CMB Infrastructure Group IX, LP et al., v. Cobra Energy Investment Finance, Inc.
Case No.: 2:21-cv-00214-JAD-DJA
UNITED STATES DISTRICT COURT DISTRICT OF NEVADA
November 15, 2021
[ECF Nos. 17, 24, 51, 52, 53, 60]
The Crescent Dunes Project brought together numerous Nevadan, Texan, Californian, Delawarean, and Spanish entities and their subsidiaries; the United States Department of Energy; the Nevada Power Company; and hundreds of millions of dollars through a series of contracts and guaranties to fund, construct, and operationalize a solar-thermal power plant in Tonopah, Nevada. As a result of alleged misfeasance, nonfeasance, and malfeasance, the project failed, and the plant is now nonoperational. Through a half dozen motions, the project‘s diverse cast of characters asks this court to untangle their web of relationships and determine the consequences of those acts and omissions. By this order, I deny plaintiffs’ motion to remand, dismiss with prejudice plaintiffs’ claim for aiding and abetting tortious interference with contract, grant the Cobra defendants’ motion to compel arbitration, and stay the remainder of this case except to permit limited jurisdictional discovery and motion practice as to Santander.
Background1
The three plaintiffs are two California limited partnerships—CMB Infrastructure Investment Group IX, LP (CMB 9) and CMB Infrastructure Investment Group XI, LP (CMB 11)—and a Texas limited-liability company, CMB Export, LLC (CMBE).2 Collectively, plaintiffs sue eight defendants: ACS Servicios Comunicaciones y Energia, S.L. (ACS), a Spanish corporation; Banco Santander, S.A. (Santander), a Spanish corporation; Tonopah Solar Energy, LLC (TSE), a Delaware company; and the Cobra defendants—Cobra Energy Investment, LLC (CEI), a Delaware company; Cobra Energy Investment Finance, Inc. (CEIF), a Delaware corporation; Cobra Industrial Services, Inc. (CISI), a Delaware corporation; Cobra Instalaciones y Servicios S.A. (CISSA), a Spanish corporation; and Cobra Thermosolar Plants, Inc. (CTPI), a Nevada corporation.3
Under the Second Amended and Restated Limited Liability Agreement of Tonopah Solar Investments, LLC (TSI Agreement), SolarReserve, Inc.‘s (SR) indirect subsidiary, SolarReserve CSP Finance, LLC (SRCSP), and CEI each hold a 50% membership interest in Tonopah Solar Investments, LLC (TSI).4 TSI wholly owns Tonopah Solar Energy Holdings I, LLC (TSEH 1), which wholly owns Tonopah Solar Energy Holdings II, LLC
To finance construction of the Plant, SRCSP and ACS‘s indirect subsidiary, CEIF, obtained loans totaling $170 million from CMB 9 and CMB 11.10 The loans were evidenced by two loan agreements, one between CMB 9 and SRCSP (the Group 9 Loan) and guaranteed by SR, and the other between CMB 11 and CEIF (the Group 11 Loan) and guaranteed by CISSA.11 In addition, TSE—an indirect subsidiary of SRCSP and CEI‘s Delawarean joint venture, Tonopah Solar Investments, LLC (TSI)12—obtained a $715 million United States Department of Energy (DOE)-guaranteed loan from the Federal Financing Bank (FFB), memorialized in the Loan Guaranty Agreement (LGA) signed by SR, CEI, and TSE.13 The loans were to be repaid through revenue generated from a power purchase agreement (PPA) between TSE and the Nevada Power Company (NV Energy), as well as other sources.14 Under the LGA, DOE had the right to appoint an additional TSEH 1 board member.15 But in 2018, on DOE‘s insistence, the TSEH 1 board was reconstituted to four members—one SR appointee, one CEI appointee, and two DOE appointees.16
Since its delivery, the Plant has failed to meet its power-generation requirements, has been offline for significant periods of time, and is now nonoperational.17 The Project is insolvent, and the Group 9 Loan agreement, the LGA, and the PPA are in default.18 Plaintiffs claim that the Plant is poorly constructed, and more than 9,000 distinct defects and seven major defects that affect its safety and regular use have been identified.19 Despite these foundational issues preventing provisional acceptance—a contractually defined milestone following a series of conditions precedent—from being achieved, SR, Santander, and the DOE amended the contract to deem it achieved anyway and transferred control of the incomplete Plant to TSE.20 Plaintiffs allege that following the premature handover, TSE discovered an additional 2,000 warranty claims.21
