finding that “[a] 9 favorable ruling for Plaintiff on the Motion to Compel Arbitration would eliminate any 10 need to consider the Motion to Dismiss.”
How later courts described this case
- finding that “[a] 9 favorable ruling for Plaintiff on the Motion to Compel Arbitration would eliminate any 10 need to consider the Motion to Dismiss.”
- finding, after surveying precedent, that a “favorable ruling…on 13 the Motion to Compel Arbitration would eliminate any need to consider the Motion to 14 Dismiss.”
- finding no “mandated order” in 6 which the court must decide the two motions
- finding that federal courts normally follow state law in 15 determining the limits of their jurisdiction over persons, and concluding that California’s 16 long-arm statute confers federal courts with the fullest extent of personal jurisdiction 17 permitted by due process
Written by the judges who cited it.
The opinion
1
2
3
4
5
6 UNITED STATES DISTRICT COURT
7 SOUTHERN DISTRICT OF CALIFORNIA
8
9 MU TECH, INC., Case No.: 3:24-cv-01976-JAH-VET
10 Plaintiff,
ORDER
11 v. (1) GRANTING DEFENDANT
BELTON TECHNOLOGY INC. and
12 CATHERINE CHAN KOK YIN,
DEFENDANT CATHERINE YIN’S
THOMAS LESS CHEUK WAI,
13 MOTION TO COMPEL
MAJESTIC PLAN INVESTMENTS
ARBITRATION;
14 LIMITED, BELTON TECHNOLOGY,
(2) DENYING DEFENDANT
INC., AND DOES 1 THRU 50,
15 BELTON TECHNOLOGY INC.’s
Defendants. MOTION TO DISMISS;
16
(3) DENYING DEFENDANT
17 CATHERINE YIN’S MOTION TO
DISMISS; and
18
(3) DENYING DEFENDANT
19 THOMAS LEE’S MOTION TO
DISMISS
20
21 [ECF Nos. 12, 25, 30, & 42]
22 Pending before the Court are motions brought by Defendants Belton Technology
23 Inc., Catherine Yin, and Thomas Lee. Upon consideration of the matter, the Court
24 GRANTS IN PART and DENIES IN PART Defendants’ motions, and the Court GRANTS
25 Defendants Belton Technology Inc. and Catherine Yin’s motion to compel the case in its
26 entirety to arbitration pursuant to 9 U.S.C. § 206.
27
///
28
1 BACKGROUND
2 A. Factual Background
3 On October 23, 2024, Plaintiff Mu Tech (“Plaintiff”) filed its complaint against
4 Defendants Belton Technology Inc., Catherine Yin, Thomas Lee, and Majestic Plan
5 Investments Ltd. (“Defendants”) for claims of trade secret misappropriation, breach of
6 fiduciary duty, self-dealing, breach of contract, and tortious interference with prospective
7 business interests. ECF No. 1 at ¶¶ 29-54 (“Complaint” or “Compl.”). Plaintiff alleges
8 Defendants conspired to deprive Plaintiff of its exclusive license to Asia Top Loyalty’s
9 (“ATL”) intellectual property through launching a competitor company, Asia Top Loyalty
10 Alliance, based on proprietary information Defendants Yin and Lee accessed while serving
11 as board members of ATL. Compl. at ¶¶ 13-17. Plaintiff alleges Defendants copied the
12 ATL business model and logo into Asia Top Loyalty Alliance, including by creating a
13 LinkedIn page and website for the competitor platform that is virtually indistinguishable
14 from those used by ATL, for the purpose of diverting investors and customers away from
15 ATL. Id. at ¶¶ 15-17. Plaintiff also alleges that Defendants’ theft of intellectual property
16 constitutes breach of a contract signed between ATL and Defendants Yin, Lee, and
17 Majestic Plan Investments, which includes clauses that bar the parties from the
18 unauthorized disclosure of ATL’s software program and client lists. Id. at ¶ 21, Compl.
19 Ex. A at §§ 6.1-6.3 (ECF No. 1 at 15-16) (herein “Guarantee Agreement”). 1 Plaintiff
20 further alleges that Defendants are attempting to frustrate ATL’s obligations under the
21 Guarantee Agreement, including its requirement to offer an initial public offering on a
22 reputable stock exchange, through their support of Asia Top Loyalty Alliance. Id. at ¶¶ 22-
23 24.
24 ///
25 ///
26
27
1 Unless otherwise stated, page numbers referenced herein refer to page numbers generated
28
1 B. Procedural History
2 i. Defendant Belton Technology Inc.
3 On December 31, 2024, Defendant Belton Technology Inc. moved to dismiss
4 Plaintiff’s complaint under Federal Rules of Civil Procedure 12(b)(1), 12(b)(3), and
5 12(b)(6), and in the alternative, moved to compel arbitration under 9 U.S.C. § 206. ECF
6 No. 12. On March 9, 2025, Plaintiff filed its response in opposition. ECF No. 29. On
7 March 17, 2025, Defendant filed its reply. ECF No. 33.
8 In its motion to dismiss, Defendant argues that Plaintiff fails to state a claim under
9 the Defend Trade Secrets Act, 18 U.S.C. § 1836, and as a result, Plaintiff may not avail
10 itself of federal question jurisdiction. ECF No. 12 at 12. Defendant also argues that
11 Plaintiff lacks standing to bring claims for breach of fiduciary duty, self-dealing, and
12 breach of contract on behalf of ATL, that Plaintiff does not adequately plead its claim of
13 tortious interference with prospective business interests against the Defendant, and that
14 dismissal of the complaint is proper because Plaintiff has filed the complaint in an improper
15 venue. Id. at 15-20. Alternatively, Defendant requests the Court grant its motion to compel
16 arbitration because the contract central to the dispute involves almost all named parties and
17 requires that “[a]ny dispute, controversy or claim arising out of or relating” to the
18 Guarantee Agreement be arbitrated in the Hong Kong International Arbitration Centre. Id.
19 at 21-25.
20 ii. Defendant Catherine Yin
21 On March 10, 2025, Defendant Catherine Yin moved to dismiss Plaintiff’s
22 complaint under Federal Rules of Civil Procedure 12(b)(2) and 12(b)(5), and in addition,
23 joined Defendant Belton Technology Inc.’s motions to dismiss and motion to compel
24 arbitration. ECF No. 30. On April 9, 2025, Plaintiff filed its response in opposition. ECF
25 No. 38. On April 16, 2025, Defendant Yin filed her reply. ECF No. 40.
26 Defendant Yin argues the Court lacks personal jurisdiction over her. Defendant
27 argues that personal jurisdiction in California does not exist because Plaintiff’s claims do
28 not arise out of Defendant’s contacts with California and, even if Defendant maintained
1 minimum contacts with California, the Court’s exercise of personal jurisdiction over her
2 would be unreasonable given the lack of evidence and witnesses present in California and
3 the availability of an alternative forum in the Hong Kong International Arbitration Centre.
4 ECF No. 30 at 16-17. Defendant also argues that service must be quashed and the case
5 dismissed for insufficient process under Federal Rule of Civil Procedure 12(b)(5) because
6 Plaintiff has not properly served her with the summons and complaint. Id. at 18-19.
7 iii. Defendant Thomas Lee
8 On April 30, 2025, Defendant Thomas Lee filed his motion to dismiss under Federal
9 Rules of Civil Procedure 12(b)(2) and 12(b)(5). ECF No. 42. On June 19, 2025, Plaintiff
10 filed its response in opposition. ECF No. 44. On June 27, 2025, Defendant Lee filed his
11 reply. ECF No. 45.
