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Answers Corp. v. First East Circular, LLC

United States District Court, E.D. Missouri, Eastern Division

October 18, 2016




         This matter is before the Court on Petitioner Answers Corporation's ("Answers") Petition to Compel Arbitration (ECF No. 1). In the Petition, Answers contends that it advanced payment to First East Circular, LLC ("FEC") for services which FEC has failed and refused to deliver. The Petition further avers that FEC is holding the funds and refuses to return the advances paid by Answers. (Pet. ¶ 1, ECF No. 1)


         On August 27, 2015, Answers and FEC, through its owner, Osaro Osagie ("Osagie"), entered into an agreement ("Agreement"), wherein Answers advanced sums to FEC in return for certain services. (Pet. ¶¶ 8-9) However, Answers alleges that FEC failed and refused to provide these services. (Pet. ¶ 9) The Agreement contained an arbitration provision which provided that any disputes arising under the Agreement be resolved through binding arbitration in Los Angeles, California.[1] (Pet. ¶ 10) On or about May 24, 2016, Answers filed a Demand for Arbitration ("Demand") with the American Arbitration Association - Commercial Arbitration Tribunal - Los Angeles, California ("AAA"), pursuant to the arbitration provision in the Agreement. (Pet. ¶ 11) The Demand alleges breach of contract against FEC for failure to perform its obligations under the Agreement. (Pet. ¶ 12) In addition, the Demand alleges fraudulent misrepresentation against FEC and Osagie for allegedly false statements they provided to Answers, which were made to induce Answers to enter into the Agreement. (Pet. ¶ 12)

         After Answers served the Demand on FEC and Osagie, AAA perfected Answers' filing as Case Number 01-16-0001-9565 and assigned a case management team. (Pet. ¶¶ 13-14) Osagie, on behalf of himself and FEC, initially communicated and cooperated with Answers an< the AAA with regard to the Arbitration. (Pet. ¶ 16) However, by the end of July 2016, Osagie ceased communicating with Answers and AAA, and he failed to follow through with commitments and deadlines regarding the Arbitration.[2] (Pet. ¶¶ 16-17; Schultz Decl. Exs. 2 &; ECF Nos. 19-1, 19-2)

         Answers then filed the instant Petition to Compel Arbitration on August 1, 2016. Answers has its principal place of business in St. Louis Missouri, and Osagie, the only member of FEC, is a citizen of California, making FEC a citizen of California for diversity jurisdiction purposes.[3] (Pet. ¶¶ 2-4) Answers contends, and the Court agrees, that this Court has subject matter jurisdiction under 28 U.S.C. § 1332 because there is complete diversity of citizenship, and the amount in controversy exceeds $75, 000. (Pet. ¶ 5) Further, by transacting business with Answers in Missouri, this Court has personal jurisdiction under Mo. Rev. Stat. § 506.500.1. Since the Respondents were served with the Summons, neither Osagie nor an attorney on behalf of FEC has answered or otherwise responded to the Petition or any other documents filed or provided by Petitioner in this case.

         Legal Standard

         The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., governs the agreement to arbitrate in this action. Under the FAA:

a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. Further, section 4 of the FAA provides that "a party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28 . . . for an order directing that such arbitration proceed in the manner provided for in such agreement." 9 U.S.C. § 4.

         The FAA's primary purpose is to '"ensur[e] that private arbitration agreements are enforced according to their terms.'" Torres v. Simpatico, Inc., 781 F.3d 963, 968 (8th Cir. 2015) (quoting AT&T Mobility LLC v. Conception, 563 U.S. 333, 344 (2011)). Further, the FAA "reflects 'a liberal federal policy favoring arbitration.'" Id. (quoting AT&T Mobility, 563 U.S. at 339 (internal quotations omitted)). However, a district court's initial role in addressing a challenge to an arbitration agreement is limited "to deciding 'whether the making of the agreement for arbitration or the failure to comply therewith' is at issue." MedCam, Inc. v. MCNC, 414 F.3d 972, 974 (8th Cir. 2005) (quoting 9 U.S.C. § 4). The inquiry is thus refined to 1) whether the arbitration agreement was validly made; and 2) whether the dispute at hand falls within the scope of the arbitration clause contained in the agreement. Id. at 974-75 (citations omitted). Courts interpret the scope of an arbitration agreement liberally, and any doubts are resolved in favor of arbitration. Id. at 975.


         Neither Osagie nor FEC has disputed the allegations contained in the Petition in this case, and the time for doing so has expired. Further, as stated above, this Court has jurisdiction to entertain Answers' Petition. Answers contends that the parties entered into an Agreement, which contained an enforceable agreement to arbitrate any disputes arising under the Agreement, and that FEC breached that contract. Further, Answers alleges that the fraudulent misrepresentation claim arises out of the dispute regarding the terms of the Agreement because the misrepresentations are integrally linked to the parties' contractual relationship. Petitioner Answers thus argues that arbitration is required for both claims.

         The Court notes that Osagie initially cooperated with Answers to find a time to discuss the issues and to notify the AAA whether Osagie preferred a single arbitrator or a panel of three arbitrators. (Schultz Decl. Ex. 3, ECF No. 19-2) While Osagie was aware of the pending litigation before this Court, along with the documents filed and ...

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