In state court, plaintiffs sued (1) CEIF for fraud and breach of the Group 11 Loan agreement for failure to make required disclosures and misleading plaintiffs about the Project‘s progress; (2) TSE and CEI for fraud in amending the EPC contract to deem provisional acceptance achieved when it was not, failure to disclose that prematurity, and misleading plaintiffs that defects would be resolved and that the Project was complete; (3) ACS, CISSA, CISI, and CEI for aiding and abetting fraud by directing nondisclosure and failing to correct misleading disclosures; (4) Santander for aiding and abetting fraud as to the provisional acceptance and by providing its proxy and later selling its interest in the Project to the Cobra defendants to prevent disclosures or material corrections from being made; (5) all defendants for intentional tortious interference with and/or aiding and abetting tortious interference with contractual relations for withholding information about the Project‘s failures as relevant to the Group 9 Loan agreement; (6) CEI for breach of the implied covenant of good faith and fair dealing as to the TSI Agreement for intentionally depriving SRCSP of the benefits of its bargain under that agreement; (7) Cobra defendants for aiding and abetting CEI‘s breach of the implied covenant of good faith and fair dealing; (8) TSE and the Cobra defendants for intentional tortious interference with contractual relations as to the TSI Agreement for expelling SRCSP from that agreement; (9) CEI for breach of fiduciary duties owed to SRCSP under the TSI Agreement; and (10) TSE and the Cobra defendants for aiding and abetting CEI‘s breach of fiduciary duties.26
The defendants removed the action to this court.27 Plaintiffs move to remand;28 the Cobra defendants move to compel arbitration;29 and Santander,30 ACS,31 and TSE32 each move to dismiss.
Discussion
I. Santander and ACS‘s motions to dismiss [ECF Nos. 51, 52, 53]
Santander raises a statute-of-limitations defense and moves to dismiss for want of personal jurisdiction and failure to state a claim. ACS also moves to dismiss for want
A. Personal-jurisdiction legal standard
The Fourteenth Amendment limits a forum state‘s power “to bind a nonresident defendant to a judgment of its courts,”33 and
Plaintiffs do not dispute that this court lacks general personal jurisdiction over ACS and Santander, both Spanish companies with principal places of business in Spain,38 so I need only evaluate whether this court may exercise specific jurisdiction over them. Specific jurisdiction “focuses on the relationship among the defendant, the forum, and the litigation.”39 This means that “the plaintiff[s] cannot be the only link between the defendant and the forum,”40 and “[t]he unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State.”41 Courts in the Ninth Circuit apply a three-prong test to resolve whether specific jurisdiction exists.42 The plaintiffs bear the burden of satisfying the first two by showing that (1) the defendant “purposefully direct[ed its] activities toward the forum,” and (2) the claim “arises out of or relates to the defendant[‘s] forum-related
To establish purposeful direction, a plaintiff must show that the defendant (1) “committed an intentional act,” (2) “expressly aimed at the forum state,” (3) “causing harm that the defendant kn[ew was] likely to be suffered in the forum state.”46 The intentional-act prong requires “intent to perform an actual, physical act in the real world” and an “external manifestation of” that intent.47 Express aiming requires something more than just “untargeted negligence“; the defendant‘s conduct must be intended to reach a person “whom the defendant knows to be a resident of the forum state.”48 And the harm prong requires that the defendant‘s actions be “performed for the very purpose of having their consequences felt in the forum state.”49
“[T]he formation of a contract with a nonresident defendant is not, standing alone, sufficient to create jurisdiction,”50 and “a parent-subsidiary relationship alone is insufficient to attribute the contacts of the subsidiary to the parent for jurisdictional purposes” unless the subsidiary is the parent‘s general agent or acts as the parent‘s alter ego.51 A corporation can be subject to personal jurisdiction in the forum if it “direct[s] its agents ... to take action there.”52 To satisfy the agency test, the plaintiffs must show “that the subsidiary represents the parent corporation by performing services ‘sufficiently important to the parent corporation that if it did not have a representative to perform them, the parent corporation would undertake to perform substantially similar services.‘”53 To satisfy the alter-ego test, the plaintiffs must show “(1) that there is such unity of interest and ownership that the
