holding that district court did not abuse its discretion in denying discovery because the requesting parties “failed to demonstrate” how the requested discovery “would have assisted them in opposing the motion to compel arbitration”
How later courts described this case
- holding that district court did not abuse its discretion in denying discovery because the requesting parties “failed to demonstrate” how the requested discovery “would have assisted them in opposing the motion to compel arbitration”
- finding “[t]he remainder of appellants’ arguments can be dismissed in short order” including the appellants’ “unclean hands argument” because when deciding whether the parties agreed to submit a grievance to arbitration, the court should not rule on the merits of the claim
- rejecting party’s argument that arbitration clause in terminated agreement was unenforceable where the agreement required arbitration of “any dispute” arising out of the agreement and “survived the expiration of the [ ] Agreement and compels appellants to submit their claims to arbitration.”
- stating that because no party had requested a stay, district court did not err in dismissing case rather than staying it
Written by the judges who cited it.
The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 5, 2008 Decided March 6, 2009
No. 07-7136
ELLIOT WOLFF, PERSONALLY AND AS TRUSTEE OF THE TRUST
ESTABLISHED UNDER ARTICLE III OF THE ESTATE OF EGON
WOLFF,
APPELLANTS
v.
WESTWOOD MANAGEMENT, LLC, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 06cv01234)
Leslie D. Alderman III argued the cause and filed the
briefs for appellants.
Paul J. Kiernan argued the cause and filed the brief for
appellees.
Before: ROGERS, BROWN and GRIFFITH, Circuit Judges.
2
Opinion for the Court filed by Circuit Judge BROWN.
BROWN, Circuit Judge: This case concerns the shelf-life
of an arbitration provision in a superseded contract.
Appellant Elliot Wolff sued Westwood Management LLC
and various related individuals and entities for breach of
fiduciary duties and derivative claims. The district court
dismissed the complaint, concluding—over Wolff’s vehement
objections—that all of his claims were covered by a
mandatory arbitration clause. Finding no error, we affirm.
I.
In 1971, Elliot Wolff’s father, Egon, invested in a real
estate venture—the District of Columbia Joint Venture
(DCJV)—organized by Dr. Laszlo Tauber that developed a
piece of District real estate into an office building complex
known as the Transpoint building. For his $20,000
investment, Egon received an interest of 0.5% in the land and
0.25% in the building. The agreement Egon signed when he
invested in the DCJV (DCJV Agreement) contained an
arbitration clause, providing that “[t]he parties agree not to
enter into any court action in any dispute which may arise
during construction and management of the office building
complex and agree that any dispute or controversy that cannot
be amicably settled will be submitted to arbitration[.]”
Egon Wolff died in November 1984, and his interest in
the DCJV passed to the appellants, Elliot Wolff and a trust
established from Egon’s estate. On December 6, 1984, Dr.
Tauber wrote a letter to the DCJV investors, along with those
who had invested in other ventures he had organized,
informing them that his “long standing goal has been to
merge all the partnerships into one single partnership. This
3
must be achieved now with no further delay.” The letter
made the merger “effective the 1st of January, 1985,” and
gave the investors four options: to sell their interest, to
become a class “B” partner in the new entity, to become a
class “C” partner in the new entity, or—for anyone who
“ha[d] second thoughts and [wa]s not willing to cooperate”—
to “put his/her interest in trust.” The new entity, referred to as
the Consolidated Partnership, was reorganized into various
other entities over time.
Though the record is silent on this point, the parties agree
Elliot Wolff declined to join the Consolidated Partnership.
Wolff alleges he asked Dr. Tauber to hold his DCJV interest
in trust. As a result, Wolff was not a party to the
Consolidated Partnership agreement nor was he an owner of,
or investor in, any of the successor entities. Rather, his
ownership interest of 0.5% in the land and 0.25% in the
building that made up the Transpoint Building complex,
acquired via the DCJV Agreement, was held for him in trust
by Dr. Tauber and his successors.
After Dr. Tauber died in 2002, management and control
of all the ventures stemming from the Consolidated
Partnership went to appellee Westwood Management. In
February 2004, Westwood Management sold the Transpoint
Building and the adjacent land and paid the investors. Wolff
filed this lawsuit in 2006:
alleging breach of fiduciary duty and
derivative claims, all resulting from the
management and sale of the Transpoint
building and the adjacent lot. He alleges that
defendants used funds from various mortgages
and refinances of the Transpoint building and
the adjacent lot for purposes other than for use
4
by and for the Transpoint building and that
adjacent lot; specifically, to make
improvements to other properties and for
defendants’ enrichment.
Wolff v. Westwood Mgmt., 503 F. Supp. 2d 274, 278 (D.D.C.
2007).
The district court granted defendants’ motion to compel
arbitration. In response to Wolff’s argument that the DCJV
Agreement and its arbitration clause were extinguished by the
creation of the Consolidated Partnership, the district court
concluded the agreement to arbitrate survived the expiration
of the DCJV Agreement and applied to this dispute. Id.
at 281. The district court reasoned “[t]he obligations at issue
in this case can only have arisen from the DCJV Agreement
because there was no other agreement with defendants that
Wolff entered into.” Id. The district court noted that if the
arbitration clause was to be read broadly—“any dispute or
controversy . . . will be submitted to arbitration”—then it
encompasses all matters that touch upon the contract. Id.
at 282. If read narrowly—“any dispute which may arise
during construction and management of the office building
complex”—then it covers only specified types of disputes.
Id. The dispute at issue in this case was covered under either
reading of the arbitration clause. Id. at 283. The court
therefore concluded the parties had entered into a valid and
enforceable arbitration agreement that covered the claims in
this case, and dismissed the complaint. This appeal followed.
