Phoenix Group Home, LLC v. Anew Behavioral Health LLC, 1:21-cv-00034

Background

PATH Integrated Healthcare (PATH) provides behavioral health services in OH, VT, and NH; five former employees (Pratt, Heid, Conn, Boggs, Newsome) are defendants.
PATH alleges that, while still employed, those employees and co-defendant Cales formed Anew Behavioral Health (Ohio and New Hampshire) to compete and diverted PATH’s clients, employees, confidential information, and resources to Anew.
In July 2020 PATH onboarded G&A Partners, which implemented arbitration agreements; each Employee Defendant signed an Arbitration Agreement incorporating the AAA Employment Rules and containing a delegation clause assigning arbitrability questions to the arbitrator.
PATH filed a 14-count complaint (including breach of contract, fiduciary duty, DTSA, CFAA, tortious interference, conversion, unjust enrichment, conspiracy) on Jan. 15, 2021; Employee Defendants moved to dismiss or, alternatively, compel arbitration and stay the case.
The court entered a Consent Injunction restricting defendants’ solicitation and use of PATH information; the injunction remains in effect and the court retains enforcement jurisdiction.
The court considered whether the arbitration agreements (and their delegation clauses) cover PATH’s claims and whether those claims are arbitrable, and whether to dismiss or stay the action pending arbitration.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the parties agreed to arbitrate arbitrability (delegation)	Arbitration agreements were induced by fraud and thus void ab initio; court should decide arbitrability	Agreements valid; incorporation of AAA Rules shows delegation so arbitrator decides arbitrability	Incorporation of AAA Rules is "clear and unmistakable" evidence of delegation; arbitrator decides arbitrability
Whether PATH’s claims fall within scope of the arbitration agreements	Broad challenge to the entire arbitration agreement (fraud in inducement of whole contract) so court should resolve arbitrability	The arbitration provisions are broad; scope questions fall to arbitrator per delegation clause	Scope is a preliminary question for the arbitrator due to the delegation provision and PATH’s failure to specifically target the delegation clause
Whether federal statutory claims (DTSA; CFAA) are nonarbitrable	PATH did not argue Congress excepted these statutes from arbitration; argued generally for court adjudication via fraud claim	Employee Defendants argued statutory claims are arbitrable	Court finds DTSA and CFAA claims are arbitrable and not excepted from arbitration
Remedy: dismissal vs stay; extent of court’s retained jurisdiction	PATH sought court resolution of arbitrability and related remedies; opposed dismissal	Defendants sought dismissal or, alternatively, stay and compelled arbitration	Court denied dismissal, granted motion to compel arbitration and stayed PATH’s claims against Employee Defendants; retained jurisdiction over Consent Injunction and PATH’s claims against Anew and Cales remain in court

Key Cases Cited

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard for plausibility)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (courts must accept well-pleaded allegations as true for Rule 12(b)(6))
Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (parties may delegate gateway arbitrability questions to arbitrator)
Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (2010) (challenge to arbitration clause must be specific to delegation provision to be decided by court)
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (clear-and-unmistakable evidence required to delegate arbitrability)
Blanton v. Domino's Pizza Franchising LLC, 962 F.3d 842 (6th Cir. 2020) (incorporation of AAA Rules provides clear-and-unmistakable evidence of delegation)
Ciccio v. SmileDirectClub, LLC, 2 F.4th 577 (6th Cir. 2021) (parties who incorporate AAA rules delegate arbitrability to arbitrator)
Stout v. J.D. Byrider, 228 F.3d 709 (6th Cir. 2000) (four-step framework for motions to compel arbitration)
Volt Info. Sciences v. Bd. of Trs. of Leland Stanford Univ., 489 U.S. 468 (1989) (arbitration is a matter of contract and consent)
McGee v. Armstrong, 941 F.3d 859 (6th Cir. 2019) (confirming delegation-clause principles in this circuit)