District Court Compels Arbitration Pursuant to Operating Agreement
The action arises out of a foreclosure sale in which property was conveyed to First 100 LLC. Subsequent to the foreclosure sale, First 100 conveyed the property to Alan and Theresa Lahrs as trustees of the Lahrs Family Trust. In this action, the Lahrs filed crossclaims against First 100 alleging, among other things, intentional and negligent misrepresentation, fraudulent inducement, and breach of the covenant of good faith and fair dealing. An operating agreement between First 100 and the Lahrses contained a binding arbitration clause providing that “[a]ny dispute, controversy, or claim arising out of or relating to this [a]greement or the breach thereof shall solely be settled by arbitration under the Commercial Arbitration rules of the American Arbitration Association.” First 100 moved to compel arbitration.
The U.S. District Court for the District of Nevada granted the motion and stayed the action pending the arbitration. The court explained that in addressing a motion to compel arbitration, the court’s role is “limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Further, there is a strong federal policy that favors arbitration, and a court will not accept a controversy unless it may be said with positive assurance that the arbitration clause does not cover the dispute. The court held that the crossclaims and the issue of liquidated damages were subject to the arbitration agreement.
Bank of N.Y. Mellon v. Christopher Cmtys., No. 2:17-cv-01033 (D. Nev. Sept. 9, 2019).