as an
offset to Plaintiffs attorneys' fees claim, which is within the arbitration panel's jurisdiction to
12

award, as well as damages exceeding Plaintiffs attorneys' fees claim, which is outside of the
arbitration panel's jurisdiction to award.

In summary, what this current dispute comes down to is whether or not the arbitration panel
can award affirmative damages against Plaintiff under arbitration counterclaim IV or any other
portion of the counterclaims in arbitration. This Court made clear in its previous rulings that the

arbitration was to determine Plaintiffs claimed fee, if any,but that any affirmative damages award
would not and could not come from the arbitration proceedings. Instead, any affirmative award
against Plaintiff would have to come through a trial in federal district court. The Court of Appeals

put all this succinctly when it held that:
It is true that arbitrability generally does not depend on the remedy sought, but that
is because arbitration clauses, especially broad ones, often do not say anything
about the available remedies. But here, the fee agreement ties arbitration to a
particular remedy available to the firm: recovery of the termination fee. So it is
logical—^indeed, necessary—to determine what the counterclaims seek. If what
they seek is to reduce or eliminate the money the Williamses owe the firm, the
claims are arbitrable; ifthey seek something else—like moneyfrom the firm—^they
are not.

Doc. 36 at 6.

At this juncture,, the Court concludes that it is necessary and appropriate to enjoin

arbitration of any counterclaim for affirmative damages to enforce this Court's order, that was

affirmed on appeal, enjoining arbitration of Defendants' damages claims that exceed the
termination fee Plaintiff claims to be owed.

III.

Motion to Stay

The Court entered a stay on September 27,2019, to allow the Court to rule on the pending
Motion to Re-Declare the Scope of Arbitration and Motion to Disqualify Arbitrators. Having now
ruled on those motions, the Court ordinarily would have lifted the stay on arbitration. However,

the Court's order granting stay of the arbitration. Doc. 68, is on appeal and the Court is without
jurisdiction to enter such an order at this time. See Chambers v. Pennycook, 641 F.3d 898, 90304(8th Cir. 2011).
Accordingly, it is hereby ORDERED:

13

1) Defendants' Motion for Reconsideration, Doc. 46, was considered and is DENIED;
and

2) Plaintiffs Motion to Re-Declare Scope of Arbitration Proceedings, Doc. 50, is
GRANTED. The parties are enjoined from arbitrating counterclaims seeking damages
that exceed the attorneys' fees claimed by Plaintiff in this matter. The Court ruled in
its November 20,2017, order. Doc. 26,that "[ajrbitrators determining damages against
Plaintiff was not reasonably contemplated by the parties when they entered into the

Attorney Fee Contract arbitration clause" and that "the parties would not have
contemplated a separate award of damages against Plaintiff except as an offset against
claimed attorney fees;" and

3) Plaintiffs Motion to Disqualify Arbitrators Martineau and Johnson, Doc. 55, is
DENIED.

XL
Dated thisQf^'jday ofNovember,2019.

BY THE COURT:

. Omtoti Urns(t^
^awrence L. Piersol

ATTEST:

United States District Judge

MATTHEW W.THELEN,CLERK

14