Lusk v. Guggenheim

IN THE UNITED STATES DISTRICT COURT March 14, 2023

FOR THE SOUTHERN DISTRICT OF TEXAS Nathan Ochsner, Clerk

HOUSTON DIVISION

CHARLES MORGAN LUSK, II §

(personally and derivatively on behalf of §

Cornerstone Onsite, LLC), SYLVASON, §

LLC (derivatively on behalf of Cornerstone §

Onsite, LLC), §

§

Plaintiffs, §

§

v. § CIVIL ACTION NO. H-22-4183

§

DANIEL GUGGENHEIM-NETTER, §

SOUTHERN SPEAR, INC., PAUL C. §

BENNETT, III, JOHN D. WHITE, SCOTT §

H. COLEMAN, CORNERSTONE §

ONSITE, LLC, and TIMOTHY NEWMAN, §

§

Defendants. §

MEMORANDUM AND ORDER

Charles Lusk founded Cornerstone Onsite, LLC to provide on-site dental services at

educational and corporate campuses. Lusk alleges that unscrupulous investors, business partners,

and company officers violated their duties to the company and to Lusk when they engaged in

conduct that culminated in Lusk’s termination in August 2022. Lusk and his wholly owned entity

Sylvason, LLC sued in state court, asserting both derivative and direct claims. The plaintiffs

amended the petition to add a claim for violations of the Computer Fraud and Abuse Act against

Timothy Newman, Cornerstone’s former CEO. The addition of the federal claim prompted

removal to this court. (Docket Entry No. 1). The plaintiffs now move to sever the state-law claims

and remand them to state court. (Docket Entry No. 7). Cornerstone has moved to compel

arbitration of its dispute with Lusk. (Docket Entry No. 12). Based on the parties’ briefing and the

relevant law, the court denies the motion to sever and remand and grants the motion to compel

arbitration. The reasons are as follows.

I. Background

Charles Lusk is the sole member of Sylvason, LLC. (Docket Entry 1-1 ¶ 3).1 Lusk owns

13.42%, and Sylvason 15.73%, of Cornerstone Onsite, LLC. (Id. ¶¶ 2–3). Cornerstone does

business under the name Dent-Well. (Id. ¶ 2 n.2).

In 2010, Lusk came to believe that the general absence of onsite dental care in campus

environments—both educational and corporate—represented a business opportunity. (Id. ¶ 18).

While Lusk identified this opportunity and developed the business plan to implement it, he needed

a dentist with industry experience. (Id. ¶ 20). Lusk hired Scott Coleman, whom he believed had

the experience Lusk needed. (Id.). In return for Coleman’s services as the “head of all clinical

operations, staffing, quality, and treatment oversight,” Lusk made Coleman an equal partner in

Dent-Well. (Id.). Despite Coleman’s equal interest, Lusk alleges that Coleman “did only the bare

minimum necessary to satisfy his legal obligations as Dent-Well’s licensed dentist.” (Id. ¶ 38).

Lusk’s business model proved initially successful at Dent-Well’s first campus location, at

the University of Houston, but Dent-Well required substantial investor capital to grow. (Id. ¶¶ 32,

39). Lusk reached out to his former instructor at Rice University’s Jones School of Business,

Dennis Murphree. (Id. ¶ 40). Murphree suggested that he and his partner, John White, invest in

Dent-Well through Murphree Venture Partners, their venture capital firm. (Id. ¶ 42). Murphree

Venture Partners closed on its first stage of their investment in Dent-Well in December 2012. (Id.

¶ 45).

1 All paragraph references to Docket Entry No. 1-1 refer to the verified amended petition, filed on November

21, 2022. The amended petition begins on page 138 of Docket Entry No. 1-1, according to the pagination

in the blue CM/ECF header. All page references to Docket Entry No. 1-1, including to the exhibits it

contains, are to that pagination.

Around 2013, Dent-Well’s success began outpacing Lusk’s capacity to manage it, and Lusk

suggested to Murphree and White that Dent-Well needed to hire an executive with past dental

operations experience. (Id. ¶ 47). Murphree and White initially resisted, but subsequently

“pressured Lusk to hire Murphree’s son and other individuals in their personal networks.” (Id.).

