Discover Growth Fund, LLC v. GBT Technologies, Inc.

Opinion

IN THE DISTRICT COURT OF THE VIRGIN ISLANDS DIVISION OF ST. THOMAS AND ST. JOHN

DISCOVER GROWTH FUND, LLP, AND JOHN ) KIRKLAND, ) ) Plaintiffs, ) Case No. 3:20-cv-00012-RAM-RM ) v. ) ) GBT TECHNOLOGIES, INC., ) ) Defendant. ) )

ORDER THIS MATTER is before the Court upon Plaintiffs’ Application to Confirm Arbitration Award (Appl.) (ECF No. 1) and Defendant’s Motion to Confirm the Arbitration Award; Address the Outstanding Issue Regarding Whether Plaintiffs’ Rights are Subordinated to Other Creditors and, thereafter, Oversee a Commercially Reasonable Foreclosure Sale (Mot.) 1 (ECF No. 28). These matters are fully briefed and ripe for adjudication. For the reasons stated below, the Court will grant Plaintiffs’ application and grant, in part, and deny, in part, Defendant’s motion. I. FACTUAL AND PROCEDURAL BACKGROUND This matter arises from a demand for arbitration initiated by Defendant (formerly known as Gopher Protocol, Inc.) against Plaintiff Discover Growth Funds, LLC (Discover Growth), pursuant to a Securities Purchase Agreement executed between Defendant and Gopher said Plaintiff on December 3, 2018. Appl. at 4 and ECF No. 6. Prior to the completion of the Protocol, Inc. v. Discover Growth Fund, LLC arbitration proceedings, Defendant filed a complaint against Discover Growth ( , Case Number 2:19-cv-01039-JCM-BNW) in the See District Court of Nevada on June 18, 2019, seeking declaratory and injunctive relief regarding the sale of Defendant’s assets . Complaint (2:19-cv-01039-JCM-BNW (D. Nev.), ECF No. 1). 1 The record shows that, on March 30, 2022, the Court entered an Order (ECF No. 52), setting the matter for in- person hearing before the Court on April 8, 2022. It appears, in the absence of a subsequent docket entry, that a hearing never was held, and the Court is unable to recall, at this time, the reason therefor. Despite the order, Case No. 3:2 0-cv-00012-RAM-RM O rder Page 2 of 5 Upon the entry of the final arbitration award and the filing of Plaintiffs’ Application in the above-captioned matter, the District Court of Nevada denied Gopher’s motion to consolidate the two cases and closed the Nevada case. Order (2:19-cv-01039-JCM-BNW (D. Nev.) ECF No. 80), entered February 27, 2020; Notice of Entry of Order by U.S. District Court, District of Nevada (ECF No. 27). While both Plaintiffs and Defendant seek confirmation of the arbitration award, Defendant requests additional relief: that the Court determine “what interest, if any, a prospective buyer might acquire at a future foreclosure sale,” Mot. at 10, and “oversee any foreclosure sale to assure the same is commercially reasonable.” Mot. at 13. Plaintiffs oppose the motion on the ground that these issues were raised before the Arbitrator and the “Arbitrator expressly ruled against Defendant’s requests in the Final Award, which disposed of all issues in the arbitration.” Plaintiffs’ Response to Defendant’s Motion to Confirm the Arbitration Award; Address the Outstanding Issue Regarding Whether Plaintiffs’ Rights are Subordinated to Other Creditors and, thereafter, Oversee a Commercially Reasonable Foreclosure Sale (Response or RespII..) L(EEGCFA LN oS.T 3A6N) DatA 4R. D

