Merida Capital Partners III LP v. Fernane
Merida Capital Partners III LP v. Jacob Fernane, Pacific Lion LLC, Liqueous LP, “ABC CORP.” and John Does 1-3
- Vargas
- 1:25-cv-01235
- U.S. District Court · Southern District of New York
- 16
Merida Capital Partners v. Fernane: Judge Vargas transferred the case to Florida because the agreement required arbitration there, but this court could not compel it.
Merida Capital Partners III LP and the named Defendants are affected by the transfer from the Southern District of New York to the Southern District of Florida. The order resolved the enforceability and scope of the arbitration clause for purposes of the motion, but it did not decide the underlying fraud or securities claims.
What happened
In Merida Capital Partners III LP v. Jacob Fernane, Pacific Lion LLC, Liqueous LP, “ABC CORP.” and John Does 1-3, Merida alleged that Defendants used a fraudulent securities repurchase agreement to obtain securities and $1.625 million. Defendants asked the court to require arbitration under that agreement or transfer the case to Florida.
The court found that the arbitration clause was valid and covered Merida’s claims, including claims against Fernane and Liqueous even though they did not sign the agreement. But the agreement required arbitration in Fort Lauderdale, Florida, and this court concluded that it lacked authority to compel arbitration in another federal district. The court therefore transferred the case to the Southern District of Florida.
Judge Jeannette A. Vargas granted the motion to transfer under the federal venue-transfer statute. The order did not decide whether Merida’s fraud and securities claims were true or whether Defendants were liable.
The detailed version
- Merida Capital Partners III LP v. Fernane · No. 1:25-cv-01235
- Vargas
- Sept. 3, 2025
Background
Merida brought claims alleging securities fraud, common-law fraud, and fraudulent inducement. According to the complaint, Merida entered a Stock Repurchase Agreement with Pacific Lion, later amended, involving 415,000 shares of Green Thumb Industries Inc. Merida alleged that the agreement was used to transfer control of the shares and that Fernane later received a $1.625 million repurchase payment without returning the shares.
The agreement contained a broad arbitration clause. It required disputes arising from or relating to the agreement to be resolved by binding arbitration in Florida, with the arbitration held in Fort Lauderdale unless the parties agreed otherwise. Defendants Jacob Fernane, Liqueous LP, and Pacific Lion LLC moved to compel arbitration and dismiss the case. Alternatively, they asked the court to transfer the case to the Southern District of Florida so that court could decide the request to compel arbitration.
Validity and Scope of the Arbitration Clause
Merida argued that the arbitration clause itself had been obtained through fraud and that Fernane had previously used arbitration provisions to delay relief. The court applied the rule that a general allegation that a contract was fraudulently induced does not establish fraud in the inducement of the arbitration clause. A party challenging the arbitration clause must identify particularized facts showing deception about the arbitration provision itself.
The court found that Merida did not allege that it was deceived about the arbitration clause’s nature, scope, or terms. It therefore concluded that the arbitration clause was enforceable.
The court also rejected Merida’s argument that Fernane and Liqueous could not enforce the clause because they were not signatories to the agreement. It concluded that Fernane had a sufficiently close relationship with Pacific Lion because he executed the agreement for that entity. It further concluded that the claims against Fernane and Liqueous were closely connected to the claims against Pacific Lion, including because Merida alleged that the entities were Fernane’s alter egos. The court held that Fernane and Liqueous could invoke the arbitration clause against Merida.
Authority to Compel Arbitration and Transfer
The court concluded that the arbitration clause barred Merida from continuing this litigation in the current court. However, it interpreted Section 4 of the Federal Arbitration Act as allowing a federal district court to compel arbitration only within the district where the order is issued, or as otherwise limited by the statute. Because the agreement specified Fort Lauderdale, Florida, the court concluded that it could not compel arbitration there.
The court then considered transfer under 28 U.S.C. § 1404(a), which permits transfer when it serves the convenience of the parties and witnesses and the interests of justice. The court gave controlling weight to the agreement’s selection of Florida as the arbitration location and concluded that transferring the case to the Southern District of Florida would serve convenience and the interests of justice.
Disposition
The court granted the motion to transfer the case to the United States District Court for the Southern District of Florida. The Clerk of Court was directed to transfer the case. The order did not decide the truth of Merida’s fraud allegations or whether Defendants are liable on the underlying claims.
Read the full 16-page opinion on CourtListener, the free public archive maintained by the Free Law Project.