McMillan v. Unique Places, LLC, 2015 NCBC 4.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION CATAWBA COUNTY 14 CVS 2179
GEORGE “ERIK” McMILLAN, ENIGMA UNIVERSAL TECHNOLOGIES, LLC d/b/a ENIGMA LED, and KISA McMILLAN,
Plaintiffs, AMENDED ORDER AND OPINION v.
UNIQUE PLACES, LLC, JOSH HAWN, JEFFREY SCOTT, JEFF FISHER, UP PROPERTY 1, LLC, ANN SHY, and WARREN HENRY HUNTSMAN,
Defendants.
{1} THIS MATTER is before the Court upon Defendants Unique Places,
LLC (“Unique Places”), Josh Hawn, Jeffrey Scott, Jeff Fisher, and UP
Property 1, LLC’s (“UP Property 1”) (collectively, “Defendants”) Motions to
Stay Proceedings and Compel Arbitration (the “Arbitration Motions”) and
Defendant Josh Hawn’s Motion for Appointment of a Receiver (the “Motion for
a Receiver”) in the above-captioned case.
{2} The Court, having considered the Motions, affidavits, and briefs in
support of and in opposition to the Motions, as well as the arguments of
counsel at the December 17, 2014 hearing in this matter, hereby GRANTS the
Arbitration Motions and DENIES the Motion for a Receiver without prejudice
to Defendant Hawn’s right to seek such relief in any arbitration proceedings
between these parties for the reasons stated below.
Law Offices of Matthew K. Rogers, PLLC, by Matthew K. Rogers, for Plaintiffs. Patrick, Harper & Dixon, LLP, by Michael J. Barnett, and Forrest Firm, P.C., by Michael R. Epperly, for Defendants Unique Places, LLC, Josh Hawn, Jeffrey Scott, Jeff Fisher, and UP Property 1, LLC.
York Williams, LLP, by Gregory C. York, for Defendants Unique Places, LLC, Jeffrey Scott, Jeff Fisher, and UP Property 1, LLC.
Brooks, Pierce, McClendon, Humphrey & Leonard, LLP, by Clint S. Morse, for Defendant Josh Hawn.
Bledsoe, Judge. I. BACKGROUND
{3} Plaintiff George “Erik” McMillan has invented and patented several
types of LED lights and high efficiency improvements to LED lights. He and
his wife, Plaintiff Kisa McMillan (together, the “McMillans”), founded the
predecessor to Plaintiff Enigma Universal Technologies, LLC d/b/a Enigma
LED (“Enigma”), in order to manufacture LED lights and to foster, develop,
and monetize Erik McMillan’s research and associated inventions. The
McMillans subsequently sought investors to provide both capital and “sweat
equity” to further the growth of their business.
{4} In early 2013, Defendants Hawn, Scott, and Fisher indicated their
interest in investing in the McMillans’ business. Fisher manages Defendants
Unique Places and UP Property 1.
{5} On May 6, 2013, the McMillans and Defendants Hawn, Scott, and
Fisher executed a Memorandum of Understanding (“MoU”), a three-page
document describing the basic parameters of the parties’ agreement. The
MoU contemplated the formation of a new entity, Enigma, which would continue the McMillans’ business and which would be owned 35% by Erik
McMillan, 27.5% by Hawn, 27.5% by Fisher, and 4% by Scott. The MoU also
contemplated that Fisher would make an initial capital contribution to
Enigma of approximately $75,000, which was intended to cover the McMillans’
salaries, and that Fisher and Hawn would, among other things, obtain and
personally guarantee a line of credit for Enigma. Scott agreed to work at
Enigma one day each week in exchange for his equity interest.
{6} On or about May 30, 2013, Hawn provided Erik McMillan with a
draft version of Enigma’s Operating Agreement (the “Original Agreement”).
Spanning more than thirty pages, the Original Agreement, which reflected
most of the material terms of the MoU and included a merger clause, set forth
a more detailed and sophisticated embodiment of the parties’ agreement than
that delineated in the three-page MoU. Plaintiffs aver that either Hawn or
Fisher drafted the Original Agreement. Erik McMillan informed Hawn that
he was unable to understand many of the terms included in the Original
Agreement, but that he would rely on Hawn and Fisher to ensure that the
Original Agreement was consistent with the MoU. Fisher responded,
according to Plaintiffs, that the Original Agreement did not alter or override
the MoU, but instead “complemented” and “supplemented” the MoU. (Am.
