Pan Am Flight 73 Liaison Group v. Dave

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
PAN AM FLIGHT 73 LIAISON GROUP,
Movant,
v. No. 10-mc-0077 (JDB)
GIATRI DAVÉ & GARGI DAVÉ,
Respondents.
MEMORANDUM OPINION
This action arises out of a dispute over the enforceability of a contract -- termed the Joint
Prosecution Agreement ("JPA" or "the Agreement") -- by which victims of the 1986 hijacking of
Pan Am Flight 73 agreed to jointly pursue legal remedies. Giatri Davé and Gargi Davé, victims
of the hijacking and respondents here, brought suit in California state court seeking a declaratory
judgment that the JPA was unenforceable. The Pan Am Flight 73 Liaison Group ("the LG"), a
defendant in the Davés' California action and the movant here, thereafter initiated this action to
compel the Davés to arbitrate their claims. It also has moved for a preliminary injunction
seeking to hold in escrow disputed assets. For their part, the Davés have moved to transfer this
case, or to stay the case pending the termination of the California action. The Court heard oral
arguments on the parties' motions on March 4, 2010. In an order issued on May 7, 2010, the
Court granted the LG's motion to compel arbitration, and denied both the Davés' motion to
transfer or to stay, and the LG's motion for a preliminary injunction.1 This opinion articulates the
1
The Davés filed a motion for a temporary restraining seeking to stay arbitration
proceedings on May 3, 2010, which precipitated the need for the May 7 order. The Court has
denied as moot the Davés' motion. See May 7, 2010 Order [Docket Entry 37], at 2.
reasons for those decisions.
I.
Four members of the Abu Nidal Organization, allegedly operating with financial and
logistical support from Libya, hijacked Pan Am Flight 73 on September 5, 1986. By the end of
that terrible ordeal, the hijackers had killed twenty passengers and injured another approximately
130 passengers. In 2004, a group of victims -- and in some cases their representatives or estates
-- decided to pursue jointly "legal remedies, including a civil action, against the Libyan State . . . ,
and certain individuals implicated [in] and convicted of carrying out the hijacking." LG's V.
Mot. to Compel Arbitration ("LG's Arbitration Mot.") [Docket Entry 3], Ex. A (JPA), 1. To do
so, the victims executed the JPA, which, among other things, created the LG to act as the
managing agent for the victims' collective legal claims. See LG's Arbitration Mot. at ¶ 14; JPA
at p.1. The LG comprises five individuals -- residents of Connecticut, New York, North Dakota,
Ohio, and India -- who were "either victims of the Pan Am Flight 73 hijacking themselves or
were family members of individuals killed during the hijacking." LG's Arbitration Mot. at ¶ 2. It
is tasked with "maintaining and overseeing the conduct of all litigation, settlement, and collection
efforts," and "act[ing] in the interests of the Parties respecting any issues arising during the"
prosecution of the victims' claims. JPA at ¶ 6.
With the LG as their managing agent, the parties to the JPA agreed not only to "jointly
pursue their legal claims in the same proceedings and subsequent collection efforts," but also to
"share in the recovery arising from any proceedings." Id. at p.2. The victims selected Crowell &
Moring LLP, an international law firm, to represent them, and agreed that "[t]o the extent there is
any financial recovery against any of the Defendants, either jointly or severally, either by way of
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settlement, judgment or other award, all monies shall be deposited in the Crowell & Moring LLP
IOLTA account." Id. at ¶ 2. After payment of litigation expenses and attorneys' fees, the
remaining funds would be distributed to the victims according to a formula set forth in the JPA.
See id. at ¶ 5. Moreover, the JPA parties agreed to mediate any dispute regarding "the
construction and enforceability of the Agreement or any actions or disputes arising under or in
connection with the Agreement." Id. at ¶¶ 13-14. And they agreed that if mediation were
unsuccessful, they would submit their dispute "for confidential arbitration under the provisions of
the American Arbitration Association" before a three-member arbitration panel. Id. Arbitration
under the Agreement must be held in the District of Columbia. See id. at ¶ 13.
Giatri Davé and Gargi Davé, both United States citizens, were passengers on Pan Am
Flight 73. See LG's Arbitration Mot., Ex. D (Davés' Cal. Compl.), ¶ 1. They both became
parties to the JPA in 2005 "by virtue of each executing a Joinder to [the] Pan Am Flight 73 Joint
Prosecution Agreement." LG's Arbitration Mot. at ¶ 18. In doing so, the Davés "agree[d] to be
bound by all terms, conditions and covenants contained in the Agreement." Id., Ex. B (Davés'
JPA Joinders), 1, 4. And in their joinders, they each represented that they had read "the terms,
conditions, and covenants of the Agreement"; had "underst[ood] all terms and conditions of the
Agreement and agree[d] to be bound by its terms"; and had "been represented by an attorney in
the review of the Agreement and the decision to execute [the] Joinder, or . . . had the opportunity
to do so, and elected not to do so." Id. at 1-2, 4-5. Approximately 180 individuals -- both U.S.
nationals and non-U.S. nationals -- became parties to the JPA.
Pursuant to the Agreement, Crowell & Moring filed a lawsuit against Libya in the United
States District Court for the District of Columbia. See LG's Arbitration Mot. at ¶ 15; see also
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Manjula Patel v. The Socialist People's Libyan Arab Jamahiriya, Civ. A. No. 06-0626 (D.D.C.
filed Apr. 24, 2006). Crowell purportedly pursued the case "actively" during the ensuing two
years. See LG's Arbitration Mot. at ¶ 15. As Crowell was litigating the victims' claims,
Congress passed the Libyan Claims Resolution Act, Pub. L. No. 110-301, 122 Stat. 2999 (2008),
which set forth procedures to govern how individuals would be compensated if the United States
and Libya were to settle outstanding terrorism-related claims by U.S. citizens against Libya.
Two weeks after Congress passed the Libyan Claims Resolution Act, the United States
and Libya signed the Claims Settlement Agreement Between the United States of America and
the Great Socialist People's Libyan Arab Jamahiriya ("Claims Settlement Agreement"). See
Claims Settlement Agreement, available at http://www.state.gov/documents/organization/
109771.pdf. The stated objective of the Claims Settlement Agreement was to "reach a final
settlement of the Parties' claims, and those of their nationals"; "terminate permanently all pending
suits"; and "preclude any future suits" based on past terrorist actions or military measures taken
by the United States or Libya. Claims Settlement Agreement, Art. I. As part of the settlement,
Libya and the United States "agree[d] to authorize the establishment of a humanitarian settlement
fund . . . as the basis for settling the claims and terminating and precluding . . . suits." Id., Art. II.
Libya contributed $1.5 billion to the fund. See id., Annex. Fulfilling his duty under the treaty,
President Bush thereafter espoused and settled all existing terrorism-related claims by United
States nationals against Libya. See Exec. Order No. 13,477, 73 Fed. Reg. 65,965, at 65,965 (Oct.
