533 F.Supp.3d 122
S.D.N.Y.2021Background
- Signac LLC was a 50-50 joint venture between Credit Suisse First Boston Next Fund (CSFB) and Palantir to develop ETOS; Graham was a Signac manager and CS was Signac’s only client.
- CS (parent of CSFB) terminated the Master Services Agreement (MSA); Signac’s board (minus Graham) approved dissolution; Graham filed an arbitration (JAMS I) against CSFB and Palantir alleging wrongful dissolution and misuse of Signac technology.
- Arbitrator Young in JAMS I denied Graham’s claims and noted he lacked authority to adjudicate claims directly against CS; Graham’s subsequent state-court petition to vacate the JAMS I award was denied and her appeal lapsed.
- Graham later filed a second arbitration (JAMS II) against CS and Warner under the MSA, alleging CS continued use/misappropriation of Signac’s surveillance tool (THS/BRM) and that Warner aided/abetted breaches; she relies on post-JAMS I SOX documents.
- CS and Warner petitioned to enjoin JAMS II as an impermissible collateral attack on JAMS I; Graham removed the state-court petition to federal court and moved to compel arbitration. The district court (Liman, J.) denied the stay and granted the motion to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Whether the JAMS II dispute falls within an enforceable arbitration agreement | JAMS II alleges MSA claims expressly covered by MSA’s arbitration clause | Petitioners conceded the arbitration clause is valid but sought to bar JAMS II as collaterally attacking JAMS I | Held: JAMS II falls within the MSA arbitration clause; motion to compel granted |
| 2. Whether the court should enjoin JAMS II as an impermissible collateral attack on JAMS I | JAMS II rehashes same facts/claims and thus impermissibly circumvents FAA review of JAMS I | JAMS II involves different defendants, different contract (MSA vs LLC Agreement), and claims unresolved as to CS/Warner | Held: Court will not enjoin; whether JAMS II impermissibly relitigates JAMS I is for the arbitrator to decide |
| 3. Who decides preclusion/collateral-attack issues (court or arbitrator) | Petitioners: collateral-attack is a legal question for the court to resolve before compelling arbitration | Respondent: arbitrability and preclusion issues fall within the parties’ arbitration agreement and JAMS rules delegating such questions to arbitrators | Held: Issue of claim-preclusive effect or collateral attack should ordinarily be decided by arbitrator under FAA and parties’ agreement (court limited to gateway questions) |
| 4. Whether allowing JAMS II undermines FAA finality and FAA §10 remedies (timeliness of vacatur) | Permitting JAMS II circumvents FAA’s exclusive judicial review and §10/§12 time limits | Allowing arbitration respects parties’ contract and FAA policy favoring arbitration; courts can vacate awards under §10 if arbitrators manifestly disregard law | Held: Allowing arbitration does not violate FAA; potential FAA remedies remain if arbitrator disregards law |
Key Cases Cited
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (FAA compels enforcement of written arbitration agreements)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (strong federal policy favoring arbitration)
- Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985) (courts must direct parties to arbitration where agreement exists)
- First Options of Chicago Inc. v. Kaplan, 514 U.S. 938 (1995) (use ordinary state-law contract principles to decide existence of arbitration agreement)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (arbitrator determines gateway arbitrability when parties clearly and unmistakably delegate that question)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (procedural questions of arbitration are presumptively for arbitrators)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (doubts about scope of arbitrable issues resolved in favor of arbitration)
- Decker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 205 F.3d 906 (6th Cir. 2000) (court enjoined second arbitration as an impermissible collateral attack)
- Citigroup, Inc. v. Abu Dhabi Investment Authority, 776 F.3d 126 (2d Cir. 2015) (claim-preclusive effect of a judgment confirming an arbitration award is ordinarily for arbitrators to decide)
- John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132 (3d Cir. 1998) (finality clauses in arbitration agreements are contractual and may be for arbitrators to enforce)