CollegeAmerica Services v. Western Benefit Solutions et al
Filing
39
MEMORANDUM DECISION and Ordergranting in part and denying in part 16 Motion to Enforce. The Court Orders 16 is granted as it relates to the claims against Defendant Keoppel, and denied as it relates to the claims against Defendants WBS and Osborne. Signed by Judge David Sam on 5/2/12. (jmr)
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
COLLEGEAMERICA SERVICES, INC.,
Plaintiff,
)
Case No.
2:11CV01208 DS
)
vs.
)
)
WESTERN BENEFIT SOLUTIONS,
LLC, ET AL.,
)
Defendants.
MEMORANDUM DECISION
AND ORDER
)
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
I.
Defendants
move
INTRODUCTION
to
enforce
a
Mediation
and
Arbitration
Agreement entered into by Plaintiff and Defendant Keoppel on August
27,
2010.
They
urge
that
Plaintiff
should
be
compelled
to
arbitrate all of its claims against all Defendants.
Briefly these are the relevant facts.
Plaintiff, which
provides administrative and other services to private colleges and
universities, hired Defendant Keoppel as its Vice President of
Human Resources
beginning
September
7,
2010.
Along
with
an
Employment Agreement, Plaintiff and Defendant Keoppel also entered
into an Arbitration Agreement which provides that “[a]ny and all
disputes, conflicts, problems, controversies, or claims of any kind
arising from or connected to” Keoppel’s employment with College
America
must
mediation.
first
be
submitted
to
management,
and
then
to
And if not resolved at mediation, the matter must be
submitted to binging arbitration. Mem. Supp. at 3-4. Keoppel left
his employment with Plaintiff in late 2011.
On March 11, 2011, Plaintiff and Defendant Western Benefit
Solutions, LLC, (“WBS”) executed a Consulting Agreement whereby WBS
agreed
to
provide
consulting services.
Plaintiff
employee
benefits
brokerage
and
The Consulting Agreement does not contain an
arbitration provision.
Plaintiff filed this lawsuit asserting claims against Keoppel
arising from his employment with CollegeAmerica. Plaintiff also
complains that Defendants WBS and Ron Osborne violated their
Consulting Agreement and made improper inducements to Keoppel to
breach his contract and duties owed to Plaintiff.
It is undisputed by the parties that federal policy and law
favors arbitration agreements.
II. DISCUSSION
A.
Claims against Keoppel.
On its face, the Arbitration Agreement bars Plaintiff’s claims
against Keoppel and mandates arbitration.
The Court rejects
Plaintiff’s assertion that it cannot be compelled to arbitrate its
claims against Keoppel because Keoppel acted inconsistent with his
right to arbitrate and waived his right to compel arbitration when
he chose to file an answer.
Keoppel’s Answer expressly assets as
an affirmative defense his right to arbitration and that this
lawsuit is barred by the Arbitration Agreement.
2
Keoppel also
demanded
to
enforce
the
Arbitration
Agreement
through
email
correspondence soon after his answer was filed. Additional factors
weighing in favor of enforcing arbitration are that the litigation
is still in its infancy, and Plaintiff will not be prejudiced if it
is compelled to arbitrate.
Additionally, Defendant Keoppel has
taken no steps to invoke the judicial process in this matter so as
to
constitute
a
waiver
of
arbitration.
See
Peterson
v.
Shearson/American Express, Inc., 849 F.2d 464, 467-68 (10th Cir.
1988)(citing
factors
to
be
considered
in
determining
contractual right to arbitration is unenforceable).
when
a
See also Hill
v. Ricoh Americas Corp., 603 F.3d 766, 772-3 (10th Cir. 2010)(same).
B.
Claims against WBS and Osborne
WBS and Osborne contend that Plaintiff’s claims against them
are inseparably intertwined with Keoppel’s Employment Agreement and
Keoppel’s Arbitration Agreement and that Plaintiff must submit its
claims against them to binding arbitration as well.
Plaintiff asserts that its claims against Defendants WBS and
Osborne arise out of their Consulting Agreement, which does not
contain an arbitration provision.
has
asserted
a
Counterclaim
Plaintiff also notes that WBS
based
solely
on
the
Consulting
Agreement.
It is undisputed that Utah law governs this issue. Arthur
Andersen LLP v. Carlisle,
556 U.S. 624 (2009).
Under certain
circumstances Utah law permits a nonsignatory to an arbitration
3
agreement to enforce or be bound by an agreement between other
parties based on the theory of nonsignatory estoppel. Ellsworth v.
American Arbitration Ass’n, 148 P.3d 983, 989 (Utah 2006).
In
Ellsworth, the Utah Supreme Court teaches as follows:
The general rule of arbitration agreements is that one
who has not manifested assent to an agreement to
arbitrate cannot be required to submit to arbitration.
However, under certain circumstances, a nonsignatory to
an arbitration agreement can enforce or be bound by an
agreement between other parties.
... The rationale behind [nonsignatory estoppel] is
that a nonsignatory should be estopped from avoiding
arbitration when the nonsignatory seeks to benefit from
some portions of the contract but avoid the arbitration
provision. In cases where estoppel has been implemented
against a nonsignatory, the nonsignatory has sued a
signatory on the contract to his benefit but sought to
avoid the arbitration provision of the same contract. A
nonsignatory will also be estopped when it receives a
“direct benefit” from the contract which contains the
arbitration clause.
This variety of nonsignatory
estoppel has been employed only when the nonsignatory
sues the signatory on the agreement after receiving
“direct benefits” but seeks to avoid arbitration.
