McEnery v. McEnery
- Haywood Gilliam
- 4:21-cv-09614
- U.S. District Court · Northern District of California
- 7
In McEnery v. McEnery, Judge Gilliam compelled arbitration, stayed the case, and denied defendants’ motion to strike allegations.
John P. McEnery, Tom McEnery, Martin Menne, and MCM Diversified, Inc.; the case was sent to arbitration and stayed rather than proceeding in court.
What happened
John P. McEnery sued Tom McEnery and others over alleged interference with his efforts to sell interests in two limited liability companies connected to the San Pedro Square Market. He claimed that Tom McEnery discouraged a potential buyer by criticizing him and offering an alternative investment.
The court treated defendants’ motion to dismiss as a request to compel arbitration. It sent the dispute to arbitration because the companies’ operating agreements delegated questions about whether a dispute belonged in arbitration to the arbitrator. The court stayed the case and denied defendants’ request to strike allegations from the complaint.
Judge Haywood Gilliam ruled that the court did not need to decide whether McEnery’s interference claim fell within the arbitration agreements because the agreements assigned that question to the arbitrator. The clerk was directed to administratively close the case, and the parties were ordered to file periodic status reports about the arbitration.
The detailed version
- McEnery v. McEnery · No. 4:21-cv-09614
- Haywood Gilliam
- Aug. 17, 2022
Background
John P. McEnery brought one claim for intentional interference with prospective economic relations. He alleged that he was considering selling some or all of his interests in Urban Markets, LLC and Urban Markets Entertainment, LLC, which operated the San Pedro Square Market in San Jose. According to the complaint, after learning about negotiations with a potential buyer, Tom McEnery discouraged that buyer by questioning the valuation of the companies, criticizing McEnery’s morals and character, and offering an alternative investment opportunity.
Defendants Tom McEnery, Martin Menne, and MCM Diversified, Inc. moved to dismiss or stay the case based on arbitration provisions in the operating agreements for the two limited liability companies. They also asked the court to strike portions of the complaint as unnecessary and scandalous.
Arbitration
The court construed defendants’ motion as a motion to compel arbitration under the Federal Arbitration Act. The court explained that it normally must determine whether a valid arbitration agreement exists and whether that agreement covers the dispute. Here, McEnery acknowledged that the operating agreements contained arbitration provisions and that related claims were already being arbitrated. His argument concerned the agreements’ scope: he contended that his intentional-interference claim did not arise from, or require interpretation of, those agreements.
The court held that the agreements delegated questions of arbitrability—the gateway questions about whether an agreement covers a particular dispute—to the arbitrator. The agreements required arbitration of actions to enforce or interpret the agreements and disputes concerning them. They also incorporated American Arbitration Association rules giving the arbitrator authority to decide questions about the existence, scope, and validity of the arbitration agreement. The court therefore did not decide whether the intentional-interference claim was within the agreements’ scope.
Motion to Strike
Defendants also sought to strike allegations they considered unnecessary and scandalous, including an allegation that they were exploiting a family member for financial gain. The court denied that request. It found that disagreement with the allegations did not make them unnecessary or scandalous, that the allegations provided background about the parties’ professional relationships and the alleged conduct, and that striking them would not streamline the case because the dispute would proceed to arbitration.
Disposition
The court granted the motion to compel arbitration and stayed the case pending completion of arbitration. It denied the motion to strike. The parties were directed to file a joint status report about the arbitration 120 days after the order and every 120 days afterward unless the court ordered otherwise. The clerk was directed to administratively close the case.
Read the full 7-page opinion on CourtListener, the free public archive maintained by the Free Law Project.