PAN AM FLIGHT 73 LIAISON GROUP v. GIATRI DAVÉ & GARGI DAVÉ
No. 10-mc-0077 (JDB)
UNITED STATES DISTRICT
May 12, 2010
Movant, v. GIATRI DAVÉ & GARGI DAVÉ, Respondents.
MEMORANDUM OPINION
This action arises out of a dispute over the enforceability of a contract -- termed the Joint Prosecution Agreement (“JPA” or “the Agreement“) -- by which victims of the 1986 hijacking of Pan Am Flight 73 agreed to jointly pursue legal remedies.
reasons for those decisions.
I.
Four members of the Abu Nidal Organizatiоn, allegedly operating with financial and logistical support from Libya, hijacked Pan Am Flight 73 on September 5, 1986. By the end of that terrible ordeal, the hijackers had killed twenty passengers and injured another approximately 130 passengers. In 2004, a group of victims -- and in some cases their representatives or estates -- decided to pursue jointly “legal remedies, including a civil action, against the Libyan State . . . , and certain individuals implicated [in] and convicted of carrying out the hijacking.” LG‘s V. Mot. to Compel Arbitration (“LG‘s Arbitration Mot.“) [Docket Entry 3], Ex. A (JPA), 1. To do so, the victims executed the JPA, which, among other things, created the LG to act as the managing agent for the victims’ collective legal claims. See LG‘s Arbitration Mot. at ¶ 14; JPA at p.1. The LG comprises five individuals -- residents of Connecticut, New York, North Dakota, Ohio, and India -- who were “either victims of the Pan Am Flight 73 hijacking themselves or were family members of individuals killed during the hijacking.” LG‘s Arbitration Mot. at ¶ 2. It is tasked
With the LG as their managing agent, the parties to the JPA agreed not only to “jointly pursue their legal claims in the same proceedings and subsequent collection efforts,” but also to “share in the recovery arising from any proceedings.” Id. at p.2. The victims selected Crowell & Moring LLP, an international law firm, to represent them, and agreed that “[t]o the extent there is any financial recovery against any of the Defendants, either jointly or severally, either by way of
settlement, judgment or other award, all monies shall be deposited in the Crowell & Moring LLP IOLTA account.” Id. at ¶ 2. After payment of litigation expenses and attorneys’ fees, the remaining funds would be distributed to the victims according to a formula set forth in the JPA. See id. at ¶ 5. Moreover, the JPA parties agreed to mediate any dispute regarding “the construction and enforceability of the Agreement or any actions or disputes arising under or in connection with the Agreement.” Id. at ¶¶ 13-14. And they agreed that if mediation were unsuccessful, they would submit their dispute “for confidential arbitration under the provisions of the American Arbitration Association” before a three-member arbitration panel. Id. Arbitration under the Agreement must be held in the District of Columbia. See id. at ¶ 13.
Giatri Davé and Gargi Davé, both United States citizens, were passengers on Pan Am Flight 73. See LG‘s Arbitration Mot., Ex. D (Davés’ Cal. Compl.), ¶ 1. They both became parties to the JPA in 2005 “by virtue of each executing a Joinder to [the] Pan Am Flight 73 Joint Prosecution Agreement.” LG‘s Arbitration Mot. at ¶ 18. In doing so
Pursuant to the Agreement, Crowell & Moring filed a lawsuit against Libya in the United States District Court for the District of Columbia. See LG‘s Arbitration Mot. at ¶ 15; see also
Manjula Patel v. The Socialist People‘s Libyan Arab Jamahiriya, Civ. A. No. 06-0626 (D.D.C. filed Apr. 24, 2006). Crowell purportedly pursued the case “actively” during the ensuing two years. See LG‘s Arbitration Mot. at ¶ 15. As Crowell was litigating the victims’ claims, Congress passed the
Two weeks after Congress passed the
Consistent with the
In July 2009, the Foreign Claims Settlement Commission awarded Gargi Davé money for a claim that Crowell & Moring had submitted to it. See LG‘s Arbitration Mot., Ex. C (Decl. of Clifton Elgarten), ¶ 2. And in November 2009, Crowell & Moring notified Gargi Davé that her award had “been certified for payment by the United States Department of Treasury,” and therefore the firm expected that “Treasury will soon be contacting both you and our frm to arrange for a method of payment of this award.” Id. at ¶ 3 (internal quotation marks omitted). Pursuant to the terms of the JPA, Crowell & Moring “provided Ms. Davé with a form of directive to the Treasury Department that she could use to direct payment of the funds to [Crowell & Moring‘s IOLTA] account.” Id. at ¶ 15.
