McMILLAN v. UNIQUE PLACES, LLC

McMillan v. Unique Places, LLC, 2015 NCBC 4.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
CATAWBA COUNTY 14 CVS 2179

GEORGE “ERIK” McMILLAN, ENIGMA
UNIVERSAL TECHNOLOGIES, LLC
d/b/a ENIGMA LED, and KISA
McMILLAN,

Plaintiffs,
AMENDED ORDER AND OPINION
v.

UNIQUE PLACES, LLC, JOSH HAWN,
JEFFREY SCOTT, JEFF FISHER, UP
PROPERTY 1, LLC, ANN SHY, and
WARREN HENRY HUNTSMAN,

Defendants.

{1} THIS MATTER is before the Court upon Defendants Unique Places,

LLC (“Unique Places”), Josh Hawn, Jeffrey Scott, Jeff Fisher, and UP

Property 1, LLC’s (“UP Property 1”) (collectively, “Defendants”) Motions to

Stay Proceedings and Compel Arbitration (the “Arbitration Motions”) and

Defendant Josh Hawn’s Motion for Appointment of a Receiver (the “Motion for

a Receiver”) in the above-captioned case.

{2} The Court, having considered the Motions, affidavits, and briefs in

support of and in opposition to the Motions, as well as the arguments of

counsel at the December 17, 2014 hearing in this matter, hereby GRANTS the

Arbitration Motions and DENIES the Motion for a Receiver without prejudice

to Defendant Hawn’s right to seek such relief in any arbitration proceedings

between these parties for the reasons stated below.

Law Offices of Matthew K. Rogers, PLLC, by Matthew K. Rogers, for
Plaintiffs.
Patrick, Harper & Dixon, LLP, by Michael J. Barnett, and Forrest Firm,
P.C., by Michael R. Epperly, for Defendants Unique Places, LLC, Josh
Hawn, Jeffrey Scott, Jeff Fisher, and UP Property 1, LLC.

York Williams, LLP, by Gregory C. York, for Defendants Unique Places,
LLC, Jeffrey Scott, Jeff Fisher, and UP Property 1, LLC.

Brooks, Pierce, McClendon, Humphrey & Leonard, LLP, by Clint S. Morse,
for Defendant Josh Hawn.

Bledsoe, Judge.
I.
BACKGROUND

{3} Plaintiff George “Erik” McMillan has invented and patented several

types of LED lights and high efficiency improvements to LED lights. He and

his wife, Plaintiff Kisa McMillan (together, the “McMillans”), founded the

predecessor to Plaintiff Enigma Universal Technologies, LLC d/b/a Enigma

LED (“Enigma”), in order to manufacture LED lights and to foster, develop,

and monetize Erik McMillan’s research and associated inventions. The

McMillans subsequently sought investors to provide both capital and “sweat

equity” to further the growth of their business.

{4} In early 2013, Defendants Hawn, Scott, and Fisher indicated their

interest in investing in the McMillans’ business. Fisher manages Defendants

Unique Places and UP Property 1.

{5} On May 6, 2013, the McMillans and Defendants Hawn, Scott, and

Fisher executed a Memorandum of Understanding (“MoU”), a three-page

document describing the basic parameters of the parties’ agreement. The

MoU contemplated the formation of a new entity, Enigma, which would
continue the McMillans’ business and which would be owned 35% by Erik

McMillan, 27.5% by Hawn, 27.5% by Fisher, and 4% by Scott. The MoU also

contemplated that Fisher would make an initial capital contribution to

Enigma of approximately $75,000, which was intended to cover the McMillans’

salaries, and that Fisher and Hawn would, among other things, obtain and

personally guarantee a line of credit for Enigma. Scott agreed to work at

Enigma one day each week in exchange for his equity interest.

{6} On or about May 30, 2013, Hawn provided Erik McMillan with a

draft version of Enigma’s Operating Agreement (the “Original Agreement”).