12 Defendant Lee argues the Court lacks personal jurisdiction over him. ECF No. 42
13 at 4-9. Defendant argues he has no minimum contacts with California that relate to his
14 investments in and board membership on ATL, and Defendant argues instead that his
15 conduct at issue took place exclusively in Hong Kong. Id. Defendant also argues
16 Plaintiff’s service of the summons and complaint was defective under Federal Rule of Civil
17 Procedure 4(e), requiring that service be quashed and the case dismissed for insufficient
18 process. Id. at 9-12.
19 DISCUSSION
20 A. Jurisdiction
21 Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co.
22 of Am., 511 U.S. 375, 377 (1994). It is “presumed that a cause lies outside this limited
23 jurisdiction,” and “the burden establishing the contrary rests upon the party asserting
24 jurisdiction.” Id. The Court will review each jurisdictional challenge raised by Defendants
25 in turn.
26 i. Defendant Belton Technology Inc.
27 Defendant Belton Technology Inc. argues that Plaintiff’s complaint must be
28 dismissed for failure to state a claim upon which relief can be granted under Federal Rule
1 of Civil Procedure 12(b)(6). ECF No. 12 at 11. Defendant argues that Plaintiff does not
2 sufficiently allege its trade secret to state a claim under the Defense of Trade Secrets Act,
3 18 U.S.C. § 1836 et seq. Id. at 12. Defendant also argues that, because Plaintiff’s
4 complaint fails to present a federal question, and because diversity jurisdiction does not
5 exist, the Court does not have subject-matter jurisdiction over the case. Id. at 15.
6 Defendant argues the case must be dismissed as a result on jurisdictional grounds under
7 Federal Rule of Civil Procedure 12(b)(1). Id.
8 Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the sufficiency of the
9 complaint. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2009). “To survive a motion
10 to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a
11 claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
12 (quoting Twombly, 550 U.S. at 570). A claim is “plausible” when “the plaintiff pleads
13 factual content that allows the court to draw the reasonable inference that the defendant is
14 liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Courts evaluating a motion to
15 dismiss under Rule 12(b)(6) must assume the truth of all factual allegations and must
16 construe all inferences from them in the light most favorable to the nonmoving party. Id.
17 The requirement that “a court must accept as true all of the allegations contained in a
18 complaint is inapplicable to legal conclusions.” Id. While a plaintiff need not give
19 “detailed factual allegations,” plaintiff must sufficiently plead facts that, if true, “raise a
20 right to relief above the speculative level[.]” Twombly, 550 U.S. at 555. When ruling on
21 a motion to dismiss, the Court’s review is generally limited to the complaint and the
22 documents attached to the complaint. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988,
23 1003 (9th Cir. 2018). The determination of whether a complaint states a plausible claim
24 for relief will be “a context-specific task that requires the reviewing court to draw on its
25 judicial experience and common sense.” Iqbal, 556 U.S. at 679.
26 In order to state a claim under the Defense of Trade Secrets Act, the plaintiff must
27 show “(1) that the plaintiff possessed a trade secret, (2) that the defendant misappropriated
28 the trade secret; and (3) that the misappropriation caused or threatened damage to the
1 plaintiff.” InteliClear, LLC v. ETC Global Holdings, Inc., 978 F.3d 653, 657-58 (9th Cir.
2 2020). The federal statute defines a “trade secret” as any type of “financial, business,
3 scientific, technical, economic, or engineering information” including formulas, programs,
4 and codes that “the owner thereof has taken reasonable measures to keep such information
5 secret[.]” 18 U.S.C. § 1839(3)(A). The information must also derive independent
6 economic value from not being generally known. 18 U.S.C. § 1839(3)(B).
7 “Misappropriation” under the statute is defined as either the acquisition of a trade secret by
8 another person who has reason to know the trade secret was acquired by improper means
9 or the disclosure or use of a trade secret without the consent of the trade secret’s owner.
10 18 U.S.C. § 1839(5). The plaintiff may demonstrate actual or threatened damage by the
11 misappropriation of a trade secret through unfair advantage gained by a competitor as a
12 result of the trade secret’s disclosure or through threat of complete loss of the trade secret
13 by an unauthorized disclosure. WeRide Corp. v. Kun Huang, 379 F. Supp. 3d 834, 853
14 (N.D. Cal. 2019). There is no heightened pleading requirement for Defense of Trade Secret
15 Act claims. Alta Devices, Inc. v. LG Elec., Inc., 343 F. Supp. 3d 868, 882 (N.D. Cal. 2018).
16 Defendant argues that Plaintiff has only provided general allegations of its purported
17 trade secret and that Plaintiff’s allegations fail to provide sufficient notice of the boundaries
18 of the purported trade secret as required by caselaw. Id. at 14. Plaintiff responds that
19 ATL’s computer code, web design, and business model all constitute valuable intellectual
20 property protected by non-disclosure agreements and misappropriated by Defendant. ECF
21 No. 29 at 10-11.
22 The plaintiff claiming a trade secret must provide the defendant with sufficient
23 information “to ascertain at least the boundaries within which the secret lies.” Alta
24 Devices, 343 F. Supp. 3d at 881. At a point “where no discovery whatsoever had occurred,”
25 plaintiff may plead its claim of trade secrets more generally because “discovery provides
26 an iterative process where requests between parties lead to a refined and sufficiently
27 particularized trade secret identification.” InteliClear, 978 F.3d at 658, 662. As long as
28 the plaintiff provides “concrete identification” of the trade secret at issue so that defendant
1 may prepare a rebuttal, plaintiff generally meets its pleading burden. See id. at 658. The
2 plaintiff “cannot be expected to disclose publicly in the complaint the very secrets they are
3 seeking to protect.” Alta Devices, 343 F. Supp. 3d at 882.
4 Here, Plaintiff identifies its trade secret as “ATL’s loyalty points exchange and
5 proprietary system for eCommerce, pay-with-points, co-brand Mastercard and buy-now,
6 pay-later system.” Compl. at ¶ 10. As explained in an attachment to the complaint, ATL’s
7 system is based on a software program that connects businesses to individuals and allows
8 businesses to design and launch promotional campaigns, including discounts on goods and
9 services, to consumers. Id., Ex. F at 30-33. The ATL software may also be used by banks,
10 financial institutions, and companies that provide card-processing services in order to
11 connect their consumers and clients with the discounts provided by participating
12 businesses. Id. The software includes the ability for businesses and financial institutions
13 to set an agreed-upon internal price for a discounted good or service and a slightly higher,
14 consumer-oriented price for the same good or service, and the software allows for
15 participating financial institutions and ATL to share in the profit margin between the two
16 prices. Id. Plaintiff alleges that ATL’s program was confidential and accessible to
17 Defendants only through their directorships as board members of ATL, which they used to
18 access and disclose the software program in furtherance of their efforts to launch the
19 competitor “Asia Top Loyalty Alliance.” Compl. at ¶¶ 13-15, 23. Plaintiff also alleges
20 that the software program is central to ATL’s business model and a source of economic
21 value. Id. at ¶ 13.
