Aviation Fin. Co. v. Chaput

Full title: AVIATION FINANCE CO. LTD, Plaintiff, v. CHRIS CHAPUT, Defendant. AVIATION…

Court: UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Date published: Mar 12, 2015

No. 14 Civ. 8313 (CM) (S.D.N.Y. Mar. 12, 2015)

Opinion

No. 14 Civ. 8313 (CM) No. 14 Civ. 8315 (CM)

03-12-2015

AVIATION FINANCE CO. LTD, Plaintiff, v. CHRIS CHAPUT, Defendant. AVIATION FINANCE CO. LTD., and AVIATION FINANCE CORP. LLC, Plaintiffs, v. SEAPORT GLOBAL SECURITIES LLC, THE SEAPORT GROUP LLC, and GLOBAL HUNTER SECURITIES, LLC Defendants.

McMahon, J.

DECISION AND ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO COMPEL ARBITRATION OR DISMISS

:

These two related actions arise from the same set of operative facts.

Plaintiffs Aviation Finance Company, Limited ("Aviation Limited") and Aviation Finance Corporation, LLC ("Aviation LLC," and together with Aviation Limited, "Plaintiffs") sued Defendants Seaport Global Securities LLC, The Seaport Group LLC, and Global Hunter Securities, LLC ("Global Hunter," and collectively "Seaport Defendants") in case number 14 Civ. 8315 ("the Seaport Action"). Plaintiff Aviation Limited sued individual defendant Chris Chaput ("Chaput"), a current employee of Seaport Global Securities, in case number 14 Civ. 8313 ("the Chaput Action"). Both complaints assert claims for breach of contract, unfair competition, defamation, and violations of the Lanham Act. For the most part, any distinctions between the complaints are semantic.

Before the Court are motions by the defendants in each action to compel arbitration or, in the alternative, to dismiss under Rule 12(b)(6) for failure to state a claim on which relief may be granted. See Docket #14 in the Chaput Action and Docket #20 in the Seaport Action. As described in greater detail below, both motions are GRANTED IN PART and DENIED IN PART.

BACKGROUND

I. The Parties to These Lawsuits

Aviation Limited is a Bermuda limited liability company that originates and structures debt financing in the form of pre-delivery payments ("PDPs"), which are progress payments made by aircraft purchasers to aircraft manufacturers while aircraft are being built. (Seaport Compl. ¶ 4.) Airlines assume that debt to finance airplane acquisitions. Plaintiff Aviation LLC is a Delaware limited liability company that places PDP debt with investors. (Seaport Compl. ¶6.)

Defendant Global Hunter is an investment bank organized as a Louisiana limited liability company. (Seaport Compl. ¶ 8.) Defendant The Seaport Group is a debt broker organized as a Delaware limited liability company. (Seaport Compl. ¶ 9.) In September 2013, Global Hunter was acquired by The Seaport Group. (Seaport Compl. ¶ 14.) Seaport Global Securities is a Delaware limited liability company. (Seaport Compl. ¶ 9.) Seaport Global Securities was formed after Global Hunter and The Seaport Group merged, (Chaput Compl. ¶ 6), although neither complaint states precisely how Seaport Global Securities is related to the other Seaport Defendants or what its role is in the aviation financing business.

Individual Defendant Chaput is a resident of New York. (Chaput Compl. ¶ 5.) As described more fully below, Chaput was hired by Aviation Limited in February 2014, but he subsequently accepted employment with one of the Seaport Defendants. The complaints do not state which specific defendant employed Chaput, only that "Chaput accepted employment with GSS [the Chaput Complaint's acronym referring the three Seaport Defendants collectively]." (Chaput Compl. ¶¶ 2, 24.)

II. The Aircraft Acquisitions

Plaintiffs were involved in financing four aviation-sector transactions that play a role in this case. Each transaction placed PDP debt to finance the sale of commercial aircraft. Although the parties' briefing on both motions places a disproportionate emphasis on the fourth transaction, the factual allegations underlying both complaints are not limited to the fourth transaction. Rather, Plaintiffs plead misconduct concerning each of the first three transactions specifically as well as misconduct concerning "the Transactions" generally.

