Attia v. Oura Ring, Inc.

• Court: District Court, N.D. California
• Decided: April 1, 2024
• Docket: 4:23-cv-03433
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 PETER ATTIA, Case No. 23-cv-03433-HSG

8 Plaintiff, ORDER DENYING DEFENDANTS’ MOTION TO COMPEL 9 v. ARBITRATION AND TO DISMISS OR, IN THE ALTERNATIVE, STAY 10 OURA RING, INC., et al., PROCEEDINGS 11 Defendants. Re: Dkt. No. 16

12 13 Pending before the Court is a motion to compel arbitration filed by Defendants Ouraring, 14 Inc. and Oura Health Ltd. Dkt. No. 16. The Court finds this matter appropriate for disposition 15 without oral argument and the matter is deemed submitted. See Civil L.R. 7-1(b). For the reasons 16 discussed below, the Court DENIES Defendants’ motion to compel arbitration. 17 I. BACKGROUND 18 On July 10, 2023, Plaintiff Peter Attia filed a complaint against Ouraring. Inc. (“Oura”) 19 and Oura Health Oy (“Oura Oy”) (collectively, “Defendants”) based on Defendants’ alleged 20 failure to compensate him for advisory work he performed for the companies.1 See Dkt. No. 1 21 (“Compl.”). Plaintiff is a “renowned” physician who focuses on “the applied science of 22 longevity” and has expertise in “nutritional interventions, exercise physiology, sleep physiology, 23 emotional and mental health, and pharmacology to increase lifespan, while simultaneously 24 cultivating and improving a healthy quality of life.” Compl. ¶ 11. Oura and Oura Oy are affiliated 25 Finnish companies (with Oura Oy acting as Oura’s parent company) that developed the Oura 26 Ring, which is “a piece of wearable technology that uses sensors to track health metrics,” 27 1 including sleep metrics. Id. ¶ 15. Plaintiff first met with Harpreet Singh Rai (“Rai”) – who began 2 serving around that time as president of the two companies – in December 2016 for a discussion 3 about Plaintiff’s possible involvement with the Oura Ring product. Id. ¶ 21. Plaintiff alleges that 4 following that conversation, he began serving as medical advisor to Defendants, and provided a 5 host of useful services, such as beta testing the Oura Ring (id. ¶¶ 31–32), promoting the Oura Ring 6 in the scientific community and on social media (id. ¶¶ 54–58), recommending new product 7 features and modifications (id. ¶ 64), connecting Defendants with business leaders (id. ¶ 54), and 8 suggesting doctors who could perform validation studies of the product (id. ¶ 34). 9 Plaintiff alleges that he provided these and other services throughout 2017 and 2018 10 without any written agreement formalizing the arrangement, though he repeatedly requested that 11 one be drafted. Compl. ¶¶ 35, 37, 44. Defendants supposedly “delayed circulating a written 12 document memorializing the agreement, but reiterated their promises to do so and to fairly 13 compensate [Plaintiff]” for his advisory services.” Id. ¶ 37. In October 2018, after Plaintiff again 14 raised the issue of a written agreement, Rai emailed him with an update that he “received approval 15 from the board to issue [Plaintiff] [advisory] options equal to [Plaintiff’s] previous total 16 investments.” Id. ¶ 46. That year, in April and October 2018, Plaintiff had made investments in 17 Oura Oy, facilitated in each instance by an Investment Agreement and an Adherence and 18 Amendment Agreement, which bound Plaintiff to the terms of the Oura Health Shareholders 19 Agreement containing, among other things, an arbitration clause. Dkt. No. 28-5, Declaration of 20 Dr. Peter Attia (“Attia Decl.”) ¶¶ 19–25. In the October 18 email, Rai explained that the package 21 approved for Plaintiff was more generous than some others because Plaintiff “ha[d] been so 22 helpful” and Defendants “need[ed] [his] expertise more than ever.” Id. Based on Rai’s 23 representations, Plaintiff alleges that he continued to work, “believing that Oura and he had 24 reached a separate agreement that he would be compensated via advisory options to purchase 25 discounted stock in Oura.” Compl. ¶ 47. 