Opinion
1:22-cv-10964-GHW
05-24-2024
AMIT V PATEL, Plaintiff, v. CLANE GESSEL STUDIO, et al., Defendants.
ORDER
Gregory H. Woods, United States District Judge
For the reasons that follow, the Court adopts in full Magistrate Judge Tarnofsky's Report and Recommendation (“R&R”) regarding Defendants' motions to dismiss, motion to transfer venue, and motion to compel arbitration.
I. BACKGROUND
On April 18, 2024, Magistrate Judge Tarnofsky issued an R&R recommending “that the motion to dismiss the complaint for insufficient service of process be DENIED as moot; that the motion to dismiss the complaint for lack of personal jurisdiction be DENIED; that the motion to dismiss for improper venue be DENIED; that the motion to transfer venue be DENIED; that the motion to dismiss in favor of arbitration be DENIED; . . . that the motion to compel arbitration be GRANTED;” and “that the motion to dismiss pursuant to Rule 12(b)(6) be DENIED without prejudice to Defendants' renewing it before the arbitrator.” Dkt. No. 77 (the “R&R”) at 1-2.
On May 1, 2024, Plaintiff timely filed objections to the R&R, “specifically object[ing] only to that portion of the Report in which the Magistrate Judge recommends that arbitration be compelled.” See Dkt. No. 80 (the “Objections”) at 4. Judge Tarnofsky reached this conclusion based on her reading of the arbitration clause, which states, in its entirety: “In the unlikely event of a disagreement of this document, only arbitration may be used.” See R&R at 23 (quoting Dkt. No. 1-1 at 2). In the R&R, Judge Tarnofsky concluded that this arbitration clause is unambiguous and that it provides that any disagreement about the contract-including whether Defendants breached it-must be settled by arbitration. See R&R at 23-25. Plaintiff argues that this conclusion was erroneous. See Objections at 4-8. Specifically, Plaintiff argues that Judge Tarnofsky “ignor[ed] the precise language of the agreement” and improperly “transform[ed]” its meaning, see Objections at 5, “transform[ing] an irretrievably vague and ambiguous sentence into a broad arbitration clause that engulfs the entire present dispute,” id. at 2. Plaintiff argues that Judge Tarnofsky's interpretation “is at odds with Hearst Communications, Inc. v. Seattle Times Co.,” insofar as, in Plaintiff's view, Judge Tarnofsky's interpretation does not adequately give the words in the contract their ordinary meaning. See id. at 6 (citing Hearst, 154 Wash.2d 493, 503-04 (Wash. 2005)).
On Plaintiff's reading of the clause, “only the authenticity” of the contract-not the substance of its terms-was “intended to be the subject of the arbitration clause.” See, e.g., id. n.4. And Plaintiff argues that the phrase “[i]n the unlikely event of a disagreement” suggests that “the parties thought it unlikely they would contest the authenticity of the document, and, in turn, provides a basis for why they did not expressly agree to arbitrate the ‘substance of its terms' ....” See id. at 6-7 (citing, inter alia, JC Aviation Investments, LLC v. Hytech Power, LLC, 2021 WL 778043, at *3 n.11 (Ct. App. Wash. Mar. 1, 2021) (“Individual words and phrases matter and must be interpreted in each contract to determine whether the parties intended to arbitrate a dispute.”)).
Plaintiff argues that “there is no fair reading of the arbitration sentence - particularly in light of its grave grammatical defects - that arrives at the conclusion that the parties intended to submit to binding arbitration all substantive disputes arising under their agreement.” Id. at 7. Plaintiff asserts that the phrase “a disagreement of this document” is “not a phrase known to the English language” and is “unintelligible,” arguing that “such unintelligible language cannot waive Plaintiff's federal and state constitutional right to bring his claim before this Court and have it decided by a jury trial.” Id. (citing Adler v. Fred Lind Manor, 103 P.3d 773, 789 (Wash. 2004); Godfrey v. Hartford Cas. Ins. Co., 16 P.3d 617, 623 (Wash. 2001) (“[W]aiver of the right to jury trial ‘must be voluntary, knowing, and intelligent.'” (citation omitted))). Last, Plaintiff argues that given that this phrase is, in Plaintiff's view, ambiguous, “such an ambiguity should be construed against Defendants as the drafters of the agreement.” Id. at 8.
Defendants filed their response on May 9, 2024, arguing that the Court “should reject Plaintiff's object[ion]s to Magistrate Judge Tarnofsky's Report and Recommendation, adopt her findings and recommendations, and grant Defendant[s'] motion to compel Plaintiff to arbitrate his purported claim against Defendants.” See Dkt. No. 82 at 6 (ECF pagination).