B. This court has personal jurisdiction over ACS. [ECF No. 53]
Taking the well-pled facts in the complaint as true and construing factual disputes in plaintiffs’ favor,55 I find that ACS is subject to this court‘s personal jurisdiction. ACS is the parent company of CTPI,56 owns 50% of TSI through its ownership of CEI, and provided a payment and performance guaranty of CTPI‘s obligations under the EPC Contract.57 Plaintiffs claim that ACS aided and abetted fraud as to CTPI‘s EPC Contract obligations, aided and abetted CEI‘s breach of the implied covenant of good faith and fair dealing as to the TSI Agreement, and tortiously interfered with the Group 9 Loan agreement.58 It‘s undisputed that the EPC Contract was one of the primary instruments executed to launch the construction of the Nevada plant at the heart of this lawsuit.59 ACS‘s status as CTPI‘s guarantor under that contract is sufficient for this court to exercise personal jurisdiction over it.
Although the Ninth Circuit hasn‘t directly addressed the question of whether a corporation‘s guaranty of another corporation‘s obligations in the forum state may give rise to personal jurisdiction over the guarantor corporation, the court‘s analyses in Forsythe v.Overmyer and Global Commodities Trading Group, Inc. v. Beneficio de Arroz Choloma, S.A. are instructive.60 In both cases, the court affirmed a district court‘s finding of personal jurisdiction over an individual who personally guaranteed a corporation‘s obligations in the forum state.61 The EPC Contract and ACS‘s guaranty, like the contract and guaranty in Forsythe, are expressly subject to the laws of the forum.62 And like the guaranty in
C. The question of whether this court has personal jurisdiction over Santander merits limited jurisdictional discovery. [ECF Nos. 51, 52, 56]
As to Santander, however, I find that “[t]he record is simply not sufficiently developed to enable [me] to determine whether the alter[-]ego or agency tests are met.”69 Plaintiffs’ allegations and the evidence show that Santander and Tonopah Solar I, LLC (TS 1)—Santander‘s wholly-owned subsidiary corporation, which had a significant stake in the Nevada plant70—were involved in the decision to conceal the Plant‘s performance issues by deeming unmet goals as achieved and thereby preventing plaintiffs from enforcing contractual liabilities for those unmet goals.71 Santander‘s subsidiary was listed as an owner of the Plant Project; was involved with the Plant‘s board of directors; failed to make required financial disclosures; eventually gave the Cobra defendants its proxy to control the Project despite knowing of potential misfeasance; and, later, sold them its stake in the Project.72
On these facts, absent further details about Santander and its subsidiary‘s corporate structures, how closely the former controlled the latter‘s day-to-day actions, and how those actions created effects in Nevada, dismissing Santander from this case for want of personal jurisdiction would be premature. I therefore deny Santander‘s motion to dismiss without prejudice to its ability to refile after limited jurisdictional discovery.73 Plaintiffs and Santander must meet and confer on the length and scope of discovery and file a
D. Plaintiffs state some colorable claims against Santander. [ECF Nos. 51, 52]
Plaintiffs allege three claims against Santander: (1) aiding and abetting fraud regarding provisional acceptance by providing the Cobra defendants its proxy to prevent the disclosure of material facts and later selling its interest to them, (2) tortious interference with the Group 9 Loan agreement, and (3) aiding and abetting tortious interference with the Group 9 Loan agreement by other defendants.74 Santander moves to dismiss for failure to state a claim and argues that all of the plaintiffs’ claims are time-barred.75 I grant Santander‘s motion as to aiding and abetting tortious interference and dismiss that claim with prejudice, but I deny the motion on the remaining claims.
