EMMET G. SULLIVAN, District Judge.
This action arises out of an alleged breach of an Agreement in Principle entered into by Nanosolutions, LLC ("Nano") and Aqiss Beverage Technologies, Inc. ("ABT") (collectively, "plaintiffs"), and Rudy Prajza ("Prajza"), Aqiss Canada, Ltd. ("ACL") and 2221267 Ontario, Ltd. ("Ontario") (collectively "defendants"). Pending before the Court are plaintiffs' motion for leave to amend their complaint and defendants' motion and renewed motion to stay the litigation pending arbitration. Upon consideration of the motions, responses and replies thereto, the applicable law, the entire record, and for reasons set forth below, the Court will
Plaintiff Nano is a biotechnology company which develops "technology involving tissue-like nano-encapsulation delivery systems, providing instant delivery of payloads into the bloodstream." Pls.' Am. Compl. ("Am. Compl.") ¶ 19.
This case involves three contracts: a 2007 Employment Agreement between Prajza and ABT ("Employment Agreement"), a March 2010 Agreement between ABT and professional tennis player Andy Roddick, who is not a party to this case (the "Roddick Agreement"), and the June 2010 Agreement in Principle ("AIP") between all the parties in this case. The agreements will be discussed in turn.
In 2007, ABT and Prajza entered into an employment agreement ("Employment Agreement"), which provided for Prajza to become Chief Marketing Officer of ABT. Under the agreement, ABT would pay Prajza $150,000 per year plus benefits, expenses, and shares of stock, in exchange for which Prajza was to "promote the beverage brand [AQISS] and expand the existing product sales and distribution." Am. Compl. ¶ 32. According to plaintiffs, Prajza failed to perform the required functions of his position, resulting in significant losses to ABT. In mid-2008 ABT ceased making payments to Prajza under the Employment Agreement. The Employment Agreement contains no arbitration provision. Am. Compl. Ex. D.
After Prajza and ABT parted ways in 2008, ABT negotiated an endorsement agreement with professional tennis player Andy Roddick. ABT and Roddick executed the Roddick Agreement in March 2010, which grants to ABT the worldwide right to use Roddick's endorsement to promote ABT beverages, including AQISS. In consideration for the right to use the athlete endorsement, the Roddick Agreement provides, among other things, for minimum annual royalties and the payment of a royalty on the sales of ABT beverages. Am. Compl. ¶ 92. The Roddick Agreement does not contain a mandatory arbitration provision. Pls.' Opp'n to Motion to Stay, Declaration of James Hovis ("Hovis Decl.") ¶ 20.
Meanwhile, notwithstanding their troubled history, Prajza and ABT remained in contact. Following protracted negotiations, the parties executed an Agreement in Principle ("AIP") for Prajza and two companies created by him—Defendants Ontario and ACL—to market and distribute AQISS products in Canada. In the AIP, plaintiffs agreed to license Nano's technology to defendants and convey other rights in connection with the development, production and marketing of AQISS in Canada. See Am. Compl. Ex. A., AIP. In exchange for these rights, ACL and Ontario agreed to pay royalties and other fees to plaintiffs and also agreed to provide other services, including a website. Pursuant to the AIP, ABT also agreed to sublicense to ACL its rights obtained under the Roddick Agreement, so as to permit ACL to use the endorsement of Andy Roddick in the marketing of AQISS. None of the defendants are party to the Roddick Agreement.
The AIP does not create an employment relationship between Prajza and plaintiffs, nor does it reinstate Prajza's prior employment with ABT. It does, however, contain a provision referring to that history. Paragraph 10 of the AIP provides, in relevant part:
AIP ¶ 10.
Paragraph 12(d) of the AIP contains a mandatory arbitration provision. It provides:
AIP ¶ 12(d).
