Goldberg Family Inv. Corp. v. Quigg
| Decision Date | 28 October 2014 |
| Docket Number | No. 44915-3-II,44915-3-II |
| Court | Washington Court of Appeals |
| Parties | GOLDBERG FAMILY INVESTMENT CORPORATION, a Washington corporation, Appellant, v. WILLIAM D. QUIGG and CAROL QUIGG, and the marital community comprised thereof; and PATRICK D. QUIGG and KATHLEEN A. QUIGG, and the marital community comprised thereof, Respondents. |
BJORGEN, A.C.J. — This appeal arises out of a lawsuit "by Goldberg Family Investment Corporation (Goldberg) to compel William and Patrick Quigg (the Quiggs) to arbitrate claims related to the failure of a limited liability company in which Goldberg and entities in which the Quiggs were officers had ownership interests. The Quiggs opposed Goldberg's claims, arguing that Goldberg (1) lacked standing, (2) was not the real party in interest, and (3) could not compel them to arbitrate because they were not parties in their individual capacities to the agreements containing the arbitration clauses.
Before us, Goldberg appeals two trial court orders. The first order granted the Quiggs' motion to strike portions of Goldberg's pleadings as unauthenticated hearsay. Goldberg claims that the trial court erred in granting this motion because it did not offer the statements in the pleadings for their truth, but only to show that its claims were subject to arbitration. The second order granted summary judgment to the Quiggs on the arbitrability of Goldberg's claims, denied Goldberg's motion to compel arbitration, denied Goldberg's motion to strike the Quiggs' affirmative defenses and counterclaim, and dismissed Goldberg's claims with prejudice. Goldberg contends that the trial court erred in granting this order because the arbitration clauses at issue required the Quiggs to arbitrate in their individual capacities and because it had standing to pursue the claims at issue.
Holding that the trial court properly granted the Quiggs' motion to strike, properly determined that the arbitration clauses did not bind the Quiggs in their individual capacities, and properly determined that Goldberg lacked standing and was not the real party in interest for the type of claims it brought, we affirm.
In 1993 a group of investors formed a limited partnership, Grays Harbor Paper L.P. (the Partnership), to operate the Hoquiam Paper Mill and related assets. Among the entities involved in forming the Partnership were its general partner, Grays Harbor Industrial Inc. (GHI), and a number of limited partner entities, including Goldberg, WDQ Investments Inc., and Quigg Investments Inc. William Quigg signed the limited partnership agreement as the president of both GHI and WDQ. Patrick Quigg signed the limited partnership agreement as the president of Quigg Investments Inc.
In 2010 the partners created Grays Harbor Paper LLC (the LLC) and merged the Partnership into it. The merger resulted in the partners receiving "generally equivalent shares of ownership" in the LLC as those they had possessed in the Partnership. Through this merger the LLC obtained "all properties and assets, and all the rights, privileges, powers, immunities and franchises of [the Partnership]." CP at 164.
CP at 129. Any party to the agreement wishing to invoke the arbitration clause could do so by serving a written "[d]ispute [n]otice" on the party it wished to arbitrate with "setting forth the nature of the [d]ispute." CP at 129. Once successfully invoked, the LLC operating agreement'sarbitration clause provided that the Federal Arbitration Act would govern and specified the arbitration's procedures and substantive governing law.
The LLC became insolvent in 2011 and eventually assigned its assets to a court appointed receiver. Goldberg filed a notice of appearance in the receivership matter as an interested party, but filed no claims related to this suit.
After the opening of the receivership estate, Goldberg served a dispute notice on the Quiggs under the arbitration clause, making various allegations of misconduct related to the LLC's failure. The notice alleged that William Quigg, through his alter ego GHI, the Partnership's general partner, had misappropriated partnership funds in breach of fiduciary duties he owed to Goldberg. The notice asserted that these financial improprieties continued when the Partnership became an LLC by virtue of William Quigg's role as a de facto manager of the LLC. The notice further alleged that Patrick Quigg took part in his brother's "diversions of funds" and then failed to seek disgorgement of the ill-gotten gains in violation of fiduciary duties that he owed Goldberg. CP at 15.
Despite receiving the notice of dispute, the Quiggs declined to arbitrate Goldberg's claims. Consequently, Goldberg filed a complaint to compel arbitration.
Before the Quiggs responded to Goldberg's complaint, the receiver appeared in the matter by filing a notice of automatic stay. The notice advised the parties that "[w]hile [the LLC] is not a party to this litigation, the claims made herein are assets of the Receivership estate and the commencement of this action constitutes a violation of the automatic stay" triggered by the creation of the receivership estate. CP at 157. Goldberg filed no answer and ultimately, thereceiver assigned all of the LLC's assets to its senior secured creditor; the supervising trial court approved the assignment and closed the receivership.
The Quiggs answered Goldberg's complaint on three grounds. First, the Quiggs denied the substance of Goldberg's allegations. Second, the Quiggs contended that they had not agreed to arbitrate any dispute with Goldberg. In support of this argument, the Quiggs noted that they were not parties to the Partnership or LLC operating agreements in their individual capacities. Finally, the Quiggs maintained that Goldberg was not the real party in interest and lacked standing to make its claims. The Quiggs argued that had the Partnership and the LLC suffered any injuries as Goldberg alleged the right to any remedy belonged to the LLC. The Quiggs contended that this right had passed into the receivership estate and the receiver had assigned it to the LLC's senior secured creditor. The Quiggs' answer also contained a counterclaim requesting declaratory relief and dismissal with prejudice of Goldberg's claims based on their real party in interest and standing arguments.
Goldberg then moved to compel arbitration, arguing that the trial court could compel the Quiggs to arbitrate whether or not they had signed the Partnership and LLC operating agreements in their individual capacities. In support, Goldberg noted that the federal courts had compelled nonsignatories to arbitrate under numerous theories and that the courts of this state had seemingly adopted those theories. Of these theories, Goldberg contended that two required the Quiggs to arbitrate. First; Goldberg claimed that principles of agency law required the Quiggs to arbitrate with it because they were corporate officers in entities that had signed the Partnership and LLC operating agreements. Second, Goldberg argued that, because various entities that had signed the Partnership and LLC operating agreements were alter egos for theQuiggs, the trial court could compel them to arbitrate in the place of those entities by disregarding the entities' corporate form.
Goldberg also moved to strike the Quiggs' standing and real party in interest defenses and dismiss the associated counterclaim with prejudice.1 Goldberg first contended that the standing and real party in interest issues concerned the merits of its right to recover, and therefore the arbitrator, rather than the trial court, needed to resolve them. Goldberg then argued that, under the Uniform Limited Partnership Act, chapter 25.05 RCW, and the Washington Limited Liability Company Act, chapter 25.15 RCW, general partners and LLC managers owe fiduciary duties to limited partners and LLC members as well as to the business entity itself. Goldberg maintained that it alleged a breach of a fiduciary duty owed to it, not to the Partnership or the LLC, and that it was the proper party to seek a remedy for this breach.
The Quiggs responded with three motions of their own, the first of which was a motion to strike certain factual allegations from Goldberg's motions to compel arbitration and to strike the Quiggs' affirmative defenses and counterclaim. These factual allegations concerned the existence of financial improprieties at the Partnership and LLC, the Quiggs' managerial control over the LLC, the Quiggs' ownership of entities that were members of the Partnership and the LLC,...
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