1. Legal standard
Federal pleading standards require plaintiffs to pled enough factual detail to “state a claim to relief that is plausible on its face.”76 This “demands more than an unadorned, the-
defendant-unlawfully-harmed-me accusation”77; plaintiffs must make direct or inferential factual allegations about “all the material elements necessary to sustain recovery under some viable legal theory.”78 A complaint that fails to meet this standard must be dismissed.79 Additionally, a claim may be dismissed as untimely on a
2. Plaintiffs state timely claims for tortious interference and aiding and abetting fraud.
Santander argues that, because the allegedly fraudulent provisional acceptance occurred in December 2016 and this lawsuit was brought in May 2020, any claims against it are time-barred by Nevada‘s three-year statute of limitations.81 But under Nevada‘s “discovery rule, the statutory period of limitations is tolled until the injured party discovers or reasonably should have discovered facts supporting a cause of action.”82 The allegations in the complaint establish that plaintiffs did not learn the extent of the wrongful acts and omissions relating to these claims until mid-to-late 2018, and that the alleged deception by the defendants, including Santander, continued well past the provisional acceptance.83 So plaintiffs filed this action within the limitations period.
In addition to being timely, plaintiffs’ aiding-and-abetting-fraud claim is sufficiently pled to withstand dismissal.
Plaintiffs have also sufficiently pled facts to establish the second and third elements. They allege that Santander knew that the Plant‘s construction was delayed and deficient but CEIF and others were reporting to plaintiffs that the Project was progressing well.88 And, despite knowing that CEIF was misrepresenting the condition of the Plant to the Project‘s creditors, Santander negotiated and approved the EPC Contract amendment that deemed provisional acceptance achieved when countless defects remained unresolved and the requisite benchmarks in the contract had not been met.89 So plaintiffs have stated a colorable claim for aiding and abetting fraud.
They also plead a plausible tortious-interference claim against Santander. To state a claim for tortious interference, plaintiffs must show that the defendant knew of an existing contract but took intentional acts to disrupt it, resulting in damage to plaintiffs.90 Here, plaintiffs allege that Santander knew of the Group 9 Loan agreement and intentionally negotiated and approved the EPC Contract amendment to hide defects in the Plant and forestall enforcement of plaintiffs’ rights; and as a result, plaintiffs could not obtain repayment of the Group 9 Loan, which remains unpaid.91 Plaintiffs also allege that, for the same dilatory and obfuscating reasons, Santander gave its proxy to the Cobra defendants and eventually sold them its stake in the Project.92 These facts are sufficient for the tortious-interference claim to survive a motion to dismiss.
3. Plaintiffs fail to state a claim for aiding and abetting tortious interference.
Plaintiffs’ aiding-and-abetting-tortious-interference claim, however, does not fare as well. They theorize that Santander aided and abetted CEIF‘s tortious interference with the Group 9 Loan agreement by “directing and encouraging [CEIF] not to make the requisite disclosures to” plaintiffs and at least partially by “negotiating and approving” the amendment to the EPC Contract that deemed provisional acceptance
Company v. Mahlum, discusses aiding and abetting in the context of fraud.94 The court‘s reference to the basic theory of aiding-and-abetting liability under the Restatement (Second) of Torts95 is insufficient to give rise to a cause of action in the context of tortious interference with contractual relations under state law. So I grant the motion to dismiss as to this claim only and, because amendment would be futile, dismiss the claim with prejudice.
