Blash v. BCS Placements, LLC

CourtDistrict Court, S.D. New York
DecidedMay 31, 2020
Docket1:19-cv-06321
StatusUnknown

This text of Blash v. BCS Placements, LLC (Blash v. BCS Placements, LLC) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Blash v. BCS Placements, LLC, (S.D.N.Y. 2020).

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

W. Bradford Blash, et al., Plaintiffs, 19-cv-6321 (AJN) ~ OPINION & ORDER BCS Placements, LLC, et al., Defendants.

ALISON J. NATHAN, District Judge: Plaintiffs W. Bradford Blash and Theodore M. Kerr, Jr. initiated this action, invoking the Court’s diversity jurisdiction, to enjoin Defendants BCS Placements, LLC and Keith Butler from arbitrating claims they claim are not arbitrable and to obtain other related declaratory relief. Now before the Court is Plaintiffs’ motion to preliminarily enjoin the arbitration at issue. For the reasons that follow, Plaintiffs’ preliminary injunction motion is DENIED. I. BACKGROUND A. Factual Background! Plaintiffs owned a controlling interest in Crossbeam Holdings, LLC until it was dissolved on December 28, 2018. Dkt. No. 7-2 J 4, 6. Defendant Keith Butler is the Managing Member of Defendant BCS Placements, LLC. Dkt. No. 28 4 3. On November 7, 2006, WFHG Management, LLC, which later became Crossbeam, entered into a placement agreement with BCS. Dkt. No. 7-2 97; Dkt. No. 28 49. The 2006 agreement was amended on June 1, 2007 to change the compensation payable under it but otherwise remained unchanged. Dkt. No. 7-2 4 8;

| These facts are drawn from the parties’ submissions on the preliminary injunction motion and, unless otherwise noted, are undisputed.