II. DISCUSSION
A. Motions to Dismiss and to Transfer Venue
A district court reviewing a magistrate judge's report and recommendation “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1). Parties may raise specific, written objections to the report and recommendation within fourteen days of receiving a copy of the report. Id.; see also Fed.R.Civ.P. 72(b)(2). The Court reviews for clear error those parts of the report and recommendation to which no party has timely objected. 28 U.S.C. § 636(b)(1)(A); Lewis v. Zon, 573 F.Supp.2d 804, 811 (S.D.N.Y. 2008).
No objection to the R&R's conclusions on the motions to dismiss or to transfer venue were submitted within the fourteen-day window. The Court has reviewed those portions of the R&R for clear error and finds none. See Braunstein v. Barber, No. 06 Civ. 5978 (CS) (GAY), 2009 WL 1542707, at *1 (S.D.N.Y. June 2, 2009) (explaining that a “district court may adopt those portions of a report and recommendation to which no objections have been made, as long as no clear error is apparent from the face of the record”).
B. Motion to Compel Arbitration
The portion of the R&R to which Plaintiff objected relates to a non-dispositive matter: a motion to compel arbitration. See, e.g., Chen-Oster v. Goldman, Sachs & Co., 449 F.Supp.3d 216, 227 (S.D.N.Y. 2020), objections overruled, No. 10CIV6950ATRWL, 2021 WL 4199912 (S.D.N.Y. Sept. 15, 2021) (“District courts in this Circuit regularly have concluded that a motion to compel arbitration and stay litigation pending arbitration is non-dispositive ....” (collecting cases)); Marcus v. Collins, No. 16CV4221GBDBCM, 2016 WL 8201629, at *1 n.1 (S.D.N.Y. Dec. 30, 2016).
Therefore, the Court considers the objections to this portion of the R&R under Federal Rule of Civil Procedure 72(a). An objection directed at non-dispositive matters decided by the assigned magistrate judge will not be “modified” or “set aside” unless the magistrate judge's ruling is “clearly erroneous or is contrary to law.” Fed.R.Civ.P. 72(a). “[M]agistrate judges are afforded broad discretion in resolving nondispositive disputes and reversal is appropriate only if their discretion is abused.” Williams v. Rosenblatt Securities, Inc., 236 F.Supp.3d 802, 803 (S.D.N.Y. 2017) (citing Thai Lao Lignite (Thailand) Co., Ltd. v. Gov't of Lao People's Democratic Republic, 924 F.Supp.2d 508, 511 (S.D.N.Y. 2013)). “A magistrate's ruling is contrary to law if it ‘fail[s] to apply or misapplies relevant statutes, case law, or rules of procedure.'” Thai Lao Lignite, 924 F.Supp.2d at 512 (quoting Moore v. Publicis Groupe, 2012 WL 1446534, at *1 (S.D.N.Y. Apr. 26, 2012)). A magistrate judge's order is clearly erroneous where “‘on the entire evidence,' [the district court] is ‘left with the definite and firm conviction that a mistake has been committed.'” Easley v. Cromartie, 532 U.S. 234, 242 (2001) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)). “The party seeking to overturn a magistrate judge's decision thus carries a heavy burden.” McFarlane v. First Unum Life Ins. Co., 2017 WL 4564928, at *2 (S.D.N.Y. Oct. 12, 2017) (quoting State Farm Mut. Auto. Ins. Co. v. Fayda, 2016 WL 4530890, at *1 (S.D.N.Y. Mar. 24, 2016)). Under Rule 72(a), “[a] party may serve and file objections to [a magistrate judge's non-dispositive] order within 14 days after being served with a copy.” Fed.R.Civ.P. 72(a). Objections were timely filed here.
The Court concludes that this portion of the R&R was not clearly erroneous or contrary to law. See Thai Lao Lignite, 924 F.Supp.2d at 512. Judge Tarnofsky correctly reasoned that Defendants' “motion to dismiss in favor of arbitration” sought an order compelling arbitration. See R&R at 21 (citing Nicosia v. Amazon.com, Inc., 834 F.3d 220, 230 (2d Cir. 2016); Gilbert v. Indeed, Inc., 513 F.Supp.3d 374, 390 (S.D.N.Y. 2021); Dkt. No. 25-17 at 7-8)). Judge Tarnofsky correctly rejected Plaintiff's argument below-in part reiterated in his objections here-that “the use of the term ‘document [in the arbitration clause],' as opposed to ‘the parties' agreement,' demonstrates that arbitration was contemplated ‘for the sole purpose of resolving any dispute associated with the authenticity of the document, rather than any substantive dispute involving the scope of work contemplated under the Service Agreement.'” Id. at 23 (citing Dkt. No. 29 at 9). Judge Tarnofsky correctly looked to Washington law to give the words in this contract “their ordinary, usual, and popular meaning unless the entirety of the agreement clearly demonstrates a contrary intent.” Id. at 24 (quoting Hearst, 154 Wash.2d at 504 (internal quotation marks omitted)).