Compl. ¶ 86.) Heeding Fisher’s advice, Plaintiffs retained Defendant Ann
Shy, an attorney, to assist with their review and understanding of the
Original Agreement. {7} On June 21, 2013, Fisher presented a finalized version of the
Original Agreement to Erik McMillan for his signature. Erik McMillan
indicated that he was working and did not have time to read the Original
Agreement, but that he would sign it so long as it reflected the terms of the
MoU. Fisher purportedly responded that the Original Agreement and the
MoU were “tied hand in hand” and that the Original Agreement was
essentially an “add on” to the MoU. (Am. Compl. ¶ 92.) Erik McMillan signed
the Original Agreement without reading it.
{8} Page 34 of the Original Agreement includes the following provision,
which was not included in the MoU:
7.4 Governing Law; Arbitration. . . . Any dispute arising out of or in connection with this Agreement or the breach thereof shall be decided by arbitration to be conducted in Durham, North Carolina in accordance with the then prevailing commercial arbitration rules of the American Arbitration Association. All determinations made in any such arbitration proceeding shall be final and conclusive on all parties, and judgment incorporating such determinations may be entered in any court of competent jurisdiction. . . .
(Orig. Ag. § 7.4, p. 34.)
{9} The parties subsequently executed an Amended and Restated
Operating Agreement for Enigma (the “Amended Agreement”).1 Provision
13.4 on page 31 of the Amended Agreement sets forth the same language
included in provision 7.4 of the Original Agreement, supra. Erik McMillan
asserts that he did not read the Amended Agreement and was unaware of its
1The purpose of the Amended Agreement was to address tax issues not pertinent to the Court’s resolution of the present Motions. arbitration clause at the time he signed it. Plaintiffs contest the validity of
both the Original Agreement and the Amended Agreement (collectively, the
“Agreements”).
{10} Thereafter, discord ensued among the parties concerning control over
Enigma and its operations, prompting Plaintiffs to file the present lawsuit on
September 3, 2014. This action was designated a complex business case and
assigned to the undersigned that same day.
{11} On September 8, 2014, Defendants filed the present Motions,
requesting that Plaintiffs’ claims be resolved in arbitration in accordance with
the Agreements.2
{12} On October 3, 2014, Plaintiffs filed an Amended Complaint,
supported by thirty-four (34) exhibits, in addition to Plaintiffs’ response in
opposition to the Motions.
{13} The Court held a hearing on the Motions on December 17, 2014. The
Motions are now ripe for resolution.
II. ANALYSIS
{14} North Carolina courts apply the following standard in determining
whether a dispute is properly subject to arbitration:
As a general matter, public policy favors arbitration. However, before a dispute can be ordered resolved through arbitration, there must be a valid agreement to arbitrate. Thus, whether a dispute is subject to arbitration is a matter of contract law. Parties to an arbitration must specify clearly the scope and
2 Defendants filed two separate Motions seeking to compel arbitration with respect to the claims asserted by (i) Erik McMillan and Enigma; and (ii) Kisa McMillan. terms of their agreement to arbitrate. Moreover, a party cannot be forced to submit to arbitration of any dispute unless he has agreed to do so.
The question of whether a dispute is subject to arbitration is an issue for judicial determination. . . . The determination of whether a dispute is subject to arbitration involves a two pronged analysis; the court must ascertain both (1) whether the parties had a valid agreement to arbitrate, and also (2) whether the specific dispute falls within the substantive scope of that agreement.
Raspet v. Buck, 147 N.C. App. 133, 135—36, 554 S.E.2d 676, 678 (2001)
(citations and quotation marks omitted).
Existence of a Valid Agreement to Arbitrate
i. Erik McMillan
{15} Plaintiffs contend that Erik McMillan is not bound by a valid
agreement to arbitrate. Plaintiffs concede that Erik McMillan signed the
Agreements, but assert that he was “fraudulently induced” to sign them and
that he did not specifically agree to the arbitration clauses “buried therein.”
(Pls.’ Br. Opp. Defs.’ Mot. to Stay, p. 1.)
