United States District Court, D. Arizona
Douglas L. Rayes United States District Judge
Before the Court is Plaintiffs’ motion to stay arbitration proceedings, (Doc. 10), and Defendants’ motion to dismiss or stay proceedings and compel arbitration, (Doc. 16). Both motions are fully briefed, and neither party requested oral argument. For the reasons stated below, Plaintiffs’ motion is denied and Defendants’ motion is granted.
Since 1998, Plaintiff Chad McAllister has held various positions as a tutor and lecturer at Arizona State University (“ASU”), focusing on holding exam review sessions for science classes. (Doc. 1, ¶ 18.) His lectures grew in popularity, and he eventually developed specialized review sessions for professional admissions exams, such as the Dentistry Admission Test and the Medical College Admission Test. (Id., ¶¶ 19, 23.)
In 2007, Defendant Alan Halls, a pre-dentistry student, created a website forum, CourseSaver.com, on which he posted class notes and other class materials. (Id., ¶ 28.) Halls eventually began attending McAllister’s review sessions and obtained permission from McAllister to film the lectures and post them to his “coursesaver.com” website. (Id., ¶¶ 29-31.) Halls’ website grew, and he began recording all of McAllister’s review sessions, eventually creating another website - Chadsreview.org. (Id., ¶ 39.)
On May 18, 2011, Halls and McAllister signed a “Coursesaver.com” Partnership Agreement wherein McAllister’s lectures would be distributed via the coursesaver.com website. (Id., ¶¶ 41-42.) Halls and McAllister agreed to split the profits of the website equally. (Id., ¶¶ 44-45.) In addition, McAllister was responsible for creating and editing the content of the lectures, and Halls was responsible for design and technology issues related to the website. (Id., ¶¶ 48-49.) The agreement contained an arbitration provision, which provides:
Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled by arbitration without attorneys in accordance with the rules, then obtaining, of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof.
(Doc. 16-1 at 4.)
On June 7, 2011, McAllister formed Chad’s Videos, LLC with his father. (Doc. 1, ¶ 52.) On November 21, 2011, Halls formed Course Saver, LLC - Arizona. (Id., ¶ 56.) In June 2014, the partnership soured, and the parties began to dispute ownership of the course materials, website, and other related intellectual property. (Id., ¶¶ 85, 117-24.) In mid-2015, Halls and Course Saver, LLC filed a demand for arbitration of the dispute against McAllister and Chad’s Videos, LLC before the American Arbitration Association (“AAA”) Commercial Tribunal. (Id., ¶ 120; see also Doc. 27-1.)
On November 2, 2015, Plaintiffs Chad and Jordan McAllister; Mind Smoothie, LLC; Chad’s Videos, LLC; and CourseSaver.com filed a trademark and copyright infringement action against Defendants Alan and Tamara Halls; Course Saver, LLC - Arizona; and Course Saver, LLC - Utah. Shortly thereafter, Plaintiffs filed a motion to stay arbitration proceedings, (Doc. 10), and Defendants responded with a motion to dismiss this action and compel arbitration, (Doc. 16.)
The Federal Arbitration Act “leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an agreement has been signed.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original). The court must compel arbitration where: (1) a valid agreement to arbitrate exists, and (2) the agreement encompasses the dispute at issue. Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). “Where a contract contains an arbitration clause, courts apply a presumption of arbitrability as to particular grievances, and the party resisting arbitration bears the burden of establishing that the arbitration agreement is inapplicable.” Wynn Resorts, Ltd. v. Atlantic-Pacific Capital, Inc., 497 F. App’x 740, 742 (9th Cir. 2012) (internal citations omitted); see also AT&T Mobility, LLC v. Concepcion, 563 U.S. 333, 339 (2011) (“We have described [§ 2 of the FAA] as reflecting . . . a ‘liberal federal policy favoring arbitration[.]’”).
Plaintiffs do not dispute the validity of the arbitration provision in the Partnership Agreement. Instead, they argue the Court should stay the arbitration proceedings for four reasons: (1) Course Saver, LLC - Utah is not a signatory to the arbitration agreement; (2) Chad’s Videos, LLC is not a signatory to the contract; (3) only two counts alleged in the demand for arbitration fall within the scope of the arbitration agreement; and (4) there are necessary and indispensable parties that are not subject to the arbitration, and thus the arbitration cannot provide the relief requested. (Doc. 10 at 2-3.) These matters concern the issue of arbitrability. Defendants argue that the parties agreed the arbitrator would determine arbitrability, and therefore ...