GARLAND E. BURRELL, Jr., Senior District Judge.
Defendants SynGen, Inc. ("SynGen"), PHC Medical, Inc. ("PHC Medical"), and Philip Coelho ("Coelho") (collectively, "Defendants") "move for an order to compel arbitration of all claims asserted against all Defendants in the Complaint filed by Plaintiff Cesca Therapeutics Inc." ("Cesca"). (Defs.' Notice of Mot. 1:5-6, ECF No. 41.) Cesca opposes the motion, arguing "[t]here are no controlling arbitration provisions applicable to this action." (Pl.'s Opp'n to Defs.' Mot. to Compel Arbitration ("Opp'n") 6:9, ECF No. 42.)
The following factual allegations in Cesca's Complaint concern this motion.
"Cesca designs, develops, and commercializes medical products that enable the collection, processing, and cryopreservation of stem cells and other cellular tissues used in research in the practice of regenerative medicine." (Compl. ¶ 15, ECF No. 2.) "Cesca . . . is the surviving entity of a merger between ThermoGenesis Corp. [("ThermoGenesis")] and TotiPotentRX Corporation, which occurred on February 13, 2014." (Compl. ¶ 3.)
"Coelho . . . [is a] former employee[] of Cesca who w[as] hired specifically to design, invent and develop new products, product improvements, and inventions for Cesca." (Compl. ¶ 18.) Specifically, "Coelho is a founder and former Chief Executive Officer of Cesca." (Compl. ¶ 20.) In 2007, Coelho and ThermoGenesis entered into an Executive Employment Agreement, which contained an arbitration provision. (Compl. ¶ 20, Ex. 1 § 11, ECF No. 11.)
"On or about May 1, 2008, ThermoGenesis and Coelho terminated Coelho's employment, and the parties entered into an Employment Severance Agreement." (Compl. ¶ 21.) The Employment Severance Agreement contains an arbitration provision. (Ex. 2 § 14.5.)
"On or about May 2, 2008, ThermoGenesis and PHC Medical, an entity of which Coelho was President, entered into a [C]onsulting [A]greement including a Proprietary Information and Confidentiality Agreement wherein PHC Medical agreed, inter alia, to provide consulting services to ThermoGenesis as an independent contractor." (Compl. ¶ 22.) The Consulting Agreement contains an arbitration provision, (Ex. 3 § 19), whereas the Proprietary Information and Confidentiality Agreement contains a "Governing Law" section, which states in pertinent part: "Any legal action or proceeding relating to this Agreement shall be instituted in a state or federal court in Sacramento County, California." (Ex. A in Ex. 3 § 5.1.)
"On or about October 1, 2009, [ThermoGenesis], Coelho, and PHC Medical entered into a Mutual Termination Agreement, which terminated the Executive Employment Agreement, Employment Severance Agreement, and Consulting Agreement, but not the [Proprietary Information and Confidentiality] Agreement." (Compl. ¶ 23.)
The Mutual Termination Agreement provides in pertinent part:
(Ex. 4 § 1.)
The Mutual Termination Agreement's "Governing Law and Venue" section further provides: "Any legal action or proceeding relating to this Agreement shall be instituted in a state or federal court in Sacramento, County California." (Ex. 4 § 9.)
The Mutual Termination Agreement also contains an "Entire Agreement" section which states in pertinent part: "This Agreement contains the entire agreement and understandings by and between the Parties with respect to the subject matter hereof, and no representations, promises, agreements or understandings concerning such subject matter, written or oral, not herein contained shall be of any force or effect." (Ex. 4 § 10.)
"[F]ollowing his employment with Cesca, Coelho formed SynGen." (Compl. ¶ 43.)
Defendants Coelho and PHC Medical seek to enforce arbitration provisions between ThermoGenesis and Coelho, and ThermoGenesis and PHC Medical, found in the Executive Employment Agreement, the Employment Severance Agreement, and the Consulting Agreement. (Mem. P.&A. in Supp. of Defs.' Mot. to Compel Arbitration ("Mot.") 6:6-10, ECF No. 41-1.) They argue these arbitration provisions survived the October 2009 Mutual Termination Agreement because "[p]arties' duties under an arbitration clause survive contract termination when the dispute is over an obligation the expired contract arguably created." (Mot. 8:22-28 n.2 (citations omitted).)
