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OfferHubb.Net, Inc. v. Fun Club USA, Inc.

United States District Court, D. Nevada

July 24, 2015

OFFERHUBB.NET, INC. and DAVID FLYNN, Plaintiffs,
v.
FUN CLUB USA, INC., ROBERT CRADDOCK, AND SYLVIA SALGADO CRADDOCK, Defendants.

ORDER

RICHARD F. BOULWARE, II, UNITED STATES DISTRICT COURT JUDGE

Before this Court are three motions: Plaintiffs OfferHubb.net, Inc. and David Flynn’s Motion for Leave to Amend Complaint and for Joinder of Additional Defendant, ECF No. 12; Defendants Fun Club USA, Inc., Robert Craddock, and Sylvia Craddock’s Counter-Motion to Dismiss, ECF No. 14; and Defendants Fun Club USA, Inc., Robert Craddock, and Sylvia Craddock’s Counter-Motion to Compel Arbitration, ECF No. 15.[1] For the reasons discussed below, the motion for leave to amend is granted, the motion for dismissal is denied, and the motion to compel arbitration is granted in part and denied in part.

I. Background

A. Factual

OfferHubb.net, Inc. (“OfferHubb”) and David Flynn (collectively “Plaintiffs”) allege that on or about November 29, 2012, they entered into a contract (the “Contract”) with Fun Club USA, Inc. (“Fun Club”) and Robert Craddock for the purpose of performing marketing services for OfferHubb. The Contract included an arbitration agreement. Plaintiffs allege they paid a total of $120, 000 in compensation for these services. Plaintiffs further allege that Fun Club and Robert Craddock did not conduct the required marketing efforts in an ethical and honest manner and did not perform certain other services required by the Contract.

After OfferHubb notified Fun Club on or about July 11, 2013, of its decision not to renew the Contract, Plaintiffs claim Fun Club, Robert Craddock, and Sylvia Craddock engaged in various activities disparaging and harmful to Plaintiffs.

B. Procedural

On February 5, 2014, Plaintiffs filed in this Court the instant complaint against Fun Club USA, Inc., Robert Craddock, and Sylvia Salgado Craddock (collectively “Defendants”), alleging eleven claims for relief: cybersquatting, statutory trademark infringement, wrongful use of computer, common law trademark infringement, statutory misappropriation of trade secret, common law misappropriation of trade secret, wrongful interference with economic relations, breach of contract, unjust enrichment, defamation, and piercing the corporate veil/alter ego. ECF No. 1. Defendants answered on February 27. ECF No. 9.

On March 14, 2014, Plaintiffs moved to amend their complaint to, among other things, join Theodore F. Zentner as a party defendant. ECF No. 12. On March 31, Defendants responded and counter-moved to dismiss and to compel arbitration. ECF Nos. 13, 14, 15.

On May 7, 2014, a discovery and scheduling order was issued. ECF No. 21.

On July 22, 2014, Defendants’ attorneys moved to leave to withdraw. ECF No. 22. Fun Club failed to comply with court orders to retain new counsel, ECF Nos. 23 and 25, and, on February 4, 2015, this Court struck Fun Club’s answer[2] and ordered default entered against Fun Club. ECF No. 28.

II. Counter-Motion to Compel Arbitration

A. Legal Standard

The Federal Arbitration Act (“FAA”) provides that a “written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising . . . 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 provides two methods for enforcing arbitration: (1) an order compelling arbitration of a dispute; and (2) a stay of pending litigation raising a dispute referable to arbitration. 9 U.S.C §§ 3, 4.

“By its terms, the Act 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). The FAA limits the district court's role to determining (1) whether the parties agreed to arbitrate, and, if so, (2) whether the scope of that agreement to arbitrate encompasses the claims at issue. Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1175 (9th Cir. 2014). “The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration . . . .” Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983). Thus, “[t]he standard for demonstrating arbitrability is not a high one; in fact, a district court has little discretion to deny an arbitration motion, since the Act is phrased in mandatory terms.” Republic of Nicar. v. Std. Fruit Co., 937 F.2d 469, 475 (9th Cir.1991). However, “arbitration 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.” AT & T Technologies, Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648 (1986), (quoting United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960)).

The determination of whether a particular issue should be determined by the arbitrator rather than the court is governed by federal law. Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). However, when deciding whether the parties agreed to arbitrate a certain matter, courts generally apply ordinary state law principles of ...


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