Gargi Davé, however, never returned the executed documents to the firm. See id. Instead, she, along with her sister Giatri Davé, filed a declaratory judgment action in the Superior Cоurt of California, County of Los Angeles, requesting that, to the extent the JPA required them to share their Foreign Claims Settlement Commission awards with the other parties to the JPA,
the Agreement be found unenforceable due to fraud, unconscionability, and the fact that it conflicts “with the terms, intent and policies of the United States under the” Claims Settlement Agreement,
In response to the Davés’ suit in California, the LG filed this action, seeking to compel the Davés to arbitrate the claims asserted in their California complaint pursuant to the terms of the JPA. In addition, the LG filed a motion for a preliminary injunction asking the Court to order that the Davés’ Foreign Claims Settlement Commission awards be held in escrow pending the start of arbitration. See Mots. Hr‘g Tr. 34:21-35:3, Mar. 4, 2010.2 For their part, the Davés oppose both the LG‘s motion to compel arbitration and its motion for a preliminary injunction. And they have asked this Court either to transfer this action to the United States District Court for the Central District of California, or to stay this action pending resolution of the California case. See Davés’ Mot. to Transfer or to Stay (“Davés’ Transfer Mot.“) [Docket Entry 12], at 2.
II.
The Court begins its analysis with the Davés’ motion to transfer or to stay because it presents a “threshold ground[] for denying audience to a case on the merits.” Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 585 (1999); see also Sinochem Int‘l Co. Ltd. v. Malaysia Int‘l Shipping Corp., 549 U.S. 422, 431 (2007).
The Davés argue that this action presents “the identical issues of fact and law which are the basis of [their] action in California -- and which could have been brought in the California [court] which has jurisdiction and venue.” Davés’ Transfer Mot. at 2. Therefore, in their view, this Court should transfer the action to the United States District Court for the Central District of California pursuant to
Neverthеless, the Davés contend that if the Court does not transfer the case, it should stay this action “pending the resolution of the California action.” Davés’ Transfer Mot. at 2. In other words, they ask the Court to defer to an earlier-filed action. See Davés’ Reply in Supp. of Transfer Mot. [Docket Entry 20], at 5-6. Here, the district court remanded the Davés’ California action; thus, the earlier-filed action that the Davés ask this Court to defer to is a state court proceeding. But federal courts do not defer to pending state court proceedings: “‘the pendency of an action in the state court is no bar to proceedings concerning the same subject matter in the
Federal court having jurisdiction.‘” Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) (quoting McClellan v. Carland, 217 U.S. 268, 282 (1910)); see also id. (“Th[e] difference in general approach between state-federal concurrent jurisdiction and wholly federal concurrent jurisdiction stems from the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.“).4 The Court therefore will not stay this action in favor of the parallel state proceeding in California, and hence turns to the merits of the LG‘s motion to cоmpel arbitration.
III.
The Federal Arbitration Act provides that “a written provision in . . . a contract to settle by arbitration a controversy . . . arising out of such contract . . . shall be valid, irrevocable, and enforceable save upon any grounds as exist at law or in equity for the revocation of any contract.”
or that the arbitration provision is unenforceable as a matter of contract law, see Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-46 (2006). Here, the Davés do not dispute that the JPA‘s arbitration provision encompasses the claims raised in their California complaint.5 They do contend, however, that “the arbitration provision itself, which is contained in the [JPA], is not a valid and enforceable agreement.” Davés’ Opp‘n to the LG‘s Arbitration Mot. (“Davés’ Arbitration Opp‘n“) [Docket Entry 14], at 1.
