Sole LLC member not bound by arbitration agreement

Where the sole member of an LLC asserted a defamation claim against another company, that claim was not subject to arbitration because the member was not a signatory to that agreement.

Background

Philippe Hetrick is the sole member of Hetrick Companies LLC, or HetCo. Both Philippe Hetrick and HetCo sued IINK Corp., alleging (1) violation of the Stored Communications Act; (2) violation of the Electronic Communications Privacy Act; (3) violation of the Computer Fraud and Abuse Act; (4) defamation; (5) misappropriation of trade secrets in violation of the Virginia Uniform Trade Secrets Act and (6) intentional interference with business relations. Although all six claims are raised by HetCo, Philippe Hetrick’s only claim in this action is for defamation.

IINK moved to transfer this matter to the Middle District of Florida, to allow that court to compel arbitration. In the alternative, IINK seeks an order compelling arbitration and either dismissing the complaint or staying the proceedings.

Analysis

The parties’ briefing reveals six issues to be resolved: (i) whether a valid arbitration agreement exists between both plaintiffs and IINK; (ii) whether plaintiffs’ claims fall within the parameters of the arbitration clause; (iii) whether the arbitration agreement is unenforceable as an “infinite arbitration provision;” (iv) whether the Federal Arbitration Act, or FAA, is unconstitutional in light of the Seventh Amendment; (v) whether, if there is a valid and enforceable agreement to arbitrate, this court may compel arbitration and (vi) whether any or all claims in this action should be transferred to the Middle District of Florida.

A careful review of the record reveals (i) that there is a valid and enforceable arbitration agreement between Hetco and IINK and (ii) that each of HetCo’s claims are within the scope of that agreement. However, because the parties agreed to arbitrate in Tampa, Florida, and because district courts may not compel arbitration outside of their respective districts, HetCo’s claims must be transferred to the Middle District of Florida pursuant to 28 U.S.C. § 1404(a).

But Philippe Hetrick is not bound to the arbitration agreement because he is not a signatory to that contract. There is no basis in Florida law to compel Philippe to arbitrate his claim against IINK, and the § 1404(a) factors do not favor transfer of his claim. Philippe Hetrick’s claim must accordingly be severed and retained in this district.

However, independent resolution of HetCo and Philippe’ Hetrick s defamation claims may risk inconsistent judgments. From the allegations in the complaint, it cannot be determined at this time whether IINK made independent or interconnected statements about HetCo and Philippe Hetrick. As a result, supplemental briefing is necessary on whether staying Philippe Hetrick’s claim is appropriate.

Defendant’s motion to compel transfer venue or, in the alternative, to compel arbitration and dismiss granted in part, denied in part.

Hetrick Companies LLC v. IINK Corp., Case No. 1:23-cv-961, Jan. 3, 2024. EDVA at Alexandria (Ellis). VLW 024-3-007. 39 pp.