The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge
ORDER GRANTING DEFENDANTS'
MOTION TO COMPEL ARBITRATION
AND STAYING PROCEEDINGS
Defendants Loral Langemeier ("Langemeier") and Live Out Loud, Inc. ("LOL") (collectively, "Defendants") filed a motion for an order compelling Plaintiffs Brady Heath and Theresa Heath (collectively, the "Heaths") to arbitrate under 9 U.S.C. § 4 and for an order staying the remainder of this litigation pending arbitration. (ECF No. 66.) The Heaths oppose the motion. (ECF No. 67.) For the following reasons, the motion to compel arbitration will be granted and the remainder of this litigation will be stayed pending arbitration.
A. Plaintiffs' Allegations and Claims
Plaintiffs attended various investment education events, known as "Big Table" programs, at the Embassy Suites Hotel in South Lake Tahoe, California in May and September 2006, and in January 2007. (Compl. ¶¶ 9, 12-15.) Defendants, and LOL's predecessor in interest Coaching Resources, Inc. ("CRI"), marketed these programs, at which they encouraged Plaintiffs to "invest in various real estate ventures and other investment opportunities." Id. ¶¶ 18-19. Plaintiffs allege Defendants made several misrepresentations when they promoted these "high risk and not safe" investments "in pursuit of their own pecuniary interests." Id. ¶¶ 20, 117. Each Plaintiff alleges a loss of tens or hundreds of thousands of dollars as a result of the investments they made following the Big Table programs. Id. ¶¶ 123, 195, 221, 239, 257.
Plaintiffs allege the following claims in their Complaint: (1) fraud and deceit; (2) aiding and abetting fraud; (3) breach of California Civil Code § 3373; (4) breach of fiduciary duty; (5) violation of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5; (6) violation of California Corporation Code § 25401; (7) assisting in the violation of California Corporation Code § 25401; (8) violation of California Corporation Code § 25110; (9) assisting in the violation of California Corporation Code § 25110; and (10) violation of California Business and Professions Code §§ 17200, et seq.. Id. ¶¶ 115-144, 189-302.
B. Previous Motions and Orders
On January 20, 2010, Defendants moved to stay this action pending arbitration under 9 U.S.C. § 3. (ECF No. 9.) Defendants relied on arbitration clauses in Big Table Agreements signed by five Plaintiffs. (ECF No. 10.) In an Order filed August 24, 2010 ("August 24 Order"), the Court determined that the five Big Table Agreements that were signed by Plaintiffs Laurie Wolf, Delores Berman, Kimchi Chow, Steven A. Newell, and Marilyn Cadreau Newell, and Langemeier, on behalf of CRI, were not procedurally or substantively unconscionable. (Order 12:13-14, 14:10-18, ECF No. 37.) Therefore, the action was "stayed under 9 U.S.C. § 3 pending arbitration of Plaintiffs Laurie Wolf, Delores Berman, Kimchi Chow, Steven A. Newell, and Marilyn Cadreau Newell's claims in accordance with the terms of the Big Table Agreements." Id. 16:9-12.
In their motion, Defendants also relied on arbitration clauses in Alumni Agreements signed by six Plaintiffs, including the Heaths. (ECF No. 10.) However, the Court did not consider the agreements to arbitrate in the Alumni Agreements, since Defendants failed to show how the Alumni Agreements relate to the dispute at issue in Plaintiffs' Complaint. (Order 6:9-11, ECF No. 37.)
Plaintiffs then moved under Federal Rule of Civil Procedure ("Rule") 54(b) for revision of the August 24 Order, arguing "defendants committed fraud on the court" when obtaining the August 24 Order. (ECF No. 42.) This motion was denied. (Order 4:2-3, ECF No. 57.)
Subsequently, Plaintiffs voluntarily dismissed Laurie Wolf, Delores Berman, Kimchi Chow, Steven A. Newell, and Marilyn Cadreau Newell, following which the stay was lifted. (ECF Nos. 38, 58-61, 63.) Defendants argue the instant motion to compel arbitration is brought against the Heaths since Defendants have discovered a fully executed copy of the Heaths' Big Table Agreement, which contains an identical arbitration clause to those discussed in the August 24 Order. (Mot. 2:14-21, 3:17-22; Decl. of Langemeier, Ex. C, ECF No. 51.)
Plaintiffs argue that "[a]lthough defendants have brought this motion under 9 U.S.C. [§] 4, it is [in] essence a motion for reconsideration[ of the August 24 Order, b]ut the motion fails to present any procedural or substantive grounds for reconsidering this court's previous decision." (Opp'n 2:15-18.) However, Defendants' previous motion sought an order staying the litigation pending arbitration; Defendants have not previously sought to compel arbitration under 9 U.S.C. § 4. Therefore, the current motion does not seek reconsideration of the August 24 Order.
Defendants' motion to compel arbitration concerns Section 4 of the Federal Arbitration Act ...