22 Plaintiff has pled its trade secrets claim under the Defense of Trade Secrets Act with
23 sufficient particularity and has provided Defendant Belton Technology Inc. with “concrete
24 identification” of its claimed trade secret, namely the rewards and discount software
25 program developed by ATL and replicated in its entirety by Asia Top Loyalty Alliance, a
26 competitor allegedly fronted by all Defendants. See InteliClear, 978 F.3d at 658. Plaintiff
27 has provided Defendant Belton Technology Inc. with sufficient information “to ascertain
28 at least the boundaries within which the secret lies” and at most, the relevant software
1 platform for discounts and promotional campaigns that is at the heart of Plaintiff’s claimed
2 proprietary material. See Alta Devices, 343 F. Supp. at 880-882 (finding that claimant had
3 provided both the court and opposing party with notice of the boundaries of the trade secret,
4 and that even if the claims resembled “broad categories of trade secret information,” they
5 were specific enough to survive a motion to dismiss). At the pleading stage, Plaintiff
6 provides sufficient information to place Defendant Belton Technology Inc. on notice of
7 Plaintiff’s trade secret claim. See Alta Devices, 343 F. Supp. 3d at 882.
8 Plaintiff has alleged that all named Defendants, including Defendant Belton
9 Technology Inc., worked in concert to graft the entirety of the ATL consumer platform into
10 the alleged rival Asia Top Loyalty Alliance platform. The Court finds, as a result, that
11 Defendant Belton Technology Inc. has requisite notice of the specific subject matter
12 claimed by Plaintiff as a trade secret to prepare its response. See Compl. at ¶¶ 10, 13-15;
13 see also Cisco Systems, Inc. v. Chung, 462 F. Supp. 3d 1024, 1049-1050 (N.D. Cal. 2020)
14 (finding the plaintiff had provided sufficient information for the defendant “to ascertain at
15 least the boundaries within which the trade secret lies and the scope of appropriate
16 discovery.” (citation omitted)).
17 Accordingly, the Court finds Plaintiff plausibly pleads its claim of trade secrets
18 misappropriation under the Defense of Trade Secrets Act, 18 U.S.C. § 1836 et seq.
19 Because Plaintiff raises a claim arising under the laws of the United States, the Court has
20 federal question jurisdiction over the matter. 28 U.S.C. § 1331. Accordingly, Defendant’s
21 motion to dismiss for failure to state a claim and for lack of subject-matter jurisdiction is
22 DENIED.
23 ii. Defendant Catherine Yin
24 Defendant Yin argues that Plaintiff’s claims against her must be dismissed for lack
25 of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). ECF No. 30 at 11.
26 Defendant argues that she is not subject to either general or specific jurisdiction in
27 California. Id. at 12-13. In response, Plaintiff argues that specific jurisdiction exists over
28 the Defendant. ECF No. 38 at 8-13.
1 “The party seeking to invoke jurisdiction has the burden of establishing that
2 jurisdiction exists.” Flynt Dist. Co., Inc. v. Harvey, 734 F.2d 1389, 1392 (9th Cir. 1984).
3 When a motion to dismiss for lack of personal jurisdiction is “based on written materials
4 rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of
5 jurisdictional facts.” Glob. Commodities Trading Grp., Inc. v. Beneficio de Arroz
6 Choloma, S.A., 972 F.3d 1101, 1106 (9th Cir. 2020) (quotation and citation omitted). The
7 uncontroverted allegations in the complaint are taken as true and all genuine factual
8 disputes are resolved in favor of the plaintiff. Id. See also Schwarzenegger v. Fred Martin
9 Motor Co., 374 F.3d 797, 798 (9th Cir. 2004) (finding “the prima facie jurisdictional
10 analysis requires us to accept the plaintiff’s allegations as true” and that courts generally
11 “must adopt [the plaintiff’s] version of events.”) (citation omitted).
12 Federal courts within California may exercise personal jurisdiction to the fullest
13 extent permissible under the U.S. Constitution given California’s long-arm statute.
14 Beneficio, 972 F.3d at 1106 (finding that federal courts normally follow state law in
15 determining the limits of their jurisdiction over persons, and concluding that California’s
16 long-arm statute confers federal courts with the fullest extent of personal jurisdiction
17 permitted by due process). As a result, the Court’s inquiry rests on whether an exercise of
18 personal jurisdiction comports with due process. Id. In cases where the defendant does
19 not maintain contacts so continuous and systematic as to render the defendant “at home”
20 in the forum state, courts evaluate whether the defendant has “at least minimum contacts
21 with the relevant forum” such that the exertion of jurisdiction over the defendant comports
22 with “traditional notions of fair play and substantial justice” as required by due process. Id
23 at 1106-7, 1109.
24 Under personal jurisdiction based on minimum contacts, also known as specific
25 jurisdiction, courts must analyze a three-prong test, requiring (1) the non-resident
26 defendant either purposefully directed activities within the forum state or performed an act
27 by which the defendant purposefully availed himself or herself of the privileges of
28 conducting activities in the forum state, (2) the claim arises out of or relates to the
1 defendant’s forum-related activities, and (3) the exercise of jurisdiction is reasonable. Id
2 at 1107. If the plaintiff satisfies the first two prongs of the test, the burden shifts to the
3 defendant to present a “compelling case” that the exercise of jurisdiction would be
4 unreasonable. Id.
5 a. Specific Jurisdiction Analysis
6 The Court first turns to whether Defendant Yin purposefully availed herself of the
7 California forum. Courts evaluate “whether the defendant purposefully established
8 minimum contacts within the forum,” and courts must evaluate the “entire course of
9 dealing” between the parties in the assessment. Beneficio, 972 F.3d 1108 (citation
10 omitted). Because the Court’s decision rests on the “written materials rather than an
11 evidentiary hearing,” Plaintiff’s factual allegations are construed as true and any genuine
12 factual disputes are construed in favor of Plaintiff. See id. at 1106.
13 Defendant Yin argues her role as a director of Belton Technology Inc., a California
14 company, had no connection with her role as a board member of ATL. ECF No. 30 at 15.
15 Defendant also argues that she did not know about ATL’s plan to launch its initial public
16 offering through Plaintiff in the United States, and Defendant Yin argues that Belton
17 Technology Inc. has had no relationship with either ATL or Plaintiff. Id. at 15-16.
18 Defendant Yin concedes that Defendant Belton Technology Inc. is a corporation
19 incorporated under the laws of California with its principal place of business in Santa Fe
20 Springs, California. Id. at 8.
21 Under Beneficio, the Court first reviews Plaintiff’s factual allegations. Plaintiff
22 alleges that Defendant Yin used her position as a board member of ATL to access and
23 disclose ATL’s intellectual property to harm ATL and benefit Defendant Belton
24 Technology Inc. Compl. at ¶¶ 17-19, 23-24. Plaintiff also alleges that Defendant Yin and
25 Belton Technology Inc. worked in concert with the remaining Defendants to graft the
26 entirety of the ATL platform into a competitor, Asia Top Loyalty Alliance, so that investors
27 and consumers would be diverted from ATL. Id. at ¶¶ 13-15. Plaintiff has alleged the
28
1 existence of a broader conspiracy involving both Defendant Yin and Defendant Belton
2 Technology Inc.
3 Plaintiff further alleges that Defendants Yin and Lee had previously viewed ATL’s
4 financial information during their tenure as board members of ATL and discovered that
5 ATL’s short-term assets were not sufficient to both (1) complete its initial public offering
6 within the United States and (2) buy back the shares held by Defendant Majestic Plan
7 Investments, which is allegedly owned by Defendant Yin, under the terms of the Guarantee
8 Agreement. Id. at ¶¶ 23-24. Based upon this information, Defendants Yin, Lee, Belton
9 Technology Inc., and Majestic Plan Investments are alleged to have created Asia Top
10 Loyalty Alliance to create confusion in the marketplace and to prevent ATL from raising
11 the capital it needed from investors to complete its initial public offering. Id. at ¶¶ 22-24.
