United States District Court, N.D. California, San Jose Division
ORDER DENYING DEFENDANT'S MOTION TO COMPEL ARBITRATION [Re: Docket No. 115]
EDWARD J. DAVILA, District Judge.
Plaintiff Evan Weaver ("Weaver") brings this instant action against Defendant Halcyon Cabot Partners Ltd. ("Halcyon"). Presently before this Court is Halcyon's Motion to Compel Arbitration (the "Motion") of Weaver's claims. See Docket Item No. 115. Weaver opposed the Motion. The Court found this matter suitable for decision without oral argument and vacated the associated hearing date.
The Court has original jurisdiction pursuant to 28 U.S.C. § 1332. Having reviewed the parties' briefing, the court DENIES Defendants Motion to Compel Arbitration for the reasons explained below.
On February 2, 2012, Weaver originally filed a complaint against Defendant Tampa Investment Group ("Tampa"), for contract and fraud claims involving Weaver's Twitter stock with an associated loss of over seven million dollars. See Docket Item No. 1. On December 20, 2012, after engaging in discovery, Weaver filed an amended complaint ("FAC") adding Defendants Felix Investments ("Felix"), John Bivona ("Bivona"), and Halcyon. See Dkt. No. 59. In that FAC, Weaver alleged that Tampa and Felix worked with Halcyon and Halcyon's registered representative, Paul McCabe, to purchase pre-IPO Twitter stocks, and to generate commission. Id. at ¶ 6-8. In addition, Weaver alleged that McCabe contacted Weaver and represented that he had a buyer for Weaver's shares, Tampa, who was "ready to move" if the deal cleared Twitter's right of first refusal ("ROFR"). Id. at ¶ 30. Weaver alleged that Weaver, Tampa and Halcyon executed the "Term Sheet" (together with the Letter Agreement), which set forth the exact number of shares to be sold and the exact price to be paid. Id. at ¶ 40. Finally, Weaver alleged that Tampa, Halcyon and Felix fraudulently induced Weaver to contract to sell his Twitter shares. Id. at 8.
On March 05, 2013, Halcyon filed for a Motion to Dismiss Weaver's FAC. Dkt. No. 80. On March 19, 2013, Weaver responded to Halcyon's Motion to Dismiss Weaver's FAC. Dkt. No. 89. On March 26, 2013, Halcyon replied in support of its Motion to Dismiss Weaver's FAC. Dkt. No. 93. On March 31, 2013, this Court Denied the Motion to Dismiss Weaver's FAC. Dkt. No. 104. On April 22, 2014, Halcyon filed an Answer to Weaver's FAC. Dkt. No. 110. On May 28, 2014, Halcyon filed a Motion to Compel Arbitration. Dkt. No. 115. On June 11, 2014, Weaver responded to Halcyon's Motion to Compel Arbitration. Dkt. No. 117. Finally, on June 18, 2014, Halcyon replied in support of its Motion to Compel Arbitration. Dkt. No. 118.
II. Legal Standard
Under the Federal Arbitration Act, "A party to a valid arbitration agreement may petition any United States district court for an order directing that such arbitration proceed in the manner provided for in such agreement.'" Lifescan, Inc. v. Premier Diabetic Servs., Inc. , 363 F.3d 1010, 1012 (9th Cir. 2004) (quoting 9 U.S.C. § 4). When such a request is made, the court must determine whether an arbitration agreement exists and whether it encompasses the dispute at issue. See id. at 1012; see also Chiron Corp. v. Ortho Diagnostic Sys., Inc. , 207 F.3d 1126, 1130 (9th Cir. 2000). "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24-25 (1983).
A motion to compel arbitration should be denied if "it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." AT&T Techs., Inc. v. Commc'n Workers , 475 U.S. 643, 650 (1986). Moreover, arbitration should be denied if the court finds "grounds as exist at law or in equity for the revocation of any contract, " such as fraud, duress or unconscionability. 9 U.S.C. § 2; Rent-A-Center, West, Inc. v. Jackson , 130 S.Ct. 2772, 2776 (2010). The court applies ordinary state-law principles governing the formation of contracts to carry out this task. Davis v. O'Melveny & Myers , 485 F.3d 1066, 1072 (9th Cir. 2007).
a. FINRA Rule 12200
Financial Industry Regulatory Authority's ("FINRA") Customer Code governs arbitration between customers of FINRA members and FINRA members. Rule 12200 provides:
(1) Arbitration under the Code ...