Spanning more than thirty pages, the Original Agreement, which reflected

most of the material terms of the MoU and included a merger clause, set forth

a more detailed and sophisticated embodiment of the parties’ agreement than

that delineated in the three-page MoU. Plaintiffs aver that either Hawn or

Fisher drafted the Original Agreement. Erik McMillan informed Hawn that

he was unable to understand many of the terms included in the Original

Agreement, but that he would rely on Hawn and Fisher to ensure that the

Original Agreement was consistent with the MoU. Fisher responded,

according to Plaintiffs, that the Original Agreement did not alter or override

the MoU, but instead “complemented” and “supplemented” the MoU. (Am.

Compl. ¶ 86.) Heeding Fisher’s advice, Plaintiffs retained Defendant Ann

Shy, an attorney, to assist with their review and understanding of the

Original Agreement.
{7} On June 21, 2013, Fisher presented a finalized version of the

Original Agreement to Erik McMillan for his signature. Erik McMillan

indicated that he was working and did not have time to read the Original

Agreement, but that he would sign it so long as it reflected the terms of the

MoU. Fisher purportedly responded that the Original Agreement and the

MoU were “tied hand in hand” and that the Original Agreement was

essentially an “add on” to the MoU. (Am. Compl. ¶ 92.) Erik McMillan signed

the Original Agreement without reading it.

{8} Page 34 of the Original Agreement includes the following provision,

which was not included in the MoU:

7.4 Governing Law; Arbitration. . . . Any dispute arising out of or in
connection with this Agreement or the breach thereof shall be decided
by arbitration to be conducted in Durham, North Carolina in
accordance with the then prevailing commercial arbitration rules of the
American Arbitration Association. All determinations made in any
such arbitration proceeding shall be final and conclusive on all parties,
and judgment incorporating such determinations may be entered in any
court of competent jurisdiction. . . .

(Orig. Ag. § 7.4, p. 34.)

{9} The parties subsequently executed an Amended and Restated

Operating Agreement for Enigma (the “Amended Agreement”).1 Provision

13.4 on page 31 of the Amended Agreement sets forth the same language

included in provision 7.4 of the Original Agreement, supra. Erik McMillan

asserts that he did not read the Amended Agreement and was unaware of its

1The purpose of the Amended Agreement was to address tax issues not pertinent to the
Court’s resolution of the present Motions.
arbitration clause at the time he signed it. Plaintiffs contest the validity of

both the Original Agreement and the Amended Agreement (collectively, the

“Agreements”).

{10} Thereafter, discord ensued among the parties concerning control over

Enigma and its operations, prompting Plaintiffs to file the present lawsuit on

September 3, 2014. This action was designated a complex business case and

assigned to the undersigned that same day.

{11} On September 8, 2014, Defendants filed the present Motions,

requesting that Plaintiffs’ claims be resolved in arbitration in accordance with

the Agreements.2

{12} On October 3, 2014, Plaintiffs filed an Amended Complaint,

supported by thirty-four (34) exhibits, in addition to Plaintiffs’ response in

opposition to the Motions.

{13} The Court held a hearing on the Motions on December 17, 2014. The

Motions are now ripe for resolution.

II.
ANALYSIS

{14} North Carolina courts apply the following standard in determining

whether a dispute is properly subject to arbitration:

As a general matter, public policy favors arbitration. However,
before a dispute can be ordered resolved through arbitration,
there must be a valid agreement to arbitrate. Thus, whether a
dispute is subject to arbitration is a matter of contract law.
Parties to an arbitration must specify clearly the scope and

2 Defendants filed two separate Motions seeking to compel arbitration with respect to the
claims asserted by (i) Erik McMillan and Enigma; and (ii) Kisa McMillan.
terms of their agreement to arbitrate. Moreover, a party cannot
be forced to submit to arbitration of any dispute unless he has
agreed to do so.