31, 2008). In his executive order, President Bush also granted the Secretary of State the authority
to promulgate "procedures governing application of United States nationals with [terrorism-
related] claims . . . for compensation for those claims." Id.-4-
Consistent with the Libyan Claims Resolution Act and Executive Order 13,477, the
Department of State paid monetary awards to parties that previously held pending wrongful death
claims against Libya. See LG's Arbitration Mot. at ¶ 15. The State Department also "referred
'for adjudication and certification' claims for physical injury and, later, six other forms of injury
to the [Foreign Claims Settlement Commission]," id., an entity within the Department of Justice
that adjudicates claims of U.S. nationals against foreign governments, see 22 U.S.C. § 1622.
Because Executive Order 13,477 terminated the JPA parties' pending case against Libya, Crowell
& Moring "pursued recovery under the Claims Settlement Agreement for all JPA Parties eligible
to make claims under it, including the Davés." LG's Arbitration Mot. at ¶ 15.
In July 2009, the Foreign Claims Settlement Commission awarded Gargi Davé money for
a claim that Crowell & Moring had submitted to it. See LG's Arbitration Mot., Ex. C (Decl. of
Clifton Elgarten), ¶ 2. And in November 2009, Crowell & Moring notified Gargi Davé that her
award had "been certified for payment by the United States Department of Treasury," and
therefore the firm expected that "Treasury will soon be contacting both you and our frm to
arrange for a method of payment of this award." Id. at ¶ 3 (internal quotation marks omitted).
Pursuant to the terms of the JPA, Crowell & Moring "provided Ms. Davé with a form of directive
to the Treasury Department that she could use to direct payment of the funds to [Crowell &
Moring's IOLTA] account." Id. at ¶ 15.
Gargi Davé, however, never returned the executed documents to the firm. See id.
Instead, she, along with her sister Giatri Davé, filed a declaratory judgment action in the Superior
Court of California, County of Los Angeles, requesting that, to the extent the JPA required them
to share their Foreign Claims Settlement Commission awards with the other parties to the JPA,
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the Agreement be found unenforceable due to fraud, unconscionability, and the fact that it
conflicts "with the terms, intent and policies of the United States under the" Claims Settlement
Agreement, Libyan Claims Resolution Act, and Executive Order 13,477. Davés' Cal. Compl. at
¶ 17. They also raised several common law contract and tort claims against the LG and Crowell
& Moring. The defendants removed the case to the Central District of California. See Davé v.
Crowell & Moring LLP, Civ. A. No. 10-00172 (C.D. Cal. removed Jan 11, 2010).
In response to the Davés' suit in California, the LG filed this action, seeking to compel the
Davés to arbitrate the claims asserted in their California complaint pursuant to the terms of the
JPA. In addition, the LG filed a motion for a preliminary injunction asking the Court to order
that the Davés' Foreign Claims Settlement Commission awards be held in escrow pending the
start of arbitration. See Mots. Hr'g Tr. 34:21-35:3, Mar. 4, 2010.2 For their part, the Davés
oppose both the LG's motion to compel arbitration and its motion for a preliminary injunction.
And they have asked this Court either to transfer this action to the United States District Court
for the Central District of California, or to stay this action pending resolution of the California
case. See Davés' Mot. to Transfer or to Stay ("Davés' Transfer Mot.") [Docket Entry 12], at 2.
II.
The Court begins its analysis with the Davés' motion to transfer or to stay because it
presents a "threshold ground[] for denying audience to a case on the merits." Ruhrgas AG v.
Marathon Oil Co., 526 U.S. 574, 585 (1999); see also Sinochem Int'l Co. Ltd. v. Malaysia Int'l
2
The Court has entered a stipulated consent order precluding any person from dissipating
the Davés' compensation award "until the Court issues a decision on the LG's motion for a
[preliminary injunction]." January 29, 2010 Stipulated Consent Order [Docket Entry 10], at 1.
Pursuant to that order, the disputed award currently resides in an interest-bearing trust account
maintained by the Davés' counsel.
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Shipping Corp., 549 U.S. 422, 431 (2007).
The Davés argue that this action presents "the identical issues of fact and law which are
the basis of [their] action in California -- and which could have been brought in the California
[court] which has jurisdiction and venue." Davés' Transfer Mot. at 2. Therefore, in their view,
this Court should transfer the action to the United States District Court for the Central District of
California pursuant to 28 U.S.C. § 1404(a). See id. But the Davés' California action is no longer
in federal court -- pursuant to a motion filed by the Davés, the district court recently remanded
the case to the Superior Court of California, Los Angeles County. See Davé v. Crowell &
Moring LLP, Civ. A. No. 10-172, 2010 U.S. Dist. LEXIS 43397, at *7 (C.D. Cal. May 4, 2010).
Therefore, the Court cannot transfer this action to the Central District of California.3
Nevertheless, the Davés contend that if the Court does not transfer the case, it should stay
this action "pending the resolution of the California action." Davés' Transfer Mot. at 2. In other
words, they ask the Court to defer to an earlier-filed action. See Davés' Reply in Supp. of
Transfer Mot. [Docket Entry 20], at 5-6. Here, the district court remanded the Davés' California
action; thus, the earlier-filed action that the Davés ask this Court to defer to is a state court
proceeding. But federal courts do not defer to pending state court proceedings: "'the pendency of
an action in the state court is no bar to proceedings concerning the same subject matter in the
3
Nor can the Court construe the Davés' motion as a request to transfer this suit to the
Superior Court of California. A federal court cannot transfer a case to state court pursuant to 28
U.S.C. § 1404(a). See Pope v. Atlantic Coast Line R.R. Co., 345 U.S. 379, 384 (1953) ("Section
1404(a), by its very terms, speaks to federal courts; it addresses itself only to that federal forum
in which a lawsuit has been initiated; its function is to vest such a federal forum with the power
to transfer a transitory cause of action to a more convenient federal court."); id. (section 1404(a)
"does not speak to state courts"); cf. Sinochem, 549 U.S. at 430 ("For the federal court system,
Congress has codified the doctrine and has provided for transfer, rather than dismissal, when a
sister federal court is the more convenient place for trial of the action.").
-7-
Federal court having jurisdiction.'" Colo. River Water Conservation Dist. v. United States, 424
U.S. 800, 817 (1976) (quoting McClellan v. Carland, 217 U.S. 268, 282 (1910)); see also id.("Th[e] difference in general approach between state-federal concurrent jurisdiction and wholly
federal concurrent jurisdiction stems from the virtually unflagging obligation of the federal courts
to exercise the jurisdiction given them.").4 The Court therefore will not stay this action in favor
of the parallel state proceeding in California, and hence turns to the merits of the LG's motion to
compel arbitration.
III.
The Federal Arbitration Act provides that "a written provision in . . . a contract to settle
by arbitration a controversy . . . arising out of such contract . . . shall be valid, irrevocable, and
enforceable save upon any grounds as exist at law or in equity for the revocation of any contract."
9 U.S.C. § 2. Because the Act creates a strong presumption favoring the enforcement of
arbitration agreements, see Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25, arbitration must be
ordered unless it can be said with certainty either that the arbitration provision cannot be
interpreted to cover the dispute, see AT&T Techs., Inc. v. Commc'n Workers of Am., 475 U.S.