26 On January 24, 2019, Rai emailed Plaintiff a copy of Oura Health Oy/Oura Ring Inc.’s 27 Adviser Equity Plan 2018 US Stock Option Agreement (“Advisor Agreement”), which provided 1 share in conjunction with his provision of services in a ‘Medical Advisory role for Oura Ring.’” 2 Id. ¶ 49. Plaintiff signed and returned the agreement, and continued serving in his medical 3 advisory role. Nearly two years later, Plaintiff reached out to Rai to explore exercising his stock 4 options early (though he did not ultimately do so). Id. ¶ 66. In his March 4, 2021 reply, Rai stated 5 the “advisory agreement [was] for 20,000 options,” which he estimated to be worth “1.3 million 6 USD.” Id. In January 2022, after Rai’s departure from the companies, Plaintiff contacted the 7 Chairman of the Board of Oura in order to exercise his options, which by that point had fully 8 vested. After many months of unresponsiveness, Oura’s general counsel allegedly advised 9 Plaintiff that “Oura would not honor the options contract, but proposed it would provide 10 unspecified lesser monetary compensation for past efforts if Dr. Attia would agree to continue to 11 serve as an advisor.” Id. ¶ 74. 12 Based on these events, and to recover the amount allegedly due to him for his advisory 13 services, Plaintiff sued for breach of contract, quantum meruit, promissory estoppel, and negligent 14 misrepresentation. Id. ¶¶ 75–98. Defendants, on September 18, 2023, filed a motion to compel 15 the case to arbitration. Dkt. No. 16 (“Mot.”). They mainly argue that because Plaintiff agreed to 16 arbitrate the transfer of options when he invested as a shareholder, the present dispute must be 17 arbitrated because the form of compensation alleged to be owed to him for his medical advisory 18 services is also options. The matter is now fully briefed. Dkt. Nos. 28 (“Opp.”), 29 (“Reply”). 19 II. LEGAL STANDARD 20 Written agreements to settle commercial disputes by arbitration are subject to the Federal 21 Arbitration Act (“FAA”). The FAA, 9 U.S.C. § 1 et seq., establishes that a written arbitration 22 agreement is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in 23 equity for the revocation of any contract.” 9 U.S.C. § 2; see also Moses H. Cone Mem’l Hosp. v. 24 Mercury Constr. Corp., 460 U.S. 1, 24 (1983) (noting federal policy favoring arbitration). The 25 FAA allows that a party “aggrieved by the alleged failure, neglect, or refusal of another to arbitrate 26 under a written agreement for arbitration may petition any United States district court . . . for an 27 order directing that . . . arbitration proceed in the manner provided for in such agreement.” 9 1 In determining whether to compel arbitration, the court must consider the two “gateway” 2 questions of arbitrability, namely whether a valid arbitration agreement exists between the parties, 3 and whether the agreement covers a particular controversy. Henry Schein, Inc. v. Archer & White 4 Sales, Inc., 139 S. Ct. 524, 529 (2019). However, even these “gateway” questions can be 5 delegated to an arbitrator where there is “clear and unmistakable” evidence that the parties 6 contracted for that. See Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015). Because an 7 “agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party 8 seeking arbitration asks the federal court to enforce,” a court may not decide gateway issues if 9 they have been clearly delegated. Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 69 (2010). 10 That notwithstanding, and even when there is a valid delegation clause, “the court 11 determines whether a valid arbitration agreement exists” before referring the matter to an 12 arbitrator. Henry Schein, Inc., 139 S. Ct. at 530; see also Caremark, LLC v. Chickasaw Nation, 43 13 F.4th 1021 (9th Cir. 2022) (“[T]he the Supreme Court clarified that contract-formation issues are 14 always matters for judicial resolution” and “explained that the issues reserved to the courts for 15 decision always include whether an arbitration agreement was formed, even in the presence of a 16 delegation clause.” (internal citations omitted) (emphasis in original)). The party seeking to 17 compel arbitration bears the burden of proving by a preponderance of the evidence that there was 18 such an agreement. Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279, 1283 (9th Cir. 19 2017). Where the existence of an arbitration agreement encompassing the claim at bar is at issue, 20 the court applies “general state-law principles of contract interpretation,” without a presumption in 21 favor of arbitrability. Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733, 742 (9th Cir. 2014) 22 (internal quotation omitted). 23 III. DISCUSSION 24 Defendants contend that when Plaintiff signed the Adherence Agreement, which 25 incorporated the Shareholders Agreement, he agreed to arbitrate this dispute with Oura Oy and to 26 commit the threshold questions of arbitrability to an arbitrator with a clear and unmistakable 27 delegation clause. See generally Mot. They further argue that even if Plaintiff did enter into an 1 to arbitration. Id. Plaintiff disagrees, arguing that Defendants’ analysis improperly frames the 2 arbitration agreement contained in the Shareholders Agreement as operative, but that in fact the 3 parties never formed an agreement to arbitrate claims encompassing Plaintiff’s current dispute in 4 either agreement. See Opp. The Court agrees with Plaintiff that his agreement to invest and his 5 agreement to advise were “separate and not interrelated,” and that Plaintiff and Oura Oy never 6 formed an agreement to arbitrate the claims at issue in this lawsuit. Johnson v. Walmart Inc., 57 7 F.4th 677, 683 (9th Cir. 2023). 8 A. The Adherence Agreement and Shareholders Agreement 9 In their motion, Defendants presuppose that the Shareholders Agreement – “the contract in 10 which the arbitration provision appeared” – is “the ‘relevant contract between the parties’ and 11 generally governed the subject matter of the parties’ dispute.” Perez v. Discovery Bank, 74 F.4th 12 1003, 1010 (citing and quoting Smorowski v. Domino’s Pizza LLC, CV 20-10739-MWF, 2021 WL 13 4440167, at *4 (C.D. Cal. July 23, 2021)). But Plaintiff is correct that recent Ninth Circuit 14 authority confirms that “where the parties have entered into multiple contracts, it is not sufficient 15 for a party moving to compel arbitration to merely point to an arbitration agreement between the 16 parties relating to one of those transactions,” and must instead “demonstrate that the parties 17 formed an agreement to arbitrate the particular claims at issue.” Opp. at 11 (discussing Perez v. 18 Discovery Bank and Johnson v. Walmart Inc.). While Defendants argue that the Adherence and 19 Shareholders Agreements govern the claims at issue, the Court finds “that the existence of an 20 arbitration agreement [governing the subject matter of the parties’ dispute]” is contested, meaning 21 that “the presumption in favor of arbitrability does not apply.” Johnson, 57 F.4th at 681. 22 To answer whether Plaintiff and Oura Oy formed an agreement to arbitrate the claims at 23 issue here when they entered into the Adherence Agreement, which in turn incorporated the 24 Shareholders Agreement (“SHA”), ‘[the Court] use[s] general state-law principles of contract 25 interpretation.” Johnson, 57 F.4th at 681 (quoting Goldman, Sachs & Co, 747 F.3d at 743). In 26 California, “a contract must be so interpreted as to give effect to the mutual intention of the parties 27 at is existed at the time of contracting.” Perez, 74 F.4th at 1010 (quoting Revtich v. DIRECTTV, 1 “words of a contract [] their usual and ordinary meeting” and must “interpret the meaning of the 2 individual arbitration clauses ‘in connection with the rest of the agreement’ and ‘not detached 3 portions thereof.’” Johnson, 57 F.4th at 682 (quoting Int’l Bhd. Of Teamsters v. NASA Servs., 4 Inc., 957 F.3d 1038, 1042 (9th Cir. 2020)). 5 The arbitration clause contained in the SHA to which Plaintiff consented to be bound when 6 he bought shares of Oura Oy and executed the Adherence Agreements in April and October 2018 7 states that:

8 Any dispute, controversy or claim arising out of or in connection with this Agreement or 9 the transactions contemplated herein, or the breach, termination or validity thereof shall be finally and exclusively settled by arbitration in accordance with the Arbitration Rules of 10 the Finland Chamber of Commerce.

