Stuart v. Camp Korey

Filing 33

ORDER denying defendant Camp Korey's 10 Motion for Summary Judgment; denying plaintiff's 13 Motion to strike; denying plaintiff's 18 Cross Motion for Summary Judgment by Judge Ricardo S Martinez.(RS)

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  1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 Case No. C16-1815 RSM ELBRIDGE H. STUART, III, 11 12 13 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE Plaintiff, v. CAMP KOREY, 14 15 Defendant. I. 16 INTRODUCTION 17 This matter comes before the Court on Defendant Camp Korey’s Motion for Summary 18 Judgment (Dkt. #10), Plaintiff Elbridge H. Stuart, III’s Motion to Strike (Dkt. #13), and Mr. 19 Stuart’s Cross Motion for Summary Judgment (Dkt. #18). For the reasons below, the Court 20 21 22 DENIES all three Motions. II. BACKGROUND 23 Plaintiff Elbridge H. Stuart III is a director of the Elbridge and Debra Stuart Family 24 Foundation and the manager of SCF Holdings, LLC (“SCF”), previously known as Carnation 25 Farms, LLC, which is a subsidiary of the Foundation. Dkt. #17 at 1. Mr. Stuart is the great- 26 27 28 grandson of Elbridge Stuart, who founded the Carnation Milk Company in 1899. Id. at 2. In 1985, Carnation was acquired by the Nestle Corporation. Id. This sale included the original ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 1   1 Carnations Farm Site in Carnation, Washington. Id. In 2008, Nestle sold Carnation Farms to 2 Defendant Camp Korey, a nonprofit organization that provides camping facilities for children 3 with serious illnesses. Id. Mr. Stuart served on the board of directors for Camp Korey starting 4 in 2007. Id. at 2. 5 6 On December 21, 2009, SCF purchased Carnation Farms from Camp Korey and leased 7 the property back to Camp Korey. Id. at 4. At this time, Mr. Stuart was still on the board of 8 directors for Camp Korey. 9 10 In April of 2016, Mr. Stuart resigned from the board and sent a notice of default to Camp Korey alleging, among other things, that Camp Korey had not performed certain 11 12 maintenance and improvement projects ostensibly required by the lease. Dkts. #12 at 2; #12-1. 13 This notice was sent “[o]n behalf of Carnation Farms LLC” and signed by Mr. Stuart. Dkt. 14 #12-1. Eventually, counsel for Camp Korey and counsel representing SCF negotiated an 15 Agreement to Mediate to Resolve Differences (“Agreement”) on May 27, 2016. Dkt. #12-5. 16 The Agreement refers to disputes between “the parties” but does not define that term or list the 17 18 parties to the Agreement. Id. The Agreement states “[a]ny disputes between the parties that 19 are not resolved by September 30, 2016 shall be resolved by binding arbitration, by an 20 arbitrator agreed to by counsel for the parties.” Id. The Agreement has only two signature 21 lines, and is signed by Chris McReynolds for Camp Korey and Mr. Stuart for Carnation Farms 22 23 LLC. Id. 24 Mediation ultimately occurred with Mr. Stuart in attendance. The engagement letter for 25 the mediation listed the parties as “Camp Korey/Carnation Farms, LLC/Elbridge Stuart.” Dkt. 26 #12-8. Mr. Stuart’s counsel submitted a mediation brief “on behalf of the Elbridge and Debra 27 Stuart Family Foundation, its subsidiary, Carnation Farms LLC, and Elbridge (‘Bridge’) 28 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 2   1 Stuart.” Dkt. #12-9 at 1. This letter states “[t]he parties will arbitrate any remaining claims if 2 they cannot be resolved at mediation,” and appears to list Mr. Stuart as a party under a section 3 titled “The Parties.” Id. at 3. Later, the letter reiterates “[t]he parties have agreed to arbitrate 4 all claims if they cannot be resolved at mediation.” Id. at 9. 5 6 The parties mediated but were unsuccessful and the dispute was scheduled for binding 7 arbitration. 8 Preliminary Hearing and Case Scheduling Order listing “Elbridge H. Stuart/Carnation Farms, 9 LLC” as the Plaintiffs. 10 On October 4, 2016, the arbitrator, Judge Kallas (ret.), issued a Report of Dkt. #11-5. Although the arbitration included claims between Carnation Farms LLC and Camp Korey, Camp Korey also brought cross-claims against Mr. 11 12 Stuart personally. 13 In this action, Mr. Stuart asserts that he was not subject to the Agreement, cannot be 14 bound to arbitration, and seeks declaratory judgment. Dkt. #1. The parties have agreed to stay 15 the arbitration until this action is resolved. 16 Camp Korey now moves for summary judgment, arguing that extrinsic evidence 17 18 establishes Mr. Stuart as a party to the Agreement, that he should be bound to the Agreement 19 by equitable estoppel, and that he should be bound through agency theory. Dkt. #10. Mr. 20 Stuart also moves for summary judgment based on the face of the Agreement and certain 21 extrinsic evidence. Dkt. #18. 