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Streamline Consulting Group LLC v. Legacy Carbon LLC

United States District Court, D. Hawaii

January 27, 2016

STREAMLINE CONSULTING GROUP LLC, Plaintiff,
v.
LEGACY CARBON LLC, dba HAWAIIAN LEGACY CARBON; HAWAIIAN LEGACY REFORESTATION INITIATIVE, dba HAWAIIAN LEGACY HARDWOODS, dba HAWAIIAN LEGACY FORESTS, dba, LEGACY FORESTS, dba LEGACY TREES; HLH LLC, aka HAWAIIAN LEGACY HARDWOODS, LLC; LEGACY HARDWOODS, INC., aka HAWAIIAN LEGACY HARDWOODS, INC,; LEGACY HOLDINGS LLC, aka HAWAIIAN LEGACY HOLDINGS, LLC; JEFFREY DUNSTER; and JOHN DOES, Defendants.

ORDER (1) DETERMINING THAT CLAIMS ARISING UNDER THE SERVICING AND NON-CIRCUMVENTION AGREEMENTS ARE SUBJECT TO ARBITRATION AND DENYING MOTION TO DISMISS; (2) DENYING REQUEST FOR FEES; AND (3) STAYING CASE EXCEPT WITH RESPECT TO THE ISSUE OF WHICH DEFENDANTS ARE SUBJECT TO THE ARBITRATION AGREEMENT

SUSAN OKI MOLLWAY, District Judge.

I. INTRODUCTION.

The main issue before this court is whether claims that Defendants breached a Services Agreement and a Non-Circumvention Agreement must be arbitrated. The court determines that all claims arising under either the Services Agreement or the Non-Circumvention Agreement must be arbitrated. However, this court reserves to itself the issue of which parties are covered by the arbitration agreement. The court therefore stays this case except with respect to that issue. The court denies Defendants' motion to dismiss and request for fees.

II. FACTUAL BACKGROUND.

A. The Services Agreement.

Streamline Consulting Group is a District of Columbia limited liability company that says it "provides consulting services in the management of business development, data and information, and capacity building for project developers raising and placing capital in eco-asset markets, including renewable energy, nutrient credits, energy efficiency, carbon offsets, and mitigation banking." Complaint ¶ 1, ECF No. 1, PageID # 2.

On or about January 3, 2014, Streamline entered into a contract with Hawaiian Legacy Carbon LLC. ("Services Agreement") See ECF No. 1-1, PageID # 22. The Services Agreement lists a Coelho Way address for Hawaiian Legacy Carbon LLC. Id.

The Services Agreement says that Hawaiian Legacy Carbon, "through its affiliate[, ] Hawaiian Legacy Hardwoods, is a project developer that plants trees, restores degraded land, provides ecotourism, and creates products in the form of RFID tacks and ecosystem service credits." Id . Hawaiian Legacy Hardwoods is also called "HLH" in the Services Agreement. Id.

Pursuant to the Services Agreement, Streamline was to "assist in implementing [Hawaiian Legacy Carbon's] business plan" by, among other things (1) coordinating and creating a retail program or plan to sell carbon offset and water quality and trading credits; (2) introducing Hawaiian Legacy Carbon affiliates to people or companies that raised capital or sold products; (3) assisting with retail strategies and grant proposals; and (4) including Streamline's president's biography in Hawaiian Legacy Carbon and Hawaiian Legacy Hardwoods "marketing documentation and website." Id . In return, Hawaiian Legacy Carbon and Hawaiian Legacy Hardwoods promised to pay a fee of 3.5% of the "awarded project funding." Id.

The Services Agreement had an arbitration provision stating:

Any controversy or claim arising out of, or relating to this agreement, or breach thereof, which is not settled amicably by and between the signatories within a period of 30 days shall be settled through binding arbitration in accordance with the laws of the defending state.

Id., PageID # 24.

The Services Agreement was executed on behalf of Hawaiian Legacy Carbon by Jeffrey Dunster, its co-founder, in early January 2014. Id.

Streamline alleges that Defendants, who appear to all be citizens of Hawaii, breached the Services Agreement by failing to pay amounts due. From April 2, 2014, through July 22, 2014, these amounts allegedly equaled $28, 610.71. Complaint ¶ 23.

B. The Non-Circumvention Agreement.

On or about December 17, 2013, which was a few weeks before the Services Agreement was executed, Hawaiian Legacy Hardwoods, LLC, entered into a Non-Circumvention Agreement with Streamline. See ECF No. 1-2. Through this agreement, Hawaiian Legacy Hardwoods, which has the same Coelho Way address as Hawaiian Legacy Carbon, agreed not to "circumvent, avoid, bypass, or obviate directly or indirectly, the creation or pursuit of the Collaboration [defined as the mutually beneficial business relationship that might involve third parties] by entering into any direct or indirect negotiations, communications, or transactions with, or by soliciting or accepting any business or financing from or on behalf of an Introduced Party...." Id., PageID # 28. If it breached this provision, Hawaiian Legacy Hardwoods promised to pay Streamline a fee of 20% of the total value of the money involved. Id.

The Non-Circumvention Agreement was executed by Dunster on behalf of Legacy Hardwoods, LLC, even though, in the first paragraph of the Non-Circumvention Agreement, it is Hawaiian Legacy Hardwoods, LLC, that is listed as a party to that agreement. See ECF No. 1-2, PageID # 30.

The Complaint alleges that Streamline introduced Defendants to key personnel at the Cambridge office of a company called The Gold Standard in connection with an award-winning certification standard for carbon mitigation projects. See Complaint ¶¶ 33-35, ECF No. 1, PageID # 10. The Complaint alleges that, after Defendants failed to pay its bills, Defendants began communicating and negotiating with The Gold Standard directly. Id . ¶ 36. The Complaint alleges that, as a result, Defendants owe Streamline $300, 000. Id . ¶ 41, PageID # 11.

C. Allegations and Facts Concerning Piercing the Corporate Veil, Alter Ego, and Joint Tortfeasor Liability.

Although the Services Agreement was executed by Hawaiian Legacy Carbon LLC, and although the Non-Circumvention Agreement was executed by Legacy Hardwoods, LLC, the Complaint seeks to hold other Defendants liable through piercing the corporate veil or on alter ego and joint tortfeasor theories of liability:

8. Defendant JEFFREY A. DUNSTER ("Dunster") is a resident of the City and County of Honolulu, State of Hawaii, and is the owner and operator of a business organization or enterprise involved in developing a tropical hardwood plantation on the Island of Hawaii, with emphasis upon growing koa trees, and related activities, utilizing the foregoing entities as a conduit for his operation (hereinafter, the "Dunster's Project").
9. Dunster is operating his organization through a network of related or affiliated entities, including Defendants Legacy Carbon, LLC dba Hawaiian Legacy Carbon, Hawaiian Legacy Reforestation Initiative dba Hawaiian Legacy Hardwoods dba Hawaiian Legacy Forests dba Legacy Forests dba Legacy Trees, HLH, LLC fka Hawaiian Legacy Hardwoods, LLC, Legacy Hardwoods, Inc. fka Hawaiian Legacy Hardwoods, Inc., and Legacy Holdings, LLC fka Hawaiian Legacy Holdings, LLC (collectively, the "Dunster Entities"), which however are all part of ...

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