Brendel v. Meyrowitz

• Decision Date: 25 January 2016
• Docket Number: Civil Action No. 3:15-CV-1928-D
• Parties: GREG BRENDEL, Plaintiff, v. SCOTT MEYROWITZ, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

GREG BRENDEL, Plaintiff, v. SCOTT MEYROWITZ, et al., Defendants.

Civil Action No. 3:15-CV-1928-D

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

January 25, 2016

MEMORANDUM OPINION AND ORDER

The instant motion to compel arbitration presents questions of federal and Florida law and requires that the court decide, among other questions, whether the moving defendants waived their right to arbitration. For the reasons explained, the court grants the motion to compel, orders the parties to arbitrate plaintiff's claims, and dismisses this action with prejudice.

I

This is a removed action in which plaintiff Greg Brendel ("Brendel") sues defendants Scott Meyrowitz ("Meyrowitz"), SSB International, LLC ("SSB"), Mary Meyrowitz ("Mary"), Wells Fargo Bank, and Charles Schwab Bank (collectively, "defendants") arising from an investment in precious stones.¹ Brendel alleges that he entered into an agreement with Meyrowitz whereby, in exchange for a payment of $250,000 to Meyrowitz, Brendelwould receive 50% of the profits, after full reimbursement of his $250,000 payment, from proceeds received from the sale of precious stones. Am. Not. of Rem. Ex. J at 3, ¶ 10. Brendel asserts that he wired the sum of $250,000 to Meyrowitz's account at Wells Fargo Bank, held in the name of SSB, but, instead of using the funds as agreed, Meyrowitz converted them to his personal use and refused to return the $250,000 payment or deliver the stones. Brendel pleads causes of actions for common law fraud, conversion, constructive trust, unjust enrichment, equitable restitution, money had and received, and exemplary damages.² He also requests attorney's fees.

Before this case was removed, a Texas state court granted Brendel's application for a temporary restraining order, restraining defendants from transferring or otherwise disbursing monies from accounts belonging to, or controlled by, Meyrowitz, Mary, or SSB, in an amount not to exceed $250,000. After a hearing, the state court ordered the sum of $250,000 be deposited into the court registry from a specific account, and it entered a temporary injunction enjoining Meyrowitz, Mary, and SSB from using, spending, commingling, or disbursing funds from that account, in an amount up to $250,000, until the monies were deposited into the court registry or the entry of judgment in the case.

Meyrowitz and SSB filed a motion to compel arbitration in state court, but they removed the case to this court based on diversity of citizenship before the state court convened the scheduled hearing. Once in this court, Brendel moved to remand the case, andthe court denied the motion. Meyrowitz and SSB now move to compel Brendel to arbitrate his claims based on the arbitration clause (the "Arbitration Agreement") in the parties' Joint Venture Agreement (the "JV Agreement"). Brendel opposes the motion.

II

As a threshold matter, the court must address Brendel's request under § 4 of the Federal Arbitration Act ("FAA") for a jury trial to determine whether an agreement to arbitrate exists. The FAA "provides that '[i]f the making of the arbitration agreement . . . be in issue, the court shall proceed summarily to the trial thereof.'" Am. Heritage Life Ins. Co. v. Orr, 294 F.3d 702, 709 (5th Cir. 2002) (ellipses in original) (quoting 9 U.S.C. § 4). "Although the FAA permits parties to demand a jury trial to resolve factual issues surrounding the making of an arbitration agreement, or the failure, neglect, or refusal to perform the agreement, it is well-established that '[a] party to an arbitration agreement cannot obtain a jury trial merely by demanding one.'" Id. at 710 (quoting Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th Cir. 1992)). "[A] party contesting the 'making' of the arbitration agreement must 'make at least some showing that under prevailing law, he would be relieved of his contractual obligations to arbitrate if his allegations proved to be true . . . and produce some evidence to substantiate his factual allegations.'" Id. (ellipse in original) (alterations omitted) (quoting Dillard, 961 F.2d at 1154).³

Brendel merely requests a jury trial. He makes no attempt to show that the making of the Arbitration Agreement is "in issue." Accordingly, Brendel has not met his burden of showing that he is entitled to a jury trial. Id.; see also Bhatia v. Johnston, 818 F.2d 418, 422 (5th Cir. 1987) ("As the party resisting arbitration, [plaintiff] has the burden of showing that he is entitled to a jury trial under § 4 of the [FAA].") (citation omitted).