The question of whether a dispute is subject to arbitration is an
issue for judicial determination. . . . The determination of
whether a dispute is subject to arbitration involves a two
pronged analysis; the court must ascertain both (1) whether the
parties had a valid agreement to arbitrate, and also (2) whether
the specific dispute falls within the substantive scope of that
agreement.

Raspet v. Buck, 147 N.C. App. 133, 135—36, 554 S.E.2d 676, 678 (2001)

(citations and quotation marks omitted).

Existence of a Valid Agreement to Arbitrate

i. Erik McMillan

{15} Plaintiffs contend that Erik McMillan is not bound by a valid

agreement to arbitrate. Plaintiffs concede that Erik McMillan signed the

Agreements, but assert that he was “fraudulently induced” to sign them and

that he did not specifically agree to the arbitration clauses “buried therein.”

(Pls.’ Br. Opp. Defs.’ Mot. to Stay, p. 1.)

{16} The Court finds these contentions unpersuasive because under well-

established North Carolina law, a signatory to “a written instrument is under

a duty to read it for his own protection[;] . . . [is] ordinarily . . . charged with

knowledge of its contents[;] . . . [and] may [not] predicate an action for fraud

on his ignorance of the legal effect of its terms.” Raper v. Oliver House, LLC,

180 N.C. App. 414, 420, 637 S.E.2d 551, 555 (2006) (quoting Biesecker v.

Biesecker, 62 N.C. App. 282, 285, 302 S.E.2d 826, 828—29 (1983)); see also
Leonard v. Power Co., 155 N.C. 10, 14, 70 S.E. 1061, 1063 (1911) (“[T]he law

will not relieve one who can read and write from liability upon a written

contract, upon the ground that he did not understand the purport of the

writing, or that he has made an improvident contract, when he could inform

himself and has not done so.”). Further, Erik McMillan had the opportunity to

read the Agreements, but declined to do so, relying instead on Hawn and

Fisher to include the appropriate terms.3 See Setzer v. Ins. Co., 257 N.C. 396,

401, 126 S.E.2d 135, 139 (1962) (“[W]here no trick or device had prevented a

person from reading the paper which he has signed or has accepted as the

contract prepared by the other party, his failure to read when he had the

opportunity to do so will bar his right to reformation.”).4

{17} Plaintiffs also seek to invalidate the Agreements on grounds that

they were unsupported by consideration. Plaintiffs contend, in this respect,

that Defendants failed to provide any consideration to support the

Agreements beyond what Defendants had already promised under the MoU.

This contention lacks merit, however, as the Agreements include numerous

provisions that were not included in the MoU but that function to protect the

McMillans’ interest in their business. The Agreements’ non-compete and

3 The attorneys’ fees provisions of the Agreements – provision 7.13 on page 35 of the Original

Agreement and provision 13.13 on page 32 of the Amended Agreement – reference the
Agreements’ arbitration clauses as well.

4 Plaintiffs’ allegations that Defendant Shy failed to disclose certain conflicts of interest with

other clients are irrelevant for purposes of the present Motions.
nondisclosure provisions5, for instance, guard against Defendants’

misappropriation of Enigma’s proprietary information and preclude

Defendants from competing with Enigma for two years after leaving the

company, should they seek to do so. These protections appear especially

significant to Erik McMillan in light of his contributions to Enigma – two

patents and all intellectual property that he creates in the future – which

comprise the foundation of Enigma’s business.

{18} The Court has reviewed Plaintiffs’ remaining contentions on this

issue and finds them to be without merit. Accordingly, the Court concludes

that the Agreements contain valid agreements to arbitrate and that Erik

McMillan is bound by these provisions.

ii. Kisa McMillan

{19} Plaintiffs further contend that Kisa McMillan is not bound by a valid

agreement to arbitrate because she did not sign the Agreements.