11 Dkt. No. 16-1, Declaration of Avonte Campinha-Bacote (“Campinha-Bacote Decl.”), Exhibit B 12 (SHA § 13.12). 13 Defendants point out that the stated “purpose” of the SHA is “to agree, among other things, 14 on matters relating to the administration of the Company and the Shareholders’ rights and 15 obligations as shareholders of the Company, including terms and conditions relating to the 16 transfer of Equity Securities.” Dkt. No. 16-1, Exhibit B (“SHA”) at 46 (Recital D) (emphasis 17 added). They further stress that the SHA defines “Equity Securities” as “the Shares and any 18 securities directly or indirectly convertible into or exchangeable for Shares, as well as an option or 19 any other right to subscribe for, purchase or otherwise acquire Shares.” Id. at 49 (§ 1.25, 20 definition of “Equity Securities”) (emphasis added). Putting the pieces together, Defendants 21 contend that because the Advisor Agreement contemplates compensation with options and 22 because the SHA governs the transfer of options, the arbitration clause contained in the SHA 23 controls this case. Mot. at 13–15. 24 Considering the SHA holistically, as it must, the Court is not persuaded that an agreement 25 governing Plaintiff’s shareholder relationship also governs his advisory one. The plain language 26 of the SHA specifies that it delineates “Shareholders’ rights and obligations as shareholders of the 27 Company.” SHA, Recital D (emphasis added). In other words, it does not purport to govern all 1 the one described in Johnson v. Walmart Inc., which also dealt with two different transactions 2 between the same two parties. There, the court determined that an arbitration clause contained in 3 the Terms of Use that Johnson agreed to when making an online purchase governed his 4 relationship with “Walmart Sites,” but could not be read to govern his in-store engagement with 5 Walmart. Johnson, 57 F.4th at 682. Since the plaintiff’s dispute arose out of an in-store (not an 6 online) purchase, the Court concluded that “the language and subject matter of the contract make 7 clear that by agreeing to the Terms of Use, Johnson did not assent to arbitrate claims that might 8 arise out of a separate, in-store purchase.” Id. The situation here is comparable: Plaintiff agreed 9 to arbitrate claims arising from his relationship as a shareholder, but not those arising in other 10 contexts. 11 Even if it were otherwise, the provisions of the SHA that govern the transfer of equity 12 securities (including options) almost exclusively impose rights and restrictions on shareholders’ 13 transfer of those investments. See SHA § 5 (Transfer of Equity Securities). The SHA “is largely 14 silent as to the terms of conditions placed on Oura [Oy] regarding the issuance or transfers of 15 equities,” and where “issuance” is discussed, it is only “to describe shareholders’ rights arising 16 from such issuances.” Opp. at 17 (citing SHA § 2.1) (emphasis in original). That “any and all 17 (i.e., 100%) of the issuance of any and all options [is] governed by the [SHA],” Reply at 7, does 18 not change the fact that the plain language of the agreement governs what shareholders can and 19 cannot do with their equity securities (including options) after purchase, and does not provide any 20 guidance about when and under what circumstances Defendants issue options as compensation for 21 advisory services. Based on this, the Court cannot conclude that Plaintiff and Oura Oy’s mutual 22 intent upon executing the SHA was for that agreement to govern the future issuance (or non- 23 issuance) of options to Plaintiff for advisory services. 24 Ultimately, the Court views the agreements governing Plaintiff’s decision to invest and his 25 decision to advise as independent. The indisputable gravamen of the current suit is Defendants’ 26 alleged failure to compensate Plaintiff for the advisory services he provided. Though Defendants 27 try to paint this as a suit about options and argue that Plaintiffs’ references to consulting are 1 compensation. Analytically, the form of compensation is incidental: Defendants could have 2 promised to pay Plaintiff in cash or real estate or baseball cards, and his central complaint would 3 be the same. The point is that the agreements bear on fundamentally unrelated subject matters, 4 were negotiated separately, and involve different consideration. The fact that they happen to both 5 say the word “options” and involve the same parties is insufficient to make these independent 6 agreements interrelated. 7 Therefore, the Court disagrees with Defendants that “it would be absurd not to find that 8 [Plaintiff] and Oura Health Oy agreed to arbitrate” Plaintiff’s claims related to the advisor 9 agreement, Reply at 11, and concludes the record clearly establishes that the parties formed no 10 such agreement when they executed the Adherence Agreements incorporating the SHA. 11 B. The Advisor Agreement 12 The Court must next consider whether Plaintiff and Oura Oy formed an agreement to 13 arbitrate the claims involved in this case when they allegedly agreed that Plaintiff would provide 14 paid advisory services. The Court concludes that they did not. 15 As a preliminary matter, the Court acknowledges that the parties do not see eye to eye 16 about whether they ever even formed a contract to pay Plaintiff for his advisory services. Plaintiff 17 alleges they “reached an agreement that was memorialized in their various written 18 communications (including the