5
II.
The “determination that the parties have contractually
bound themselves to arbitrate disputes—a determination
involving interpretation of state law—is a legal conclusion
subject to our de novo review, … but the findings upon which
that conclusion is based are factual and thus may not be
overturned unless clearly erroneous.” Bailey v. Fed. Nat’l
Mortgage Ass’n, 209 F.3d 740, 744 (D.C. Cir. 2000). Under
District of Columbia law, “arbitration is predicated on the
consent of the parties to a dispute, and the determination of
whether the parties have consented to arbitrate is a matter to
be determined by the courts on the basis of contracts between
the parties.” Bailey, 209 F.3d at 746; see also Air Line Pilots
Ass’n v. Fed. Express Corp., 402 F.3d 1245, 1248 (D.C. Cir.
2005).
“[A]n order to arbitrate [a] particular grievance should
not be denied unless it may be said with positive assurance
that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute. Doubts should
be resolved in favor of coverage.” Air Line Pilots Ass’n, 402
F.3d at 1248 (quoting United Steelworkers of America v.
Warrior & Gulf Nav. Co., 363 U.S. 574, 582–83 (1960)).
“The Arbitration Act establishes that, as a matter of federal
law, any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration, whether the
problem at hand is the construction of the contract language
itself or an allegation of waiver, delay, or a like defense to
arbitrability.” Moses H. Cone Memorial Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24–25 (1983).
Wolff contends the arbitration clause in the DCJV
Agreement does not apply to this dispute because the
agreement terminated in 1985. And, appellants argue, their
6
claims arise under the alleged trust; not the DCJV. But, as the
district court observed, “an arbitration clause is enforceable
after the expiration of a contract when the dispute is over an
obligation created by the contract.” Wolff, 503 F. Supp. 2d
at 280. We agree.
The Supreme Court has observed that “a party cannot be
compelled to arbitrate any matter in the absence of a
contractual obligation to do so. Adherence to these
principles, however, does not require us to hold that
termination of a collective-bargaining agreement
automatically extinguishes a party’s duty to arbitrate
grievances arising under the contract.” Nolde Bros. v. Local
No. 358, Bakery and Confectionery Workers Union, 430 U.S.
243, 250–51 (1977). “[E]ven though the parties could have
so provided, there is nothing in the arbitration clause that
expressly excludes from its operation a dispute which arises
under the contract, but which is based on events that occur
after its termination.” Id. at 252–53. Moreover, the Court in
Nolde Bros. found a “presumption in favor of postexpiration
arbitration of matters unless ‘negated expressly or by clear
implication,’ but that conclusion was limited by the vital
qualification that arbitration was of matters and disputes
arising out of the relation governed by contract.” Litton Fin.
Printing Div. v. NLRB, 501 U.S. 190, 204 (1991) (quoting and
discussing Nolde Bros., 430 U.S. at 255) (emphasis added).
With these principles in mind, it is easy to see the district
court did not err when it held the “agreement to arbitrate
manifested in the DCJV Agreement survives termination of
the DCJV Agreement and that it applies to this controversy.”
Wolff, 503 F. Supp. 2d at 281. The claims in this case, after
all, “can only have arisen from the DCJV Agreement because
there was no other agreement with [appellees] that Wolff
entered into.” Id. Even assuming a valid trust was created
7
under District of Columbia law when the DCJV Agreement
terminated in 1985, appellants’ claims are “disputes arising
out of the relation governed by the contract,” Litton Fin.
Printing Div., 501 U.S. at 204, because the Wolffs’ ownership
interest in the land and the building—the res of the alleged
trust—was created under the DCJV Agreement. We conclude
that the agreement to arbitrate “any dispute which may arise
during construction and management of the office building
complex” survived the expiration of the DCJV Agreement
and compels appellants to submit their claims to arbitration.
The remainder of appellants’ arguments can be dismissed
in short order. Appellants’ unclean hands argument goes to
the merits of their claims rather than their arbitrability. There
is no allegation that appellees have unclean hands with
respect to the agreement to arbitrate itself. “[I]n deciding
whether the parties have agreed to submit a particular
grievance to arbitration, a court is not to rule on the potential
merits of the underlying claims.” Air Line Pilots Ass’n, 402
F.3d at 1248; see also Prima Paint Corp. v. Flood & Conklin
Mfg. Co., 388 U.S. 395, 406 (1967) (allegation of fraud in the
inducement of a contract is arbitrable, at least absent a claim
of fraud in the inducement of the agreement to arbitrate). The
district court did not abuse its discretion in refusing
appellants’ request for discovery under Rule 56(f) of the
Federal Rules of Civil Procedure. The appellants failed to
demonstrate, both to the district court and on appeal, how
discovery related to the merits of the claims would have
assisted them in opposing the motion to compel arbitration.
Appellants also argue that the DCJV Agreement’s arbitration
clause lacks sufficient detail as to the material terms of the
agreement. This argument, which was not presented to the
district court, is not properly before us. See, e.g., Albrecht v.
Comm. on Employee Benefits of Fed. Reserve Employee
Benefits Sys., 357 F.3d 62, 66 (D.C. Cir. 2004) (argument not
8
presented to the district court ordinarily waived on appeal);
District of Columbia v. Air Florida, Inc., 750 F.2d 1077, 1084
(D.C. Cir. 1984) (same) (citing cases). The same is true of
appellants’ argument that the district court erred by
dismissing this case rather than staying it under Section 3 of
the Federal Arbitration Act; no one requested a stay from the
district court.
III.
Accordingly, the order of the district court compelling
arbitration and dismissing the complaint is
Affirmed.