The opinion of the court was delivered by: SIDNEY STEIN, District Judge
In these related actions, plaintiffs Samyak Veera and Andrew D.
Beer move to stay arbitration proceedings initiated by
defendants. Because plaintiffs signed the agreements containing
the arbitration clause solely as agents acting on behalf of
disclosed principals, and because plaintiffs did not knowingly
exploit the agreements and receive benefits directly from the
agreements, the motion is granted.
Plaintiffs were both managing directors of Equilibrium Currency
Trading, LLC. (Decl. of Samyak Veera filed in case no. 05 Civ.
2145 ("First Veera Decl.") ¶ 3; V. Pet. of Andrew D. Beer dated
Feb. 28, 2005 ¶ 1, Ex. 8 to Pl. Beer's Mem. of Law in Supp. of
His Mot. to Stay Arb.). Beer also was president of Bricolage
Capital, LLC. (V. Pet. of Andrew D. Beer dated Mar. 1, 2005 ¶ 1,
Ex. 7 to Pl. Beer's Mem. of Law).
Both Equilibrium and Bricolage (collectively, the "Investment
Companies") engaged in investment management for clients, (Veera
Decl. dated Apr. 23, 2005 ¶ 1; Beer Pet. dated Mar. 1, 2005 ¶ 1,
Ex. 7 to Pl. Beer's Mem. of Law), and defendants entered into two
"Currency Management and Trading Authorization Agreements" and
one "Investment Management Agreement" (collectively, the
"agreements") with the Investment Companies. One agreement
identified Equilibrium as the manager and Dean and Kathleen
Janssen as the "client." Kathleen Janssen signed on behalf of
herself; Veera signed the agreement under the signature line for
Equilibrium, writing "Managing Director" in the line set forth as
"Title." (Currency Management and Trading Authorization
Agreement, Ex. A to First Veera Decl.).
The second agreement identified Equilibrium as the Manager and
White Buffalo, LLC as the "client," and was signed by defendant
Allan Green. (Currency Management and Trading Authorization
Agreement dated June 2, 2000, Ex. A to Decl. of Samyak Veera
filed in case no. 05 Civ. 3788 ("Second Veera Decl.")). However, Veera did not sign
this agreement at all; instead, plaintiff Beer signed on behalf
of Equilibrium as a managing director. (Id.).
The third agreement was between Kathleen Janssen and Bricolage.
Bricolage was the Manager. This agreement does not identify any
person or entity as the client and bears only Kathleen Janssen's
signature; neither Veera nor Beer signed the document. (Investment
Management Agreement, Ex. 1 to Pl. Beer's Mem. of Law).
Thus, in each document, the Investment Company that was a party
to the agreement was identified as "the Manager." Each agreement
expressly specified that it was "entered into by and between" the
relevant Investment Company as "Manager" on one hand and the
"client" on the other. Plaintiffs signed the agreements as
"Managing Director" of the relevant Investment Company. In
particular, each signature line specified that the Investment
Company was the signatory, and was being represented "By"
plaintiffs, who also set forth their "Title" in the Investment
Company. The agreements never referred to plaintiffs
individually. (See Currency Management and Trading
Authorization Agreement, Ex. A to First Veera Decl.; Currency
Management and Trading Authorization Agreement dated June 2,
2000, Ex. A to Second Veera Decl.; Investment Management
Agreement, Ex. 1 to Pl. Beer's Mem. of Law).
The agreements contained another important provision
paragraph 5, titled "Liabilities of the Manager." As noted above,
each contract defines the relevant Investment Company to be the
"Manager." Paragraph 5 states in relevant part as follows:
Positions, assets, contracts, and transactions
conducted by the Manager for the Client's Account are
for the account and risk of the Client and are not
guaranteed by the Manager. Neither the Manager nor
any of its officers, directors, employees or agents
shall be liable for any loss, expense, cost or
liability arising out of any error in judgment or any
action or omission hereunder, including any
instruction given to the Custodian by anyone other
than an officer, director, employee or agent of the
Manager, unless arising out of their negligence,
malfeasance or bad faith. The Manager may rely on any
notice or communication (written or oral) reasonably
believed by it to be genuine. These limitations shall
not act to relieve the Manager from any
responsibility or liability for any responsibility,
obligation or duty that the Manager may have under
state or federal law that is not waivable by
(Currency Management and Trading Authorization Agreement, Ex. A
to First Veera Decl.; Currency Management and Trading
Authorization Agreement dated June 2, 2000, Ex. A to Second Veera
Decl.; Investment Management Agreement, Ex. 1 to Pl. Beer's Mem.
After entering into the agreements, the clients allegedly
suffered substantial losses in connection with a tax strategy
they claim that plaintiffs and the Investment Companies devised
and effectuated. (Statement of Claim dated Dec. 23, 2004, Ex. C
to First Veera Decl.). The clients then served Veera and Beer,
among others, with demands for arbitration and statements of
claim alleging breach of fiduciary duty, fraud, negligent
misrepresentation, malpractice, breach of contract, conspiracy
and other wrongs. (Id.; Demand for Arbitration dated Dec. 23,
2004, Ex. B to First Veera Decl.; Demand for Arbitration dated
Dec. 28, 2004, Ex. B to Second Veera Decl.). Specifically, the
Janssens, the Greens, and White Buffalo served demands for
arbitration upon Veera and Beer.
In response, Veera filed two litigations in this Court: one
against the Janssens and one against the Greens and White
Buffalo. Both suits seek a declaration that the agreements did
not bind Veera personally to arbitration, as well as prohibiting
the arbitrations from proceeding.
Beer filed two petitions in New York State Supreme Court: one
against the Janssens and one against the Greens and White
Buffalo. Both petitions sought judgments staying the
arbitrations. Defendants then removed the two Beer actions to
federal court on the basis of diversity jurisdiction. All four
actions are now before this Court as related actions. Since the
relevant facts are identical with respect to each agreement and
all parties, this Opinion sets forth the reasoning applicable to
the motions to stay arbitration in all four actions. II. Legal Standard
"[T]he 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 also 9 U.S.C. § 4 (1999).
The summary judgment standard, set forth in Fed.R.Civ.P.
56(c), provides that summary judgment is appropriate when "there
is no genuine issue as to any material fact" and "the moving
party is entitled to judgment as a matter of law." Fed.R. Civ.
P. 56(c); see also Bensadoun, 316 F.3d at 175-78; Oppenheimer
& Co., Inc. v. Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995). If
the moving party has "substantiated the entitlement [to stay
arbitration] by a showing of evidentiary facts, the party
opposing may not rest on a denial but must submit ...