4To be sure, there are limited circumstances in which abstention in favor of a pending
state court proceeding may be appropriate. See Colo. River, 424 U.S. at 813-18 (discussing
abstention doctrines). None of those exceptions is present here, however. In any event,
abstention would be particularly unwarranted because the Supreme Court has held there is
"substantial room for doubt" that a party can obtain an order from a state court compelling
arbitration. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26-27
(1983). Under section 4 of the Federal Arbitration Act, which governs the LG's motion to
compel arbitration, a party "may petition any United States district court . . . for an order
directing that such arbitration proceed in the manner provided for in [an] agreement." 9 U.S.C. §
4 (emphasis added). The Supreme Court has recognized that the phrase "United States district
court" may not oblige a state court to compel arbitration. See Moses H. Cone Mem'l Hosp., 460
U.S. at 26 & n.35. The "probable inadequacy of the state-court proceeding to protect [the LG's]
rights" renders abstention inappropriate. Id. at 26.
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643, 650 (1986), or that the arbitration provision is unenforceable as a matter of contract law, see
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-46 (2006). Here, the Davés do not
dispute that the JPA's arbitration provision encompasses the claims raised in their California
complaint.5 They do contend, however, that "the arbitration provision itself, which is contained
in the [JPA], is not a valid and enforceable agreement." Davés' Opp'n to the LG's Arbitration
Mot. ("Davés' Arbitration Opp'n") [Docket Entry 14], at 1.
State contract law governs whether there is an enforceable agreement to arbitrate. See
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Here, that is District of
Columbia law. See JPA at ¶10 ("This Agreement, including its terms and definitions as well as
any actions or disputes arising hereto, shall be governed by District of Columbia substantive law
. . . ."). A "contract's validity is [generally] considered by the arbitrator in the first instance."
Buckeye Check Cashing, 546 U.S. at 446. Only where a party challenges the validity of the
arbitration provision itself may a court assess whether the parties have consented to arbitrate.
See id. at 445-46; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04 (1967).
"[I]f the party opposing arbitration contends that no agreement to arbitrate was entered,
which effectively raises the issue whether there was a meeting of the minds on the agreement to
arbitrate, the standards for resolving a summary judgment motion pursuant to Fed. R. Civ. P. 56
should be applied." Booker v. Robert Half Int'l, Inc., 315 F. Supp. 2d 94, 99 (D.D.C. 2004);
accord Brown v. Dorsey & Whitney, LLP, 267 F. Supp. 2d 61, 67 (D.D.C. 2003). "[T]he party
asserting the existence of a contract [to submit disputes to arbitration] has the burden of proving
5
Nor could they: the arbitration agreement is broadly worded, and covers any challenge
"either regarding the construction and enforceability of the Agreement or any actions or disputes
arising under or in connection with the Agreement." JPA at ¶ 13.
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its existence." Bailey v. Fed. Nat'l Mortgage Ass'n, 209 F.3d 740, 746 (D.C. Cir. 2000).
It is therefore appropriate to grant a party's motion to compel arbitration when the
pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The
party seeking to compel arbitration bears the initial responsibility of demonstrating the absence
of a genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In
determining whether there is a genuine issue of material fact sufficient to preclude summary
judgment, the non-movant's statements should be accepted as true and all inferences should be
drawn in the non-movant's favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986). The non-moving party, however, must establish more than the "mere existence of a
scintilla of evidence" in support of its position. Id. at 252. Thus, the non-moving party cannot
rely on mere speculation or a compilation of inferences to defeat a motion for summary
judgment. See Hutchinson v. Cent. Intelligence Agency, 393 F.3d 226, 229 (D.C. Cir. 2005).
Nor can the non-moving party rely on hearsay statements or conclusory statements with no
evidentiary basis to establish a genuine issue of material fact. See Ass'n. of Flight Attendants-
CWA, AFL-CIO v. Dep't of Transp., 564 F.3d 462, 465 (D.C. Cir. 2009). "If the evidence is
merely colorable, or is not significantly probative, summary judgment may be granted."
Anderson, 477 U.S. at 249-50 (citations omitted). Moreover, a moving party may succeed on
summary judgment by pointing to the absence of evidence proffered by the non-moving party.
See Celotex, 477 U.S. at 322.
Here, the Davés raise three arguments in support of their assertion that the JPA's
arbitration provision is unenforceable: "(1) it is unconscionable in that the Davés lacked
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meaningful choice and its terms unreasonably favor the LG both substantively and procedurally;
(2) it was secured by fraudulent misrepresentations and omissions; and (3) it conflicts with the
terms of federal legislation and undermines serious federal interests in foreign affairs." Davés'
Arbitration Opp'n at 1.
A.
A "'contract may be unconscionable either because of the manner in which it was made or
because of the substantive terms of the contract.'" Urban Invs., Inc v. Branham, 464 A.2d 93, 99
(D.C. 1983) (quoting Bennett v. Fun & Fitness of Silver Hill, Inc., 434 A.2d 476, 480 (D.C.
1981)). That is, in examining whether a contract is unconscionable, the Court must determine
whether one party lacked a meaningful choice and whether the contract terms were unreasonably
favorable to the other party. See Riggs Nat'l Bank v. District of Columbia, 581 A.2d 1229, 1251
(D.C. 1990); Urban Invs. Inc, 464 A.2d at 99; Williams v. Walker-Thomas Furniture Co., 350
F.2d 445, 450 (D.C. Cir. 1964). Generally, a party must prove both elements for a court to find
the contract unconscionable. See Riggs, 581 A.2d at 1251 ("To establish unconscionability . . .
the District must prove not only that one of the parties lacked a meaningful choice but also that
the terms of the contract are unreasonably favorable to the other party." (emphasis added)); but
see Bennett, 434 A.2d at 480 n.4 ("[I]n an egregious situation, one or the other may suffice.").
The Davés have not demonstrated that either element is present here.
1.
In support of their assertion that they lacked meaningful choice, the Davés allege the
following: "the arbitration agreement was drafted by the LG and LG's counsel," who had "far
superior bargaining power and legal sophistication in the subject matter"; "the JPA[] containing
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the arbitration provisions was mailed in boiler-plate form" with "no explanation of its terms";
and the arbitration provision "was inconspicuously hidden in two paragraphs on page 17 of a
twenty page document." Davés' Arbitration Opp'n at 8, 10. In other words, they contend that
they did not have a fair opportunity to understand the terms of the arbitration provision.6
Mere inequality of bargaining power, by itself, is insufficient to render an arbitration
provision unenforceable. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33 (1991);
Booker, 315 F. Supp. 2d at 102. Nor does the fact that one party to a contract may have been
without technical legal expertise render the provision unenforceable. See Olle v. 5401 W. Ave.
Residential, LLC, 569 F. Supp. 2d 141, 146 (D.D.C. 2008) ("The plaintiffs contracted to
purchase a $2.5 million condominium and have not alleged that they lack the basic educational or
financial wherewithal to negotiate a real-estate purchase contract or its attendant arbitration
clause." (emphasis added)). Rather, "[w]hat is important is that [the Davés] had the opportunity
to read and understand the Agreement before [they] signed it." Booker, 315 F. Supp. 2d at 102(emphasis omitted).
