HFA Specialty Acquisitions LLC v. Nexgen Flight Sols.

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HFA SPECIALTY ACQUISITIONS LLC, et al., Plaintiffs, v. NEXGEN FLIGHT SOLUTIONS, LLC, et al., Defendants.

Civil Action No. 24-1891 (BAH)

United States District Court, District of Columbia

November 19, 2024

MEMORANDUM OPINION

BERYL A. HOWELL, United States District Judge

Plaintiffs HFA Specialty Acquisitions LLC and Michael P. Halperin own an aircraft, for which they entered into an agreement with defendants NexGen Flight Solutions, LLC and Andrew C. Bradley to provide aircraft management and pilot services. First Am Compl. (“FAC”) ¶ 20, ECF No. 14. Following a dispute regarding payments for services, defendants filed, on May 15, 2024, a possessory lien, under the Maryland Garageman's Lien Statute, Md. Code Ann., Com. Law § 16-201 et seq., on the aircraft, FAC ¶ 44, and about one month later, a demand for arbitration on plaintiffs, pursuant to the agreement's terms requiring arbitration to resolve certain disputes, id. ¶ 51. In response to defendants' demand for arbitration plaintiffs filed the instant diversity action alleging replevin and breach of contract, id. ¶¶ 60-78, and also moved to stay the arbitration initiated by defendants, pending the outcome of this litigation, Pls.' Mot. to Stay Arb. (“Pls.' Stay Mot.”) at 1 ECF No. 3. Defendants have consistently maintained that the dispute must be arbitrated, see, e.g., Defs.' Opp'n Pls.' Stay Mot. (“Defs.' Opp'n”) at 48, ECF No. 9, Defs.' Mot. to Dismiss or in the Alternative Stay the Litigation (“Defs.' MTD”) at 1, ECF No. 10, and seek a stay of this litigation pending outcome of the arbitration, see Defs.' Mot. to Stay. Litig. (“Defs.' Stay Mot.”) at 1, ECF No. 18.

For the following reasons, defendants' motion to stay this litigation is granted and plaintiffs' motion to stay arbitration is denied.

I. BACKGROUND

A. Factual Background

Plaintiffs, who own a Dassault Aviation model Falcon 50EX aircraft, FAC ¶ 13, entered into an Aircraft Management Agreement (“Agreement”) with defendants, who operate a fullservice aviation company that provides owners of private jet aircraft “sales management, charter and everything in between,” including aircraft maintenance, id. ¶¶ 16, 20. As relevant here, the Agreement contains the following provision:

Except as for injunctive relief which is expressly reserved in the applicable State or Federal Court for Washington, D.C., any controversy, or dispute arising out of this Agreement, the interpretation of any of the provisions hereof, or the action or inaction of a party hereunder shall be submitted to a confidential arbitration in Washington, D.C. before a retired District Court or Court of Appeal judge selected by the JAMS. (“JAMS”) who shall administrate the controversy or dispute. If the parties cannot agree to an arbitrator, JAMS shall be empowered to make the selection. The arbitration shall be held before a single arbitrator and shall be binding with no right of appeal. The arbitration shall be conducted pursuant to the JAMS Standard Arbitration Rules.

Id., Ex. 1 (“Agreement”) at § 11.7, ECF No. 14-1. On May 15, 2024, defendants, believing that plaintiffs failed to pay sums due to them under the Agreement, see Defs.' Opp'n at 2, recorded a lien under Maryland law on plaintiffs' aircraft and filed a demand for arbitration on June 20, 2024, see FAC ¶¶ 44, 51.

B. Procedural History

A week after defendants demanded arbitration, plaintiffs filed the instant action, on June 28, 2024, alleging that defendants improperly asserted a lien on the aircraft and breached various provisions of the contract, FAC ¶¶ 60-78, and simultaneously moved to stay the arbitration pending resolution of this litigation, see Pls.' Stay Mot. at 1. Defendants oppose a stay of arbitration, highlighting that the Agreement mandates arbitration to resolve their dispute and vigorously denying plaintiffs' allegation, which is put forward in the plaintiffs' motion for a stay of arbitration, see Pls.' Mem. Supp. Stay Mot. (“Pls.' Mem.”) at 7-9, ECF No. 3-1, that they waived their right to seek arbitration. Defs.' Opp'n at 4-8. Defendants filed their opposition to plaintiffs' motion before moving to dismiss or stay the litigation pending arbitration “as their response to the Motion to Stay [was] due first.” Defs.' Opp'n at 2 n.1.