22 III. 23 24 DISCUSSION A. Plaintiff’s Motion to Strike 25 Mr. Stuart brought this action for the Court to determine whether his participation in a 26 mediation binds him personally to the Agreement and its term requiring mandatory arbitration. 27 In its Answer, Camp Korey alleges certain counterclaims. Dkt. #7. In doing so, Camp Korey 28 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 3   1 relies on language from a mediation brief submitted “on behalf of the Elbridge and Debra 2 Stuart Family Foundation, its subsidiary, Carnation Farms LLC (collectively referred to as the 3 ‘Stuart Foundation’), and Elbridge (‘Bridge’) Stuart.” Id. at ¶ 5.11. Camp Korey asserts that 4 Mr. Stuart’s counsel “made clear that any resolution in the mediation necessarily would have to 5 6 include the claims Camp Korey was asserting against Mr. Stuart individually.” Id. at ¶ 5.12. 7 Mr. Stuart now moves to strike these paragraphs under the mediation privilege and the terms of 8 the mediation. Dkt. #13. The Court has reviewed Mr. Stuart’s Motion to Strike Paragraphs 9 5.11 and 5.12 from Camp Korey’s Answer pursuant to Rule 12(f) and determined that Mr. 10 Stuart cannot rely on the mediation privilege or the terms of the mediation to strike these 11 12 paragraphs because he has necessarily opened the door to such communications by bringing 13 this action. See Bradfield v. Mid-Continent Cas. Co., 15 F. Supp. 3d 1253, 1256-57 (M.D. Fla. 14 2014) (discussing mediation privilege); Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1162 15 (9th Cir. 1992). The Court is also convinced that Mr. Stuart has waived the mediation privilege 16 with regard to these specific paragraphs through his own declaration stating he “would never 17 18 have agreed to a settlement in which SCF compromised its claims against Camp Korey, if 19 Camp Korey retained the right to sue [him] personally.” Dkt. #17 at 7. In any event, the Court 20 agrees with Camp Korey that the information submitted to the Court does not contain the 21 substance of the mediation negotiations. 22 23 B. Legal Standard for Summary Judgment 24 Summary judgment is appropriate where “the movant shows that there is no genuine 25 dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. 26 R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Material facts are 27 those which might affect the outcome of the suit under governing law. Anderson, 477 U.S. at 28 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 4   1 248. In ruling on summary judgment, a court does not weigh evidence to determine the truth of 2 the matter, but “only determine[s] whether there is a genuine issue for trial.” Crane v. Conoco, 3 Inc., 41 F.3d 547, 549 (9th Cir. 1994) (citing Federal Deposit Ins. Corp. v. O’Melveny & 4 Meyers, 969 F.2d 744, 747 (9th Cir. 1992)). 5 6 On a motion for summary judgment, the court views the evidence and draws inferences 7 in the light most favorable to the non-moving party. Anderson, 477 U.S. at 255; Sullivan v. 8 U.S. Dep't of the Navy, 365 F.3d 827, 832 (9th Cir. 2004). The Court must draw all reasonable 9 inferences in favor of the non-moving party. See O’Melveny & Meyers, 969 F.2d at 747, rev’d 10 on other grounds, 512 U.S. 79 (1994). However, the nonmoving party must make a “sufficient 11 12 showing on an essential element of her case with respect to which she has the burden of proof” 13 to survive summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Further, 14 “[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be 15 insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” 16 Anderson, 477 U.S. at 251. 17 18 C. The Agreement and the Intent of the Parties 19 Camp Korey urges the Court to consider extrinsic evidence to determine the intent of 20 the possible parties to the Agreement. Such evidence may be considered under Washington 21 law “as an aid in ascertaining the parties’ intent.” Berg v. Hudesman, 115 Wn.2d 657, 667–69, 22 23 801 P.2d 222 (1990). This evidence can include subsequent actions of the contracting parties. 24 Id. at 668. Under Washington law, contract interpretation is a question of fact when a court 25 relies on inferences drawn from extrinsic evidence, but is a question of law when “(1) the 26 interpretation does not depend on the use of extrinsic evidence or (2) only one reasonable 27 inference can be drawn from the extrinsic evidence.” Kelley v. Tonda, 2017 Wash. App. 28 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 5   1 LEXIS 734, *8 (Wash. Ct. App. Mar. 27, 2017) (citing Spectrum Glass Co. v. Pub. Util. Dist. 2 No. 1 of Snohomish County, 129 Wn. App. 303, 311, 119 P.3d 854 (2005)). 