Here, the Davés had that opportunity: they each took several months to review the JPA
and its arbitration provision before signing it. See LG's Reply in Supp. of Arbitration Mot.
[Docket Entry 17], Decl. of Stuart H. Newberger, at ¶ 22 ("Our records reflect that Ms. Gargi
Davé signed the Joinder and became party to the JPA . . . approximately three months after she
was initially contacted; Ms. Giatri Davé signed her joinder five months later . . . ."). Nor,
6
The Davés also allege that they were "told they had no viable alternative but to sign the
JPA with the arbitration provision." See Davés' Arbitration Opp'n at 9. But this is an argument
about the unenforceability of the contract as a whole, rather than the arbitration clause
specifically. Accordingly, it is properly for the arbitrator to resolve. See Buckeye Check
Cashing, 546 U.S. at 449.
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contrary to their argument, was the provision "hidden in a maze of fine print," Walker-Thomas,
350 F.2d at 449; instead, it was written in the same font as the rest of the Agreement, and
therefore easily visible to anyone reading it, see Nur v. K.F.C., USA, Inc., 142 F. Supp. 2d 48, 51
(D.D.C. 2001) (permissible to write arbitration provision in same font as other provisions of the
contract). And, upon becoming a party to the JPA, the Davés indicated that they had "been
represented by an attorney in the review of the [JPA] and the decision to [join the JPA], or . . .
had the opportunity to do so, and elected not to do so." See Davés' JPA Joinders at 2.
Taken together, these facts demonstrate that the Davés had a fair opportunity to
understand the terms of the JPA and its arbitration provision. See Olle, 569 F. Supp. 2d at 146(that "the plaintiffs had fifteen days to review and cancel [an arbitration agreement]" indicated
they had a meaningful opportunity to consider it); cf. Sullenberger v. Titan Health Corp., Civ. A.
No. S-08-2285, 2009 U.S. Dist. LEXIS 46586, at *6 (E.D. Cal. May 20, 2009) (arbitration
provision unconscionable where employer told individual that he "needed to sign all of the
documents right then, in the employer's presence or he would not be hired" (quotation omitted)).
"That [the Davés] may not have comprehended the implications of" their decision to accede to
the JPA and its arbitration provision "is irrelevant as to whether the agreement is valid." Nur,
142 F. Supp. 2d at 51. Indeed, "[u]nder District of Columbia law, there is no requirement that [a
party] explain or point out that an arbitration provision is included in the contract." Adams v.
Am. Residential Servs., Civ. A. No. 02-0410, 2003 U.S. Dist. LEXIS 26478, at *21-22 (D.D.C.
May 8, 2003); accord Emeronye v. CACI Int'l, Inc., 141 F. Supp. 2d 82, 86 (D.D.C. 2001) ("The
fact that plaintiff does not recall signing the agreement, that she had other paperwork to
complete, or that the arbitration provision was not explained to her is insufficient to render the
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contract unenforceable."). Accordingly, the Davés did not lack meaningful choice.
2.
Nor do the terms of the arbitration clause "unreasonably favor" the LG. To support their
contention, the Davés allege the following: the arbitration provision together with its forum
selection clause require all of the parties to the JPA to travel to Washington, D.C. to arbitrate
their disputes; the costs of arbitration are prohibitive for the Davés relative to the LG; and the
procedures that would be used during an arbitration of the Davés' claims would limit their ability
to obtain fair relief. See Davés' Arbitration Opp'n at 11-13.
The Davés believe that the arbitration provision, and its forum selection clause,
unreasonably favors the LG because it requires the JPA parties to travel to the District of
Columbia and therefore "litigate [any] dispute several thousand miles away" from their homes.
But the Davés fail to explain how this fact favors the LG, when none of the LG's members reside
in the District of Columbia -- indeed, each of the LG's members would have to travel to the
District to participate in any arbitration. Moreover, even if the Davés could demonstrate that the
District was more convenient for the LG members than for themselves, where a party alleges that
a clause would result in "inconvenience," it faces a "heavy burden of proof" to substantiate that
argument. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 591-92 (1991); see also
Commerce Consultants Int'l, Inc. v. Vetrerie Riunite, S.p.A., 867 F.2d 697, 700 (D.C. Cir. 1989)
(forum selection clause enforced despite serious doubts about the fairness of jurisdictional rules
of discovery in the transferee court); Joyner v. Reno, 466 F. Supp. 2d 31, 37 (D.D.C. 2006)
(forum selection clause enforced where statute of limitations had run in transferee forum). Here,
the fact that the JPA may require parties from all over the world to travel to the District fails to
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demonstrate that enforcement of the JPA's forum selection clause will create the kind of grave
inconvenience needed to abrogate a contractual agreement.7
Nor can the Davés show unconscionability by observing that the LG's counsel is located
in the District of Columbia -- the jurisdiction in which arbitration must take place. See Davés'
Arbitration Opp'n at 11-12. The mere fact that LG has selected counsel located in the District of
Columbia does not render the arbitration provision unconscionable -- the Davés too are free to
select counsel located in the District and knowledgeable about District law.
The Davés' allegation that the costs of arbitration are prohibitive fares no better. A "party
seek[ing] to invalidate an arbitration agreement on the ground that arbitration would be
prohibitively expensive . . . bears the burden of showing the likelihood of incurring such costs."
Green Tree Fin. Corp. - Ala. v. Randolph, 531 U.S. 79, 92 (2000); see also Adams, 2003 U.S.
Dist. LEXIS 26478 at *29. The Davés contend that the "arbitration agreement['s] terms
regarding costs are unreasonably favorable to . . . the LG." Davés' Arbitration Opp'n at 13. But
they offer no specific facts, as they must, to support this conclusion -- for example, "'the expected
cost difference between arbitration and litigation in court, and whether that cost differential is so
substantial as to deter the bringing of claims.'" Toledano v. O'Connor, 501 F. Supp. 2d 127, 148-
49 (D.D.C. 2007) (quoting Bradford v. Rockwell Semiconductor Sys., Inc., 238 F.3d 549, 556
(4th Cir. 2001)). Indeed, arbitration may be a less costly alternative to formal litigation. See
7
Because the parties to the JPA reside across the globe, the Agreement reasonably
selected a single, predictable locus of activity for the contract. See Scherk v. Alberto-Culver Co.,
417 U.S. 506, 516 (1974) ("A contractual provision specifying in advance the forum in which
disputes shall be litigated and the law to be applied is . . . an almost indispensable precondition to
achievement of the orderliness and predictability essential to any international business
transaction."). Absent a forum selection clause, the JPA parties could be subject to dispute
resolution proceedings across the globe -- a potentially inefficient and chaotic outcome.
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Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 123 (2001) ("Arbitration agreements allow
parties to avoid the costs of litigation.").8
Finally, the Court is not persuaded that the procedures of an arbitration panel would
preclude the Davés from obtaining fair relief. Specifically, the Davés believe that the required
confidentiality of arbitration proceedings will "prevent[] the terrorism victims . . . [from
benefitting] from the efforts of others who challenge the contract and the arbitration agreement."