State contract law governs whether there is an enforceable agreement to arbitrate. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Here, that is District of Columbia law. See JPA at ¶10 (“This Agreement, including its terms and definitions as well as any actions or disputes arising hereto, shall be governed by District of Columbia substantive law . . . .“). A “contract‘s validity is [generally] considered by the arbitrator in the first instance.” Buckeye Check Cashing, 546 U.S. at 446. Only where a party challenges the validity of the arbitration provision itself may a court assess whether the parties have consented to arbitrate. See id. at 445-46; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04 (1967).
“[I]f the party opposing arbitration contends that no agreement to arbitrate was entered, which effectively raises the issue whether there was a meeting of the minds on the agreement to arbitrate, the standards for resolving a summary judgment motion pursuant to
its existence.” Bailey v. Fed. Nat‘l Mortgage Ass‘n, 209 F.3d 740, 746 (D.C. Cir. 2000).
It is therefore appropriate to grant a party‘s motion to compel arbitration when the pleadings and the evidence demonstrate that “there is no genuine issue as to аny material fact and that the moving party is entitled to judgment as a matter of law.”
Here, the Davés raise three arguments in support of their assertion that the JPA‘s arbitration provision is unenforceable: “(1) it is unconscionable in that the Davés lacked
meaningful choice and its terms unreasonably favor the LG both substantively and procedurally; (2) it was secured by fraudulent misrepresentations and omissions; and (3) it conflicts with the terms of federal legislation and undermines serious federal interests in foreign affairs.” Davés’ Arbitration Opp‘n at 1.
A.
A “‘contract may be unconscionable either because of the manner in which it was made or because of the substantive terms of the contract.‘” Urban Invs., Inc v. Branham, 464 A.2d 93, 99 (D.C. 1983) (quoting Bennett v. Fun & Fitness of Silver Hill, Inc., 434 A.2d 476, 480 (D.C. 1981)). That is, in examining whether a contract is unconscionable, the Court must determine whether one party lacked a meaningful choice and whether the contract terms were unreasonably favorable to the other party. See Riggs Nat‘l Bank v. District of Columbia, 581 A.2d 1229, 1251 (D.C. 1990); Urban Invs. Inc, 464 A.2d at 99; Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 450 (D.C. Cir. 1964). Generally, a party must prove both elements for a court to find the cоntract unconscionable. See Riggs, 581 A.2d at 1251 (“To establish unconscionability . . . the District must prove not only that one of the parties lacked a meaningful choice but also that the terms of the contract are unreasonably favorable to the other party.” (emphasis added)); but see Bennett, 434 A.2d at 480 n.4 (“[I]n an egregious situation, one or the other may suffice.“). The Davés have not demonstrated that either element is present here.
1.
In support of their assertion that they lacked meaningful choice, the Davés allege the following: “the arbitration agreement was drafted by the LG and LG‘s counsel,” who had “far superior bargaining power and legal sophistication in the subject matter“; “the JPA[] containing
the arbitration provisions was mailed in boiler-plate form” with “no explanation of its terms“; and the arbitration provision “was inconspicuously hidden in two paragraphs on page 17 of a twenty page document.” Davés’ Arbitration Opp‘n at 8, 10. In other words, they contend that they did not have a fair opportunity to understand the terms of the arbitration provision.6
Mere inequality of bargaining power, by itself, is insufficient to render an arbitration provision unenforceable. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33 (1991); Booker, 315 F. Supp. 2d at 102. Nor does the fact that one party to a contract may have been without technical legal expertise render the provision unenforceable. See Olle v. 5401 W. Ave. Residential, LLC, 569 F. Supp. 2d 141, 146 (D.D.C. 2008) (“The plaintiffs contracted to purchase a $2.5 million condominium and have not alleged that they lack the basic educational or financial wherewithal to negotiate a real-estate purchase contract or its attendant arbitration clause.” (emphasis added)). Rather, “[w]hat is important is that [the Davés] had the opportunity to read and understand the Agreement before [they] signed it.” Booker, 315 F. Supp. 2d at 102 (emphasis omitted).
