Dekrypt Capital, Llc, V. Uphold Ltd ( 2022 )

THE COURT OF APPEALS FOR THE STATE OF WASHINGTON
DEKRYPT CAPITAL, LLC, a Delaware No. 82606-9-I
company, DEKRYPT MASTER FUND
L.P., a British Virgin Islands company, DIVISION ONE
DEKRYPT VENTURES I L.P., a British
Virgin Islands company, ARRINGTON UNPUBLISHED OPINION
XRP CAPITAL CAYMAN SPV, LTD., a
Cayman Islands company, and
ARRINGTON CAPITAL MANAGEMENT,
LLC, a Washington Company,
Respondents,
v.
UPHOLD LTD., a Cayman Islands
exempted limited liability company,
UPHOLD, INC., a Washington corporation,
UPHOLD HQ INC., a South Carolina
corporation, JUAN PABLO THIERIOT,
individually and the marital community
comprised thereof, and DANIEL SCHATT,
individually and the marital community
comprised thereof,
Appellants.
ANDRUS, A.C.J. — Uphold Ltd., two affiliated companies, Juan Pablo
Thieriot, Uphold’s chief executive officer, and Daniel Schatt, a member of Uphold’s
board (collectively Uphold), appeal a trial court order denying their motion to
compel arbitration of claims asserted by five companies who contracted with
Citations and pin cites are based on the Westlaw online version of the cited material.
No. 82606-9-I/2
Uphold to purchase units of cryptocurrency (the Buyers). We conclude the
arbitrability of the Buyers’ claims is governed by the Federal Arbitration Act (FAA), 1
and that under this federal statute, we refer to state law to interpret the agreement
to decide who may compel arbitration. We further conclude there is no conflict
between Singapore law, the choice of law of the contract, and Washington law,
and that under both jurisdictions, Uphold has the right to compel arbitration of the
Buyers’ claims. We therefore reverse and remand for the entry of an order
compelling arbitration.
FACTUAL BACKGROUND
In November 2020, five companies—Dekrypt Capital LLC, Dekrypt Master
Fund L.P., Dekrypt Ventures L.P. (the Dekrypt Companies), Arrington XRP Capital
Cayman SPV, Ltd., and Arrington Capital Management LLC (the Arrington
Companies)—initiated a lawsuit against Uphold. 2 The lawsuit alleges that Uphold
represented that it intended to universalize the process of trading cryptocurrencies
by building a “Universal Protocol Platform, a digital reserve ecosystem that
provides interoperability for blockchain-based assets,” and was raising money for
the project through the sale of cryptocurrency tokens. It further alleges that the
Dekrypt Companies and the Arrington Companies entered into “Token Sale
Agreements” (TSAs) with Uphold for the purchase of these tokens, that the tokens
were “securities” under the Washington State Securities Act (WSSA), chapter
21.20 RCW, and that Uphold violated the WSSA by selling unregistered securities
19 U.S.C. §§ 1-14.
2 According to the complaint, Uphold, Inc. and Uphold HQ, Inc. are subsidiaries of Uphold, Ltd.
Juan Pablo Thieriot is the chief executive officer of all three Uphold companies. Daniel Schatt was
a board member of Uphold HQ.
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No. 82606-9-I/3
and making materially false representations in the sales. These Buyers seek to
rescind the TSAs and to recover damages for violations of the WSSA and for
negligent misrepresentations.
The Buyers’ claims arise out of three separate, but identical TSAs. Each
TSA provided:
THIS TOKEN SALE AGREEMENT is entered into . . . by and
between:
1. THE VENDOR (AS DEFINED HEREIN); and
2. THE PERSON/CORPORATION WHOSE PARTICULARS ARE
SET OUT IN SCHEDULE 1 (the “Buyer”),
in connection with the intended distribution by the Vendor of certain
cryptographic tokens known as “Universal Protocol Tokens” . . . in
furtherance of the establishment and launch of the “Universal
Protocol” project (the “Project”), which is being jointly developed by
a coalition of cryptocurrency companies and blockchain pioneers
known as the Universal Protocol Alliance (the “Project Group”). . . . 3
On August 3, 2018, Uphold executed the first TSA with the Arrington
Companies. The TSA recitals stated that the “Parties” to the agreement were “the
Buyer” and “the Vendor.” The “Buyer” was identified as Arrington XRP (AXRP).
