Creative Telecommunications, Inc. v. Breeden, No. CIV. 98-01021 ACK.

CourtU.S. District Court — District of Hawaii
Writing for the CourtKay
Citation120 F.Supp.2d 1225
PartiesCREATIVE TELECOMMUNICATIONS, INC., a Nevada Corporation, Plaintiff, v. John BREEDEN and Does 1-10 Defendant. John Breeden, Third-Party Plaintiff, v. Clean Air Technologies, Inc., a Delaware corporation; William R. Simmons, individually and in his capacity as an officer and Director of Clean Air Technologies, Inc.; and Charles Baugh, individually and in his capacity as the acting CEO and Director of Clean Air Technologies, Inc. Third Party Defendants.
Decision Date04 October 1999
Docket NumberNo. CIV. 98-01021 ACK.
120 F.Supp.2d 1225
CREATIVE TELECOMMUNICATIONS, INC., a Nevada Corporation, Plaintiff,
v.
John BREEDEN and Does 1-10 Defendant.
John Breeden, Third-Party Plaintiff,
v.
Clean Air Technologies, Inc., a Delaware corporation; William R. Simmons, individually and in his capacity as an officer and Director of Clean Air Technologies, Inc.; and Charles Baugh, individually and in his capacity as the acting CEO and Director of Clean Air Technologies, Inc. Third Party Defendants.
No. CIV. 98-01021 ACK.
United States District Court, D. Hawaii.
October 4, 1999.

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COPYRIGHT MATERIAL OMITTED

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Gary W. Vancil, Gallup and Van Pernis, Kailua-Kona, HI, for Creative Communications, Inc., a Nevada Corporation, plaintiffs.

Francis Leon Jung, Jung & Vassar, Joseph Fagundes, III, Kailua-Kona, HI, for John Breeden, Does 1-10, defendants.

ORDER DIRECTING THE PARTIES TO PROCEED WITH ARBITRATION OF PLAINTIFF'S CLAIMS AND DEFENDANT'S COUNTERCLAIMS AND THIRD-PARTY CLAIMS; STAYING ACTION PENDING ARBITRATION; DENYING THIRD-PARTY DEFENDANTS SIMMONS AND BAUGH'S MOTION FOR ORDER TO SHOW CAUSE AGAINST DEFENDANT/THIRD PARTY PLAINTIFF JOHN BREEDEN RE: BREEDEN'S 6/7/99 AFFIDAVIT

KAY, District Judge.


BACKGROUND

From 1996 through June 1998, John Breedon ("Defendant" and Third-Party

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Plaintiff) was employed as Vice President and President of ComputerTime, Inc. ("ComputerTime"), a Hawaii corporation, engaged in the business of conceiving, designing, operating, maintaining, and retailing computer network hardware and software. Defendant was also the owner of fifty percent (50%) of the stock of ComputerTime.

On June 15, 1998, Defendant entered into an employment contract with ComputerTime, providing that he would perform the duties of President and Chief Operating Officer. William R. Simmons ("Simmons"), a Third-Party Defendant, signed the agreement on behalf of ComputerTime. From the record, it appears as though Simmons had no prior connection to ComputerTime. Rather, he was currently the Chairman of CTI and CATI.

On or about June 18, 1998, as President of, and on behalf of ComputerTime, Defendant entered into a Sale of Assets Agreement ("Agreement") with Plaintiff Creative Telecommunications, Inc. ("Plaintiff" or "CTI") and Third-Party Defendant Clean Air Technology, Inc. ("CATI") for the sale of specific assets of ComputerTime to Plaintiff and CATI. Defendant signed the Agreement as President of ComputerTime. Simmons signed the Agreement as the Chairman of both CATI and Plaintiff.

The Agreement provided for the sale of "all of the Sellers' [ComputerTime] assets" to the Buyer (CATI and Plaintiff). The Agreement further stated that "all the tangible corporate assets [of ComputerTime] are identified in Exhibit `A' hereto." The Agreement's Exhibit "A" consists of (1) eight hand-written pages that list or identify items; and (2) a typed Inventory Value sheet. The ComputerTime shareholders, Defendant and Russell Smith, each received 500,000 shares of CATI common stock in exchange for the ComputerTime Assets.

The Agreement contains a number of Representations and Warranties. These warranties include, but are not limited to, a warranty that "Seller has all ownership rights to all the said tangible and intangible assets hereby conveyed"; that "Seller shall transfer, deliver to Buyer all documents of title or transfer necessary or desirable to perfect the transfer of the said corporate assets"; and that the said assets were free and clear of all Federal or State tax liability.

The Agreement also contains an arbitration clause:

Any dispute, claim, or disagreement under or relating to this Agreement, shall be arbitrated according to the commercial arbitration rules of the American Arbitration Association, unless the parties agree, in writing, to a different form of arbitration. Such arbitration shall be binding arbitration.