12 Plaintiff alleges that all Defendants sought to prevent ATL from completing its public
13 offering on the U.S. stock market so that ATL would be frustrated or otherwise unable to
14 fulfill its contractual obligations under the terms of the Guarantee Agreement it had signed
15 with Defendants. Id. at ¶¶ 21-23; and see Guarantee Agreement at § 4.1 (requiring ATL
16 to trade, sell, or list itself on a reputable stock exchange by December 31, 2023). Under
17 the conspiracy as alleged, Defendants then initiated arbitration against ATL for breach of
18 the Guarantee Agreement’s stock exchange clause and currently seek to force ATL into
19 buying back $2 million in shares from Defendant Majestic Plan Investments under the
20 breach-of-contract terms of the Guarantee Agreement, a move that would place ATL in
21 bankruptcy and susceptible to an acquisition by Defendant Belton Technology Inc. Id. at
22 ¶¶ 23-25. Across the above-described enterprise, Plaintiff has alleged that Defendants Yin
23 and Lee collaborated with one another and maintained either employment or board
24 membership with Defendant Belton Technology Inc. Id. at ¶¶ 23-24, 41.
25 “Interpreting genuine factual disputes in [Plaintiff’s] favor—as we must in this
26 posture,” the Court finds that Plaintiff has made a prima facie showing that Defendant Yin
27 purposefully availed herself of the California forum by her collaboration with Defendant
28 Belton Technology Inc. See Beneficio, 972 F.3d at 1108. Defendant Yin currently serves
1 as board member of Defendant Belton Technology Inc., a California company, and Plaintiff
2 has alleged that both Defendants Yin and Belton Technology Inc. worked in concert to
3 launch Asia Top Loyalty Alliance to prevent ATL’s initial public offering within the
4 United States and to place ATL in financial distress. Plaintiff has alleged that Defendant
5 Yin assented to the disclosure of ATL’s confidential information without authorization to
6 Defendant Belton Technology Inc., and that Defendants Yin and Belton Technology Inc.
7 sought to place ATL in economic hardship so that ATL could become a subsidiary of
8 Belton. Construing Plaintiff’s factual allegations as true, and resolving genuine factual
9 disputes in Plaintiff’s favor, the Court finds that Defendant Yin purposefully directed
10 activities towards the California forum, including by allegedly conspiring with a California
11 corporation on which she sits as a board member, for the purpose of harming ATL for
12 Defendants’ benefit.
13 Second, the Court evaluates whether the claims against Defendant Yin “arise out of
14 or relate to the defendant’s forum-related activities.” See Beneficio, 972 F.3d at 1107.
15 Plaintiff’s claims of trade secrets misappropriation, self-dealing, and tortious interference
16 with prospective business interests involve conduct, as described above, that includes
17 Defendant Yin’s collaboration with Defendant Belton Technology Inc., a California
18 company, to block ATL’s initial public offering through its licensee, Plaintiff, in
19 California. ECF No. 38 at 9. While Defendant disputes that Plaintiff does business in
20 California, see ECF No. 30 at 16, Plaintiff represents that it engages in business in
21 California and has sought to launch ATL’s services and initial public offering in the United
22 States from California, an endeavor which has been hamstrung by Defendants. Compl. at
23 ¶ 5, ¶¶ 52-54; ECF No. 38 at 9. Resolving “all genuine factual disputes in the plaintiff’s
24 favor,” as the Court must at the pleading stage, the Court finds that the claims against
25 Defendant Yin “arise out of or relate to the defendant’s forum-related activities.” See
26 Beneficio, 972 F.3d at 1106, 1107. After finding Plaintiff successful on the first two prongs
27 of the specific jurisdiction analysis, the burden shifts to the Defendant to “‘present a
28
1 compelling case’ that the exercise of jurisdiction would not be reasonable.” See id. at 1107
2 (citations omitted).
3 b. Reasonableness of Personal Jurisdiction
4 A defendant seeking to defeat personal jurisdiction after a finding that it has
5 maintained minimum contacts with a forum state may make a “compelling case” that
6 jurisdiction is unreasonable where, despite the defendant’s purposeful availment of the
7 forum state and the relatedness of the claims at issue with the forum state, there exists some
8 other considerations that would render jurisdiction “unreasonable.” Burger King Corp. v.
9 Rudzewicz, 471 U.S. 462, 477 (1985). These considerations include choice-of-law
10 provisions that conflict between different states and the substantial inconvenience a
11 defendant may face in defending an action in the forum state. Id. Most of these
12 considerations, however, “may be accommodated through means short of finding
13 jurisdiction unconstitutional.” Id.
14 While there may be “inconvenience” for the Defendant maintaining a suit in
15 California, Defendant is designated as a board member of a California corporation named
16 as a defendant in this case, and Plaintiff has factually alleged a conspiracy between the
17 Defendant and the corporation that allegedly harmed ATL and Plaintiff’s business
18 activities in California. As a result, finding personal jurisdiction over Defendant Yin in
19 this case is “certainly nothing which amounts to a denial of due process.” McGee v. Int’l
20 Life Ins. Co., 355 U.S. 220, 224 (1957). Because Defendant has made no showing that
21 “trial [in California] will be so gravely difficult and inconvenient that [she] will for all
22 practical purposes be deprived of [her] day in court,” the Court does not find exertion of
23 personal jurisdiction unreasonable on the basis of Plaintiff’s prima facie showing. See
24 Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 18 (1972). For the reasons stated above, the
25 Court finds that it maintains specific jurisdiction over Defendant Yin and DENIES her
26 motion to dismiss for lack of personal jurisdiction.
27 ///
28 ///
1 iii. Defendant Thomas Lee
2 Defendant Lee argues Plaintiff’s claims against him must be dismissed under
3 Federal Rule of Civil Procedure 12(b)(2) because the Court does not have personal
4 jurisdiction over him. ECF No. 42 at 4-5. Plaintiff responds by arguing that factual
5 allegations demonstrate a conspiracy between Defendant Lee and Defendants Yin and
6 Belton Technology Inc. to misappropriate and economically harm ATL and Plaintiff. ECF
7 No. 44 at 2-3.
8 Plaintiff alleges Defendant Lee worked as an agent of Defendant Belton Technology
9 Inc., a California corporation, to benefit the company at the expense of ATL. Compl. at
10 ¶¶ 24-25. Plaintiff alleges that Defendant Lee used his position as a director of ATL to
11 gain confidential and private access to ATL’s intellectual property and confidential
12 information. Id. at ¶ 23. Plaintiff also alleges that, once Defendant Lee discovered ATL’s
13 assets were not sufficient to buy-back Defendant Yin’s shares in ATL, Defendant Lee
14 conspired with Defendants Yin and Belton to frustrate ATL’s obligations under the
15 Guarantee Agreement. Id. at ¶¶ 23-24. Plaintiff alleges that Defendant Lee conspired to
16 place ATL in breach of the Guarantee Agreement’s requirement that ATL list on a
17 reputable stock exchange by December 31, 2023 by interfering with ATL’s initial public
18 offering. Id. at ¶¶ 23-25. Plaintiff alleges Defendant Lee (1) conspired to launch the
19 competitor, “Asia Top Loyalty Alliance” to confuse investors and consumers, (2) pressured
20 the ATL CEO to engage an expensive firm in creating a “shell corporation” in exchange
21 for settling the arbitration and litigation, and (3) signed contracts on behalf of ATL and
22 routed funds that belonged to ATL to a separate bank account he created. Id. at ¶ 14, ¶ 25,
23 & ¶ 27. Plaintiff has alleged that Defendant Lee, working in conjunction with Defendants
24 Yin and Belton Technology Inc., engaged in the above conduct to block ATL’s initial
25 public offering and place ATL in breach of the Guarantee Agreement, from which
26 Defendants knew ATL could not recover. Id. at ¶¶ 23-24. Plaintiff alleges the conspiracy
27 operated with the motive of placing ATL into financial distress and susceptible to a
28 takeover by Belton. Id. at ¶¶ 24-25.