In Schedule 1 to the TSA, AXRP agreed to transfer $2 million to Uphold and, in
exchange, Uphold promised to transfer 250,000,000 digital tokens to AXRP at a
price of $0.008 per token.
On September 4, 2018, Uphold executed a TSA with two Dekrypt
Companies. The TSA identified the “Buyer” as Dekrypt Master Fund L.P. Dekrypt
Capital LLC, the general partner of Dekrypt Master Fund, executed the agreement
on behalf of the limited partnership. The Dekrypt Companies agreed to transfer
3The TSAs do not identify the specific companies in this Project Group but the parties appear to
agree that Uphold’s subsidiaries fall within this group.
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No. 82606-9-I/4
$1 million to Uphold and, in exchange, Uphold promised to transfer 125,000,000
tokens to them.
Finally, on October 24, 2018, Uphold executed a TSA with Dekrypt Ventures
I L.P., in which Uphold agreed to transfer 62,500,000 tokens to that Buyer in
exchange for $500,000.
The TSA defined the “Vendor” as a yet-to-be formed “company incorporated
in Singapore to be named ‘Universal Protocol Pte. Ltd.’ (or if such name is
unavailable, such other similar name as determined by the Project Group).” It
provided that Uphold “is entering into this Agreement in the capacity of a proxy on
behalf of the Vendor prior to the Vendor’s incorporation with the intention that this
Agreement will be ratified by the Vendor after its Incorporation,” as allowed under
section 41 of Singapore’s Companies Act. Thieriot signed the TSAs on behalf of
Uphold, with Uphold signing on behalf of the yet-to-be incorporated company,
Universal.
Central to this dispute is the TSA “Dispute Resolution” provision, section
7.12, which provides
The Buyer and the Vendor shall cooperate in good faith to resolve
any dispute or claim arising out of or in any way relating to this
Agreement. If the Parties are unable to resolve such dispute or claim
within 90 days, such dispute or claim shall be finally settled by
arbitration, and judgment upon the award may be entered by any
court having jurisdiction thereof or having jurisdiction over the
relevant Party or its assets. The arbitration shall be conducted under
the rules of the SIAC. 4 The arbitration tribunal shall consist of a sole
arbitrator to be appointed by the President of the SIAC. The language
of the arbitration shall be English.
4 The TSA defines the “SIAC” as the Singapore International Arbitration Centre.
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Uphold moved to compel arbitration of the Buyers’ claims under section
7.12. The Buyers argued that only the “Vendor,” Universal—and not its proxy,
Uphold, nor any of its affiliated companies, officers or directors—could invoke the
arbitration clause of the TSA. The trial court denied Uphold’s motion on April 20,
2021. Uphold appeals.
ANALYSIS
Uphold challenges the trial court’s order denying its motion to compel
arbitration. We review this decision de novo. Satomi Owners Ass'n v. Satomi,
LLC, 167 Wn.2d 781, 797, 225 P.3d 213 (2009). The party opposing arbitration
bears the burden of showing that the agreement is not enforceable. Zuver v.
Airtouch Commc’ns, Inc., 153 Wn.2d 293, 302, 103 P.3d 753 (2004).
A. The Federal Arbitration Act
Uphold argues that the FAA governs the arbitrability of the Buyers’ claims.
We agree. The FAA provides:
A written provision in . . . a contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising out
of such contract or transaction, . . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for
the revocation of any contract.
9 U.S.C. § 2. This section declares a national policy favoring arbitration of claims
that parties contract to settle in that manner. Satomi, 167 Wn.2d at 798. The effect
of this section is to create a body of federal substantive law of arbitrability,
applicable to any agreement within the coverage of the act. Id. Both state and
federal courts must enforce this body of law. Id.
