Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_17-cv-03241/USCOURTS-azd-2_17-cv-03241-0/pdf.json

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

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA

 

 Before the Court is Plaintiff’s Motion for Summary Judgment (Doc. 29), 

Defendant’s Motion to Strike, or, in the alternative, its Response to Plaintiff’s Motion for 

Summary Judgment (Doc. 36), and Defendant’s Motion to Stay Briefing on Plaintiff’s 

Motion for Summary Judgment (Doc. 31). 

I. Background1

Plaintiff is the founder and principal of Bird Medical, LLC (“Bird Medical”). (Doc. 

37 at 2.) On February 27, 2008, Defendant, DJO, LLC, a medical device manufacturer, 

entered into an agreement with Bird Medical authorizing Bird Medical to distribute DJO’s 

orthopedic medical devices (the “Agreement”). (Doc. 37 at 2.) Plaintiff signed the 

Agreement on behalf of his company. (Doc. 37 at 2.) The Agreement provides that the 

parties will mediate any disputes between them regarding any aspect of, or arising out of, 

or related to, the Agreement, pursuant to the rules of the American Arbitration Association 

 

1

 The following facts are uncontroverted unless otherwise stated. 

Michael Bird, 

 

Plaintiff, 

vs. 

DJO, LLC, 

Defendant. 

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No. CV-17-03241-PHX-SPL 

ORDER 

 

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(the “AAA”), in Phoenix, Arizona. (Doc. 6 at 3-4; Doc. 11 at 2.) The Agreement also 

provides that, should the mediation prove unsuccessful, the parties will arbitrate their 

claims in Phoenix, Arizona. (Doc. 6 at 3-4; Doc. 11 at 2.) On March 22, 2008, Plaintiff 

signed, in his individual capacity, two addenda to the Agreement—a Code of Ethics 

Certification and a Sales Representative Acknowledgment (the “Addenda”). (Doc. 16 at 2; 

Doc. 11 at 3.) 

On October 31, 2015, Defendant terminated the Agreement. (Doc. 37 at 5.) On April 

24, 2017, Defendant sent Bird Medical a demand for mediation, pursuant to the Agreement. 

(Doc. 37 at 7.) In its demand, Defendant alleged that both Bird Medical and Plaintiff 

breached the Agreement and converted Defendant’s property. (Doc. 37 at 7.) On May 30, 

2017, Defendant filed a demand for arbitration with the AAA, which included claims for 

breach of contract, breach of covenant of good faith and fair dealing, and conversion 

against both Bird Medical and Plaintiff. (Doc. 37 at 7.) On July12, 2017, Plaintiff objected 

to the arbitrator’s jurisdiction as to the claims against him personally. (Doc. 1-1 at 108.) 

On August 2, 2017, the AAA stated that it would proceed with the case against Plaintiff 

absent a court order staying the arbitration or an agreement by the parties. (Doc. 1-1 at 

124.) 

On September 19, 2017, Plaintiff filed his Complaint in this Court seeking 

declaratory relief as to the arbitrability of Defendant’s claims against him in his individual 

capacity. (Doc. 1.) On September 20, 2017, Plaintiff filed a Motion to Stay the AAA 

arbitration. (Doc. 6.) On October 23, 2017, Defendant filed a Motion to Compel the AAA 

arbitration. (Doc. 11.) On May 5, 2018, Plaintiff filed his Motion for Summary Judgment 

on his claim for Declaratory Judgment Regarding the Arbitrability of Dispute as to Michael 

Bird. (Doc. 29.) That same day, Defendant filed a Motion to Stay the summary judgment 

briefing. (Doc. 31.) On May 25, 2018, Plaintiff filed his response to the Motion to Stay. 

(Doc. 32.) On June 1, 2018, Defendant filed its reply to its Motion to Stay. (Doc. 33.) On 

July 2, 2018, Defendant filed a Motion to Strike Plaintiff’s Motion for Summary Judgment, 

or, in the alternative, its response to Plaintiff’s Motion. (Doc. 36.) That same day, Plaintiff 

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filed his response to the Motion to Strike. (Doc. 37.) On July 16, 2018, Defendant filed its 

reply to its Motion to Strike. (Doc. 38.) On September 10, 2018, this Court ruled on 

Plaintiff’s Motion to Stay and Defendant’s Motion to Compel. (Doc. 39.) In that order, the 

Court stayed the AAA proceeding until this Court ruled on the issue of arbitrability. (Doc. 

39.) Now before the Court is the issue of arbitrability. 