1 Here, construing Plaintiff’s factual allegations as true for purposes of assessing
2 personal jurisdiction, the Court finds substantial collaboration between Defendant Lee and
3 Defendant Belton Technology Inc., a California corporation, for the benefit of the
4 California entity. See Beneficio, 972 F.3d at 1106. As previously noted, federal courts
5 construe the factual allegations contained in the complaint as true and resolve genuine
6 factual disputes in favor of the plaintiff when evaluating personal jurisdiction based “on
7 written materials,” when challenges to personal jurisdiction are made at an early stage in
8 the proceedings. Beneficio, 972 F.3d at 1106. While Defendant Lee’s arguments are
9 closer on the issue of personal jurisdiction than Defendant Yin’s, Plaintiff has factually
10 alleged a significant relationship between Defendant Lee and Defendant Belton
11 Technology Inc., including Defendant Lee’s employment with Belton Technology while
12 serving as a corporate officer for ATL and the significant materials Defendant Lee
13 transferred to Belton from ATL for Belton’s benefit. In light of the totality of the factual
14 allegations made by Plaintiff regarding Defendant Lee’s conspiracy with Defendants Yin
15 and Belton Technology Inc., the Court finds based on the written materials submitted at
16 this stage in the proceedings that Defendant Lee maintained at least minimum contacts with
17 the California forum. See Beneficio, 972 F.3d at 1106-1107.
18 Resolving the threshold jurisdictional issues raised by the parties, the Court now
19 proceeds to the remainder of the Defendants’ motions.
20 ///
21 ///
22
23
24
25
26
27
28
1 B. Defendant Belton Technology Inc. and Defendant Yin’s Motion to Compel
Arbitration
2
3 Courts presented with both a motion to dismiss and a motion to compel arbitration
4 may adjudicate the motions in any order. Hebei Hengbo New Materials Tech. Co., Ltd. v.
5 Apple, Inc., 344 F. Supp. 3d 1111, 1120 (N.D. Cal. 2018) (finding no “mandated order” in
6 which the court must decide the two motions). If the movant is successful on its motion to
7 compel arbitration, courts may dismiss the remainder of the action as moot given the
8 matter’s transfer from federal court to the arbitration forum. Id. at 1120 (finding that “[a]
9 favorable ruling for Plaintiff on the Motion to Compel Arbitration would eliminate any
10 need to consider the Motion to Dismiss.”). Accordingly, the Court will first evaluate
11 Defendant Belton Technology Inc. and Defendant Yin’s motion to compel arbitration, see
12 ECF No. 12 at 20-25 and ECF No. 30 at 7, n.1, before turning to the remainder of the
13 Defendants’ motions to dismiss.
14 I. Legal Standard
15 The Supreme Court has recognized “the emphatic federal policy in favor of arbitral
16 dispute resolution,” which “applies with special force in the field of international
17 commerce.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631
18 (1985). The Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
19 implemented by Congress in 9 U.S.C. § 201 et seq. (herein “Convention” or “New York
20 Convention”), requires federal courts to compel arbitration in foreign territories when
21 agreements include arbitration clauses that select for arbitration abroad. 9 U.S.C. §§ 201,
22 202. Federal courts review four factors when determining whether to enforce an arbitration
23 agreement under the Convention. Balen v. Holland Am. Line Inc., 583 F.3d 647, 654-55
24 (9th Cir. 2009). The factors require that “(1) there is an agreement in writing within the
25 meaning of the Convention; (2) the agreement provides for arbitration in the territory of a
26 signatory of the Convention; (3) the agreement arises out of a legal relationship, whether
27 contractual or not, which is considered commercial; and (4) a party to the agreement is not
28
1 an American citizen, or that the commercial relationship has some reasonable relation with
2 one or more foreign states.” Id. at 654-55 (citation omitted).
3 II. Discussion
4 Defendants argue the New York Convention requires that this case be arbitrated in
5 the Hong Kong International Arbitration Centre, the arbitration venue selected by the
6 Guarantee Agreement’s arbitration clause. ECF No. 12 at 21-25. Defendants contend that
7 the Guarantee Agreement, signed between ATL’s chief executive officer and Defendants
8 Catherine Yin, Thomas Lee, and Majestic Plan Investments, includes a clear and
9 unambiguous agreement to arbitrate any claim or controversy arising from the agreement
10 in the Hong Kong International Arbitration Centre. Id. at 22-23. Defendants argue that all
11 four factors of the Balen analysis under the New York Convention are met in this case and
12 counsel in favor of compelling arbitration. Id. at 21-23. Defendants also argue that the
13 entirety of Plaintiff’s claims, including breach of the Guarantee agreement, trade secret
14 misappropriation, breach of fiduciary duty, self-dealing, and tortious interference with
15 prospective business interest all “arise out of” or “relate to” the parties’ relationships under
16 the Guarantee Agreement. ECF No. 33 at 9.
17 Plaintiff responds by arguing that the present dispute falls outside of the scope of the
18 Guarantee Agreement’s arbitration clause because it involves intellectual property theft,
19 which ATL did not anticipate when it entered into the Guarantee Agreement with
20 Defendants Yin, Lee, and Majestic Plan Investments. ECF No. 29 at 14. Plaintiff contends
21 that public policy exceptions counsel against enforcement of the arbitration clause when
22 intellectual property theft is involved because Defendants’ wrongful conduct “threatens
23 U.S. economic interests.” Id. Plaintiff also argues that Defendants’ allegedly fraudulent
24 conduct under the contract makes the arbitration clause unenforceable. Id. at 15.
25 a. Third-Party Standing to Compel Arbitration
26 As a threshold matter, neither party has briefed the issue of whether Plaintiff, which
27 is not a party to the Guarantee Agreement, can be compelled to arbitrate its claims against
28
1 Defendants in the Hong Kong International Arbitration Centre. See Guarantee Agreement
2 at 1 (ECF No. 1 at 13).
3 Because neither party has briefed the issue, the parties have waived arguments on
4 standing to compel arbitration. See Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999)
5 (finding waiver on an issue when a party fails to present their argument to the district court).
6 Even if the argument was not waived, the Court finds no issue with compelling the parties
7 to arbitration in this case.
8 “[N]onsignatories of arbitration agreements may be bound by the agreement under
9 ordinary contract and agency principles.” Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th
10 Cir. 2006) (citation omitted). When a non-signatory is an agent of a signatory to an
11 arbitration agreement, the non-signatory may be compelled to arbitrate claims arising from
12 the agreement. Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185, 1187-1188 (9th Cir.
13 1986) (agreeing with other circuit courts that “have held consistently that nonsignatories
14 of arbitration agreements may be bound by the agreement under ordinary contract and
15 agency principles.”). In addition, a non-signatory party may invoke a contract’s arbitration
16 clause to compel arbitration of a dispute when the causes of action at issue “are intimately
17 founded in and intertwined with the underlying contract obligations.” Kramer v. Toyota
18 Motor Corp., 705 F.3d 1122, 1129 (9th Cir. 2013) (citations omitted) (emphasis in the
19 original).
