SAC Advisory Group, LLC v. Nanya

• Court: District Court, N.D. California
• Decided: September 12, 2022
• Docket: 3:22-cv-04327
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 SAC ADVISORY GROUP, LLC, et al., Case No. 22-cv-04327-JSC

8 Petitioners, ORDER DENYING MOTION FOR A 9 v. TEMPORARY RESTRAINING ORDER AND ORDERING PETITIONERS TO 10 KAZVO NANYA, SHOW CAUSE 11 Respondent. Re: Dkt. No. 25

12 Petitioners SAC Advisory Group, LLC, Fortune Film Fund I, LLC, Fortune Film Fund II, 13 LLC, Jeffrey Spiegel, Ryan Spiegel and Spiegel Accountancy Corporation filed a petition to 14 compel individual arbitration against Kazvo Nanya. Shortly after the petition was filed, 15 Petitioners filed a motion to compel arbitration seeking an order that the arbitration only proceed 16 on an individual rather than class-wide basis, and a month later, the now pending motion for a 17 temporary restraining order (TRO) seeking the same relief. (Dkt. Nos. 10, 25.) After carefully 18 considering the arguments and briefing submitted, the Court concludes that oral argument is 19 unnecessary, see Civ. L.R. 7-1(b), DENIES the motion for a temporary restraining order and 20 ORDERS Petitioners to SHOW CAUSE as to how this Court has subject matter jurisdiction over 21 their petition to compel arbitration. 22 BACKGROUND 23 Mr. Nanya was one of several investors in a series of funds operated by Petitioners. 24 Pursuant to an arbitration clause in the parties’ operating agreement, Mr. Nanya initiated 25 arbitration proceedings through the American Arbitration Association against Petitioners on an 26 individual and class basis. (Dkt. No. 10-5 at ¶ 6.) Another investor, Jocelyn Carter, who likewise 27 1 claims for securities fraud, negligent misrepresentation, and unjust enrichment arising out of the 2 same factual predicate. See Carter v. Spiegel, No. 21-3990, Dkt. No. 1 (N.D. Cal. May 26, 2021). 3 The court there granted Petitioners’ motion to compel arbitration of Ms. Carter’s claims based on 4 the same arbitration agreement at issue here. See Carter v. Spiegel, No. 21-CV-03990-TSH, 2022 5 WL 126303 (N.D. Cal. Jan. 13, 2022). In doing so, the court found that Ms. Carter could only 6 proceed on her claims on an individual, not class basis because the arbitration agreement was 7 silent as to class actions. Id. at *4 (citing Lamps Plus, Inc. v. Varela, ––– U.S. ––––, 139 S. Ct. 8 1407 (2019); Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, (2010)). 9 Six months after that order, the same counsel who represented Ms. Carter filed the at-issue 10 arbitration claim with the American Arbitration Association on behalf of Mr. Nanya on an 11 individual and class basis. (Dkt. No. 10-5 at 4.) Two weeks later, Petitioners filed this petition to 12 compel arbitration seeking an order that Ms. Nanya’s arbitration claim proceed on an individual 13 basis only. Petitioners thereafter filed a motion to compel arbitration, and after an arbitrator was 14 appointed on August 31, 2022, the now pending TRO. (Dkt. Nos. 10, 25.) 15 DISCUSSION 16 The standard for issuing a TRO is identical to the standard for a preliminary injunction. 17 Stuhlbarg Int’l Sales Co., Inc. v. John D. Brush & Co., 240 F.3d 832, 839 n.7 (9th Cir. 2001). A 18 court considers four factors before granting preliminary relief: (1) whether the applicant is likely 19 to succeed on the merits of the action; (2) whether the applicant is likely to suffer irreparable harm 20 in the absence of preliminary relief; (3) whether the balance of the equities tip in the applicant’s 21 favor; and (4) that an injunction is in the public interest. Doe v. Reed, 586 F.3d 671, 676 (9th Cir. 22 2009) (quoting Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)). A TRO is an 23 “extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled 24 to such relief.” Winter, 555 U.S. at 22. 25 Petitioners contend that a TRO is necessary to avoid irreparable injury and to put an end to 26 “the gamesmanship of Respondent Nanya’s counsel.” (Dkt. No. 25 at 7.) Petitioners’ motion fails 27 to meet the standard for a TRO. Petitioners concede in the very same paragraph alleging 1 Respondent’s claim cannot proceed on a class basis.” (Id.) That is, Petitioners maintain that the 2 arbitrator can and will grant them the same relief they seek from this Court and therefore 3 themselves undermine any contention “that irreparable injury is likely in the absence of an 4 injunction.” Winter, 555 U.S. at 22 (emphasis original). An adequate showing of irreparable harm 5 is the “single most important prerequisite for the issuance of a [TRO].” Universal Semiconductor, 6 Inc. v. Tuoi Vo, No. 5:16-CV-04778-EJD, 2016 WL 9211685, at *2 (N.D. Cal. Nov. 29, 2016) 7 (quoting Freedom Holdings, Inc. v. Spitzer, 408 F.3d 112, 114 (2d Cir. 2005)). A TRO ordered on 8 anything less is “inconsistent” with the “characterization of injunctive relief as an extraordinary 9 remedy....” Winter, 555 U.S. at 22. Because Petitioners have not made an adequate showing of 10 irreparable injury, the extraordinary remedy of a TRO is improper. 11 In addition, upon review of the petition to compel arbitration, the Court has concerns 12 regarding its subject matter jurisdiction over this matter. While Petitioners argue that this Court is 13 authorized to compel arbitration under the Federal Arbitration Act, 9 U.S.C. § 4, this is not the 14 relief Petitioners seek. The parties’ dispute is already proceeding in arbitration—a proceeding 15 which was initiated by Mr. Nanya. Petitioners instead seek an order directing the arbitrator to 16 only hear Mr. Nanya’s individual arbitration claim and not any claims he brings on behalf of the 17 class. Thus, the petition does not on its face fall within 9 U.S.C. § 4. 18 Further, even if Petitioners were seeking an order compelling arbitration under Section 4, 19 the “court must have what we have called an independent jurisdictional basis to resolve the 20 matter.” Badgerow v. Walters, 142 S. Ct. 1310, 1314 (2022) (cleaned up). Section 4 of the FAA 21 “instructs a federal court to look through the petition to the underlying substantive controversy 22 between the parties—even though that controversy is not before the court. If the underlying 23 dispute falls within the court’s jurisdiction—for example, by presenting a federal question—then 24 the court may rule on the petition to compel.” Id. (cleaned up). Here, the petition to compel 25 arbitration does not set forth an independent basis for federal jurisdiction nor have Petitioners 26 invoked a basis for the Court’s subject matter jurisdiction in response to Mr. Nanya’s opposition 27 brief raising this issue. (Dkt. Nos. 17, 24.) 1 subject matter jurisdiction over this petition. Petitioners shall file a written response to this Order 2 || by September 19, 2022. 3 4 IT IS SO ORDERED. 5 Dated: September 12, 2022 6 ’ ne 7 CQUELINE SCOTT CORL 8 United States District Judge 9 10 11 12

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