Sacramento Gun Club, LLC v. Anatolian Arms LLC

— 1 — — 2 — — 3 — — 4 — — 5 — — 6 — — 7 — 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA — 10 — 11 | Sacramento Gun Club, LLC, No. 2:20-cv-02447-KJM-DB 12 Plaintiff, ORDER 13 v. 14 Anatolian Arms, LLC; William Michael 15 | Johnson, and DOES 1-25, 16 Defendants. 17 A federally licensed gun retailer, Sacramento Gun Club (SGC) alleges breach of contract 18 | against federally licensed gun manufacturer Anatolian Arms (Anatolian) and its owner William 19 | Michael Johnson. In this order, the court resolves two matters: (1) SGC’s application for a night 20 | to attach order and writ of attachment,’ Appl. Right to Attach. (Appl.), ECF No. 7, and (2) 21 | defendants’ motion to compel arbitration and dismiss the complaint, Mot. to Dismiss (MTD), 22 | ECF No. 12. For the following reasons, SGC’s application for a right of attachment is denied 23 | and defendants’ motion to compel arbitration is granted. Defendant’s motion to dismiss the 24 | complaint is denied and the case is stayed pending arbitration. ' A plaintiff may seek both a right to attach order and a writ of attachment in a single application. Cal. Code Civ. Proc. § 484.010. “[T]he right to attach order may issue if the claim is one that can support issuance of a writ of attachment,” as discussed further below. GE Capital Corp. v. Rhino Bus. Sys., No. 2:16-00029, 2016 U.S. Dist. LEXIS 62589 , at *9 (E.D. Cal. May 10, 2016). 1 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 2 Plaintiff SGC is a firearm and ammunition retailer that operates a public shooting range. 3 Compl. ¶ 8, ECF No. 1. Defendant Anatolian manufacturers guns and ammunition, which it sells 4 online. Id. ¶ 9. SGC’s principal place of business is in Sacramento, California and Anatolian’s 5 principle place of business is in Mexico, Missouri. Id. ¶¶ 1–2. 6 In July 2020, a volatile ammunition market led to ammunition shortages and spikes in 7 pricing. Id. ¶ 10. Anatolian offered an attractive proposal to SGC: if SGC paid for large amounts 8 of ammunition in advance, Anatolian would provide a steady supply of ammunition with a stable 9 price point. Id. ¶¶ 12–14. SGC made two purchases from Anatolian. Both purchase orders 10 contained an invoice on the first page detailing the ammunition type, quantity, unit price and total 11 dollar amount. See July 10, 2020 & September 15, 2020 Invoices, Appl. Ex. B & Ex. C, ECF No. 12 7-4 (Invoices). The first invoice dated July 10, 2020 showed a purchase of 165,000 rounds of 13 different types of ammunition for $57,035. Compl. ¶ 14; see also July 10, 2020 Invoice. 14 Delivery of the first shipment was due by August 31, 2020. Compl. ¶ 14. The second invoice 15 reflected a $265,027 purchase of 575,000 rounds of three different types of ammunition due for 16 delivery by November 1, 2020. Id.; see also September 15, 2020 Invoice. Following the invoice, 17 each purchase order included a three page “purchase agreement” delineating the “terms and 18 conditions” of the agreement, which provided “[a]ny controversies or disputes arising out of or 19 relating to this Contract shall be resolved by binding arbitration in accordance with the then 20 current Commercial Arbitration Rules of the American Arbitration Association.” See Invoices; 21 see also MTD Ex. 1 & Ex. 3, ECF No. 12-2 (attaching same invoices as plaintiff). 22 In exchange for the promise of a stable supply of ammunition at a reduced cost, SGC also 23 entered into an exclusivity agreement with Anatolian. See Exclusivity Agreement, MTD Ex. 2, 24 ECF No. 12-2. The exclusivity agreement contained its own arbitration provision, differing 25 slightly from the arbitration agreement included in the purchase agreements. See Exclusivity 26 Agreement at 3. As explained further below, the parties agree this action should be ordered to 27 arbitration. Opp’n MTD at 2, 5, ECF No. 13; Def. MTD Reply at 4, ECF No. 15. Therefore, the 28 court does not address the scope of the arbitration agreement in this order. 1 On October 1, 2020 and October 16, 2020, SGC received two shipments, which taken 2 together represented less than two-thirds of the amount of ammunition covered by the first 3 purchase order; both shipments arrived more than a month past the due date. See Compl. ¶ 15. 4 On October 29, 2020, SGC asked when the outstanding portion of the first purchase order would 5 arrive, and sought assurances regarding the shipment covered by the second purchase order. Id. 6 ¶ 16. SGC’s request for assurances kindled a conflict between the two companies, which then 7 erupted over email. Id. ¶¶ 16–19. On November 6, 2020, Jackie Long, SGC Director of 8 Operations, flew to Anatolian’s headquarters in Missouri to discuss the kerfuffle in person. Id. 9 ¶ 19. Ultimately the parties did not meet, no agreement was reached, Anatolian dropped SGC as 10 a customer, and SGC demanded an immediate refund on November 12, 2020. Id. ¶¶ 18–20. On 11 November 12, 2020, Johnson replied to Long’s demand and said he had 30 days to process the 12 refund. See id. ¶ 21. Anatolian has yet to refund SGC. See id. ¶ 22. 