1 2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 RB PRODUCTS, INC., Case No. 3:19-cv-00105-MMD-WGC 7 Plaintiff, ORDER v. 8 RYZE CAPITAL, LLC, et al., 9 Defendants. 10 11 I. SUMMARY 12 RB Products, Inc. (“Plaintiff”) alleges that Ryze Capital Partners, LLC (“Ryze”) and 13 other defendants utilized confidential information that Plaintiff provided them pursuant to 14 a joint venture agreement, but Ryze later excluded Plaintiff from the ventures. (ECF No. 15 44 at 9-13.) Before the Court is Defendants’ motion to stay this case pending arbitration 16 (“Motion”) (ECF No. 51),1 pursuant to an arbitration clause in a Mutual Non-disclosure 17 Agreement (“NDA”) between Plaintiff and Ryze. Plaintiff concedes in its Response that it 18 must arbitrate its claims against Ryze, but it insists that the other Defendants cannot 19 invoke the arbitration clause because they never signed the NDA. (ECF No. 78.) For the 20 reasons explained below, the Court will grant the Motion and stay this action as to all 21 Defendants 22 II. BACKGROUND 23 The following facts are taken from Plaintiff’s First Amended Complaint (“FAC”) 24 (ECF No. 44) unless otherwise noted. 25 Plaintiff is a Texas-based, petrochemical corporation that produces diesel fuel from 26 renewable feedstock (“HDRD”). (Id. at 4.) In late 2015, private-equity company Ryze hired 27 1 1 Plaintiff as a subject matter expert for the construction of a new gas-to-liquids facility in 2 Port Arthur, Texas. (Id. at 5-6.) In November 2015, both parties signed the NDA to protect 3 confidential information shared between the parties. (Id. at 6.) This NDA contains an 4 arbitration clause that applies to “[a]ny dispute, claim or controversy . . . arising out of or 5 related to [the NDA] or to the breach . . . interpretation or validity [of the NDA].” (ECF No. 6 51-1 at § 3.5.) Ultimately, Ryze decided to not invest in the construction project. (ECF No. 7 44 at 7.) 8 In early 2016, Plaintiff, Ryze and Defendant Randy Soule, the sole owner of 9 Defendant Encore D.E.C., LLC (“Encore”), began discussing the re-purposing of Encore’s 10 petrochemical terminal located in Reno, Nevada. (Id. at 9.) In early February 2016, all 11 parties reached a joint venture agreement regarding their ownership percentages in 12 NewCo, which was not yet formed. (Id.) Plaintiff acted as the venture’s subject matter 13 expert and provided the venture confidential information on, inter alia, the process and 14 logistics of producing HDRD, a list of suppliers and customers for HDRD, how to generate 15 regulatory and tax credits, and how to sell those credits. (Id. at 10.) Meanwhile, Ryze 16 allegedly lied to Plaintiff that it was in the process of securing funding for the venture. (Id. 17 at 12-13.) In fact, Ryze conspired with Soule and Encore to pursue the business 18 opportunity through Ryze Renewables, LLC, which excluded Plaintiff and is also presently 19 constructing an HDRD facility in Las Vegas using the same confidential information. (Id.) 20 On February 20, 2019, Plaintiff filed this action against Ryze and the following: (1) 21 entities in which Plaintiff claims to have an ownership interest in, such as Ryze 22 Renewables, LLC, Ryze Renewables Reno, LLC and Ryze Renewables Las Vegas, LLC; 23 (2) Ryze employees Matt Pearson, Michael Brown and Chris Dancy (collectively, “Ryze 24 Employees”); and (3) entities that allegedly formed the Reno venture with Ryze, namely 25 Soule, Encore and RESC, LLC.2 (ECF No. 44.) The FAC alleges the following claims: (1) 26 trade secret misappropriation against all Defendants; (2) breach of contract against Ryze 27 1 and Encore; (3) fraud against Ryze, Encore, and Soule; (4) breach of fiduciary duty against 2 Ryze and Encore; (5) participation of breach of fiduciary duty and fraud against all 3 Defendants; (6) and declaratory judgment. (Id. at 14-20.) 4 On May 28, 2019, Defendants Ryze, Pearson, Dancy, and Ryze Renewables Las 5 Vegas, LLC filed this Motion (ECF No. 51), which the remaining Defendants later joined 6 (ECF Nos. 52, 58, and 121).3 Aside from Ryze, the other Defendants are not signatories 7 to the NDA (collectively “Nonsignatories”). 