Freaner v. Valle

966 F.Supp.2d 1068

Ariel FREANER, Plaintiff,

v.Enrique Martin Lutteroth VALLE, an individual; Hotelera Coral, S.A. de C.V., a stock company of Baja California, Republic of Mexico; and Does 1 to 10, Defendants.

Case No. 11CV1819 JLS (MDD).

United States District Court, S.D. California.

Aug. 22, 2013.

Frederick M. Reich, Law Offices of James J. Warner, San Diego, CA, for Plaintiff.

Margarita Haugaard, Horton Knox Carter and Foote, San Diego, CA, Orlando Bailey Foote, III, Horton Knox Carter and Foote LLP, El Centro, CA, for Defendants.

ORDER (1) DENYING MOTION TO COMPEL ARBITRATION; (2) GRANTING IN PART AND DENYING IN PART MOTION FOR PARTIAL SUMMARY JUDGMENT; AND, (3) SETTING DEADLINE FOR COMPLETION OF PENDING ARBITRATION PROCEEDINGS

JANIS L. SAMMARTINO, District Judge.

Presently before the Court is Plaintiff Ariel Freaner's (“Plaintiff,” or “Freaner”) Motion to Compel Arbitration of the 2009 Contract, (Mot. Compel Arbit., ECF No. 82), as well as Defendants Enrique Martin Lutteroth Valle (“Valle”) and Hotelera Coral, S.A. de C.V.'s (“Hotelera Coral,” and collectively, “Defendants”) response in opposition, (Resp. in Opp'n, ECF No. 85), and Freaner's reply in support, (Reply in Supp., ECF No. 86). The hearing on the motion set for March 22, 2013 was vacated and the matter was taken under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1).

Also before the Court is Defendants' Motion for Partial Summary Judgment, or Alternatively, for an Order Treating Specified Facts as Established, on Hotelera Coral's Counterclaim, (Mot. Partial Summ. J., ECF No. 64), along with Freaner's response in opposition, (Resp. in Opp'n, ECF No. 69), and Defendants' reply in support, (Reply in Supp., ECF No. 72). A hearing on the motion was held on January 31, 2013, at which time the Court took the motion under submission pending the filing and expedited briefing of Freaner's motion to compel arbitration.

Having considered the parties' arguments and the law, the Court (1) DENIES Freaner's motion to compel arbitration, (2) GRANTS IN PART AND DENIES IN PART Defendants' motion for partial summary judgment on their counterclaim, and (3) SETS a deadline of October 31, 2013 for the completion of all pending arbitration proceedings.

BACKGROUND

1. Factual Background

The Court has issued two prior Orders in this case that discuss the relationship between Freaner and Hotelera Coral and the breakdown of communication between the parties that preceded the filing of this suit. ( SeeOrder, Nov. 17, 2011, ECF No. 23, 2011 WL 5596919; Order, Feb. 6, 2013, ECF No. 81). This Order incorporates by reference the facts as set forth in those prior Orders. The most pertinent facts are set forth here once again to provide necessary context for the issues discussed below.

This case arises out of a contract dispute between Freaner, a graphic and web designer in San Diego, California, and Hotelera Coral, a resort hotel located in Baja California, Mexico. On June 23, 2008, the parties entered into a Service Agreement, memorialized in a signed, printed contract, pursuant to which Freaner was to provide marketing services and products to Hotelera Coral, including, among other things, design and development of a new web site, development of advertising concepts and strategies, and design and production of print advertising materials. Hotelera Coral was to pay $76,592 to Freaner in six installments.

The June 2008 Service Agreement includes a provision requiring Hotelera Coral to pay Freaner an hourly rate for projectsor tasks outside the scope of the contract. The provision reads as follows:

c. Any projects or tasks outside the scope of this Agreement will be billed as follows:

i. $250 (two hundred fifty U.S. dollars) per hour for design and creative services

ii. $150 (one hundred fifty U.S. dollars) per hour for production services.

d. Clients will not be obligated to pay for any project outside the scope of this Agreement unless previously approved in writing.

The June 2008 Service Agreement also includes a provision requiring the parties to settle their disputes through binding arbitration. The arbitral clause reads as follows:

Arbitration. Any controversy or claim arising out of or related to this Agreement, or breach thereof, shall be submitted to and resolved by binding arbitration. The arbitration will be conducted in San Diego, California by a single neutral arbitrator and in accordance with the then current rules of the American Arbitration Association. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the State of California, and only such power, and shall follow the law. The parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue the award in writing and therein shall state the essential findings and conclusions on which the award is based. Judgment on the award may be entered in any court having jurisdiction thereof.