Cesca counters, inter alia, that "the intention of the parties is clear from the plain language of the Mutual Termination Agreement—to replace the parties' obligations under [the Executive Employment Agreement, the Employee Severance Agreement, and the Consulting Agreement] with the obligations set forth in the Mutual Termination Agreement. In particular, the parties . . . indicated a desire to forego arbitration by expressly requiring all disputes under the Mutual Termination Agreement to be resolved in state or federal court." (Opp'n 9:11-16.)
Defendants Coelho and PHC Medical reply, inter alia, that Cesca has sued them "over obligations and rights created by the [Executive Employment Agreement, the Employee Severance Agreement, and the Consulting Agreement]." (Reply in Supp. of Defs.' Mot. ("Reply") 4:17-18, ECF No. 44.) They further respond: "If [Cesca] wants to enforce the [Executive Employment Agreement, the Employee Severance Agreement, and the Consulting Agreement], based on acts or omissions that occurred or rights that accrued while these three contracts were in effect, then it must abide by the arbitration clauses in these agreements." (Reply 5:26, 6:1-3.)
A district "court's role under the [Federal Arbitration] Act is . . . limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue."
"In deciding these questions, federal courts must `place arbitration agreement on equal footing with other contracts.'"
Further, "[a]rbitration provisions can survive expiration of an agreement where (1) `the dispute is over a provision of the [prior] agreement' and (2) the parties have not indicated a desire to forego arbitration either `expressly or by clear implication.'"
The Mutual Termination Agreement controls here. Coelho, PHC Medical, and ThermoGenesis (Cesca's predecessor) terminated the Executive Employment Agreement, the Employee Severance Agreement, and the Consulting Agreement by subsequently entering into the Mutual Termination Agreement. (Ex. 4 § 1.)
Further, the Mutual Termination Agreement supersedes the prior agreements' arbitration provisions, and therefore, those arbitration provisions no longer control the proper forum for this litigation. Specifically, the Mutual Termination Agreement's "Termination of Prior Agreements and Obligations" section provides in pertinent part: "Neither Coelho nor [PHC Medical] shall have any further or ongoing obligations to [ThermoGenesis] under the Prior Agreements or any other agreement, whether written or oral, between [ThermoGenesis] and Coelho, or between [ThermoGenesis] and [PHC Medical],
Moreover, even if the court assumes that this dispute is over provisions of the prior agreements, as Defendants contend, the parties here have expressly indicated a desire to forego arbitration. The Executive Employment Agreement, the Employee Severance Agreement, and the Consulting Agreement contain arbitration provisions, but the Mutual Termination Agreement contains its own "Governing Law and Venue" section. As stated above, this section does not require arbitration and instead provides that "[a]ny legal action or proceeding relating to this Agreement shall be instituted in a state or federal court in Sacramento County, California." (Ex. 4 § 9.) Thus, the Mutual Termination Agreement "indicate[s] a desire to forego arbitration either expressly or by clear implication."
Thus, Defendants Coelho and PHC Medical cannot compel arbitration under the Executive Employment Agreement, the Employee Severance Agreement, or the Consulting Agreement, since the Mutual Termination Agreement supersedes those prior agreements, and it does not contain an arbitration provision. Therefore, their motion is denied.
Both parties agree that "SynGen is not a signatory to the arbitration agreements at issue." (Mot. 9:11-12; Opp'n 9:20-21 ("[T]here is no agreement to arbitrate between Cesca and SynGen.").) Defendant SynGen argues that even though it is not a signatory to the Executive Employment Agreement, the Employee Severance Agreement, the Consulting Agreement, or any other arbitration agreement with Cesca, Cesca must submit its claims against SynGen to arbitration under an equitable estoppel or agency theory. (Opp'n 9:13-21, 10:26-28, 11:19-23.)
"[A]rbitration 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."
Here, Cesca and SynGen have not agreed to arbitrate. Further, SynGen's arguments, based on an equitable estoppel or agency theory, rely on the existence of an underlying arbitration agreement, which the court has held does not exist.
Therefore, SynGen's motion is denied.
For the stated reasons, Defendants' motion to compel arbitration is DENIED.