Sokol Holdings, Inc. v. Bmb Munai, Inc.

• Decision Date: 18 September 2008
• Docket Number: Docket No. 07-2871-cv.
• Citation: 542 F.3d 354
• Parties: SOKOL HOLDINGS, INC., Brian Savage, and Thomas Sinclair, Plaintiffs-Appellees, v. BMB MUNAI, INC., Boris Cherdabayev, Alexandre Agaian, Bakhytbek Baiseitov, Mirgali Kunayev, Georges Benarroch, Credifinance Capital, Inc., and Credifinance Securities, Ltd., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

542 F.3d 354

SOKOL HOLDINGS, INC., Brian Savage, and Thomas Sinclair, Plaintiffs-Appellees, v. BMB MUNAI, INC., Boris Cherdabayev, Alexandre Agaian, Bakhytbek Baiseitov, Mirgali Kunayev, Georges Benarroch, Credifinance Capital, Inc., and Credifinance Securities, Ltd., Defendants-Appellants.

Docket No. 07-2871-cv.

United States Court of Appeals, Second Circuit.

Argued: October 26, 2007.

Decided: September 18, 2008.

Thomas E.L. Dewey, Dewey Pegno & Kramarsky LLP, (Jerome M. Marcus, Jonathan Auerbach, Marcus Auerbach & Zylstra, LLC, Wyncote, PA; Jacob A. Goldberg, Jamie Mogil, Faruqi & Faruqi, New York, NY; on the brief), New York, NY, for Plaintiffs-Appellees.

Kenneth A. Caruso, Bracewell & Giuliani LLP (Daniel S. Meyers, David A. Shargel, on the brief), New York, NY, for Defendants-Appellants.

Before: LEVAL, SOTOMAYOR, and B.D. PARKER, Circuit Judges.

LEVAL, Circuit Judge:

Defendants appeal from an order of the United States District Court for the Southern District of New York (Wood, Chief Judge) denying their motion under § 3 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 3, to stay or dismiss plaintiffs' action pending arbitration in Kazakhstan. Defendants assert that they are entitled to arbitrate plaintiffs' claims, although they are not parties to the contract by which plaintiffs agreed to arbitrate. In support of their claim, they contend (1) plaintiffs are estopped from refusing to arbitrate because plaintiffs' claims are "intertwined" with the underlying contract, and because the factual allegations supporting those claims "touch matters" covered by the contract; and (2) if some, but not all, of the claims are deemed arbitrable, then the nonarbitrable claims should be stayed pending the arbitration.

As to all but one claim, we reject defendants' arguments and affirm the rulings of the district court. As to one claim, which seeks specific performance of the contract containing the arbitration clause, we conclude defendants are entitled to arbitrate. We reject defendants' contention that the nonarbitrable claims should be stayed pending resolution of the one arbitrable claim.

Background

Plaintiff Sokol Holdings, Inc. ("Sokol") is a Delaware corporation with its principal place of business in Colorado. Plaintiffs Brian Savage and Thomas Sinclair are Sokol's directors and principal officers. They formed Sokol in March 2003 for the purpose of exploring and developing oil and gas fields in the Republic of Kazakhstan. Sokol entered into a contract (the "Emir Contract") with Tolmakov Toleush Kalmukanovitch ("Tolmakov"), a citizen of Kazakhstan, to buy 70% of Tolmakov's 90% interest in Emir Oil LLP ("Emir"). Emir held a license to explore and develop the Aksaz-Dolinnaya-Emir oil and gas fields in Kazakhstan. The Emir Contract provides for the arbitration of all disputes arising from it in Kazakhstan.¹

Defendant BMB Munai, Inc. ("BMB") is a publicly traded Nevada corporation with its principal place of business in Kazakhstan and an office in Salt Lake City, Utah. Defendants Boris Cherdabayev, Alexandre Agaian, Bakhytbek Baiseitov, Mirgali Kunayev, and Georges Benarroch are, or have been, directors and officers of BMB. (BMB and the individual defendants are collectively referred to as the "BMB defendants.") In this action, the BMB defendants are charged, inter alia, with tortious interference with Sokol's contract with Tolmakov.

Plaintiffs allege in their complaint that the BMB defendants tortiously interfered with Sokol's contract rights with Tolmakov under the Emir Contract and induced Tolmakov to sell his interest in Emir to BMB instead of Sokol. By reason of the BMB defendants' interference, plaintiffs allege they did not make payments to Tolmakov and Emir, which were required under the Emir Contract. Tolmakov then sold the Emir interest to BMB. BMB now employs Tolmakov as general manager of Emir.

