Diwan v. Emp Global, LLC, 841 F. Supp. 2d 246

Background

Diwan served as Managing Director of EMPG’s Second Asian Fund and then CEO of EMPG’s First Asian Fund; he resigned in 2007 and later became CEO of EMP Bahrain’s Asset Management Division.
In 2010, Diwan received carry in EMP VI, LLC and signed a Grant Letter admitting him as a member and binding him to the LLC Agreement, which requires arbitration for disputes under UNCITRAL rules.
The LLC Agreement mandates arbitration for disputes among Members, the Manager, or the Company, with proceedings to be conducted in New York under UNCITRAL rules and Delaware law governing substantive issues.
In 2010 EMPG terminated Diwan for cause; he later filed a DC Superior Court complaint alleging wrongful termination and LLC Agreement breach; defendants removed to this court and moved to dismiss or compel arbitration.
ICC arbitrators were appointed in November 2011 to arbitrate the dispute; Diwan sought a preliminary injunction to stay arbitration, which this court denied.
The court held that Diwan failed to show irreparable harm or likelihood of success on the merits, thus denying the preliminary injunction and the motion to stay arbitration.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Diwan shows irreparable harm justifying an injunction	Diwan argues irreparable injury from starting arbitration and potential $74,000 deposit	Arbitration deposit is recoverable and harm is not irreparable	No irreparable harm shown
Whether Diwan is likely to succeed on the merits regarding arbitrability	Arbitrability should be decided by court due to unconscionability and misrepresentation claims	Arbitration clause and UNCITRAL Article 23 reserve arbitrability to arbitrators	Arbitrability to be determined by arbitrators; Diwan unlikely to succeed on merits that arbitration should be avoided
Whether the arbitration agreement governs the dispute and whether scope is covered	LLC Agreement should not bind due to unconscionability and scope issues	Diwan was admitted as a member bound by the LLC Agreement; disputes must be arbitrated	Arbitration clause covers the dispute; doubts resolved in favor of arbitration
Whether the balance of equities and public interest support a stay	Delays and public policy reasons favor judicial relief	Maintain arbitration to enforce certainty of international contracts; harms of delay not compelling	Balance and public interest do not favor injunction

Key Cases Cited

Mazurek v. Armstrong, 519 U.S. 968 (U.S. 1997) (irreparable harm central to injunctions; four-factor test applied)
Cobell v. Norton, 391 F.3d 251 (D.C. Cir. 2004) (four-factor test for preliminary injunction; balancing scale)
In re: Navy Chaplaincy, 516 F. Supp. 2d 119 (D.D.C. 2007) (sliding-scale approach to injunction factors)
Beattie v. Barnhart, 663 F. Supp. 2d 5 (D.D.C. 2009) (summary-judgment-like standard for stay/arbitration decisions)
Granite Rock Co. v. Int’l Brotherhood of Teamsters, 130 S. Ct. 2847 (S. Ct. 2010) (presumption in favor of arbitrability; doubts resolved for coverage)
Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (arbitrability scope and contract independence principles)
PaineWebber, Inc. v. Hartmann, 921 F.2d 507 (3d Cir. 1990) (arbitrability considerations and threshold disputes; limits on stay)
Contec Corp. v. Remote Solution Co., Ltd., 398 F.3d 205 (2d Cir. 2005) (arbitrability reserved for arbitrators in similar language)
AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643 (U.S. 1986) (construction of arbitration clause; presumption in favor of arbitration)
Howsam v. Dean Witter Reynolds, 537 U.S. 79 (U.S. 2002) (gatekeeping on arbitrability; arbitrators may resolve some issues)
City of Moundridge v. Exxon Mobil Corp., 429 F. Supp. 2d 117 (D.D.C. 2006) (irreparable injury threshold for injunctions)
Wis. Gas Co. v. FERC, 758 F.2d 669 (D.C. Cir. 1985) (irreparable harm analysis and remedies)
Propane Gas Ass’n v. DHS, 534 F. Supp. 2d 16 (D.D.C. 2008) (arbitration-related injunctive considerations)