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BDO Seidman, LLP v. Kirschner

July 16, 2009

BDO SEIDMAN, LLP, PLAINTIFF,
v.
MARC S. KIRSCHNER, IN HIS CAPACITY AS THE LIQUIDATION TRUSTEE OF THE LE-NATURE'S LIQUIDATION TRUST, DEFENDANT.



The opinion of the court was delivered by: Ambrose, Chief District Judge

MDL No. 2021

MISC No. 09-162

OPINION AND ORDER OF COURT SYNOPSIS

Pending before the court is Defendant Marc Kirschner's Motion to Compel Arbitration and to Stay or Dismiss This Action, filed in Defendant's capacity as the Liquidation Trustee of the Le-Nature's Liquidation Trust. (Docket No. 17 at 9-cv-634 and Docket No. 14 at 9-mc-162).*fn1 This matter, which is part of a larger group of lawsuits involving Le-Nature's, Inc., involves the cause and consequences of LeNature's bankruptcy, and a fraudulent scheme perpetrated by Le-Nature's CEO. For a portion of time, pursuant to engagement letters between the parties, BDO Seidman, LLP ("BDO") served as Le-Nature's auditors.

In brief, BDO filed suit against Kirschner seeking to rescind and cancel engagement letters entered into between BDO and Le-Nature's, and also to recover damages for alleged breaches of a subsequent mediation agreement between the parties. Presently, Defendant has filed a Motion to Compel Arbitration and to Stay or Dismiss Action, and contends that the parties' engagement letters compels them to arbitrate the charges in the Complaint.

For the following reasons, the Motion will be granted in part and denied in part.

OPINION

Plaintiff does not dispute the applicability of the Federal Arbitration Act ("FAA"), 9 U.S.C. §1 et seq.. The United States Supreme Court has repeatedly emphasized, as illustrated by the FAA, that "questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration." E.g., Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed. 2d 765 (1983). When determining whether a dispute falls within the scope of the agreement, the court may not stay arbitration unless the court can state "with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." United Steel, Paper & Forestry, Rubber, Mfg., Energ., Allied-indus. & Serv. Workers Local Union 943 v. E.I. Dupont De Nemours & Co., No. 08-1911, 2009 U.S. App. LEXIS 15081, at *10 (3d Cir. July 2, 2009).

The Third Circuit Court of Appeals has delineated the scope of the district court's narrow inquiry, under circumstances such as those before me:

Under the FAA the district court must be satisfied that the parties entered into a valid arbitration agreement. In conducting this inquiry the district court decides only whether there was an agreement to arbitrate, and if so, whether the agreement is valid. 9 U.S.C. § 2. In so deciding, the district court is not to consider the merits of the claims giving rise to the controversy, but is only to determine, as we have stated, whether there is a valid agreement to arbitrate. Once such an agreement is found, the merits of the controversy are left for disposition to the arbitrator. Moreover, there is a strong presumption in favor of arbitration, and doubts " concerning the scope of arbitrable issues should be resolved in favor of arbitration."

Great Western Mortg. Corp. v. Peacock, 110 F.3d 222, 228 (3d Cir. 1997).

Therefore, my review is limited to whether a valid agreement existed, and whether Plaintiff's claims fall within its scope.

The parties do not dispute that they entered into an agreement to arbitrate. Each of the engagement letters between the parties contains the following clause:

If any dispute, controversy, or claim arises in connection with the performance or breach of this agreement (including disputes regarding the validity or enforceability of this agreement) and cannot be resolved by facilitated negotiations (or the parties agree to waive that process), then such dispute, controversy, or claim shall be settled by arbitration. ...


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