The first transaction involved Plaintiff Aviation LLC and Defendant Global Hunter. In March 2013, Aviation LLC hired Global Hunter to help distribute two hundred sixty-five million dollars ($265,000,000.00) of PDP debt to finance the sale of nine commercial aircraft. (Seaport Compl. ¶ 13.) According to the complaints, Global Hunter failed to raise enough money, and the parties to the sale agreed to a smaller transaction involving eight aircraft. (Seaport Compl. ¶ 13.) The first transaction closed in June 2013. (Seaport Compl. ¶ 13.)

Both complaints allege that Global Hunter failed to provide financial expertise, and as a result, Aviation LLC had to raise most of the money itself. (Seaport Compl. ¶ 13.) Neither Plaintiffs nor Defendants have provided the Court with the contract governing the first transaction or discussed the terms of that agreement.

The second and third transactions occurred in early 2014. In each case, Aviation Limited originated, structured, and closed the placement of PDP debt to finance aircraft acquisitions - one airplane in the second transaction, and ten airplanes in the third transaction. (Seaport Compl. ¶¶ 15-16.) According to the complaints, none of the Defendants was involved in either the second or third transaction. (Seaport Compl. ¶ 17.)

The Defendants disagree; in their memoranda in support of their motions, Defendants state that they "entered into . . . engagement letter[s]" to act as advisors for the second and third transactions. (Seaport Mem. at 3-4.) Defendants have provided the Court with copies of those engagement letters, each of which contains an arbitration clause. (Seaport Mem. Exs. 1 & 2.) The copies of the engagement letters Defendants submitted to the Court are not signed by Plaintiffs, and Plaintiffs insist, in their moving papers, that they never signed them. Indeed, they supply a letter, allegedly emailed by an Aviation LLC partner to an executive of Global Hunter and The Seaport Group, explaining that Plaintiffs would not be working with Defendants:

. . . I have tried to execute an engagement letter for days and days. Please see my emails of Dec 13. There is absolutely no urgency shown by your firm. After watching yet another deadline go by tonight [I] received an engagement letter that I cannot accept. . . . AFC is not in the position to take any additional risk that our deal will not be successfully concluded by year end. We will not be using Seaport and GHS to place the PDP for the ninth A330-200 . . .. (Seaport Mem. Opp. Ex. C.) (emphasis added)

Defendants ignore this letter in their reply papers.

In connection with the fourth transaction, one of the Plaintiffs (Aviation LLC) hired Global Hunter and Seaport Global Securities as placement agents and financial advisors for a transaction to place PDP debt for the sale of 3 business airplanes.¹ (Seaport Compl. ¶ 18.) The parties memorialized their agreement in a May 2, 2014 engagement letter ("Engagement Letter"), a copy of which Defendants have provided to the Court. (See Seaport Mem. Ex. 3.)

1 The complaint describes the fourth transaction and Engagement Letter as between Aviation Limited and The Seaport Group. (Seaport Compl. ¶ 18.) The Engagement Letter, however, defines the "Company" party to the agreement as Aviation LLC, and does not mention Aviation Limited. The Engagement Letter also defines the Agents (the other party) as "Hunter Global Securities, LLC" and "Sea Port Group Securities, LLC" but makes no motion of The Seaport Group. Neither complaint refers to an entity "Sea Port Group Securities, LLC."

The Engagement Letter states that Aviation LLC engaged Global Hunter and Sea Port Group Securities "in connection with the proposed financing of pre-delivery payments for 3 Bombardier Global 6000 Aircraft." (Engagement Letter at 1.) Among other matters, the Engagement Letter discusses the services Defendants would provide, the fees Defendants would receive, and the information Plaintiffs would provide to Defendants.

The Engagement Letter does not contain a merger clause. It does, however, contain an arbitration clause, which reads as follows:

This Agreement is governed by the laws of the State of New York (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE, EXCEPT FOR SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW) and will be binding upon and inure to the benefit of the Company [Aviation LLC] and the Agents [Global Hunter and Sea Port Group Securities] and their respective successors and assigns. The Company and the Agents hereby agree that any dispute, controversy or claim arising out of or relating to this Agreement will be settled by mandatory, confidential, binding arbitration before a single arbitrator in New York City in accordance with the American Arbitration Association ("AAA") Commercial Arbitration Rules then in effect. The decision of the arbitrator will be final, binding and non-appealable and may be enforced in the courts of the State of New York and any other court of competent jurisdiction. (Engagement Letter ¶ 9.)