Pocono Med. Ctr. v. JNESO Dist. Council 1 It is well-established that “a final and binding arbitration award which has not been PG Publ'g, Inc. v. Newspaper vacated, modified, or corrected must be confirmed.” , Guild of Pittsburgh 2023 U.S. Dist. LEXIS 126497, *3 (M.D. Pa. July 21, 2021) (citing Hall St. Assocs., LLC v. Mattel, , 19 F.4th 308, 313 (3d Cir. 2021) ("'[A] court must confirm an arbitration Inc. Teamsters Local 177 v. award unless it is vacated, modified or corrected.'") (quoting United Parcel Service , 552 U.S. 576, 582, 128 S. Ct. 1396, 170 L. Ed. 2d 254 (2008)); , 966 F.3d 245, 252 (3d Cir. 2020) ("The FAA explicitly requires that arbitration awards be confirmed. What could be stronger than language that, upon application, a district court 'must grant [a confirmation] order' unless the arbitration award is 'vacated, modified, or corrected.'")). Regarding whether an award is “final,” the Third Circuit Court of Appeals recently stated: We have not previously articulated a test for when an award is final but are Case No. 3:2 0-cv-00012-RAM-RM O rder Page 3 of 5 Fradella an arbitration award is final if it "evidences the arbitrators' intention to resolve all claims submitted inw thiteh dreesmpeacntd t ofo trh aer ibssitureast siounb,m" itted , 183 F.3d at 19, and it "resolve[s] them Rdoecfkinetit Jievweleyl rye nBoouxgh so that the rights and obligations of the two parties, , do not stand PG Publi.n, Innece. dv. oNf efwurstphaepre ard Gjuudilidc aotfi Ponit.t"s burgh , 157 F.3d at 176 (emphasqisu oted in original). in Pocono Med. Ctr. , 19 F.4th 308, 322-23 (3d Cir. 2021), , 2023 U.S. Dist. LEXIIIIS. 1D2IS6C4U97S,S aIOt *N4 . Because the arbitration award at issue in this proceeding has not been vacated, See, e.g., Stafford modified, or corrected and the Court finds that the award is final concerning the issues v. Baart Behavioral Health Servs “submitted in the demand for arbitration,” the Court will confirm the award. ., CV 15-252-GW (MRWx), 2020 U.S. Dist. LEXIS 252987, at *7 (C.D. Cal. Mar. 11, 2020) (“’Normally, confirmation of an arbitration award is “a summary Florasynth, Inc. v. Pickholz proceeding that merely makes what is already a final arbitration award a judgment of the D.H. Blair court,” , 750 F.2d 171, 176 (2d Cir. 1984), and the court “must & Co. v. Gottdiener grant” the award “unless the award is vacated, modified, or corrected.” 9 U.S.C. § 9.’ , 462 F.3d 95, 110 (2nd Cir. 2006)”). Despite that fact that the Arbitrator’s denial of Defendant’s “requests for declaratory relief or alternatively injunctive relief concerning Gopher’s debt and the Collateral securing 2 the debt,” Final Award (ECF No. 1-2) at 37, was not a denial on the merits, the Court finds that the Arbitrator’s decision is final. Because Defendant failed to raise its request for Dooley v. Federated Law Grp., PLLC declaratory and/or injunctive relief before the Arbitrator in a timely manner, those issues are deemed waived. , Civil Action File No. 1:16-cv-4703- SCJ, 2019 U.S. Dist. LEXIS 239168, at *7-8 (N.D. Ga. Nov. 26, 2019) (“Where a party fails to raise an issue before an arbitrator, ‘[t]he matter is [thereafter] deemed waived, irrespective Clark Realty Builders, LLC v. Falls at Marina Bay, L.P. of whether [the] court [enters] a final order confirming the arbitration award.’” (quoting , No. 05-60089-CIV, 2007 WL 2 The Arbitrator specifically states: “Issues relating to foreclosure on ‘the Collateral’ securing Gopher’s obligations under the SPA and Indenture are not before this tribunal for arbitration.” Final Award (ECF No. 1- 2) at 37. The Arbitrator also agrees with Plaintiffs that Gopher attempts “to raise a new issuIed on a matter that Case No. 3:2 0-cv-00012-RAM-RM O rder Page 4 of 5 Nat’l Wrecking Co. v. Int’l Bhd. of Teamsters, Local 731 9751796, at *3 (S.D. Fla. May 18, 2007) and citing , 990 F.2d 957,960 (7th Cir. 1993) ("Failure to present an issue before an arbitrator waives the issue in an enforcement proceeding. Parties . . . cannot stand by during Int'l Bhd. of Elec. Workers, Local Union No. 323 v. Coral Elec. arbitration, withholding certain arguments, then, upon losing the arbitration, raise such Corp. arguments in federal court."); , 576 F. Supp. 1128, 1134 (S.D. Fla. 1983) ("[A]n adverse party who fails to raise substantive defenses before an arbitrator waives the right to argue those defenses before a reviewing court.") (other citations omIVit.t eCdO)N). CLUSION Based upon the foregoing, the Court will grant Plaintiffs’ Application to Confirm Arbitration Award (ECF No. 1) and grant in part and deny in part Defendant’s Motion to Confirm the Arbitration Award; Address the Outstanding Issue Regarding Whether Plaintiffs’ Rights are Subordinated to Other Creditors and, thereafter, Oversee a Commercially ReasonOabRlDe EFRorEeDclosure Sale (ECF No. 28). Accordingly, it is hereby VACATED that the Order (ECF No. 52), entered March 30, 2022, is ; it is furtherO RDERED G RANTED that Plaintiffs’ Application to Confirm Arbitration Award (ECF No. 1) is ORD; iEtR isE fDurther that Defendant’s Motion to Confirm the Arbitration Award; Address the Outstanding Issue Regarding Whether Plaintiffs’ Rights are Subordinated to Other Creditors aGnRdA, NtTheErDe,a fItNer ,P OAvReTrsee a Commercially Reasonable Foreclosure Sale (ECF No. 28) is , DtoE NthIEeD e, xINte PntA RthTat Defendant requests the Court to confirm the arbitration award,and , to the extent that Defendant requests the Court to determine whether Plaintiffs’ rights are subordinated to other creditors and to oversee a commeOrcRiaDllEyR rEeDasonable foreclosure sale; it is further that theC FOinNaFl IARwMaErdD of Arbitrator Hon. Philip M. Pro (Ret.), dated January 31, 202O0R (EDCEFR NEDo. 1-2), is ; it is further that MPlOaiOntTiffs’ Motion to Set Hearing on Application to Confirm Arbitration Award (ECF No. 25) is ; it is further Case No. 3:2 0-cv-00012-RAM-RM O rder Page 5 ofO 5RDERED CLOSE THIS CASE that the Clerk of Court . Dated / Robert A. Molloy ROBERT A. MOLLOY : Januar y 25, 20 24 Csh/i ef Judge