RTAE Holdings LLC et al v. FOCUS Investment Banking LLC et al

Filing 33

MEMORANDUM OPINION AND ORDER: The Court GRANTS Defendants' Motion to Stay and Compel Arbitration by Special Appearance (ECF No. 5 ) with respect to FOCUS Investment only. The Court STAYS Plaintiffs' claims against FOCUS Investment. The Court DENIES the Motion with respect to Shah and FOCUS Securities but STAYS Plaintiffs' claims against Shah and FOCUS Securities as well. (Ordered by Judge Karen Gren Scholer on 3/10/2025) (cfk)

United States District Court

CO?

v.

60

KO?

RTAE HOLDINGS, LLC, RYAN
TRIMBERGER, and AARON
EBERTOWSKI

802 60?

NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

COR (OR COR
COR

FOCUS INVESTMENT BANKING
LLC, FOCUS SECURITIES LLC, and
MANAN SHAH

MEMORANDUM

OPINION AND ORDER

Before the Court is Defendants FOCUS
LLC,

and Manan

CIVIL ACTION NO. 3:24-CV-1829-S

Investment Banking LLC, FOCUS

Shah’s Motion to Stay and Compel

Securities

Arbitration by Special Appearance

(“Motion”) [ECF No. 5]. The Court has reviewed the Motion, Defendants’ Memorandum in
Support of the Motion (“Defendants’ Brief”) [ECF No. 6], Plaintiffs RTAE Holdings, LLC, Ryan
Trimberger,

and

Aaron

Ebertowski’s

Response

and

Brief in Opposition

to the

Motion

(“Response”) [ECF No. 14], Defendants’ Reply Brief in Support of the Motion (“Reply”) [ECF

No. 19], and the applicable law. For the following reasons, the Court GRANTS the Motion with
respect to Defendant FOCUS Investment Banking LLC (“FOCUS Investment”) only.

I. BACKGROUND
This business dispute arises out of agreements related to the sale of a company. In 2020,
Plaintiffs Ryan Trimberger and Aaron Ebertowski co-owned Stratum Technology Management,
LLC. Pls.’ Original Pet. (“Petition”) [ECF No. 1-6] { 12. In September of that year, Trimberger

contemplated selling Stratum and engaged Defendants Manan Shah, FOCUS Investment, and
FOCUS Securities LLC (“FOCUS Securities”) to serve as Stratum’s exclusive financial advisor
for the sale. /d. at 1, {[ 12-13. In furtherance of that engagement, FOCUS Investment and Stratum

entered into a letter agreement (“Agreement”). See App. to Resp. (“Response Appendix”) [ECF
No. 15] 3-10. Douglas E. Rodgers signed the Agreement on behalf of FOCUS

Investment, and

Trimberger signed on behalf of Stratum. Jd. at 10. Pursuant to the Agreement, FOCUS Investment
agreed to act as Stratum’s “exclusive financial advisor” in connection with a sale or other transfer
of Stratum. Jd. at 3, 5. The Agreement included an arbitration clause providing that “[a]ny dispute,
claim or controversy arising out of or relating to this [Agreement] or the breach, termination,

enforcement, interpretation or validity thereof, including the determination of the scope or
applicability of this agreement to arbitrate, shall be determined by arbitration in Wilmington,
Delaware before one arbitrator.” Jd. at 8. After the Agreement was signed, Stratum’s ownership
was reorganized so that Plaintiff RTAE Holdings, LLC, wholly owned Stratum. Pet. { 15.
In July 2021, Stratum was about to close on a transaction with a buyer when “a prior suitor
of Stratum”

poached

Stratum’s

Chief Technology

Officer.

Jd.

416.

Defendants

allegedly

introduced Stratum to the poacher. Jd. { 17. Stratum disclosed the loss of its Chief Technology
Officer to the buyer, and the buyer terminated negotiations. Jd.

¥ 18. According to Plaintiffs,

Stratum later learned that Shah had agreed to a contractual provision with the poacher that
permitted that entity to hire away Stratum employees. Jd. ¢ 19.