20 Under “ordinary contract and agency principles,” Plaintiff may be bound to the
21 Guarantee Agreement’s arbitration clause. See Letizia, 802 F.2d at 1187. Based on the
22 record, there exists a “virtual abandonment of separateness” between Plaintiff and ATL,
23 given that ATL created and controls Plaintiff’s corporate entity in order to comply with
24 terms of the Guarantee Agreement. See Thomson-CSF, S.A. v. Am. Arb. Ass’n, 64 F.3d
25 773, 778 (2d Cir. 1995) (analyzing agency principles in the determination of whether non-
26 signatories may be compelled to arbitration), and see Comer, 436 F.3d at 1101
27 (incorporating the Second Circuit’s analysis in Thomson-CSF). Plaintiff shares the same
28 chief executive officer and shareholders as ATL, and Plaintiff’s corporate entity was
1 created by ATL to comply with provisions of the Guarantee Agreement. Plaintiff has made
2 representations to this Court that “Mu Tech was the plan the entire time according to
3 Section 4.1 of the agreement,” “[t]he president and CEO of Mu Tech is Andy Chen” (the
4 chief executive officer of ATL), “[t]he shareholders of Mu Tech are the exact same
5 shareholders of ATL,” and that Plaintiff “is a vehicle by which the company was fulfilling
6 its obligations to its shareholders and to the Guarantee Agreement.” Hr. Tr. 120: 17-25,
7 121: 1-7 (ECF No. 20). As a result, under ordinary contract and agency principles, Plaintiff
8 is bound by ATL’s obligations under the Guarantee Agreement, including its arbitration
9 clause.
10 The Court also finds that Defendant Belton Technology Inc. has third-party standing
11 to enforce the arbitration clause. When a plaintiff brings claims against a non-signatory
12 defendant that are “intimately founded in and intertwined with” the underlying contract at
13 issue, the non-signatory defendant may enforce the contract’s arbitration clause against the
14 plaintiff under the doctrine of equitable estoppel. Kramer, 705 F.3d at 1128-1129.
15 i. Plaintiff’s Claims Under the Guarantee Agreement
16 Here, Plaintiff brings claims against Defendants for misappropriation of trade secrets
17 (Compl. at ¶¶ 30-32) and tortious interference with prospective business interests (Id. at
18 ¶¶ 50-54). Plaintiff claims that Defendants conspired to launch the competitor, “Asia Top
19 Loyalty Alliance,” in breach of the non-compete and non-disclosure clauses of the
20 Guarantee Agreement signed by ATL’s chief executive officer and Defendant Yin (on
21 behalf of Majestic Plan Investments) and Defendant Lee. Id. at ¶¶ 13-14, 30-31, and see
22 Guarantee Agreement at §§ 6.1-6.3 (describing the non-compete and non-disclosure
23 obligations of the Guarantors). Plaintiff also alleges that Defendants intentionally
24 interfered with ATL’s plan to use Plaintiff to complete its initial public offering in the
25 United States. Id. at ¶¶ 51, 54, and see Guarantee Agreement at § 4.1 (describing ATL’s
26 requirement to trade, sell, or list itself on a reputable stock exchange by December 31,
27 2023). Because Plaintiff’s claims against Defendants are “intimately founded in and
28
1 intertwined with” the Guarantee Agreement, Defendants have standing to compel Plaintiff
2 into arbitration under the agreement’s arbitration clause. See Kramer, 705 F.3d at 1129.
3 b. Application of the New York Convention on Foreign Arbitration
4 Defendants argue that the arbitration clause in the Guarantee Agreement must be
5 enforced under the New York Convention because all four factors of the Balen analysis are
6 met in this case. ECF No. 12 at 21 (citing to Balen, 583 F.3d at 654-655). Plaintiff does
7 not dispute Defendants’ arguments under Balen. Instead, Plaintiff raises multiple defenses
8 to arbitrability, including fraud, unconscionability, and public policy exceptions that
9 counsel against compelled arbitration. ECF No. 29 at 14-15. In reply, Defendants argue
10 that Plaintiff fails to contest the application of the New York Convention to the dispute and
11 has therefore conceded that the case is amenable to arbitration in the Hong Kong
12 International Arbitration Centre. ECF No. 33 at 9-10.
13 A party waives argument when it fails to respond to an argument made to the court.
14 See Smith, 194 F.3d at 1052. Generally, “the argument must be raised sufficiently for the
15 trial court to rule on it.” Sofamor Danek Grp., Inc. v. Brown, 124 F.3d 1179, 1186 n.4 (9th
16 Cir. 1997) (citations omitted). Here, Plaintiff does not argue that any of the factors
17 evaluated under Balen counsel against the application of the New York Convention to the
18 instant dispute. As a result, the Court finds the case amenable to compelled arbitration.
19 The Court’s review of Balen and the arbitration clause of the Guarantee Agreement also
20 confirm this outcome.
21 Here, the Guarantee Agreement is a share subscription agreement that constitutes a
22 writing within the meaning of the Convention. See 9 U.S.C. § 202 (establishing
23 jurisdiction under the Convention for contracts “considered as commercial.”). The
24 agreement, signed between Defendant Catherine Yin on behalf of Defendant Majestic Plan
25 Investments and Andy Chen, Defendant Thomas Lee, and Shun Chung (the “Guarantors”),
26 requires, among other provisions, that the Guarantors (1) not dilute the shares held by
27 Majestic Plan Investments, (2) offer Majestic Plan Investments the right of first refusal on
28 stock sales, and (3) cease from engaging in conduct that could compete with ATL’s
1 financial success, either by soliciting clients away from ATL, divulging the company’s
2 confidential information to third parties, or using trade names that could reasonably be
3 confused with the name of the company. See Guarantee Agreement §§ 1.1, 3.1, 4.1, 6.1-
4 6.3. In exchange, Majestic Plan Investments agreed to buy 15,721 shares in ATL. See id.
5 at 1 (“Recitals”). Under the first and third factors of the Balen analysis, the agreement
6 constitutes both a written contract and one that is “considered commercial.” See Balen,
7 583 F.3d at 655.
8 Second, the Guarantee Agreement provides for arbitration in the territory of a
9 signatory to the Convention. Balen, 584 F.3d at 654. The Guarantee Agreement includes
10 an arbitration clause, and the clause selects the Hong Kong International Arbitration Centre
11 as the arbitration forum for the dispute. See Guarantee Agreement § 7.3. The clause states:
12 § 7.3. Any dispute, controversy or claim arising out of or relating to this Agreement,
or the breach, termination or invalidity thereof, shall be resolved first by mediation
13
as introduced under the Civil Justice Reform since 2 April 2009. If both parties
14
cannot reach a mutual agreement through mediation, the matter shall be referred to
15 arbitration in Hong Kong by a sole arbitrator and the award thus issued shall be final
16 and binding. The language of the arbitration shall be in English. The arbitration shall
be administered by the Hong Kong International Arbitration Centre under its
17
prevailing arbitration rules. See Guarantee Agreement, Compl. Ex. A. (ECF No. 1
18 at 16).