II. Standard of Review 

 A court must grant summary judgment “if the movant shows that there is no genuine 

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” 

Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). 

Material facts are those facts “that might affect the outcome of the suit under the governing 

law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine dispute of 

material fact arises if “the evidence is such that a reasonable jury could return a verdict for 

the nonmoving party.” Id. 

 The party moving for summary judgment bears the initial burden of informing the 

court of the basis for its motion and identifying those portions of the record, together with 

affidavits, which it believes demonstrate the absence of a genuine issue of material fact. 

Celotex, 477 U.S. at 323. If the movant is able to do so, the burden then shifts to the nonmovant who “must do more than simply show that there is some metaphysical doubt as to 

the material facts,” and, instead, must “come forward with ‘specific facts showing that 

there is a genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 

U.S. 574, 586-87 (1986). 

III. Discussion 

 Plaintiff moved for summary judgment as to Count One in his Complaint. (Doc. 

29.) Specifically, he seeks a final declaration from this Court stating that he cannot, as a 

matter of law, be compelled to arbitrate Defendant’s claims. (Doc. 38 at 1.) Plaintiff argues 

that he, in his individual capacity, cannot be compelled to arbitrate because he is not a party 

to the Agreement and, thus, did not consent to the arbitration provision in the Agreement. 

(Doc. 29 at 5.) Plaintiff also argues that he is not the alter ego of his company because he 

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has not controlled nor operated his business as his own personal business and that the Court 

would not sanction a fraud if it did not pierce the corporate veil. (Doc. 29 at 7-8.) Defendant 

argues that Plaintiff is seeking “a second bite from the proverbial apple” with the filing of 

his summary judgment motion and, thus, the Court should strike it. (Doc. 36 at 1.) Should 

the Court not strike Plaintiff’s motion, Defendant argues that Plaintiff is a party to the 

Agreement because he signed the Addenda in his personal capacity and those Addenda 

were incorporated by reference into the Agreement. (Doc. 36 at 7.) Defendant argues that, 

even if Plaintiff is not a party to the Agreement, he is bound to arbitrate because he is the 

alter ego of Bird Medical. (Doc. 36 at 7.) Specifically, Defendant argues that Plaintiff used 

the company to perpetrate a fraud upon Defendant and cannot hide behind the corporate 

form to avail responsibility. (Doc. 36 at 7-8.) 

 First, the Court denies Defendant’s Motion to Strike Plaintiff’s Motion for 

Summary Judgment. The summary judgment motion was properly filed, briefed, and 

before the Court. Also, the relief sought in Plaintiff’s Motion for Summary Judgment is 

distinct from that sought in his Motion to Stay. Second, the Court is now called upon to 

address Plaintiff’s Motion for Summary Judgment as to whether Plaintiff is, indeed, 

required to arbitrate the claims against him personally despite not signing the Agreement. 

A. Declaratory Judgment 

 Under the Declaratory Judgment Act, 28 U.S.C. § 2201, a plaintiff must establish 

standing by showing “that there is a substantial controversy, between parties having 

adverse interests, of sufficient immediacy and reality to warrant issuance of a declaratory 

judgment.” Scott v. Pasadena Unified Sch. Dist., 306 F.3d 646, 658 (9th Cir. 2002) 

(quoting Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981)). 

The Court finds that there is a substantial controversy between the parties of 

sufficient immediacy and reality, which would warrant the issuance of a declaratory 

judgment. The Court has already ruled on the issue of whether the arbitrator or this Court 

is the appropriate authority to decide whether Plaintiff is subject to the arbitration provision 

in the Agreement. (See Doc. 39.) The Court found that it, and not the arbitrator, was the 

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proper authority to decide this threshold issue. The Court also held that the arbitration must 

be stayed pending its determination of whether Plaintiff is subject to the arbitration. (Doc. 

39.) 

1. Arbitrability as a Non-Party 

 “In general, a party is bound to arbitrate only those disputes which it has 

contractually agreed to arbitrate.” Smith v. Pinnamaneni, 227 Ariz. 170, 176 (Ct. App. 

2011). However, “[a] party need not sign an arbitration agreement to be bound by it. It can 

agree to submit to arbitration by means other than personally signing the agreement.” 