{20} While it is generally true that “a party cannot be required to submit

to arbitration any dispute which he has not agreed so to submit, a variety of

nonsignatories of arbitration agreements have been held to be bound by such

agreements under ordinary common law contract and agency principles.” LSB

Fin. Servs. v. Harrison, 144 N.C. App. 542, 547, 548 S.E.2d 574, 578 (2001)

(citations and quotation marks omitted). In Harrison, for example, the North

Carolina Court of Appeals held that a non-signatory to an agreement was

bound by the agreement’s arbitration provision because “[i]t [was] clear from

5 (Orig. Ag. §§ 1.7—1.10, p. 17—18; Am. Ag. §§ 7.7—7.10, p. 15.)
the text and purpose of [the agreement] that the parties to the agreement

intended to benefit such nonsignatory, third parties . . . .” Id. In determining

whether the contracting parties intended to benefit a third party, “the court

‘should consider [the] circumstances surrounding the transaction as well as

the actual language of the contract.’” Revels v. Miss Am. Org., 182 N.C. App.

334, 336, 641 S.E.2d 721, 723 (2007) (citation omitted) (alteration in original).

{21} Here, the circumstances under which the parties executed the

Agreement, in addition to the terms of the Agreements themselves, support a

finding that Kisa McMillan was an intended third-party beneficiary of the

Agreements. As Erik McMillan states in his affidavit, he and Kisa McMillan

work “as a team” and he is “not sure if [he could] work anywhere without

Kisa’s help.” (Erik McMillan Aff. ¶ 12, Oct. 3, 2014.) Seeking to monetize

Erik McMillan’s inventions, the McMillans, as a team, sought investors to

further their business, eventually entering into the Agreements now at issue.

Although Kisa McMillan did not sign the Agreements, the terms of the

Agreements benefit both of the McMillans by requiring that Defendants

provide equity and debt financing to further the business conceived by the

McMillans years earlier.6 While it is true that the MoU provided similar

terms to benefit the McMillans, the MoU was superseded by the Agreements,

6 Specifically, the Agreements require Fisher (through Unique Places) to provide a $75,000

capital contribution and further require Fisher (through Unique Places) and Hawn to obtain
and guarantee loans on Enigma’s behalf. The Agreements also require Scott to provide “sweat
equity” in that he promised to dedicate at least one day of work each week to Enigma. That
Defendants may have failed to fulfill some of these promises does not detract from the
manifest intent of these provisions to benefit both Erik and Kisa McMillan.
each of which contains a merger clause indicating that it represents “the

entire agreement among the parties relative to the subject matter hereof . . . .”

(Orig. Ag. § 7.5, p. 34; Am. Ag. § 13.5, p. 31.)

{22} Moreover, Plaintiffs assert claims based on Kisa McMillan’s status

and rights that derive, if at all, from the Agreements. See Holshouser v.

Shaner Hotel Grp. Props., One Ltd. P’ship., 134 N.C. App. 391, 400, 518

S.E.2d 17, 25 (1999) (“A person is a direct beneficiary of the contract if the

contracting parties intended to confer a legally enforceable benefit on that

person.”). Specifically, the Agreements designate Kisa McMillan as Enigma’s

“Director of Operations”7 (Orig. Ag. § 5.1.3, p. 8; Am. Ag. § 5.1.3, p. 11.), and

Plaintiffs use this fact to support their conversion claim, asserting that

Defendants “lack[ed] authority to terminate” Kisa’s employment with Enigma

because “[a]fter Hawn resigned as President, Erik and Kisa were the highest

ranking officers of Enigma . . . .” (Am. Compl. ¶ 423.); see Am. Bankers Ins.