These individuals did not have the abilities Lusk sought. (Id.). In 2014 and 2015, a lack of

resources forced Dent-Well to abandon growth opportunities. (Id. ¶ 50). During this period, Lusk

alleges that Murphree and White “insisted” on retaining Michael Fields as a consultant, despite

Field’s lack of experience in dental care or healthcare. (Id. ¶¶ 52–53). Around the time of Fields’s

hire, Lusk was able to secure only small additional investments from the father of a Dent-Well

employee. (Id. ¶ 55). Eventually, Murphree helped secure additional capital from Daniel

Guggenheim and Southern Spear, the North American subsidiary of Guggenheim’s Swiss firm.

(Id. ¶¶ 57–59).

Around February 2015, White asked to be appointed the Executive Chairman of the

Cornerstone Board and to be paid $8,500 per month. (Id. ¶ 61). White also supported pay

increases for Lusk and the other Board members. (Id.). White ultimately resigned the Chair

position because of his alleged inability to “understand Dent-Well’s business” or produce results.

(Id. ¶ 63). At Lusk’s renewed insistence, Dent-Well hired Timothy Newman, who had experience

at a large dental services organization. (Id.). In August 2015, Newman became Chief Operations

Officer, and White advocated for his eventual promotion to CEO. (Id. ¶ 64). When Newman was

hired, both Newman and Lusk signed employment agreements with Dent-Well. (Id. ¶ 65). Lusk’s

contract memorialized his role as President and Founder of the company. (Id.).

Dent-Well continued to miss growth opportunities and still required additional capital.

Lusk alleges that Murphree and White wanted to secure additional financing from Guggenheim

by issuing convertible bridge notes at high rates of interest, the terms of which were unfavorable

to Lusk. (Id. ¶¶ 67–68). Lusk alleges that Murphree and White continued to promote to the board

individuals with whom they had personal relationships or to whom they felt personally obligated,

but who lacked relevant experience. (Id. ¶ 70).

Newman was promoted to CEO in November 2015, with responsibilities distinct from

those of Lusk as President. (Id. ¶¶ 72–73). Newman was granted a board seat with his promotion.

(Id. ¶ 74). Murphree and White insisted on only recording “light” board minutes, which took the

form of “bullet points with no detail.” (Id.).

Through Lusk’s efforts, Dent-Well secured a large corporate client with a campus in Spring,

Texas. (Id. ¶ 75). Guggenheim was to provide funding. As a last-minute condition, Guggenheim

insisted that Dent-Well retain him as an advisor. (Id.). Because Dent-Well needed Guggenheim’s

funding, and because Murphree and White insisted, Guggenheim was provided additional

consideration and ownership shares in the company. (Id. ¶ 77). Additionally, Southern Spear

insisted on an agreement that eliminated rights of certain other shareholders and redefined the

terms and conditions of their interests in Dent-Well. (Id. ¶ 78).

In August 2017, Hurricane Harvey destroyed Lusk’s home and possessions. (Id. ¶ 80). To

help his family rebuild, Lusk signed a $40,000 promissory note with Southern Spear and worked

with Newman to obtain a loan from Dent-Well secured by Sylvason’s ownership interests in Dent-

Well. (Id.).

In late 2017, Lusk learned that Guggenheim had been directly compensating Murphree,

primarily for Murphree’s own interest in Dent-Well. (Id. ¶ 81). White and Fields helped facilitate

the payments between Guggenheim and Murphree without disclosing them to other company

managers. (Id.). The transactions between Guggenheim and Murphree occurred while

Guggenheim sought aggressive financing terms, presumably (the amended petition is not specific)

in conjunction with the plan to open a Dent-Well on the Spring, Texas, corporate campus. (Id.).

Murphree resigned from the board. Guggenheim and Southern Spear insisted that Paul Bennett,

Southern Spear’s representative, take Murphree’s place. (Id. ¶ 82).

During 2018, White, Bennett, Guggenheim, and Southern Spear continued to insist that

Southern Spear be given the first right to invest in Dent-Well. (Id. ¶ 84). With each round of

investment came new terms and more control for Guggenheim and Southern Spear. (Id.). In

August 2019, the board approved a $2.6 million investment from Southern Spear and awarded

Lusk deferred bonus compensation, provided that Lusk stayed as President and Founder for three

more years. (Id. ¶ 85).

In 2021, Lusk and Newman pressed for written compensation agreements, which White

and others resisted. (Id. ¶ 90). Lusk’s request for additional compensation came in part because

he relocated from Houston to Nashville to further the company’s growth outside the Houston area.

