(PS) Malik v. Nationwide Mutual Ins. Co.

[7] 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA [10] 11 MUHAMMAD YOUNAS MALIK, et al., Case No. 2:24-cv-1093-JAM-JDP (PS) 12 Plaintiffs, 13 v. FINDINGS AND RECOMMENDATIONS 14 NATIONWIDE MUTUAL INSURANCE COMPANY, et al., [15] Defendants. [17] 18 Plaintiffs filed this case in the Sacramento County Superior Court and defendant removed 19 it. ECF No. 1. Plaintiffs, husband and wife, allege that they worked as insurance agents under a 20 contract with defendants. Id. at 12. Defendants terminated the contract, allegedly costing 21 plaintiffs their personal and professional reputations and the loss of their insurance business. Id. 22 at 12-13. They allege that, in terminating the contract, defendants are liable to them for 23 (1) defamation, (2) false light tort, (3) fraud, (4) intentional interference with prospective business 24 relations, and (5) violations of California’s Business and Professions Code. ECF No. 1 at 13. 25 Defendants have now filed a motion to compel arbitration, ECF No. 11, arguing that plaintiff 26 Malik’s claims are governed by an arbitration agreement. Plaintiffs have opposed the motion, 27 ECF No. 30, and defendants have filed a reply, ECF No. 34. For the reasons stated hereafter, the 28 motion to compel arbitration should be granted and plaintiff Malik compelled to arbitrate his 1 claims. This case, including plaintiff Iqbal’s claims, should be stayed pending that arbitration. 2 As such, if these recommendations are adopted, defendants’ motion to stay, ECF No. 14, should 3 also be granted. Defendants’ motion for an order to show cause, ECF No. 13, should be denied 4 without prejudice. 5 The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 , et seq., states that written arbitration 6 provisions are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in 7 equity for the revocation of any contract.” 9 U.S.C. § 2 . In weighing whether to enforce 8 arbitration agreement should be enforced, a federal court’s role “under the FAA is to determine 9 (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement 10 encompasses the dispute at issue.” Kilgore v. KeyBank, Nat’l Ass’n, 718 F.3d 1052, 1058 (9th 11 Cir. 2013) (en banc) (internal quotation marks omitted). Federal law has a presumption in favor 12 of arbitration. See Comedy Club, Inc. v. Improv West Assocs., 553 F.3d 1277, 1286 (9th Cir. 13 2009) (“Under the federal presumption in favor of arbitration, because the arbitration agreement 14 is ambiguous, it should be interpreted as granting arbitration coverage over ‘all disputes’ arising 15 from the Trademark Agreement.”). 16 Here, an arbitration agreement exists between defendants and Averwood Insurance 17 Agency, a business entity that plaintiff Malik owned and of which he acted as principal agent. 18 ECF No. 11-1 at 5. In a separate case, the district judge already found that arbitration agreement 19 enforceable.1 See Indus Insurance Agency, Inc. et al. v. Nationwide Mutual Ins. Co., et al., 2:2220 cv-2022-JAM-JDP at ECF No. 39. That case, like this one, arose out of defendants’ cancellation 21 of the pertinent contract. Id. at 2-3. Rather than engaging in arbitration, however, plaintiffs filed 22 this suit in their individual capacities, arguing that they did not individually sign the arbitration 23 agreement and, therefore, are not subject to it. ECF No. 30 at 2. Plaintiff Malik should be [24] 1 A copy of that agreement is contained in defendants’ request for judicial notice, ECF No. [25] 12-1 at 34-35. Plaintiff Malik signed the agreement on behalf of Averwood Insurance Services, Inc. Id. at 36. I take judicial notice of the agreement because it “can be accurately and readily [26] determined” from a source “whose accuracy cannot reasonably be questioned.” Federal Rule of 27 Evidence 201(b). Indeed, there appears to be no dispute as to the agreement’s existence or validity. Instead, plaintiffs assert that it does not apply to them in their individual capacity. ECF 28 No. 30 at 3-4. 