An Annex incorporated into the Engagement Letter specified that Aviation LLC would "indemnify and hold harmless" Defendants "and their affiliates and their respective directors, officers, agents and employees . . . from and against any losses, expenses, claims or proceedings . . . relating to or arising out of" the transaction unless resulting solely from Defendants' "gross negligence, bad faith or willful misconduct." (Engagement Letter at 8.) The Annex further specified that Defendants "shall have [no] liability (whether direct or indirect, in contract or tort or otherwise) . . . for or in connection with the engagement or any actual or proposed transactions or other conduct in connection therewith . . .." (Engagement Letter at 8.)

Four days later, on May 6, 2014, Aviation Finance and Global Hunter signed a separate Non-Disclosure and Confidentiality Agreement. (Seaport Mem. Ex. 4, "Seaport NDA".) The "Purpose" of the NDA was to facilitate information sharing "in particular, in relation to The Global 6000 PDP Financing" (Seaport NDA at 1) - that is to say, in relation to the transaction that was the subject of the Engagement Letter. The NDA requires Global Hunter to keep Aviation LLC's "confidential information" - including its proprietary know-how and financial details of the fourth transaction - in strict confidence. (Seaport Compl. ¶¶ 27-28.)

The Seaport NDA contains a forum selection clause, which reads:

This Agreement shall be governed by and construed in accordance with the laws of [sic] United States and the Parties hereby submit to the exclusive jurisdiction of the courts of the [sic] New York, NY. (Seaport NDA ¶ 14.)

Furthermore, unlike the Engagement Letter, the NDA does contain a merger clause, which reads "This Agreement constitutes the entire agreement and understanding between the Parties and supersedes any and all prior agreements and understandings, oral or written, relating to the Confidential Information and the subject matter thereof." (Seaport NDA ¶ 16.)

The Seaport NDA does not contain an arbitration clause.

III. Defendant Chaput's Consultancy

In or about February or March 2014 - between the second and third transactions - Aviation Limited hired individual Defendant Chaput as a consultant. (Chaput Compl. ¶ 10.) Chaput signed a written non-disclosure agreement with Aviation Limited dated February 27, 2014, (Chaput Mem. Opp. Ex. A, "Chaput NDA"), in which he agreed to hold Aviation Limited's "confidential information" in strict confidence for 36 months following the date of the agreement. (See Chaput Compl. ¶ 12.) In the Chaput complaint, Aviation Limited alleges that this confidential information included all details, financial and otherwise, about each of the four transactions described above. (Chaput Compl. ¶¶ 13-16.) The Complaint further alleges that Chaput was not privy to any proprietary know-how or details concerning any of the transactions before he signed the Chaput NDA. (Compl. ¶¶ 18-19.)

The Chaput NDA contains a combined merger and forum selection clause, which reads as follows:

This Agreement constitutes the entire agreement between the parties pertaining to the Subject Matter and supersedes all prior oral or written agreements concerning such Subject Matter. This Agreement may not be amended except by the written agreement signed by authorized representatives of both parties. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed therein, without giving effect to its conflicts of laws principles or rules. Any dispute arising under or in connection with this Agreement shall be brought in a court in New York. THE PARTIES WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY SUCH DISPUTE. (Chaput NDA ¶ 12.) (emphasis in original)

The Chaput NDA broadly defined "Subject Matter" as follows:

. . . transactions of mutual interest concerning the raising and or investment of capital into [Aviation Limited] or affiliates and subsidiaries of [Aviation Limited] related [sic] aviation finance. Such information contains proprietary subject matter, highly sensitive and confidential pricing information as well as matters that are subject to non-disclosure and confidentiality agreements between multiple parties involved and/or affiliated with AFC (the 'Subject Matter')[.] (Chaput NDA at 1.)