Davés' Arbitration Opp'n at 13; see also id. at 14 ("[O]ther U.S. nationals who are not parties to
such arbitration proceedings will have no knowledge of these [completed arbitrations] because
the arbitration provision requires all proceedings to be confidential."). This is incorrect: the JPA
does not require confidentiality among the parties to the Agreement. See JPA at ¶ 9 ("The
Parties will not disclose any of the matters arising from this Agreement to any third party . . . ."
(emphasis added)). Hence, all JPA parties may obtain the insight of parties who have challenged
the JPA previously.9
8
The Davés cannot salvage their unsubstantiated allegation of prohibitive costs by
indicating that "the terms [of the arbitration agreement] permit the LG and its counsel to utilize
the [remaining] funds [from the victims' compensation] to pay for the costs of arbitration and any
litigation." Davés' Arbitration Opp'n at 12. This fact is of no moment -- it is appropriate for the
LG to use the resources obtained under the terms of the JPA to defend the Agreement's validity,
for all other parties to the Agreement have an interest in seeing it upheld. The non-challenging
JPA parties are simply paying litigation costs by using common funds, of which the Davés'
disputed awards are not a part. Hence, that the LG may use funds common to the non-
challenging JPA parties in an arbitration against the Davés neither bears on the relative costs of
arbitration nor burdens the Davés' ability to pay for arbitration.
9
Although the Davés also suggest that arbitration is unconscionable "because arbitration
proceedings do not have the effect of non-mutual collateral estoppel," Davés' Arbitration Opp'n
at 13, courts have recognized that an arbitration panel may apply collateral estoppel, see Bear,
Stearns & Co., Inc., Bear, Stearns Sec. Corp. v. 1109580 Ontario, Inc., 409 F.3d 87, 91-92 (2d
Cir. 2005).
-16-
Taking another tack, the Davés posit that because the LG may be "a repeat player in
confidential proceedings, other parties who challenge the JPA will be at a disadvantage as the
arbitrators will have a financial incentive to rule in favor of the LG." Davés' Arbitration Opp'n at
14-15. In other words, the Davés worry that if multiple parties want to challenge the JPA, the
arbitrators will rule consistently in favor of the LG, as it will be the source of future business.
But even if parties who challenge the JPA cannot combine their actions in arbitration -- and there
is nothing in the Agreement that limits joinder -- the D.C. Circuit has concluded that the mere
possibility of bias is insufficient to render arbitration inappropriate. See Cole v. Burns Int'l Sec.
Servs., 105 F.3d 1465, 1485 (D.C. Cir. 1997). And, to the extent that such bias may exist, the
Cole court discounted the likelihood of it producing any harm: "it is unlikely that such corruption
would escape the scrutiny of plaintiffs' lawyers or appointing agencies like the [American
Arbitration Association]. Corrupt arbitrators will not survive long in the business." Id.10 For all
these reasons, the Davés have not demonstrated that the arbitration panel's procedures
unreasonably favor the LG.
B.
The Davés next assert that the LG fraudulently induced them to agree to the arbitration
provision. According to them, the LG, "as their fiduciary legal representative," "knowingly and
fraudulently failed to disclose several facts which go to the heart of the arbitration agreement,"
and which apparently led the Davés to accede to the JPA. Davés' Arbitration Opp'n at 17. The
10
Cole dismissed these concerns in the context of arbitrating "public law claims," such as
those under Title VII. See Cole, 105 F.3d at 1485. In such cases, courts are particularly vigilant
in ensuring that arbitration permits the prospective litigation to "effectively . . . vindicate [his or
her] statutory cause of action." Gilmer, 500 U.S. at 28.
-17-
Davés identify four material facts that the LG purportedly failed to disclose: the "serious conflicts
of interest between Americans and non-U.S. nationals"; that Crowell & Moring's "interests were
aligned against the American parties such as the Davés"; that "the arbitration clause is
intertwined with a confidentiality clause which was designed by the LG and [Crowell & Moring]
to perpetuate their fraud on the Americans who were never warned of their serious conflicts of
interest"; and "the financial and legal costs of arbitration, such as the absence of joinder and
discovery in [the] arbitration setting." Id. at 17, 20, 22. These arguments do not convince the
Court that arbitration is unwarranted.
A party can only avoid arbitration if the party demonstrates that the arbitration provision
itself is invalid -- the party cannot rely on the unenforceability of the contract containing the
provision. See Buckeye Check Cashing, 546 U.S. at 449; Prima Paint Corp., 388 U.S. at 403-04.
Here, the Davés' first two allegations of fraud -- that there was a conflict of interest between U.S.
national and non-U.S. national parties to the JPA, and that Crowell & Moring's interest were
aligned against the U.S. national parties -- are challenges to the Agreement as a whole. Indeed,
they are the very same concerns that purportedly render the entire JPA unenforceable.7 And
where, as here, an allegation may support a challenge to a contract generally, as well as to its
arbitration provision specifically, the party must demonstrate that he was "fraudulently induced
to specifically enter the arbitration clause." Lok Tio v. Wash. Hosp. Ctr., Civ. A. No. 04-0701,
7
See, e.g., Davés' Cal. Compl. at ¶ 119 ("The consent of Plaintiffs to the JPA was . . .
obtained by . . . failing to disclose that should there be any settlement agreement between Libya
and the U.S., the U.S. would only be able to represent and satisfy the claims of the U.S.
nationals."); id at ¶ 55 ("Defendants knew or should have known the United States' espousal and
settlement of claims would preempt and/or nullify all judicial claims . . . [and] Plaintiffs stood to
lose substantial benefit by partnering with non-U.S. nationals . . . .").
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2004 U.S. Dist. LEXIS 23503, at *16 (D.D.C. Nov. 5, 2004). The Davés have not done so, and
therefore cannot rely on their first two allegations of fraud to avoid the arbitration clause.8
Nor can they demonstrate fraud by alleging that "the arbitration clause is intertwined with
a confidentiality clause which was designed . . . to perpetrate [a] fraud on the Americans who
were never warned of their serious conflicts of interest." Davés' Arbitration Opp'n at 22. A
party "may not . . . establish a connection between the alleged fraud and the arbitration clause in
particular merely by adding the allegation that the arbitration clause was part of the overall
scheme to defraud." Campaniello Imports, Ltd. v. Saporiti Italia, S.p.A., 117 F.3d 655, 668 (2d
Cir. 1997). Rather, the party must aver "particularized facts specific to the . . . arbitration clause
which indicate how it was used to effect the scheme to defraud." Id. at 667. This is so because a
contrary rule would permit a plaintiff to avoid arbitration whenever the plaintiff alleged fraud.
See Garten v. Kurth, 265 F.3d 136, 144 (2d Cir. 2001). The Davés' papers, however, are devoid
of such particularized facts.