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No. 82606-9-I/6
The FAA applies to transactions involving economic activity in interstate
commerce. Id. at 799 (FAA applied to arbitration agreement between developers
and homeowner association for construction defect claims). The FAA applies to
the Buyers’ token sales because, like Satomi, the transactions involve interstate
commerce. AXRP is a Cayman Islands corporation. Dekrypt Master Fund and
Dekrypt Ventures are British Virgin Islands limited partnerships. They each agreed
to purchase “BTC,” defined as “bitcoin, the cryptographic token associated with the
Bitcoin cash blockchain.” Each designated a “Buyer Token Receiving Address” on
the “Ethereum blockchain” to which Uphold Ltd., a Cayman Islands limited liability
company, agreed to transfer the digital tokens. 5 The Ethereum blockchain is an
open source, decentralized platform on the Internet used to issue custom digital
assets. U.S. Sec. & Exch. Comm’n v. Kik Interactive, Inc., 492 F. Supp. 3d 169,
174 (S.D.N.Y. 2020). Virtual currencies, such as Bitcoin, are commodities in
interstate commerce. McDonnell, 287 F. Supp. at 228 (virtual currencies can be
regulated by the Commodities Futures Trading Commission). The nature of the
transactions here make the arbitration provision in the TSA subject to the FAA.
B. Arbitrability under the FAA
Under the FAA, arbitration is a matter of contract and courts must enforce
arbitration contracts according to their terms. Henry Schein, Inc. v. Archer & White
Sales, Inc., __ U.S. __, 139 S. Ct. 524, 529, 202 L. Ed. 2d 480 (2019); AT&T
5 Virtual currencies are generally defined as digital assets used as a medium of exchange.
Commodity Futures Trading Comm’n v. McDonnell, 287 F. Supp. 3d 213, 218 (E.D.N.Y. 2018).
They are stored electronically in digital wallets and exchanged over the Internet through a direct
peer-to-peer system. Id. They are often called “cryptocurrencies” because they use “cryptographic
protocols to secure transactions . . . recorded on publicly available decentralized ledgers,” called
“blockchains.” Id.-6-
No. 82606-9-I/7
Mobility LLC v. Concepcion, 563 U.S. 333, 344, 131 S. Ct. 1740, 179 L. Ed. 2d
742 (2011). But a party cannot be required to submit to arbitration any dispute
which it did not agree to resolve in that forum. AT&T Techs., Inc. v. Commc’ns.
Workers of Am., 475 U.S. 643, 648, 106 S. Ct. 1415, 89 L. Ed. 2d 648 (1986).
Thus, a court must resolve any issue that calls into question the validity or
applicability of an arbitration clause. Granite Rock Co. v. Int’l Bhd. of Teamsters,
561 U.S. 287, 297, 130 S. Ct. 2847, 177 L. Ed. 2d 567 (2010).
The court’s role under the FAA is to determine (1) whether a valid
agreement to arbitrate exists, and (2) whether the agreement encompasses the
dispute at issue. Shivkov v. Artex Risk Solutions, Inc., 974 F.3d 1051, 1058 (9th
Cir. 2020). 6
1. Existence of Valid Arbitration Agreement
The parties agree that the TSA contains a valid arbitration clause, but
disagree as to who may benefit from that contractual provision. Uphold maintains
that all of the Uphold affiliated companies, as well as Thieriot and Schatt, can
compel arbitration, regardless of whether they signed the TSA, because the
arbitration agreement extends to all members of the Universal Protocol Alliance
“Project Group.” The Buyers, however, contend that the arbitration agreement
extends to only the “Parties” to the TSA, defined by contract as the “Buyer” and
the “Vendor,” Universal.
6The Third and Eighth Circuits apply the same test. See Sommerfeld v. Adesta, LLC, 2 F.4th 758,
761 (8th Cir. 2021); In re Remicade (Direct Purchase) Antitrust Litig., 938 F.3d 515, 519 (3rd Cir.
2019).
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No. 82606-9-I/8
State law principles, and not—as Uphold argues—federal law, governs our
interpretation of paragraph 7.12 and our determination of who can invoke the right
to arbitration. In First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115
S. Ct. 1920, 131 L. Ed. 2d 985 (1995), the Supreme Court held that in deciding
whether parties have agreed to arbitrate, courts apply ordinary state law principles
governing the formation of contracts. In Arthur Andersen LLP v. Carlisle, 556 U.S.