II. TSE‘s motion to dismiss [ECF No. 60]
TSE moves to dismiss for insufficient process, insufficient service of process, and failure to state a claim under Rules 12(b)(4), 12(b)(5), and 12(b)(6).96 For the same reasons discussed in subsection I(D)(3), supra, I grant the motion to dismiss as to plaintiffs’ claim against TSE for aiding and abetting tortious interference with contractual relations, and I dismiss that claim with prejudice. In all other respects, I deny TSE‘s motion to dismiss.
A. Process was sufficient, and TSE has not shown that it would suffer prejudice based on service issues.
TSE‘s first argument for dismissal is that it was served with a state-court summons 150 days after this action was removed to federal court—60 days after the time for service provided by the Federal Rules of Civil Procedure (FRCP) elapsed.97 When a state-court case is removed
to federal court, “the jurisdiction of the state court absolutely cease[s], and that of the [district] court of the United States immediately attache[s].”98 All defendants properly served in the state-court action are deemed properly served in the removed action, and unserved defendants must be served with a summons from the federal court.99 But in the Ninth Circuit, if a defendant “either initiated the removal or consented to it, and thus indisputably had notice of the action prior to removal and notice that it was now a federal action,”
And while plaintiffs served TSE with process 60 days after the
summons the following month.107 It has had extensive actual notice of the action since the claims were brought in its bankruptcy proceedings,108 and it consented to the removal of state-court action.109 And because TSE raises a statute-of-limitations defense to most of the claims plaintiffs raise against it,110 dismissal at this stage could impact plaintiffs’ recovery. Most importantly, TSE does not argue that it was prejudiced by the delay in service, only that it feels it was an “afterthought” in this litigation.111 So, good cause appearing, I excuse any defects in plaintiffs’ service upon TSE, and I deny TSE‘s request to dismiss to the extent it is based upon insufficient process and insufficient service of process.
B. Plaintiffs state colorable claims against TSE.
Plaintiffs raise six claims against TSE: (1) fraud, (2) aiding and abetting fraud, (3) tortious interference with the Group 9 Loan agreement, (4) aiding and abetting tortious interference with the Group 9 Loan agreement, (5) tortious interference with the TSI Agreement, and (6) aiding and abetting breach of fiduciary duties.112 As those against Santander, see subsection I(D)(2), supra, the plaintiffs’ claims against TSE don‘t run afoul of Nevada‘s three-year statute of limitations for fraud and tortious-interference claims. And as above, see subsection I(D)(3), supra, I dismiss with prejudice plaintiffs’ aiding-and-abetting-tortious-interference-with-contractual-relations claim because it is not cognizable under Nevada law. I address the remaining claims in turn.
1. Fraud
To state a claim for fraud in Nevada, plaintiffs must demonstrate (1) a “false representation made by the defendant,” (2) the defendant‘s “knowledge or belief that the representation is false,” (3) the defendant‘s “intention to induce the plaintiff[s] to act or to refrain from acting
“[A]llegations of fraud based on information and belief usually do not satisfy” Rule 9(b)‘s particularity requirement, but “the rule may be relaxed as to matters within the opposing party‘s knowledge.”117 This is especially pertinent in cases of “corporate fraud, [where] plaintiffs will not have personal knowledge of all of the underlying facts” and may not be able to “attribute particular fraudulent conduct to each defendant.”118 This relaxed standard thus only requires plaintiffs alleging corporate fraud to plead the “facts on which the belief is founded” and
“include the misrepresentations themselves with particularity and, where possible, the roles of the individual defendants in the misrepresentations.”119
Plaintiffs allege that TSE and many of its co-defendants knowingly misrepresented the Project‘s progress in reports required by the Group 9 Loan agreement; made specific certifications that no work remained beyond a potential “temporary shutdown” to repair the hot-salt tank that “would impair the safe, reliable, normal and continuous operation” of the Plant; and amended the EPC Contract to deem provisional acceptance achieved when it was not, all for the purpose of precluding the Project‘s lenders—including plaintiffs—from enforcing their rights under their loan agreements.120 But, plaintiffs contend, TSE knew that the numerous defects in the Plant‘s construction and major necessary repairs would prevent it from ever being fully functional, let alone profitable enough to repay the loans used to build it.121 Because of these misrepresentations, plaintiffs could not timely enforce their rights under their contracts and obtain repayment of the Group 9 Loan from SRCSP.122 With these facts, plaintiffs have sufficiently pled the elements of fraud under the relaxed corporate-fraud standard.