Finally, the Davés cannot demonstrate that the LG fraudulently induced them to agree to
the arbitration provision by asserting that the LG failed to disclose the legal and financial costs of
arbitration. The information about the arbitration procedures that the LG purportedly did not
disclose to the Davés is presented on the face of the JPA. For example, the Davés object to the
fact that "[t]he LG did not disclose to the U.S. nationals that they would be required to hire
attorneys familiar with the law of the District of Columbia." Davés' Arbitration Opp'n at 20. But
8
The Davés posit that because of these omissions, they "had no information by which to
evaluate or to understand the ramifications of the agreement to arbitrate." Davés' Arbitration
Opp'n at 19. But "[t]hat [they] may not have comprehended the implications of" their decision to
accede to the JPA and its arbitration provision "is irrelevant as to whether the agreement is
valid." Nur, 142 F. Supp. 2d at 51.
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the JPA states that its terms, and any disputes arising under it, "shall be governed by District of
Columbia substantive law, regardless of choice of law principles." JPA at ¶ 16. And although
the Davés contend that the LG "did not disclose that any attempts to pursue discovery in
arbitration are allowed 'solely at the discretion of the arbitration panel,'" Davés' Arbitration Opp'n
at 21 (quoting JPA at ¶ 14), they have themselves quoted the language of the JPA that reflects
this requirement, see JPA at ¶ 14.9 Moreover, their allegation that the LG failed to disclose the
expected costs of arbitration is similarly infirm, as it merely repackages the unconscionability
argument the Court has already rejected. As the Court concluded above, the Davés have failed to
demonstrate, at the least, that the expected costs of arbitration are significantly greater than the
costs of litigation, and the likelihood of incurring such "significantly greater" costs. See Green
Tree Fin. Corp., 531 U.S. at 92.
C.
The Davés lastly contend that they cannot be bound by the arbitration provision because
"it conflicts with the terms of federal legislation and undermines serious federal interests."
Davés' Arbitration Opp'n at 1. Specifically, they assert that "compelling arbitration would
subject U.S. citizens such as the Davés to private non-judicial review where judicial process is
9
The Davés argue in the alternative that the terms of the arbitration provision violate
California law. See Davés' Arbitration Opp'n at 20 ("Further, the LG did not disclose that the
Davés would be required to pay for the administrative fees and the costs of three arbitrators, a
provision that violates their own California state law designed to protect indigent consumers
. . . ." (citing Cal. Civ. Proc. Code § 1284.3)); id. at 21 (allowing discovery at the discretion of
the arbitrator violates Cal. Civ. Proc. Code § 1283.1). But California law does not apply to the
claims the Davés assert in the California complaint. See JPA at ¶ 10. And, in any event, the
citations do not aid the Davés. They nowhere show that they are indigent within the meaning of
California law. And Cal. Civ. Proc. Code § 1283.1 applies only to agreements to arbitrate
personal injury or wrongful death claims. See Christensen v. Dewar Devs., 661 P.2d 1088, 1092
n.1 (Cal. 1983).
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foreclosed by federal law," id. at 24 (emphasis omitted), and that the claims presented in the
Davés' California complaint "implicate strong federal policy interests [that] cannot be subject to
arbitration," id. at 28. Neither of these contentions convinces the Court that arbitration is
inappropriate or unenforceable here.
According to the Davés, the Libyan Claims Resolution Act "protect[s] the funds intended
for U.S. nationals from being shared with third parties" in part by prohibiting a court "from using
any judicial process -- such as an order to compel arbitration -- to facilitate review of claims to
these assets by third parties." Id. at 24 (citing Libyan Claims Resolution Act § 4(b)(1)(A)). In
other words, they believe that United States law precludes them from sharing their Foreign
Claims Settlement Commission awards with any other parties, and hence prohibits an arbitration
having that possible outcome. The Court is not persuaded. Under the Act, the Secretary of State
has the authority to "designate 1 or more entities to assist in providing compensation to nationals
of the United States, pursuant to the claims agreement." Libyan Claims Resolution Act § 4(a)(1).
It also provides that "if the Secretary designates any entity" to assist the claims settlement
process, property held or transferred by the entity that relates to claims settlement "shall be
immune from attachment or any other judicial process." Id. § 4(b)(1)(A). The Libyan Claims
Resolution Act, then, protects from judicial process all claims settlement funds in the hands of
entities assisting the claims settlement process.
The Davés conclude that this immunity provision also covers claims settlement funds
once the funds are in the hands of a claimant -- in effect, they read the immunity provision to last
in perpetuity. But such a reading of the Act is anathema to the Secretary of State's conclusion,
offered when designating entities to assist in the claims settlement process, that "property related
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to the entities shall be accorded the immunity provided for in section 4(b) of the Libyan Claims
Resolution Act." Designation of Entities Under Section 4(a)(1) of the Libyan Claims Resolution
Act of 2008, 73 Fed. Reg. 50,666, at 50,666 (Aug. 27, 2008) (emphasis added); see also Libyan
Claims Resolution Act § 4 (immunity provisions contained in section of statute titled "Entity to
Assist in Implementation of Claims Agreement"). Once such property is transferred to an
individual claimant, it is no longer "related to the entities." Moreover, the Davés' reading
produces an absurd result: if the immunity provision is perpetual, individuals who have obtained
claims settlement funds would forever have a cache of money untouchable in any court
proceeding for any purpose. For example, a creditor in a bankruptcy proceeding -- a third party --
would be unable to access any funds traceable to a Foreign Claims Settlement Commission
award. The Court need not adopt such an irrational reading of the Act's immunity provision
when its structure supports a narrower, more reasonable interpretation.10 See Milavetz, Gallop &
Milavetz, P.A. v. United States, 130 S. Ct. 1324, 1337 (2010) ("That '[n]o other solution yields as
sensible a' result further persuades us of the correctness of this narrow reading." (quoting United
States v. Granderson, 511 U.S. 39, 55 (1994) (alteration in Milavetz)).
The Davés also assert that Executive Order 13,477 "precludes claims by foreign nationals
brought against American nationals that arise from injuries caused by Libyan terrorist attacks."
Davés' Arbitration Opp'n at 26. In their view, "a suit by foreigners against Americans arising
from the Pan Am 73 terrorist attack falls within the category of prohibited claims under
10
In any event, even if the Davés' reading of the Libyan Claims Resolution Act's
immunity provision were correct, it would not render arbitration of the claims asserted in the
Davés' California complaint inappropriate. The Act only immunizes property from attachment or
other judicial process -- it does not preclude judicial review or, therefore, arbitration.
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Executive Order 13,477." Id. And because the LG has foreign members, the Davés believe that
the LG cannot bring its motion to compel arbitration against them. See id. Not so. Executive
Order 13,477 precludes a party from bringing a claim within the terms of Article I of the Claims
Settlement Agreement. Exec. Order No. 13,477 § 1(b)(ii) ("No foreign national may assert or
maintain any claim coming within the terms of Article I [of the Claims Settlement Agreement] in
any court in the United States."). Article I, in turn, precludes a claim
if such claim or suit is against [either the United States or Libya] or [their]
agencies or instrumentalities, or against officials, employees, or agents therefrom
. . . , or (where the claim or suit implicates in any way the responsibility of any of
the foregoing) against the other Party's nationals.
