Amit P. Mehta, United States District Judge.
This Memorandum Opinion and Order sets forth the reasons for the court's oral ruling, entered at the hearing held on September 15, 2017, denying Defendants Cesar de Armas and Heidi Schultz's ("Individual Defendants") Application for Stay Pending Arbitration ("Motion"). See Ind. Defs.' Appl. for Stay, ECF No. 41 [hereinafter Appl. for Stay]; Hr'g Tr. (draft), Sept. 15, 2017. When denying that Motion, the court also deemed Individual Defendants' Application for Stay and any subsequent appeal to be "frivolous" and, thus, retained jurisdiction over the case.
Individual Defendants' Motion, filed more than ten months after this action began, seeks to invoke an arbitration clause in the contract underlying this litigation (the "Contract") and stay further proceedings in this court pending the results of arbitration. Appl. for Stay at 3-6; see also 9 U.S.C. § 3. The court previously denied a similar motion filed by the organizational Defendant, Dream Catcher LLC, on the ground that Dream Catcher had forfeited its right to arbitrate by failing to invoke the right at the "earliest available opportunity," as required under Zuckerman Spaeder, LLP v. Auffenberg, 646 F.3d 919, 923-24 (D.C. Cir. 2011). Individual Defendants, taking a different tack than
The court concludes Individual Defendants misunderstand when the "earliest available opportunity" to invoke the Contract's arbitration clause arose in this matter. Like Defendant Dream Catcher, Individual Defendants were fully able to invoke their right to arbitration upon filing of Plaintiff's Complaint and failed to do so. Accordingly, Individual Defendants clearly forfeited their right to arbitrate the claims against them. Moreover, the court finds that any appeal of such a straightforward application of Zuckerman would be frivolous. Thus, Individual Defendants' Motion is denied, and the court will retain jurisdiction over this matter.
The underlying premise of Individual Defendants' position — that their ability to invoke the Contract's arbitration clause hinged on Plaintiff first pleading a plausible alter-ego liability claim against them — is simply wrong. "[A] litigant who [is] not a party to the relevant arbitration agreement may invoke § 3 [of the Federal Arbitration Act] if the relevant state contract law allows him to enforce the agreement." Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009). The Contract is governed by the law of the District of Columbia. See Def. Dream Catcher's Mot. to Stay, ECF No. 21 [hereinafter Dream Catcher Mot.], Ex. 1, ECF No. 21-1 [hereinafter Contract]. Applying District of Columbia law here, it is plain that Individual Defendants could have invoked the Contract's arbitration clause at the time they were named in the Complaint (1) under the theory that they are third-party beneficiaries to the Contract, or (2) under equitable principles of estoppel.
First, Individual Defendants could have invoked the Contract's arbitration clause at the time Plaintiff filed his Complaint because they are third-party beneficiaries of the Contract. Although the D.C. Court of Appeals has not squarely addressed whether arbitration agreements can be enforced by non-signatories, it is clear under District of Columbia law that a third party may sue to enforce contract provisions if the contracting parties intended for the third party to benefit directly from the contract. See Hossain v. JMU Props., LLC, 147 A.3d 816, 820 (D.C. 2016). A third party need not be named in the contract itself to qualify as an intended beneficiary, but his or her identity must be ascertainable from either the terms of the contract or the circumstances surrounding its creation. See id. In circumstances similar to those present here, the D.C. Court of Appeals held, in Hossain v. JMU Properties, that the sole owner of a closely-held business was a third-party beneficiary of an agreement and could sue to enforce its terms. See id. In Hossain, the defendant was the sole owner of a tax preparation franchise, JMU Tax, who had negotiated and signed a franchise agreement with the plaintiff on behalf of JMU Tax. The defendant also was the sole owner of a real estate company, JMU Properties, and, in a
Based on the allegations in the Amended Complaint, which the court must accept as true at this stage in the litigation, Individual Defendants are third-party beneficiaries of the Contract. First, Individual Defendants' "involvement was plainly ascertainable" from the "four corners" of the Contract; after all, Defendant De Armas signed the Contract on behalf of Dream Catcher and was listed as its "authorized representative." See Contract at 1, 9. Second, Plaintiff was clearly aware that Individual Defendants "stood to benefit" from the Contract's creation. According to Plaintiff's own Amended Complaint, Individual Defendants are the sole owners of Dream Catcher, "controlled Dream Catcher, made all material decisions affecting Dream Catcher, and dominated the conduct of Dream Catcher." Am. Compl., ECF No. 13 [hereinafter Am. Compl.], ¶ 73. Moreover, Defendant Schultz obtained a home improvements salesperson's license on behalf of Dream Catcher, see id. ¶ 30. Thus, much like the defendant in Hossain, Individual Defendants "clearly stood to benefit" from the Contract. Hossain, 147 A.3d at 820. Accordingly, as third-party beneficiaries to the contract between Dream Catcher and Plaintiff, Individual Defendants were entitled to enforce the arbitration clause contained therein at the time they were named in the Complaint.