In September 2014, after the fourth transaction was complete, Chaput accepted employment with Seaport Defendants (as noted above, the complaints do not specify whether one or all of the Seaport Defendants employed Chaput). He did not disclose that employment to Aviation Limited. (Chaput Compl. ¶¶ 25-27.) Chaput was privy to Aviation Limited's confidential information. (Chaput Compl. ¶ 24.) When it learned that Chaput had accepted employment with Defendants, Aviation Limited ended its working relationship with Chaput. (Chaput Compl. ¶ 29.)

IV. The Complaints

The gravamen of both complaints is that Chaput, while acting within the scope of his employment with the Seaport Defendants - and possibly in conjunction with other employees of the Seaport Defendants - prepared an electronic presentation dated "September 2014," titled "Introduction to Seaport Global Securities LLC Aviation Banking Capabilities." (Chaput Compl. ¶¶ 29-30; Seaport Compl. ¶¶ 34-36.) Both complaints allege that the presentation included confidential information relating to one or more of the transactions and contained false and misleading statements damaging to Plaintiffs' businesses. According to the complaints, the presentation was disclosed to at least one aviation company. (Chaput Compl. ¶ 43; Seaport Compl. ¶ 49.) Plaintiffs allege that they did not give Chaput or the Seaport Defendants permission to disclose this information to third parties.

The Chaput complaint alleges that the presentation disclosed the following proprietary information about "the Transactions" (without specifying whether this information was about any particular transaction or all of them): [1] "whether there was a senior and/or a junior loan involved in the Transactions"; [2] "the 'WAL' (weighted average life) of the loans involved in the Transactions"; [3] "whether the loans involved in the Transactions were guaranteed by the manufacturer of the airplane(s)"; [4] "whether the Transactions were guaranteed by any company"; and [5] information regarding "the structure of the guarantee(s) for the loans involved in the Transactions." (Chaput Compl. ¶ 32.) The Chaput Complaint alleges that this information was disclosed in violation of the Chaput NDA. (Chaput Compl. ¶ 32.)

The Seaport complaint alleges that the presentation disclosed similar information, but it alleges that the loan terms (junior or senior, weighted average life, guarantees, and structure) were disclosed only with respect to the fourth transaction, not "the Transactions" generally. (Seaport Compl. ¶ 38.) The Seaport Complaint alleges that the disclosure of that information about the fourth transaction violated the Seaport NDA, rather than the Chaput NDA. (Seaport Compl. ¶ 38.)

Both Complaints allege, using substantially identical language, that the presentation was false and misleading in the following ways:

• The presentation gives the impression that the Seaport Defendants were "solely responsible for the First Transaction" by referring to Global Hunter as the first transaction's "sole placement agent," when Global Hunter raised only about 25% of the debt involved in the transaction. (Chaput Compl. ¶ 36; Seaport Compl. ¶ 42.)

• The presentation gives the impression that the Seaport Defendants "Created the PDP Market" and won the "Deal of the Year award" for the first transaction, when they did not win that award. (Chaput Compl. ¶ 37; Seaport Compl. ¶ 43.)

• The presentation gives the impression that the Seaport Defendants were involved in both the second and third transactions when they were not involved. (Chaput Compl. ¶¶ 38-39; Seaport Compl. ¶ 44.)

• The presentation states that the third transaction involved 8 airplanes when in fact it involved 10 airplanes. (Chaput Compl. ¶ 40; Seaport Compl. ¶ 45.)

• The presentation gives the impression that a major Swiss aviation company was involved in both the third and fourth transactions, when it was not so involved. (Chaput Compl. ¶ 41; Seaport Compl. ¶ 46.)

• The presentation gives the impression that the "labors, expenditures, goodwill and services of [Aviation] Limited are [the Seaport Defendant's]" by stating that: [1] Seaport Global Securities "created" the PDP capital markets product; [2] Seaport Global Securities executes the most deals PDP deals and raises the most PDP debt; [3] "the Transactions"
(which transactions, or all of them, is not specified) are examples of Seaport Global Securities' work; (4) that Seaport Global Securities is the "Largest arranger" of PDP debt, is "best qualified" to place such debt, and is in fact a "Pioneer" in the PDP debt market. (Chaput Compl. ¶¶ 34-35; Seaport Compl. ¶¶ 40-41.)