Claims Settlement Agreement, Art. I (emphasis added). By its plain terms, then, Executive
Order 13,477 only prohibits claims by foreign nationals against U.S. citizens arising out of
Libyan terrorist attacks where the suit "implicates the responsibility" of either Libya or the
United States. But the claims asserted in the Davés' California complaint do not implicate the
responsibility of either the United States or Libya -- they seek only to determine the scope and
enforceability of the JPA, and whether Crowell & Moring and the LG abided by their contractual
commitments. Hence, the JPA's arbitration provision is not inconsistent with either the Libyan
Claims Resolution Act or Executive Order 13,477.
The Davés' argument that the claims asserted in their California complaint cannot be
arbitrated because they implicate "strong federal policy interests" fares no better. As the
prepotent interest, they identify "the federal policy in the treaty and statutes prohibiting judicial
process to interfere with the [Foreign Claims Settlement Commission] funds distributed to the
American citizens." Davés' Arbitration Opp'n at 29; see also id. at 26 ("[F]ederal law prohibits
-23-
courts from changing or modifying the [Foreign Claims Settlement Commission's] decision on
the 'fair compensation' to be awarded to the Davés." (citing 22 U.S.C. § 1622g)). Although "[t]he
decisions of the Commission with respect to claims shall be final and conclusive on all questions
of law and fact, and shall not be subject to review by . . . any court," 22 U.S.C. § 1622g, neither
this action, nor the Davés' California action, asserts any claims that challenge the Commission's
decision to award the Davés compensation. Nor are there any claims that seek "review" of that
award. Instead, what is at issue is simply who may share in such awards, and how.
There is nothing in the Libyan Claims Resolution Act, the Claims Settlement Agreement,
or Executive Order 13,477 to suggest that private parties may not dispose of Foreign Claims
Settlement Commission awards in any manner they choose. Those documents contain no
constraints on an award recipient's freedom to share, assign, or make other arrangements
regarding their awards, or to refer disputes relating to such arrangements to arbitration. Although
the penumbras of the Davés' claims in their California complaint may concern foreign relations --
the United States has an interest in ensuring that Pan Am Flight 73 victims obtain recovery --
"[t]he mere fact that an issue of national interest may incidentally figure into the resolution does
not make the dispute not arbitrable." Parsons & Whittemore Overseas Co., Inc. v. Societe
Generale De L'Industrie Du Papier (RAKTA), 508 F.2d 969, 975 (2d Cir. 1974). The Davés
simply have not identified any foreign policy interests that would preclude arbitration of their
challenges. Cf. Davé, 2010 U.S. Dist. LEXIS 43397 at *46 (the Claims Settlement Agreement,
Libyan Claims Resolution Act, and Executive Order 13,477 "do not provide Plaintiffs with any
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"rights and entitlements" to which they could assert private contractual claims.").11
* * * * *
To summarize, although the Davés raise numerous challenges to the enforceability of the
JPA's arbitration provision, their arguments are unpersuasive. They have not demonstrated that
the arbitration provision is unconscionable. Nor have they shown that they agreed to the
provision as a result of fraud. And none of the foreign policy interests they articulate render
arbitration inappropriate.12 Hence, the Davés must arbitrate the claims brought in their California
action.
IV.
In light of the Court's determination that the Davés' claims in their California complaint
must be arbitrated in accordance with the JPA, the Court will turn to the LG's motion for a
preliminary injunction. The LG seeks such relief "to preserve the status quo and prevent
disruption in the administration of a common fund as well as the possible dissipation of those
11
The Davés attempt to supply a foreign policy interest by observing that "arbitration of
this matter conflicts with . . . the procedures whereby courts consider and defer to the United
States executive branch on matters affecting the national interest" because "federal law does not
provide for the United States' filing of Statements of Interest in arbitration." Davés' Arbitration
Opp'n at 27. At the motions hearing, the Davés' counsel represented that the United States had
represented that it intended to file a statement of interest in this case. But in the more than two
months that have passed since that hearing, the United States has not done so. Nor, given the
fact that this action is, at bottom, a private contractual suit, is this the type of case in which the
United States generally would file a statement of interest. See McDonald v. The Socialist
People's Libyan Arab Jamahiriya, 666 F. Supp. 2d 50, 51-52 (D.D.C. 2009) (statement of interest
filed where parties brought suit against Libya in violation of Claims Settlement Agreement).
12
The Davés insist that they are entitled to a "full evidentiary hearing" before a jury to
determine the validity of the arbitration provision. See Davés Arbitration Opp'n at 1. Not so.
"Because the Court here is satisfied that the plaintiff entered into a valid agreement to arbitrate,
there is no need for a trial on that issue." Brown, 267 F. Supp. 2d at 78 n.12.
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funds." LG's Mem. in Supp. of Mot. for Prelim. Inj. ("LG's PI Mem.") [Docket Entry 6], at 1.
Although there is a circuit split on whether preliminary injunctive relief is available when a court
compels arbitration, compare Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 47 (1st Cir. 1986)
(relief available), and Roso-Lino Beverage Distribs., Inc. v. Coca-Cola Bottling Co. of N.Y, Inc.,
749 F.2d 124, 125 (2d Cir. 1984) (same), with Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Hovey, 726 F.2d 1286, 1291 (8th Cir. 1984) (relief unavailable), the Court need not address this
competing precedent here. Even if preliminary injunctive relief is available, the LG cannot
demonstrate that it is entitled to such relief.
A preliminary injunction is an extraordinary remedy, one that should be granted only
when the moving party, by a clear showing, carries the burden of persuasion. See Mazurek v.
Armstrong, 520 U.S. 968, 972 (1997); see also Munaf v. Geren, 128 S. Ct. 2207, 2219 (2008).
To obtain a preliminary injunction, the moving party must demonstrate (1) that it would suffer
irreparable harm without injunctive relief, (2) that it has a substantial likelihood of success on the
merits, (3) that an injunction would not substantially harm the non-moving or other interested
parties, and (4) that issuance of the injunction is in the public interest. See Chaplaincy of Full
Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006); Cobell v. Norton, 391 F.3d
251, 258 (D.C. Cir. 2004).
A district court weighing whether to grant a preliminary injunction must "'balance the
strengths of the requesting party's arguments in each of the four required areas.'" Chaplaincy of
Full Gospel Churches, 454 F.3d at 297 (quoting CityFed Fin. Corp. v. Office of Thrift
Supervision, 58 F.3d 738, 747 (D.C. Cir. 1995)). But "[a] movant's failure to show any
irreparable harm is . . . grounds for refusing to issue a preliminary injunction, even if the other
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three factors entering the calculus merit such relief." Id. at 297; see also Winter v. Natural Res.
Def. Council, Inc., 129 S. Ct. 365, 375 (2008) (a plaintiff must "demonstrate that irreparable
injury is likely in the absence of an injunction," and not a mere "possibility"). Here, because the
LG cannot show any irreparable harm without an injunction, the Court will begin its discussion
with that dispositive factor.13
A.
The irreparable injury requirement erects a very high bar for a movant. See Varicon Int’l
v. Office of Pers. Mgmt., 934 F. Supp. 440, 447 (D.D.C. 1996). A plaintiff must show that it
will suffer harm that is "more than simply irretrievable; it must also be serious in terms of its
effect on the plaintiff." Gulf Oil Corp. v. Dep't of Energy, 514 F. Supp. 1019, 1026 (D.D.C.