2. Aiding and abetting fraud
Plaintiffs have also pled a colorable claim for aiding and abetting fraud. They allege that CEIF engaged in fraud and TSE knowingly and substantially assisted it in that fraud by agreeing to falsely certify progress to the DOE and then approving the EPC Contract amendment regarding provisional acceptance with the intent to deceive the Project‘s financiers.
3. Tortious interference
The same misrepresentations that give rise to plaintiffs’ fraud claims against TSE also undergird one of their tortious-interference claims. Plaintiffs allege that TSE was the beneficiary of two loans made by plaintiffs to SRCSP and CEIF, both of which funded the Plant‘s construction and operationalization.126 Taking these facts as true, plaintiffs’ general assertion that TSE knew—or at least knew of facts from which it could be inferred—that the Group 9 Loan agreement existed establishes TSE‘s knowledge of the contract with which plaintiffs assert TSE interfered.127 Plaintiffs further allege that TSE‘s intent in making misrepresentations about the Plant‘s progress was to forestall enforcement and collection efforts by the lending plaintiff,128 and those misrepresentations caused actual disruption of the Group 9 Loan agreement, preventing it from being repaid and depriving plaintiffs of tens of millions of dollars.129 Thus, plaintiffs state a plausible claim for tortious interference with that contract.
Plaintiffs’ second tortious-interference claim concerns the TSI Agreement. They allege that when SR decided to replace its appointee on TSE‘s board of managers, which it had an unconditional right to do under the TSI Agreement, TSE demanded that SR obtain “upstream consents” before doing so.130 That demand prevented SR from getting access to TSE‘s books and records, which it needed to assess a DOE deal that TSE had requested consent to within ten days.131 The only alternative to the deal was a capital call that “TSE and the Cobra defendants kn[e]w” was impossible to fulfill due to the Project‘s failure.132 That deal granted the Cobra defendants a release from liabilities for the Project, made SRCSP‘s interest in TSE “valueless,” and eventually led to SR‘s ouster from TSE management.133 Plaintiffs allege that the deal and capital call were “done in furtherance of the Cobra [d]efendants’ efforts to . . . shield themselves from liability” for the
4. Aiding and abetting fiduciary breach
Finally, plaintiffs’ claim against TSE for aiding and abetting CEI‘s breach of fiduciary duties may proceed as well. Four elements must be shown for such a claim to survive a motion to dismiss: “(1) a fiduciary relationship exists, (2) the fiduciary breached the fiduciary relationship, (3) the third party knowingly participated in the breach, and (4) the breach of the fiduciary relationship resulted in damages.”137 Plaintiffs allege that CEI owed SRCSP fiduciary duties under the TSI Agreement; CEI breached those duties by ousting SRCSP from TSI; TSE blocked SRCSP‘s access to TSE‘s books, sought consent to the DOE deal within ten days and without realistic alternatives, and negotiated a release from liability for the Cobra defendants; and that pre-negotiated deal and ouster resulted in damage to SRCSP. TSE does not dispute that CEI owed and breached fiduciary duties to SRCSP; it only argues that TSE‘s actions did not substantially assist those breaches because SRCSP could not afford the capital call anyway and the Delaware Court of Chancery has already rejected the claim.138
But both sides agree SRCSP could not have paid the hundreds of millions of dollars requested in the capital call. Plaintiffs’ allegations focus more so on the call being pitched as an alternative when TSE was actually forcing the parties into the pre-negotiated DOE deal that would release the Cobra defendants—including CEI—from all liability while also depriving SRCSP of its interest in TSE.139 And whatever the merits of the Delaware court‘s decision, it appears that the Supreme Court of Delaware has since vacated it, mooting that concern.140 So plaintiffs have sufficiently pled this claim at this stage.