Here, the Davés had that opportunity: they each took several months to review the JPA and its arbitration provision before signing it. See LG‘s Reply in Supp. of Arbitration Mot. [Docket Entry 17], Decl. of Stuart H. Newberger, at ¶ 22 (“Our records reflect that Ms. Gargi Davé signed the Joinder and became party to the JPA . . . approximately three months after she was initially contacted; Ms. Giatri Davé signed her joindеr five months later . . . .“). Nor,
contrary to their argument, was the provision “hidden in a maze of fine print,” Walker-Thomas, 350 F.2d at 449; instead, it was written in the same font as the rest of the Agreement, and therefore easily visible to anyone reading it, see Nur v. K.F.C., USA, Inc., 142 F. Supp. 2d 48, 51 (D.D.C. 2001) (permissible to write arbitration provision in same font as other provisions of the contract). And, upon becoming a party to the JPA, the Davés indicated that they had “been represented by an attorney in the review of the [JPA] and the decision to [join the JPA], or . . . had the opportunity to do so, and elected not to do so.” See Davés’ JPA Joinders at 2.
Taken together, these facts demonstrate that the Davés had a fair opportunity to understand the terms of the JPA and its arbitration provision. See Olle, 569 F. Supp. 2d at 146 (that “the plaintiffs had fifteen days to review and cancel [an arbitration agreement]” indicated they had a meaningful opportunity to consider it); cf. Sullenberger v. Titan Health Corp., Civ. A. No. S-08-2285, 2009 U.S. Dist. LEXIS 46586, at *6 (E.D. Cal. May 20, 2009) (arbitration provision unconscionable where employer told individual that he “needed to sign all of the documents right then, in the employer‘s presence or he would not be hired” (quоtation omitted)). “That [the Davés] may not have comprehended the implications of” their decision to accede to the JPA and its arbitration provision “is irrelevant as to whether the agreement is valid.” Nur, 142 F. Supp. 2d at 51. Indeed, “[u]nder District of Columbia law, there is no requirement that [a party] explain or point out that an arbitration provision is included in the contract.” Adams v. Am. Residential Servs., Civ. A. No. 02-0410, 2003 U.S. Dist. LEXIS 26478, at *21-22 (D.D.C. May 8, 2003); accord Emeronye v. CACI Int‘l, Inc., 141 F. Supp. 2d 82, 86 (D.D.C. 2001) (“The fact that plaintiff does not recall signing the agreement, that she had other paperwork to complete, or that the arbitration provision was not explained to her is insufficient to render the
contract unenforceable.“). Accordingly, the Davés did not lack meaningful choice.
2.
Nor do the terms of the arbitration clause “unreasonably favor” the LG. To support their contention, the Davés allege the following: the arbitration provision together with its forum selection clause require all of the parties to the JPA to travel to Washington, D.C. to arbitrate their disputes; the costs of arbitration are prohibitive for the Davés relative to the LG; and the procedures that would be used during an arbitration of the Davés’ claims would limit their ability to obtain fair relief. See Davés’ Arbitration Opp‘n at 11-13.
The Davés believe that the arbitration provision, and its forum selection clause, unreasonably favors the LG because it requires the JPA parties to travel to the District of Columbia and therefore “litigate [any] dispute several thousand miles away” from their homes. But the Davés fail to explain how this fact favors the LG, when none of the LG‘s members reside in the District of Columbia -- indeed, each of the LG‘s members would have to travel to the District to participate in any arbitration. Moreover, even if the Davés could demonstrate that the District was more convenient for the LG members than for themselves, where a party alleges that a clause would result in “inconvenience,” it faces a “heavy burden of proof” to substantiate that argument. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 591-92 (1991); see also Commerce Consultants Int‘l, Inc. v. Vetrerie Riunite, S.p.A., 867 F.2d 697, 700 (D.C. Cir. 1989) (forum selection clause enforced despite serious doubts about the fairness of jurisdictional rules of discovery in the transferee court); Joyner v. Reno, 466 F. Supp. 2d 31, 37 (D.D.C. 2006) (forum selection clause enforced where statute of limitations had run in transferee forum). Here, the fact that the JPA may require parties from all over the world to travel to the District fails to
demonstrate that enforcement of the JPA‘s forum selection clause will create the kind of grave inconvenience needed to abrogate a contractual agreement.7
Nor can the Davés show unconscionability by observing that the LG‘s counsel is located in the District of Columbia -- the jurisdiction in which arbitration must take place. See Davés’ Arbitration Opp‘n at 11-12. The mere fact that LG has selected counsel located in the District of Columbia does not render the arbitration provision unconscionable -- the Davés too are free to select counsel located in the District and knowledgeable about District law.