19
Under the arbitration clause, “[a]ny dispute, controversy or claim arising out of or
20
relating” to the Agreement, “or the breach, termination or invalidity thereof…shall be
21
referred to arbitration in Hong Kong.” Id. In addition to the inclusion of an arbitration
22
clause, the Guarantee Agreement requires arbitration in Hong Kong, a territory that is a
23
signatory to the New York Convention.2
24
25
26 2 Defendants contend, and Plaintiff has not disputed, that Hong Kong exists within a
27 territory that is a signatory of the Convention. ECF No. 12 at 23. The Court also takes
judicial notice that Hong Kong is listed as a participating territory under the New York
28
1 Under the remaining Balen factor, the Guarantee Agreement also includes “a party
2 to the agreement [who] is not an American citizen.” See Balen, 583 F.3d at 655. The
3 parties to the Guarantee Agreement, Majestic Plan Investments, Andy Chen, Thomas Lee,
4 and Shun Chung, are all citizens of foreign countries. See Guarantee Agreement at 1
5 (stating that Majestic Plan Investments is a company incorporated in the British Virgin
6 Islands and that Andy Chen, Thomas Lee, and Shun Chung are all residents of Hong Kong).
7 Because all four factors under Balen are met, and because Plaintiff has disputed no part of
8 the Balen analysis in its submissions, the Court finds the New York Convention applicable
9 to the Guarantee Agreement. Under the Convention, the Court finds the parties bound by
10 arbitration in the Hong Kong International Arbitration Centre, the arbitration tribunal
11 selected by the contract.
12 c. Plaintiff’s Arguments Against Arbitration
13 Plaintiff advances three arguments against application of the Guarantee Agreement’s
14 arbitration clause. ECF No. 29 at 14-15. Plaintiff argues (1) the dispute falls outside the
15 scope of the arbitration clause, (2) that Defendants engaged in malfeasance when entering
16 into the Guarantee Agreement which renders the agreement unenforceable, and (3) that
17 public policy exceptions to enforcement of the arbitration clause apply. Id. Defendants
18 respond by arguing that all claims raised by Plaintiff clearly “arise out of or relate to” the
19 Guarantee Agreement and are therefore subject to arbitration. ECF No. 33 at 8-9.
20 Defendants further contend that alleged wrongful conduct does not preclude enforcement
21 of the arbitration clause, and no public policy exceptions exist in this dispute. Id. The
22 Court evaluates each argument in turn.
23 ///
24 ///
25
26
27 judicial notice of facts that can be “accurately and readily determined from sources whose
accuracy cannot reasonably be questioned.”). See Status: Convention on the Recognition
28
1 i. Scope of the Arbitration Clause
2 Plaintiff argues Defendants’ conduct under the Guarantee Agreement does not fall
3 squarely within the scope of the arbitration clause. ECF No. 29 at 14. Defendant argues
4 that the text of the arbitration clause is “broad and far reaching,” and encompasses every
5 dispute between the parties with a significant relationship to the Guarantee Agreement,
6 including the instant dispute. See ECF No. 12 at 22 and ECF No. 33 at 8-9.
7 The Supreme Court has held that “as a matter of federal law, any doubts concerning
8 the scope of arbitrable issues should be resolved in favor of arbitration, whether the
9 problem at hand is the construction of the contract language itself or an allegation of
10 waiver, delay, or a like defense to arbitrability.” Mitsubishi Motors, 473 U.S. at 626
11 (citation omitted). Courts evaluate the arbitration clause at issue to determine whether the
12 clause is “broad and far reaching” or limited in scope. Chiron Corp. v. Ortho Diagnostic
13 Systems, Inc., 207 F.3d 1126, 1131 (9th Cir. 2000). If the scope of the arbitration clause
14 “is arguably susceptible of an interpretation that the parties agreed to arbitrate” the claims
15 in dispute, federal courts must resolve the issue of scope in favor of arbitration. Republic
16 of Nicar. v. Standard Fruit Co., 937 F.2d 469, 479 (9th Cir. 1991).
17 Here, the arbitration clause states that “[a]ny dispute, controversy or claim arising
18 out of or relating to this Agreement, or the breach, termination or invalidity thereof…shall
19 be referred to arbitration in Hong Kong.” See Guarantee Agreement at § 7.3. The language
20 of the arbitration clause is “broad and far reaching” and makes no reference to specific
21 claims that have been excluded by the parties from the scope of arbitration. See Chiron
22 Corp., 207 F.3d at 1131 (finding that breach of contract claims under an agreement must
23 be compelled to arbitration when the agreement’s arbitration clause includes language like
24 “[a]ny dispute, controversy or claim arising out of or relating to the…Agreement shall be
25 settled by binding Alternate Dispute Resolution.”). Because Plaintiff’s claims against
26 Defendants arise out of and relate to the Guarantee Agreement, see supra B.II.a.i.
27 (“Plaintiff’s Claims Under the Guarantee Agreement”), Plaintiff’s claims clearly fall
28 within the scope of the arbitration clause.
1 ii. Validity of the Arbitration Clause
2 Plaintiff contends that the presence of theft or fraud by Defendants invalidates the
3 arbitration clause of the Guarantee Agreement and that the arbitration clause “must be
4 deemed unenforceable.” ECF No. 29 at 15. Defendants respond by arguing that the clear
5 weight of caselaw supports resolving any doubts on the enforceability of arbitration,
6 including whether an arbitration clause is valid, in favor of compelling arbitration. ECF
7 No. 33 at 8-9.
8 A party may avoid arbitration under the New York Convention if the agreement to
9 arbitrate is “null and void” and therefore unenforceable. Balen, 583 F.3d at 653-654, and
10 see Rogers v. Royal Caribbean Cruise Line, 547 F.3d 1148, 1157-58 (9th Cir. 2008).
11 Courts may decline to send the case to arbitration upon a finding that the agreement to
12 arbitrate “resulted from the sort of fraud or overwhelming economic power that would
13 provide grounds ‘for the revocation of any contract.’” Mitsubishi Motors, 473 U.S. at 627
14 (citation omitted). The party opposing arbitration must argue by “well-supported claims”
15 that the formation of the contract, or the inclusion of the arbitration clause, was the product
16 of fraud or duress. Id.
17 Here, Plaintiff contends that it “did not anticipate Defendant’s malfeasances when
18 entering into their relationship, contractual or otherwise.” ECF No. 29 at 14. In the
19 complaint, Plaintiff alleges that Defendants “never had any intention of honoring the
20 Guarantee Agreement and simply used it as a ‘trojan horse’ to gain access to ATL’s IP.”
21 Compl. at ¶ 49. While Plaintiff’s allegation raises an inference that the formation of the
22 Guarantee Agreement was the product of fraud, the factual allegation is a single sentence
23 within Plaintiff’s filings that raises this inference.3 No additional factual allegations are
24
25
3 Plaintiff raises several allegations about fraudulent conduct undertaken by Defendants
26
after the signing of the Guarantee Agreement, including the Defendants’ use of their board
27 memberships to view ATL’s financial statements and transfer ATL’s proprietary materials
to the competitor they supported, Asia Top Loyalty Alliance. See e.g. Compl. at ¶¶ 15-19,
28
1 raised by Plaintiff to support its claim of fraud in contract formation by Defendants.
2 Because Plaintiff has provided no “well-supported claims” that the formation of the
3 Guarantee Agreement between the parties was the product of fraud or duress, the Court
4 finds the arbitration clause enforceable. See Mitsubishi Motors, 473 U.S. at 627.
5 Even if Plaintiff’s sparse argument on contract fraud raises doubt on whether the
6 case may be compelled to arbitration, precedent is clear: “any doubts concerning the scope
7 of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand
8 is…an allegation of waiver, delay, or a like defense to arbitrability.” Mitsubishi Motors,
9 473 U.S. at 626 (citing Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S.