The complaint asserts claims for: (1) tortious interference with contract, (2) specific performance, (3) breach of contract, (4) unjust enrichment, (5) two counts of breach of fiduciary duty, (6) unfair competition, (7) tortious interference with fiduciary duty, and (8) aiding and abetting breach of fiduciary duty.

Defendants moved to stay or dismiss the action pursuant to § 3 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 3, pending arbitration in Kazakhstan as provided in the Emir Contract. Recognizing that they had no contract with Sokol providing for arbitration, the BMB defendants nevertheless contended that given the circumstances of Sokol's suit against them, Sokol was estopped from refusing to arbitrate. In an opinion and order dated June 14, 2007, the district court denied defendants' motion. Citing authorities to the effect that a close relationship between the parties and intertwinement of the dispute with the underlying arbitration contract are essential elements for such an estoppel, the district court found that both elements were lacking. Defendants brought this appeal, pursuant to § 16(a)(1)(A) of the FAA.

Discussion

Defendants rely principally on two arguments: (1) that Sokol is estopped from refusing to arbitrate its claims because the claims are "intertwined" with the Emir Contract, and because Sokol's factual allegations supporting those claims "touch matters" covered by the Emir Contract; and (2) that if this Court finds that some, but not all, of Sokol's claims should be sent to arbitration, then it should issue a stay of the remaining claims pending arbitration.

Except as to Sokol's specific performance claim, we affirm the rulings of the district court. As regards the claim for specific performance, we find that defendants are entitled to arbitrate that claim as currently pled, and thus vacate and remand that portion of the district court's judgment. We do not, however, require a stay of the nonarbitrable claims to await the resolution by arbitration of the one arbitrable claim.

I. Estoppel

Defendants' main argument is that Sokol, being a signatory to an arbitration contract, should be estopped from refusing the demand of BMB, a nonsignatory, to arbitrate Sokol's claims against the BMB defendants because those claims are "intertwined" with the arbitration contract (the Emir Contract) from which the dispute arises. It is black letter law that an obligation to arbitrate can be based only on consent. See Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989); Vera v. Saks & Co., 335 F.3d 109, 116 (2d Cir.2003) ("[A] party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit." (internal citation and quotation marks omitted)); accord Westmoreland v. Sadoux, 299 F.3d 462, 465 (5th Cir.2002) ("An agreement to arbitrate is a waiver of valuable rights that are both personal to the parties and important to the open character of our state and federal judicial systems—an openness this country has been committed to from its inception."). Persons are generally entitled to have their dispute settled by the ruling of a court of law. Cf. Tice v. Am. Airlines, Inc., 162 F.3d 966, 968 (7th Cir.1998) ("It is a fundamental principle of American law that every person is entitled to his or her day in court."). It is essentially only by making a commitment to arbitrate that one gives up the right of access to a court of law in favor of arbitration. Most frequently such a commitment is made either by entering into an agreement to arbitrate or by entering into a relationship which is governed by an agreement to arbitrate.

It is undisputed that Sokol never made a contract with BMB for the arbitration of disputes between them. Sokol did, however, make a contract with Tolmakov, the Emir Contract, in which Sokol and Tolmakov agreed to arbitrate all disputes between them arising from the contract. BMB argues that because the dispute between Sokol and the nonsignatory BMB involves the question whether Tolmakov breached the Emir Contract, Sokol should be compelled by the terms of its contract with Tolmakov to arbitrate the dispute on BMB's demand.

BMB relies on rulings in our prior cases which have compelled a signatory to an arbitration contract to arbitrate disputes relating to that contract although the dispute was with an entity which was not a signatory to the arbitration contract. It relies particularly on language from our recent opinion in JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163 (2d Cir. 2004), quoting a prior opinion of our court, as follows:

Our cases have recognized that under principles of estoppel, a non-signatory to an arbitration agreement may compel a signatory to that agreement to arbitrate a dispute where a careful review of "the relationship among the parties, the contracts they signed ..., and the issues that had arisen" among them discloses that "the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed."

387 F.3d at 177 (quoting Choctaw Generation Ltd. P'ship v. Am. Home Assurance Co., 271 F.3d 403, 406 (2d Cir.2001)). Because Sokol must prove Tolmakov's breach of the Emir Contract in order to make out its claim for BMB's tortious interference with the contract, that claim is "intertwined" with the Emir Contract. According to the BMB defendants, Sokol, having agreed to arbitrate claims under the Emir Contract, should therefore be estopped from refusing to resolve the intertwined claim in arbitration.

The BMB defendants read more into the quotation from JLM Industries than that opinion intended. In the first place, the passage from JLM Industries did not purport to state a standard for estoppel; it rather described circumstances in which estoppel might be found. Thus, JLM Industries did not say or mean that whenever a relationship of any kind may be found among the parties to a dispute and their dispute deals with the subject matter of an arbitration contract made by...