The Davés’ allegation that the costs of arbitration are prohibitive fares no better. A “party seek[ing] to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive . . . bears the burden of showing the likelihood of incurring such costs.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 92 (2000); see also Adams, 2003 U.S. Dist. LEXIS 26478 at *29. The Davés contend that the “arbitration agreement[‘s] terms regarding costs are unreasonably favorable to . . . the LG.” Davés’ Arbitration Opp‘n at 13. But they offer no specific facts, as they must, to support this conclusion -- for example, “‘the expected cost difference between arbitration and litigation in court, and whether that cost differential is so substantial as to deter the bringing of claims.‘” Toledano v. O‘Connor, 501 F. Supp. 2d 127, 148-49 (D.D.C. 2007) (quoting Bradford v. Rockwell Semiconductor Sys., Inc., 238 F.3d 549, 556 (4th Cir. 2001)). Indeed, arbitration may be a less costly alternative to formal litigation. See
Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 123 (2001) (“Arbitration agreements allow parties to avoid the costs of litigation.“).8
Finally, the Court is not persuaded that the procedures of an arbitration panel would preclude the Davés from obtaining fair relief. Specifically, the Davés believe that the required confidentiality of arbitration proceedings will “prevent[] the terrorism victims . . . [from benefitting] from the efforts of others who challenge the contract and the arbitration agreement.” Davés’ Arbitration Opp‘n at 13; see also id. at 14 (“[O]ther U.S. nationals who are not parties to such arbitration proceedings will have no knowledge of these [completed arbitrations] because the arbitration provision requires all proceedings to be confidential.“). This is incorrect: the JPA does not require confidentiality among the parties to the Agreement. See JPA at ¶ 9 (“The Parties will not disclose any of the matters arising from this Agreement to any third party . . . .” (emphasis added)). Hence, all JPA parties may obtain the insight of parties who have challenged the JPA previously.9
Taking another tack, the Davés posit that because the LG may be “a repeat player in confidential proceedings, other parties who challenge the JPA will be at a disadvantage as the arbitrators will have a financial incentive to rule in favor of the LG.” Davés’ Arbitration Opp‘n at 14-15. In other words, the Davés worry that if multiple parties want to challenge the JPA, the arbitrators will rule consistently in favor of the LG, as it will be the source of future business. But even if parties who challenge the JPA cannot combine their actions in arbitration -- and there is nothing in the Agreement that limits joinder -- the D.C. Circuit has conсluded that the mere possibility of bias is insufficient to render arbitration inappropriate. See Cole v. Burns Int‘l Sec. Servs., 105 F.3d 1465, 1485 (D.C. Cir. 1997). And, to the extent that such bias may exist, the Cole court discounted the likelihood of it producing any harm: “it is unlikely that such corruption would escape the scrutiny of plaintiffs’ lawyers or appointing agencies like the [American Arbitration Association]. Corrupt arbitrators will not survive long in the business.” Id.10 For all these reasons, the Davés have not demonstrated that the arbitration panel‘s procedures unreasonably favor the LG.
B.
The Davés next assert that the LG fraudulently induced them to agree to the arbitration provision. According to them, the LG, “as their fiduciary legal representative,” “knowingly and fraudulently failed to disclose several facts which go to the heart of the arbitration agreement,” and which apparently led the Davés to accede to the JPA. Davés’ Arbitration Opp‘n at 17. The
Davés identify four material facts that the LG purportedly failed to disclose: the “serious conflicts of interest between Americans and non-U.S. nationals“; that Crowell & Moring‘s “interests were aligned against the American parties such as the Davés“; that “the arbitration clause is intertwined with a confidentiality clause which was designed by the LG and [Crowell & Moring] to perpetuate their fraud on the Americans who were never warned of their serious conflicts of interest“; and “the financial and legal costs of arbitration, such as the absence of joinder and discovery in [the] arbitration setting.” Id. at 17, 20, 22. These arguments do not convince the Court that arbitration is unwarranted.
