Megaforce, Korea Corp. v. Eng, Case No. 18-cv-1691 (ECT/HB)
| Decision Date | 01 February 2019 |
| Docket Number | Case No. 18-cv-1691 (ECT/HB) |
| Parties | MegaForce, a South Korea corporation, Plaintiff, v. Joseph Robert Eng, an individual; William Joseph Johnson, an individual; and WAV Events and Entertainment, LLC, a Minnesota Limited Liability Company, Defendants. |
| Court | U.S. District Court — District of Minnesota |
Rachel K. Paulose, DLA Piper LLP, Minneapolis, MN; Mandy Chan, DLA Piper LLP, San Francisco, CA; Miles Cooley, DLA Piper LLP, Los Angeles, CA; and Sangwon Sung, DLA Piper LLP, East Palo Alto, CA, for Plaintiff MegaForce.
Brian N. Niemczyk, Stephen M. Ringquist, and Carol R. M. Moss, Hellmuth & Johnson, PLLC, Edina, MN, for Defendant William Joseph Johnson.
Plaintiff MegaForce, a concert promoter based in South Korea, commenced this action on June 19, 2018, alleging that it had entered into two contracts with Defendant WAV Events and Entertainment, LLC ("WAV")—the "Performance Agreement" and the "Appearance Agreement,"—for two events MegaForce was producing in South Korea on January 26 and 27, 2018. See generally Compl. ¶ 19 [ECF No. 1] and Exs. A [ECF No. 1-1] (hereinafter "Performance Agreement"), and B [ECF No. 1-2] (hereinafter "Appearance Agreement," and with the Performance Agreement, the "Agreements"). Under the Agreements, WAV was to have arranged for "the celebrity appearances of Floyd Mayweather Jr., and musical artists Lil Wayne and Lil Jamez." Compl. at 1. MegaForce alleges that it paid WAV $110,000 under the Agreements, and incurred hundreds of thousands of dollars more in third-party expenses and liabilities as it prepared for the two events, but WAV never produced the promised celebrities, giving MegaForce less than two weeks' notice of the celebrities' non-appearance. Id. ¶¶ 13-14, 25, 35, 63-64. MegaForce sued WAV and its two co-"managers," Defendants Joseph Robert Eng ("Eng") and William Joseph Johnson ("Johnson"), whom MegaForce alleges personally strung it along for months until virtually the last minute. MegaForce brings claims for breach of contract and for breach of the covenant of good faith and fair dealing under each of the Agreements (Counts I and II for breach of contract and Counts IV and V for breach of covenant), and for fraud (Count III), unjust enrichment (Count VI), violation of the Minnesota Deceptive Trade Practices Act, Minn. Stat. § 325D.44 (Count VII), and civil conspiracy (Count VIII). See generally id. ¶ 4, 36-61. MegaForce brings the breach-of-contract claims and the claims for breach of covenant of good faith and fair dealing against WAV only; it brings each of its other claims against all Defendants. See id. ¶¶ 66-112.
WAV and Eng have not appeared in this action, and MegaForce now moves for a default judgment on its claims against them. ECF No. 48. Johnson, who has appeared, opposes the default-judgment motion to the extent a default judgment against WAV and Eng might somehow prejudice his rights as he defends against this litigation, and on the additional basis of an arbitration clause in each of the Agreements, under which (Johnson contends) all of MegaForce's claims in this action are subject to mandatory arbitration in New York. See generally Johnson Opp'n to Pl.'s Mot. for Dflt. J. [ECF No. 33], Johnson Opp'n to Pl.'s Second Mot. for Dflt. J. [ECF No. 61] ). Johnson moves to compel arbitration and dismiss the claims against him. ECF No. 41. MegaForce opposes that motion, arguing primarily that Johnson, as a non-signatory to either of the Agreements, cannot compel arbitration under their respective arbitration clauses. MegaForce Opp'n to Johnson Arb. Mot. ( ) [ECF No. 62]. Johnson's motion to compel MegaForce to arbitrate its claims against him will be granted, and MegaForce's motion for default judgment as to the two other Defendants will be denied without prejudice.