1981). "[T]he alleged injury must be certain, great, actual, and imminent." Hi-Tech Pharmacal
Co., Inc. v. Food and Drug Admin., 587 F. Supp. 2d 1, 11 (D.D.C. 2008) (citing Wis. Gas Co. v.
Fed. Energy Regulatory Comm'n, 758 F.2d 669, 674 (D.C. Cir. 1985) (per curiam)). And
"economic loss does not, in and of itself, constitute irreparable harm." Wis. Gas Co., 758 F.2d at
674 (D.C. Cir. 1985). Rather, the movant must establish that the economic harm is so severe as
13
The LG suggests that the Court need not analyze their motion for a preliminary
injunction under the traditional four-part test. Rather, it offers another test for assessing the
propriety of injunctive relief pending arbitration: whether the relief is necessary to preserve the
"status quo" pending arbitration. See LG's Reply in Supp. of Mot. for Prelim. Inj. ("LG's PI
Reply") [Docket Entry 19], at 7. Although some courts have utilized this approach, they have
only done so where an arbitration provision requires the parties' initial agreement to remain in
effect pending arbitration -- that is, where the contract has a "status quo" provision. See
Guinness-Harp Corp. v. Jos. Schlitz Brewing Co., 613 F.2d 468, 471 (2d Cir. 1980); Nat'l R.R.
Passenger Corp. v. Expresstrak, LLC, Civ. A. Nos. 02-1733, 02-2012, 2003 U.S. Dist. LEXIS
24486, at *14 (D.D.C. May 1, 2003); see also Ortho Pharm. Corp. v. Amgen, Inc., 882 F.2d 806,
813 (3d Cir.1989) ("[W]e disagree that the 'preservation of the status quo' operates as a separate
test for determining whether the district court acted within its jurisdictional authority."). There is
no "status quo" provision in the JPA.
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to "threaten[s] the very existence of [its] business." Wis. Gas, 758 F.2d at 674; accord
Experience Works, Inc. v. Chao, 267 F. Supp. 2d 93, 96 (D.D.C. 2003); Gulf Oil, 514 F. Supp. at
1025.
The irreparable harm here, according to the LG, would be the loss of the arbitration
panel's ability to order preliminary injunctive relief.14 See Mots. Hr'g Tr. at 38:13-14; see also id.
38:5-8 (injunction "would require the Davés to hold [their] funds in escrow pending
determination of a preliminary injunction motion by the arbitrator"); id. at 40:4-9.15 But the
arbitration panel will lose its ability to order preliminary injunctive relief only if the Davés
dissipated the funds prior to the beginning of arbitration. And the LG only speculates that the
Davés will dissipate the disputed funds -- it has provided no evidence that the Davés intend to do
so. See id. 42:7-9 ("I acknowledge that with respect to that showing, we don't have very much.").
Irreparable harm, however, cannot rest on mere possibilities. See Winter, 129 S. Ct. at 375; see
also Hi-Tech Pharmacal Co., 587 F. Supp. 2d at 11 (outcome must be "certain, great, actual, and
imminent"). Moreover, the LG has not shown that even were the Davés to dissipate their awards,
such an outcome would be irreparable. In other words, it has not demonstrated that the amount
of funds the Davés could disperse would leave an insufficient amount to protect the LG's
14
Under the rules of the American Arbitration Association, which apply to arbitrations
under the JPA, an arbitrator may order preliminary injunctive relief. See Pac. Reinsurance
Mgmt. Corp. v. Ohio Reinsurance Corp., 935 F.2d 1019, 1023 n.1 (9th Cir. 1991) ("'[T]he
arbitrator may issue such orders for interim relief as may be deemed necessary to safeguard the
property that is the subject matter of the arbitration without prejudice to the rights of the parties
or to the final determination of the dispute.'" (quoting Am. Arbitration Ass'n Rule 34)).
15
The LG alternatively argued that it would suffer irreparable harm absent an injunction
because "other JPA parties will have an even greater incentive to ignore their obligations to
arbitrate." LG's PI Reply at 13. At the motions hearing, however, the LG disclaimed this
iteration of irreparable harm. See Mots. Hr'g Tr. at 38:5-8.
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financial interests. Nor has the LG shown that it would be unable to recover sufficient amounts
from the Davés through a separate action. Absent such evidence, the Court cannot conclude that
the purported harm is irreparable.
B.
Because the LG cannot demonstrate that it would suffer irreparable harm absent an
injunction, the Court will not engage in a lengthy analysis of the remaining factors. See
Chaplaincy of Full Gospel Churches, 454 F.3d at 297 ("A movant's failure to show any
irreparable harm is . . . grounds for refusing to issue a preliminary injunction, even if the other
three factors entering the calculus merit such relief."). But given that the Court has concluded
the Davés must arbitrate their claims asserted in their California complaint, it would appear that
the LG has demonstrated a likelihood of success on the merits animating this action.16
The balance of harms is of little relevance here: it is for the arbitrator to determine
whether the Davés must share their Foreign Claims Settlement Commission award under the
terms of the JPA, and hence the Court cannot assess whether an injunction would harm the
Davés. And the LG has not shown that the public interest weighs in favor of an injunction. The
LG contends that "an injunction would "preserve the meaningfulness of the arbitration process"
16
Both the LG and the Davés suggest that the likelihood of success element turns on the
merits of the claims asserted in the Davés' California complaint. See LG's PI Reply at 16; Davés'
Opp'n to the LG's Mot. for Prelim. Inj. [Docket Entry 15], at 12. But the case before this Court
presents only the issue whether the Davés' claims must be arbitrated. And therefore the propriety
of the preliminary injunction the LG seeks does not turn on the merits of the Davés' underlying
claims in California. In other words, because the LG seeks an injunction to protect the ability of
the arbitration panel to order preliminary relief, if an injunction from this Court were appropriate,
it would be appropriate regardless of the arbitrator's ultimate decision on the merits. This
conclusion is particularly compelling here, for considering the likelihood of the LG's success on
the merits of the Davés' underlying claims would "inject the court into the merits of issues more
appropriately left to the arbitrator." Hovey, 726 F.2d at 1292.
-29-
by ensuring the Davés do not dissipate the disputed funds. LG's PI Reply at 15. But the Court
has already concluded that the LG has offered no evidence that that would happen. Therefore,
because the LG has not shown that the status quo will be threatened absent an injunction, there is
no threat to that public interest.
* * * * *
The LG has not demonstrated it will suffer irreparable harm without an injunction, a
prerequisite for the extraordinary relief it seeks. This absence is fatal to its request for a
preliminary injunction. See Chaplaincy of Full Gospel Churches, 454 F.3d at 297.
V.
For the foregoing reasons, the Court will deny the Davés' motion to transfer or to stay,
will grant the LG's motion to compel arbitration, and will deny the LG's motion for a preliminary
injunction. A separate Order to that effect was issued on May 7, 2010.
/s/
JOHN D. BATES
United States District Judge
Dated: May 12, 2010
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