A party can only avoid arbitration if the party demonstrates that the arbitration provision itself is invalid -- the party cannot rely on the unenforceability of the contract containing the provision. See Buckeye Check Cashing, 546 U.S. at 449; Prima Paint Corp., 388 U.S. at 403-04. Here, the Davés’ first two allegations of fraud -- that there was a conflict of interest between U.S. national and non-U.S. national parties to the JPA, and that Crowell & Moring‘s interest were aligned against the U.S. national parties -- are challenges to the Agreement as a whole. Indeed, they are the very same concerns that purportedly render the entire JPA unenforceable.7 And where, as here, an allegation may support a challenge to a contract generally, as well as to its arbitration provision specifically, the party must demonstrate that he was “fraudulently induced to specifically enter the arbitration clause.” Lok Tio v. Wash. Hosp. Ctr., Civ. A. No. 04-0701,
2004 U.S. Dist. LEXIS 23503, at *16 (D.D.C. Nov. 5, 2004). The Davés have not done so, and therefore cannot rely on their first two allegations of fraud to avoid the arbitration clause.8
Nor can they demonstrate fraud by alleging that “the arbitration clause is intertwined with a confidentiality clause which was designed . . . to perpetrate [a] fraud on the Americans who were never warned of their serious conflicts of interest.” Davés’ Arbitration Opp‘n at 22. A party “may not . . . establish a connection between the alleged fraud and the arbitration clause in particular merely by adding the allegation that the arbitration clause was part of the overall scheme to defraud.” Campaniello Imports, Ltd. v. Saporiti Italia, S.p.A., 117 F.3d 655, 668 (2d Cir. 1997). Rather, the party must aver “particularized facts specific to the . . . arbitration clause which indicate how it was used to effect the scheme to defraud.” Id. at 667. This is so because a contrary rule would permit a plaintiff to avoid arbitration whenever the plaintiff alleged fraud. See Garten v. Kurth, 265 F.3d 136, 144 (2d Cir. 2001). The Davés’ papers, however, are devoid of such particularized facts.
Finally, the Davés cannot demonstrate that the LG fraudulently induced them to agree to the arbitration provision by asserting that the LG failed to disclose the legal and financial costs of arbitration. The information about the arbitration procedures that the LG purportedly did not disclose to the Davés is presented on the face of the JPA. For example, the Davés object to the fact that “[t]he LG did not disclose to the U.S. nationals that they would be required to hire attorneys familiar with the law of the District of Columbia.” Davés’ Arbitration Opp‘n at 20. But
the JPA states that its terms, and any disputes arising under it, “shall be governed by District of Columbia substantive law, regardless of choice of law principles.” JPA at ¶ 16. And although the Davés contend that the LG “did not disclose that any attempts to pursue discovery in arbitration are allowed ‘solely at the discretion of the arbitration panel,‘” Davés’ Arbitration Opp‘n at 21 (quoting JPA at ¶ 14), they have themselves quoted the language of the JPA that reflects this requirement, see JPA at ¶ 14.9 Moreover, their allegation that the LG failed to disclose the expected costs of arbitration is similarly infirm, as it merely repackages the unconscionability argument the Court has already rejected. As the Court concluded above, the Davés have failed to demonstrate, at the least, that the expected costs of arbitration are significantly greater than the costs of litigation, and the likelihood of incurring such “significantly greater” costs. See Green Tree Fin. Corp., 531 U.S. at 92.
C.
The Davés lastly contend that they cannot be bound by the arbitration provision because “it conflicts with the terms of federal legislation and undermines serious federal interests.” Davés’ Arbitration Opp‘n at 1. Specifically, they assert that “compelling arbitration would subject U.S. citizens such as the Davés to private non-judicial review where judicial process is
foreclosed by federal law,” id. at 24 (emphasis omitted), and that the claims presented in the Davés’ California complaint “implicate strong fedеral policy interests [that] cannot be subject to arbitration,” id. at 28. Neither of these contentions convinces
According to the Davés, the
The Davés conclude that this immunity provision also covers claims settlement funds once the funds are in the hands of a claimant -- in effect, they read the immunity provision to last in perpetuity. But such a reading of the Act is anathema to the Secretary of State‘s conclusion, offered when designating entities to assist in the claims settlement process, that “property related
to the entities shall be accorded the immunity provided for in section 4(b) of the Libyan Claims Resolution Act.” Designation of Entities Under Section 4(a)(1) of the Libyan Claims Resolution Act of 2008, 73 Fed. Reg. 50,666, at 50,666 (Aug. 27, 2008) (emphasis added); see also
The Davés also assert that
if such claim or suit is against [either the United States or Libya] or [their] agencies or instrumentalities, or against officials, employees, or agents therefrom . . . , or (where the claim or suit implicates in any way the responsibility of any of the foregoing) against the other Party‘s nationals.