{16} The Court finds these contentions unpersuasive because under well-
established North Carolina law, a signatory to “a written instrument is under
a duty to read it for his own protection[;] . . . [is] ordinarily . . . charged with
knowledge of its contents[;] . . . [and] may [not] predicate an action for fraud
on his ignorance of the legal effect of its terms.” Raper v. Oliver House, LLC,
180 N.C. App. 414, 420, 637 S.E.2d 551, 555 (2006) (quoting Biesecker v.
Biesecker, 62 N.C. App. 282, 285, 302 S.E.2d 826, 828—29 (1983)); see also Leonard v. Power Co., 155 N.C. 10, 14, 70 S.E. 1061, 1063 (1911) (“[T]he law
will not relieve one who can read and write from liability upon a written
contract, upon the ground that he did not understand the purport of the
writing, or that he has made an improvident contract, when he could inform
himself and has not done so.”). Further, Erik McMillan had the opportunity to
read the Agreements, but declined to do so, relying instead on Hawn and
Fisher to include the appropriate terms.3 See Setzer v. Ins. Co., 257 N.C. 396,
401, 126 S.E.2d 135, 139 (1962) (“[W]here no trick or device had prevented a
person from reading the paper which he has signed or has accepted as the
contract prepared by the other party, his failure to read when he had the
opportunity to do so will bar his right to reformation.”).4
{17} Plaintiffs also seek to invalidate the Agreements on grounds that
they were unsupported by consideration. Plaintiffs contend, in this respect,
that Defendants failed to provide any consideration to support the
Agreements beyond what Defendants had already promised under the MoU.
This contention lacks merit, however, as the Agreements include numerous
provisions that were not included in the MoU but that function to protect the
McMillans’ interest in their business. The Agreements’ non-compete and
3 The attorneys’ fees provisions of the Agreements – provision 7.13 on page 35 of the Original
Agreement and provision 13.13 on page 32 of the Amended Agreement – reference the Agreements’ arbitration clauses as well.
4 Plaintiffs’ allegations that Defendant Shy failed to disclose certain conflicts of interest with
other clients are irrelevant for purposes of the present Motions. nondisclosure provisions5, for instance, guard against Defendants’
misappropriation of Enigma’s proprietary information and preclude
Defendants from competing with Enigma for two years after leaving the
company, should they seek to do so. These protections appear especially
significant to Erik McMillan in light of his contributions to Enigma – two
patents and all intellectual property that he creates in the future – which
comprise the foundation of Enigma’s business.
{18} The Court has reviewed Plaintiffs’ remaining contentions on this
issue and finds them to be without merit. Accordingly, the Court concludes
that the Agreements contain valid agreements to arbitrate and that Erik
McMillan is bound by these provisions.
ii. Kisa McMillan
{19} Plaintiffs further contend that Kisa McMillan is not bound by a valid
agreement to arbitrate because she did not sign the Agreements.
{20} While it is generally true that “a party cannot be required to submit
to arbitration any dispute which he has not agreed so to submit, a variety of
nonsignatories of arbitration agreements have been held to be bound by such
agreements under ordinary common law contract and agency principles.” LSB
Fin. Servs. v. Harrison, 144 N.C. App. 542, 547, 548 S.E.2d 574, 578 (2001)
(citations and quotation marks omitted). In Harrison, for example, the North
Carolina Court of Appeals held that a non-signatory to an agreement was
bound by the agreement’s arbitration provision because “[i]t [was] clear from
5 (Orig. Ag. §§ 1.7—1.10, p. 17—18; Am. Ag. §§ 7.7—7.10, p. 15.) the text and purpose of [the agreement] that the parties to the agreement
intended to benefit such nonsignatory, third parties . . . .” Id. In determining
whether the contracting parties intended to benefit a third party, “the court
‘should consider [the] circumstances surrounding the transaction as well as
the actual language of the contract.’” Revels v. Miss Am. Org., 182 N.C. App.
334, 336, 641 S.E.2d 721, 723 (2007) (citation omitted) (alteration in original).
{21} Here, the circumstances under which the parties executed the
Agreement, in addition to the terms of the Agreements themselves, support a
finding that Kisa McMillan was an intended third-party beneficiary of the
Agreements. As Erik McMillan states in his affidavit, he and Kisa McMillan
work “as a team” and he is “not sure if [he could] work anywhere without
Kisa’s help.” (Erik McMillan Aff. ¶ 12, Oct. 3, 2014.) Seeking to monetize
Erik McMillan’s inventions, the McMillans, as a team, sought investors to
further their business, eventually entering into the Agreements now at issue.
