United States District Court, D. Minnesota
MEMORANDUM AND ORDER
A. Magnuson United States District Court Judge
matter is before the Court on Defendants' Motion to
Dismiss and Compel Arbitration or to Dismiss for Lack of
Jurisdiction. (Docket No. 4.) Because the parties entered
into a valid arbitration agreement, Defendants' Motion is
granted in part and denied in part.
Wakaya Perfection (“Wakaya”) is a multi-level
marketing company headquartered in Utah that offers a variety
of health and wellness products. Plaintiff Jennifer Sanneman
is the founder and CEO of Plaintiff Essence Skin Clinic based
in Rochester, Minnesota. In late 2016, Sanneman became an
investor in Wakaya. On or around December 28, 2016, Sanneman
entered into an agreement with Wakaya known as the
Endorsement Agreement (“the Agreement”). The
Agreement required Sanneman to license her image, name,
likeness, and voice for Wakaya's commercial purposes. The
Agreement also required Sanneman to invest $250, 000 with
Wakaya, which she did.
“Dispute Resolution” section of the Agreement
states in pertinent part:
Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, which cannot be resolved
between the Parties shall be settled by binding arbitration
in accordance with the Commercial Rules of the American
Arbitration Association by a single arbitrator in a location
to be agreed to by the Parties (or, if no agreement on
location can be reached, the arbitration shall be held in
Salt Lake City, Utah).
(Compl. (Docket No. 1, Ex. 1) at 31.) Sanneman eventually
decided that Wakaya and its representatives had deceived her
before she entered into the contract by making
misrepresentations about the company and failing to disclose
Wakaya's ongoing litigation in another matter. Plaintiffs
filed suit alleging violations of state securities law,
breach of contract, fraud, promissory estoppel, and unjust
enrichment. Defendants now seek to compel arbitration and
either dismiss the complaint or stay the proceedings pending
the outcome of arbitration.
the Federal Arbitration Act, 9 U.S.C. § 1 et seq., the
Court is to “rigorously enforce agreements to
arbitrate.” Dean Witter Reynolds, Inc. v.
Byrd, 470 U.S. 213, 221 (1985). In determining whether
to compel arbitration, the Court must determine: (1) whether
a valid agreement to arbitrate exists between the parties;
and (2) whether the specific dispute is within the scope of
that agreement. Pro Tech Indus., Inc. v. URS Corp.,
377 F.3d 868, 871 (8th Cir. 2004). “Absent a
well-founded claim that an arbitration agreement
‘resulted from the sort of fraud or overwhelming
economic power that would provide grounds for the revocation
of any contract', the Court must enforce the arbitration
agreement.” Lang v. Burlington N. R.R., 835
F.Supp. 1104, 1106 (D. Minn. 1993) (Rosenbaum, J.) (citation
omitted). There is a strong presumption in favor of
arbitration and any doubts concerning arbitration rights
should be resolved in favor of arbitration. Moses H. Cone
Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
“9 U.S.C. § 3 provides that, when a suit pending
in federal court is subject to arbitration, the court
‘shall . . . stay . . . the action until such
arbitration has been had.'” Jann v.
Interplastic Corp., 631 F.Supp.2d 1161, 1167 (D. Minn.
2009) (Kyle, J.) (citation omitted). However, it is within
the Court's discretion to decide whether it is
appropriate to dismiss the complaint when all claims are
arbitable, or to stay the action pending the outcome of
arbitration. Unison Co. v. Juhl Energy Dev., Inc.,
789 F.3d 816, 821 (8th Cir. 2015) (citing Green v.
SuperShuttle Int'l, Inc., 653 F.3d 766, 769-70 (8th
an arbitration agreement is valid is a matter of state
contract law.” Faber v. Menard, Inc., 367 F.3d
1048, 1052 (8th Cir. 2004). The Agreement states that it is
governed by the laws of Utah, and Plaintiffs have not
disputed the validity of the arbitration provision based on
state law. Plaintiffs instead contend that the arbitration
provision is invalid because the entire Agreement was
terminated in November 2018 pursuant to a clause in the
Agreement allowing termination by either party on 90
days' written notice. But “there is ‘a
presumption in favor of postexpiration arbitration of matters
unless negated expressly or by clear implication.'”
Koch v. Compucredit Corp., 543 F.3d 460, 465 (8th
Cir. 2008) (citation omitted). There is no express or implied
indication in the record that the parties intended to sever
the arbitration provision when the Agreement was terminated,
and thus the arbitration provision remains binding.
also argue that the Agreement is invalid because they raise a
claim under the Minnesota Blue Sky Law, which “prevents
Defendants' reliance on a contract secured in violation
of statutory law.” (Pl.'s Opp'n Mem. (Docket
No. 25) at 3), see Minn. Stat. § 80A.14, Subd. 18.
However, “Minnesota Blue Sky Law and related common law
claims are . . . subject to arbitration.” Fairview
Cemetery Asso. v. Eckberg, 385 N.W.2d 812, 821 (Minn.
1986). Thus, the Blue Sky Law does not prevent enforcement of
the arbitration provision.
Plaintiffs argue that their dispute is not within the scope
of the arbitration provision because their claims relate to
securities law under Minn. Stat. § 80A and do not arise
out of the Endorsement Agreement. Specifically, Plaintiffs
contend that “the underlying allegations of
Plaintiffs' primary claims are unrelated to any matters
covered by the broad arbitration provision.” (Pls.'
Opp'n Mem. at 8.) The Complaint disproves this assertion.
Notably, the Agreement states that “[a]ny controversy
or claim arising out of or relating to this Agreement . . .
shall be settled by binding arbitration.” (Defs.'
Supp. Mem. at 4.) All six counts in the Complaint either
explicitly rely on the Agreement or argue that Sanneman was
fraudulently induced to enter into the Agreement. While
Plaintiffs may base some of their arguments on securities
law, the ...