Plaintiffs and defendants executed the AIP on June 24, 2010. Problems between the parties developed immediately. Plaintiffs allege that defendants breached the AIP by, among other things, changing the price at which they promised to sell AQISS, misrepresenting information about plaintiffs on ACL's website, and failing to abide by the terms and conditions of the Roddick Agreement. On August 19, 2010 ABT sent a letter to ACL terminating all of ACL's rights under the Roddick Agreement. On September 13, 2010, plaintiffs sent a letter to all defendants terminating the AIP. The next day, defendants ACL and Ontario responded by delivering to the plaintiffs a Notice to Arbitrate in Ontario, Canada. Defs.' Motion to Stay, Declaration of Jonathan Stainsby ("Stainsby Decl.") Ex. A. ("Notice to Arbitrate"). The Notice to Arbitrate sought, inter alia, a declaration that the AIP had not been terminated, an interpretation of the AIP, a declaration regarding ACL's obligations under the Roddick Agreement, specific performance of the AIP, and damages for breach of contract. Notice to Arbitrate p. 2.
Plaintiffs informed the defendants that they would not participate in the arbitration. Stainsby Decl. Ex. B. Instead, a week later, on September 20, 2010, plaintiffs filed a one count complaint alleging Fraud in the Inducement of the AIP in the Superior Court for the District of Columbia. Defendants removed the case to this Court, citing "two independently sufficient grounds for removal . . . the Federal Arbitration Act §§ 203 and 205 . . . [and] diversity[.]" Notice of Removal, Doc. No. 1 at 1-2. Following removal, defendants immediately moved to stay this case pending completion of the arbitration initiated by ACL and Ontario and "pending the outcome of any such claims as ABT may seek to bring in arbitration under the [AIP]." Defs.' Mem. in Support of Motion to Stay at 9.
Shortly after the parties finished briefing Defendants' Motion to Stay, an arbitrator appointed by the Ontario Supreme
On January 31, 2011, plaintiffs filed a Motion for Leave to File an Amended Complaint. The amended complaint contains eight counts. Counts One and Two are common law claims of negligence, breach of contract, and conversion against Prajza only, and arise from Prajza's 2007 Employment Agreement with ABT. Count Three alleges fraudulent inducement to enter into the AIP against all defendants. Count Four alleges the defendants breached the AIP in several ways, including that ACL breached its obligations under the Roddick Agreement as incorporated into the AIP. Count Five asserts that Prajza converted plaintiffs' property by registering the AQISS website in his own name. Count Six claims Prajza made false statements and representations to plaintiffs in 2009 regarding his interest in again working for ABT. Count Seven claims fraud in the arbitration proceeding. Finally, Count Eight asserts defendants tortiously interfered in plaintiffs' business relationships by contacting one of Nano's owners and Andy Roddick regarding the parties' underlying disputes. Plaintiffs seek a declaratory judgment that the AIP is void, that the arbitrator lacks jurisdiction, and that the decision of the Canadian arbitrator is not binding on plaintiffs, an injunction preventing defendants from using the Roddick endorsement, and damages of $330 million. Defendants have opposed the motion for leave to amend, and have renewed their motion to stay the proceedings pending arbitration. The motions are ripe for review by the Court.
II. STANDARD OF REVIEW
A. Leave to Amend the Complaint
Under Federal Rule of Civil Procedure 15(a)(1), a party may amend its pleading once as a matter of course within twenty-one days after serving it, or, if a pleading is one to which a responsive pleading is required, within twenty-one days after service of a responsive pleading or within twenty-one days after the defendant files a motion under Rule 12(b), (e) or (f), whichever is earlier. Fed.R.Civ.P. 15(a)(1). Once the time to amend a pleading as a matter of course elapses, a plaintiff may amend the complaint with leave of the Court. Fed. R. 15(a)(2). The Rule directs courts to "freely give" leave to amend a complaint "when justice so requires." Id. "If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits." Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). Accordingly, courts should grant leave to amend "in the absence of undue delay, bad faith, undue prejudice to the opposing party, repeated failure to cure deficiencies, or futility." Richardson v. U.S., 193 F.3d 545, 548-49 (D.C.Cir. 1999) (citing Foman, 371 U.S. at 182, 83 S.Ct. 227).
