United States District Court, S.D. New York
OPINION & ORDER
VALERIE CAPRONI, United States District Judge.
Aurora Distributed Solar, LLC (“Aurora”) brings
this suit to enforce a guaranty executed by Defendant AKTOR,
S.A. (“AKTOR”) on behalf of its wholly owned
subsidiary, Biosar America, LLC (“Biosar”), which
has allegedly defaulted on a contract to construct solar
power plants for Aurora. Before Aurora initiated this
lawsuit, Biosar commenced an arbitration proceeding against
Aurora alleging breach of contract, and Aurora submitted a
counter-demand for arbitration against Biosar, also for
breach of contract. AKTOR moves to stay this lawsuit pending
the arbitration (“Motion”). For the following
reasons, AKTOR's Motion is GRANTED.
dispute arises out of a contract for the design and
construction of a large solar power project in Minnesota,
comprised of sixteen photovoltaic power plants at sixteen
different sites (the “Project”). Compl. ¶ 4
(Dkt. 1-1). On February 4, 2016, Aurora, as owner, and
Biosar, as contractor, entered into an Engineering,
Procurement, and Construction Agreement to design and
construct the Project (the “EPC Agreement”).
Id. In furtherance of the EPC Agreement, on February
4, 2016, AKTOR, as Biosar's parent company, agreed with
Aurora to guaranty Biosar's obligations under the EPC
Agreement (“Guaranty”). Id. ¶ 6.
The EPC Agreement contains a mandatory arbitration clause
stating that “any controversy, claim, or dispute
between the Parties arising out of or related to this
Agreement . . . shall be submitted for arbitration before a
single arbitrator in accordance with the provisions contained
herein and in accordance with the JAMS Comprehensive
Arbitration Rules.” Declaration of John Foust in
Support of AKTOR's Motion to Stay the Entire Action
Pending Arbitration (“Foust Decl.”), Ex. A ¶
14.2 (Dkt. 8-1). Under the terms of the Guaranty, Aurora may
enforce the Guaranty against AKTOR only if Biosar
“fails, neglects or refuses to perform any of its
[o]bligations as expressly provided in the [EPC]
Agreement.” Id., Ex. B ¶ 2 (Dkt. 8-2).
after executing the EPC Agreement, disputes arose between
Biosar and Aurora. Aurora claims Biosar failed to comply with
its obligations under the EPC Agreement to meet certain
Project deadlines, to comply with safety and environmental
obligations, and to pay its subcontractors' invoices.
Compl. ¶¶ 14-16. To that end, Aurora sent Biosar
several notices of default between July and November 2016.
Id. On the other side of the dispute, Biosar claims
that Aurora's interference with the design and
construction process resulted in delays and that Aurora
refused to pay subcontractors for costs associated with
change orders that Aurora allegedly indicated it would pay.
Def. Mem. 4-5 (Dkt. 9).
January 26, 2017, Biosar initiated arbitration against Aurora
pursuant to the EPC Agreement, and on February 8, 2017,
Aurora submitted a counter-demand. Foust Decl., Ex. C (Dkt.
8-3); id., Ex. D (Dkt. 8-4). Also on February 8,
2017, Aurora filed this action against AKTOR in New York
Supreme Court, asking the court to enforce the Guaranty.
Id., Ex. E (Dkt. 8-5). Specifically, Aurora wants
AKTOR to discharge various subcontractors' liens and
reimburse Aurora for costs, damages, payments to
subcontractors, and a labor bonus incurred by Aurora due to
Biosar's alleged defaults. Compl. ¶¶ 26-36,
38-48, 50-58, 60-69, 71-80, 82-91, 100, 103-08. Aurora also
seeks a declaratory judgment that AKTOR's liability under
the Guaranty is distinct from any determination made in the
arbitration and that AKTOR is liable for any breach of the
EPC Agreement by Biosar as determined in the arbitration.
Id. ¶ 120(j). On March 20, 2017, AKTOR removed
the action to this Court, Notice of Removal (Dkt. 1), and
promptly moved for a stay pending arbitration.
court has the inherent power to stay proceedings in the
interest of saving “time and effort for itself, for
counsel, and for litigants.” WorldCrisa Corp. v.
Armstrong, 129 F.3d 71, 76 (2d Cir. 1997) (quoting
Nederlandse Erts-Tankersmaatschappij, N.V. v. Isbrandtsen
Co., 339 F.2d 440, 441 (2d Cir. 1964)). This
discretionary power to stay proceedings should be exercised
only in rare circumstances. Landis v. N. Am. Co.,
299 U.S. 248, 255 (1936). Such circumstances include those in
which one of the parties is involved in a pending arbitration
involving similar issues. Nederlandse, 339 F.2d at
441. Courts have consistently granted stays pending
arbitration in cases such as this one in order to minimize
inconsistent results and conserve judicial resources.
See, e.g., British Marine PLC v. Aavanti
Shipping & Chartering Ltd., No. 13 CIV. 839 (BMC),
2014 WL 2475485, at *5 (E.D.N.Y. June 3, 2014); In re A2P
SMS Antitrust Litig., 972 F.Supp.2d 465, 500 (S.D.N.Y.