Claims Settlement Agreement, Art. I (emphasis added). By its plain terms, then,
The Davés’ argument that the claims asserted in their California complaint cannot be arbitrated because they implicate “strong federal policy interests” fares no better. As the prepotent interest, they identify “the federal policy in the treaty and statutes prohibiting judicial process to interfere with the [Foreign Claims Settlement Commission] funds distributed to the American citizens.” Davés’ Arbitration Opp‘n at 29; see also id. at 26 (“[F]ederal law prohibits
courts from changing or modifying the [Foreign Claims Settlement Commission‘s] decision on the ‘fair compensation’ to be awarded to the Davés.” (citing
There is nothing in the
“rights and entitlements” to which they could assert private contractual claims.“).11
* * * * *
To summarize, although the Davés raise numerous challenges to the enforceability of the JPA‘s arbitration provision, their arguments are unpersuasive. They have not demonstrated that the arbitration рrovision is unconscionable. Nor have they shown that they agreed to the provision as a result of fraud. And none of the foreign policy interests they articulate render arbitration inappropriate.12 Hence, the Davés must arbitrate the claims brought in their California action.
IV.
In light of the Court‘s determination that the Davés’ claims in their California complaint must be arbitrated in accordance with the JPA, the Court will turn to the LG‘s motion for a preliminary injunction. The LG seeks such relief “to preserve the status quo and prevent disruption in the administration of a common fund as well as the possible dissipation of those
funds.” LG‘s Mem. in Supp. of Mot. for Prelim. Inj. (“LG‘s PI Mem.“) [Docket Entry 6], at 1. Although there is a circuit split on whether preliminary injunctive relief is available when a court compels arbitration, compare Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 47 (1st Cir. 1986) (relief available), and Roso-Lino Beverage Distribs., Inc. v. Coca-Cola Bottling Co. of N.Y, Inc., 749 F.2d 124, 125 (2d Cir. 1984) (same), with Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Hovey, 726 F.2d 1286, 1291 (8th Cir. 1984) (relief unavailable), the Court need not address this competing precedent here. Even if preliminary injunctive relief is available, the LG cannot demonstrate that it is entitled to such relief.
A preliminary injunction is an extraordinary remedy, one that should be granted only when the moving party, by a clear showing, carries the burden of persuasion. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997); see also Munaf v. Geren, 128 S. Ct. 2207, 2219 (2008). To obtain a preliminary injunction, the moving party must demonstrate (1) that it would suffer irreparable harm without injunctive relief, (2) that it has a substantial likelihood of success on the merits, (3) that an injunction would not substantially harm the non-moving or other interested parties, and (4) that issuance of the injunction is in the public interest. See Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006); Cobell v. Norton, 391 F.3d 251, 258 (D.C. Cir. 2004).
A district court weighing whether to grant a preliminary injunction must “‘balance the strengths of the requesting party‘s arguments in each of the four required areas.‘” Chaplaincy of Full Gospel Churches, 454 F.3d at 297 (quoting CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 747 (D.C. Cir. 1995)). But “[a] movant‘s failure to show any irreparable harm is . . . grounds for refusing to issue a preliminary injunction, even if the other
three factors entering the calculus merit such relief.” Id. at 297; see also Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365, 375 (2008) (a plaintiff must “demonstrate that irreparable injury is likely in the absence of an injunction,” and not a mere “possibility“). Here, because the LG cannot show any irreparable harm without an injunction, the Court will begin its discussion with that dispositive factor.13
A.