B. Stay of Proceedings Pending Arbitration
When considering "a motion to stay proceedings and/or compel arbitration, the
In determining whether a genuine issue of material fact exists, the Court must view all facts in the light most favorable to the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 597, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Keyes v. Dist. of Columbia, 372 F.3d 434, 436 (D.C.Cir.2004). The non-moving party's opposition, however, must consist of more than mere unsupported allegations or denials and must be supported by affidavits or other competent evidence setting forth specific facts showing that there is a genuine issue for trial. See Fed.R.Civ.P. 56(a); Celotex, 477 U.S. at 324, 106 S.Ct. 2548. If the evidence favoring the non-moving party is "merely colorable, or is not significantly probative, summary judgment may be granted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment will be granted, therefore, if the plaintiffs fail to offer "evidence on which the jury could reasonably find for" the plaintiffs. Id. at 252, 106 S.Ct. 2505.
There are two motions pending before the Court. First, the plaintiffs move for leave to amend their complaint. Second, defendants have moved for a stay of all proceedings pending arbitration. The Court considers each motion in turn.
A. Plaintiffs' Motion for Leave to Amend
Plaintiffs seek leave to file an amended complaint, which they have tendered to the Court. As discussed above, a party may amend its complaint once as a matter of course before being served with a responsive pleading. Fed.R.Civ.P. 15(a). Because a motion to stay is not a responsive pleading, see Fed.R.Civ.P. 7(a) (defining "pleadings"), and because this is plaintiffs' first attempt to amend the complaint, they are entitled to amend their complaint without leave of the Court.
B. Defendants' Motion to Stay Proceedings Pending Arbitration
The defendants argue that all of plaintiffs' claims in the Amended Complaint are covered by the parties' arbitration agreement in the AIP, and accordingly, this case
i. Applicable Law
Defendants invoke the Convention on the Recognition and Enforcement of Foreign Arbitral Awards  21 U.S.T. 2517, 330 U.N.T.S. 38, reprinted at 9 U.S.C. § 201 ("New York Convention") to request a stay in this action pending arbitration of plaintiffs' claims. The New York Convention governs enforcement of an arbitration clause contained within an international commercial contract such as the AIP. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 616, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). The New York Convention is implemented in the United States through the Federal Arbitration Act ("FAA"), 9 U.S.C. § 201, which provides "the [New York Convention] shall be enforced in United States courts in accordance with this chapter."
For an arbitration provision to be enforceable under the New York Convention, "(1) there must be a written agreement; (2) it must provide for arbitration in the territory of a signatory of the convention; (3) the subject matter must be commercial; and (4) it cannot be entirely domestic in scope." Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration Int'l, Inc., 198 F.3d 88, 92 (2d Cir.1999). The parties do not dispute that the New York Convention applies to the AIP's arbitration agreement.
As noted above, international arbitrations subject to the New York Convention are governed by Chapter Two of the FAA. Chapter One of the FAA applies, however, "to actions and proceedings brought under [Chapter 2] to the extent that [Chapter 1] is not in conflict with [Chapter 2] or the Convention as ratified by the United States." 9 U.S.C. § 208; see Khan v. Parsons Global Services, Ltd., 521 F.3d 421, 425 n. 1 (D.C.Cir.2008).
The FAA provides that an agreement to arbitrate in any "contract evidencing a transaction involving commerce" is enforceable "save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Thus, arbitration agreements may be invalidated under Section 2 of the FAA on the basis of "generally applicable contract defenses, such as fraud, duress, or unconscionability."
Once a court determines that an arbitration agreement is valid—i.e. that the parties have a contract that provides for arbitration of some issues between them, any doubts concerning the scope of the arbitration clause are resolved in favor of arbitration. "In determining the scope of arbitrability, there is a presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." Granite Rock Co. v. Int'l Brotherhood of Teamsters, ___ U.S. ___, 130 S.Ct. 2847, 2866, 177 L.Ed.2d 567 (2010) (Sotomayor, J., concurring/dissenting) (quoting AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)); see also Wolff v. Westwood Management, LLC, 558 F.3d 517, 520 (D.C.Cir.2009) ("the [FAA] establishes that, as a matter of federal law, 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.")(quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).
