Pilgrim Skating Arena, Inc. v. Laubenstein (In re Laubenstein)
| Decision Date | 05 March 2021 |
| Docket Number | Case No: 2:20-cv-765-SPC,Bankruptcy Case No. 9:20-bk-3697-FMD |
| Court | U.S. District Court — Middle District of Florida |
| Parties | IN RE: PAUL CHARLES LAUBENSTEIN and LISA MARY LAUBENSTEIN CREDITOR, PILGRIM SKATING ARENA, INC., Appellant-Creditor, v. PAUL CHARLES LAUBENSTEIN and LISA MARY LAUBENSTEIN, Appellee-Debtors. |
Appellant-Creditor Pilgrim Skating Arena, Inc. ("Pilgrim") appeals the bankruptcy court's2 order denying its motion for relief from stay to allow for continuation of arbitration proceedings. (Doc. 1). Appellee-Debtors Paul C. Laubenstein and Lisa M. Laubenstein's oppose. For the following reasons, the Court overrules Pilgrim's appeal and affirms the bankruptcy court's order.
"Under the Bankruptcy Code, filing a petition for bankruptcy automatically 'operates as a stay' of creditors' debt-collection efforts outside the umbrella of the bankruptcy case." Ritzen Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 586 (2020) (citing 11 U.S.C. § 362(a)(1)). The bankruptcy court may grant relief from the automatic stay. 11 U.S.C. § 362(d). The bankruptcy court's adjudication of a motion for relief from the automatic stay provision is appealable. Ritizen Grp, Inc., 140 S. Ct. at 586; 28 U.S.C. § 158(a). When a matter is appealed from bankruptcy court, the district court functions as an appellate court. Williams v. EMC Mortg. Corp. (In re Williams), 216 F.3d 1295, 1296 (11th Cir. 2000) (per curiam). "Factual findings by the bankruptcy court are reviewed under the limited and deferential clearly erroneous standard." Club Assocs. v. Consol. Capital Realty Inv'rs. (In re Club Assocs.), 951 F.2d 1223, 1228 (11th Cir. 1992). Legal conclusions are reviewed de novo. Id.
Paul and Lisa Laubenstein own New England Senior Hockey League, Inc., a corporation that manages adult hockey leagues in Massachusetts. (Doc. 15-1 at 172 [App. 168]). Pilgrim owns three ice rinks and office space in Massachusetts, renting them to third parties. (Id.) In June 2010, Pilgrim entered into a ten-year License Agreement with "Paul Laubenstein d/b/a New England Senior Hockey League" for rental of Pilgrim's ice rinks and office space. (Id. at 244-49 [App. 240-45]). The agreement was amended the month after. (Id. at 250-56 [App. 246-52]). The agreement was signed by PaulLaubenstein as the "duly authorized officer or agent" of "Paul Laubenstein d/b/a New England Senior Hockey League." (Id. at 172, 249, 256 [App. 168, 245, 252]). The agreement provided for quarterly rental payments to Pilgrim for ice time and monthly rental payments for office space. (Id. at 172 [App. 168]). The agreement also contains a noncompete agreement prohibiting the licensee—Paul Laubenstein d/b/a New England Senior Hockey League—from renting ice rinks within a 20-mile radius of Pilgrim's rinks. (Id.) Finally, the agreement required "any action for damages" to be submitted to arbitration. (Id. at 172-73 [App. 168-69]).
New England Senior Hockey League, Inc. was incorporated in Massachusetts in June 2012, with the Laubensteins serving as its only officers and directors. (Id. at 272-76 [App. 268-72]). The License Agreement was never updated to replace "Paul Laubenstein d/b/a New England Senior Hockey League" with New England Senior Hockey League, Inc.
Pilgrim terminated the License Agreement effective September 1, 2019 based on Paul Laubenstein's alleged failure to pay rent and violation of the noncompete provision. (Id. at 173 [App. 169]). That same month, Pilgrim submitted a Demand for Arbitration, naming as respondents New England Senior Hockey League, Inc. and Paul Laubenstein. (Id.; Id. at 277-78 [App. 273-74]).
The Laubensteins filed their bankruptcy petition on May 12, 2020. Thereafter, the arbitrator entered a temporary restraining order and permanent injunction against New England Senior Hockey League, Inc., enforcing the noncompete provision of the License Agreement. (Id. at 173-74 [App. 169-70]).