Larson v. Speetjens, No. C05-3176 SBA, 2006 WL 2567873, at *3 (N.D. Cal. Sept. 5, 

2006), order clarified, No. C05-3176 SBA, 2006 WL 3365589 (N.D. Cal. Nov. 17, 2006) 

(citing International Paper Co. v. Schwabedissen Maschinen & Anglagen GMBH, 206 

F.3d 411, 416 (4th Cir. 2000)). Those means include: incorporation by reference, 

assumption, agency, veil-piercing or alter ego, equitable estoppel, and third-party 

beneficiary. Duenas v. Life Care Centers of Am., Inc., 236 Ariz. 130, 139 (Ct. App. 2014) 

(citing Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347 (5th Cir. 2003)). 

a. Incorporation by Reference 

 Ordinary principles of state contract law apply to determine whether an agreement 

to arbitrate exists. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). 

Interpretation of a contract is a matter of law for the court. Scholten v. Blackhawk Partners, 

909 P.2d 393, 395 (Ariz. Ct. App. 1995). Under Arizona law, “[i]t is a basic rule of contract 

construction that to incorporate by reference[,] the reference must be clear and unequivocal 

and must be called to the attention of the other party, he must consent thereto, and the terms 

of the incorporated document must be known or easily available to the contracting 

parties....” United California Bank v. Prudential Ins. Co. of America, 140 Ariz. 238, 268 

(Ct. App. 1983) (quoting 17A C.J.S. Contracts § 299 at 136 (1963)) (internal quotations 

omitted). Further, “[w]hile it is not necessary that a contract state specifically that another 

writing is ‘incorporated by this reference herein,’ the context in which the reference is made 

must make clear that the writing is part of the contract.” Id. 

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 Defendant argues that Plaintiff is bound to the terms of the Agreement because he 

signed the Addenda, in his personal capacity, which allegedly incorporated by reference 

the Agreement. It also argues that, by signing the Addenda, Plaintiff received benefits from 

the Agreement, and, thus, “the Agreement would never have had any purpose without 

[Plaintiff’s] execution of the [Addenda].” (Doc. 36 at 7.) Plaintiff argues that, although he 

signed the Addenda in his personal capacity, he did so separately and after signing the 

Agreement. (Doc. 29 at 5 n. 4.) He argues that the Addenda do not contain their own 

arbitration provisions, nor the specific arbitration provision stated in the Agreement. (Doc. 

29 at 5 n. 4.) 

 After reviewing the record, the Court finds that the Addenda Plaintiff signed do not 

clearly and unequivocally incorporate by reference the Agreement. Though the Addenda 

are titled Addendum E and Addendum F, the Court finds that that title alone is not a clear 

reference to the Agreement and does not properly call to the attention of Plaintiff, or any 

other employee who would be signing the Addenda, that they are accepting the terms of 

the Agreement between Bird Medical and Defendant. Further, only the Code of Ethics 

addendum explicitly references an “Agreement.” It is not at all clear what “Agreement” 

the Code of Ethics contract is referring to, as it does not define the “Agreement.” Instead, 

the reading of that paragraph implies that if the executor fails to report violations of said 

policies, the executor might face disciplinary action, “up to and including termination for 

cause of this Agreement with DJO, LLC.” Doc. 1-1 at 15, emphasis added; see United, 140 

Ariz. at 260 (stating that ambiguities will be construed against the drafter, especially when 

a “party is attempting to impose an obligation on another where otherwise such an 

obligation would not exist”). While it is not necessary to expressly reference the writing 

being incorporated, the context around the reference must make “clear that the writing is 

part of the contract,” which, here, are the Addenda. Neither Addenda reference arbitration, 

reference the arbitration provision in the Agreement, nor otherwise give adequate notice to 

the person signing the Addenda that they are also accepting the terms of the Agreement. 

 

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 While Plaintiff, in this factual situation, likely knew about the Agreement and its 

terms before he signed the Addenda approximately one month later, the incorporation by 

reference standard requires the Court to look at the contract before it. There is simply 

nothing in either Addenda that supports a finding that the alleged references in the Addenda

were called to the attention of Plaintiff, so as to give him notice (or any other person who 

would be signing the Addenda) that they would also be consenting to the terms in the 

Agreement. The Court does not look to the Agreement for evidence of whether that 

contract, to which Bird Medical and Defendant are parties, incorporate by reference the 

Addenda. Indeed, at the time the Agreement was executed, the Addenda were blank forms, 

to which both Defendant and Bird Medical agreed would be signed by sales associates at 

later times in order for those associates to sell Defendant’s products. That necessity does 

not change the analysis for an incorporation by reference claim. 

