Reeves v. Safeguard Properties

Background

On October 31, 2019, pro se plaintiff Michael Duke Reeves and Dreamduke Enterprise, LLC filed the action against Safeguard Properties Management, LLC and other defendants. The plaintiffs alleged that Dreamduke contracted with Safeguard to provide property-preservation services for foreclosed properties in New York and New Jersey, and that Safeguard did not adequately pay Dreamduke.

On June 23, 2020, the court ordered the plaintiffs to submit a short letter showing good cause why the case should not be dismissed under Federal Rule of Civil Procedure 4(m), which concerns completing service of process. After the plaintiffs did not respond, the court dismissed the action on August 18, 2020, for failure to prosecute. Reeves later filed a letter and then moved for reconsideration. The court treated both letters as a timely reconsideration motion under Local Rule 6.3. Reeves argued that the court's pro se intake unit had incorrectly advised him about service and that an automobile accident and medical problems, including two surgeries, contributed to the delay.

Issues Identified by the Court

The court stated that it could not yet assess the reconsideration motion because the complaint had two potentially fatal defects.

First, Reeves was attempting to litigate for Dreamduke, the limited liability company he organized. The court cited Second Circuit precedent holding that a limited liability company may appear in federal court only through a licensed attorney. Because Reeves was not a licensed attorney, the court stated that Dreamduke had to be dismissed unless it obtained counsel.

Second, the Master Services Agreement between Dreamduke and Safeguard included a broad arbitration provision. It stated that arbitration was the exclusive, final, and binding method for resolving disputes related to the agreement, the services, work orders, or the parties' relationship. The agreement also selected the Federal Arbitration Act and provided that arbitration would occur in Cuyahoga County, Ohio, before a single lawyer-arbitrator. The agreement included an Ohio choice-of-law and forum-selection provision except where the arbitration clause applied.

The court explained that written arbitration agreements are generally enforceable under the Federal Arbitration Act. It also explained that the broad language in this agreement created a presumption that the dispute was arbitrable. Although the plaintiffs alleged that the agreement and arbitration clause were unconscionable, the court found that they had not supplied evidence disputing the arbitration clause's enforceability or rebutting that presumption.

Order and Effect

The court ordered Reeves to submit, by January 20, 2021, a letter explaining why the case should not be dismissed in favor of arbitration and stating whether, and by what date, he intended to seek counsel for Dreamduke. The court warned that if Reeves failed to comply, it might stay the action in favor of arbitration and/or dismiss the case for failure to comply with the order under Federal Rule of Civil Procedure 41(b).

Judge Vernon S. Broderick did not grant or deny the reconsideration motion in this order. The prior dismissal was not expressly vacated in the text provided. The order instead required further explanation before the court would decide what to do with the reconsideration request. The opinion also states that defendants could refile their earlier motions to dismiss if the reconsideration motion were granted.