Qi v. Dingledine

Background

Xiaohong a/k/a Sophie Qi and Harmonia Holdings Ltd. sued Kenneth Dingledine, Yebo a/k/a Boris Cao, Barbara Darwall, Royo Holdings Ltd., Harmonia Holdings UK Ltd., and BBKTheatricals Ltd. The complaint alleged fraud, conversion, breach of contract, tortious interference, theft of trade secrets, trademark infringement, and unjust enrichment based on an alleged scheme to divert business from the plaintiffs by creating competing entities with virtually identical names.

Dingledine had served as Harmonia’s president from April 2017 through December 2023. His employment agreement with Harmonia was governed by New York law and required mediation followed by binding arbitration for “[a]ny claim or controversy arising out of or relating to” the agreement, the parties’ relationship, or “any other matter or thing,” subject to a stated exception for certain injunctive relief. After an unsuccessful mediation, Dingledine moved to compel arbitration and stay the case.

Arbitration Agreement and Scope

The court held that the employment agreement contained a valid arbitration agreement and that its language was broad. The court rejected the plaintiffs’ argument that the agreement’s just-cause termination provision, which preserved Harmonia’s rights and remedies “at law or in equity,” created an exception allowing the plaintiffs to litigate in federal court. The court concluded that the agreement did not contain such an exception and that arbitration could provide legal and equitable remedies.

The court also held that the plaintiffs’ claims against Dingledine were within the arbitration clause. The Lanham Act false-endorsement claim against Dingledine related to the parties’ relationship because his employment allegedly positioned him to use Harmonia’s trade name and create confusion. The conversion claim concerning funds allegedly taken from Harmonia’s bank account arose from conduct during Dingledine’s employment and was facilitated by his position. The court further held that Dingledine’s defamation counterclaim against Qi arose from the parties’ relationship because it concerned statements about Dingledine’s conduct during his employment.

Waiver

The plaintiffs argued that Dingledine waived arbitration by waiting more than ten months to file his motion, answering the complaint and asserting counterclaims, failing to plead arbitration as an affirmative defense, participating in mediation and settlement discussions, and engaging in litigation and discovery-related activity.

The court rejected the waiver argument under both the post-2022 federal arbitration waiver framework and New York contract law. Although the delay weighed slightly toward waiver, the employment agreement required mediation before arbitration, and Dingledine moved to compel arbitration about seven months after the mediation. The court also found that the case had not involved enough substantive motion practice or discovery to establish waiver: the parties had not exchanged documents before the motion, and the activity before the motion consisted largely of early litigation steps, mediation, and settlement efforts. Under New York law, the plaintiffs also failed to show a clear intent to relinquish the arbitration right.

Stay and Disposition

The court found that all of the plaintiffs’ claims against Dingledine and Dingledine’s counterclaims were arbitrable. Because the claims against the other defendants substantially overlapped factually with the claims sent to arbitration, the court concluded that the entire case should be stayed to avoid duplicative discovery and potentially inconsistent results.

The court GRANTED Dingledine’s motion to compel arbitration, with arbitration to take place within the district. It STAYED the case until resolution of the plaintiffs’ claims against Dingledine in arbitration and required Qi, Harmonia, and Dingledine to file monthly joint updates about the arbitration beginning July 1, 2025. The court DENIED as moot, without prejudice to renewal after the stay is lifted, the request to extend the discovery deadline. The opinion was signed by Robyn F. Tarnofsky, United States Magistrate Judge.