Group v. Long, 453 F.3d 623, 628 (4th Cir. 2006) (providing that “a

nonsignatory should be estopped from denying that it is bound by an

arbitration clause when its claims against the signatory ‘arise[]from’ the

contract containing the arbitration clause” (citation omitted) (alteration in

original)). Indeed, Plaintiffs themselves identify Kisa McMillan as a third

party beneficiary to the Agreements, asserting in support of their breach of

7 This designation of Kisa McMillan as Enigma’s “Director of Operations” superseded the
MoU’s designation of Kisa McMillan as Enigma’s “Operations Manager.” (Am. Compl. Ex. 9,
p. 1; Orig. Ag. § 7.5, p. 34; Am. Ag. § 13.5, p. 31.)
contract claim that although “Kisa was not a party to the Operating

Agreements, [she] was . . . [an] intended beneficiary of the Operating

Agreements.” (Am. Compl. ¶ 450.)

{23} Accordingly, because Kisa McMillan was an intended third party

beneficiary of the Agreements, and because Plaintiffs seek to assert rights

based on Kisa McMillan’s status as a third party beneficiary to the

Agreements, the Court concludes that Kisa McMillan is also bound by the

Agreements’ arbitration provisions.

iii. Enigma

{24} Although not specifically contested, the Court notes that Enigma is

likewise bound by the Agreements’ arbitration provisions. See N.C.G.S. §

57D-2-31(a) (2014) (providing that “[t]he LLC is deemed to be a party to the

operating agreement and, therefore, is bound by and may enforce the

provisions thereunder applicable to the LLC”).

Scope of the Arbitration Agreement

{25} Plaintiffs contend that even if they are bound by the Agreements’

arbitration provisions, the scope of these provisions fails to encompass all of

Plaintiffs’ claims.

{26} In determining whether a plaintiff’s claims fall within the scope of a

particular arbitration provision, the Court “must look at the language in the

agreement, viz., the arbitration clause, and ascertain whether the claims fall

within its scope. In so doing, any doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration.” Rodgers Builders, Inc. v.

McQueen, 76 N.C. App. 16, 23—24, 331 S.E.2d 726, 731 (1985) (citations and

quotation marks omitted). “[W]hether a claim falls within the scope of an

arbitration clause and is thus subject to arbitration depends not on the

characterization of the claim as tort or contract, but on the relationship of the

claim to the subject matter of the arbitration clause.” Id. at 24, 331 S.E.2d at

731 (citations omitted).

{27} In McQueen, the North Carolina Court of Appeals addressed the

scope of an arbitration clause which specified that “[a]ll claims . . . arising out

of, or relating to, the Contract Documents or the breach thereof . . . shall be

decided by arbitration . . . .” Id. at 18, 331 S.E.2d at 728. The court held that

“the language of the arbitration clause [was] sufficiently broad to include any

claims which [arose] out of or [were] related to the contract or its breach,

regardless of the characterization of the claims as tort or contract.” Id. at 25,

331 S.E.2d at 732. The court further held that the language of the arbitration

clause encompassed the plaintiff’s claims for fraud, unfair and deceptive trade

practices, and negligent misrepresentation, as each claim “concern[ed] alleged

tortious conduct on the part of defendants [that] occurred in connection with,

or as a part of, the formation of, performance under, or breach of the contract

between [the parties].” Id. at 25, 331 S.E.2d at 732.

{28} More recently, the United States District Court for the Eastern

District of North Carolina considered the scope of an arbitration clause
“requir[ing] arbitration of ‘[a]ny [c]laim arising out of or related to the

Agreement.’” United States ex rel. TGK Enters. v. Clayco, Inc., 978 F. Supp.

2d 540, 549 (E.D.N.C. 2013). Noting that “[t]he Supreme Court and the

Fourth Circuit have recognized that such language represents a ‘broad’

arbitration provision,” the court determined that the “plaintiff’s state

law claims . . . squarely fall within the scope of the arbitration agreement.”

Id. (citing Drews Distrib., Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 350 (4th

Cir. 2001); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 398

(1967)).

{29} The arbitration clauses here, similar to those at issue in McQueen

and Clayco, each provide that “[a]ny dispute arising out of or in connection

with this Agreement or the breach thereof shall be decided by arbitration . . .

