United States District Court, D. Hawaii
ORDER DENYING WITHOUT PREJUDICE PETITION TO COMPEL
ARBITRATION OF THIRD-PARTY CLAIMS AGAINST TIFFANY
Oki Mollway, United States District Judge.
main issue before this court is whether Tiffany Potter,
President of Streamline Consulting Group LLC, is compelled to
arbitrate claims brought against her in her individual
capacity by Legacy Carbon LLC. Legacy Carbon and Potter ask
this court to rule on the present petition based on the
papers. The petition is denied. However, Legacy Carbon may
file an amended petition within thirty days of the date of
amended petition must include an exhibit clearly and
thoroughly identifying all claims Legacy Carbon proposes to
pursue against Potter in her individual capacity. This
exhibit must include the factual basis for each claim. If the
amended motion seeks discovery, the specific discovery and
the legal authority to conduct discovery must be set forth.
January 3, 2014, Streamline Consulting Group, a District of
Columbia limited liability company, entered into a contract
with Hawaiian Legacy Carbon LLC. (“Services
Agreement”). See Petition to Arbitrate,
Exhibit A, ECF No. 1-2, PageID #s 16-18. See also
Streamline Consulting Group LLC v. Legacy Carbon LLC,
Civ. No. 15-00318 SOM-KSC, 2016 WL 347301, at *1 (D. Haw.
Jan. 27, 2016). The Services Agreement states that Streamline
“is a consulting practice managing information,
communication, due diligence services, and capacity building
for private or public sector entities that develop
eco-assets.” ECF No. 1-2, PageID # 16. It says that
Hawaiian Legacy Carbon, also known as 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.”
to the Services Agreement, Streamline was to “assist in
implementing [Legacy Carbon's] business plan.”
Id. In return, Legacy Carbon and Hawaiian Legacy
Hardwoods promised to pay a fee of 3.5% of the “awarded
project funding.” Id.
Services Agreement has an arbitration clause 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 # 18.
early January 2014, the Services Agreement was signed on
behalf of Legacy Carbon by Jeffrey Dunster, its co-founder,
and on behalf of Streamline by Tiffany Potter, its President.
about December 17, 2013, a few weeks before the Services
Agreement was executed, Hawaiian Legacy Hardwoods, entered
into a Non-Circumvention Agreement with Streamline.
See id.; see also Petition to
Arbitrate, Exhibit E, ECF No. 1-6, PageID #s 109-13.
According to the terms of the agreement, Hawaiian Legacy
Hardwoods 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 . . . .
ECF No. 1-6, PageID # 111. Hawaiian Legacy Hardwoods promised
to pay Streamline a fee of 20% of the total value of money
involved if it breached this non-circumvention provision.
Non-Circumvention Agreement was executed by Dunster on behalf
of Legacy Hardwoods, LLC, even though it was Hawaiian Legacy
Hardwoods that was listed as a party to the agreement,
see id., PageID # 109, and by Potter on behalf of
Streamline, see id., PageID # 113.
October 21, 2014, Streamline sent a demand for arbitration of
its claims that the Services Agreement and Non-Circumvention
Agreement had been breached. The demand went to Legacy Carbon
LLC, dba Hawaii Legacy Carbon, dba Hawaiian Legacy Hardwoods.
See Exhibit B, ECF No. 1-3, PageID #s 20-22. The
Legacy entities responded that only Legacy Carbon, the
company that had signed the Services Agreement, was subject
to the mandatory arbitration provision. See Exhibit
C, ECF No. 1-4, PageID #s 64-69. The parties chose former
Hawaii Supreme Court Associate Justice James Duffy as their
arbitrator. See Streamline Consulting Group LLC,
2016 WL 347301, at *3.
light of a dispute about which parties were subject to
arbitration, Streamline commenced a suit in this court
against the following entities: Legacy Carbon LLC, dba
Hawaiian Legacy Carbon; Hawaiian Legacy Reforestation
Initiative, dba Hawaiian Legacy Hardwoods, dba Hawaiian
Legacy Forests, dba, Legacy Forest, 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; and Jeffrey Dunster
individually (“Legacy Defendants”). See
Id. at *1; see also Exhibit H, ECF No. 1-9,
PageID #s 150-82. Legacy Defendants sought dismissal of
certain claims and an order compelling arbitration of other
claims. Exhibit J, ECF No. 1-11, PageID #s 184-328; Exhibit
K, ECF No. 1-12, PageID #s 331-53. Streamline filed a
countermotion seeking to compel arbitration of all claims.
