Jet Aviation Flight Services Incorporated v. 7BD LLC
2:23-cv-00059
| D. Ariz. | Aug 20, 2025Background
- Jet Aviation and 7BD LLC entered into agreements for Jet Aviation to manage and charter aircraft owned by 7BD, with provisions for revenue sharing and monthly accounting.
- Disputes arose regarding alleged misrepresentations by Jet Aviation and failure to provide aircraft revenue accounting to 7BD.
- Both parties agreed to binding arbitration via JAMS for disputes arising out of their agreements, later formalizing this in a written Stipulation.
- While arbitration on earlier contract claims was pending, 7BD filed a separate state court action for accounting and fraud, not seeking damages but specific accounting.
- Jet Aviation moved to compel arbitration and dismiss 7BD’s new claims, asserting that the claims fell within the arbitration agreement.
- The Court was asked to determine if the fraud/accounting claims must proceed to arbitration and whether Jet Aviation was entitled to attorneys’ fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Arbitrability of fraud/accounting claims | Claims not arbitrable due to carve-out for equitable relief; court—not arbitrator—should decide arbitrability | Claims are subject to JAMS arbitration; parties delegated arbitrability decision to arbitrator via JAMS rules | Parties clearly delegated arbitrability to arbitrator via JAMS rules; arbitrator must decide |
| Modification of Arbitration Agreement | Stipulation did not amend original carve-outs; formal written modification required | Stipulation is binding and broadens arbitration to all disputes; parties intended modification | Stipulation is a valid modification, binding the parties to broad arbitration |
| Use of Extrinsic Evidence on Motion | Limited to pleadings; extrinsic evidence improper at 12(b)(6) | Court can consider all admissible evidence including agreement/stipulation | Court may consider relevant, admissible extrinsic evidence for motion to compel arbitration |
| Attorneys’ Fees | Jet Aviation not entitled to fees; claim is premature | Entitled to fees if motion is successful per contract | No prevailing party at this stage; fees denied without prejudice |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for motions to dismiss)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausible claim requirement; more than conclusory statements)
- Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220 (arbitration agreements are presumptively valid under FAA)
- Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (party challenging arbitration agreement has burden)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (ordinary state-law principles govern contract formation for arbitration agreements)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (arbitrability gateway issues can be delegated to arbitrators)