ii. The Arbitration Agreement is Enforceable
As a threshold matter, the Court must determine whether the arbitration agreement is valid and enforceable under Section 2 of the FAA. Plaintiffs contend that the arbitration agreement is invalid because defendants fraudulently induced them into agreeing to the AIP. See Am. Compl. Count 3, ¶¶ 141-149. Defendants counter that the plaintiffs have not alleged fraud in the inducement of the arbitration clause; rather, plaintiffs claim fraud in the inducement of the AIP as a whole. Defs.' Reply in Support of Motion to Stay at 2-4. Defendants argue that this court is not permitted to adjudicate claims of fraud in the inducement of the contract generally; instead, such claims must be considered by an arbitrator. Defs.' Mem. in Support of Motion to Stay at 7. This Court agrees with the defendants.
In Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006), the Supreme Court noted that "[c]hallenges to the validity of arbitration agreements . . . can be divided into two types." Id. at 444, 126 S.Ct. 1204.
Here, the plaintiffs allege they were fraudulently induced into entering into an agreement to do business with Prajza, who misrepresented the composition of his companies, his connections, and his abilities. Plaintiffs claim that "such false representations included, but were not limited to," representations that Prajza "had contacts and leads in a number of foreign countries . . . who would be excellent candidates to license the plaintiff's technology and distribute AQISS beverages in such countries," that Prajza would "make such introductions and promote such licensing and distribution efforts in the event that the parties executed an agreement acceptable to Mr. Prajza," and that "a list of prominent businessmen were part of the Defendant companies." Pls.' Opp'n to Motion to Stay at 14; Am. Compl. ¶¶ 75, 77. As defendants point out, plaintiffs do not allege any "fraud in the inducement of the arbitration clause specifically. Rather, each and every allegedly false statement that [plaintiffs] identify as a basis for the alleged `fraudulent inducement' relates to the parties' plans and expectations for their business relationship, and not at all to the A[IP]'s dispute-resolution mechanism." Defs.' Reply at 2-3.
The Court agrees with defendants that plaintiffs have not alleged fraud in the inducement of the arbitration provision either in their original complaint or their amended complaint. Significantly, Count Three of the Amended Complaint—Fraud in the Inducement—contains no allegation that plaintiffs were fraudulently induced to specifically enter into the arbitration clause. Moreover, plaintiffs' letter terminating the AIP makes no reference to the arbitration clause. Rather, plaintiffs claim that the entire "Agreement in Principle was obtained by fraud in the inducement." Hovis Decl. Ex. B (Notice of Termination).
iii. The Arbitration Agreement Encompasses All of Plaintiffs' Claims in the Amended Complaint
Plaintiffs argue that even if the arbitration clause is valid and binds them to arbitrate certain claims under the AIP, it does not encompass all of the claims asserted in their Amended Complaint. Defendants counter that all of plaintiffs' claims fall within the scope of the parties' broad arbitration agreement, and thus the entire litigation must be stayed. For the reasons set forth above, the Court concludes that Count Three of the Amended Complaint must be stayed. The Court will examine the remaining counts in plaintiffs' Amended Complaint in turn.
a. Claims Arising from the Alleged Breach of the AIP
Counts Four, Seven and Eight of the Amended Complaint arise from or relate to the AIP. The Court will address Counts Seven and Eight briefly, then turn to Count Four.
Count Seven alleges that defendant Prajza committed fraud in the Canadian arbitration proceeding. Am. Compl. ¶¶ 169-175. Count Eight alleges defendants tortiously interfered with plaintiffs' business opportunities by contacting an owner/shareholder of Nano and Andy Roddick's agent in order to "damage the [plaintiffs'] relationships" with these two individuals and thus undermine plaintiffs' business. Am. Compl. ¶¶ 176-185. Defendants argue that these allegations must be stayed pending arbitration. However, in their opposition, plaintiffs fail to respond to the defendants' arguments regarding Counts Seven and Eight. It is therefore proper to treat defendants' arguments as conceded. See Sewell v. Chao, 532 F.Supp.2d 126, 135 n. 5 (D.D.C.2008), aff'd Slip Copy, No. 08-5079, ___ Fed.Appx. ___, 2009 WL 585660 (D.C.Cir. Feb. 25, 2009); see also Lytes v. D.C. Water & Sewer Auth., 572 F.3d 936, 943 (D.C.Cir. 2009).