624, 630, 129 S. Ct. 1896, 173 L. Ed. 2d 832 (2009), the Supreme Court reiterated
that the FAA does not “alter background principles of state contract law regarding
the scope of agreements (including the question of who is bound by them).” Thus,
whether Uphold is a “party” to the TSA entitled to compel arbitration and whether
the affiliated Uphold companies, Thieriot, and Schatt, as nonsignatories, may
invoke arbitration under the FAA are questions to be resolved by state contract
law.
The next question is which state law to apply—the law of the forum state,
Washington, as the Buyers contend, or the law of Singapore, the parties’ choice of
law in their contract, as Uphold contends. Choice of law is a question of law that
we review de novo. Erwin v. Cotter Health Ctrs., 161 Wn.2d 676, 691, 167 P.3d
1112 (2007).
The TSA includes a choice of law provision:
Governing Law. This Agreement shall be governed in all
respects, including as to validity, interpretation, and effect, by the
Laws of Singapore, without giving effect to its principles or rules of
conflict of laws, to the extent such principles or rules are not
mandatorily applicable by statute and would permit or require the
application of the Laws of another jurisdiction (emphasis added).
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No. 82606-9-I/9
“[I]n resolving disputes concerning choice of law the court need decide (1) whether
there is an actual conflict of laws and, if so, (2) whether the parties’ agreement’s
choice of law provision is effective.” Shanghai Commercial Bank Ltd. v. Kung Da
Chang, 189 Wn.2d 474, 480, 404 P.3d 62 (2017) (citing Erwin, 161 Wn.2d at 692).
“ ‘When parties dispute choice of law, there must be an actual conflict between the
laws or interests of Washington and the laws or interests of another state before
Washington courts will engage in a conflict of laws analysis.’ ” Id. at 480–81
(quoting Seizer v. Sessions, 132 Wn. 2d 642, 648, 940 P.2d 261 (1997)).
We conclude that under either Singapore or Washington law, the answer is
the same—Uphold is a signatory and thus a party to the TSA and can compel
arbitration. The other affiliated Uphold companies, as well as Thieriot and Schatt,
may invoke the arbitration agreement under either Singapore’s third party
beneficiary statute or the Washington doctrine of equitable estoppel.
First, under Singapore law, Uphold signed the TSA and is a party to that
agreement. The TSA recitals specifically refer to and incorporate by reference
section 41 of Singapore’s Companies Act (Chapter 50). 7 Under this statute,
(1) Any contract or other transaction purporting to be entered into by
a company prior to its formation or by any person on behalf of a
company prior to its formation may be ratified by the company
after its formation and thereupon the company becomes bound
by and entitled to the benefit thereof as if it had been in existence
at the date of the contract or other transaction and had been a
party thereto.
(2) Prior to ratification by the company the person or persons who
purported to act in the name or on behalf of the company are, in
the absence of express agreement to the contrary, personally
bound by contract or other transaction and entitled to the benefit
thereof (emphasis added).
7 Available at https://sso.agc.gov.sg/Act/CoA1967.
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No. 82606-9-I/10
Uphold signed the TSA on behalf of Universal, a company that Uphold had yet to
form. The Companies Act thus provides that Uphold, acting as Universal’s proxy
prior to its incorporation, is legally bound by, and entitled to any benefits set out in,
the TSA. Because Uphold is a party to the TSA by operation of law, the defined
party, “Vendor,” includes both Uphold and the yet-to-be formed corporation,
Universal. Under paragraph 7.12, Uphold has the right to compel arbitration as a
party to the TSA.
Washington law is in accord. A promoter8 who signs a contract for the
benefit of a corporation that is not yet in existence is generally considered a party
to that agreement. Goodman v. Darden, Doman & Stafford Assocs., 100 Wn.2d
476, 478-79, 670 P.2d 648 (1983). This rule is based on the strong inference that
a person intends to make a present contract with an existing person. Id. at 479
(citing White & Bollard, Inc. v. Goodenow, 58 Wn.2d 180, 184, 361 P.2d 571(1961)). Accordingly, “there may be multiple parties on one side of the contract
even though signed only in the name of the corporation.” White v. Dvorak, 78 Wn.