See also R&R at 2 (“The Contract had a Washington State choice of law provision and an arbitration clause.” (citing Dkt. No. 1-1)).
As Judge Tarnofsky aptly reasoned:
While the arbitration clause is ungrammatical, . . . it is nevertheless unambiguous. Given its ordinary meaning, the term “this document” seems clearly to be synonymous with “the parties' agreement.” It follows that the phrase “a disagreement of this document” means any disagreement about the parties' agreement, including whether Defendants breached that agreement. There is no other plausible interpretation of the term document, and the entirety of the agreement does not clearly demonstrate a contrary intent.Id. She continues, correctly stating that Plaintiff's position that the words “about the authenticity” should be inserted between the words “a disagreement” and “of this document” “finds no support in the plain language of the document, which has no need for additional language to make sense.” Id. And the Court agrees with Judge Tarnofsky that “[i]t also seems highly improbable that the parties would have agreed to arbitrate the authenticity of the Contract but not the substance of its terms.” Rather, “[i]t is clear from the plain language of the clause that the purpose for which arbitration is to be used is to resolve ‘a disagreement of this document.'” Id. And “[t]he statement that ‘only' arbitration may be used to resolve disputes between the parties indicates that the arbitration was meant to be binding, since the agreement provides for no other means of dispute resolution.” Id. at 25.
The Court sustains Judge Tarnofsky's ruling that the motion to compel arbitration be granted based upon this sound reading of the contract's arbitration clause. It is Plaintiff's proposed interpretation, not Judge Tarnofsky's, that would effectively “ignor[e] the precise language of the agreement” and improperly “transform[]” it to say something it does not say. See Objections at 5. Judge Tarnofsky's interpretation is faithful to Hearst, which provides that:
[W]hen interpreting contracts, the subjective intent of the parties is generally irrelevant if the intent can be determined from the actual words used. We generally give words in a contract their ordinary, usual, and popular meaning unless the entirety of the agreement clearly demonstrates a contrary intent. We do not interpret what was intended to be written but what was written.See 154 Wash.2d at 503-04. She gives the contract's words their “ordinary, usual, and popular meaning” and correctly finds that the entirety of the agreement does not “clearly demonstrate[] a contrary intent.” See id.; R&R at 24.
Nor is the Court persuaded by Plaintiff's argument that the phrase “[i]n the unlikely event of a disagreement” suggests that “the parties thought it unlikely they would contest the authenticity of the document, and, in turn, provides a basis for why they did not expressly agree to arbitrate the ‘substance of its terms' ....” See Objections at 6-7. In no way does this phrase suggest that the parties thought it unlikely that they would contest the document's authenticity as opposed to its substance. The Court agrees with Judge Tarnofsky that, although the arbitration clause was neither verbose nor grammatically sound, its words-by their plain and ordinary meaning-are clear: it unambiguously commits the parties to arbitrating “any disagreement about the parties' agreement, including whether Defendants breached that agreement.” See R&R at 24.
Moreover, to the extent that any doubts may remain, “Washington courts apply a ‘strong presumption in favor of arbitrability,' and ‘[d]oubts should be resolved in favor of coverage.'” Berman v. Tierra Real Est. Grp., LLC, 515 P.3d 1004, 1010 (Wash. App. 2d 2022) (quoting Peninsula Sch. Dist. No. 401 v. Pub. Sch. Emps. of Peninsula, 924 P.2d 13 (Wash. 1996)).
III. CONCLUSION
The Court, therefore, adopts the R&R's conclusions in full and sustains Judge Parker's ruling on the motion to compel arbitration, which was not clearly erroneous. For the reasons articulated in the R&R, the motion to dismiss for lack of service of process is denied as moot; the motion to dismiss for lack of personal jurisdiction is denied; the motion to dismiss for improper venue is denied; the motion to transfer venue is denied; the motion to dismiss in favor of arbitration is denied; the motion to compel arbitration is granted, with such arbitration to take place within this District; and the motion to dismiss pursuant to Rule 12(b)(6) is denied without prejudice to Defendants' renewing that motion before the arbitrator. The parties may either agree to an arbitrator or, if they cannot do so, one or both of them may make an application to the Court to choose an arbitrator for them and, thereafter, an application to stay this case pending conclusion of the arbitration.
SO ORDERED.