8 III. DISCUSSION 9 The Federal Arbitration Act “reflects ‘an emphatic federal policy’ in favor of 10 arbitration.” Ferguson v. Corinthian Colleges, Inc., 733 F.3d 928, 932 (9th Cir.2013) 11 (quoting Marmet Health Care Ctr. Inc. v. Brown, 132 S.Ct. 1201, 1203 (2012)). The FAA 12 applies to arbitration agreements that, like the NDA here, are “contract[s] evidencing a 13 transaction involving commerce.” See 9 U.S.C. § 2; Greystone Nevada, LLC v. Anthem 14 Highlands Cmty. Ass'n (Greystone), 549 F. App'x 621, 624 (9th Cir. 2013) (holding that 15 construction contracts involving out-of-state parties and materials evidenced commerce 16 for purposes of the FAA)4; Airbus S.A.S. v. Aviation Partners, Inc., 2012 WL 5295145, at 17 *2 (W.D. Wash. 2012) (holding that the FAA applied to a non-disclosure agreement in 18 which both parties agreed to share confidential information for the purpose of designing 19 an aircraft). Under the FAA, an agreement to arbitrate is “valid, irrevocable, and 20 enforceable, save upon such grounds as exist at law or in equity for the revocation of any 21 contract.” 9 U.S.C. § 2. If a party files an application to stay proceedings involving an issue 22 that is subject to arbitration, generally a court must grant the stay until such arbitration has 23 been conducted in accordance with the agreement. 9 U.S.C. § 3; Chiron Corp. v. Ortho 24 3At the time Plaintiff filed its Response, Plaintiff contended that a few of the 25 Nonsignatories have not joined in the Motion (ECF No. 78 at 3), but this argument is now moot. 26 4Pursuant to Ninth Circuit Rule 36-3, Greystone, 549 F. App'x 621 is not precedent, 27 but may be cited by this Court. See FRAP 32.1 The Court accordingly cites Greystone not 1 Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (quoting Dean Witter Reynolds 2 Inc. v. Byrd, 470 U.S. 213, 218 (1985)). 3 Here, Plaintiff has conceded that its claims against Ryze are subject to arbitration. 4 (ECF No. 78 at 3.) Having reviewed the NDA, the Court agrees. (ECF No. 51-1 at § 3.5.) 5 Thus, Plaintiff’s claims against Ryze must be stayed pending arbitration. 6 The Court will next address whether Plaintiff’s claims against the Nonsignatories 7 should be similarly stayed. Defendants contend that the Court has authority to do so under 8 equitable estoppel and its inherent power to stay proceedings in its own court. (ECF No. 9 51 at 19-25.) Because the Court only agrees with the latter point, the Court declines to 10 address Defendants’ equitable estoppel argument. 11 A district court has an inherent and discretionary power to stay proceedings in its 12 own court. Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936); see also Lockyer v. Mirant 13 Corp., 398 F.3d 1098, 1109 (9th Cir. 2005). A district court may stay proceedings “pending 14 resolution of independent proceedings which bear upon the case.” Leyva v.
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1 2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 RB PRODUCTS, INC., Case No. 3:19-cv-00105-MMD-WGC 7 Plaintiff, ORDER v. 8 RYZE CAPITAL, LLC, et al., 9 Defendants. 10 11 I. SUMMARY 12 RB Products, Inc. (“Plaintiff”) alleges that Ryze Capital Partners, LLC (“Ryze”) and 13 other defendants utilized confidential information that Plaintiff provided them pursuant to 14 a joint venture agreement, but Ryze later excluded Plaintiff from the ventures. (ECF No. 15 44 at 9-13.) Before the Court is Defendants’ motion to stay this case pending arbitration 16 (“Motion”) (ECF No. 51),1 pursuant to an arbitration clause in a Mutual Non-disclosure 17 Agreement (“NDA”) between Plaintiff and Ryze. Plaintiff concedes in its Response that it 18 must arbitrate its claims against Ryze, but it insists that the other Defendants cannot 19 invoke the arbitration clause because they never signed the NDA. (ECF No. 78.) For the 20 reasons explained below, the Court will grant the Motion and stay this action as to all 21 Defendants 22 II. BACKGROUND 23 The following facts are taken from Plaintiff’s First Amended Complaint (“FAC”) 24 (ECF No. 44) unless otherwise noted. 25 Plaintiff is a Texas-based, petrochemical corporation that produces diesel fuel from 26 renewable feedstock (“HDRD”). (Id. at 4.) In late 2015, private-equity company Ryze hired 27 1 1 Plaintiff as a subject matter expert for the construction of a new gas-to-liquids facility in 2 Port Arthur, Texas. (Id. at 5-6.) In November 2015, both parties signed the NDA to protect 3 confidential information shared between the parties. (Id. at 6.) This NDA contains an 4 arbitration clause that applies to “[a]ny dispute, claim or controversy . . . arising out of or 5 related to [the NDA] or to the breach . . . interpretation or validity [of the NDA].” (ECF No. 6 51-1 at § 3.5.) Ultimately, Ryze decided to not invest in the construction project. (ECF No. 7 44 at 7.) 