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Long v. Miller

United States District Court, D. Minnesota

May 11, 2017

Dave Long, Plaintiff,
v.
Jill Miller, Defendant.

          Mark J. Briol, Esq., Scott A. Benson, Esq., and Briol & Associates, counsel for plaintiff.

          Jonathan S. Parritz, Esq., Judah Druck, Esq. and Maslon, LLP, counsel for defendant.

          ORDER

          David S. Doty, Judge

         This matter is before the court upon defendant Jill Miller's motion to compel arbitration and to stay proceedings. Based on a review of the file, record, and proceedings herein, and for the following reasons, the motion is granted.

         BACKGROUND

         This dispute arises from Miller's business relationship with plaintiff Dave Long. The court will recite only those facts and allegations relevant to the narrow issue presented. For several years, the parties were engaged in the business of operating Medifast, Inc. franchised weight loss clinics in Minnesota and Wisconsin under the corporate name Minnesota Weight Control, Inc. (MWC). Arb. Demand ¶ 1; Compl. ¶ 6. Long appointed Miller as the CEO of MWC in 2012 and sold her a ten-percent stake in the company pursuant to a stock purchase agreement dated August 1, 2012 (SPA).[1]Arb. Demand ¶¶ 2, 18. On October 15, 2012, the parties entered into an amended and restated shareholder agreement (Shareholder Agreement) in which Long was appointed sole director of MWC. Id. ¶ 19.

         In 2013, Long formed Washington Weight Control, Inc. (WWC) to run newly franchised Seattle-area clinics. Id. ¶ 20; Compl. ¶ 7. As with MWC, Long serves as WWC's sole director and Miller as its CEO. Arb. Demand ¶ 20. Long owns seventy percent of WWC and Miller owns the remaining thirty percent. Id.; Compl. ¶ 8.

         In October 2013, WWC borrowed $1.5 million from Bank of America to finance its business operations. Compl. ¶¶ 12, 14. Long and Miller personally guaranteed the loan. Id. ¶ 13. WWC was only in business a short time, however; it closed all four of its locations by September 2014 and later filed for bankruptcy. Id. ¶¶ 16-17. Long then restructured the Bank of America loan. Id. ¶ 19. Under the new loan agreement, Long and Miller were jointly and severally indebted to Bank of America. Id. MWC and Medifast guaranteed the loan, and MWC, in turn, agreed to indemnify Medifast. Arb. Demand ¶ 23. Long then paid the entire loan amount to Bank of America, which meant that Miller directly owed Long her portion of the debt - $427, 848. Compl. ¶¶ 20-21. According to the complaint, Miller has only paid Long $270, 000 of that amount and refuses to pay the remainder. Id. ¶¶ 22-23. Long and Miller nevertheless continued to work together at MWC for nearly two more years.

         On August 12, 2016, Long fired Miller from MWC and demanded that she forfeit her shares in MWC pursuant to the SPAs. Arb. Demand ¶ 32. On October 19, 2016, Long and MWC filed a demand for arbitration and statement of claim with the American Arbitration Association (AAA) seeking declarations that (1) Miller breached her duties under Minn. Stat. § 302A.361 and was lawfully terminated, and (2) Long has the right to enforce his stock repurchase rights and that Miller is obligated to tender her shares to MWC. Long's arbitration demand was consistent with dispute-resolution provision in the SPAs and the Shareholder Agreement. Specifically, the SPAs provide:

Any disputes (of whatever kind or nature, whether in law or in equity) arising out of, relating to or concerning the validity, specific enforcement, breach, or interpretation of this Stock Purchase Agreement shall be submitted to binding arbitration before a single arbitrator which proceedings shall be held in Hennepin County, Minnesota.

Arb. Demand Exs. 23 ¶ 7.10. The Shareholder Agreement likewise provides:

Any disputes (of whatever kind or nature, whether in law or in equity) arising out of, relating to or concerning the validity, specific enforcement, breach, or interpretation of this Agreement shall be submitted to binding arbitration before a single arbitrator.

Id. Ex. 1 ¶ 7.2. All three agreements further state that the arbitration “shall be conducted pursuant to the then-current Commercial Arbitration Rules of the American Arbitration Association.” Id.; id. Exs. 2 & 3 ¶ 7.10. The arbitration is ongoing and is currently in the discovery phase.

         On February 8, 2017, Long filed this suit against Miller seeking the remaining $157, 848 owed on the Bank of America debt under the theories of statutory, implied, and equitable contribution. Long also seeks a declaration that Miller's home in Coon Rapids should be exempted from homestead protection so that he may use her interest in that home to collect on any judgment. Miller now moves to compel arbitration and for a stay. Long maintains that ...


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