(Id. ¶ 93). Newman and Lusk agreed to increase Lusk’s compensation by $7,000 a month. Lusk’s

additional compensation was entered into the company’s payroll system by Hunter Coleman, the

son of Lusk’s original partner, Scott Coleman. (Id. ¶ 96). Only Hunter Coleman and Newman had

access to the payroll system. (Id.).

In November 2021, Southern Spear again sought expanded control over Dent-Well in

return for additional funding. (Id. ¶ 99). Southern Spear demanded that, unless its loan was not

repaid by the end of 2022, Southern Spear would take control of Dent-Well’s financing and take

senior lien positions on all Dent-Well assets. (Id. ¶ 101).

On April 26, 2022, Lusk and Dent-Well entered into an Award Agreement, which granted

him 248,563 Class F shares with distributions to be made in accordance with the LLC agreement.

(Id. ¶ 102). The same day, the company executed a Fifth Amended LLC Agreement, (id.), and

Lusk and Dent-Well executed an Incentive Bonus and Equity Grant Agreement. Under this

agreement, Lusk would earn bonuses and Class D shares going forward. (Id.). Around this time,

Newman confided to Lusk that White had approached him about being put on the company payroll

“for unspecified duties.” (Id. ¶ 104). The “duties” were not disclosed to the board. (Id.). Although

the amended petition is unclear, it appears that Newman arranged for Dent-Well to compensate

White. Lusk alleges that the terms of the arrangement were not “included . . . in the Company’s

reported financials.” (Id.). Lusk confronted White, who stated that he neither had copies of his

emails to Newman nor copies or memories of the terms of the agreements he allegedly signed. (Id.

¶ 105).

In May 2016, Bennett set up an “informal meeting” with Lusk away from Dent-Well’s

offices. (Id. ¶ 108). When Lusk arrived, White declared it a “special session” of the board, which

was not in compliance with the notice provisions for board meetings contained in the LLC

agreement. (Id.). Bennett had prepared a resolution terminating Newman, which Lusk and

Coleman resisted. (Id.). Bennett insisted that the company retain outside consultants that he had

identified. (Id. ¶ 109). Ultimately, the board adopted Bennett’s resolutions to hire the consultants

and to replace Newman with Lusk as CEO. (Id.). In subsequent discussions, Bennett stated his

certainty that the board could find a reason to terminate Newman for cause to avoid paying any

severance. (Id. ¶ 110). The amended petition does not allege whether Newman was terminated

from Cornerstone or was merely removed as CEO. White and Bennett retained Skytale Group to

conduct an operational and financial assessment of Dent-Well for $17,000 a month, plus expenses.

(Id. ¶ 114).

Lusk again asked White to commit his compensation to writing. (Id. ¶ 111). On June 9,

2022, Lusk executed a new employment contract memorializing the increased compensation he

had been granted the prior year. (Id. ¶ 112). The June 9, 2022, employment agreement stated that

termination for cause could be based on Lusk’s conduct before the execution of the agreement.

(Id. ¶ 113).

In July 2022, Bennett and White pushed for David Wilson, Skytale’s lead consultant, to

become co-CEO with Lusk, despite Wilson’s lack of experience with Dent-Well, much less a

proven record of results. (Id. ¶ 116). Wilson was ultimately appointed “special advisor” to the

board rather than co-CEO. (Id.). The board because increasingly secretive in its dealings with

Lusk. (Id. ¶ 117). Lusk complained of Skytale’s lack of engagement, its costs, and its unilateral

hiring of an accounting firm at Dent-Well’s expense. (Id.). In late July, Lusk circulated a

memorandum relaying his concerns to the board. (Id. ¶ 120).

On August 3, 2022, Dent-Well terminated Lusk for cause, stating as the reason that Lusk

took compensation increases without the board’s knowledge. (Id. ¶ 122). Lusk was not notified

of any vote before his termination. (Id.). Lusk was not terminated in his capacity as President,

and he alleges that he remains President of Dent-Well. (Id. ¶ 125). Lusk alleges that his

termination was a pretext to further the control Guggenheim and Southern Spear had over the

company and to further their oppression of other shareholders. (Id. ¶ 126).