8 In early 2016, Plaintiff, Ryze and Defendant Randy Soule, the sole owner of 9 Defendant Encore D.E.C., LLC (“Encore”), began discussing the re-purposing of Encore’s 10 petrochemical terminal located in Reno, Nevada. (Id. at 9.) In early February 2016, all 11 parties reached a joint venture agreement regarding their ownership percentages in 12 NewCo, which was not yet formed. (Id.) Plaintiff acted as the venture’s subject matter 13 expert and provided the venture confidential information on, inter alia, the process and 14 logistics of producing HDRD, a list of suppliers and customers for HDRD, how to generate 15 regulatory and tax credits, and how to sell those credits. (Id. at 10.) Meanwhile, Ryze 16 allegedly lied to Plaintiff that it was in the process of securing funding for the venture. (Id. 17 at 12-13.) In fact, Ryze conspired with Soule and Encore to pursue the business 18 opportunity through Ryze Renewables, LLC, which excluded Plaintiff and is also presently 19 constructing an HDRD facility in Las Vegas using the same confidential information. (Id.) 20 On February 20, 2019, Plaintiff filed this action against Ryze and the following: (1) 21 entities in which Plaintiff claims to have an ownership interest in, such as Ryze 22 Renewables, LLC, Ryze Renewables Reno, LLC and Ryze Renewables Las Vegas, LLC; 23 (2) Ryze employees Matt Pearson, Michael Brown and Chris Dancy (collectively, “Ryze 24 Employees”); and (3) entities that allegedly formed the Reno venture with Ryze, namely 25 Soule, Encore and RESC, LLC.2 (ECF No. 44.) The FAC alleges the following claims: (1) 26 trade secret misappropriation against all Defendants; (2) breach of contract against Ryze 27 1 and Encore; (3) fraud against Ryze, Encore, and Soule; (4) breach of fiduciary duty against 2 Ryze and Encore; (5) participation of breach of fiduciary duty and fraud against all 3 Defendants; (6) and declaratory judgment. (Id. at 14-20.) 4 On May 28, 2019, Defendants Ryze, Pearson, Dancy, and Ryze Renewables Las 5 Vegas, LLC filed this Motion (ECF No. 51), which the remaining Defendants later joined 6 (ECF Nos. 52, 58, and 121).3 Aside from Ryze, the other Defendants are not signatories 7 to the NDA (collectively “Nonsignatories”). 8 III. DISCUSSION 9 The Federal Arbitration Act “reflects ‘an emphatic federal policy’ in favor of 10 arbitration.” Ferguson v. Corinthian Colleges, Inc., 733 F.3d 928, 932 (9th Cir.2013) 11 (quoting Marmet Health Care Ctr. Inc. v. Brown, 132 S.Ct. 1201, 1203 (2012)). The FAA 12 applies to arbitration agreements that, like the NDA here, are “contract[s] evidencing a 13 transaction involving commerce.” See 9 U.S.C. § 2; Greystone Nevada, LLC v. Anthem 14 Highlands Cmty. Ass'n (Greystone), 549 F. App'x 621, 624 (9th Cir. 2013) (holding that 15 construction contracts involving out-of-state parties and materials evidenced commerce 16 for purposes of the FAA)4; Airbus S.A.S. v. Aviation Partners, Inc., 2012 WL 5295145, at 17 *2 (W.D. Wash. 2012) (holding that the FAA applied to a non-disclosure agreement in 18 which both parties agreed to share confidential information for the purpose of designing 19 an aircraft). Under the FAA, an agreement to arbitrate is “valid, irrevocable, and 20 enforceable, save upon such grounds as exist at law or in equity for the revocation of any 21 contract.” 9 U.S.C. § 2. If a party files an application to stay proceedings involving an issue 22 that is subject to arbitration, generally a court must grant the stay until such arbitration has 23 been conducted in accordance with the agreement. 9 U.S.C. § 3; Chiron Corp. v. Ortho 24 3At the time Plaintiff filed its Response, Plaintiff contended that a few of the 25 Nonsignatories have not joined in the Motion (ECF No. 78 at 3), but this argument is now moot. 26 4Pursuant to Ninth Circuit Rule 36-3, Greystone, 549 F. App'x 621 is not precedent, 27 but may be cited by this Court. See FRAP 32.1 The Court accordingly cites Greystone not 1 Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (quoting Dean Witter Reynolds 2 Inc. v. Byrd, 470 U.S. 213, 218 (1985)). 3 Here, Plaintiff has conceded that its claims against Ryze are subject to arbitration. 4 (ECF No. 78 at 3.) Having reviewed the NDA, the Court agrees. (ECF No. 51-1 at § 3.5.) 5 Thus, Plaintiff’s claims against Ryze must be stayed pending arbitration. 