On December 31, 2021, RTAE sold Stratum to Open Systems Technologies DE, LLC
(“OST”).! Id. § 22. The OST deal was less valuable than the previous deal had been. Jd. § 23. And
OST allegedly defrauded Plaintiffs and violated their contractual agreements. Jd. | 24. Plaintiffs
later learned that Defendants allegedly “played a bigger role in the fraud than was previously
understood.” Jd. | 29. Among other things, Plaintiffs claim that Defendants entered into a buy-side

agreement with OST’s parent company, Koniag, Inc., that had many similarities to Defendants’

' OST has since been renamed Vervint, LLC. Jd. § 22.

sell-side agreement with Stratum. Id. {{[ 42-44. That agreement included a provision stating that
Koniag would not be liable for paying FOCUS

Investment’s “success fee” if the seller was a

FOCUS Investment client. Jd. §§ 46-51. Defendants allegedly did not disclose this information to
Plaintiffs. Jd, §52. Shah told Koniag that FOCUS

Investment was representing Stratum and

“encouraged OST to make an offer on Stratum.” Jd. ¢ 62. When OST made the offer, Shah “tried
to convince Stratum to select OST.” Jd. | 63. According to Plaintiffs, Defendants did not disclose
the extent of their relationship with Koniag, and Stratum did not waive this alleged conflict of
interest. Id. J] 64-65.
Plaintiffs allege that OST’s purchase of Stratum “provided significant value to OST other
than through Stratum’s cloud services offerings.” Id. J] 74-79. And according to Plaintiffs,
Defendants and OST knew this fact. Jd. § 74. By contrast, Stratum allegedly was unaware of these

benefits and either would not have sold to OST or would not have sold to OST on the terms
negotiated by Defendants had it known. Jd. J§ 80-81.
As a result of the foregoing, Plaintiffs brought suit, asserting causes of action for breach of
fiduciary duty, negligence, gross negligence, fraud, negligent misrepresentation, equitable fraud,

and aiding and abetting fraud. /d. {{ 83-115. Defendants moved to compel arbitration pursuant to
the Agreement. Mot. 1-2.

Il. LEGAL STANDARD
Pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., written arbitration

provisions “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. The FAA provides that a party seeking
to enforce an arbitration provision may petition the court for “an order directing the parties to

proceed to arbitration in accordance with the terms of the agreement.” Jd. § 4.

Whether to enforce an arbitration agreement involves two analytical steps. “First, the court
must determine whether the parties agreed to arbitrate the dispute.” Will-Drill Res., Inc. v. Samson

Res. Co., 352 F.3d 211, 214 (Sth Cir. 2003) (citation omitted). This first question requires two
determinations: “(1) whether there is a valid agreement to arbitrate between the parties; and
(2) whether the dispute in question falls within the scope of that arbitration agreement.” Jd.

(quoting Am. Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 538 (Sth Cir. 2003)). Second, the court
“must consider whether any federal statute or policy renders the claims nonarbitrable.” Jd. (citation
omitted). In analyzing these steps, the court may look to “the pleadings and evidence on file.”
Jackson v. Royal Caribbean Cruises, Lid., 389 F. Supp. 3d 431, 444 (N.D. Tex. 2019) (citing Feb.

R. Clv. P. 56(a)).
If. ANALYSIS

Below, the Court first considers Plaintiffs’ objection to the version of the Agreement
submitted

by Defendants.

unenforceable

because

Next,

the Court

the designated

forum

analyzes

whether

is unavailable.

the arbitration
With

provision

these preliminary

is

issues

resolved, the Court then moves on to the traditional analysis governing enforceability of arbitration
agreements. Because Plaintiffs do not contend that any federal statute or policy renders their claims
nonarbitrable, the Court need only resolve the first question, with its two subparts—whether there
is a valid agreement to arbitrate and whether the parties’ dispute falls within the scope of that
agreement.
A, Evidentiary Objection

Before turning to the substance of the parties’ dispute over arbitration, the Court must
briefly address Plaintiffs’ contention that Defendants failed to present evidence of an enforceable
arbitration agreement because they rely on “an unauthenticated contract.” Resp. 10. Whatever the

merits of this argument may be, Plaintiffs cured any issue by including a copy of the Agreement
in their Appendix that is properly authenticated by the Declaration of Ryan Trimberger. Resp.
App. 1-10. Therefore, the Court overrules Plaintiffs’ objection.
B. Availability of Forum

Plaintiffs also argue that the Court cannot compel arbitration because the designated forum
is unavailable. Resp. 16. According to Plaintiffs, the Agreement requires arbitration to take place

in Wilmington, Delaware, and to be administered by JAMS. Jd. at 17. Plaintiffs contend that JAMS
“does not have any arbitrators located in Wilmington[,] Delaware,” thus rendering the Court

incapable of compelling arbitration. Jd. at 17-18. Defendants reply that “JAMS directly confirmed
they are more than willing and able to accommodate arbitrations in Delaware.” Reply 9; see also
Reply, Ex. C (email from JAMS Practice Manager stating that JAMS “can accommodate a hearing
in Delaware”).
Where a “forum-selection clause is an ‘important’ part of the arbitration agreement,” courts