The plaintiffs do, however, respond to defendants' claim that certain of the breaches alleged in Count Four—specifically, the breaches which arise from defendant ACL's alleged obligations under the Roddick Agreement fall within the parties' arbitration agreement in the AIP.
As set forth in Section I supra, the AIP contains an arbitration agreement which governs, without limitation, "disputes between parties" to the AIP. AIP ¶ 12(d). The AIP also contains a provision regarding ABT's agreement to sublicense to ACL its rights obtained under the Roddick Agreement in order to permit ACL to use the endorsement of Andy Roddick in the marketing of AQISS. That provision provides:
AIP ¶ 2(a). The Roddick Agreement does not contain a mandatory arbitration provision; rather, it provides that "the legal relationships among the parties hereto" shall be governed by Maryland law, and that "any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or validity of it, may, upon mutual agreement of the parties hereto, be finally settled by arbitration[.]" Roddick Agreement ¶ 16.
Plaintiffs argue that by agreeing to be bound to "all the terms and conditions of the Roddick Agreement," see AIP ¶ 2(a), ACL is bound to the Roddick Agreement's dispute resolution provision and not to the AIP's arbitration clause, to resolve disputes with plaintiffs which relate to the Roddick Agreement. Defendants respond that the only contract the parties all signed is the AIP, and therefore its dispute resolution process controls. Defs.' Supplemental Mem. In Support of Motion to Stay, p. 3-4, 6. After careful consideration, and for the following reasons, the Court finds plaintiffs' claims regarding ACL's alleged obligations under the Roddick Agreement are arbitrable under the AIP's arbitration clause.
As discussed throughout, the arbitration clause in the AIP is extremely broad. It provides that "conflicts between parties shall be resolved through the Arbitration Act, Ontario, held in the city of Toronto" and contains no limits on the subject matter of the conflicts to be arbitrated. Standing alone, the arbitration provision clearly encompasses the parties' conflict about the sublicensing of Andy Roddick's endorsement of the AQISS beverage, particularly since the sublicense was granted in the AIP. In determining the parties' intent, however, the Court "looks to all terms of the parties' agreement bearing on arbitration. Even though the words of the agreement's arbitration provision may be broad, its scope may be limited by language elsewhere in the agreement clearly and unambiguously negating or limiting it with respect to a matter in dispute." Woodcrest Nursing Home v. Local 144, Hotel, Hospital, Nursing Home and Allied Services Union, 788 F.2d 894,
Plaintiffs urge the Court to read the arbitration clause together with paragraph 2(a) of the AIP, which relates to the Roddick Agreement, as well as the dispute provision of the Roddick Agreement. Neither of these provisions, however, "clearly or unambiguously  negate[s]" the AIP's arbitration clause with respect to conflicts regarding the ACL's obligation under the Roddick Agreement. Woodcrest, 788 F.2d at 898.
Section 2(a) contains ACL's agreement to be bound to the Roddick Agreement as it relates to "the marketing and selling of the Finished Products [AQISS beverages] in the Territory [Canada]." AIP ¶ 2(a). Given the limited scope of ACL's sub-license of the Roddick endorsement, its agreement to comply with "all of the terms and conditions" of the Roddick Agreement cannot be logically read to mean that every term and condition of the Roddick Agreement creates an enforceable obligation for ACL. [redacted] Again, these provisions create no obligation for ACL. Were the Court to read paragraph 2(a) as plaintiffs suggest—creating obligations for ACL under each and every provision of the Roddick Agreement—these portions of the Roddick Agreement would be rendered meaningless—a result forbidden by ordinary principles of contract interpretation. See, e.g., Booker v. Robert Half Intern., Inc., 413 F.3d 77, 83 (D.C.Cir.2005) (citing Restatement (Second) of Contracts § 203(a) (1981)).