3 judgment is inappropriate when more than one reasonable inference can be drawn from the 4 Summary extrinsic evidence. Id. (citing Kries v. WA-SPOK Primary Care, LLC, 190 Wn. App. 98, 120, 5 6 362 P.3d 974 (2015)). 7 The Court finds that extrinsic evidence is necessary to determine the intent of the parties 8 in this case because the term “parties” is not defined in the Agreement and the signature blocks 9 are ambiguous. The Court has reviewed the extrinsic evidence cited by both parties and cannot 10 conclude as a matter of law that Mr. Stuart was or was not a party to the Agreement. See, e.g., 11 12 Dkts. #10 at 9-10 and #18 at 14-16. A factfinder could draw reasonable inferences in favor of 13 Mr. Stuart’s or Camp Korey’s respective positions on this issue. 14 judgment will not be granted for either party on this issue. 15 16 Accordingly, summary D. Equitable Estoppel “Equitable estoppel is a limited exception to the general rule that parties cannot be 17 18 required to submit to a contract to which they have not agreed: ‘Equitable estoppel precludes a 19 party from claiming the benefits of a contract while simultaneously attempting to avoid the 20 burdens that contract imposes.’” E.W. Bank v. Bingham, 992 F. Supp. 2d 1130, 1133 (W.D. 21 Wash. 2014) (quoting Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1045 (9th Cir. 2009)). 22 23 A nonsignatory “may be held to an arbitration clause where the nonsignatory knowingly 24 exploits the agreement containing the arbitration clause despite having never signed the 25 agreement.” Id.; see also T-Mobile USA, Inc. v. Montijo, No. C12-1317RSM, 2012 WL 26 6194204, at *1 (W.D. Wash. Dec. 11, 2012) (explaining equitable estoppel exception). 27 “Washington courts, like federal courts, have recognized that both equitable estoppel and 28 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 6   1 ‘normal contract and agency principles’ permit signatories to arbitration agreements to compel 2 arbitration against non-signatories in some circumstances.” Alaska Protein Recovery, LLC v. 3 Puretek Corp., No. C13-1429, 2014 WL 2011235, at *5 (W.D. Wash. May 16, 2014) (quoting 4 McClure v. Davis Wright Tremaine, 77 Wash. App. 312, 315, 890 P.2d 466 (1995)). 5 6 Camp Korey argues that Carnation Farms LLC and Mr. Stuart were only willing to 7 reach a settlement in mediation if it included a release for Mr. Stuart in his personal capacity. 8 Dkt. #10 at 11. 9 understanding that it included Mr. Stuart, and that Mr. Stuart “lull[ed] Camp Korey into 10 Camp Korey further argues that it entered the Agreement with the reliance on that understanding, such that Camp Korey waited to bring claims against him until 11 12 after September 30 and did so in the context of the arbitration.” Dkt. #10 at 12. Camp Korey 13 argues that “[i]f he had not hidden behind the Agreement in all of his actions up until Camp 14 Korey filed its cross-claims against him in arbitration, Camp Korey could have acted sooner 15 and potentially saved itself significant litigation costs or altered the equities in its favor for 16 settlement purposes.” Id. 17 18 In Response, Mr. Stuart argues that equitable estoppel of third parties to arbitration 19 agreements should be “narrowly confined.” Dkt. #15 at 16 (quoting Murphy v. DirecTV, Inc., 20 724 F.3d 1218, 1229 (9th Cir. 2013). Mr. Stuart argues that he has not “knowingly exploited” 21 the Agreement because he has not attempted to enforce the terms of the Agreement. Id. at 17. 22 23 Mr. Stuart argues that he personally received no benefit from the Agreement. Id. at 18. He 24 argues that even if he forced Camp Korey to mediate claims against him personally, he did not 25 benefit (presumably because the mediation was unsuccessful) and that Camp Korey’s reliance 26 on his apparent participation in the mediation to delay bringing claims was Camp Korey’s 27 “own doing.” Id. 28 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 7   1 On Reply, Camp Korey argues that Mr. Stuart knowingly exploited the Agreement 2 when “Mr. Stuart used his position as manager of SCF and his own ‘voluntary’ participation to 3 prevent any successful resolution of the claims between Camp Korey and SCF, short of 4 arbitration, unless he obtained a full release of Camp Korey’s claims against him in his 5 6 personal capacity.” Dkt. #21 at 8 (citing Dkt. #10 at 11). 