“need not compel arbitration in a substitute forum if the designated forum becomes unavailable.”
PoolRe Ins. Corp. v. Organizational Strategies, Inc., 783 F.3d 256, 264 (Sth Cir. 2015) (quoting

Ranzy v. Tijerina, 393 F. App’x 174, 176 (Sth Cir. 2010)). Here, however, JAMS has confirmed
that the parties’ selected foruam—Wilmington, Delaware—is available. Therefore, unavailability
does not prevent the Court from compelling arbitration. See Unger v. Celevoke Inc., No. 6:09-CV365-LED-JDL, 2010 WL

11530640, at *6 (E.D. Tex. Oct. 14, 2010) (rejecting challenge to

arbitration based on the American Arbitration Association not having a location in Orange County,

California, where the Association confirmed in an email that the arbitration could take place in
Orange County).

C. Valid Agreement to Arbitrate

Having resoived these preliminary questions, the Court turns to the question of whether to
enforce the Agreement’s arbitration clause. Ordinarily, the Court must first determine whether
there is a valid agreement to arbitrate between the parties. Will-Drill, 352 F.3d at 214 (citation
omitted). Here, there is no dispute that the Agreement’s arbitration provision is valid. But there is
also no dispute that no express agreement to arbitrate exists between
Defendants.

Only

Stratum

and

FOCUS

Investment

all Plaintiffs and all

signed the Agreement.

Resp.

App.

10.

Nevertheless, both the signatory and non-signatory Defendants seek to bind the non-signatory
Plaintiffs to the Agreement pursuant to an equitable estoppel theory.
i. Non-Signatory Defendants

Plaintiffs first argue that Shah and FOCUS
Plaintiffs,

who

are not parties

to the Agreement,

Securities cannot compel arbitration with
because

unlike

FOCUS

Investment,

these

Defendants are not signatories to the Agreement. Resp. 11. Defendants do not meaningfully
respond,

stating

only

in a footnote

that “Shah

is cc’d

on the Agreement[,]

and

FOCUS

Securities .. . is referenced in the Agreement.” Reply 4 n.2. Defendants “offer[] no authority for
[their] contention that a non-signatory to an arbitration agreement can compel

another non-

signatory to arbitrate certain claims.”* Invista S.A.R.L. v. Rhodia, S.A., 625 F.3d 75, 85 (3d Cir.
2010); see also Gupta y. Lynch, No. 12-1787, 2013 WL 3187273, at *7 (E.D. La. June 20, 2013)

(“[T]here is little, if any, case law that would permit a non-signatory to compel arbitration against

another non-signatory.” (citation omitted)). And it is unclear to the Court whether Shah and
FOCUS Securities intend to compel arbitration, as Defendants argue only that “Plaintiffs fail to
explain how the presence of non-signatory co-Defendants would

somehow

destroy signatory

? As discussed more thoroughly below, the parties disagree as to whether Delaware or Texas law applies to
this dispute. The Court’s conclusion here would be the same under either state’s law.

[FOCUS Investment’s] ability to bind Plaintiffs.” Reply 4. Because Defendants have provided no
argument or authority supporting Shah and FOCUS Securities’ ability to compel arbitration, the
Court denies the Motion with respect to these Defendants.
ti. Non-Signatory Plaintiffs
The parties next dispute whether FOCUS Investment can compel Plaintiffs, who did not
sign the Agreement, to arbitration.
a. Governing Law

“[B]ackground principles of state contract law” apply to questions like “who is bound by
{arbitration agreements].” Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (2009); see also

IMA, Inc. v. Columbia Hosp. Med. City at Dall., Subsidiary L.P., 1 ¥ 4th 385, 391 (Sth Cir, 2021)
(“[W]hether a party can compel a non-signatory to arbitrate on equitable grounds is determined by
state law.” (citation omitted)). Therefore, the Court must first determine whether Delaware or
Texas law governs its analysis.
Both Delaware and Texas courts have held that an arbitration agreement may be enforced
against a non-signatory under principles of equitable estoppel. See Fla. Chem. Co. v. Flotek Indus.,
Inc., 262 A.3d 1066, 1074 (Del. Ch. 2021) (citation omitted); Hays v. HCA Holdings, Inc., 838