Although Kisa McMillan did not sign the Agreements, the terms of the
Agreements benefit both of the McMillans by requiring that Defendants
provide equity and debt financing to further the business conceived by the
McMillans years earlier.6 While it is true that the MoU provided similar
terms to benefit the McMillans, the MoU was superseded by the Agreements,
6 Specifically, the Agreements require Fisher (through Unique Places) to provide a $75,000
capital contribution and further require Fisher (through Unique Places) and Hawn to obtain and guarantee loans on Enigma’s behalf. The Agreements also require Scott to provide “sweat equity” in that he promised to dedicate at least one day of work each week to Enigma. That Defendants may have failed to fulfill some of these promises does not detract from the manifest intent of these provisions to benefit both Erik and Kisa McMillan. each of which contains a merger clause indicating that it represents “the
entire agreement among the parties relative to the subject matter hereof . . . .”
(Orig. Ag. § 7.5, p. 34; Am. Ag. § 13.5, p. 31.)
{22} Moreover, Plaintiffs assert claims based on Kisa McMillan’s status
and rights that derive, if at all, from the Agreements. See Holshouser v.
Shaner Hotel Grp. Props., One Ltd. P’ship., 134 N.C. App. 391, 400, 518
S.E.2d 17, 25 (1999) (“A person is a direct beneficiary of the contract if the
contracting parties intended to confer a legally enforceable benefit on that
person.”). Specifically, the Agreements designate Kisa McMillan as Enigma’s
“Director of Operations”7 (Orig. Ag. § 5.1.3, p. 8; Am. Ag. § 5.1.3, p. 11.), and
Plaintiffs use this fact to support their conversion claim, asserting that
Defendants “lack[ed] authority to terminate” Kisa’s employment with Enigma
because “[a]fter Hawn resigned as President, Erik and Kisa were the highest
ranking officers of Enigma . . . .” (Am. Compl. ¶ 423.); see Am. Bankers Ins.
Group v. Long, 453 F.3d 623, 628 (4th Cir. 2006) (providing that “a
nonsignatory should be estopped from denying that it is bound by an
arbitration clause when its claims against the signatory ‘arise[]from’ the
contract containing the arbitration clause” (citation omitted) (alteration in
original)). Indeed, Plaintiffs themselves identify Kisa McMillan as a third
party beneficiary to the Agreements, asserting in support of their breach of
7 This designation of Kisa McMillan as Enigma’s “Director of Operations” superseded the MoU’s designation of Kisa McMillan as Enigma’s “Operations Manager.” (Am. Compl. Ex. 9, p. 1; Orig. Ag. § 7.5, p. 34; Am. Ag. § 13.5, p. 31.) contract claim that although “Kisa was not a party to the Operating
Agreements, [she] was . . . [an] intended beneficiary of the Operating
Agreements.” (Am. Compl. ¶ 450.)
{23} Accordingly, because Kisa McMillan was an intended third party
beneficiary of the Agreements, and because Plaintiffs seek to assert rights
based on Kisa McMillan’s status as a third party beneficiary to the
Agreements, the Court concludes that Kisa McMillan is also bound by the
Agreements’ arbitration provisions.
iii. Enigma
{24} Although not specifically contested, the Court notes that Enigma is
likewise bound by the Agreements’ arbitration provisions. See N.C.G.S. §
57D-2-31(a) (2014) (providing that “[t]he LLC is deemed to be a party to the
operating agreement and, therefore, is bound by and may enforce the
provisions thereunder applicable to the LLC”).
Scope of the Arbitration Agreement
{25} Plaintiffs contend that even if they are bound by the Agreements’
arbitration provisions, the scope of these provisions fails to encompass all of
Plaintiffs’ claims.
{26} In determining whether a plaintiff’s claims fall within the scope of a
particular arbitration provision, the Court “must look at the language in the
agreement, viz., the arbitration clause, and ascertain whether the claims fall
within its scope. In so doing, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Rodgers Builders, Inc. v.
McQueen, 76 N.C. App. 16, 23—24, 331 S.E.2d 726, 731 (1985) (citations and
quotation marks omitted). “[W]hether a claim falls within the scope of an
arbitration clause and is thus subject to arbitration depends not on the
characterization of the claim as tort or contract, but on the relationship of the
claim to the subject matter of the arbitration clause.” Id. at 24, 331 S.E.2d at
731 (citations omitted).
{27} In McQueen, the North Carolina Court of Appeals addressed the
scope of an arbitration clause which specified that “[a]ll claims . . . arising out
of, or relating to, the Contract Documents or the breach thereof . . . shall be
decided by arbitration . . . .” Id. at 18, 331 S.E.2d at 728. The court held that
“the language of the arbitration clause [was] sufficiently broad to include any
claims which [arose] out of or [were] related to the contract or its breach,
regardless of the characterization of the claims as tort or contract.” Id. at 25,
331 S.E.2d at 732. The court further held that the language of the arbitration
clause encompassed the plaintiff’s claims for fraud, unfair and deceptive trade
practices, and negligent misrepresentation, as each claim “concern[ed] alleged
tortious conduct on the part of defendants [that] occurred in connection with,
or as a part of, the formation of, performance under, or breach of the contract
between [the parties].” Id. at 25, 331 S.E.2d at 732.
