Vallco Property Owner, LLC. v. American Arbitration Association, Inc.

District Court, N.D. California·Decided November 28, 2023·No. 5:23-cv-05843·Unknown

Opinion

VALLCO PROPERTY OWNER, LLC., Case No. 5:23-cv-05843-EJD

Plaintiff, ORDER DENYING EX PARTE APPLICATION FOR TEMPORARY v. RESTRAINING ORDER

ASSOCIATION, INC., Re: ECF No. 3 Defendant.

Plaintiff Vallco Property Owner, LLC (“Vallco”) initiated this action for injunctive relief against the American Arbitration Association (“AAA”) to enjoin the AAA proceedings in New York and preclude the AAA from setting venue in any jurisdiction other than California. See generally ECF No. 1 (“Compl.”). The arbitration concerns a since-terminated agreement between Vallco and Rafael Vinoly Architects (“RVA”) pursuant to the AAA Construction Industry Arbitration Rules. RVA brought a claim for fees against Vallco in New York, but Vallco contends that the AAA proceedings should be venued in California pursuant to the parties’ agreement and the AAA Construction Industry Arbitration Rules. Vallco filed the instant ex parte application for a temporary restraining order requesting that the Court issue a temporary restraining order and/or a preliminary injunction against the AAA seeking the same relief. For the reasons discussed herein, the Court DENIES the request. I. BACKGROUND Vallco is a Delaware limited liability company specializing in real estate investment that has its principal place of business in Palo Alto, California. Compl. ¶¶ 1, 6. RVA is a New York- based architecture firm. Id. ¶ 6. On May 4, 2015, Vallco and RVA entered into a design contract (the “Agreement”) for the Vallco Mall Redevelopment Project (the “Project”) at 10123 N Wolfe Road, in Cupertino, California. Id. ¶ 7. The multi-billion-dollar project was intended to reconstruct and redevelop the Vallco two-story shopping mall on a 50-acre parcel into a 7,000,000 square-feet mixed-use development structure that includes residential construction, retail and office space, as well as parkland, trails, and bike paths. Id. The parties’ Agreement is based on AIA Form document B101-2007 “Standard Form Agreement Between Owner and Architect.” Id. ¶ 12. It was executed in California and concerns the design and development of property in California. Id. ¶ 13. Section 8.3.1 of the Agreement provides that any disputes arising out of the Agreement were to be resolved by the AAA under the Construction Industry Arbitration Rules: Any claim, dispute or other matter in question arising out of or related to this Agreement subject to, but not resolved by, mediation shall be subject to arbitration which, unless the parties mutually agree otherwise, shall be administered by the American Arbitration Association in accordance with its Construction Industry Arbitration Rules in effect on the date of this Agreement. Id. ¶ 14; ECF No. 3-2 (“McLennon Decl.”), Ex. 2 (emphasis added). Section 10.1 states that the Agreement “shall be governed by the law of the place where the Project is located, without giving effect to its conflict of law provisions.” Id. ¶ 16. The Agreement does not fix a locale for arbitration, but Construction Industry Arbitration Rule 12 provides that arbitration agreements that are “silent” as to locale designation “shall be the city nearest to the site of the project in dispute.” Id. ¶ 15. During the performance of the Agreement, RVA allegedly delayed the Project and exceeded the budget in violation of the Agreement. Id. ¶¶ 6, 11. RVA was terminated after 7 years, in April 2023. Id. ¶ 9. On April 26, 2023, RVA filed a demand for arbitration with AAA’s New York office seeking over $9 million in alleged unpaid project fees from Vallco and asserting claims on behalf of “numerous California subconsultants who worked for RVA on the Project in California.” Id. ¶¶ 17–19. Specifically, 16 of the 26 project subconsultants identified by Vallco has being relevant witnesses to both parties’ claims, counterclaims, and defenses are located in California. ECF No. 3 (“Mot.”) at 12–13. Vallco subsequently counterclaimed for damages. Compl. ¶ 19. Vallco answered the demand for arbitration and moved to transfer the venue to California based on the AAA rules and the fact that the majority of the witnesses are located in California. Id. ¶ 20. On June 12, 2023, the AAA appointed a panel of three arbitrators (the “Panel”). Id. ¶ 21. Vallco timely objected to the appointments because none of the arbitrators are licensed to practice law in California. Id. ¶ 22. On June 28, the AAA Administrative Review Council (the “Council”) ruled that New York would remain the locale of the case, subject to the Arbitrator’s authority to make a final determination on the issue. Id. ¶ 23. During the preliminary hearing in July, Vallco again raised change of venue. Id. ¶ 26. The Panel ordered additional briefing on the matter and, on August 4, issued a decision confirming the locale of the hearing as New York. Id. ¶¶ 26, 28. The Panel’s decision did not provide a basis or explanation for its decision to maintain the New York locale. Id. ¶ 29; see McLennon Decl., Ex. 11. The arbitration is in the preliminary stages of discovery, and the Panel has issued no substantive rulings. Id. ¶ 30. On November 11, 2023, Vallco moved for a temporary restraining order. See generally Mot. Summons was issued as to the AAA the following day. See ECF No. 5. A temporary restraining order is a provisional remedy intended to “preserv[e] the status quo and prevent[ ] irreparable harm just so long as is necessary to hold a [preliminary injunction] hearing, and no longer.” Granny Goose Foods, Inc. v. Bhd. of Teamsters & Auto Truck Drivers, 415 U.S. 423, 439 (1974). The standards for a TRO are the same as those for a preliminary injunction. See Stuhlbarg Int’l Sales Co., Inc. v. John D. Brush & Co., Inc., 240 F.3d 832, 839 n.7 (9th Cir. 2001). A plaintiff must demonstrate (1) a likelihood of success on the merits, (2) a likelihood of irreparable harm that will result if an injunction is not issued, (3) the balance of equities tips in favor of the plaintiff, and (4) an injunction is in the public interest. See Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). The Ninth Circuit also recognizes the “sliding scale” test, which provides that “[a] preliminary injunction [or TRO] is appropriate when a plaintiff demonstrates . . . that serious questions going to the merits were raised and the balance of hardships tips sharply in the plaintiff’s favor.” All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134–35 (9th Cir. 2011) (quotations and citation omitted). Under this test a plaintiff must still satisfy the other Winter factors. Id. A. Likelihood of Success on the Merits “Likelihood of success on the merits ‘is the most important’ Winter factor; if a movant fails to meet this ‘threshold inquiry,’ the court need not consider the other factors, in the absence of ‘serious questions going to the merits.’” Disney Enters., Inc. v. VidAngel, Inc., 869 F.3d 848, 856 (9th Cir. 2017) (quoting Garcia v. Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015) (en banc)). “[O]nce the moving party has carried its burden of showing a likelihood of success on the merits,” the non-moving party bears the burden of showing a “likelihood that its affirmative defense will succeed.” Id. Vallco must show that they are likely to succeed in seeking vacatur or modification of the Panel’s venue decision in the AAA proceeding. Vallco contends that the Federal Arbitration Act (“FAA”

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Vallco Property Owner, LLC. v. American Arbitration Association, Inc., (N.D. Cal. 2023).

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