13 In December 2020, SGC filed the complaint in this case alleging fraud, conversion, unfair 14 competition and unfair business practices, money had and received, and breach of contract. 15 Compl. ¶¶ 27–52. SGC also separately applied for a right to attach order and writ of attachment 16 based on its contractual claims. Appl.; see also Pl. Right to Attach. Order and Writ of Attach., 17 ECF No. 7-1; Mem. Supp. Right to Attach. at 1, ECF No. 7-3. Defendants oppose on the grounds 18 that Anatolian owns no property within the state of California and its property is therefore exempt 19 from attachment. Opp’n Right to Attach. at 2–4 (Opp’n Right to Attach.), ECF No. 9. In the 20 briefing on the motion to attach, neither party mentioned an arbitration agreement. The court 21 submitted the motion without oral argument as provided by Local Rule 230(g), Jan. Min. Order, 22 ECF No. 10, and SGC later filed its reply, ECF No. 11. 23 Defendants then filed the pending motion to compel arbitration and dismiss the complaint. 24 See generally MTD. The matter is fully briefed and the court has submitted it on the papers. 25 March Minute Order, ECF No. 14. The parties agree an arbitration clause governs their dispute. 26 See Opp’n MTD at 5 (“Plaintiff does not challenge the validity of the arbitration clauses in the 27 Contracts, and freely consents to arbitration.”). Plaintiff opposes dismissal, however, and argues 28 the case should instead be stayed. Id. at 2. 1 The court addresses the issues as narrowed by the parties: (1) whether a writ of 2 attachment should be granted and (2) whether the case should be dismissed or stayed pending 3 arbitration. The court addresses the motion for a writ of attachment first because it is not mooted 4 even if the court compels arbitration. 5 II. PLAINTIFF’S MOTION FOR A WRIT OF ATTACHMENT 6 A federal court applies the law of the state in which it sits when reviewing an application 7 for a prejudgment writ of attachment. See Fed. R. Civ. P. 64; Granny Goose Foods Inc. v. 8 Brotherhood of Teamsters & Auto Truck Drivers, Local No. 70 of Alameda Co., 415 U.S. 423 , 9 436 n.10 (1974) (“state law is incorporated to determine the availability of prejudgment remedies 10 for the seizure of person or property to secure satisfaction of the judgment ultimately entered.”) 11 The party applying for a writ of attachment bears the burden to establish grounds for an order of 12 attachment. Loeb and Loeb v. Beverly Glen Music, Inc., 166 Cal. App. 3d 1110, 1116 (1985). 13 “The statutory requirements for writs of attachment ‘must be strictly followed or no rights will be 14 acquired[.]’” TVBI Co. v. Hong Thoa Thi Pham, No. 17-5858, 2018 U.S. Dist. LEXIS 165609 , at 15 *5 (N.D. Cal. Sep. 26, 2018) (citing to Anaheim Nat’l Bank v. Kraemer, 120 Cal. App. 63 , 65–67 16 (1932)). 17 Under California law, a court may issue a writ of attachment only in an action involving 18 claims for money, based on an express or implied contract, where the “fixed or readily 19 ascertainable amount” of damages is no less than $500. Cal. Code Civ. Proc. § 483.010(a). The 20 law also requires the following: 21 (1) The claim upon which the attachment is based is one upon 22 which an attachment may be issued. (2) The plaintiff has 23 established the probable validity of the claim upon which the 24 attachment is based. (3) The attachment is not sought for a purpose 25 other than the recovery on the claim upon which the attachment is 26 based. (4) The amount to be secured by the attachment is greater 27 than zero. 28 Id. § 484.090(a). Additionally, the plaintiff must provide a description of the property, with 29 different details required depending on whether the defendant is a natural person or a corporation. 30 Id. § 484.020(e). 1 District courts may review writs of attachment even if an arbitration agreement is at play 2 but the moving party must meet additional requirements. See id § 1281.8(b); Cal. Retail Portfolio 3 Fund GMBH & Co. KG v. Hopkins Real Est. Grp. (Cal. Retail), 193 Cal. App. 4th 849 , 856–57 4 (2011). Specifically, when an arbitration agreement governs the parties’ dispute, the party seeking 5 the writ must demonstrate any arbitration award ultimately would be “ineffectual without 6 provisional relief.” Cal. Code Civ. Proc. § 1281.8(b). The ineffectual-relief requirement is 7 “similar to irreparable harm” as defined in the injunction context. Cal. Retail, 193 Cal. App. 4th 8 at 857. A party seeking a writ demonstrates “ineffectual relief” by showing a danger the 9 respondent is insolvent by a preponderance of the evidence. Id. at 858. This additional 10 requirement is necessary to ensure “the court does not invade the province of the arbitrator—i.e., 11 the court should be empowered to grant provisional relief in an arbitrable controversy only where 12 the arbitrator’s award may not be adequate to make the aggrieved party whole.” Id. at 856. 