1 compelled to arbitrate his claims because this argument is meritless. “[N]onsignatories of 2 arbitration agreements may be bound by the agreement under ordinary contract and agency 3 principles.” Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185 , 1187-88 (9th Cir. 1986). 4 Under Ohio law, which plaintiffs assert governs the arbitration agreement, ECF No. 30 at 5, non5 signatories may be bound “under an estoppel theory when the nonsignatory seeks a direct benefit 6 from the contract while disavowing the arbitration provision.” Javitch v. First Union Sec., Inc., [7] 315 F.3d 619, 629 (6th Cir. 2003). Here, plaintiffs plainly argue that the contract was to benefit 8 them; their argument hinges on defendants’ denial of that benefit by way of the termination. 9 Other courts in this circuit have rejected similar arguments. See Brilliant Info Corp. v. Moso 10 Power Tech Int’l Ltd., No. CV 15-3090 FMO (PLAx), 2015 U.S. Dist. LEXIS 182946 , *13 (C.D. 11 Cal. Oct. 29, 2015) (“Su is BIC’s sole shareholder . . . . Any money flowing to BIC, the signatory 12 to the Distribution Agreement, from the sale of defendants’ LED products necessarily flows to 13 Su. Accordingly, Su is the third-party beneficiary to the Distribution Agreement.”) (internal 14 citations omitted). Neither does it matter that plaintiffs have recast those claims as violations of 15 their individual rights. The claims all stem from the same contract termination that undergirded 16 the other suit, and “if there is doubt about that matter—about the scope of arbitrable issues—we 17 should resolve that doubt in favor of arbitration.” Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 , 18 452 (2003); see also Gestetner Holdings, PLC v. Nashua Corp., 784 F.Supp. 78, 82 (S.D.N.Y. 19 1992) (“[W]here claims may be understood to raise an arbitrable issue, arbitration must be 20 compelled, even if the claims can also be characterized another way.”). 21 I will recommend that this case, including plaintiff Iqbal’s claims, be stayed pending that 22 arbitration. See Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458 , 1465 (9th Cir. 23 1983) (“[A] trial court may, with propriety, find it is efficient for its own docket and the fairest 24 course for the parties to enter a stay of an action before it, pending resolution of independent 25 proceedings which bear upon the case. This rule applies whether the separate proceedings are 26 judicial, administrative, or arbitral in character, and does not require that the issues in such 27 proceedings are necessarily controlling of the action before the court.”). [28] 1 Accordingly, it is RECOMMENDED that: 2 1. Defendants’ motion to compel arbitration, ECF No. 11, be GRANTED, and plaintiff 3 | Malik be compelled to arbitrate his claims. 4 2. Defendants’ motion to stay, ECF No. 14, be GRANTED, and this case be STAYED 5 | pending arbitration of Malik’s claims. 6 3. Defendants’ motion for a show cause order, ECF No. 13, be DENIED without 7 | prejudice. 8 These findings and recommendations are submitted to the United States District Judge 9 | assigned to the case, pursuant to the provisions of 28 U.S.C. § 636 (b)(1). Within fourteen days 10 | after being served with these findings and recommendations, any party may file written 11 | objections with the court and serve a copy on all parties. Such a document should be captioned 12 || “Objections to Magistrate Judge’s Findings and Recommendations.” Any response to the 13 | objections shall be served and filed within fourteen days after service of the objections. The 14 | parties are advised that failure to file objections within the specified time may waive the right to 15 || appeal the District Court’s order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez 16 | v. Yist, 951 F.2d 1153 (9th Cir. 1991). [17] 18 IT IS SO ORDERED. 19 ( q Sty — Dated: _ February 4, 2025 q——— 20 JEREMY D. PETERSON UNITED STATES MAGISTRATE JUDGE