.” (Orig. Ag. § 7.4, p. 34; Am. Ag. § 13.4, p. 31.) Upon review, the Court finds,

as detailed below, that all of Plaintiffs’ claims fall within the scope of this

broad language, as each claim either “arises out of” or “in connection with” the

Agreements.

{30} Initially, the Court notes that Plaintiffs’ twelfth and thirteenth

claims for relief allege that Defendants breached the Agreements themselves

and thus plainly “arise out of” the Agreements. Likewise, Plaintiffs’ claim

that Defendants breached the MoU (eleventh claim for relief) “arises out of”

the Agreements because many of the alleged breaches in support of this claim

concern the same promises allegedly breached under the Agreements. For
example, paragraphs 448, 466, and 480 of Plaintiffs’ Complaint allege

breaches of the same ten (10) promises under the MoU, Original Agreement,

and Amended Agreement, respectively.8 Additionally, Plaintiffs’ breach of

fiduciary duty claim (second claim for relief) alleges that Defendants breached

duties owed to Plaintiffs by virtue of their relationship, as established under

the Agreements.

{31} Plaintiffs also assert a number of claims alleging conduct that

implicates specific provisions of the Agreements and that, if proved true,

would constitute breaches of those provisions. Plaintiffs’ misappropriation of

trade secrets claim (sixth claim for relief) and conspiracy to defraud claim

(ninth claim for relief) allege, inter alia, that Defendants misappropriated and

conspired to misappropriate Enigma’s trade secrets, conduct that is expressly

prohibited under the Agreements.9 Plaintiffs’ conversion claim (eighth claim

for relief) alleges that Defendants converted Enigma’s property to their own

use, conduct that would violate the Agreements’ general prohibition against

use of Enigma property for “any personal benefit.” (Orig. Ag. § 4.3.2, p. 10;

Am. Ag. § 4.3.2, p. 7.) Plaintiffs’ fourteenth claim for relief alleges that

Defendants used other entities to compete with Enigma, conduct that would

violate the Agreements’ provision that, absent Enigma’s consent, officers and

managers of the company are prohibited from “engag[ing], directly or

8 Moreover, the Agreements superseded the MoU, as noted above.

9 (Orig. Ag. §§ 1.7—1.10, p. 17—18; Am. Ag. §§ 7.7—7.10, p. 15.)
indirectly, in activities that are competitive with [Enigma’s] Business or that

would constitute business opportunities of [Enigma].” (Orig. Ag. § 6.1, p. 11—

12; Am. Ag. § 6.1, p. 9.) Finally, Plaintiffs’ unfair and deceptive trade

practices claim (fifteenth claim for relief) alleges that Hawn left Enigma to

work for a competitor, raising a potential violation of the Agreements’ non-

compete provisions. See McQueen, 76 N.C. App. at 27, 331 S.E.2d at 733

(finding “no reason” to exclude UDTP claim from arbitration where “[t]he

claim concern[ed] essentially a private dispute” and appeared asserted

“merely to bolster and supplement the remainder of plaintiff's claims and to

increase the amount of damages recoverable”).

{32} Plaintiffs additionally allege claims that invoke certain rights or

statuses that inhere in Plaintiffs, if at all, by virtue of the Agreements.

Plaintiffs’ intentional infliction of emotional distress claim (fifth claim for

relief) alleges that Defendants intentionally caused the McMillans distress by

terminating their employment with Enigma. The Agreements designate the

McMillans’ respective roles with Enigma, and any right to continued

employment thus emanates from these roles or otherwise “arises out of” rights

created under the Agreements. Similarly, Plaintiffs’ obtaining property under

false pretense claim (seventh claim for relief) asserts Plaintiffs’ status as

Enigma’s “highest ranking officials” (Am. Compl. ¶ 423), and Plaintiffs

predicate their dissolution claim (sixteenth claim for relief) upon Erik
McMillan’s “rights as reflected in the [Agreements] as a minority Member of

