SAC Advisory Group, LLC v. Nanya

Background

Petitioners SAC Advisory Group, LLC, Fortune Film Fund I, LLC, Fortune Film Fund II, LLC, Jeffrey Spiegel, Ryan Spiegel, and Spiegel Accountancy Corporation filed a petition asking the court to compel individual arbitration against Kazvo Nanya. They later moved for an order requiring that Nanya’s arbitration proceed only on an individual basis rather than on a class-wide basis. After an arbitrator was appointed, petitioners filed the temporary restraining order motion seeking the same relief.

Nanya was an investor in funds operated by petitioners. Under an arbitration clause in the parties’ operating agreement, Nanya initiated proceedings through the American Arbitration Association on both an individual and class basis. The opinion notes that, in a prior related proceeding involving another investor and the same arbitration agreement, the court ordered individual—not class-wide—arbitration because the agreement was silent about class actions.

Temporary restraining order

A temporary restraining order, or TRO, is emergency injunctive relief. The court applied the same four-factor standard used for a preliminary injunction: likelihood of success, likely irreparable harm without relief, the balance of the equities, and the public interest.

The court denied the TRO. Petitioners argued that immediate relief was needed to avoid irreparable injury and what they called gamesmanship by Nanya’s counsel. But petitioners also asserted that the arbitrator could and would grant the same individual-only relief. The court concluded that this concession undermined the required showing that irreparable injury was likely without a court-ordered TRO. Because petitioners had not adequately shown irreparable injury, the court held that the extraordinary remedy was improper.

Subject-matter jurisdiction and order to show cause

The court also questioned its subject-matter jurisdiction, meaning its legal authority to hear the petition. Petitioners relied on Section 4 of the Federal Arbitration Act, but the court stated that they were not seeking an order compelling the parties to begin arbitration. The dispute was already in arbitration; petitioners instead sought an order directing the arbitrator to hear only Nanya’s individual claim and not any claims brought for a class.

The court therefore stated that the petition did not appear on its face to fall within Section 4. The court added that even if petitioners were seeking relief under Section 4, federal jurisdiction would still require an independent jurisdictional basis. The petition did not identify one, and petitioners had not invoked one in response to Nanya’s jurisdictional argument.

The court ordered petitioners to file a written response explaining how the court has subject-matter jurisdiction over the petition by September 19, 2022. The opinion denied the TRO and did not state that it dismissed the petition or decide whether Nanya’s arbitration could proceed on a class-wide basis.