After Lusk sued in state court in November 2022, Lusk asked that Dent-Well transfer to

the company personal guaranties he had signed for Dent-Well’s obligations, in accordance with

the termination provisions of his employment contract. The transfer of the guaranties has allegedly

not occurred. (Id. ¶¶ 136–137).

Lusk had also personally registered the company’s web domain and had maintained the

company website. (Id. ¶ 145). Lusk alleges that he discovered that Newman had attempted to

hack into Lusk’s account on at least two occasions. (Id.). Lusk also alleges that Newman is

responsible for someone attempting to access Lusk’s personal Facebook account in order to

remove Lusk from Dent-Well’s Facebook pages. (Id. ¶ 146). Lusk amended his petition to add a

Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq., claim against Newman for these actions.

The claim against Newman is the only federal claim.

II. The Legal Standards

A. The Motion to Sever and Remand

Federal Rule of Civil Procedure 21 states, “[o]n motion or on its own, the court may at any

time, on just terms, add or drop a party. The court may also sever any claim against a party.” FED.

R. CIV. P. 21. The plaintiffs argue that the court should sever and remand their state-law claims

because it lacks or should decline to exercise supplemental jurisdiction over those claims. The

supplemental jurisdiction statute, 28 U.S.C. § 1367, provides:

[I]n any civil action of which the district courts have original jurisdiction, the

district courts shall have supplemental jurisdiction over all other claims that are so

related to claims in the action within such original jurisdiction that they form part

of the same case or controversy under Article III of the United States Constitution.

Such supplemental jurisdiction shall include claims that involve the joinder or

intervention of additional parties.

28 U.S.C. § 1367(a). In United Mine Workers of Am. v. Gibbs, 383 U.S. 715 (1966), the Supreme

Court stated the rule, as follows:

The state and federal claims must derive from a common nucleus of operative fact.

But if, considered without regard to their federal or state character, a plaintiff’s

claims are such that he would ordinarily be expected to try them all in one judicial

proceeding, then, assuming substantiality of the federal issues, there is power in

federal courts to hear the whole.

Id. at 725. Two conditions must be met: the claims must share a “common nucleus of operative

fact,” and the plaintiff would “ordinarily be expected to try them all in one judicial proceeding.”

These conditions are often treated as redundant. See CHARLES ALAN WRIGHT & ARTHUR MILLER,

13D FEDERAL PRACTICE AND PROCEDURE § 3567.1 (3d ed.) (“And, frankly, the two factors do

seem redundant, because if two claims are factually related, one normally would expect to try them

together; the factual relatedness would make joint trial of both claims convenient.”).

Section 1367 provides exceptions to its grant of supplemental jurisdiction:

The district courts may decline to exercise supplemental jurisdiction over a claim

under subsection (a) if—

(1) the claim raises a novel or complex issue of State law,

(2) the claim substantially predominates over the claim or claims over which

the district court has original jurisdiction,

(3) the district court has dismissed all claims over which it has original

jurisdiction, or

(4) in exceptional circumstances, there are other compelling reasons for

declining jurisdiction.

28 U.S.C. § 1367(c). In addition to these statutory factors, the court should also “consider and

weigh in each case, and at every stage of the litigation, the values of judicial economy,

convenience, fairness, and comity,” when deciding whether to maintain supplemental jurisdiction

over state-law claims. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988). Both sets of

factors are considered together, Enochs v. Lampasas County, 641 F.3d 155, 159 (5th Cir. 2011),

and no single factor is dispositive. Parker & Parsley Petroleum Co. v. Dresser Indus., 972 F.2d

580, 587 (5th Cir. 1992).

B. The Motion to Compel Arbitration

The Federal Arbitration Act, 9 U.S.C. § 1 et seq., permits a party to move to compel

arbitration when an opposing party refuses to arbitrate issues covered by a valid arbitration

agreement. Am. Bankers Ins. Co. of Fla. v. Inman, 436 F.3d 490, 493 (5th Cir. 2006) (quoting

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)); 9 U.S.C. §§ 3, 4.

To determine whether a dispute is arbitrable under the FAA, the court must determine: “(1)

whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute . .

. falls within the scope of that arbitration agreement. Gross v. GGNSC Southaven, LLC, 817 F.3d

169, 176 (5th Cir. 2016) (quoting Tittle v. Enron Corp., 463 F.3d 410, 418–19 (5th Cir. 2006));

Gezu v. Charter Commc’ns, 17 F.4th 547 (5th Cir. 2021). Federal policy strongly favors enforcing

contractual arbitration agreements if the contract exists under state law and the disputes are within

the scope of the arbitration clause. Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 217 (1983);

Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983).

Unless the parties clearly and unmistakably provide otherwise, the court, not the arbitrator,

decides whether the parties agreed to arbitrate a particular dispute. AT&T Techs., Inc. v. Commc’ns

Workers of Am., 475 U.S. 643, 649 (1986). Incorporating of arbitration rules that vest the arbitrator

with the power to determine arbitrability is considered clear and unmistakable evidence of party

intent. Halliburton Energy Servs., Inc. v. Ironshore Specialty Ins. Co., 921 F.3d 522, 537 (5th Cir.

2019) (“One way parties can provide such clear and unmistakable evidence of their intent to

delegate these issues is by expressly incorporating rules empowering the arbitrator to decide

substantive arbitrability.” (alterations and internal quotation marks omitted)).

III. Analysis

A. The Plaintiffs’ Motion to Sever and Remand

The plaintiffs argue that the court lacks, or should decline to exercise, supplemental

jurisdiction over their state-law claims. They do not dispute that the Computer Fraud and Abuse

Act claim is within the court’s original subject-matter jurisdiction.

The plaintiffs emphasize that § 1367(a) requires that state-law causes of action be “so

related” to claims within the court’s original jurisdiction for the court to exercise supplemental

jurisdiction over them. (Docket Entry No. 7 at 4). The plaintiffs note that the claim under the

Computer Fraud and Abuse Act is based on actions taken after those alleged in the original petition.

(Id. at 2). The plaintiffs argue that this timeline demonstrates that the claims do not arise out of a

common nucleus of operative fact and do not form part of the same case or controversy. (Id. at 5).

The plaintiffs note that Newman is not a named defendant to the derivative action or to the breach-

of-contract, tortious interference, civil conspiracy, or conversion claims. (Id.).

Even if supplemental jurisdiction is proper, the plaintiffs argue the court should decline to

exercise it based on the first two factors listed in § 1367(c). The plaintiffs argue that the derivative

claims raise complex issues of state law not yet squarely addressed by the Texas Supreme Court,

including what duties a controlling shareholder—who is not also a board member—owes the

business and its other shareholders. (Docket Entry No. 14 at 2). The plaintiffs argue that the state-

law claims are predominant, both in their number and centrality to the action. (Id. at 2–3; Docket

Entry No. 7 at 7–8).

The plaintiffs also argue that common-law considerations of judicial economy,

convenience, fairness, and comity favor severance and remand of the state-law claims. The

plaintiffs note that the court has not yet invested significant work in the action. (Docket Entry No.

7 at 8). The plaintiffs argue the complexity of the state-law claims would result in “[n]eedless

decisions of state law.” (Id. (quoting Gibbs, 383 U.S. at 726)). Finally, the plaintiffs argue that,

in light of the complexity of the state-law claims and the “significant amount of Texas state

jurisprudence that bears on those issues, the state-law claims are best left to the state court’s

determination.” (Id. at 8–9).

In his opposition to the motion, Newman argues that the plaintiffs’ Computer Fraud and

Abuse Act claim directly relates to Lusk’s claims challenging his termination and the defendants’

breaches of their duties to Dent-Well. (Docket Entry No. 13 at 3). For example, Newman notes

that the accounts and webpages to which he allegedly sought access are Dent-Well company

accounts and webpages. (Id.). Newman argues that the resolution of the claims against him turns,

at least in part, on the validity of claims against the other defendants. (Id. at 3–4). Because all of

the plaintiffs’ claims arise from Lusk’s relationship with, and employment by, Dent-Well, the

claims share a common nucleus of operative fact. (Id. at 6).

Newman also argues that the discretionary factors of § 1367(c), in addition to the common-

law factors, favor the exercise of supplemental jurisdiction. Newman notes that the plaintiffs’

claims all involve straightforward applications of existing state law. (Id. at 7–8). Newman

responds that the state-law claims do not predominate because they involve “substantially the same

facts and evidence.” (Id. at 8 (quoting reference omitted)). The third statutory factor is not relevant

because the federal claim has not been dismissed. (Id. at 9). Newman argues that, because there

are no compelling reasons to decline jurisdiction, the final statutory factor favors exercising

supplemental jurisdiction. (Id.). Newman also argues that common-law considerations of judicial

economy and fairness favor jurisdiction, because, if the court to declined jurisdiction, Newman

would be subject to discovery in two competing actions, and the parallel actions might result in

inconsistent judgments. (Id. at 9–10).