2013); Alghanim v. Alghanim, 828 F.Supp.2d 636, 665
the moving party's burden to demonstrate that a stay is
justified. WorldCrisa Corp., 129 F.3d at 76. The
movant first must establish that “there are issues
common to the arbitration and the court proceeding, ”
and that “those issues will be finally determined by
arbitration.” Am. Shipping Line, Inc. v. Massan
Shipping Indus. Inc., 885 F.Supp. 499, 502 (S.D.N.Y.
1995) (citing Sierra Rutile Ltd. v. Katz, 937 F.2d
743, 750 (2d Cir. 1991)). If the movant makes the required
initial showing, it must then show that it “will not
hinder the arbitration, that the arbitration will be resolved
within a reasonable time, and that such delay that may occur
will not cause undue hardship to the non-moving
parties.” Id. (citing Sierra, 937
F.2d at 750). Although the movant bears that burden, the
courts have “substantial discretion to stay . . . the
proceedings pending arbitration as a means to promote
judicial efficiency and to control their dockets.”
Argus Media Ltd. v. Tradition Fin. Servs. Inc., No.
09 CIV. 7966 (HB), 2009 WL 5125113, at *3 (S.D.N.Y. Dec. 29,
has satisfied its initial burden as there are common issues
which will be finally determined by the arbitration.
Aurora's counter-demand for arbitration alleges that
Biosar has breached the EPC Agreement because it failed to
comply with safety and environmental requirements, meet
Project deadlines, and pay its subcontractors. Foust Decl.,
Ex. D at 2-3. Similarly, the Complaint in this action alleges
that Biosar breached the EPC Agreement by failing to meet
certain Project deadlines, to comply with safety and
environmental obligations, and to pay its subcontractors.
Compl. ¶¶ 14-16, 26-28, 38-40, 50-51, 60-62, 71-73,
82-84. AKTOR's liability under the Guaranty hinges on
whether Biosar breached the EPC Agreement, which is the
central issue in the arbitration. Thus, the arbitrator will
make factual determinations regarding Biosar's putative
breach of the EPC Agreement that are also necessary to
resolve Aurora's claims under the Guaranty. “It is
appropriate, as an exercise of the district court's
inherent powers, to grant a stay ‘where the pending
proceeding is an arbitration in which issues involved in the
case may be determined.'” Sierra, 937 F.2d
at 750 (quoting Nederlandse, 339 F.2d at 441);
see also British Marine, 2014 WL 2475485, at *5
(staying litigation on the ground that plaintiff had to
prevail in arbitration against the contracting party in order
to succeed in litigation on claims against other defendants
as guarantors because those claims would be moot if there
were no breach of contract in the first instance).
issue of Biosar's liability for breach of the EPC
Agreement is also capable of being finally determined in the
arbitration proceedings. Neither party has indicated it will
not be bound by the arbitration. Cf. Massan, 885
F.Supp. at 502 (holding the common issue would not be finally
determined by the arbitration because the parties indicated
they would not be bound by the arbitration). Moreover,
because, as explained above, both the arbitrator and this
Court must determine whether Biosar breached the EPC
agreement, collateral estoppel is likely to apply in this
litigation as to whether Biosar breached the EPC agreement.
See Bear, Stearns & Co. v. 1109580 Ontario,
Inc., 409 F.3d 87, 91 (2d Cir. 2005) (“An
arbitration decision may effect collateral estoppel in a
later litigation or arbitration if the proponent can show
‘with clarity and certainty' that the same issues
were resolved.” (quoting Postlewaite v.
McGraw-Hill, Inc., 333 F.3d 42, 49 (2d Cir. 2003))).
has also carried its burden with respect to delay and
hardship. Aurora has not asserted that AKTOR will hinder the
arbitration, and there is no indication that the arbitration
will not proceed in a reasonable time despite Aurora's
contention to the contrary. Pl. Opp. at 15-16 (Dkt. 13). Both
Aurora and Biosar have demonstrated a willingness to
cooperate in arbitration, and an arbitrator was appointed as
of May 1, 2017. Def. Reply Br. at 9 (Dkt. 18). Proceeding
with the arbitration will not cause Aurora any undue hardship
as Aurora itself agreed to participate in the arbitration and
to be bound by its ruling. Should there be substantial delay in
the arbitration, a claim of "undue hardship" by
Aurora could then be reconsidered upon a motion to vacate the
stay or upon AKTOR's motion for a renewal of the stay.
See Nederlandse, 339 F.2d at 442. The Court expects,
however, that the parties to the arbitration will proceed in
the decision "to stay litigation among the
non-arbitrating parties pending the outcome of arbitration
.... is one left to the district court... as a matter of its
discretion to control its docket." Moses H. Cone
Mem 7Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 21 n.23 (1983); see also Massan 885 F.Supp. at
502 (decision to issue "a stay is firmly within a
district court's discretion"). Here, because the
issuance of a stay pending the arbitration will conserve
judicial resources and avoid inconsistent ...