App. 105, 112, 896 P.2d 85 (1995).
The Buyers knew that Universal had not yet been incorporated at the time
they entered into the contract and knew that Uphold was acting as Universal’s
“proxy.” Black’s Law Dictionary defines the term “proxy” as “[s]omeone who is
authorized to act as a substitute for another.” BLACK’S LAW DICTIONARY 1482 (11th
8 In the corporate context, a promoter is one who “forms a corporation and procures for it the rights,
instrumentalities and capital to enable it to conduct its business.” Goodman v. Darden, Doman &
Stafford Assocs., 100 Wn.2d 476, 478 n.2, 670 P.2d 648 (1983). Because Uphold undertook to
sell UPT tokens and raise capital “in furtherance of the establishment and launch of the ‘Universal
Protocol’ project,” Uphold is a promoter of Universal.
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No. 82606-9-I/11
ed. 2019). Uphold signed the TSA “for and on behalf of” Universal, and, prior to
Universal’s incorporation, evidencing the parties’ intent to allow Uphold to act as
the substitute for the “Vendor.” Thus, under Washington law, as under Singapore
law, Uphold is a party to the TSA as the promoter of a yet-to-be formed corporation
and is entitled to seek arbitration under paragraph 7.12 of the TSA.
Second, the affiliated Uphold companies, Thieriot, and Schatt are similarly
entitled to invoke the arbitration provision of the TSA under both Singapore and
Washington law. Paragraph 7.11 of the TSA grants to Uphold, and its affiliates,
rights under Singapore’s third party beneficiary statute, Contracts (Rights of Third
Parties) Act (Chapter 53b). Under section 2(1) of that statute, “a person who is not
a party to a contract . . . may, in [his] own right, enforce a term of the contract if—
(a) the contract expressly provides that [he] may; or (b) . . . the term purports to
confer a benefit on [him].”9
The TSA explicitly confers benefits on Uphold, as the proxy, and its affiliated
companies, officers and directors. Section 6.1, entitled “DISCLAIMER,
LIMITATIONS, AND INDEMNITY” declares that “[n]either this agreement nor the
purchase of the Buyer Tokens provides the Buyer with any claim whatsoever with
respect to the Vendor, the Project Group, the Proxy, their respective Affiliates,
and/or their respective assets.”10 Section 6.2 requires the Buyers to indemnify and
hold harmless Universal, Uphold, their affiliates, and their respective officers and
directors for any claims resulting from any warranty made by the Buyers or any
9 Available at: https://sso.agc.gov.sg/Act/CRTPA2001.
10The Buyers characterize Uphold HQ, Uphold Inc., and Uphold Ltd. as affiliated entities in their
complaint.
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No. 82606-9-I/12
breach of agreement by Buyers. Schedule 3 to the TSA sets the limitations period
for any claims against Universal and Uphold to six months. And it disclaims all
liability of Universal and Uphold for any consequential damages. These provisions
trigger section 2(1) of Singapore’s Contracts (Rights of Third Parties) Act.
Section 9(1) of that same statute provides
[w]here a right under section 2 to enforce a term (called in this section
the substantive term) is subject to a term providing for the submission
of disputes to arbitration . . . the third party is treated for the purposes
of the Arbitration Act 2001 or the International Arbitration Act 1994
(as the case may be) as a party to the arbitration agreement as
regards disputes between [himself] and the promisor relating to the
enforcement of the substantive term by the third party.
Here, the Buyers seek to rescind the TSA, which would nullify the contractual
benefits conferred on the nonsignatory affiliated entities, officers and directors.
Paragraph 7.12 provides that all disputes “arising out of” or “in any way relating to”
the TSA must be arbitrated. This broad language makes the third party
beneficiaries’ right to enforce the TSA subject to the arbitration provision. Again,
by operation of Singapore law, as referenced in the TSA itself, the Uphold affiliated
companies, Thieriot, and Schatt, are all parties to the TSA for purposes of
enforcing rights conferred on them under the agreement, including the right to
invoke the arbitration clause to resolve disputes with the Buyers.