Advisor Agreement),” Opp. at 20 n.7, while Defendants 19 “vehemently dispute” that a contract was formed, since the Advisor Agreement was “never 20 authorized or approved by Oura Health Oy’s (or Ouraring Inc.’s) Board of Directors, and was 21 never executed by anyone at either company,” Mot. at 15. Getting to the bottom of that question 22 is a task for another day: at this stage in the litigation, Defendants concede – as they must – that 23 the allegations must be construed in the light most favorable to the nonmoving party, and argue 24 that even if the Advisor Agreement did bind the parties, it also provides for arbitration. Id. 25 Defendants rest their argument on the fact that the Advisor Agreement purportedly states 26 that “the Options and Shares issued to [Plaintiff] pursuant to an exercise hereof are subject to . . ., 27 and [sic] the terms and provisions (including rights of first refusal) of that certain shareholders 1 Share transfer restrictions and co-sale obligations set for in Section 9 thereof.” Mot. at 15. 2 Defendants argue that because the Advisor Agreement subjects Plaintiff to the terms and 3 provisions the SHA, Plaintiff is bound by the arbitration clause contained within it. To do so, 4 Defendants (improperly) omit a key part of the quoted text, which actually states that Plaintiff 5 agrees that “the Options and Shares issued to [him] . . . are subject to restrictions on transfer as 6 contained in . . . the terms and provisions” of the “17 April 2015” shareholders agreement. See 7 Campinha-Bacote Decl., Ex. E (emphasis added). Defendants presumably chose to omit the 8 italicized language because its inclusion unquestionably cabins the Advisor Agreement’s 9 incorporation of the SHA to the terms and provisions relating to restrictions on the transfer of 10 options and shares. But even this narrower incorporation is suspect: Plaintiff is correct that 11 because the Advisor Agreement references “that certain shareholders agreement dated 17 April 12 2015,” and because – as Defendants concede, see Campinha-Bacote Decl. ¶ 15 – no such 13 document exists, Defendants’ effort to incorporate the operative September 2016 SHA (whether in 14 part or in whole) is ineffective since the reference to it is not “clear and unequivocal.” Perez v. 15 DirecTV Grp. Holdings, LLC, 251 F. Supp. 3d, 1328, 1338 (C.D. Cal. 2017), aff’d sub nom. Perez 16 v. DirecTV, LLC, 740 F. App’x 560 (9th Cir. 2018) (internal quotations omitted). The Court 17 therefore has no trouble finding that to the extent the Advisor Agreement incorporated any 18 provisions of the SHA, it did not incorporate any SHA provisions unrelated to “restrictions on 19 transfer,” such as the arbitration clause. 20 Accordingly, the Court concludes that Plaintiff and Oura Oy did not form an agreement to 21 arbitrate this dispute when they allegedly agreed for Plaintiff to provide paid advisory services. 2 22 * * * * * 23

24 2 For purpose of this analysis, the Court assumes for sake of argument but does not hold that the Advisor Agreement is the relevant contractual instrument. However, its conclusion would be no 25 different if the Court found, arguendo, that the Advisor Agreement plus the relevant email communications between Plaintiff and Rai constituted the contract. Excepting the Advisor 26 Agreement, those email communications do not themselves contain any reference to arbitration clauses, nor do they incorporate any document containing an arbitration clause. In other words, so 27 long as the Court assumes, as it must, that the parties reached an agreement for services (whether 1 Since the Court finds that Plaintiff did not “form an agreement to arbitrate [the advisor 2 agreement claims,]... [the SHA and the Advisor Agreement] [do] not require [Plaintiff] to 3 arbitrate [his advisory agreement] claims.” Perez, 74 F.4th at 1011; see also AT&T Techs., Inc. v. 4 Comme ns Workers of Am., 475 U.S. 643, 649 (1986) (since “arbitration is a matter of contract[,] . 5 .. aparty cannot be required to submit to arbitration any dispute which he has not agreed so to 6 || submit.” (internal quotation marks and citations omitted)). Defendants’ motion to compel 7 || arbitration is DENIED.’ 8 || IV. CONCLUSION 9 The Court DENIES Defendants’ motion to compel arbitration. Dkt. No. 16. 10 The Court further SETS a telephonic case management conference on April 16, 2024, at 11 2:00 p.m. and DIRCTS the parties to submit a joint case management statement by April 9, 2024. 12 || All counsel shall use the following dial-in information to access the call: g 13 Dial-In: 888-808-6929 14 Passcode: 6064255 3 15 All attorneys and pro se litigants appearing for a telephonic case management conference a 16 are required to dial in at least 15 minutes before the hearing to check in with the courtroom

17 deputy. For call clarity, parties shall NOT use speaker phone or earpieces for these calls, and 18 where at all possible, parties shall use landlines. 19 IT IS SO ORDERED. 20 || Dated: 4/1/2024 21 Alayed 3 |p HAYWOOD S. GILLIAM, JR. 22 United States District Judge 23 24 25 26 || 3 Given that the Court found that Plaintiff and Oura Oy never reached an agreement to arbitrate the 7 claims at issue in this case, it need not address the parties’ arguments as to whether the delegation clause in the SHA is “clear and unmistakable,” whether the “gateway” issues under the FAA have 2g || been satisfied, or whether Oura can be compelled to arbitration as a non-party to the shareholders agreements.