Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-02354/USCOURTS-azd-2_05-cv-02354-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

First National Bank of Arizona, 

Plaintiff, 

vs.

Kislak National Bank, a national banking

association; Kislak Financial Corporation,

a Florida Corporation; Wyndham Lending

Group, LLC; Robert C. Walsh; Jennifer

Boyle; Dale Calomeni; Michael Kingdon;

Eric Lapin; Jack Lehr; Rick Lohmeyer;

Mike Rotscheld; Jim Schnaath; Frank

Stadler; M it ch Whit t ingt on; Black

Corporations I to X; White Partnerships

I to X; John Does 1 to X; and Jane Does

I to X, 

Defendants. 

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No. 05-2354-PHX-EHC

ORDER

Pending before the Court are Defendants Jennifer Boyle, Michael Kingdon, Mike

Rotscheld and Wyndham Lending Group, LLC's Motion to Stay Lit igat ion Pending

Arbitration [dkt. 19] and M otion to Strike Plaintiff's Demand for Jury Trial [dkt. 33]. Pending

before the Court is Defendants Kislak National Bank and Kislak Financial Corporation's

Mot ion to Dismiss [dkt. 7] for lack of personal jurisdiction. The Motions are fully briefed.

Motion to Stay Litigation Pending Arbitration

Under the Arbitration Act, a district court must stay an action arbitrable under an

arbitration agreement. 9 U.S.C. § 3. A stay is proper if "the issue involved is referable to

arbitration under such an agreement and [] the applicant for the stay is not in default in

Case 2:05-cv-02354-EHC Document 46 Filed 04/13/06 Page 1 of 6
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proceeding with such arbitration." Sink v. Aden Enters., 352 F.3d 1197, 1201 (9th Cir. 2003)

(quotation omitted).

Defendants Boyle, Kingdon, and Rotscheld (Employee Defendants) are former

employees of Plaintiff and current employees of Defendant Wyndham Lending Group. As

a condition of employment, they entered into a Grievance, Arbitration and Termination

Dispute Resolution Policy (Arbitration Agreement) with Plaintiff. 

T he Policy section of the Arbitration Agreement limits arbitrable disputes to those

based on wrongful acts by the employer. That section provides as follows:

ALL DISPUTES INVOLVING ALLEGED UNLAWFUL EMPLOYMENT

DISCRIMINATION, TERMINATION BY BREACH OF ALLEGED

CONTRACT OR POLICY, OR EMPLOYMENT TORT COMMITTED BY

EMPLOYER OR A REPRESENTATIVE OF EMPLOYER... SHALL BE

RESOLVED PURSUANT TO THIS POLICY.

[Dkt. 19, ex. A, p. 1 (emphasis in original)]. 

The Disputes Subject to Arbitration section of the Arbitration Agreement focuses

on claims of the employee. "Dispute" is defined therein as "all claims or issues of which

the employee is or should be aware."[Dkt. 19, ex. A, p . 3]. All such disputes are subject to

arbitration:

All disputes involving claims of alleged unlawful employment discrimination,

termination by breach of alleged contract or policy, violations of federal or

state discrimination statut es, governmental law, regulation, ordinance, or

public policy, or employment tort are subject to arbitration.

[Dkt. 19, ex. A, p. 3]. An employer is only required to arbitrate its claims against an

employee who has filed an arbitration action against the employer: "All Employer claims

against that employee of which Employer is or should have been aware prior to submission

to arbitration must also be submitted to arbitration." [Dkt. 19, ex. A, p. 3]. 

Only an emp loyee can initiate arbitration under the Arbitration Agreement. An

emp loyee initiates arbitration by giving "written notice to the Director of Human Resources

of Employer... The Notice shall state the nature of the employee's claim and the address

which the employee will use for the purpose of arbitration." [Dkt. 19, ex. A, p . 5]. An

employer's role is responsive: "Within fourteen (14) calendar days after the employee's

notice is given, the Employer shall give the employee a written statement of any defense

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and any counterclaim." [Dkt . 19, ex. A, p. 5]. There is no provision in the Arbitration

Agreement for the employer to initiate arbitration.

Based on those p rovisions, the Arbitration Agreement requires the Employee

Defendants to arbitrate their claims against Plaintiff; it does not require Plaintiff to arbitrate

its claims against the Employee Defendants.

Citing Circuit City Stores, Inc. v. Adams, 279 F.3d 889 (9th Cir. 2002), the Employee

Defendants argue that the Arbitration Agreement is unenforceable if only they- and not

Plaintiff- are required to arbitrate. Circuit City, 279 F.3d at 896, held that an arbitration

agreement requiring an employee- but not the employer- to arbitrate was unconscionable

and therefore could not be enforced. There is nothing in Circuit City suggesting that a

court can remedy a one-sided arbitration agreement by construing it to require the

employer t o arbitrate its claims against the employee. Application of Circuit City to the

present case leads to the conclusion that the Arbit rat ion Agreement is unenforceable;

neither the Emp loy ee Defendants nor Plaintiff can be forced to arbitrate under an

unenforceable agreement.