Even if Singapore law does not govern, Washington law leads us to the
same result. Several traditional principles of state law allow a contract to be
enforced by or against nonparties. Arthur Andersen, 556 U.S. at 631. One such
principle is equitable estoppel. Id.; GE Energy Power Conversion France SAS,
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No. 82606-9-I/13
Corp. v. Outokumpu Stainless USA, LLC, __ U.S. __, 140 S. Ct. 1637, 1644, 207
L. Ed. 2d 1 (2020).
Equitable estoppel precludes a party from claiming the benefits of a contract
while simultaneously attempting to avoid the burdens that the contract imposes.
Townsend v. Quadrant Corp., 173 Wn.2d 451, 461, 268 P.3d 917 (2012) (citations
omitted). In David Terry Investments, LLC-PRC v. Headwaters Development.
Group Limited Liability Company, 13 Wn. App. 2d 159, 171, 463 P.3d 117 (2020),
Division Three of this court held that “the equitable estoppel doctrine applies when
a party has signed an agreement to arbitrate but attempts to avoid arbitration by
suing nonsignatory defendants for claims that are ‘based on the same facts and
are inherently inseparable’ from arbitrable claims against signatory defendants.”
Id. (quoting Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757
(11th Cir. 1993)). Courts applying equitable estoppel against a signatory have
looked to whether the claims the nonsignatory sought to arbitrate were “intimately
founded in and intertwined with the underlying contract obligations.” Id. (quoting
Choctow Generation Ltd. P’ship v. Home Assur. Co., 271 F3d 406 (2d Cir. 2001)).
Here, as in David Terry, the Buyers, who are all signatories to the TSA,
brought suit against nonsignatories, the Uphold affiliated companies, Thieriot, and
Schatt, based on the same facts and seeking the same relief as the claims they
assert against Uphold, a signatory defendant. The Buyers’ claims for violation of
the WSSA and negligent misrepresentation are inherently tied to their agreement
for the purchase of cryptocurrency tokens. The Buyers’ claims necessarily turn on
the construction of the contract and representations allegedly made by Uphold,
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No. 82606-9-I/14
Thieriot, and Schatt, in their respective roles promoting the TSA. And a resolution
of these claims will require resolution of contract defenses Uphold and its affiliates
may have. Because the Buyers’ claims and Uphold’s defenses are founded in and
intertwined with the underlying contract, we conclude the Buyers are equitably
estopped from circumventing the arbitration provision in the TSA.
The Buyers argue that Singapore law does not govern because the TSA
choice of law provision is invalid under Ito Int’l Corp. v. Prescott, Inc., 83 Wn. App.
282, 921 P.2d 566 (1996). In that case, a Japanese general partnership, formed
to operate a building in downtown Seattle, marketed the building for sale. Id. at
285. It sold shares in the building to 36 investors, mostly Japanese individuals and
to a Japanese-owned Washington corporation. The partnership agreement
provided that the entity had been formed under, and was to be regulated by,
Japanese law. It excluded the application of Washington partnership law but
selected Washington law to apply to any issues concerning title to the real
property. Id. at 287-88.
A group of investors sued under the WSSA and the trial court ruled that the
investors’ partnership interests were not securities under that statute. Id. at 288.
The parties agreed that if Japanese law applied, the general partnership was not
a security. Id. The investors argued on appeal that the choice of Japanese law in
the partnership agreement was invalid under the WSSA. Id. at 288. RCW
21.20.430(5) renders void any contract provision waiving compliance with the
WSSA. Because it deemed the choice of law provision to be a waiver of
compliance with the WSSA, the court refused to enforce that clause and instead
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No. 82606-9-I/15
conducted an independent choice of law analysis. Id. It concluded that while both
Washington and Japan had significant contacts with the transaction at issue, public
policy favored the application of Washington law because Washington residents
were involved in the sale, Ito was a Washington corporation, and the property was
located here. Id. at 290.
We cannot conclude, on the briefing before us, that the TSA choice of
Singapore law constitutes a waiver of compliance with the WSSA. Neither party
has briefed whether digital currency sales are considered the sale of securities
under Singapore law. Moreover, Ito did not involve the validity of a choice of law
provision in the context of interpreting an arbitration agreement. The Buyers here
conflate the validity of a choice of law provision for interpreting an agreement, with
the validity of a choice of law provision that may result in a waiver of a state
statutory claim, such as the WSSA, and thereby violate the WSSA’s anti-waiver
provision. It is the former issue we confront, not the latter.