{28} More recently, the United States District Court for the Eastern
District of North Carolina considered the scope of an arbitration clause “requir[ing] arbitration of ‘[a]ny [c]laim arising out of or related to the
Agreement.’” United States ex rel. TGK Enters. v. Clayco, Inc., 978 F. Supp.
2d 540, 549 (E.D.N.C. 2013). Noting that “[t]he Supreme Court and the
Fourth Circuit have recognized that such language represents a ‘broad’
arbitration provision,” the court determined that the “plaintiff’s state
law claims . . . squarely fall within the scope of the arbitration agreement.”
Id. (citing Drews Distrib., Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 350 (4th
Cir. 2001); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 398
(1967)).
{29} The arbitration clauses here, similar to those at issue in McQueen
and Clayco, each provide that “[a]ny dispute arising out of or in connection
with this Agreement or the breach thereof shall be decided by arbitration . . .
.” (Orig. Ag. § 7.4, p. 34; Am. Ag. § 13.4, p. 31.) Upon review, the Court finds,
as detailed below, that all of Plaintiffs’ claims fall within the scope of this
broad language, as each claim either “arises out of” or “in connection with” the
Agreements.
{30} Initially, the Court notes that Plaintiffs’ twelfth and thirteenth
claims for relief allege that Defendants breached the Agreements themselves
and thus plainly “arise out of” the Agreements. Likewise, Plaintiffs’ claim
that Defendants breached the MoU (eleventh claim for relief) “arises out of”
the Agreements because many of the alleged breaches in support of this claim
concern the same promises allegedly breached under the Agreements. For example, paragraphs 448, 466, and 480 of Plaintiffs’ Complaint allege
breaches of the same ten (10) promises under the MoU, Original Agreement,
and Amended Agreement, respectively.8 Additionally, Plaintiffs’ breach of
fiduciary duty claim (second claim for relief) alleges that Defendants breached
duties owed to Plaintiffs by virtue of their relationship, as established under
the Agreements.
{31} Plaintiffs also assert a number of claims alleging conduct that
implicates specific provisions of the Agreements and that, if proved true,
would constitute breaches of those provisions. Plaintiffs’ misappropriation of
trade secrets claim (sixth claim for relief) and conspiracy to defraud claim
(ninth claim for relief) allege, inter alia, that Defendants misappropriated and
conspired to misappropriate Enigma’s trade secrets, conduct that is expressly
prohibited under the Agreements.9 Plaintiffs’ conversion claim (eighth claim
for relief) alleges that Defendants converted Enigma’s property to their own
use, conduct that would violate the Agreements’ general prohibition against
use of Enigma property for “any personal benefit.” (Orig. Ag. § 4.3.2, p. 10;
Am. Ag. § 4.3.2, p. 7.) Plaintiffs’ fourteenth claim for relief alleges that
Defendants used other entities to compete with Enigma, conduct that would
violate the Agreements’ provision that, absent Enigma’s consent, officers and
managers of the company are prohibited from “engag[ing], directly or
8 Moreover, the Agreements superseded the MoU, as noted above.
9 (Orig. Ag. §§ 1.7—1.10, p. 17—18; Am. Ag. §§ 7.7—7.10, p. 15.) indirectly, in activities that are competitive with [Enigma’s] Business or that
would constitute business opportunities of [Enigma].” (Orig. Ag. § 6.1, p. 11—
12; Am. Ag. § 6.1, p. 9.) Finally, Plaintiffs’ unfair and deceptive trade
practices claim (fifteenth claim for relief) alleges that Hawn left Enigma to
work for a competitor, raising a potential violation of the Agreements’ non-
compete provisions. See McQueen, 76 N.C. App. at 27, 331 S.E.2d at 733
(finding “no reason” to exclude UDTP claim from arbitration where “[t]he
claim concern[ed] essentially a private dispute” and appeared asserted
“merely to bolster and supplement the remainder of plaintiff's claims and to
increase the amount of damages recoverable”).
{32} Plaintiffs additionally allege claims that invoke certain rights or
statuses that inhere in Plaintiffs, if at all, by virtue of the Agreements.