6 The Court will next address whether Plaintiff’s claims against the Nonsignatories 7 should be similarly stayed. Defendants contend that the Court has authority to do so under 8 equitable estoppel and its inherent power to stay proceedings in its own court. (ECF No. 9 51 at 19-25.) Because the Court only agrees with the latter point, the Court declines to 10 address Defendants’ equitable estoppel argument. 11 A district court has an inherent and discretionary power to stay proceedings in its 12 own court. Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936); see also Lockyer v. Mirant 13 Corp., 398 F.3d 1098, 1109 (9th Cir. 2005). A district court may stay proceedings “pending 14 resolution of independent proceedings which bear upon the case.” Leyva v. Certified 15 Grocers of California, Ltd., 593 F.2d 857, 863 (9th Cir. 1979). In determining whether a 16 stay is appropriate, a court “must weigh competing interests and maintain an even 17 balance.” Landis, 299 U.S. at 254-55; see also Lockyer, 398 F.3d at 1110. These 18 competing interests include: (1) possible damage resulting from granting a stay; (2) 19 hardship or inequity to a party if the proceedings go forward; and (3) simplification or 20 complication of issues, proof and questions of law from a stay. CMAX, Inc. v. Hall, 300 21 F.2d 265, 268 (9th Cir. 1962). 22 Plaintiff has not shown how a stay on proceedings against the Nonsignatories 23 would prejudice Plaintiff. In fact, Plaintiff would ostensibly benefit from such a stay. 24 Plaintiff’s arbitration claims against Ryze overlap with its claims against the Nonsignatories 25 because both sets of claims rest on the joint venture agreement and the circumstances 26 surrounding it. (ECF No. 44 at 14-19.) Moreover, Plaintiff’s claims against the Ryze 27 Employees—who are all either affiliated or involved with Ryze—will likely involve the same 1 No. 93 at 16.) Absent a stay, Plaintiff and Nonsignatories will expend unnecessary 2 resources on duplicative litigation that will involve nearly identical evidence to prove 3 overlapping claims. See In re Wynn Resorts Derivative Litig. (Wynn), 2019 U.S. Dist. 4 LEXIS 54105, at *10-11 (D. Nev. Mar. 29, 2019). A stay on this proceeding would benefit 5 all parties by giving them “more complete information regarding whether and how Plaintiff[] 6 might pursue [its] claims which promotes the orderly course of justice.” Id. at *11. This 7 would further “increase[] judicial economy and the crystallization of the factual issues.” Id. 8 at *12-13; see also Wells Fargo Clearing Servs., LLC v. Foster, 2018 U.S. Dist. LEXIS 9 61356, *7-8, 2018 WL 1746307 (holding that a stay was warranted where an arbitration 10 “will likely narrow if not eliminate the issues before this Court”). Even if Plaintiff’s claims 11 are dismissed in arbitration, Plaintiff would still benefit from a stay here because it would 12 “be spared the expense of pursuing doomed claims.” Wynn, 2019 U.S. Dist. LEXIS 54105, 13 at *10-11; see also CMAX, Inc., 300 F.2d at 269 (rejecting the argument that prejudice 14 may result where evidence or rulings made in another proceeding will adversely affect the 15 party’s claims in the district court). 16 The Court will thus impose a stay on Plaintiff’s claims against Nonsignatories 17 pending Plaintiff’s arbitration with Ryze. 18 IV. CONCLUSION 19 The Court notes that the parties made several arguments and cited to several cases 20 not discussed above. The Court has reviewed these arguments and cases and determines 21 that they do not warrant discussion as they do not affect the outcome of the Motion. 22 It is ordered that Defendants’ motion to stay Plaintiff’s claims pending arbitration 23 (ECF Nos. 51, 53, 58, and 121) is granted. Plaintiff’s claims against Ryze will be stayed 24 pending arbitration. Plaintiff’s remaining claims against Nonsignatories are similarly stayed 25 pending Plaintiff’s arbitration with Ryze. 26 It is further ordered that Defendants’ motions to dismiss (ECF Nos. 47, 52, 59) are 27 denied as moot. 1 It is further ordered that Plaintiff's motion to compel (ECF No. 126) is denied as 2 || moot. 3 It is further ordered that the parties file a status report within 14 days from resolution 4 || of Plaintiff's arbitration with Ryze. 5 The Clerk of Court is directed to administratively close this case. 6 7 DATED THIS 4" day of November 2019.
9 MIRANDA M.DU 10 CHIEF UNITED STATES DISTRICT JUDGE
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