F.3d 605, 609 n.1 (Sth Cir. 2016) (citation omitted). And, as relevant here, courts in both states
recognize direct benefits estoppel. See Fairstead Cap. Mgmt. LLC y. Blodgett, 288 A.3d 729, 755
(Del. Ch. 2023) (citation omitted); Taylor Morrison of Tex., Inc. v. Ha, 660 S.W.3d 529, 533 (Tex.
2023) (citation omitted). Because neither party asserts an actual conflict between Delaware and
Texas law, and because there are no material differences between the states’ relevant substantive
laws, the Court need not choose between Texas and Delaware law. See Jacked Up, L.L.C. v. Sara

Lee Corp., 854 F.3d 797, 813 (Sth Cir. 2017) (citation omitted); R.R. Mgmt.

Co. v. CFS La.

Midstream Co., 428 F.3d 214, 222 (Sth Cir. 2005) (citation omitted), The Court’s analysis and
conclusion below would be the same under either Delaware or Texas law.

b. Direct Benefits Estoppel
Under Delaware law, “[a] non-signatory can be bound to a[n] [arbitration agreement] under
principles of equitable estoppel if the non-signatory has accepted a direct benefit under the
agreement.” Fairstead Cap. Mgmt., 288 A.3d at 755. Likewise, under Texas law, “a non-signatory

plaintiff seeking the benefits of a contract is estopped from simultaneously attempting to avoid the
contract’s burdens, such as the obligation to arbitrate disputes.” Taylor Morrison, 660 S.W.3d
at 533 (quoting In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005)). A plaintiff
seeks the benefits of a contract either by suing to enforce the contract or by “deliberately seek[ing]
and obtain[ing] substantial benefits from the contract itself." Jd. (citation omitted). A nonsignatory
seeks and obtains benefits from a contract when it “knowingly exploit[s] the contract during the

contract’s existence,” meaning the party knew about the contract and its terms and acted to exploit
it. In re Lloyd’s Reg. N. Am, Inc., 780 F.3d 283, 291 (Sth Cir. 2015) (citation omitted). And the
party must have “obtained some benefit under the contract.” Jd

(citation omitted); see also

Fairstead Cap. Mgmt., 288 A.3d at 755 (noting that the benefits can be pecuniary or nonpecuniary
so long as they are direct and actually received (citations omitted)). “If a nonsignatory seeks the

benefits of a contract with an arbitration clause, then the nonsignatory must arbitrate all claims that
fall within the scope of that arbitration clause.” Taylor Morrison, 660 S.W.3d at 533.
Plaintiffs do not contend that they were unaware of the Agreement, nor could they.
Trimberger signed the Agreement on behalf of Stratum. Resp. App. 10. RTAE owned Stratum and
sold it to OST. Pet. §[ 15, 22. And Trimberger and Ebertowski owned Stratum at the time the

3 Because it is unclear whether Delaware law recognizes the first option—suing to enforce the contract—
the Court focuses its analysis only on the second option—seeking and obtaining substantial benefits.

Agreement was signed and are members of RTAE. Jd. [ff 1, 12-13. Therefore, the Court concludes
that Plaintiffs knew about the Agreement and its terms.
Plaintiffs also obtained a direct benefit under the Agreement. According to FOCUS
Investment, “Trimberger and Ebertowski benefited directly from the services that FOCUS
[Investment] provided under the Agreement” because “[t]he Agreement contemplated the sale of
Stratum,”

and once that sale happened,

Trimberger

and Ebertowski,

as owners

of Stratum,

“enjoyed a significant financial benefit.” Defs.’ Br. 6-7. Plaintiffs respond that: (1) FOCUS
Investment did not perform as Stratum’s exclusive financial advisor as required by the Agreement;
(2) only Stratum directly benefited from FOCUS

Investment’s advisory services under the

Agreement; and (3) any benefit from the sale of Stratum resulted directly from a separate Unit
Purchase Agreement and not from the Agreement itself or assistance from FOCUS Investment.
Resp. 12-14.