III. Plaintiffs’ motion to remand [ECF No. 17]
Plaintiffs move to remand to state court on three bases: (1) untimeliness, (2) abstention, and (3) lack of subject-matter jurisdiction.141 The first two can be swiftly disposed of. Under
Plaintiffs’ subject-matter jurisdiction argument fares no better. This court has jurisdiction under
TSE‘s bankruptcy and its reorganization plan loom large here because TSE was the primary entity charged with operationalizing and operating the Plant whose failure precipitated this case. But plaintiffs’ own actions in and since TSE‘s bankruptcy case alone establish jurisdiction under the “close nexus” test. Plaintiffs affirmatively raised the claims they assert in this lawsuit in the bankruptcy proceedings, and they asked the bankruptcy court to consider them when developing TSE‘s reorganization plan.151 The court did so, requiring the Cobra defendants or their designee to issue a $6 million letter of credit to be drawn on if this lawsuit results in a final judgment for plaintiffs and against TSE.152 Should that happen, though, TSE would be jointly and severally liable for $90 million or more in damages, so it‘s possible TSE would be subject to more liability than its reorganization plan currently allows.153
IV. The Cobra defendants’ motion to compel arbitration [ECF No. 24]
The Federal Arbitration Act (FAA) states that “[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy” arising out of the contract or transaction “shall be valid, irrevocable, and enforceable save upon such grounds as exist at law or in equity for the revocation of any contract.”155 The FAA permits any party “aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration” to petition any federal district court for an order compelling arbitration in the manner provided for in the arbitration agreement.156 The FAA “establishes a federal policy favoring arbitration, requiring that [courts] rigorously enforce agreements to arbitrate”157 and provides “that where [a] contract contains an arbitration clause, there is a presumption of arbitrability.”158 “By its terms, the Act ‘leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.‘”159
The district court‘s role under the FAA is “limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.”160 In answering these questions, the court must “interpret the contract by applying general state-law principles of contract interpretation, while giving due regard to the federal policy in favor of arbitration by resolving ambiguities as to the scope of arbitration in favor of arbitration.”161 The party seeking to compel arbitration has the burden to show that both of these questions must be answered in the affirmative.162 “If the response is affirmative on both counts, then the [FAA] requires the court to enforce the arbitration agreement in accordance with its terms.”163
The Cobra defendants seek to compel arbitration based on the arbitration clause in CISSA‘s guaranty of “all [of CEIF‘s] performance and financial obligations” under the Group 11 Loan agreement.164 Under the guaranty, New York law applies and “any dispute[],” “suit, action or proceeding arising out of, in connection with, or with respect to” the guaranty must be finally resolved in “the International Court of Arbitration of the International Chamber of Commerce . . in accordance with the ICC Rules of Arbitration.”165 Plaintiffs argue that the guaranty and its provisions no longer apply because the Group 11 Loan has been fully repaid.166 But “the prevailing general rule of both New York and Federal common law of contracts is that, absent a clear manifestation of contrary intent, it is presumed that the parties intended that the arbitration forum for dispute resolution provided in an agreement will survive termination of the agreement as to subsequent disputes arising thereunder.”167 And plaintiffs’ claims revolve around various disclosure requirements—quintessential performance obligations—by which they allege CEIF failed to abide and, by extension, with which CISSA failed to guarantee compliance. So the arbitration clause exists and remains active as to suits in connection with those unmet responsibilities, such as this one.
Because the ICC Rules, as incorporated by the guaranty, delegate claim-arbitrability questions to the arbitrator,168 any argument plaintiffs make about which claims can and cannot be arbitrated are for the arbitrator to resolve. The Supreme Court has made clear that “[w]hen the parties’ contract delegates the arbitrability question to an arbitrator, . . . a court possesses no power to decide the arbitrability issue[—]even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.”169
B. Both signatory and nonsignatory defendants may enforce the arbitration agreement against both signatory and nonsignatory plaintiffs.