Enigma.” (Am. Compl. ¶ 511.)10

{33} The Court further finds that Plaintiffs have asserted claims “in

connection with” the Agreements. Plaintiffs’ fraud claim (first claim for relief)

alleges that Defendants fraudulently induced Erik McMillan to sign the

Agreements, and Plaintiffs’ tenth claim for relief alleges, in pertinent part,

that Defendants “took advantage of the trust Erik placed in Hawn, Fisher and

Shy with regard to explaining the purposes and effects of the [Agreements],

and did not fully disclose the terms or effects of [the Agreements] to Erik.”

(Am. Compl. ¶ 443.)11 Any such inducement or lack of disclosure occurred “in

connection with” the formation of the Agreements. See McQueen, 76 N.C.

App. at 18, 25, 331 S.E.2d at 728, 732 (finding that claims alleging

misrepresentations in connection with formation of contract were within scope

of contract’s arbitration clause, which provided that “[a]ll claims . . . arising

out of, or relating to, the Contract Documents or the breach thereof” were

subject to arbitration). Moreover, Plaintiffs’ libel and defamation claims (third

and fourth claims for relief), which allege that Defendants informed Enigma’s

customers and suppliers that Erik and Kisa had “walked away” from Enigma

(Am. Compl. ¶¶ 393—96), implicate the McMillans’ roles with Enigma, as

10 Furthermore, as discussed below, the Agreements set forth in detail the procedure to be

employed by the parties in dissolving Enigma. (Orig. Ag. §§ 6.2—6.5, p. 31—32; Am. Ag. §§
12.2—12.5, p. 28—29.)

11 Although captioned “Breach of § N.C.G.S. 57D-3-04,” which concerns inspection of company

records, Plaintiffs’ tenth claim for relief sets forth a variety of allegations, including those
cited above.
delineated in the Agreements, and thus also concern a dispute “in connection

with” the Agreements.12

{34} The Court concludes, accordingly, that the language set forth in the

Agreements’ arbitration provisions is sufficiently broad to encompass all of

Plaintiffs’ claims.

Motion for a Receiver

{35} Defendant Hawn has moved the Court to appoint a receiver for

Enigma, asserting that the company is “teetering on bankruptcy” and must be

dissolved before it “loses all going concern value.” (Hawn Mot. for Receiver, p.

1—2.) Hawn attributes Enigma’s demise to the parties’ “contentious”

relationship, which, he alleges, has not only precluded effective management

of Enigma, but also deterred potential investment in the company by third

parties. (Hawn Mot. for Receiver, p. 3.)

{36} The Court does not disagree with Hawn’s characterization of Enigma

as a company in distress. As stated above, however, the Agreements prescribe

the manner in which Enigma is to be dissolved should the parties seek to wind

up the company. And because no other party to the Agreements joins Hawn

in his request for a receiver, which seeks to deviate from the Agreements’

dissolution provisions, a dispute exists among the parties concerning both

whether and how Enigma should be dissolved. Accordingly, the Court finds

that Hawn’s Motion for a Receiver raises a dispute concerning subject matter

12 Furthermore, each of Plaintiffs’ claims for relief “incorporate[s] by reference as if fully set

forth [therein] all prior allegations of the Complaint.” (E.g., Am. Compl. ¶ 385.)
that is governed by the Agreements and, therefore, is also subject to

arbitration for the reasons stated above.

III.
CONCLUSION

{37} In light of the foregoing, the Court hereby (i) GRANTS Defendants’

Motions to Stay Proceedings and Compel Arbitration and (ii) DENIES Hawn’s

Motion for Appointment of a Receiver without prejudice to Defendant Hawn’s

right to seek such relief in any arbitration proceedings between these parties.

{38} Accordingly, this civil action is hereby STAYED pending the outcome

of any arbitration proceedings between the parties.

SO ORDERED, this the 14th day of January, 2015.