As to Plaintiffs’ first argument, Plaintiffs themselves allege that FOCUS

Investment

introduced Stratum to OST and that RTAE sold Stratum to OST “with FOCUS’s seller-side
involvement” for some amount of money. Pet. 2 & ff 22-23, 62-63, 73. Plaintiffs’ contention that
they did not receive the full benefit of the Agreement is unavailing. “[MJerely alleging that a
benefit was deficient or outweighed by the negative aspects of the signatory’s actions does not
mean that no benefit was received.” In re Lloyd’s Reg., 780 F.3d at 293 (citation omitted); see also
Fla. Chem. Co., 262 A.3d at 1091 (“The law does not require a weighing of the relative benefits
before binding a non-signatory to a[n] [arbitration agreement].”). Even if the Court assumes that

FOCUS

Investment’s performance was deficient, “that partial performance was still a direct

benefit to [Plaintiffs].” In re Lloyd’s Reg., 780 F.3d at 292-93,

As to Plaintiffs’ second and third arguments, Plaintiffs concede that they “ultimately
benefitted from the execution and closing of the Unit Purchase Agreement with OST.” Resp. 14.
But according to Plaintiffs, their benefits from the Agreement at issue were only indirect because
they arose out of the separate Unit Purchase Agreement, which was negotiated “without any
substantial assistance from FOCUS Investment.”* Jd. (emphasis omitted). The Court disagrees.
Stratum entered into the Agreement with FOCUS Investment so that FOCUS Investment would

serve as its exclusive financial advisor “in connection with a Transaction.” Resp. App. 3. The
Agreement defines “Transaction” to mean “a sale or other transfer . . . of all or a material interest
in any of the assets or securities of [Stratum].” Jd. at 5 (emphasis omitted). Thus, although the
“Transaction”

at issue was

effectuated by a different agreement,

Investment for the purpose of such a sale, and FOCUS

Stratum engaged

FOCUS

Investment was performing under the

Agreement when it arranged the sale of Stratum to OST.

Plaintiffs accepted a benefit of the

Agreement when the company they owned, Stratum, entered into the Unit Purchase Agreement as
a direct result of the services provided by FOCUS

Investment under the Agreement. See Fla.

Chem. Co., 262 A.3d at 1091 (finding that the non-signatory accepted a benefit of an agreement

containing an arbitration provision because that agreement led to the execution of a second
agreement that provided the non-signatory with a necessary resource). In other words, “[i]t is clear

that many benefits flowed directly to [Plaintiffs] when [FOCUS Investment] performed its contract
with [Stratum].” Hellenic Inv. Fund, Inc, v. Det Norske Veritas, 464 F.3d 514, 519 (Sth Cir. 2006).
ec. Unclean Hands
Plaintiffs argue that even if principles of estoppel bind them to the Agreement, FOCUS
Investment’s unclean hands prevent it from relying on equitable estoppel to compel arbitration.

‘ Plaintiffs’ argument is belied by the Petition, in which they allege that Defendants “helped negotiate” the

terms of the sale to OST. Pet. § 81.

10

Resp. 15-16. “It is well-settled that a party seeking an equitable remedy must do equity and come
to court with clean hands.” Truly v. Austin, 744 S.W.2d 934, 938 (Tex. 1988) (citation omitted);
see also Am. Healthcare Admin. Servs., Inc. y. Aizen, 285 A.3d 461, 484 (Del. Ch. 2022) (citation

omitted). “A party seeking to invoke this equitable doctrine must show that he has been seriously
harmed and the wrong complained of cannot be corrected without applying the doctrine.” LDF
Constr., Inc. v. Bryan, 324 $.W.3d 137, 149 (Tex. App.—Waco 2010, no pet.) (citation omitted).
The party claiming unclean hands bears the burden to show that it was injured by unlawful or

inequitable conduct. Cantu v. Guerra & Moore, LLP, 549 $.W.3d 664, 671 (Tex. App.—San
Antonio 2017, pet. denied) (citation omitted).
In support of their argument, Plaintiffs cite evidence in the record allegedly showing that

Defendants “secretly negotiated a buy-side agreement with Stratum’s counterparty,” 29 66, “secretly ...
negotiated that sell-side clients like Stratum ... would pay the hefty contingent success fee,” and
“had secret discussions with Koniag about the transaction.” Resp. 15-16. FOCUS

Investment

counters by pointing to evidence that Shah disclosed the buy-side agreement to Plaintiffs and that
there were no secret negotiations. Reply 8-9. Having reviewed the evidence produced by both

parties, the Court concludes that Plaintiffs have not adequately demonstrated that
Investment

has

unclean

hands.