Johnson denominated his motion to compel arbitration under Fed. R. Civ. P. 12(b)(1), but, as MegaForce points out, recent Eighth Circuit case law makes clear that such motions should be analyzed under Rule 12(b)(6) or Rule 56, not under Rule 12(b)(1) or Rule 12(b)(3). See Seldin v. Seldin, 879 F.3d 269, 272 (8th Cir. 2018); City of Benkelman, Neb. v. Baseline Eng'g Corp., 867 F.3d 875, 881 (8th Cir. 2017). Johnson states that he "has no objection to this motion being deemed a motion to dismiss under either" Rule 12(b)(6) or Rule 12(b)(1). Johnson Arb. Reply Br. at 4 [ECF No. 70]. In view of the Eighth Circuit's holdings in Seldin and Benkelman, Johnson's motion to compel arbitration will be analyzed under Rule 12(b)(6).
In reviewing a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6), a court must accept as true all of the factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor. Gorog v. Best Buy Co., 760 F.3d 787, 792 (8th Cir. 2014) (citation omitted). Although the factual allegations need not bedetailed, they must be sufficient to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). The complaint must "state a claim to relief that is plausible on its face." Id. at 570.
Ordinarily, courts do not consider matters outside the pleadings in resolving a Rule 12(b)(6) motion to dismiss, see Fed. R. Civ. P. 12(d), but the Court may consider exhibits attached to the complaint and documents that are necessarily embraced by the pleadings without transforming the motion into one for summary judgment. Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003) (citation omitted). Because the Agreements are attached to, and embraced by, MegaForce's Complaint, they may be considered in resolving Johnson's motion.
Johnson is not a signatory to any Agreement with MegaForce containing an arbitration clause; those Agreements were signed by MegaForce and WAV only. The arbitration clause in each Agreement provides:
ARBITRATION: This Agreement shall be governed and construed in accordance with the laws of the State of New York. Any claim or dispute arising out of or relating to this agreement or the breach thereof shall be settled by arbitration in the State of New York in accordance with the rules and regulations of the American Arbitration Association. The parties hereto agree to be bound by the award in such arbitration and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.
Compl. Exs. A at 5, B at 5.
The Parties suggest that, under the Agreements' choice-of-law clause, New York law governs the issue of arbitrability—i.e., whether Johnson, as a non-signatory to the Agreements, can compel MegaForce to arbitrate its claims against him. See Johnson Arb. Br. at 7 [ECF No. 43]; MegaForce Arb. Opp'n at 7. No Party, however, relies meaningfully on New York law with respect to this issue. In his opening brief, Johnson cites a case describing the elements necessary to establish the existence of an enforceable contract under New York law, but then cites only cases from the Eighth and other federal circuits determining arbitrability under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq. Johnson Arb. Br. at 8-12. In his reply brief, Johnson cites another Second Circuit case as describing legal rules under New York state law for determining whether a signatory to an arbitration agreement can be compelled to arbitrate a claim with a non-signatory. Johnson Arb. Reply Br. at 8. But on this issue the Second Circuit case Johnson cites applies legal rules under the FAA. Denney v. BDO Seidman, L.L.P., 412 F.3d 58, 70 (2d Cir. 2005). In its brief in opposition to Johnson's motion, MegaForce cites a Second Circuit decision, JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163 (2d Cir. 2004), as identifying the four factors a court must consider in determining whether a dispute is arbitrable "[u]nder New York law." MegaForce Arb. Opp'n at 7. But this case lists those factors as relevant to determining arbitrability under the FAA. JLM Indus., 387 F.3d at 169. All of this is not to suggest that the Parties' Second Circuit citations are not useful. They are. It's just to make clear that these cases apply the FAA—and not New York law—to determinearbitrability. As a result, the Parties are not understood to rely upon New York law on the question of whether MegaForce must arbitrate its claims against Johnson.1
Ordinarily, the fact that Johnson and MegaForce never entered into an arbitration agreement would end the Court's inquiry because "arbitration is a matter of contract, and a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit." United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960). But in some circumstances, certain common-law contract principles—including theories of estoppel—allow non-signatories to enforce an arbitration agreement against a signatory. CD Partners, LLC v. Grizzle, 424 F.3d 795, 799 (8th Cir. 2005) (); see also Medidata Sols., Inc. v. Veeva Sys., Inc., Nos.17-2694 (L) and 18-681 (CON), ___ F. App'x ___, 2018 WL 4224324, at *2 (2d Cir. Sept. 6, 2018) (citing Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d 115, 126 (2d Cir. 2010)).
The Eighth Circuit has held that a non-signatory may compel a signatory to arbitrate when "the relationship between the signatory and nonsignatory defendants is sufficiently close that only by permitting the nonsignatory to invoke arbitration may evisceration of the underlying arbitration agreement between the signatories be avoided," or when "the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the...
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