No. 17. Defendants oppose that motion. Docket No. 19. For the reasons which follow, both motions are granted.
This action was commenced in the United States District Court for the Southern District of New York and transferred to this district by order of United States District Judge Harold Baer, Jr. Ryan v. Allen, 1997 U.S. Dist. LEXIS 13783, No. 97- CIV-55, 1997 WL 567717 (S.D.N.Y. Sept. 11, 1997). Plaintiff's complaint alleges that the individual and corporate defendants wrongfully induced plaintiff to make loans to further development of mining interests in or around Medellin, Colombia. Plaintiff alleges that defendants Robert Allen and Thomas Ward owned controlling interests in various corporate entities, including Rio de Oro, S.A. ("RIO"), the Bullet Group and Andes Colombianos Mineria & Exploracion, S.A. ("ACME"), which were used to defraud individual investors like plaintiff.
In 1994, plaintiff became involved with defendants' mining endeavor in South America. Plaintiff claims that defendants falsely told him that, through their connections within Colombia, defendants had obtained certain interests to gold claims in that nation. According to plaintiff, defendants stated that the gold could be commercially mined, that projected yield from the mines was over sixteen million ounces of gold, that defendants were experienced in the mining industry, and that following certain initial investments, the remaining costs of developing the Colombian mines could be borrowed against future profits.
In reliance on these representations, plaintiff made a series of loans to defendants to finance initial steps in the mining process. These loans were memorialized in written agreements (collectively "the loan agreements") on November 27, 1995 ($ 200,000 from plaintiff to RIO); March 12, 1996 ($ 33,333 from plaintiff to Allen for ACME's benefit); and March 16, 1996 ($ 33,333 from plaintiff to Ward for ACME's benefit).
Plaintiff now claims that the representations about the alleged claims to gold interests in Colombia and the potential profitability of any mines there were false and that defendants fraudulently induced his investment. He now asserts claims sounding in fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract, money had and received; an action for an accounting; and statutory claims based on the securities acts and RICO.
A. Motion for a Stay Pending Arbitration
Plaintiff correctly notes that a district court lacks authority to compel parties to arbitrate a matter outside of that court's district. See Oil Basins Ltd. v. Broken Hill Proprietary Co., 613 F. Supp. 483, 486 (S.D.N.Y. 1985); Couleur Int'l Ltd. v. Saint-Tropez West, 547 F. Supp. 176, 177-78 (S.D.N.Y. 1982). Those cases, however, also recognize that a court may stay a pending action while a party seeks an order compelling arbitration in the proper forum. Id.; see also Management Recruiters of Albany, Inc. v. Management Recruiters Int'l, Inc., 643 F. Supp. 750, 753 (N.D.N.Y. 1986).
Section 3 of the Federal Arbitration Act provides:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.