Therefore,

the

unclean

hands

doctrine

poses

no

FOCUS

obstacle

to

compelling arbitration.
D. Dispute Within the Scope of the

Agreement

The Court next determines whether the Arbitration Agreement covers Plaintiffs’ claims
against FOCUS Investment. Will-Drill, 352 F.3d at 214 (citation omitted). The Court looks at the
language of the Agreement to make this determination. £.E.0.C. v. Waffle House, Inc., 534 U.S.
279, 289 (2002) (“[I]t is the language of the contract that defines the scope of disputes subject to

11

arbitration.” (citation omitted)). The Agreement’s arbitration provision applies to “[a]ny dispute,
claim or controversy arising out of or relating to this [Agreement] or the breach, termination,
enforcement, interpretation or validity thereof, including the determination of the scope or
applicability of this agreement to arbitrate.” Resp. App. 8. This language “is nearly infinitely
broad.” Martinez v. Experian Info. Sols., Inc., No. 3:24-CV-0744-X, 2024 WL

3906775, at *3

(N.D. Tex. Aug.

(“Agreements

22, 2024); see also PoolRe Ins.

Corp., 783

F.3d at 262-63

mandating arbitration of disputes that ‘relate to’ . . . a contract are ‘broad arbitration clauses
capable of expansive reach.”” on (quoting Pennzoil Expl. & Prod. Co. v. Ramco Energy Ltd., 139

F.3d 1061, 1067 (Sth Cir. 1998))).
Plaintiffs’ breach of fiduciary duty, negligence, and gross negligence claims relate to the
Agreement because they are based on FOCUS Investment’s alleged deficiencies as Plaintiffs’
“exclusive financial advisor,” i.e., the role Plaintiffs contracted FOCUS

Investment to perform

under the Agreement. Pet. {ff 84, 88, 92. And Plaintiffs’ fraud, negligent misrepresentation, and
equitable fraud claims are based on FOCUS Investment allegedly inducing Plaintiffs to enter the
Agreement;

therefore, these claims are related to the Agreement.

Jd. J] 98-100,

105-07; see

JBARM, L.L.P. v. Mad River Post, Inc., No. 3:06-CV-2351-L, 2007 WL 9717507, at *3 (N.D. Tex.

May

10, 2007) (“Since Plaintiffs claim that they were fraudulently induced into signing the

Agreements . . ., these are clearly claims ‘relating to’ the Agreements.” (citation omitted)), report
and recommendation adopted by 2007 WL 9717508 (N.D. Tex. May 30, 2007). Finally, Plaintiffs’

aiding and abetting fraud claim is based on allegations that FOCUS Investment was involved in
OST’s alleged fraud. Jd. §[ 111-13. Dealings between
Agreement

because

OST

was

the buyer FOCUS

obligations under the Agreement.

12

FOCUS Investment and OST relate to the

Investment located in connection with its

In sum, direct benefits estoppel binds Plaintiffs to the Agreement’s arbitration provision.
And because all of Plaintiffs’ claims fall within the scope of the Agreement,

Plaintiffs must

arbitrate their claims against FOCUS Investment.

IV. CONCLUSION
For the foregoing reasons, the Court GRANTS Defendants’ Motion to Stay and Compel
Arbitration by Special Appearance [ECF No. 5] with respect to FOCUS

Investment only. The

Court STAYS Plaintiffs’ claims against FOCUS Investment. See 9 U.S.C. § 3.

The Court DENIES the Motion with respect to Shah and FOCUS Securities but STAYS
Plaintiffs’ claims against Shah and FOCUS Securities as well. The Fifth Circuit has set forth three
requirements for courts to stay proceedings with respect to non-signatories: “1) the arbitrated and
litigated disputes must involve the same operative facts; 2) the claims asserted in the arbitration

and litigation must be ‘inherently inseparable’; and 3) the litigation must have a ‘critical impact’
on the arbitration.” Waste Mgmt., Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d
339, 343-45 (Sth Cir. 2004) (citation omitted); see also Rainier DSC 1, L.L.C. y. Rainier Cap.
Memt., L.P., 828 F.3d 356, 360 (Sth Cir. 2016) (citation omitted). Because the Court concludes
that all three requirements are met in this case, the Court stays this case as to Plaintiffs’ claims
against non-signatories Shah and FOCUS Securities.
It is therefore ORDERED

that this case is administratively closed pending resolution of

the arbitration between Plaintiffs and FOCUS Investment.
SO ORDERED.
SIGNED March 10, 2025.

J

th

uw

KAREN GREN SCHOLER

Q—

UNITED STATES DISTRICT JUDGE

13