The court finds that the exercise of supplemental jurisdiction is appropriate. The plaintiffs

have themselves attempted to join the claim against Newman with the claims against the other

defendants. The claim against Newman is plainly related to the claims brought against the other

defendants: Newman plays an important role in the events alleged in the amended petition that

may, if proven, establish the liability of other defendants. Both the plaintiffs and the other

defendants will presumably seek to depose Newman in discovery regarding the state-law claims.

Both parties may plausibly seek other discovery from Newman. Newman’s allegedly unlawful

actions directly relate to the alleged wrongdoings of the other defendants that culminated in Lusk’s

ouster from Cornerstone. Whether Newman improperly sought to access the Dent-Well website

domain may turn on the validity of Lusk’s termination, making resolution of that claim necessary

even if the claim against Newman was severed. Two courts resolving that same issue might lead

to inconsistent judgments.

Finally, the alleged wrongful acts of Newman following Lusk’s termination overlap with

those acts alleged against the other defendants. The plaintiffs allege conversion against

Guggenheim, Southern Spear, Bennett, White and Coleman. The plaintiffs allege these defendants

“demanded that Lusk turn over property to the Company, such as website registrations, all of

which are registered to Lusk.” (Docket Entry No. 1-1 ¶ 215 (emphasis added)). The plaintiffs’

Computer Fraud and Abuse Act claim, which concerns Newman’s alleged attempts to gain control

over Dent-Well’s online presence, is clearly factually related to the conversion claim.

That the court has the power to hear the state-law claims does not mean that it must or

should. But neither the statutory nor the common-law factors support severance and remand.

Considering the first § 1367(c) factor, the court agrees with Newman that the plaintiffs’ claims do

not raise novel or complex issues of state law. The plaintiffs argue that Texas courts have not

“squarely addressed” the facts alleged in their claims against Guggenheim, but the plaintiffs admit

that there is “some guidance” from the Texas Supreme Court. (Docket Entry No. 14 at 2 (citing

Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014)). The plaintiffs note that there is a “significant

amount of Texas state jurisprudence” with which this court may resolve the state claims. Courts

regularly reject the notion that state-law claims against corporate fiduciaries are novel or complex.2

This is not a case in which the Texas courts have had no opportunity to interpret a particular statute,

see, e.g., Enochs, 641 F.3d at 159 (5th Cir. 2011), or in which the court must confront a novel

question of state sovereign immunity, id., or in which a state’s highest court has not resolved a

split among appellate courts. See, e.g., Knatt v. Hosp. Serv. Dist. No. 1 of E. Baton Rouge Par.,

373 F. App’x 438, 442 (5th Cir. 2010).

The second § 1376(c) factor supports remand. All 13 claims but one are based on state

law. The original petition did not raise any federal question. Although the plaintiffs’ claims relate

to Lusk’s employment relationship with Dent-Well, the state-law claims will likely require more

extensive discovery and other party and court resources than the federal claim alone. The third

factor supports the court’s exercise of jurisdiction, because the federal claim is still viable. The

plaintiffs have not identified special considerations supporting remand under the fourth and final

§ 1376(c) factor.

With respect to the common-law factors, Newman’s potential involvement in two separate

actions support supplemental jurisdiction based on judicial economy and fairness. Convenience

is neutral because both courts lie in Harris County. Courts that have found comity favored remand

have generally done so when the federal claim has previously been dismissed. See Inge v. Walker,

2 See, e.g., Wolinsky v. Oak Tree Imaging, LP, 362 B.R. 770, 779 (S.D. Tex. 2007) (holding that “state-

law claims of fraud, breach of fiduciary duty, and self-dealing cannot be said to raise ‘novel or complex

issue[s] of State law.’”); In re Avado Brands, Inc., No. 04-31555-RCM-11, 2006 WL 8437389, at *10

(Bankr. N.D. Tex. Apr. 21, 2006) (breach of fiduciary duty claim not novel or complex), report and

recommendation adopted, No. 04-31555, 2006 WL 8436979 (N.D. Tex. July 3, 2006); see also Aetna Life

Ins. Co. v. Guerrera, 300 F. Supp. 3d 367, 387 (D. Conn. 2018) (finding that, among others, breach-of-

contract and fiduciary-duty claims did not raise complex or novel issues of state law), aff’d sub nom. Aetna

Life Ins. Co. v. Big Y Foods, Inc., 52 F.4th 66 (2d Cir. 2022).