Consistent with their position that arbitration is required, defendants subsequently, on July 19, 2024, moved to dismiss or, in the alternative, stay this litigation. See Defs.' MTD. Due to plaintiffs filing of the Amended Complaint, however, see FAC, defendants' motion to dismiss was denied as moot, see Min. Order (Aug. 9, 2024). Soon thereafter, defendants filed their pending “motion to stay litigation until such time as the arbitration between the parties is concluded.” Defs.' Stay Mot. at 1. After both motions were fully briefed, the parties were directed to submit supplemental briefing to address “whether the parties' arbitration agreement delegates gateway questions of arbitrability to an arbitrator,” as the submitted briefing did not “cite[] let alone distinguish[]” applicable and relevant case law. Min. Order. (Oct. 10, 2024). All issues are now ripe for resolution. See Defs.' Supplemental Br. (“Defs.' Suppl.”), ECF No. 26; Pls.' Supplemental Br. (“Pls.' Suppl.”), ECF No. 27.

II. LEGAL STANDARD

The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., reflects “a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). “[A]rbitration is a matter of contract,” and the FAA “places arbitration agreements on an equal footing with other contracts and requires courts to enforce them according to their terms.” Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 67-68 (2010) (internal citation omitted). The Supreme Court has made clear that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone, 460 U.S. at 24-25; see also Khan v. Parsons Glob. Servs., Ltd., 521 F.3d 421, 424 (D.C. Cir. 2008) (“The Supreme Court has held that ‘questions of arbitrability must be addressed with a healthy regard for the federal policy favoring 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.'” (alteration in original) (quoting Moses H. Cone, 460 U.S. at 24-25)).

In addition to agreeing to arbitration as a method for resolving disputes, “parties may agree to have an arbitrator decide . . . gateway questions of arbitrability, such as whether the parties['] . . . agreement covers a particular controversy.” Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63, 67-68 (2019) (citation and internal quotation marks omitted). Any such provision is “simply an additional, antecedent agreement” about who, an arbitrator or a court, should decide gateway questions of arbitrability. Rent-A-Center, 561 U.S. at 70. “Such threshold arbitrability questions are generally presumed to be for a court to decide,” Commc'ns Workers of Am. v. AT&T Inc., 6 F.4th 1344, 1347 (D.C. Cir. 2021) (citing BG Grp. PLC v. Republic of Argentina, 572 U.S. 25, 34 (2014)), but “parties may delegate [them] to the arbitrator” if their “agreement does so by ‘clear and unmistakable evidence,'” Henry Schein, 586 U.S. at 69 (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)).

The FAA's Section 4 requires district courts to compel arbitration of arbitrable claims when a party to the arbitration agreement so requests. The Supreme Court, in relying on this FAA provision to hold that an arbitration agreement compelled arbitration of pendant state claims, has found that “[b]y its terms, the Act leaves no place for the exercise of discretion by the district court, but instead mandates that the district court shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original) (citing 9 U.S.C. §§ 3-4).^[1]

In evaluating whether the parties had an agreement to arbitrate courts rely on the standard for summary judgment, under Federal Rule of Civil Procedure 56, “as if it were a request for ‘summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate.'” Aliron Int'l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008) (citation omitted). While the FAA's Section 4 does not contemplate motions to stay arbitration proceedings, the analysis of such a motion is essentially the same as analyzing a motion to compel arbitration because the argument that “no agreement to arbitrate was entered . . . effectively raises the issue whether there was a meeting of the minds on the agreement to arbitrate.” Booker v. Robert Half Int'l, Inc., 315 F.Supp.2d 94, 99 (D.D.C. 2004), aff'd, 413 F.3d 77 (D.C. Cir. 2005). Thus, “the summary judgment standard is appropriate in cases where the District Court is required to determine arbitrability, regardless of whether the relief sought is an order to compel arbitration or to prevent arbitration.” Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003); see e.g., W&T Travel Servs., LLC v. Priority One Servs., Inc., 69 F.Supp.3d 158, 164 (D.D.C. 2014) (evaluating motion to compel arbitration and motion to stay arbitration under Federal Rule of Civil Procedure 56's summary judgment standard); Tower Ins. Co. of N.Y. v. Davis/Gilford, 967 F.Supp.2d 72, 76 (D.D.C. 2013) (analyzing cross motions that would determine whether plaintiff had to participate in arbitration under Federal Rule of Civil Procedure 56's summary...