Following the execution of the Agreement, ComputerTime allegedly assigned1 Defendant's Employment Contract to Plaintiff whereby Defendant was bound to comply with its terms and conditions while and following employment by Plaintiff.2 Defendant thereby employed Plaintiff as President of CTI until December 3, 1998,

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at which time CTI terminated Defendant.3 See Pl's Am. Compl. ¶ 28.

Plaintiff filed a Complaint naming Mr. Breedon as Defendant on December 30, 1998. On January 15, 1999, Plaintiff applied for a temporary restraining order, preliminary injunction, and permanent injunction. The parties subsequently stipulated that Defendant would not trespass upon Plaintiff's property or access Plaintiff's computers or other equipment.

On February 8, 1999, Defendant filed a Motion to Dismiss Counts III through VIII of the Complaint for Failure to State a Claim For Which Relief May be Granted or in the Alternative for Summary Judgment. On March 15, 1999, this Court granted Defendant's motion for summary judgment as to Count III ("Breach of Contract")4; denied Defendant's motion as to Count IV ("Negligence") and the Breach of Confidentiality claim in Count VIII; and granted Defendant's motion to dismiss without prejudice, giving Plaintiff leave to amend the Complaint, as to Counts V ("Unjust Enrichment"), VI ("Conversion and Breach of Fiduciary Duty"), VII ("Fraud"), and the Slander claim of Count VIII.

On April 14, 1999, Plaintiff filed an Amended Complaint. In the Amended Complaint, Plaintiff alleges that Defendant: (1) committed trespass and intentionally damaged Plaintiff's property; (2) received CATI stock as consideration for the Sale of Assets Agreement, which the Court should declare nullified or canceled; (3) was negligent in his dealings with Plaintiff; (4) was unjustly enriched as a result of his conduct; (5) converted various assets and money belonging to Plaintiff and breached his fiduciary duty to Plaintiff during his employment as President of CTI; (6) committed fraud against Plaintiff; (7) by committing slander and breaching confidentiality, breached his employment contract with CTI; and (8) should pay punitive damages. Plaintiff's relief sought includes, but is not limited to, preliminary and permanent injunctive relief, declaratory relief, and punitive damages.

Defendant filed a Counterclaim and Third-Party Complaint on January 26, 1999, naming CATI; Simmons, individually and in his capacity as an officer and Director of CATI; and Charles Baugh ("Baugh"), individually and in his capacity as the acting CEO and Director of CATI, as Third-Party Defendants. Defendant alleges that: (1) Plaintiff and CATI, through the oral and written representations of Baugh and Simmons, committed libel and slander per se; (2) these actions were committed with the intent to inflict emotional distress upon Defendant and did inflict such distress; (3) Plaintiff and Third-Party Defendants invaded Defendant's privacy; (4) Plaintiff and Third-Party Defendants converted Defendant's personal property; and (5) Plaintiff and Third-Party Defendants breached their fiduciary duty to Defendant, a shareholder of CATI. On March 15, 1999, the Court granted Third-Party Defendants' Motion to Dismiss Breedon's Third-Party Complaint

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Count V ("Breach of Fiduciary Duty") as to his derivative cause of action, without prejudice, with leave to amend within 30 days. Defendant did not make any such amendment.

Defendant filed an Answer to Plaintiff's Amended Complaint on April 28, 1999.

On June 8, 1999, Defendant filed a Motion for Partial Summary Judgment Against Plaintiff and Third-Party Defendants Regarding Counts I and II of the Counterclaim and Third-Party Complaint. On that same day, Defendant filed a Concise Statement of Material Facts in Support of his motion. Plaintiff and Third-Party Defendants filed a Memorandum in Opposition on June 18, 1999, supported by a Concise Statement of Facts. On June 25, 1999, Defendant filed a Reply Memorandum.

On June 22, 1999, Third-Party Defendants Simmons and Baugh filed a Motion for Partial Summary Judgment Regarding Counts I and II of the Third-Party Complaint. Defendant filed a Memorandum in Opposition on September 2, 1999. Third-Party Defendants Simmons and Baugh filed a Reply on September 9, 1999.

On June 22, 1999, Third-Party Defendants Simmons and Baugh also filed a Motion for Order to Show Cause Against Defendant/Third-Party Plaintiff Breedon Regarding Breedon's 6/7/99 Affidavit. Defendant Breeden filed a Memorandum in Opposition on September 2, 1999. Third-Party Defendants filed a Reply on September 8, 1999.

On August 18, 1999, Plaintiff and Third-Party Defendants CATI, Simmons, and Baugh filed a Motion to Bifurcate and For Arbitration. Defendant filed a Memorandum in Opposition on September 2, 1999. Plaintiff and Third-Party Defendants filed a Reply on September 8, 1999. The Court heard oral argument on September 20, 1999.