Similarly, the Court finds that the dispute resolution provision in the Roddick Agreement creates no obligation for ACL. That provision provides for resolution of disputes among the "parties" to the Roddick Agreement. Roddick Agreement at ¶ 16 (emphasis added). But, as plaintiffs admit, ACL is not a party to the Roddick Agreement. Am. Compl. ¶ 91. On the other hand, ACL is a party to the AIP, which contains a mandatory arbitration provision which covers, without limitation, conflicts between it and ABT. If, as plaintiffs urge, the Court were to hold that the dispute resolution provision of the Roddick Agreement allows plaintiffs to avoid arbitration with ACL, then that clause could not be squared with AIP's mandatory arbitration clause covering all conflicts with ACL. Such an outcome would not comport with the Court's duty to harmonize all provisions of a contract and to reconcile them if possible. See, e.g., Papago Tribal Util. Auth. v. Fed. Energy Regulatory Comm'n, 610 F.2d 914, 929 (D.C.Cir.1979).
Instead, to reconcile the clauses, the Court reads the plain language of Roddick Agreement's dispute resolution to apply only to parties to that agreement. Accordingly, if ABT has a dispute with Roddick, the dispute resolution provisions of that agreement apply. If, however, the parties to the AIP have a conflict, the AIP's dispute resolution provision applies. This construction of the agreements gives meaning to both provisions and nullifies neither.
Accordingly, the Court concludes that the AIP and the Roddick Agreement are "susceptible of an interpretation" that ABT and ACL's dispute regarding the Roddick Agreement is covered by the AIP's arbitration clause. AT & T Technologies, 475 U.S. at 650, 106 S.Ct. 1415.
b. Claims Arising from Rudy Prajza's Former Employment with ABT
Counts One, Two, Five and Six of the Amended Complaint arise from Prajza's prior employment relationship with ABT. Specifically, plaintiffs assert that Prajza breached his employment contract with ABT, committed negligence in his role as ABT's Chief Marketing Officer, converted ABT's property by registering a website for ABT in his own name while employed by ABT, and fraudulently induced ABT to obtain an H1-B visa for him by misrepresenting that he would return to work for ABT. Am. Compl. ¶¶ 131-140; 155-168.
Plaintiffs argue that their employment-related claims against Prajza are not subject to the AIP's arbitration clause because they arose before the parties entered into the AIP. Plaintiffs also argue that at least some of these claims are governed by Prajza's and ABT's 2007 Employment Agreement, which does not contain an arbitration clause.
Several circuits have held that a broad arbitration clause may encompass claims between the parties that arise out of their ongoing relationship, even if those claims predate the agreement to arbitrate and even if the claims are not related to the subject matter of the agreement containing the arbitration clause.
Indeed, courts have applied broad arbitration clauses to include disputes arising under earlier agreements between the parties that did not themselves provide for mandatory arbitration. In Levin v. Alms & Associates, 634 F.3d 260,(4th Cir.2011), the Fourth Circuit determined that an arbitration clause which provided that "[a]ny dispute shall be submitted to binding arbitration" was "broad enough to encompass all agreements and any disputes," including disputes arising from earlier agreements with no arbitration provisions. Id. at 267 (emphasis in original). The Levin Court reasoned that the "heavy presumption. . . in favor of arbitrability is particularly applicable when the arbitration clause is broadly worded." Id. at 266-67; see also Kristian v. Comcast Corp., 446 F.3d 25, 33 (1st Cir.2006) (agreement to arbitrate "any claim or dispute relating to or arising out of this agreement or the services provided" applied retroactively to claims arising from prior service contracts that did not contain arbitration provision); Cash Converters USA, Inc. v. Burns, No. 99-C-146, 1999 WL 98345, at *9 (N.D.Ill. Feb. 19, 1999) (arbitration clause covering all claims arising out of the agreement as well as claims related to the parties' "relationship" encompasses prior agreements with no arbitration provisions).