Plaintiffs’ final argument against arbitration—that parties who did not sign the guaranty cannot compel or be compelled to arbitrate the claims in this case—also fails. “[N]onsignatories may be bound to the arbitration agreements of others [under] common law principles of contract and agency law.”170 And here, the common-law theories of estoppel and agency are especially relevant because plaintiffs allege that all the defendants “acted in concert [and with] common purpose, [acting as] agents, . . . co-conspirators, or alter egos of one or more of the other” defendants.171 Because “[f]actual assertions in
The guaranty is governed by New York law, so I also consider the law of that state. New York courts have recognized a direct-benefits estoppel theory, in which “a nonsignatory may be compelled to arbitrate [if] the nonsignatory ‘knowingly exploits’ the benefits of an agreement containing an arbitration clause, and receives benefits flowing directly from the agreement.”173 By asserting claims based on the guaranty jointly with the signatory plaintiff, the nonsignatory plaintiffs are attempting to exploit the benefits of that agreement. Plaintiffs are thus equitably estopped from avoiding arbitration under the same agreement that gives rise to many of their own claims.174
V. Stay pending arbitration
Once a district court refers any claim in a proceeding to an arbitrator, it must “on application of one of the parties[,] stay the trial of the action until” arbitration is complete.175 The court has discretion to apply such a stay to “persons who are parties to the underlying dispute but not to the arbitration agreement.”176 So except as otherwise provided in this order, I grant the Cobra defendants’ request for a stay pending arbitration.177
Conclusion
IT IS THEREFORE ORDERED that defendant ACS Servicios Comunicaciones y Energia, S.L.‘s motion to dismiss for want of personal jurisdiction [ECF No. 53] is DENIED.
IT IS FURTHER ORDERED that defendant Banco Santander, S.A.‘s motion to dismiss [ECF Nos. 51, 52] is GRANTED IN PART and DENIED IN PART. Plaintiffs’ claim for aiding and abetting tortious interference with contractual relations is DISMISSED with prejudice because amendment would be futile; the motion is denied in all other respects.
IT IS FURTHER ORDERED that plaintiffs’ request for jurisdictional discovery [ECF No. 56] is GRANTED IN PART and DENIED IN PART as moot. Plaintiffs and defendant Banco Santander, S.A., must meet and confer on the length and scope of discovery and file a proposed scheduling order within 10 days. Discovery is limited to the issue of whether Santander is subject to this court‘s specific personal jurisdiction through its own actions or under either of the two agency theories.
IT IS FURTHER ORDERED that defendant Tonopah Solar Energy, LLC‘s motion to dismiss [ECF No. 60] is GRANTED IN PART and DENIED IN PART. Plaintiffs’ claim for aiding and abetting tortious interference with contractual relations is DISMISSED with prejudice because amendment would be futile; the motion is denied in all other respects.
IT IS FURTHER ORDERED that Cobra Energy Investment, LLC; Cobra Energy Investment Finance, Inc.; Cobra Industrial Services, Inc.; Cobra Instalaciones y Servicios S.A.; and Cobra Thermosolar Plants, Inc.‘s motion to compel arbitration [ECF No. 24] is GRANTED and, with the exception of (1) the Santander jurisdictional-discovery proceedings permitted by this order and (2) the proceedings related to the renewed motion to dismiss for want of jurisdiction that Santander may file after those discovery proceedings, this action is STAYED pending the conclusion of the arbitration of the claims against Cobra Energy Investment, LLC; Cobra Energy Investment Finance, Inc.; Cobra Industrial Services, Inc.; Cobra Instalaciones y Servicios S.A.; and Cobra Thermosolar Plants, Inc. in compliance with the arbitration agreement.
U.S. District Judge Jennifer A. Dorsey
November 15, 2021