The irreparable injury requirement erects a very high bar for a movant. See Varicon Int‘l v. Office of Pers. Mgmt., 934 F. Supp. 440, 447 (D.D.C. 1996). A plaintiff must show that it will suffer harm that is “more than simply irretrievable; it must also be serious in terms of its effect on the plaintiff.” Gulf Oil Corp. v. Dep‘t of Energy, 514 F. Supp. 1019, 1026 (D.D.C. 1981). “[T]he alleged injury must be certain, great, actual, and imminent.” Hi-Tech Pharmacal Co., Inc. v. Food & Drug Admin., 587 F. Supp. 2d 1, 11 (D.D.C. 2008) (citing Wis. Gas Co. v. Fed. Energy Regulatory Comm‘n, 758 F.2d 669, 674 (D.C. Cir. 1985) (per curiam)). And “economic loss does not, in and of itself, constitute irreparable harm.” Wis. Gas Co., 758 F.2d at 674. Rather, the movant must establish that the economic harm is so severe as
to “threaten[s] the very existence of [its] business.” Wis. Gas, 758 F.2d at 674; accord Experience Works, Inc. v. Chao, 267 F. Supp. 2d 93, 96 (D.D.C. 2003); Gulf Oil, 514 F. Supp. at 1025.
The irreparable harm here, according to the LG, would be the loss of the arbitration panel‘s ability to order preliminary injunctive relief.14 See Mots. Hr‘g Tr. at 38:13-14; see also id. 38:5-8 (injunction “would require the Davés to hold [their] funds in escrow pending determination of a preliminary injunction motion by the arbitrator“); id. at 40:4-9.15 But the arbitration panel will lose its ability to order preliminary injunctive relief only if the Davés dissipated the funds prior to the beginning of arbitration. And the LG only speculates that the Davés will dissipate the disputed funds -- it has provided no evidence that the Davés intend to do so. See id. 42:7-9 (“I acknowledge that with respect to that showing, we don‘t have very much.“). Irreparable harm, however, cannot rest on mere possibilities. See Winter, 129 S. Ct. at 375; see also Hi-Tech Pharmacal Co., 587 F. Supp. 2d at 11 (outcome must be “certain, great, actual, and imminent“). Moreover, the LG has not shown that even were the Davés to dissipate their awards, such an outcome would be irreparable. In other words, it has not demonstrated that the amount of funds the Davés could disperse would leave an insufficient amount to protect the LG‘s
financial interests. Nor has the LG shown that it would be unable to recover sufficient amounts from the Davés through a separate action. Absent such evidence, the Court cannot conclude that the purported harm is irreparable.
B.
Because the LG cannot demonstrate that it would suffer irreparable harm absent an injunction, the Court will not engage in a lengthy analysis of the remaining factors. See Chaplaincy of Full Gospel Churches, 454 F.3d at 297 (“A movant‘s failure to show any irreparable harm is . . . grounds for refusing to issue a preliminary injunction, even if the other three factors entering the calculus merit such relief.“). But given that the Court has concluded the Davés must arbitrate their claims asserted in their California complaint, it would appear that the LG has demonstrated a likelihood of success on the merits animating this action.16
The balance of harms is of little relevance here: it is for the arbitrator to determine whether the Davés must share their Foreign Claims Settlement Commission award under the terms of the JPA, and hence the Court cannot assess whether an injunction would harm the Davés. And the LG has not shown that the public interest weighs in favor of an injunction. The LG contends that “an injunction would “preserve the meaningfulness of the arbitration process”
by ensuring the Davés do not dissipate the disputed funds. LG‘s PI Reply at 15. But the Court has already concluded that the LG has offered no evidence that that would happen. Therefore, because the LG has not shown that the status quo will be threatened absent an injunction, there is no threat to that public interest.
* * * * *
The LG has not demonstrated it will suffer irreparable harm without an injunction, a prerequisite for the extraordinary relief it seeks. This absence is fatal to its request for a preliminary injunction. See Chaplaincy of Full Gospel Churches, 454 F.3d at 297.
V.
For the foregoing reasons, the Court will deny the Davés’ motion to transfer or to stay, will grant the LG‘s motion to compel arbitration, and will deny the LG‘s motion for a preliminary injunction. A separate Order to that effect was issued on May 7, 2010.
/s/
JOHN D. BATES
United States District Judge
Dated: May 12, 2010