7 The Court finds that Mr. Stuart is clearly not attempting to enforce the Agreement while 8 avoiding the mandatory arbitration clause. To the contrary, he is attempting to avoid being a 9 party to the Agreement altogether. The record does not support a finding that Mr. Stuart 10 personally received a benefit from the Agreement, as mediation was unsuccessful. The Court 11 12 agrees with Mr. Stuart that Camp Korey’s alleged reliance to delay further legal action was its 13 own doing, and that such reliance does not rise to the level of exploitation required to overcome 14 the general rule that parties cannot be required to submit to a contract to which they have not 15 agreed. See E.W. Bank, supra. Accordingly, this claim fails as a matter of law. 16 E. Agency Theory 17 18 Camp Korey argues under Washington law “nonsignatory agents should be compelled 19 to arbitrate if the claims involving them were intertwined with the claims involving a signatory 20 principal.” Dkt. #10 at 13 (citing Romney v. Franciscan Medical Grp., 186 Wash. App. 728, 21 747-48, 349 P.3d 32 (2015)). Camp Korey argues that “Mr. Stuart is indisputably an agent of 22 23 24 [SCF],” that Mr. Stuart signed the Agreement on SCF’s behalf, and that “it is undisputed that the claims involving Mr. Stuart and [SCF] are fundamentally intertwined.” Id. at 14. 25 In Response, Mr. Stuart argues this theory only applies “when a signatory has brought 26 claims against non-signatory agents and the agents then seek to invoke the arbitration clause 27 against the signatory,” and that “[t]he situation is materially different when… a signatory seeks 28 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 8   1 to invoke an arbitration clause against a non-signatory.” Dkt. #15 at 19 (quoting Legacy 2 Wireless Servs. V. Human Capital, L.L.C., 314 F. Supp. 2d 1045, 1054 (D. Or. 2004)). Mr. 3 Stuart argues that he has never agreed that the disputes between Camp Korey, SCF, and Mr. 4 Stuart are “intertwined,” and presents argument for why the claims against him personally are 5 6 distinct from the claims between SCF and Camp Korey. Dkt. #15 at 20-21. Mr. Stuart argues 7 that the standard in Romney is actually that the claims are “inherently inseparable,” and that this 8 standard has not been met. Id. at 20 (citing Romney, supra). 9 10 On Reply, Camp Korey points out that Legacy is an out-of-state case and Washington law controls this issue. Dkt. #21 at 12. 11 12 The Court agrees that Legacy, an Oregon case, is not controlling here. On the other 13 hand, the Court finds that the sole source for Camp Korey’s argument, Romney, does not 14 support Camp Korey’s position. Romney states “[w]here claims are based on the same set of 15 facts and inherently inseparable, the court may order arbitration of claims against the party 16 even if that party is not a party to the arbitration agreement,” citing Townsend v. Quadrant 17 18 Corp., 153 Wn. App. 870, 889, 224 P.3d 818 (2009), aff'd on other grounds, 173 Wn.2d 451, 19 268 P.3d 917 (2012). That broad statement is necessarily limited by the citation to Townsend. 20 In Townsend, plaintiff homeowners purchased houses from defendant the Quadrant 21 Corporation and brought claims against Quadrant, its parent company Weyerhaeuser Real 22 23 Estate Company (“WRECO”), and its parent company Weyerhaeuser Company. 153 Wn. App. 24 875-76. The purchase and sale agreement used in all the transactions contained a broad 25 mandatory arbitration provision. Id. at 875. The state Court of Appeals found that the two 26 nonsignatory parent companies WRECO and Weyerhaeuser could enforce the arbitration clause 27 for claims brought against them by the signatory homeowners who also had claims against the 28 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 9   1 signatory Quadrant because of “ordinary principles of contract and agency” and because the 2 charges against the parents and subsidiary were based on the same facts and were “inherently 3 inseparable.” Id. at 889. Thus Romney and Townsend do not on their own permit the Court to 4 allow a signatory to invoke an arbitration clause against a nonsignatory. The Court does not 5 6 believe the instant situation, where Mr. Stuart was signing on behalf of Carnation Farms LLC, 7 is sufficiently similar to an employer binding its employees to arbitration or a subsidiary 8 binding a parent company to arbitration. Accordingly, the Court finds that Camp Korey has 9 failed to meet its burden on this claim and will deny summary judgment. 10 IV. CONCLUSION 11 12 13 Having reviewed the relevant pleadings, the declarations and exhibits attached thereto, and the remainder of the record, the Court hereby finds and ORDERS that: 14 1) Defendant Camp Korey’s Motion for Summary Judgment (Dkt. #10) is DENIED. 15 2) Plaintiff Stuart’s Motion to Strike (Dkt. #13) is DENIED. 16 3) Plaintiff Stuart’s Cross Motion for Summary Judgment (Dkt. #18) is DENIED. 17 18 19 DATED this 26th day of April 2017. 20 21 22 23 A RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE 24 25 26 27 28 ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO STRIKE - 10

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