Dkt. No. 28 ¶ 19. Pursuant to this agreement, BCS was to obtain investors for a real estate fund operated by Crossbeam. Dkt. No. 7-2 ¶ 9; Dkt. No. 28 ¶ 10. Section 19 of this agreement is an arbitration clause, which provides that: Each of the parties hereto has been induced to enter into this letter agreement in reliance upon the waivers of this Section 19, and without those waivers no party would have entered into this letter agreement. IT IS THE DESIRE AND INTENTION OF EACH OF THE PARTIES HERETO TO AGREE UPON A MECHANISM AND PROCEDURE UNDER WHICH ANY DISPUTES OR DISAGREEMENTS UNDER OR RELATING TO THIS LETTER AGREEMENT WILL BE RESOLVED IN A PROMPT AND EXPEDITIOUS MANNER. THE PARTIES INTEND THAT SUCH RAPID MECHANISM AND PROCEDURE BE UTILIZED TO RESOLVE ANY AND ALL DISPUTES AND DISAGREEMENTS UNDER OR RELATING TO THIS LETTER AGREEMENT. ACCORDINGLY, THE PARTIES HERETO AGREE THAT ALL CLAIMS, DISPUTES AND OTHER MATTERS IN QUESTION ARISING OUT OF, OR RELATING TO, THIS LETTER AGREEMENT OR THE PERFORMANCE THEREOF, INCLUDING QUESTIONS AS TO WHETHER A MATTER IS GOVERNED BY THIS ARBITRATION CLAUSE, FOLLOWING THE EXPIRATION OF A TWENTY (20) DAY PERIOD, WHICH PERIOD SHALL COMMENCE UPON NOTICE OF SUCH DISPUTE FROM ONE PARTY TO THE OTHER IN ACCORDANCE WITH SECTION 16 ABOVE AND DURING WHICH THE PARTIES SHALL NEGOTIATE IN GOOD FAITH TO RESOLVE SUCH DISPUTE, MAY BE SUBMITTED TO BINDING ARBITRATION IN A LOCATION IN MONTGOMERY COUNTY, MARYLAND, BEFORE A SINGLE ARBITRATOR SELECTED BY THE PARTIES PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASOCIATION THEN IN EFFECT FOR THE ARBITRATION OF COMMERCIAL DISPUTES, EXCEPT THAT DISCOVERY SHALL BE GOVERNED BY TITLE 9 OF THE MARYLAND CODE OF CIVIL PROCEDURE. THE ARBITRATOR SHALL AWARD FEES AND EXPENSES (INCLUDING THE REASONABLE ATTORNEYS’ FEES) TO THE PREVAILING PARTY. THE AWARD RENDERED BY THE ARBITRATOR SHALL BE FINAL AND JUDGMENT MAY BE ENTERED IN ACCORDANCE WITH APPLICABLE LAW AND IN ANY COURT HAVING JURISDICTION THEREOF. THE EXISTENCE AND RESOLUTION OF THE ARBITRATION SHALL BE KEPT CONFIDENTIAL BY THE PARTIES AND SHALL ALSO BE KEPT CONFIDENTIAL BY THE ARBITRATOR. NO ARBITRATION PROCEEDINGS HEREUNDER SHALL BE BINDING UPON OR IN ANY WAY AFFECT THE INTERESTS OF ANY PARTY OTHER THAN THE PARTY SEEKING RELIEF OR THE OTHER PARTY WITH RESPECT TO SUCH ARBITRATION. ANY ARBITRATOR UNDER THIS SECTION 19 SHALL BE AN ATTORNEY HAVING AT LEAST TEN (10) YEARS EXPERIENCE (IN THE TWENTY (20) YEARS IMMEDIATELY PRECEDING THE ARBITRATION PROCEEDING) IN LEGAL MATTERS PERTAINING TO THE INTERPRETATION AND IMPLEMENTATION OF THE LAWS OF THE STATE OF NEW YORK RELATING TO BROKERAGE AND/OR PLACEMENT AGREEMENTS. THE PROVISIONS OF THIS SECTION 19 SHALL NOT BE INTERPRETED TO PRECLUDE THE RIGHT OF A MEMBER TO OBTAIN EQUITABLE RELIEF TO ENFORCE HIS, HER OR ITS RIGHTS UNDER THIS AGREEMENT EITHER IN A COURT OF COMPETENT JURISDICITON OR IN AN ARBITRATION PROCEEDING PURSUANT TO THIS SECTION 19. Dkt. No. 7-3 § 19. Crossbeam and BCS subsequently entered into another placement agreement on February 1, 2011. Dkt. No. 7-2 ¶ 10; Dkt. No. 28 ¶ 29; see also Dkt. No. 7-5. Pursuant to this agreement, BCS was to sell limited partnership interests in a new fund being offered by Crossbeam. Dkt. No. 7-2 ¶ 10; Dkt. No. 28 ¶ 30. This agreement does not contain an arbitration clause. See Dkt. No. 7-5. On April 25, 2013, Crossbeam informed BCS that it was terminating its engagement due to BCS’s purported failure to provide evidence that it was appropriately registered and compliant with federal and state laws and regulations. Dkt. No. 7-2 ¶¶ 11–12 ; Dkt. No. 28 ¶ 64; see also Dkt. No. 7-6. BCS contests both that it was obligated to provide such evidence and that it failed to do so. Dkt. No. 28 ¶ 65. On November 11, 2015, Mr. Butler sent a letter to Mr. Kerr demanding certain placement fees he said Crossbeam owed BCS. Dkt. No. 7-2 ¶ 16; Dkt. No. 28 ¶ 69; see also Dkt. No. 7-7. On December 28, 2018, Crossbeam was dissolved. Dkt. No. 7-8. Having obtained no resolution of various disputes with Crossbeam, including the payment dispute noted in its November 2015 letter, BCS filed a demand for arbitration with the American Arbitration Association on April 22, 2019. Dkt. No. 28 ¶ 70; see also Dkt. No. ¶ 7-9. The demand describes BCS’s claims against Crossbeam as Failure to pay fees due to BCS Placements under the terms of its contract. Taking actions that were premised knowingly on the false accusation that BCS was not registered as a broker dealer with the SEC, FINRA, and the New York State. Bringing in another banker, Kirby, to work on an assignment that was exclusive to BCS. Defaming BCS in the eyes of New York Life and other insurance companies that were prime clients for BCS’s business. Failure by the majority of the partners of Crossbeam, including New York Life, to control the abusive behavior of their partner Richard Devaney. Dkt. No. 28 ¶ 71. Defendants describe these claims as “breaches of various obligations” under the 2006 agreement. Id. ¶ 72. Plaintiffs, on the other hand, argue that these claims either do not arise under the 2006 agreement, but rather arise under the 2011 agreement—which does not contain an arbitration clause—or are time-barred. Dkt. No. 7-1 at 7–8. B. Procedural Background Plaintiffs filed their Complaint on July 8, 2019. See Dkt. No. 1. In Plaintiffs’ Complaint, they seek to enjoin Defendants from arbitrating the claims asserted in the arbitration because, as discussed above, they assert that these claims do not arise under the 2006 agreement or, if they do, are time-barred. Plaintiffs filed the preliminary injunction now before the Court on July 22, 2019 to preliminarily enjoin Defendants from arbitrating their claims. See Dkt. No. 7. On November 1, 2019, the Court held a conference on the preliminary injunction motion. See Nov. 1 Conf. Tr. At that conference, Plaintiffs requested discovery from Defendants on the nature of their claims. See id. at 2:23–4:23. Defendants argued that no such discovery was necessary because there was a threshold legal question regarding who should decide questions of arbitrability that did not require the resolution of any factual disputes to resolve. Id. at 11:6–12. On the basis of that representation, the Court declined to permit any additional discovery or hold an evidentiary hearing and determined that it would resolve the preliminary injunction motion on the papers, unless doing so required resolving a factual issue.2 Id. at 12:16–21. Because the

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Blash v. BCS Placements, LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/blash-v-bcs-placements-llc-nysd-2020.