Ambercroft Trading Limited v. Chris Biddy

Background

Dmitri Kushaev, whom the opinion identifies as a Russian citizen residing in Switzerland, was the beneficial owner and manager of Ambercroft Trading Limited, a company registered in the British Virgin Islands. Plaintiffs sued Mikhail Kokorich, Liudmila Kokorich, Chris Biddy, Astro Digital US, Inc., and Astro Digital, Inc.

Plaintiffs alleged that Mikhail Kokorich and the other defendants carried out a scheme to induce a $10 million investment in a joint venture and then divert or misappropriate the venture’s key assets. Kushaev and Mikhail Kokorich allegedly first made an oral joint-venture agreement. Kushaev formed Ambercroft, and Kokorich formed Dauria Holding International Limited. Plaintiffs later acquired a 14.29% interest in that company under a written Investment and Shareholders Agreement, called the DHIL Agreement.

The DHIL Agreement required “[a]ll and any disputes or differences” arising from or connected with the agreement, including disputes about its breach, termination, or invalidity, to be resolved under the International Chamber of Commerce’s arbitration rules. Plaintiffs brought six claims: breach of fiduciary duty, fraud, violation of California’s Unfair Competition Law, two civil claims under the Racketeer Influenced and Corrupt Organizations Act, and unjust enrichment.

Motion to Compel Arbitration

Mikhail and Liudmila Kokorich moved to compel arbitration. The court explained that the Federal Arbitration Act requires courts to determine whether the parties agreed to arbitrate and whether the agreement covers the claims. The court found no dispute that the DHIL Agreement contained an arbitration provision. Although Liudmila Kokorich was not a party to that agreement, Plaintiffs did not argue that she could not invoke the provision because she was a nonparty.

The court then considered who should decide whether the arbitration clause covered Plaintiffs’ claims. The DHIL Agreement incorporated the International Chamber of Commerce rules. Those rules state that the arbitral tribunal decides questions about the existence, validity, or scope of the arbitration agreement and whether claims may be heard together. The court held that incorporating those rules was clear and unmistakable evidence that the parties assigned these threshold questions—often called gateway questions—to the arbitrator.

The court rejected Plaintiffs’ arguments that the existence of multiple agreements required the court to decide arbitrability, that the oral joint-venture agreement had no arbitration clause, and that factual disputes prevented a finding that arbitrability had been delegated. The court held that the arbitration clause in the DHIL Agreement required the arbitrator to decide which agreement or agreements were implicated by the claims.

The court also considered, as a precaution, whether the Kokorich Defendants’ reliance on the arbitration clause was “wholly groundless.” It concluded that the claims at least arguably arose from or related to the DHIL Agreement because Plaintiffs’ allegations centered on the investment made through DHIL and the alleged loss of that investment. The court stated that Plaintiffs’ arguments that their claims were outside the clause should be raised before the arbitrator.

Stay and Other Motions

The court determined that the case should be stayed while arbitration proceeded. Only the Kokorich Defendants sought arbitration, but the court found that continuing the case against the other defendants separately would be inefficient and could create overlapping proceedings and inconsistent decisions. Mikhail Kokorich was named in all six claims, and his alleged conduct was central to the lawsuit.

The court granted the Kokorich Defendants’ motion to compel arbitration and stay the case. It denied the two pending motions to dismiss as moot. The parties were ordered to notify the court within seven days of the arbitration ruling. The clerk was directed to administratively close the case file, which the order said was an internal procedure that did not affect the parties’ rights.