In this case, like those cited above, the arbitration provision in the AIP is extremely broad—it requires arbitration of "conflicts between parties" and contains no language limiting the subject matter or temporal scope of those conflicts. AIP ¶ 12(d). Moreover, the allegations in the Amended Complaint make clear that ABT
AIP ¶ 10. This language strongly indicates that the parties accounted for and attempted to resolve issues relating to Prajza's previous employment with ABT in the AIP. At the same time, they agreed to an extremely broad arbitration clause covering "conflicts between parties" without limitation. Under these circumstances, and bearing in mind that this Court is required to accord a strong presumption in favor of arbitration, the Court concludes that the arbitration clause in the AIP encompasses plaintiffs' claims arising out of Prajza's earlier employment relationship with ABT.
Plaintiffs cite to several cases in which courts refuse to give retroactive effect to arbitration clauses. After careful review, the Court finds these cases unpersuasive as applied to the facts of this case. Nearly all of the cases relied upon by plaintiffs contain arbitration clauses which are much narrower than the arbitration agreement in the AIP, and explicitly restrict arbitration to claims arising under the contract. See, e.g., George Washington University v. Scott, 711 A.2d 1257, 1259 (D.C.1998) (parties agreed to arbitrate "any claim . . . under this contract"); Security Watch Inc. v. Sentinel Systems, 176 F.3d 369, 372 (6th Cir.1999) (arbitration required "in connection with all disputes . . . arising out of or relating to Products furnished pursuant to this Agreement"); Peerless Importers, Inc. v. Wine, Liquor & Distillery Workers Union Local 1, 903 F.2d 924, 927 (2d Cir.1990) (mandatory arbitration of all claims "arising under this agreement and during its term").
Plaintiffs cite only a single case—Hendrick v. Brown & Root—in which the court found a broad arbitration clause between the parties did not cover claims predating the arbitration agreement. 50 F.Supp.2d 527 (E.D.Va.1999). The Court finds Hendrick inapposite to the facts of this case. In Hendrick, the contract containing the arbitration provision was not negotiated at all; rather, it was presented as a take it or leave it agreement between a sophisticated multinational corporation on the one hand and a single, unsophisticated employee on the other. Id. at 529-30. In contrast, the AIP in this case was the product of protracted negotiation between several equally sophisticated parties. Moreover, the plaintiff in Hendrick did not know of the allegedly unlawful prior conduct by his employer until after he had signed the contract containing the arbitration clause; accordingly, he never had the opportunity to pursue his claims in litigation before signing the later agreement. Id. at 531. In this case, on the other hand, ABT was clearly unhappy with Prajza's work when it stopped paying him in 2008, a full two years before executing the AIP. Accordingly, plaintiffs had ample opportunity to litigate most of their employment-related claims against Prajza before negotiating a
Accordingly, given the broad scope of the AIP's arbitration clause, and in light of the parties' clearly expressed intent to resolve Prajza's old employment disputes within the body of the AIP, the Court
For the reasons stated above, plaintiffs' motion to amend the complaint is
The Court disagrees. Contrary to plaintiffs' claim, it is not clear that the arbitrator decided that Prajza's employment-related claims fall outside the scope of the parties' agreement to arbitrate. As the arbitrator noted, Prajza was not a party to the arbitration; the only claimants were ACL and Ontario. Defs.' Motion to Stay, Exhibit C, Notice of Application to Arbitrate. In declining to award employment-related damages allegedly incurred by Prajza to ACL and Ontario, the arbitrator noted that such claims "are personal to Mr. Prajza and do not arise in favour of the Claimants[.]" Notice of Decision at 4. Accordingly, it appears that the arbitrator did not have the opportunity to squarely consider whether such claims are within the scope of the parties' arbitration agreement. In contrast, the issue is squarely before this Court. As the Supreme Court has repeatedly held, it is the role of the courts to determine what claims are arbitrable under the parties' agreement to arbitrate unless the parties have clearly delegated that function to an arbitrator. See, e.g., AT & T Technologies, 475 U.S. at 649, 106 S.Ct. 1415 (courts, not arbitrators, should determine the scope of an arbitration agreement "unless the parties clearly and unmistakably provided otherwise."). Nothing in the AIP suggests that the parties delegated the question of arbitrability to the arbitrator, and none of the parties argue that they did so. Accordingly, the Court concludes that it has the authority to determine whether these claims are arbitrable.