In the Spring of 2009, the parties began negotiating another contract. Freaner initiated the negotiations by sending Defendants a document marked as a proposal, which set forth two alternatives. Defendants reviewed the proposal and the parties subsequently agreed on the first alternative, pursuant to which Freaner would provide specified design and creative services in exchange for $4,000 per month from Hotelera Coral for a 12–month term.

Freaner then sent Defendants a printed contract that incorporated the terms that the parties had discussed. This printed contract contained the same arbitral clause as the June 2008 Service Agreement.

The parties disagree as to the events that followed, as discussed more extensively below. It is undisputed, however, that Defendants never signed the printed contract. It is also undisputed that Defendants began paying Freaner $4,000 per month beginning in July 2009 and that Freaner began providing services as specified in the printed contract.

Around May 2010, Defendants became upset because Freaner failed to deliver print advertising materials that Defendants had requested, and paid for, months earlier. The relationship between the parties broke down shortly thereafter and their agreement was not renewed for the following year.

On March 31, 2011, Freaner sent Defendants a letter demanding compensation for numerous services that he allegedly rendered between June 2008 and October 2010. Freaner alleged that he was entitled to $174,080 in unpaid compensation.

2. Procedural Background

On June 17, 2011, Freaner filed suit for breach of contract in the Superior Court of the State of California for the County of San Diego. In his complaint, he alleged breach of the June 2008 Service Agreement and sought damages in excess of $170,000.

On August 15, 2011, Defendants filed a motion to compel arbitration of Freaner's breach of contract claim. On the same day, Defendants also removed the action to this Court, invoking the Inter–American Convention on International Commercial Arbitration, also known as the Panama Convention, and its implementing legislation, 9 U.S.C. §§ 301–307.

On September 2, 2011, Defendants filed a counterclaim for breach of contract, alleging that Freaner breached the parties' 2009 agreement. On the same day, Freaner filed a motion to compel arbitration of the June 2008 Service Agreement. On September 13, 2011, Freaner filed a motion to remand the action back to Superior Court. On September 27, 2011, Freaner filed an answer to Defendants' counterclaim.

On November 17, 2011, the Court denied Freaner's motion to remand because this action is related to an arbitration agreement falling under the Panama Convention, such that removal was proper under 9 U.S.C. § 205, which is incorporated by reference in cases falling under the Panama Convention by 9 U.S.C. § 302. (Order, Nov. 17, 2011, ECF No. 23). The Court granted the parties' motions to compel arbitration because the June 2008 Service Agreement contains a binding arbitration clause. ( Id.) The Court directed the parties to arbitrate their dispute with the American Arbitration Association (“AAA”) and to follow its rules to select an arbitrator. ( Id.) The Court stated that it would be “premature to consider whether to compel arbitration of issues related to the 2009 contract that are the subject of Hotelera Coral's counterclaims as the Court is not yet faced with a motion to compel arbitration of those claims.” ( Id.)

After Magistrate Judge Dembin vacated a previously scheduled Early Neutral Evaluation on January 3, 2012, Defendants proceeded to file an Ex Parte Application for Order Reinstating Scheduling of an Early Neutral Evaluation Conference. The Magistrate Judge granted Defendants' motion on the ground that only Freaner's breach of contract claim had been referred to arbitration and that Defendants' counterclaim remained before the Court and was ready to proceed to the next stage of litigation. An Early Neutral Evaluation and a Case Management Conference were subsequently held on February 23, 2012 before the Magistrate Judge.

Freaner had not commenced arbitration proceedings by the time the Magistrate Judge held these hearings. Thus, on February 24, 2012, the Magistrate Judge ordered Freaner to commence arbitration by March 8, 2012. Freaner requested additional time to raise funds to pay the AAA's initial filing fee and the Magistrate Judge subsequently extended the deadline to March 22, 2012. On March 26, 2012, this Court issued an Order to Show Cause Why Sanctions Should Not Be Imposed, requiring Freaner to explain why he had yet to commence arbitration by the generous deadline set by the Magistrate Judge.

On April 9, 2012, Freaner filed a declaration with the Court indicating that he had complied with the Magistrate Judge's Order, albeit in an untimely manner, by commencing arbitration on March 23, 2012. On that day, Freaner filed an arbitral demand with the AAA's International Centre for Dispute...