And, even assuming arguendo that Brendel had attempted to meet his burden, he has not submitted sufficient evidence to substantiate his assertion that he did not agree to arbitrate this dispute. In American Heritage the Fifth Circuit addressed the sufficiency of evidence presented in support of a demand for trial under 9 U.S.C. § 4. Am. Heritage, 294 F.3d at 710. The appellants in American Heritage asserted that they had put the making of the agreements in issue "by alleging that the Agreements [were] unconscionable, the productsof unequal bargaining power between the parties, lacking mutuality of obligation between the parties, and failing to result in a meeting of the minds." Id. And they submitted affidavit evidence that averred that "Appellees did not explain the Agreements to Appellants or that Appellants did not realize that they were waiving a trial by jury." Id. The panel held that appellants' affidavits "amount[ed] to nothing more than hollow, bald assertions that d[id] not approach fraud in the 'making' of the Agreements." Id. (citing Bhatia, 818 F.2d at 421-22 (stating that self-serving affidavits do not amount to the type of evidence required to call the "making of the arbitration" agreement into question)). It also pointed out that, "[o]ther than their self-serving affidavits, Appellants ha[d] not submitted a whisper of evidence to support the conclusion that a jury trial [wa]s warranted under § 4 of the FAA." Id. The panel therefore concluded that "Appellants ha[d] not met their burden to show their entitlement to a jury trial." Id.

As in American Heritage, the only evidence that Brendel presents is his own affidavit in which he avers that he "signed [the JV Agreement] under stress," and that "[u]pon later reading of [the JV Agreement], there were several things in the document that [he] had not seen, and never agreed to," such as the Arbitration Agreement. P. Resp. 10 (quoting P. App. 6). Without any other supporting evidence, this self-serving affidavit, filled with "hollow, bald assertions," is insufficient to put the making of the Arbitration Agreement in issue. See Am. Heritage, 294 F.3d at 710.⁴ Because Brendel has not shown that the making of theArbitration Agreement is in issue, he has not met his burden of proving that he is entitled to a jury trial. See id. Accordingly, the court denies Brendel's request for a jury trial.

III

The court now turns to the merits of the motion to compel arbitration. Section 2 of the FAA provides that written agreements to arbitrate controversies arising out of an existing contract "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original) (citing 9 U.S.C. §§ 3-4).

When considering a motion to compel arbitration, the court engages in a two-step process. First, the court determines "whether the parties agreed to arbitrate the dispute." Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996) (per curiam) (citation omitted). "This determination involves two considerations: (1) whether there is a valid agreement toarbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement." Id. (citations omitted). In deciding whether the parties agreed to arbitrate the dispute, "courts apply the contract law of the particular state that governs the agreement." Wash. Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260, 264 (5th Cir. 2004) (citation omitted).

Second, the court decides "'whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims.'" Webb, 89 F.3d at 258 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)). In making the second determination, the court applies the contract law of the particular state that governs the agreement. Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 166 (5th Cir. 2004). "If there is a valid agreement to arbitrate, and there are no legal constraints that foreclose arbitration, the court must order the parties to arbitrate their dispute." Celaya v. Am. Pinnacle Mgmt. Servs., LLC, 2013 WL 4603165, at *2 (N.D. Tex. Aug. 29, 2013) (Fitzwater, C.J.).

"The party seeking to compel arbitration need only prove the existence of an agreement to arbitrate by a preponderance of the evidence." Grant v. Houser, 469 Fed. Appx. 310, 315 (5th Cir. 2012) (per curiam). "[T]here is a 'strong federal policy in favor of enforcing arbitration agreements.'" Texaco Exploration & Prod. Co. v. AmClyde Engineered Prods. Co., 243 F.3d 906, 909 (5th Cir. 2001) (quoting Dean Witter Reynolds, 470 U.S. at 217); see also Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) ("[A]ny doubts concerning the scope of arbitrable issues should be resolved in favorof 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."). Because of this strong presumption, "a party seeking to invalidate...