Plaintiffs’ intentional infliction of emotional distress claim (fifth claim for
relief) alleges that Defendants intentionally caused the McMillans distress by
terminating their employment with Enigma. The Agreements designate the
McMillans’ respective roles with Enigma, and any right to continued
employment thus emanates from these roles or otherwise “arises out of” rights
created under the Agreements. Similarly, Plaintiffs’ obtaining property under
false pretense claim (seventh claim for relief) asserts Plaintiffs’ status as
Enigma’s “highest ranking officials” (Am. Compl. ¶ 423), and Plaintiffs
predicate their dissolution claim (sixteenth claim for relief) upon Erik McMillan’s “rights as reflected in the [Agreements] as a minority Member of
Enigma.” (Am. Compl. ¶ 511.)10
{33} The Court further finds that Plaintiffs have asserted claims “in
connection with” the Agreements. Plaintiffs’ fraud claim (first claim for relief)
alleges that Defendants fraudulently induced Erik McMillan to sign the
Agreements, and Plaintiffs’ tenth claim for relief alleges, in pertinent part,
that Defendants “took advantage of the trust Erik placed in Hawn, Fisher and
Shy with regard to explaining the purposes and effects of the [Agreements],
and did not fully disclose the terms or effects of [the Agreements] to Erik.”
(Am. Compl. ¶ 443.)11 Any such inducement or lack of disclosure occurred “in
connection with” the formation of the Agreements. See McQueen, 76 N.C.
App. at 18, 25, 331 S.E.2d at 728, 732 (finding that claims alleging
misrepresentations in connection with formation of contract were within scope
of contract’s arbitration clause, which provided that “[a]ll claims . . . arising
out of, or relating to, the Contract Documents or the breach thereof” were
subject to arbitration). Moreover, Plaintiffs’ libel and defamation claims (third
and fourth claims for relief), which allege that Defendants informed Enigma’s
customers and suppliers that Erik and Kisa had “walked away” from Enigma
(Am. Compl. ¶¶ 393—96), implicate the McMillans’ roles with Enigma, as
10 Furthermore, as discussed below, the Agreements set forth in detail the procedure to be
employed by the parties in dissolving Enigma. (Orig. Ag. §§ 6.2—6.5, p. 31—32; Am. Ag. §§ 12.2—12.5, p. 28—29.)
11 Although captioned “Breach of § N.C.G.S. 57D-3-04,” which concerns inspection of company
records, Plaintiffs’ tenth claim for relief sets forth a variety of allegations, including those cited above. delineated in the Agreements, and thus also concern a dispute “in connection
with” the Agreements.12
{34} The Court concludes, accordingly, that the language set forth in the
Agreements’ arbitration provisions is sufficiently broad to encompass all of
Motion for a Receiver
{35} Defendant Hawn has moved the Court to appoint a receiver for
Enigma, asserting that the company is “teetering on bankruptcy” and must be
dissolved before it “loses all going concern value.” (Hawn Mot. for Receiver, p.
1—2.) Hawn attributes Enigma’s demise to the parties’ “contentious”
relationship, which, he alleges, has not only precluded effective management
of Enigma, but also deterred potential investment in the company by third
parties. (Hawn Mot. for Receiver, p. 3.)
{36} The Court does not disagree with Hawn’s characterization of Enigma
as a company in distress. As stated above, however, the Agreements prescribe
the manner in which Enigma is to be dissolved should the parties seek to wind
up the company. And because no other party to the Agreements joins Hawn
in his request for a receiver, which seeks to deviate from the Agreements’
dissolution provisions, a dispute exists among the parties concerning both
whether and how Enigma should be dissolved. Accordingly, the Court finds
that Hawn’s Motion for a Receiver raises a dispute concerning subject matter
12 Furthermore, each of Plaintiffs’ claims for relief “incorporate[s] by reference as if fully set
forth [therein] all prior allegations of the Complaint.” (E.g., Am. Compl. ¶ 385.) that is governed by the Agreements and, therefore, is also subject to
arbitration for the reasons stated above.
III. CONCLUSION
{37} In light of the foregoing, the Court hereby (i) GRANTS Defendants’
Motions to Stay Proceedings and Compel Arbitration and (ii) DENIES Hawn’s
Motion for Appointment of a Receiver without prejudice to Defendant Hawn’s
right to seek such relief in any arbitration proceedings between these parties.
{38} Accordingly, this civil action is hereby STAYED pending the outcome
of any arbitration proceedings between the parties.
SO ORDERED, this the 14th day of January, 2015.