No. 3:16-cv-0042-B, 2016 WL 4920288, at *9 (N.D. Tex. Sept. 15, 2016) (citing Parker & Parsley,

972 F.2d at 588–89, and Enochs, 641 F.3d at 158, 160). The federal claim is not dismissed.

The court denies the plaintiffs’ motion to sever and remand.

B. Cornerstone’s Motion to Compel Arbitration

Cornerstone argues that the court must compel or dismiss this action in favor of arbitration,

because Lusk’s contract of employment with Cornerstone contains a mandatory arbitration clause.

In opposition, the plaintiffs argue that—assuming a favorable ruling on their motion to sever and

remand—the court lacks jurisdiction over this action and therefore over Cornerstone’s motion.

The court is satisfied of its jurisdiction and finds this argument inapplicable.

The plaintiffs also argue that other relevant agreements contain venue provisions

mandating that any dispute be brought in the courts of Texas. The parties identify the following

four contracts and jurisdictional clauses as relevant to Cornerstone’s motion to compel:

First, the Award Agreement, signed by Lusk and White, as Chairman of Cornerstone,

states:

Governing Law/Choice of Forum. This Agreement shall be construed and

enforced in accordance with the laws of the State of Texas notwithstanding any

state’s choice-of-law rules to the contrary. The parties hereto agree that any legal

action relating to this Agreement shall be commenced and maintained exclusively

before any court of competent jurisdiction sitting in Texas and the parties hereby

submit to the sole and exclusive jurisdiction of such courts and waive any right to

challenge or otherwise object to personal jurisdiction or venue in any action

commenced or maintained in such courts.

(Docket Entry No. 1-1, Ex. C (Cornerstone Onsight LLC Award Agreement, dated as of April 26,

2022) at 210 § 17).

Second, the LLC Agreement, signed by Cornerstone’s managers and members, states:

Submission to Jurisdiction. The parties hereby agree that any suit, action or

proceeding seeking to enforce any provision of, or based on any matter arising out

of or in connection with, this Agreement or the transactions contemplated hereby,

whether in contract, tort or otherwise, shall be brought in any federal or state court

located in Harris County, Texas. Each of the parties hereby irrevocably consents

to the jurisdiction of such courts (and of the appropriate appellate courts therefrom)

in any such suit, action or proceeding and irrevocably waives, to the fullest extent

permitted by law, any objection that it may now or hereafter have to the laying of

the venue of any such suit, action or proceeding in any such court or that any such

suit, action or proceeding which is brought in any such court has been brought in

an inconvenient forum. Service of process, summons, notice or other document by

registered mail to the address set forth in Section 12.2 shall be effective service of

process for any suit, action or other proceeding brought in any such court.

(Id., Ex. D (Fifth Amended and Restated Company Agreement of Cornerstone Onsite, LLC, dated

as of April 26, 2022) at 257 § 12.8).

Third, the Incentive Agreement, signed by Lusk and White, as Chairman of Cornerstone,

states:

GOVERNING LAW/CHOICE OF FORUM. This Agreement shall be construed and

enforced in accordance with the laws of the State of Texas notwithstanding any

state’s choice-of-law rules to the contrary. The parties hereto agree that any legal

action relating to this Agreement shall be commenced and maintained exclusively

before any court of competent jurisdiction sitting in Texas and the parties hereby

submit to the sole and exclusive jurisdiction of such courts and waive any right to

challenge or otherwise object to personal jurisdiction or venue in any action

commenced or maintained in such courts.

(Id., Ex. E (Incentive Bonus and Equity Grant Agreement, dated as of April 26, 2022) at 278 § 11.)

