DSNR Media Group Ltd v. Vdopia, Inc.

Background

DSNR Media Group Ltd. and DSNR Media Innovations Ltd. sued Vdopia, Inc., along with five individual defendants. The DSNR companies alleged that Vdopia failed to pay amounts due under two advertising agreements—one with each DSNR company. They asserted eleven causes of action, including breach of contract, account stated, injunctive relief, attachment, unjust enrichment, fraud and deceit, quantum meruit, breach of the implied covenant of good faith and fair dealing, negligence, and false promise.

The agreements described Vdopia’s platform, through which advertisers bid on advertising opportunities offered by publishers such as the DSNR companies. The DSNR companies alleged that Vdopia began falling behind on payments in January 2018 and diverted money received from advertisers instead of paying the amounts due.

Both agreements contained a broad arbitration clause covering all actions or proceedings connected with, touching upon, or relating to the agreements. The clause also stated that an arbitrator could issue temporary restraining orders and preliminary and permanent injunctions. It allowed a party to seek temporary court relief in Alameda County before an arbitrator was appointed or for remedies beyond an arbitrator’s jurisdiction, without giving up the right to arbitration.

The DSNR companies began arbitration against Vdopia on August 8, 2019. They later sought preliminary relief in the arbitration, including an order concerning the alleged unpaid debt. They filed this federal lawsuit on November 29, 2019, seeking injunctive relief and a prejudgment attachment of Vdopia’s assets.

Defendants’ motion

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which requires dismissal when a complaint does not state a legally sufficient claim for relief. They argued that the lawsuit sought relief duplicating the pending arbitration and that the claims were inadequately pleaded. The motion was brought for Vdopia and three individual defendants; the two remaining individual defendants joined the motion.

The DSNR companies did not dispute that the arbitration provisions covered their dispute with Vdopia. They argued instead that the court action was permitted because they sought provisional remedies beyond the arbitrator’s jurisdiction. They also argued that the arbitration clause did not apply to the individual defendants because they had not signed the agreements.

Court’s analysis

Judge Orrick concluded that every claim against Vdopia was based on alleged nonperformance or nonpayment under the agreements and therefore fell within the broad arbitration clause. The court noted that the agreements expressly gave the arbitrator authority to issue preliminary relief and that the DSNR companies had already sought preliminary relief in the arbitration. The DSNR companies did not explain how the relief sought in court differed from the relief sought in arbitration or why it was beyond the arbitrator’s authority.

The court also concluded that the arbitration clause covered the claims against the individual defendants. Although they had not signed the agreements, the court explained that an obligation to arbitrate can extend to nonsignatory agents when the alleged wrongful acts concern their conduct as agents and the claims arise from or relate to the contract. The complaint’s allegations against the individuals concerned their roles as Vdopia officers and managers and their alleged involvement with the unpaid invoices. The court found those claims related to the agreements.

Because the claims were barred by arbitration, the court did not address the defendants’ additional arguments concerning the adequacy of the fraud and negligence allegations or whether DMI had standing.

Ruling

The court granted the defendants’ motion to dismiss. The order did not state that the dismissal was with or without prejudice. It gave the DSNR companies 20 days to amend their complaint if they believed they could plausibly and in good faith assert claims that escaped arbitration.

The court also denied the DSNR companies’ request for a hearing. Judge Orrick found that the plaintiffs had improperly attempted to save additional arguments for the hearing rather than briefing them beforehand. The scheduled hearing was vacated, and the motion was decided without oral argument.