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WDCD, LLC v. iStar, Inc.

United States District Court, D. Hawaii

November 16, 2017

WDCD, LLC, A HAWAII LIMITED LIABILITY COMPANY, Plaintiff,
v.
iSTAR, INC., A MARYLAND CORPORATION, Defendant.

          ORDER GRANTING ISTAR INC.'S MOTION TO STAY LITIGATION UNDER 9 U.S.C. § 3 OR, IN THE ALTERNATIVE, TO DISMISS UNDER RULES 8, 12(B)(6), AND 12(B)(7)

          DERRICK K. WATSON UNITED STATES DISTRICT JUDGE.

         Before the Court is Defendant iStar, Inc.'s Motion to Stay Litigation Under 9 U.S.C. § 3 or, in the Alternative, to Dismiss Under Rules 8, 12(b)(6) and 12(b)(7), filed August 1, 2017 (see ECF No. 13). For the reasons set forth below, the Motion to Stay is GRANTED.

         BACKGROUND

         On April 4, 2012, SFI Ilikai Retail Owner LLC, SFI Ilikai Property Owner LLC, and SFI Ilikai 104 LLC (collectively “SFI Parties”), as owners, and WDCD, LLC, as consultant, executed a Development Consultant Agreement (“Agreement”; Dookchitra Decl., Ex. A, ECF No. 13-1) in connection with the redevelopment and potential sale of the Ilikai property in Waikiki. Mot. to Stay 1, ECF No. 13 at 6. The Agreement contains an arbitration provision requiring that any controversy “arising out of or relating to this Agreement or its breach, [] be submitted to arbitration.” Mot. to Stay 1, 6 (citing Dookchitra Decl., Ex. A [Agreement] § 7.14).

         On November 1, 2016, WDCD advised iStar, the SFI Parties' parent company, of additional commissions that WDCD claimed it was owed under the Agreement. Dorsey Decl. ¶¶ 2, 3, ECF No. 24-1. WDCD asserts that although it requested that iStar arbitrate these commissions claims pursuant to the Agreement, iStar refused:

I asked Mr. Dorsey [iStar's counsel] whether iStar Inc. was subject to arbitration under the terms of the Development Agreement. Mr. Dorsey replied that iStar had not signed the Development Agreement and therefore could not be compelled to arbitrate with WDCD. I asked Mr. Dorsey if iStar would nevertheless agree to arbitrate WDCD's claims against it and, consistent with my understanding of iStar['s] Motion to Stay, he replied that iStar would not and that WDCD could only arbitrate against SFI Parties.

Sullivan Decl. ¶ 5, ECF No. 22-1. Accordingly, WDCD filed the instant action. Sullivan Decl. ¶ 6.

         iStar claims to have never refused to arbitrate. Indeed, iStar filed the instant motion on August 1, 2017, asking the Court to stay the lawsuit “pursuant to Section 3 of the Federal Arbitration Act in favor of arbitration” because each of WDCD's claims arises out of the underlying Agreement. Mot. to Stay 2. Additionally, on September 19, 2017, iStar filed an Arbitration Demand and Statement of Claims against WDCD with Dispute Prevention & Resolution Inc. (“DPR”), seeking adjudication of all rights arising out of or relating to the Agreement, including those raised by WDCD against iStar in the instant lawsuit. See Dorsey Decl., Ex. B [Arbitration Demand], ECF No. 24-3.

         On October 13, 2017, the Court issued an order granting iStar's Motion to Stay this litigation in favor of the DPR arbitration that iStar had noticed on September 19, 2017. ECF No. 27. On November 14, 2017, before the Court could set forth its reasoning for doing so, the parties jointly filed a Notice of Agreement to Arbitrate. ECF No. 30. Notwithstanding this Notice, the Court offers the following explanation for its October 13, 2017 decision.

         LEGAL STANDARD

         The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., provides that written arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or equity for the revocation of any contract.” 9 U.S.C. § 2.[1] The FAA provides that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); see also Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995); United Steelworkers of Am. v. Warrior & Gulf Navigation, 363 U.S. 574, 584-85 (1960). “The standard for demonstrating arbitrability is not high. The Supreme Court has held that the FAA leaves no place for the exercise of discretion by a district court, but instead mandates that district courts direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir.1999) (citing Dean Witter Reynolds v. Byrd, 470 U.S. 213, 218 (1985)). Indeed, the factual allegations need only “‘touch matters' covered by the contract containing the arbitration clause” for arbitration to be triggered. Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 624 n. 13 (1985)).

         In deciding whether to compel arbitration, the court may not review the merits of the underlying dispute. Instead, the court must examine whether: (1) there exists a valid agreement to arbitrate; (2) the parties' dispute falls within their arbitration agreement; and (3) there exists “a defense that would be available to a party seeking to avoid the enforcement of any contract.” Brown v. Dillard's, Inc., 430 F.3d 1004, 1010 (9th Cir.2005); Republic of Nicar. v. Standard Fruit Co., 937 F.2d 469, 477-78 (9th Cir.1991); see also Lowden v. T-Mobile USA, Inc., 512 F.3d 1213, 1217 (9th Cir. 2008) (“[T]he court must determine (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (citation and quotation signals omitted)).

         DISCUSSION

         I. iStar May Invoke the Arbitration Clause of the Agreement, Notwithstanding its Non-Signatory Status.

         The parties do not dispute the validity of the Agreement, nor do they dispute the presence of a binding arbitration clause within the Agreement:

Any controversy between the parties regarding the construction or application of any term or provision hereof, or the performance of any services under this Agreement, and any claim arising out of or relating to this Agreement or its breach, shall be submitted to arbitration to be held in Honolulu, Hawaii upon the written request of one party after the service of that request on the other party. The arbitration shall be conducted in accordance with the Rules, Procedures, and ...

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