Fourth and finally, the June 9, 2022 Employment Agreement, signed by Lusk and White,

as Chairman of Cornerstone, states:

Agreement to Arbitrate:

Any controversy, dispute or disagreement arising out of or relating to this

Agreement, or the breach thereof, shall be settled by arbitration, which shall be

conducted in Harris County, Texas in accordance with the American Health

Lawyers Association Alternative Dispute Resolution Service Rules of Procedure

for Arbitration, and judgment on the award rendered by the arbitrator may be

entered in any court having jurisdiction thereof.

(Id., Ex. F (Cornerstone Onsite, LLC Employment Contract, dated as of June 9, 2022) at 285 § 19).

The plaintiffs argue that the multiplicity of jurisdictional clauses contained in these

agreements, which all appear at first glance relevant to this lawsuit, means that “it cannot be

plausibly maintained that there is an arbitration provision among the parties requiring arbitration

of all Plaintiffs’ claims.” (Docket Entry No. 15 at 6). The plaintiffs argue that granting

Cornerstone’s motion would “violate . . . the public policy underlying arbitration,” (id.), because

“a court cannot compel a party to arbitrate unless the court determines that the parties agreed to

arbitrate the dispute in question.” (Id. (quoting Kellogg Brown & Root Servs., Inc. v. Altanmia

Com. Mktg. Co. W.L.L., No. H-07-2684, 2007 WL 4190795, at *15 (S.D. Tex. Nov. 21, 2007)).

Cornerstone responds that the Fifth Circuit’s presumption in favor of arbitration, combined

with the centrality of Lusk’s employment dispute to his claims, brings all the plaintiffs’ claims

within the scope of the Employment Agreement’s broad arbitration clause. (Docket Entry No. 16

at 2–3). Cornerstone argues that “courts applying Texas law frequently construe a forum selection

clause that does not explicitly exclude arbitration as harmonizing with arbitration provisions.” (Id.

at 3).

Resolution of Cornerstone’s motion does not require that the court perform the

harmonization Cornerstone proposes. Under the Fifth Circuit’s holding in Halliburton, the court

need not determine which of the plaintiffs’ claims are arbitrable, because the arbitration clause in

the Employment Agreement incorporated the American Health Law Association’s procedural rules

for arbitration. The Employment Agreement refers to the “American Health Lawyers

Association,” which was the name of the “American Health Law Association” prior to January

2020.3 Both the Association’s employment and commercial rules grant the arbitrator with the

power to determine arbitrability. AM. HEALTH LAW ASS’N, RULES OF PROCEDURE OF

EMPLOYMENT ARBITRATION § 3.1 (effective Nov. 1, 2021) (“After receiving appropriate evidence

3 Am. Health Law Ass’n, About AHLA (last visited March 3, 2023), available at

https://www.americanhealthlaw.org/about-ahla.

and argument, the arbitrator, once appointed, shall have the power to determine his or her

jurisdiction and any issues of arbitrability.”); AM. HEALTH LAW ASS’N, RULES OF PROCEDURE OF

COMMERCIAL ARBITRATION § 3.1 (effective Nov. 1, 2021) (same).4 The parties’ incorporation of

these rules within the employment agreement shows their intent to grant the arbitrator, not this

court, with the power to determine arbitrability. Halliburton, 921 F.3d at 537. Even were it plain

to the court that some of the plaintiffs’ claims were not arbitrable, the parties’ incorporation of

these rules means that the arbitrator must decide all questions of arbitrability. Henry Schein, Inc.

v. Archer & White Sales, Inc., 139 S. Ct. 524, 529 (2019) (there is no exception to a contract’s

grant of power to the arbitrator to determine arbitrability, even if the court believes that “the

argument for arbitration is wholly groundless”).

The parties have agreed to submit disputes regarding the arbitrability of disputes related to

the employment agreement to arbitration. If the arbitrator concludes that some or all the plaintiffs’

claims are not arbitrable, the parties may return to this court to determine how to handle any

nonarbitrable claim or claims. The law, and the parties’ agreements, leads the court to grant the

motion to compel arbitration.

4 See https://www.americanhealthlaw.org/dispute-resolution-services/arbitration/rules-of-procedure-for-

arbitration.

IV. Conclusion

The motion to sever and remand, (Docket Entry No. 7), is denied. The motion to compel

arbitration, (Docket Entry No. 12), is granted. This case is stayed and administratively closed

pending the resolution of the arbitration.

SIGNED on March 14, 2023, at Houston, Texas.

LW Conte

Lee H. Rosenthal

United States District Judge

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