Under the FAA, if a dispute is arbitrable, the law governing the merits of
such a dispute must be resolved by the arbitrators, not this court. See Vimar
Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 540, 115 S. Ct.
2322, 132 L. Ed. 2d 462 (1995) (under the FAA, the arbitrators—and not the
courts—decide, in the first instance, what law they will apply to particular claims);
PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401, 123 S. Ct. 1531, 155 L. Ed. 2d
578 (2003) (issue of whether plaintiffs can recover treble damages under the
Racketeer Influenced and Corrupt Organizations Act in arbitration is not ripe on
motion to compel arbitration); Zuver v. Airtouch Commc’ns, Inc., 153 Wn.2d 293,
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103 P.3d 753 (2004) (validity of attorney fee provision in agreement to be
determined by arbitrator, not the court). The Buyers are free to argue to the
arbitrator that any provision waiving compliance with the WSSA is invalid, just as
the investors did in Ito.
We conclude that under either Singapore or Washington law, the Uphold
Companies, Thieriot, and Schatt may compel arbitration of the Buyers’ claims. 11
2. Arbitrability of Buyers’ WSSA and Negligent Misrepresentation Claims
Uphold contends, and the Buyers appear to concede, that the arbitration
agreement encompasses their WSSA and misrepresentation claims. We agree.
Whether a particular dispute is arbitrable appears to be a question of federal
law. In Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25,
103 S. Ct. 927, 74 L. Ed.2d 765 (1983), the Supreme Court stated that generally,
“as a matter of federal law, any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration.” The Eighth and Ninth Circuits, relying
on Moses H. Cone, have held that whether a particular claim is arbitrable is
governed by federal substantive law on arbitration, including a presumption in favor
of arbitration. Donaldson Co. v. Burroughs Diesel, Inc., 581 F.3d 726, 731 (8th
Cir. 2009); Shivkov, 974 F.3d at 1058-59; Benson v. Casa de Capri Enters., LLC,
980 F.3d 1328, 1330–31 (9th Cir. 2020).
This court has also recognized that the arbitrability of specific claims is a
matter of federal law under the FAA. In Kamaya Co., v. American Property
11The Buyers also argue that we should not rely on Singapore law because both parties briefed
their arguments below and on appeal on the assumption that Washington law controls the issue.
Because we conclude the resolution would be the same under either Singapore or Washington law,
we need not decide whether Uphold waived the application of foreign law.
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No. 82606-9-I/17
Consultants, Ltd., 91 Wn. App. 703, 959 P.2d 1140 (1998), a group of investors in
a Japanese real estate partnership appealed an order compelling them to arbitrate
their fraud-in-the-inducement claim. Id. at 707. The investors argued that fraud
claims were not arbitrable under Japanese law, the parties’ choice of law in the
agreement. Id. This court rejected that argument, holding that under Becker
Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39 (3rd Cir. 1978),
federal law under the FAA, and not Japanese law, governed whether the claim
was arbitrable. We stated that while contractual choice of law provisions are
ordinarily valid under the FAA, “it is axiomatic that courts must have some law to
apply when determining whether the parties agreed to arbitrate a particular
dispute. The FAA provides courts with this necessary analytical framework.” Id.
at 713. We held that “whether a particular dispute is within the class of those
disputes governed by the arbitration and choice of law clause is a matter of federal
law.” Id. (quoting Becker, 585 F.2d at 43). In applying federal law, this court
concluded that under the FAA, the investors’ fraud claim was arbitrable. 12 Id. at
718.