Motion to Strike Jury Demand

A p art y seeking jury trial of an issue must serve "upon the other parties a demand

therefor in writing... not later than 10 days after the service of the last pleading directed to

such issue." Fed. R. Civ. P. 38(b). The Ninth Circuit has held "that when defendants are

jointly liable on a cause of action that contains any issue triable of right by a jury , a jury

demand as to that issue is timely if served within 10 days after service of the last

defendant's answer." Bentler v. Bank of America, 959 F.2d 138, 141 (9th Cir. 1992)

(quotation omitted).

Plaintiff alleges that Defendants are joint ly liable. [Dkt. 1, ex. A, p. 20]. Count One

was filed against Defendants Boyle, Calomeni, Kingdon, Lapin, Lehr, Schnaat h,

Whittington, Lohmeyer, Stadler, and Rotscheld; Count Two was filed against Defendants

Kislak National Bank, Kislak Financial Corp., Wyndham Lending Group, and Walsh;

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1

 Defendant Richard Valgento filed an Answer [dkt. 1, ex. C-14], but he was

subsequently dismissed.

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Counts Three t hrough Seven were filed against all Defendants. [Dkt. 1, ex. A, pp. 11-19].

Because only Defendants Kingdon, Rotscheld and Wyndham Lending Group had filed an

Answer 1

 at the time Plaintiff filed its demand for jury trial [dkt. 1, exs. C-16 to C-18], the last

pleading directed to each Count stated in the Complaint had not yet been served. Plaintiff's

Demand for Jury Trial [dkt. 30] is timely.

Motion to Dismiss

Defendants Kislak National Bank and Kislak Financial Corporation (Kislak

Defendants) filed a Motion to Dismiss [dkt. 7] for lack of personal jurisdiction. Plaint iff

alleges that the Kislak Defendants are Florida citizens with their principal places of

business in Miami, Florida. [Dkt. 1, ex. A, p. 2].

If, as here, t here is no applicable federal statute, the court applies the personal

jurisdiction statute of the state in which it sits. See Panavision Int'l, L.P. v. Toeppen, 141

F.3d 1316, 1320 (9th Cir. 1998). Under Arizona law, a court may exercise p ersonal

jurisdiction over parties to t he ext ent p ermitted by the United States Constitution. Ariz. R.

Civ. P. 4.2(a). The Constitution allows a court to exercise jurisdict ion over non-resident

parties who have minimum contacts with the forum state such that suit in the forum state

does not offend "traditional notions of fair play and substantial justice." Schwarzenegger

v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004).

Plaintiff, a provider of mortgages, alleges that the Kislak Defendants and Defendant

Wyndham Lending Group encouraged emp loy ees of Plaintiff to leave Plaintiff and join the

Kislak Defendants and Defendant Wyndham Lending Group to unlawfully compete with

Plaint iff in t he mortgage business. [Dkt. 1, ex. A, pp. 7-11]. Plaintiff specifically alleges that

the Kislak Defendants and Defendant Wyndham Lending Group held a meeting "in

Scottsdale, Arizona for the purposes of soliciting and hiring the employees from [Plaintiff's]

Mortgage Division to directly compete with [Plaintiff] in the wholesale mortgage

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2

 Plaintiff is a national banking association with its principal place of business and

corp orate headquarters in Maricopa County, Arizona. [Dkt. 1, ex. A, p. 2]. A national

banking association is a citizen of the state where its designated main office is located.

Wachovia Bank v. Schmidt, __ U.S. __, 126 S. Ct. 941 (2006) (for purposes of diversity

jurisdiction, national banking association with main office in North Carolina and branch

office in South Carolina was only a citizen of North Carolina). 

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business." [Dkt. 1, ex. A, p. 10]. Plaintiff further alleges that "approximately twenty-nine [of

Plaintiff's] employees" resigned to accept posit ions with the Kislak Defendants and

Defendant Wyndham Lending Group. [Dkt. 1, ex. A, p. 9]. The Kislak Defendant s and

Defendant Wyndham Lending Group "have used the employees they raided from [Plaintiff]

to establish an office at 4800 North Scottsdale Road in Scottsdale, Arizona for purposes

of directly competing with [Plaintiff] in the wholesale mortgage business." [Dkt. 1, ex. A,

p. 10]. Plaintiff alleges that Plaintiff's employees provided the Kislak Defendants "with

unauthorized access t o and use of [Plaintiff's] customer and employee information and

Trade Secrets for p urp oses of directly competing with [Plaintiff] in the wholesale mortgage

business." [Dkt. 1, ex. A, p . 8]. If the Kislak Defendants did recruit Plaintiff's employees to

obtain Plaintiff's proprietary information and unlawfully compete with Plaintiff, such action

aimed toward an Ariz ona citizen2

 arguably is sufficient to make the exercise of personal

jurisdiction reasonable. See Ochoa v. J.B. Martin & Sons Farms, Inc., 287 F.3d 1182, 1189

n.2 (9th Cir. 2002) (personal jurisdiction may be proper "if considerations of reasonableness

dictate" (quotation omitted)).

Accordingly,

IT IS ORDERED that Defendants Jennifer Boyle, Michael Kingdon, Mike Rotscheld

and Wyndham Lending Group, LLC's Motion to Stay Litigation Pending Arbitration [dkt.

19] and Motion to Strike Jury Demand [dkt. 33] are DENIED.

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IT IS FURTHER ORDERED that Defendants Kislak National Bank and Kislak

Financial Corporation's Motion to Dismiss [dkt. 7] is DENIED.

DATED this 13th day of April, 2006.

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