United States District Court, S.D. California
ORDER GRANTING DEFENDANT'S MOTION TO COMPEL ARBITRATION AND DISMISSING THE COMPLAINT (Dkt. No. 6.) REDACTED-ORIGINAL FILED UNDER SEAL
GONZALO P. CURIEL, District Judge.
Before the Court is Defendant's motion to compel arbitration and to dismiss the complaint for lack of subject matter jurisdiction, or in the alternative, stay pending arbitration, or in the alternative, dismiss for failure to state a claim. (Dkt. No. 6.) Plaintiff filed an opposition. (Dkt. No. 8.) Defendant filed a reply. (Dkt. No. 9.) After a review of the pleadings, briefs, supporting documents and the applicable law, the Court GRANTS Defendant's motion to compel arbitration and dismisses the complaint.
On October 21, 2014, Plaintiff Haisha Corporation ("Haisha" or "Plaintiff") filed a complaint against Defendant Sprint Solutions, Inc. ("Sprint" or "Defendant") in San Diego County Superior Court alleging four causes of action for intentional interference with prospective economic relations; negligent interference with business relationships; unlawful, unfair and fraudulent business acts and practices; and interference with contractual relations. (Dkt. No. 1-1 at 2.) On November 20, 2014, Defendant removed the case to this Court. (Dkt. No. 1.)
According to the complaint, Plaintiff was a Sprint Preferred Dealer Partner doing business as The Wireless Place since August 2007. (Dkt. No. 1-1, Compl. ¶ 8.) Plaintiff ultimately owned six retail wireless phone stores in San Diego. (Id.) Plaintiff was an exclusive dealer for Sprint and operated all locations as Sprint branded stores. (Id.) In 2009, Haisha was selected to be a Preferred Dealer. (Id. ¶ 9.)
Haisha stores were consistently ranked amongst the very top independent Sprint dealers in customer service, sales, and other key performance metrics, and received high praises from the Vice President ("VP") and Directors when they would visit. (Id. ¶¶ 10, 11.) Sprint management often referred to Plaintiff as a valued partner in business and encouraged expansion. (Id. ¶ 12.)
On August 26, 2013, Sprint's VP of the West Region, Rob Bryant, sent an email to Andrew Haisha, Haisha's president, stating Haisha's contract with Sprint had expired and that Sprint would not be renewing it. (Id. ¶ 13.) The letter stated that Plaintiff had thirty (30) days to either close all six stores or find a buyer to purchase them. (Id.) This was a complete surprise to Haisha as the relationship was on track for continued growth and expansion. (Id. ¶ 14.)
Mark Pena, a director at Sprint, explained that the termination was complicated and had to do with SoftBank's purchase of Sprint. (Id. ¶ 15.) SoftBank wanted larger dealers and Haisha's six stores was no longer a partnership that Sprint considered profitable. (Id.) In that telephone conversation, Pena stated that he did not want Haisha to close its doors because he did not want to lose distribution in the San Diego market. (Id. ¶ 17.) Moreover, Pena did not want Haisha stores to convert to a competitor so he provided a list of five dealers in Sprint's West Region and stated that the sale of the stores would not be approved to anyone other than those five existing Sprint preferred dealers. (Id.)
Haisha obtained offers from Sprint preferred dealers that were not on the list of "five" provided by Pena. (Id. ¶ 18.) When Haisha contacted the five dealers, four expressed significant interest but had concerns about receiving Pena's approval of the sale. (Id. ¶ 19.) Ultimately, the only dealer that Pena permitted to negotiate with Haisha paid only $600, 000, significantly less than fair market value for its stores. (Id. ¶ 20.) Plaintiff had contractual relationships and obligations to landlords relating to the operation of the Sprint stores owned by Haisha. (Id. ¶ 21.) The dealer that purchased the stores intended to close certain locations, leaving Plaintiff liable for the leasehold obligations. (Id.)
In its motion to compel arbitration, Defendant provides additional relevant facts. On January 24, 2011, Haisha entered into an Authorized Representative Agreement ("AR Agreement") [REDACTED\] (Dkt. No. 11, Serra Decl., Ex. A, AR Agreement (UNDERSEAL).) The AR Agreement [REDACTED\] (Id. ¶ 14.1 (UNDERSEAL).) [REDACTED\] (Id. ¶ 14.2 (UNDER SEAL).) On August 26, 2013, after the two year term had expired, Sprint sent Haisha a 30 days' written notice that the contract had expired and that it would not renew the agreement. (Dkt. No. 1-1, Compl. ¶ 13.)
The AR Agreement provides a dispute resolution procedure outlined in Exhibit E of the agreement. On November 19, 2014, Sprint sent Haisha a written demand that the parties attend mediation as required in the agreement prior to invoking arbitration. (Dkt. No. 6-2, Coombe Decl. ¶ 2; Ex. A.) As of the filing of its motion, Haisha has not responded to the mediation demand. While still premature since arbitration may be initiated after the 45th calendar day following the request for mediation, Sprint moves to compel arbitration under the Federal Arbitration Act ("FAA").
A. Motion to Compel Arbitration
The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., espouses a general policy favoring arbitration agreements and establishes that a written arbitration agreement is "valid, irrevocable, and enforceable." 9 U.S.C. § 2. The FAA permits "a party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court... for an order directing that... arbitration proceed in the manner provided for in such agreement." 9 U.S.C. § 4. The United States Supreme Court has stated that there is a federal policy favoring arbitration agreements. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Federal policy is "simply to ensure the enforceability, according to their terms, of private agreements to arbitrate." Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford Jr. Univ., 489 U.S. 468, 476 (1989). Courts are also directed to resolve any "ambiguities as to the scope of the arbitration clause itself... in favor of arbitration." Id.
Under the FAA, arbitration agreements "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. In analyzing whether an arbitration agreement is valid and enforceable, "generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2." Doctor's Assoc., Inc. v. Casarotto, 517 U.S. 681, 687 (1996). In interpreting the validity and scope of an arbitration agreement, the courts apply state law principles of contract formation and interpretation. See Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1210 (9th Cir. 1998) (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)).
When considering a party's request to compel arbitration, the court is limited to determining (1) whether a valid arbitration agreement exists, and if so (2) whether the arbitration agreement encompasses the dispute at issue. Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir. 2008). If these conditions are satisfied, the court is without discretion to deny the motion and must compel arbitration. 9 U.S.C. § 4; Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) ("By its terms, the [FAA] 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.").
Plaintiff argues that its claims do not fall under the scope of the arbitration provision. Second, Plaintiff argues that the arbitration agreement is unenforceable because it ...