A federal judge form the Eastern District of Washington has thwarted a sports agency’s bid to stay discovery until the issue of what facets of a lawsuit brought by a consultant could be addressed in arbitration, finding it premature to grant such a motion.
The origins of the dispute extend back to 2001 when plaintiff Kim Grillier began working for defendant Henry Thomas as a sports agent. One of his responsibilities was to help Thomas recruit young basketball players to sign agency contracts with Thomas Sports Management.
Grillier alleged he was hired by Thomas as a “consultant” and that he was paid a nominal wage of $500.00 per month. “From the beginning,” he alleged, “Thomas promised (him) that (he) would be rewarded with a percentage of the fees generated by the players he successfully recruited.”
Grillier alleged that Thomas never paid him, even after CSMG Sports, Ltd. acquired Thomas Sports Management in 2003, and Thomas became its Vice President of Basketball Operations. The pattern continued even though Grillier allegedly opened a CSMG office in Detroit, and continued to be paid $500.00 per month.
Grillier ultimately sued, charging that “Thomas, on behalf of CSMG, promised (him) he would receive a minimum of 20 percent of the fees for any current clients that (he) had brought in, 15 percent of the fees for new clients, and 3 percent of the marketing fees for all clients.” Grillier alleged that he recruited numerous players to CSMG, including NBA players Dwayne Wade, Devin Harris, and Chris Bosh. Grillier alleges he was forced to leave CSMG when Thomas and CSMG failed to fulfill their promised financial obligations. Specifically, Count I of Grillier’s complaint alleged breach of an oral agreement. Count II alleged quantum meruit/unjust enrichment. And Count III alleges promissory estoppel.
The defendant moved to dismiss and compel arbitration on June 16, 2008. In support of the motion, CSMG cited a “Consulting Agreement” signed by Grillier and CSMG Sports, Ltd. on October 1, 2002. In relevant part, the agreement set forth that “any claims arising out of, or relating to, this Agreement, or the breach thereof, shall be settled by arbitration held in Cook County, Illinois, and administered by a commercial arbitration service agreed to by the parties under the selected services commercial arbitration rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.”
Grillier countered that the Consulting Agreement is inapplicable because Grillier became an employee of CSMG Sports, Ltd. on October 1, 2005, submitting into evidence a “New Hire Checklist,” an employee enrollment letter, and an “Employee Confidentiality and Non-Solicitation Agreement.”
CSMG did not dispute that Grillier became an employee of CSMG Sports, Ltd. but instead argued that the arbitration provision in the Consulting Agreement “remained controlling in the absence of a written employment contract.” CSMG also proffered the affidavit of CMSG, Inc. Chief Financial Officer Ginger Gordon as proof that five players mentioned in Grillier’s complaint signed representation agreements with CSMG Sports, Ltd. before Grillier became a CMSG employee or, arguing “in the alternative, that the issue of compensation for these players — Marcus Taylor (signed June 12, 2002), Alan Anderson (signed May 4, 2005), Dwyane Wade (signed May 12, 2003), Devin Harris (signed May 31, 2004), and Chris Bosh (signed June 3, 2003) — was subject to the pre-employment arbitration clause set forth in the October 1, 2002 Consulting Agreement.”
Following an August 13, 2008 hearing, the court denied, without prejudice, CMSG’s motion to dismiss and compel arbitration, ordering that “[t]he parties may proceed immediately with limited discovery reasonably related to the issue of arbitration, prior to the Rule 16 conference.”
Prior to the Rule 16 conference, the defendant consequently moved for separate trials and an order limiting discovery until after the court has conducted a trial on the issue of arbitrability.
In considering the motion, the court wrote that “when considering a motion to stay proceedings and compel arbitration under the Federal Arbitration Act, a court has four tasks: first, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration.
“While couched in terms of a motion for separate trials under Federal Rule of Civil Procedure 42(b), and an order under Federal Rule of Civil Procedure 16(b)(3)(B)(ii) limiting the scope of discovery to issues related to the arbitrabililty of Grillier’s claims, CSMG’s motion, in effect, seeks to stay these proceedings as to Grillier’s claims that are not subject to arbitration. The court has not yet made the initial determinations of whether the parties agreed to arbitrate, or the scope of any agreement to arbitrate. Fazio, 340 F.3d at 392. CSMG’s motion skips the first two steps of the court’s requisite analysis. In denying CSMG’s June 16, 2008 motion to compel arbitration without prejudice, the court provided the parties with an opportunity to factually develop the first two threshold issues. Whether any or all of Grillier’s claims are subject to arbitration, and whether this lawsuit should be stayed pending the results of arbitration, are issues of law for this court to decide. Highlands Wellmont Health Network, Inc. v. John Deere Health Plan, Inc., 350 F.3d 568, 576 (6th Cir. 2003) (citing Fazio, 340 F.3d at 395, for the proposition that ‘[d]istrict courts have the authority to decide whether an issue is within the scope of an arbitration agreement.’). CSMG’s instant motion for separate trials is procedurally unwarranted under the circumstances. CSMG may renew its motion to compel arbitration, as augmented by further discovery.
“The court has not yet decided whether any or all of Grillier’s claims are subject to arbitration CSMG’s instant motion for separate trials is not the appropriate vehicle for deciding the issue. CSMG’s motion for separate trials and an order limiting discovery until after the court has conducted a trial on the issue of arbitrability is hereby denied.”
Kim J. Grillier v. CSMG Sports, LTD. et al.; E.D.Mich.; Case No. 08-CV-12449, 2009 U.S. Dist. LEXIS 2168; 1/12/09
Attorneys of Record: (for plaintiff) Robert S. Harrison, LEAD ATTORNEY, Matthew D. Klakulak, Robert Harrison Assoc., Bloomfield Hills, MI. (for defendant) Lawrence M. Dudek, Miller, Canfield, (Detroit), Detroit, MI.
