The following e-filed documents, listed by NYSCEF document number (Motion 003) 27, 28, 29, 30, 31, 32, 33, 34, 71, 72, 73, 74, 75, 76, 77, 78, 80 were read on this motion to/for COMPEL ARBITRATION. DECISION + ORDER ON MOTION Before the Court are two motions by defendant United States of America Rugby Football Union (“USA Rugby”) (1) to compel arbitration and stay this action (motion seq. 003); and (2) in the alternative, to dismiss the complaint pursuant to CPLR 3211(a)(1), (5) and (7) based on documentary evidence, the statute of limitations, and failure to state a cause of action (motion seq. 004). USA Rugby moves only on behalf of itself. The two co-defendants World Rugby Limited and World Rugby Tournaments Limited have filed a separate motion to dismiss pursuant to CPLR 3211(a)(1), (5), (7) and (8) (motion seq. 005). The Court heard oral argument on all three motions on September 23, 2019 and reserved decision. This decision addresses only the motions by USA Rugby. For the reasons stated below, the motion by USA Rugby to compel arbitration and stay these proceedings is granted to the extent of compelling arbitration, and the motion to dismiss the complaint is denied as moot. This dispute concerns the parties’ communications and agreements related to the planning and hosting of a large-scale, seven-on-seven annual rugby tournament in the United States (the “Annual Tournament”) sanctioned by the global governing body defendant World Rugby Limited (“World Rugby”). On August 17, 2005, plaintiffs USA Sevens LLC (“USA Sevens”) and its new member American International Media LLC (“AIM”) entered into three interrelated agreements with defendant USA Rugby, the national governing body for the sport of rugby in the United States and the founding member of USA Sevens. As only one of the three agreements contains an arbitration clause, the issue for determination here is whether the dispute raised in this lawsuit falls within the terms of that agreement such that arbitration of the dispute should be ordered. One of the three interrelated August 17, 2005 agreements is a lengthy Purchase Agreement whereby USA Rugby sold 90 percent of its interest in USA Sevens to AIM (NYSCEF Doc. No. 31). The Purchase Agreement required that USA Rugby execute an Assignment of Rights, a one-page document through which USA Rugby assigned to the reconstituted USA Sevens LLC the right of USA Rugby to host a Sevens Tournament (NYSCEF Doc. No. 76).1 The other agreement in the series, also referenced in the Purchase Agreement, is entitled “USA Sevens LLC Amended and Restated Limited Liability Company Agreement” (the “LLC Agreement”) whereby USA Rugby, the founder of USA Sevens, agreed to accept AIM as a member based on USA Rugby’s transfer of 90 percent of its interest to AIM (NYSCEF Doc. No. 32). This lengthy Agreement, which functions as an Operating Agreement for the LLC, outlines the parties’ rights and responsibilities regarding the principal business of USA Sevens, which centers on organizing, staging, and conducting the “Annual Tournament” and other seven-on-seven rugby tournaments. The only agreement that contains an arbitration clause is the LLC Agreement. Article XI of that Agreement is entitled “Dispute Resolution.” Section 11.1 confirms the intended broad application of the Dispute Resolution procedure set forth in the LLC Agreement, stating that: 11.1 General. Any disagreement, dispute or controversy arising out of or relating to the subject matter of this Agreement or the interpretation hereof or any arrangements relating hereto or contemplated herein or the breach or termination hereof (each, individually, a “Dispute”) shall be resolved and settled exclusively and finally pursuant to the terms of this Article XI. It is intended by the parties that any equitable relief granted by an arbitrator shall be specifically enforced by any court of competent jurisdiction. Section 11.2 of Article XI indicates that the first step in the Dispute Resolution procedure is to submit the dispute to the other Member and then, if necessary, to the executive management of the Members. If the dispute remains unresolved after twenty days, “the parties shall proceed in accordance with Section 11.3.” Section 11.3 of Article XI is an extremely broad arbitration clause, which states in relevant part that: 11.3 Arbitration. Any Dispute, which has not be[en] resolved pursuant to Section 11.2, shall be settled by arbitration, rather than by court proceedings, in accordance with the provision of this Section 11.3. The determination of the arbitrator shall be conclusive and binding upon the parties to such arbitration proceeding and such award may be filed with the clerk of the court for the county and state, or in the United States District Court for the same district as a final adjudication of the claim involved…. The dispute here turns on plaintiffs’ complaint that defendants are unlawfully interfering with the right of plaintiff USA Sevens LLC and its majority member AIM to host the Annual Tournament in the United States (Complaint, 4, NYSCEF Doc. No. 30). This Court finds that the dispute falls within the scope of the broad arbitration clause as it relates to the operation of USA Sevens LLC and the rights and obligations of its members, which include plaintiff AIM and defendant USA Rugby.2 In opposition to this motion, plaintiffs argue that their claims do not invoke the parties’ rights or obligations under the LLC Agreement but instead relate to the Assignment Agreement, pursuant to which USA Rugby assigned to the reconstituted USA Sevens LLC the right of USA Rugby to host a Sevens Tournament. The Court disagrees. As explained above, the parties entered into three interrelated agreements in 2005: the Purchase Agreement whereby plaintiff AIM purchased the 90 percent interest of defendant USA Rugby in USA Sevens LLC; the Assignment Agreement whereby USA Rugby simply assigned to AIM, as the new majority member of USA Sevens, the hosting rights; and the LLC Agreement, which governs the rights and obligations of the parties to the reconstituted USA Sevens LLC and the procedure for the company’s operation, which includes the hosting of the tournament. The Court finds that plaintiffs’ claims necessarily invoke the rights and obligations set forth in the LLC Agreement that are subject to arbitration. The dispute does not relate to the terms of the Purchase Agreement, as there is no claim that the sale was not effectuated pursuant to the terms of that Agreement. Nor is the Assignment Agreement directly implicated, as there is no claim that the hosting rights were not assigned to the reconstituted company as required by the Purchase Agreement. Rather, the dispute is whether USA Rugby, which transferred its majority interest in USA Sevens to AIM, is improperly interfering with the operation of USA Sevens and the rights of the majority member, as set forth in the LLC Agreement. Moreover, whether New York law applies, as defendant argues, or Delaware law applies, as plaintiffs argue, public policy favors arbitration. See e.g. Rio Algom v. Sammi Steel Co., 168 A.D.2d 250, 251 (1st Dept. 1990), citing Matter of Nationwide Gen. Ins. Co. v. Investors Ins. Co., 37 NY2d 91, 95 (“the policy of this State [New York] is to favor and encourage arbitration as a means of expediting the resolution of disputes and conserving judicial resources”); see also Worldwide Ins. Grp. v. Klopp, 603 A.2d 788, 790 (Del. Supr. 1992) (“The public policy of this State [Delaware] favors the resolution of disputes through arbitration”). In sum, due to the breadth of the arbitration clause and the public policy favoring arbitration, the Court finds that plaintiffs’ claims against defendant USA Rugby should proceed to arbitration. The Court, in its discretion, declines to stay this action as it relates to the co-defendants, as the co-defendants are not parties to the LLC Agreement and no party claims that the co-defendants must proceed to arbitration. Accordingly, it is ORDERED that the motion (seq. 003) by defendant USA Rugby is granted to the extent of severing the claims of USA Rugby and compelling arbitration of those claims, but the motion is denied insofar as it seeks to stay the proceedings; and it is further ORDERED that the motion (seq. 004) by defendant USA Rugby to dismiss the complaint is granted without prejudice to the prosecution of the claims in arbitration as ordered above. Dated: October 2, 2019 CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION GRANTED DENIED X GRANTED IN PART OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