10 1, 24-25 (1983)). Courts must give effect to arbitration clauses and compel the case to
11 adjudication by an arbitration panel, even on threshold issues like defenses to arbitration,
12 based on the “strong belief in the efficacy of arbitral procedures for the resolution of
13 international commercial disputes.” Mitsubishi Motors, 473 U.S. at 631. The terms of the
14 Guarantee Agreement also assign disputes involving “breach, termination or invalidity” of
15 the Guarantee Agreement to the Hong Kong International Arbitration Centre for
16 adjudication. See Guarantee Agreement at § 7.3. As a result, the Court finds the arbitration
17 clause valid as a threshold matter. The Court also finds that Plaintiff has preserved the
18 issue of fraud in contract formation and breach of contract for arbitral review.
19 iii. Public Policy Exceptions
20 Plaintiff argues, as its third and final defense, that the Supreme Court recognizes
21 public policy exceptions to the enforcement of the arbitration clause. ECF No. 29 at 14
22 (citing to Mitsubishi Motors, 473 U.S. at 637 n.19). Plaintiff argues that trade secrets theft,
23 which “threatens U.S. economic interests,” falls into a public policy exception. Id.
24
25
engaged in fraud before or during the signing of the Guarantee Agreement with ATL, and
26
Plaintiff has made no factual allegations that Defendants engaged in fraudulent conduct for
27 the purposes of securing the contract with ATL. Because Plaintiff has not supported any
allegation of fraud in the formation of the Guarantee Agreement by “well-supported
28
1 Defendants argue that no such public policy exception exists under the Federal Arbitration
2 Act or precedent. ECF No. 33 at 9.
3 The public policy exception to the New York Convention “applies only when
4 confirmation or enforcement of a foreign arbitration award ‘would violate the forum state’s
5 most basic notions of morality and justice.’” Ministry of Def. & Support for the Armed
6 Forces of the Islamic Republic of Iran v. Cubic Def. Sys., Inc., 665 F.3d 1091, 1096-1097
7 (9th Cir. 2011) (citations omitted). It is a defense that applies only after an arbitration
8 adjudication has taken place, and it must be “construed narrowly.” Id. at 1096-1097
9 (citation omitted).
10 Here, the public policy exception applies “when a party seeks to enforce a foreign
11 arbitral award, not an agreement to arbitrate.” Wash. Sch. Risk Mgmt. Pool v. Am. Re-
12 Insurance Co., 2022 WL 2718479, *5 (W.D. Wash. April 21, 2022) (collecting cases).
13 While Plaintiff relies on Mitsubishi Motors for the proposition that a public policy
14 exception to arbitration exists for claims of trade secrets theft, Mitsubishi Motors does not
15 support Plaintiff’s argument. Mitsubishi Motors holds that an arbitration tribunal that bars
16 a party’s right to pursue statutory remedies, when those statutory claims fall within the
17 scope of an arbitration agreement, may arrive at a decision and an award whose
18 enforcement by federal courts would be against U.S. public policy. See 473 U.S. at 637
19 n.19. This Court has “no occasion to speculate on this matter at this stage in the
20 proceedings, when [Defendants] seeks to enforce the agreement to arbitrate, not to enforce
21 an award.” See id. While Plaintiff raises a statutory claim under the Defend Trade Secrets
22 Act against Defendants, the claim is intertwined with the non-compete and non-disclosure
23 obligations of the signatories under the Guarantee Agreement. Plaintiff has pointed to no
24 legislative text within the Defend Trade Secrets Act indicating that Congress has barred
25 federal trade secret claims from being sent to arbitration. See Mitsubishi Motors, 473 U.S.
26 at 627-628 (finding that “if Congress intended the substantive protection afforded by a
27 given statute to include protection against waiver of the right to a judicial forum, that
28 intention will be deducible from text or legislative history.”). Plaintiff has also “failed to
1 establish that [it] could not pursue any of [its] statutory claims in an arbitration proceeding”
2 within the Hong Kong International Arbitration Centre. See Balen, 583 F.3d at 654. At
3 the award-enforcement stage, the Court may ascertain whether the arbitration tribunal took
4 cognizance of Plaintiff’s federal trade secret claims and decided them. See Mitsubishi
5 Motors, 473 U.S. at 638, and see Balen, 583 F.3d at 654. The public policy defense raised
6 by Plaintiff is premature at this stage in the matter, and as a result, Plaintiff’s public policy
7 defense is not successful.
8 C. Remainder of Defendant Belton Technology Inc., Defendant Yin, and
Defendant Lee’s Motion to Dismiss
9
10 Upon finding success on a motion to compel arbitration, district courts may grant
11 the motion to compel arbitration and may deny any remaining motions as moot. Hebei,
12 344 F. Supp. 3d at 1120 (finding, after surveying precedent, that a “favorable ruling…on
13 the Motion to Compel Arbitration would eliminate any need to consider the Motion to
14 Dismiss.”). This is so because the federal court’s “role is strictly limited to determining
15 arbitrability and enforcing agreements to arbitrate, leaving the merits of the claim and any
16 defenses to the arbitrator.” Chiron Corp., 207 F.3d at 1131 (citation omitted). After
17 deciding the jurisdictional issues of this case and Defendants’ motion to compel arbitration,
18 and upon finding success on the motion, the Court has no need to engage in further analysis
19 regarding the sufficiency of Plaintiff’s complaint, the selection of the proper venue to
20 litigate this case, or Plaintiff’s compliance with the requirements of service under the
21 Federal Rules of Civil Procedure. As a result, the Court DENIES the remainder of
22 Defendant Belton Technology Inc.’s motion to dismiss as moot, including its argument on
23 venue, ECF No. 12 at 20, and the Court similarly DENIES Defendant Yin and Defendant
24 Lee’s motions to dismiss for insufficiency of service under Federal Rule of Civil Procedure
25 12(b)(5) as moot.
26 ///
27 ///
28
I CONCLUSION
2 Finding Defendant Belton Technology Inc. and Defendant Yin successful on their
3 ||motion to compel arbitration, the Court HEREBY COMPELS the case to arbitration
4 || pursuant to 9 U.S.C. § 206. The decision is without prejudice to Plaintiffs right to return
5 ||to this Court for the limited purpose of enforcing an arbitral award.
6 For the foregoing reasons, IT IS HEREBY ORDERED:
7 1. Defendant Belton Technology Inc.’s motion to dismiss for failure to state a
8 claim and for lack of subject-matter jurisdiction under Federal Rules of Civil
9 Procedure 12(b)(1) and 12(b)(6) is DENIED without prejudice, and its motion
10 to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3)
11 is DENIED as moot;
12 2. Defendant Catherine Yin’s motions to dismiss for lack of personal jurisdiction
13 under Federal Rule of Civil Procedure 12(b)(2) is DENIED without prejudice,
14 and her motion to dismiss for insufficient service of process under Federal
15 Rule of Civil Procedure 12(b)(5) is DENIED as moot;
16 3. Defendant Thomas Lee’s motions to dismiss for lack of personal jurisdiction
17 under Federal Rule of Civil Procedure 12(b)(2) is DENIED without prejudice,
18 and his motion to dismiss for insufficient service of process under Federal
19 Rule of Civil Procedure 12(b)(5) is DENIED as moot; and
20 4. Defendant Belton Technology Inc. and Defendant Yin’s motion to compel
21 arbitration is GRANTED pursuant to 9 U.S.C. § 206. Accordingly, the Clerk
22 of Court is instructed to close the case.
°3 IT IS SO ORDERED.
“a DATED: September 29, 2025
25
26 Mk
a7 jf JOHN A. HOUSTON
28 UNITED STATES DISTRICT JUDGE
40