We conclude that the Buyers’ WSSA and negligent misrepresentation
claims are arbitrable. Under federal arbitration law, causes of action premised on
statutory rights are subject to contractual arbitration agreements just as are claims
12 In re Remicade (Direct Purchaser) Antitrust Litig., 938 F.3d 515, 520 (3rd Cir. 2019), the Third
Circuit explicitly abrogated Becker, the case on which Kamaya relied, and held that federal
substantive law, including the presumption in favor of arbitration, applies only when state
interpretative principles do not dictate a clear outcome or when the FAA preempts a state law
prohibiting the arbitration of certain claims or transactions. It applies state law to interpret the scope
of an arbitration clause to determine a particular claim’s arbitrability. Id. at 522. Given that the
Ninth Circuit relies on federal law and Kamaya is consistent with this line of federal cases, we will
follow Kamaya here.
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under the common law. Kilgore v. KeyBank, Nat’l Ass'n, 673 F.3d 947, 955 (9th
Cir. 2012), on reh'g en banc, 718 F.3d 1052 (9th Cir. 2013).
The Buyers contend that forcing them to resolve their WSSA claim via
arbitration in Singapore violates Washington public policy. We reject this
argument. In Garmo v. Dean, Witter, Reynolds, Inc., 101 Wn.2d 585, 590, 681
P.2d 253 (1984), our Supreme Court held that WSSA claims are arbitrable under
the FAA. This binding precedent settled any contention that a party cannot agree
to arbitrate this statutory claim.
The Buyers suggest it would be unfair to force them into a proceeding
thousands of miles from Washington. The Buyers provide no authority for this
proposition. In Yei A. Sun v. Advanced China Healthcare, Inc., 901 F.3d 1081,
1090 (9th Cir. 2018), the Ninth Circuit held that a forum-selection clause in a stock
purchase agreement, designating California state courts as the forum for any
litigation, applied to claims arising under the WSSA and did not violate the public
policy of this state. We agree. If it does not violate Washington public policy to
require parties to arbitrate WSSA claims, and does not violate Washington public
policy to require parties to litigate such claims in an out-of-state forum, we see no
public policy violation in allowing an international arbitration organization to
address the Buyers’ WSSA claims.
Moreover, while the TSA specifies the rules governing the arbitration (those
of the Singapore International Arbitration Centre), the number of arbitrators (one),
and the language in which the proceeding will be conducted (English), it does not
require that the seat of the arbitration be Singapore. Under Rule 21 of the SIAC
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Rules of Arbitration, the parties may select the seat of the arbitration and, in the
absence of such an agreement, the arbitrator will select the location for the
proceedings. 13 There is nothing in the TSA that requires the Buyers to travel to
Singapore to arbitrate their WSSA and negligent misrepresentation claims.
We conclude that the TSA’s arbitration provision requires the Buyers to
arbitrate their claims against Uphold, its affiliated companies, Thieriot and Schatt.
We remand for entry of an order compelling arbitration.
C. Attorney Fees
Uphold argues that it is contractually entitled to attorney fees and costs for
having to compel arbitration. It relies on section 6.2 of the TSA which provides:
The Buyer shall defend, indemnify, and hold harmless the Vendor,
the Proxy, the Project Group, their Affiliates, and their respective
officers, directors, employees, agents, successors and assigns
(collectively the ‘Indemnified Persons’) from and against, and pay or
reimburse the Indemnified Persons for a breach or any claim, any
and all losses resulting from: (a) any inaccuracy in or breach of any
representation or warranty when made or deemed made by the
Buyer in or pursuant to this Agreement; or (b) any willful or negligent
breach of or default in performance by the Buyer under this
Agreement.
Uphold interprets this provision as requiring the Buyers to indemnify them for any
legal fees it incurred to litigate the arbitrability of the Buyers’ claims. But under the
specific language of paragraph 6.2, Uphold is entitled to such a recovery only if it
proves that the Buyers breached a representation or warranty or that the Buyers
breached or defaulted in performance under the TSA. Arguably, the Buyers’ failure
to accede to Upholds’ demand for arbitration could be deemed a breach of the
TSA. But it is not a claim we can adjudicate here as that claim is also subject to
13 https://www.siac.org.sg/our-rules/rules/siac-rules-2016 (last visited January 3, 2022).
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arbitration and should be resolved in that forum. We decline to reach the issue of
Uphold’s entitlement to an award of legal fees.
We award Uphold its costs as the prevailing party on appeal under RAP
14.2.
Reversed and remanded for entry of an order compelling arbitration.
WE CONCUR:
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