Thus, four motions are before the Court: (1) Plaintiff and Third-Party Defendants CATI, Simmons, and Baugh's Motion to Bifurcate and For Arbitration; (2) Defendant's Motion for Partial Summary Judgment Against Plaintiff and Third-Party Defendants Regarding Counts I and II of the Counterclaim and Third-Party Complaint; (3) Third-Party Defendants Simmons and Baugh's Motion for Partial Summary Judgment Regarding Counts I and II of the Third-Party Complaint; and (4) Third-Party Defendants Simmons and Baugh's Motion for Order to Show Cause Against Defendant/Third-Party Plaintiff Breedon Regarding Breedon's 6/7/99 Affidavit.

Because a decision finding Plaintiff's and Defendant's claims arbitrable will render the parties' Motions for Partial Summary Judgment improper for judicial determination, the Court will examine the issue of arbitrability first.

DISCUSSION

I. THE PARTIES ARE COMPELLED TO ARBITRATE PLAINTIFF'S CLAIMS AND DEFENDANT'S COUNTERCLAIMS AND THIRD-PARTY CLAIMS

In deciding whether the parties' disputes are arbitrable, it is necessary for the Court to analyze two distinct issues: (1) whether the Federal or Hawaii Arbitration...

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18 practice notes
  • St. Agnes Medical Center v. PacifiCare, No. S111323.
    • United States
    • United States State Supreme Court (California)
    • 18 Diciembre 2003
    ...Resins, Inc. v. Davy Int'l, AG (5th Cir.1985) 770 F.2d 416, 420-422; Creative Telecommunications, Inc. v. Breeden (D.Hawai'i 1999) 120 F.Supp.2d 1225, 1232; Realco Enterprises, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 738 F.Supp. at p. 518; cf. Cabinetree of Wisconsin, In......
  • Aviation Data v. American Express Services, No. A111602.
    • United States
    • California Court of Appeals
    • 6 Julio 2007
    ...independently review issues of law. II. Waiver10 The trial court cited Creative Telecommunications, Inc. v. Breeden (D.Hawai'i 1999) 120 F.Supp.2d 1225, 1231-1233, for the federal rule governing whether the right to arbitrate is lost by participating in litigation: "To prove that a waiver o......
  • Legacy Wireless Services v. Human Capital, L.L.C., Civil No. 03-1416-MO.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Oregon)
    • 20 Abril 2004
    ...Group, Inc. v. Deloitte Touche Tohmatsu, 278 F.Supp.2d 1041, 1048 (N.D.Cal.2003) (quoting Creative Telecommunications, Inc. v. Breeden, 120 F.Supp.2d 1225, 1240-41 (D.Haw.1999)). If agents could not invoke their principals' arbitration provisions, a party easily could "avoid the practical c......
  • Paxton v. Macy's W. Stores, Inc., 1:18-cv-00132-LJO-SKO
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • 7 Septiembre 2018
    ...litigating them) is not sufficiently inconsistent with their right to arbitrate."); Creative Telecommunications, Inc. v. Breeden, 120 F. Supp. 2d 1225, 1232 (D. Haw. 1999) ("Courts have found that the filing of a complaint, an answer, a counterclaim or a third-party complaint does not waive......
  • Request a trial to view additional results
18 cases
  • St. Agnes Medical Center v. PacifiCare, No. S111323.
    • United States
    • United States State Supreme Court (California)
    • 18 Diciembre 2003
    ...Resins, Inc. v. Davy Int'l, AG (5th Cir.1985) 770 F.2d 416, 420-422; Creative Telecommunications, Inc. v. Breeden (D.Hawai'i 1999) 120 F.Supp.2d 1225, 1232; Realco Enterprises, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 738 F.Supp. at p. 518; cf. Cabinetree of Wisconsin, In......
  • Aviation Data v. American Express Services, No. A111602.
    • United States
    • California Court of Appeals
    • 6 Julio 2007
    ...independently review issues of law. II. Waiver10 The trial court cited Creative Telecommunications, Inc. v. Breeden (D.Hawai'i 1999) 120 F.Supp.2d 1225, 1231-1233, for the federal rule governing whether the right to arbitrate is lost by participating in litigation: "To prove that a waiver o......
  • Legacy Wireless Services v. Human Capital, L.L.C., Civil No. 03-1416-MO.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Oregon)
    • 20 Abril 2004
    ...Group, Inc. v. Deloitte Touche Tohmatsu, 278 F.Supp.2d 1041, 1048 (N.D.Cal.2003) (quoting Creative Telecommunications, Inc. v. Breeden, 120 F.Supp.2d 1225, 1240-41 (D.Haw.1999)). If agents could not invoke their principals' arbitration provisions, a party easily could "avoid the practical c......
  • Paxton v. Macy's W. Stores, Inc., 1:18-cv-00132-LJO-SKO
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • 7 Septiembre 2018
    ...litigating them) is not sufficiently inconsistent with their right to arbitrate."); Creative Telecommunications, Inc. v. Breeden, 120 F. Supp. 2d 1225, 1232 (D. Haw. 1999) ("Courts have found that the filing of a complaint, an answer, a counterclaim or a third-party complaint does not waive......
  • Request a trial to view additional results

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