Global Tech Industries Group, Inc. v. Go Fun Group Holdings, Ltd

Background

Global Tech Industries Group, Inc. and its subsidiary, GT International Group, Inc., sued Go Fun Group Holdings Ltd. and Go F&B Holdings LTD for breach of contract, specific performance, indemnification, and fraud. The parties later informed the court that they had reached a confidential settlement agreement through mediation. The court dismissed the case while allowing restoration within 30 days if the settlement was not fully carried out. After the defendants asked to restore the case, the parties submitted the signed settlement agreement to the court.

The settlement agreement stated that Nevada law governed it and that disputes arising under the agreement would be decided by binding arbitration in Nevada.

Arguments and analysis

The plaintiffs moved to compel arbitration. The defendants argued that the settlement agreement as a whole was unenforceable because conditions required for the agreement to take effect had not been satisfied. They did not specifically argue that the arbitration provision itself was invalid.

The court applied the Federal Arbitration Act’s severability rule. That rule generally treats an arbitration provision as separate from the rest of the contract. When a party challenges the contract as a whole, rather than specifically challenging the arbitration provision, the arbitrator decides whether the contract is valid. The court therefore concluded that the defendants’ conditions-precedent argument had to be decided by the arbitrator. The court also found that the parties disputed whether the settlement agreement was enforceable, making the dispute one covered by the arbitration provision.

Ruling

The court granted the plaintiffs’ motion to compel arbitration. It also dismissed the action because the settlement agreement purported to resolve all claims and required disputes arising under that agreement to be submitted to an arbitrator. The clerk was directed to terminate the case and close all open motions as moot. Judge Ona T. Wang signed the opinion and order.