Second, and in addition to their status as third-party beneficiaries of the Contract, Individual Defendants also could have compelled Plaintiff to arbitrate his claims under the doctrine of estoppel. Courts in this jurisdiction have recognized that the doctrine of estoppel permits "a non-signatory ... [to] compel arbitration with a signatory when the non-signatory is seeking to resolve issues that are intertwined with an agreement that the signatory has signed." Riley v. BMO Harris Bank, N.A., 61 F.Supp.3d 92, 99 (D.D.C. 2014). For example, where there would be no claim against the non-signatory defendant but for the contract, applying the doctrine of estoppel is appropriate. See id. (collecting cases). That is precisely the situation here. Plaintiff's claims against Individual Defendants exist only because of the Contract. Indeed, Plaintiff asserts the exact same claims, based on the same operative
In sum, the court finds that Individual Defendants could have compelled Plaintiff to arbitrate his claims upon filing of the Complaint on two separate grounds. First, as third-party beneficiaries of the Contract, District of Columbia law permitted Individual Defendants to invoke the Contract's arbitration clause. See Hossain, 147 A.3d at 820. Second, Individual Defendants could have relied on the doctrine of estoppel to compel arbitration. See Riley, 61 F.Supp.3d at 99. Instead of promptly moving to compel Plaintiff to arbitrate his claims against them upon filing of the Complaint, though, Individual Defendants waited over ten months to do so. Even more inexplicably, Individual Defendants allowed five months to pass after Defendant Dream Catcher invoked the Contract's arbitration clause before filing the present Motion. Compare Dream Catcher Mot. (filed April 10, 2017), with Appl. for Stay (filed August 29, 2017). Accordingly, like Defendant Dream Catcher, Individual Defendants failed to invoke their right to arbitrate at the "earliest available opportunity" and, thus, forfeited that right. See Zuckerman, 646 F.3d at 923-24.
The court also finds that Individual Defendants' Motion to Stay is "frivolous." In the D.C. Circuit, "a non-frivolous appeal from the district court's order [denying a motion to compel arbitration] divests the district court of jurisdiction over those aspects of the case on appeal." Bombardier Corp. v. Nat'l R.R. Passenger Corp., No. 02-7125, 2002 WL 31818924, at *1 (D.C. Cir. Dec. 12, 2002). A motion is "frivolous" when its disposition is obvious and the legal arguments are wholly without merit. See Reliance Ins. Co. v. Sweeney Corp., 792 F.2d 1137, 1138 (D.C. Cir. 1986) (quoting Gattuso v. Pecorella, 733 F.2d 709, 710 (9th Cir. 1984)). Individual Defendants' argument for their belated filing is not only predicated on a flawed legal theory derived from plainly inapposite case law, see supra n.2, but their Motion wholly ignored controlling Supreme Court precedent and pertinent cases from the D.C.
For the foregoing reasons, the Individual Defendants' Application for Stay Pending Arbitration is denied.