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Wolff v. Westwood Management LLC

August 27, 2007


The opinion of the court was delivered by: Henry H. Kennedy, Jr. United States District Judge


Elliot Wolff brings this action personally and as trustee of the Egon Wolff Trust against Westwood Management LLC and other associated entities (collectively "defendants"), alleging breach of fiduciary duty and derivative claims, all of which stem from the management and sale of property in which Wolff's father invested over 35 years ago. Before the court is defendants' motion to compel arbitration [#4] under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. Upon consideration of the motion, the opposition thereto, and the record of this case, the court concludes that the motion must be granted.


In 1971, Wolff's father purchased a share in a real estate partnership venture created by Dr. Laszlo Tauber. The purpose of the venture, which was called the District of Columbia Joint Venture ("DCJV"), was to own and develop a parcel of land located in the District of Columbia into an office building complex. According to the DCJV agreement, Wolff's father purchased an ownership interest of 0.5% in the land and 0.25% in the building for $20,000. The DCJV agreement also included an arbitration clause, which provided that the parties "agree not to enter into any court action in any dispute which may arise during construction and management of the office building complex and agree that any dispute or controversy that cannot be amicably settled will be submitted to arbitration." Defs.' Ex. 1 ("DCJV Agreement") ¶ 15.

Tauber successfully developed the land into what is now the Transpoint building and later purchased an adjacent half-acre parcel of land to be used as a parking lot. When Wolff's father died in November 1984, his ownership interest in the DCJV passed to his son and to the trust established under his estate. On December 6, 1984, Tauber sent a letter to the investors in the DCJV and to the investors in the various other joint ventures he managed to inform them that he was restructuring the joint ventures into a single partnership that he would control.*fn1 In the letter, Tauber explained that the consolidation would facilitate management of the various properties and would more easily allow for a sale or merger with a larger company. The letter offered investors three options: (A) to sell their interest, (B) to become class "B" partners, or (C) to become class "C" partners. Each class contained a different kind of investment in the new partnership with a different pay structure. The letter additionally offered, "[i]f anybody has any second thoughts and is not willing to cooperate, I will put his/her interest in trust . . . ." Defs.' Ex. 2 (Tauber Ltr., Dec. 6, 1984) at 6 ("1984 Tauber Letter"). Investors were asked to respond to the letter and choose one of the three options, with option "B" to be the default position if no response was returned to Tauber by the date specified. In response to the letter, Wolff declined to become an investor in the new partnership and asked Tauber to put his interest in the DCJV in trust. Tauber agreed. Although Wolff was not a member of the newly created Consolidated Partnership and did not sign the Consolidated Partnership agreement, that agreement contained an arbitration clause providing that "any dispute or controversy that cannot amicably be settled shall be submitted to binding arbitration." Defs.' Mem. at 4.

Tauber later reorganized the Consolidated Partnership into several LLCs*fn2 in order to limit the liability of the partnership interests and, in 1999, the Transpoint building and the adjacent lot were transferred to the Laszlo N. Tauber & Associates I, LLC ("Tauber I") subsidiary. The parties dispute whether Tauber I was owned and controlled by the LNT&A Master LLC, the master entity which wholly owned a number of subsidiary LLCs, which in turn owned a number of the properties previously held by the Consolidated Partnership. Although the original LNT&A Master LLC operating agreement has not been provided to the court, a March 3, 2006 amendment to the LNT&A Master LLC operating agreement also contains an arbitration clause. See Defs.' Ex. 3 ("LNT&A Master Agreement") § 9.8(a). Wolff was not a member of the LNT&A Master LLC. Pls.' Opp'n at 22--23.

In 2002, Tauber died and, pursuant to the 1984 Tauber Letter, management and control of the ventures that had been transferred into the Consolidated Partnership was vested with Westwood Management LLC. In February 2004, Westwood sold the Transpoint building and the adjacent lot and distributed payment to the investors according to their respective classes. On July 10, 2006, Wolff filed a complaint alleging breach of fiduciary duty and derivative claims, all resulting from the management and sale of the Transpoint building and the adjacent lot. He alleges that defendants used funds from various mortgages and refinances of the Transpoint building and the adjacent lot for purposes other than for use by and for the Transpoint building and the adjacent lot; specifically, to make improvements to other properties and for defendants' enrichment. Defendants have moved to compel arbitration, asserting that Wolff is bound by the arbitration clause in the DCJV agreement as well as the arbitration clauses in the subsequent agreements.


A. Standard Of Review

When a party opposing arbitration contends that no agreement to arbitrate was entered, she effectively raises the issue of whether there was a meeting of the minds on the agreement to arbitrate, and the standards for resolving a summary judgment motion pursuant to Federal Rule of Civil Procedure 56 are therefore applied. Booker v. Robert Half Int'l, Inc., 315 F. Supp. 2d 94, 99 (D.D.C. 2004); Brown v. Dorsey & Whitney, LLP, 267 F. Supp. 2d 61, 67 (D.D.C. 2003) ("[T]he proper approach to employ in reviewing the defendant's motion to dismiss and compel arbitration is to apply the same standard of review that governs Rule 56 motions." ); see also Stromberg Sheet Metal Works, Inc. v. Washington Gas Energy Sys., Inc. 448 F. Supp. 2d 64, 68 (D.D.C. 2006). It is 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 issue 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 his 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. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249--50 (internal citations omitted).*fn3

B. The FAA

The FAA provides that "[a] written provision in . . . a contract evidencing a transaction involving interstate commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The question of whether a particular dispute is arbitrable is "undeniably an issue for judicial determination."

AT&T Techs. v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986) (citations omitted). The basis for judicial authority to make this determination lies in the fact that arbitration agreements are separable from the agreements in which they are incorporated. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403--04 (1967); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445--46 (2006). Thus, it is well settled that a court may dismiss an action altogether where "all issues raised in the complaint must be submitted to arbitration." Emeronye v. CACI Int'l, Inc., 141 F. Supp. 2d 82, 88 (D.D.C. 2001).

A strong policy favoring alternative means of dispute resolution through arbitration supports a presumption of arbitrability. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24--25 (1983); see also Buckeye Check Cashing, 546 U.S. at 440. However, "the FAA does not require parties to arbitrate when they have not agreed to do so." Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 478 (1989) (citation omitted). Indeed, the overriding purpose of the FAA is not judicial economy or the expeditious resolution of claims, but the enforcement of agreements into which parties have entered. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219--20 (1985). As articulated by the ...

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