13 As noted both parties agree an arbitration provision governs their dispute, but plaintiff has 14 provided no evidence that absent an attachment, any arbitration award in its favor would be 15 ineffectual. See generally Mem. Supp. Right to Attach. Plaintiff’s application does not even 16 mention the arbitration agreement. The only evidence provided in support of the application for a 17 writ of attachment is two lines in the declaration of Mr. Long noting that Anatolian has yet to 18 offer any refund to SGC. Long Decl. ¶¶ 15–16, ECF No. 7-4. This is a far cry from the evidence 19 provided in California Retail, where the party seeking attachment provided an email from the 20 defendant’s Chief Financial Officer admitting the company was running out of money. 21 California Retail, 193 Cal. App. 4th at 854 , 860–861. 22 In sum, SGC provides neither argument nor “compelling evidence” that Anatolian will 23 “soon be unable to pay its debts.” Id. at 860 . As “the prerequisites for issuance of a writ of 24 attachment are strictly construed” against the moving party, Albergo v. Immunosyn Corp., No. 25 09-2653 DMS, 2010 WL 5174524 , at *2 (S.D. Cal. Dec. 15, 2010), and demonstrating irreparable 26 injury “is an essential element under California law to issue a writ of attachment in the arbitration 27 context,” the writ of attachment must be denied, see Subsea Robotics, LP v. Schilling Robotics, 28 LLC, No. 13-1833, 2013 WL 6503344 , at *2–3 (E.D. Cal. Dec. 11, 2013) (denying cross motions 1 for prejudgment writs of attachment on same grounds without reaching other merits of 2 application). The denial is without prejudice to SGC’s filing a renewed application if SGC is able 3 to demonstrate Anatolian is likely unable to pay an adverse judgment. See Interpro Mfg. v. Pac. 4 Shore Holdings, Inc., No. 13-7540, 2014 U.S. Dist. LEXIS 199852 , at *24–25 (C.D. Cal. May 23, 5 2014). 6 III. DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND 7 DISMISS COMPLAINT 8 As noted, both parties agree an arbitration agreement governs their dispute, Opp’n MTD 9 at 2; Def. MTD Reply at 1, but disagree about whether the complaint should be dismissed or 10 stayed pending arbitration. Defendants argue that since both parties agree “all the claims at issue 11 in this case are arbitrable,” the court should dismiss the complaint. Def. MTD Reply at 1. 12 Plaintiff argues instead that a stay of the proceedings is the appropriate course of action. See 13 generally Opp’n MTD. 14 Under the Federal Arbitration Act (FAA), written agreements to arbitrate are “valid, 15 irrevocable, and enforceable[.]” 9 U.S.C. § 2 . Under 9 U.S.C. § 3 , the court must stay the action 16 on application of a party “upon being satisfied that the issue involved in such suit or proceeding is 17 referable to arbitration under” a written agreement to arbitrate between the parties. Id. § 3; see 18 also Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 215 (1985) (holding “shall” in statute 19 makes stay mandatory on satisfaction of court). Notwithstanding the mandatory language of the 20 statute, a court may dismiss a case upon referring it to arbitration if the court determines all the 21 alleged claims are subject to arbitration. Gadomski v. Wells Fargo Bank N.A., 281 F. Supp. 3d 22 1015, 1019, 1021 (E.D. Cal. 2018). 23 Here, the court exercises its discretion to stay the case. See Mediterranean Enters., Inc. v. 24 Ssangyong Corp., 708 F.2d 1458 , 1465 (9th Cir. 1983). Among other things, doing so will 25 preserve judicial resources if, among other reasons, SGC is able to reapply for a right to attach 26 order in good faith. 27 ///// 1] IV. CONCLUSION 2 SGC’s application for a right to attach order and writ of attachment, ECF No. 7, is denied 3 | without prejudice. 4 Defendants’ motion to compel arbitration, ECF No. 12, is granted, but the motion to 5 | dismiss is denied. 6 SGC and Anatolian are directed to file a joint status report every 120 days addressing 7 | the status of the arbitration. SGC and Anatolian are also directed to file a joint notice within 8 | seven days of the date arbitration is completed, reporting the outcome to this court and providing 9 | their positions on whether the stay should be lifted. 10 This case is stayed pending completion of arbitration, provided however that the stay does 11 | not preclude SGC’s limited ability to renew its application to attach. 12 This order resolves ECF Nos. 7, 12. 13 IT IS SO ORDERED. 14 | DATED: June 25, 2021. CHIEF ED STATES DISTRICT JUDGE