Exhibit L, ECF No. 1-13, PageID #s 355-95.
January 27, 2016, this court compelled arbitration of claims
arising under both the Services Agreement and the
Non-Circumvention Agreement. Streamline Consulting Group
LLC, 2016 WL 347301, at *5-6. However, the court
retained jurisdiction to decide which Legacy Defendants were
bound by the arbitration provision in the Services Agreement.
Id. at *7. Faced with litigation over which Legacy
Defendants were required to arbitrate, the parties entered
into a Stipulation to Stay the Proceedings Pending
Arbitration and to Refer All Issues to Arbitration
(“Stipulation”). See Exhibit N, ECF No.
1-15, PageID #s 420-22. The parties agreed that “all
[Legacy] Defendants will submit to arbitration.”
Id., PageID # 421. The parties also agreed to refer
to arbitration “(i) all Plaintiff's claims that
were or could have been raised in this action; (ii) all
[Legacy] Defendants' defenses, counterclaims, and
third-party claims that could have been raised in this
action; and (iii) all Plaintiff's defenses that could
have been raised in this action.” Id. This
court approved the Stipulation, which was signed by attorney
John Winnicki on behalf of Streamline, and by attorney
Christopher Muzzi on behalf of all Legacy Defendants. See
id., PageID # 422.
the parties raised with the arbitrator the issue of whether
claims against Potter, who had not been individually named in
the earlier lawsuit filed in this court, were arbitrable. The
arbitrator stayed arbitration proceedings to allow the
present motion asking this court to compel arbitration of
claims against Potter.
Federal Arbitration Act (“FAA”) governs
arbitration agreements in contracts involving interstate
commerce. See 9 U.S.C. § 2. Under the FAA,
arbitration agreements “shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.”
Id. “A party aggrieved by the alleged failure,
neglect, or refusal of another to arbitrate under a written
agreement for arbitration may petition” a federal
district court with jurisdiction “for an order
directing that such arbitration proceed in the manner
provided for in such agreement.” Id. § 4.
This Court, Not an Arbitrator, Should Decide Whether the
Arbitration Agreement and/or Stipulation Binds Potter, Who
Did Not Individually Sign Those Agreements.
are two categories of “gateway issues” on a
petition to compel arbitration. See Martin v.
Yasuda, 829 F.3d 1118, 1122-23 (9th Cir. 2016). The
first category concerns the “question of arbitrability,
” or rather, “whether the parties have submitted
a particular dispute to arbitration.” Howsam v.
Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002).
“This category includes issues that the parties would
have expected a court to decide such as ‘whether the
parties are bound by a given arbitration clause' or
whether ‘an arbitration clause in a concededly binding
contract applies to a particular type of
controversy.'” Martin, 829 F.3d at 1123
(quoting Howsam, 537 U.S. at 84); see,
e.g., First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 943-46 (1995) (determining that a court should
decide which parties agreed to arbitration); Atkinson v.
Sinclair Ref. Co., 370 U.S. 238, 241-45 (1962) (ruling
that a court should decide whether the term
“grievances” in the arbitration agreement covered
claims for damages for breach of a no-strike agreement).
These gateway matters are “for judicial determination
unless the parties clearly and unmistakably provide
otherwise.” Howsam, 537 U.S. at 83 (quoting
AT&T Techs., Inc. v. Comms. Workers, 475 U.S.
643, 649 (1986)).
second category of gateway issues relates to procedural
questions that “grow out of the dispute and bear on its
final disposition.” Id. at 84 (quoting
John Wiley & Sons, Inc. v. Livingston, 376 U.S.
543, 546-47 (1964)). These procedural disputes, which may
include issues such as waiver, delay, or similar defenses to
arbitrability, “are presumptively not for the
judge, but for an arbitrator to decide.” Id.
Carbon asks this court to compel Potter to arbitrate
third-party claims it proposes to assert against her. This is
not a procedural question bearing on the final disposition of
the third-party claims. Rather, it falls within the first
category of gateway disputes reserved for judicial
determination. The record does not demonstrate that the
parties have “clearly and unmistakably” agreed to
submit the question of the arbitrability of claims against
Potter individually to arbitration. See First Options of
Chicago, Inc., 514 U.S. at 943 (“Just as the
arbitrability of the merits of a dispute depends upon whether
the parties agreed to arbitrate that dispute, . . . so the
question ‘who has the primary power to decide
arbitrability' turns upon what the parties agreed ...