 The Court is also unpersuaded by Defendant’s assertion that the Agreement would 

“never have had any purpose without [Plaintiff’s] execution of the [Addenda].” (Doc. 36 

at 7.) Bird Medical employed other sales associates, who would also be required to sign 

both the Addenda. Even if Plaintiff’s action of signing the Addenda did give the Agreement 

whatever effect Defendant alleges, the Court is unaware of how that affects the analysis of 

this incorporation by reference claim. Accordingly, the Court finds that Plaintiff is not 

bound by the Agreement under the principle of incorporation by reference. 

b. Veil-Piercing or Alter Ego 

 A corporation is a “separate legal entity from its shareholders, directors, and 

officers.” State v. Angelo, 166 Ariz. 24, 27 (Ct. App. 1990). “Corporate officers and 

directors are generally shielded from liability for acts done in good faith on behalf of the 

corporation,” unless they commit “intentionally harmful or fraudulent conduct.” Albers v. 

Edelson Technology Partners L.P., 201 Ariz. 47, 52 (Ct. App. 2001) (citing 19 C.J.S. 

Corporations § 537 (1990)); see Activator Methods Int’l, Ltd. v. Future Health, Inc., No. 

CV-11-1379-PHX-GMS, 2012 WL 715629, at *2 (D. Ariz. Mar. 6, 2012). Alter ego status 

exists when there is “such unity of interest and ownership that the separate personalities of 

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the corporation and owners cease to exist.” Dietel v. Day, 16 Ariz. App. 206, 208 (1972). 

There must also be a showing that “observance of the corporate form would sanction a 

fraud or promote injustice.” Id. In determining whether an officer is an alter ego of his 

company, the court considers various factors, including “intermingling of corporate and 

personal assets, affairs, or funds, or that the corporate structure was in any way used for 

other than legitimate corporate purposes.” Id. The mere fact that an officer is the sole 

member and president of his company is not enough to find unity of interest. Id.

 Defendant argues that Plaintiff is the alter ego of his business and used his company 

as a buffer to perpetrate fraud and financial harm on Defendant for his own personal gain. 

(Doc. 36 at 9.) Specifically, Defendant alleges that Plaintiff converted Defendant’s medical 

equipment and breached the Agreement and otherwise induced Bird Medical to breach the 

Agreement and commit a tort against Defendant. (Doc. 36.) It argues that Plaintiff is the 

sole member and president of Bird Medical, and, thus, there is a unity of ownership and 

interest between him and his company. (Doc. 36 at 9.) As such, Defendant argues that not 

piercing the corporate veil here would work an injustice because Plaintiff should not be 

allowed to “avert personal responsibility for his own bad acts” and should be prevented 

from “hiding behind his company.” (Doc. 36 at 8.) Plaintiff argues that he and his business 

are not intertwined—the business has its own office, bank accounts, assets, insurance 

policies, and accounting records, and its funds are not comingled with Plaintiff’s personal 

finances. (Doc. 29 at 8.) He argues that simply because Defendant alleges he might 

ultimately be liable to Defendant for alleged wrongful conduct does not mean the corporate 

veil should be pierced. (Doc. 29 at 8.) 

 After reviewing the record, the Court is unable to determine whether the unity of 

interest requirement is met. The evidence in this case is severely lacking. The Court is 

mindful of Plaintiff’s affidavit and that discovery was “ongoing” in the arbitration. 

Therefore, considering the lack of evidence in this case, the Court finds that Defendant has 

failed to properly address Plaintiff’s assertion of facts as required by the Federal Rules of 

Civil Procedure 56(c) but gives Defendant the opportunity to properly support or address 

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the facts surrounding the alter ego claim. Fed. R. Civ. P. 56(e)(1). Accordingly, the Court 

orders that Defendant shall have until December 14, 2018 to file a supplemental brief 

addressing the alter ego issue pending on summary judgment. Plaintiff shall have seven (7) 

days after the filing of Defendant’s supplemental brief to file a response. 

V. Conclusion

Accordingly, having reviewed the record and for the reasons stated above, 

IT IS ORDERED: 

1. That Defendant shall have an opportunity to file a supplemental brief as to 

the alter ego issue by December 14, 2018, and Plaintiff shall have an 

opportunity to file a response within seven (7) days of the filing of 

Defendant’s brief; 

2. That Defendant’s Motion to Strike (Doc. 36) is denied; and 

3. That Defendant’s Motion to Stay Briefing is denied as moot (Doc. 31). 

 Dated this 30th day of November, 2018. 

Honorable Steven P. Logan 

United States District Judge 

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