Pilgrim moved in bankruptcy court for relief from the automatic stay to continue arbitration. (Id. at 29-55 [App. 25-51]). The parties extensively briefed the matter. (Id. at 56-122, 139-48 [App. 52-118, 135-44]). The bankruptcy court denied the motion. (Id. at 171 [App. 167]). The bankruptcy court found that the arbitration agreement is limited to actions for damages and that Lisa Laubenstein is not a signatory or party to the License Agreement and never agreed to arbitrate any dispute with Pilgrim. (Id. at 175 [App. 171]). Only after the Laubensteins sought bankruptcy protection did Pilgrim seek to recast its breach of contract arbitration claims to include claims for fraud and breach of fiduciary duty, claims that must be brought in the bankruptcy case as an adversary proceeding. (Id. at 176 [App. 172]). Such an adversary proceeding, the bankruptcy court held, are core proceedings. (Id.) Likewise, the Laubensteins' objection to Pilgrim's proof of claim and Pilgrim's objection to the Laubensteins' claimed homestead exemption are core proceedings. (Id.) Thus, the bankruptcy court found that "enforcement of the arbitration agreement with respect to the claims that Pilgrim has asserted and intends toassert in the arbitration proceeding inherently conflicts with the underlying purpose of the Bankruptcy Code" and principles of judicial economy requires the parties' disputes be resolved in bankruptcy court. (Id.)
When a party seeks to compel arbitration, courts engage in a two-step inquiry. Klay v. All Defendants, 389 F.3d 1191, 1200 (11th Cir. 2004). First, the court determines whether the parties agreed to arbitrate their dispute. Id. (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)). The second step considers whether "legal constraints external to the parties' agreement foreclosed arbitration of those claims." Mitsubishi Motors Corp., 473 U.S. at 628. "Bankruptcy may be one of the legal constraints foreclosing arbitration, but only if the matter under consideration is within the bankruptcy court's 'core' jurisdiction, and if enforcement of the arbitration agreement inherently conflicts with the underlying purpose of the Bankruptcy Code." In re Bateman, 585 B.R. 618, 624 (Bankr. M.D. Fla. 2018) ).
Pilgrim asserts the bankruptcy court erred by finding that Lisa Laubenstein is not bound by the arbitration agreement. Pilgrim argues the New England Senior Hockey League operated as a partnership before incorporating as New England Senior Hockey League, Inc. in 2012 and the partnership comprised of Paul and Lisa Laubenstein. Neither contention isborne out in the record. Both the original and amended License Agreement are between Licensor Pilgrim and Licensee "Paul Laubenstein d/b/a New England Senior Hockey League." (Doc. 15-1 at 244, 250 [App. 240, 246]). This language is clear and unambiguous in equating Paul Laubenstein in a one-to-one ratio with New England Senior Hockey League. The signature block on the agreements buttresses this conclusion. Pilgrim, an entity with multiple persons able to act as officers or agents, signed the agreements through its president, whose position was specifically listed. (Id. at 249, 256 [App. 245, 252]). But no such position designation accompanies Paul Laubenstein's signature. His name stands alone under the party information of "Paul Laubenstein d/b/a New England Senior Hockey League." (Id.) Nothing in the contract denotes New England Senior Hockey League is anything but the alter ego of Paul Laubenstein.
Sinking Pilgrim's argument altogether are its actions after terminating the License Agreement. Pilgrim sought arbitration against Paul Laubenstein and New England Senior Hockey League, Inc. The arbitration was pending against Paul Laubenstein and New England Senior Hockey League, Inc. for eight months before the Laubensteins filed for bankruptcy. And it appears Lisa Laubenstein's non-inclusion in the arbitration did not affect the proceedings because the arbitrator, whom Pilgrim relies on to assert the interchangeability of New England Senior Hockey League and New EnglandSenior Hockey League, Inc., discussed pre- and post-incorporation New England Senior Hockey League as being run and created by Paul Laubenstein, not Paul and Lisa Laubenstein. (Id. at 284-85 [App. 280-81]). Only following the filing of bankruptcy did Pilgrim seek to expand its arbitration to assert, for the first time, claims against Paul and Lisa Laubenstein and New England Senior Hockey League, Inc. for fraudulent transfers, breach of fiduciary duty, and misrepresentation. (See id. at 36 [App. 32]).
Pilgrim next argues that it can enforce the arbitration agreement against Lisa Laubenstein as a non-signatory on the grounds of collateral estoppel. "[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960). Courts have recognized "a number of theories under which non-signatories may be bound to the arbitration agreements of others." Emp'rs Ins. of Wausau v. Bright Metal Specialties, Inc., 251 F.3d 1316, 1322 (11th Cir. 2001) (citing Thomson-CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773 (2d Cir. 1995)). These theories arise out of common law principles of contract and agency law and include: 1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego; and 5) estoppel. Id. (citing Thomson-CSF, S.A., 64 F.3d at 776). But these theories do not apply with the same weight when a signatory seeks to bind a non-signatory. See Bridas S.A.P.I.C. v. Gov'tof Turkmenistan, 345 F.3d 347, 363 (5th Cir. 2003) (...
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