United States District Court, D. Nevada
before the court is plaintiff eTouch LV, LLC's motion to
compel arbitration. (ECF No. 21). Defendants Scott Morrow and
eTouch Menu, Inc. (collectively “defendants”)
filed a response (ECF No. 26), to which plaintiff replied
(ECF No. 27).
before the court is plaintiff's motion to dismiss, or in
the alternative, stay. (ECF No. 22). Defendants filed a
response (ECF No. 26), to which plaintiff replied (ECF No.
September 2017, plaintiff purchased from defendants a
software business in exchange for $3.5 million. Id.
The asset purchase agreement required plaintiff to pay $2
million at closing of the sale. Id. The remaining
$1.5 million was a hold-back payment that plaintiff was
obligated to pay in quarterly installments. Id.
Under the asset purchase agreement, plaintiff could use the
hold-back payment to offset any damages suffered in
conjunction with the transaction. Id.
after paying the initial $2 million and acquiring the
software business, plaintiff discovered that defendants made
numerous misrepresentations concerning various business
assets, software products, customers, distributors, and
revenues. (ECF No. 37-1). Because these breaches allegedly
resulted in over $1.5 million in damages, plaintiff exercised
its rights under the offset provision of the asset purchase
agreement by refusing to make further payments. (ECF Nos. 1,
conjunction with the asset purchase agreement, plaintiff also
signed an at-will employment agreement with Morrow. (ECF Nos.
11, 20). On May 4, 2018, plaintiff terminated Morrow
partially for his misconduct throughout the software business
acquisition process. Id. Defendants allege that the
termination was unlawful because plaintiff failed to pay
Morrow $300, 000 in accordance with the employment agreement.
(ECF No. 11).
September 19, 2018, plaintiff initiated this action in state
court, asserting six causes of action: (1) breach of
contract; (2) declaratory relief; (3) breach of the implied
covenant of good faith and fair dealing; (4) breach of
fiduciary duty; (5) unjust enrichment; (6) fraud in the
inducement; and (7) violation of the Deceptive Trade
Practices Act. (ECF No. 1-1). On October 26, 2018, defendants
removed this action to federal court. (ECF No. 1).
November 9, 2018, the defendants filed an answer and
counterclaim, asserting four causes of action: (1) breach of
contract; (2) breach of the implied covenant of good faith
and fair dealing; (3) unjust enrichment; and (4)
“failure of consideration - rescission.” (ECF No.
11). Defendants assert these counterclaims with respect to
both the asset purchase agreement and the employment
plaintiff moves to compel arbitration of defendants'
counterclaims as they pertain to the employment agreement.
(ECF No. 21). Plaintiff also moves to dismiss, or in the
alternative, stay defendants' counterclaims as they
pertain to the employment agreement. (ECF No. 21).
Federal Arbitration Act (“FAA”) provides for the
enforcement of arbitration agreements in any contract
affecting interstate commerce. 9 U.S.C. § 2;
AT&T Mobility LLC v. Concepcion, 563 U.S. 333,
339 (2011). A party to an arbitration agreement can invoke
his or her rights under the FAA by petitioning federal courts
to direct that “arbitration proceed in the manner
provided for in such agreement.” 9 U.S.C. § 4.
When courts grant a petition to compel arbitration, the FAA
requires stay of litigation “until such arbitration has
been had[.]” Id. at § 3.
embodies a clear policy in favor of arbitration. AT&T
Mobility, 563 U.S. at 339. Courts must rigorously
enforce arbitration agreements. Hall Street Assoc.,
L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008).
“[A]ny doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration.” See
Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th
Cir. 1999) (quoting Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). The FAA
leaves no place for courts to exercise discretion, but
instead mandates courts to enforce arbitration agreements.
See Dean Witter Reynolds v. Byrd, 470 U.S. 213, 218
arbitration is a “matter of contract” and the FAA
does not require a party to arbitrate “any dispute
which he has not agreed so to submit.” Howsam v.
Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (quotes
and citation omitted). When determining whether a party
should be compelled to arbitrate claims: courts engage in a
two-step process. Chiron Corp. v. Ortho Diagnostic Sys.,
Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). The court
must determine: (1) whether a valid agreement to arbitrate
exists, and if it does; (2) whether the agreement encompasses
the dispute at issue. Id.