Youlin Wang v. Forensic Professional Group USA, Inc.

Background

The action sought injunctive relief—an order stopping conduct—related to an arbitration over unpaid fees for tax services associated with two real-estate sales. Richard Kahn and Forensic Professionals Group USA, Inc. initiated the arbitration against Youlin Wang and Wang’s former attorney, Derek Longstaff. Wang asked the court to stop the arbitration and to prevent Longstaff from acting for Wang in it.

Longstaff signed a Partially Deferred Retainer and Fee Agreement and a Refund Disbursement Service Agreement on Wang’s behalf. The Refund Disbursement Service Agreement contained the arbitration clause. Wang contended that a November 2017 power of attorney authorizing Longstaff to act for him was fraudulent and that Wang had not authorized Longstaff to sign the agreements. The court had previously entered a preliminary injunction stopping the arbitration. Longstaff later became subject to default judgment, and Forensic Professionals Group USA, Inc. also went into default, leaving Kahn as the only remaining respondent.

Summary-judgment standard

Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. The court views the evidence and reasonable inferences in favor of the party opposing the motion. Wang moved for summary judgment on the validity and enforceability of the arbitration agreement.

Request to strike declaration

Kahn asked the court to strike statements in Greg Xiong’s declaration as inadmissible hearsay. The court found no inadmissible hearsay in the declaration and overruled the request.

Kahn’s standing to enforce the arbitration agreement

Wang argued that Kahn lacked standing—the legal ability to enforce the arbitration clause—because Kahn was not a signatory and the agreement was between Wang and Forensic Professionals Group USA, Inc. The court held that a nonsignatory may enforce an arbitration agreement when contract or agency principles allow it under applicable state law.

The court concluded that Kahn had standing as an agent of Forensic Professionals Group USA, Inc. The court relied on evidence that Kahn was the company’s director and sole shareholder and had executed contracts for the company, including the agreement containing the arbitration clause. The court therefore rejected Wang’s argument that Kahn could not enforce the arbitration agreement merely because he did not sign it.

Whether a valid contract was formed

The court considered whether there was a genuine dispute of material fact about the formation and validity of the Refund Disbursement Service Agreement. It rejected any argument that the company’s default alone required the court to treat allegations against the company as admitted against Kahn.

The court found no dispute of fact concerning whether the November 2017 power of attorney was forged. Wang provided evidence supporting his claim that it was fraudulent, and Kahn did not dispute that the power of attorney used to sign the agreements was fraudulent. The court also noted that a June 2018 power of attorney was legitimate but limited to filing Wang’s tax returns and did not authorize Longstaff to enter the disputed agreements.

The court then addressed ratification, which means affirming an earlier act by conduct after knowing the relevant facts. Kahn stated that Wang made payments to Forensic Professionals Group USA, Inc. under the disputed contracts and received Internal Revenue Service refunds connected to them. The court held that, if those actions occurred, they could be enough to show ratification. It therefore found a genuine dispute of material fact about whether Wang ratified the contract and did not reach apparent authority.

Disposition

The court denied Wang’s motion for summary judgment. It did not enter judgment for either side on the ultimate validity of the arbitration agreement.