Ellsworth, 148 P.3d at 989 (citations and footnotes omitted).
The Court is not persuaded that nonsignatory estoppel as
outlined
in Ellsworth has any application to the present case.
Plaintiff, a signatory to both the Arbitration Agreement and the
Employment Agreement with Keoppel, wishes to avoid arbitration.
Whereas Defendants WBS and Osborne, who are not signatories to
those agreements,
contained
Keoppel.
in
the
wish to enforce the arbitration provision
Arbitration
Agreement
between
Plaintiff
and
“[T]he nonsignatory estoppel exception does not apply to
4
... a nonsignatory who is not suing on the contract and who has not
received direct benefits from the contract.”
Id.
Defendants WBS
and Osborne do not fit under either of the two categories set forth
in
Ellsworth.
They
are
not
suing
on
Keoppel’s
Employment
Agreement and they did not directly benefit from that Contract.
In a footnote, Ellsworth references a third type of estoppel.
“Another variety of nonsignatory estoppel is that enforced by a
nonsignatory when the signatory plaintiff sues a nonsignatory
defendant on the contract but seeks to avoid the contract-mandated
arbitration
by
nonsignatory.”
relying
on
the
Id. at n.12.
fact
that
the
defendant
is
a
The parties do not fit under this
scenario either.
In support of their position that Plaintiff be compelled to
arbitrate all claims, Defendants cite Lenox MacLaren Surgical Corp.
v. Medtronic, Inc., 449 Fed. Appx. 704 (10th Cir. 2011).
In
referencing
to
some
common
elements
of
the
law
relating
nonsignatory estoppel, the court noted that in MA Dealer Service
Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999), “[t]he
Eleventh Circuit held that estoppel will permit a nonsignatory to
compel arbitration in two circumstances.
The first is when the
signatory “must rely on the terms of the written agreement in
asserting [its] claims against the nonsignatory.” Id. at 708
(citations and internal quotations marks omitted).
And “[t]he
second is when the signatory alleges substantially interdependent
5
and concerted misconduct by both the nonsignatory and one or more
of the signatories to the contract.” Id. (citations and internal
quotations marks omitted).
Because Utah law governs this issue,
Defendants must establish that the Utah Supreme Court would permit
a nonsignatory to compel a signatory to arbitrate its claims under
either of the two circumstances identified by the Eleventh Circuit.
This Defendants have failed to do.
Even if the Court were to conclude that the Utah Supreme Court
would adopt the analysis of the Eleventh Circuit as referenced in
Lenox MacLaren Surgical Corp, Defendants have failed to establish
that the present case fits either scenario contemplated by the
Eleventh Circuit.
“For a plaintiff’s claims to rely on the
contract containing the arbitration provision, the contract must
form the legal basis of those claims; it is not enough that the
contract is factually significant to the plaintiff’s claims or has
a
‘but-for’
omitted).
relationship
with
them.”
Id.
at
709
(citations
Notwithstanding Defendants’ assertion that each of
Plaintiff’s claims against WBS and Osborne are based on allegations
that WBS and Osborne made improper inducements to Keoppel to
persuade him to breach the same fiduciary duties encompassed in
Keoppel’s Employment Agreement, a fair reading of the Complaint
reflects
that
the
Arbitration
and
Employment
Agreements
with
Keoppel do not form the legal basis of each of Plaintiff’s claims
against WBS and Osborne.
Rather, it appears to the Court that the
6
claims against WBS and Osborne, for the most part, arise out of the
Consulting Agreement executed by CollegeAmerica and WBS.
As for the second scenario under Eleventh Circuit analysis
where nonsignatory estoppel would apply, “[t]he claims must be ‘so
intertwined with the agreement’ that ‘it would be unfair to allow
the signatory to rely on the agreement in formulating its claims
but to disavow availability of the arbitration clause of that same
agreement.’” Id. at 710
(citations omitted).
And “allegations of
collusion between a signatory and a nonsignatory, alone, are not
enough to estop a signatory from avoiding arbitration with a
nonsignatory.” Id. Instead, “allegations of collusion will support
estoppel ‘only when they establish that the claims against the
nonsignatory are intimately founded in and intertwined with the
obligations imposed by the contract containing the arbitration
clause.’” Id. at 710
(citations omitted).
The Court is not
persuaded that such is the case here.
Although, CollegeAmerica acknowledges that it also claims WBS
and Osborne improperly sought to obtain its business by providing
Keoppel gifts and to induce Keoppel to leave his employment with
Plaintiff, it asserts that these facts do not render the entirety
of
Plaintiff’s
claims
against WBS
and
Osborne
intertwined with Keoppel’s Employment agreement.
reading the Complaint, the Court agrees.
claims
alleged
against
WBS
and
7
Osborne
founded
in
or
After carefully
As noted, most of the
arise
out
of
their
Consulting Agreement with Plaintiff.
Plaintiff does not allege
substantially interdependent and concerted misconduct by Keoppel
and WBS and Osborne such that it would be unfair to allow Plaintiff
to disavow the arbitration provision in its contract with Keoppel.
III.
CONCLUSION
For the foregoing reasons, Defendants’ Motion to Enforce
Mediation and Arbitration Agreement (Doc. #16) is granted as it
relates to the claims against Defendant Keoppel, and denied as it
relates to the claims against Defendants WBS and Osborne.
DATED this 2nd day of May, 2012.
BY THE COURT:
DAVID SAM
SENIOR JUDGE
UNITED STATES DISTRICT COURT
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