Finally, both complaints allege that the presentation contains two specifically identified defamatory statements. The first is, "Non broker-dealer 'arrangers' [such as Aviation Limited] potentially have distribution limitations as they are legally prohibited in engaging in securities Transactions (including bonds) in many cases." The second is, "Relying on an unregistered arranger or an untested broker dealer increases the PDP execution risk." (Chaput Compl. ¶ 42; Seaport Compl. ¶ 48.)

Both complaints assert six identical causes of action.

The first two causes of action in both complaints are for breach of contract, based on the presentation's disclosure of confidential information in violation of the relevant non-disclosure agreement²: the Chaput complaint alleged that these disclosures breached the Chaput NDA, (Chaput Compl. ¶¶ 45-53), while the Seaport complaint alleges that the Seaport Defendants breached the Seaport NDA, (Seaport Compl. ¶¶ 51-62).

2 In fact, there is but one claim for breach of contract asserted in each complaint - for breach of the relevant NDA by the party/parties defendant. Plaintiff(s) erroneously assert separate claims for each type of relief they seek: the first count in each complaint seeks damages, while the second count seeks injunctive relief. Forms of relief are not separate causes of action; they are remedies.

Based on the allegedly false and misleading statements described above, counts 3, 5, and 6 in both complaints claim that the defendants in the respective actions engaged in unfair competition by "reverse palming off," (count 3, Chaput Compl. ¶¶ 54-61; Seaport Compl. ¶¶ 63-72), false designation of origin in violation of the Lanham Act, (count 5, Chaput Compl. ¶¶ 73-79; Seaport Compl. ¶¶ 89-97), and false advertising in violation of the Lanham Act (count 6, Chaput Compl. ¶¶ 80-92; Seaport Compl. ¶¶ 98-112). As discussed above, many of the allegedly misleading statements are described in both complaints as concerning "the Transactions" generally, although at least one misleading statement particular to each transaction is alleged in each complaint. See supra at 9-10 (listing allegations regarding individual transactions in each complaint).

Finally, count 4 in both complaints alleges defamation per se; Plaintiff(s) allege that Defendants committed defamation by stating that non-broker-dealer arrangers are untested and risky because they cannot engage in securities transactions. (Chaput Compl. ¶¶ 62-72; Seaport Compl. ¶¶ 73-88).

Defendants have moved to compel arbitration of all claims. In the alternative, they move to dismiss the complaints in each case for failure to state a claim on which relief may be granted.

DISCUSSION

I. The Law Governing Arbitration

Section 3 of the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (the "FAA"), expressly provides for the mandatory arbitration of issues referable to arbitration under a written agreement:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement . . ..

The FAA applies to all arbitration agreements that affect interstate (or international) commerce. See 9 U.S.C. §§ 1-2; Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 273-77 (1995). The Second Circuit has instructed that a court must address four factors in determining whether to stay a proceeding pending arbitration:

[F]irst, 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 case are arbitrable, it must then determine whether to stay the balance of the proceedings pending arbitration.

Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir. 1987) (internal citations omitted); see also Chartis Seguros Mexico, S.A. de C.V. v. HLI Rail & Rigging, LLC, 967 F. Supp. 2d 756, 761 (S.D.N.Y. 2013).

In considering the first issue - whether the parties have agreed to arbitrate - the controlling principle is that "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960). The determination whether the parties have agreed to arbitrate is based on ordinary principles of contract law. Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co., 189 F.3d 289, 296 (2d Cir. 1999); Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42, 46 (2d Cir. 1993).

Although there is a strong federal policy favoring arbitration, Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), the presumption in favor of arbitrability of disputes "does not apply to disputes concerning whether an agreement to arbitrate has been made." Applied Energetics, Inc. v. NewOak Capital Markets, LLC, 645 F.3d 522, 526 (2d Cir. 2011). The issue whether an agreement to arbitrate exists is for the Court. Canada Life Assur. Co. v. Guardian Life Ins. Co. of Am., 242 F. Supp. 2d 344, 349 (S.D.N.Y. 2003).

If the parties have agreed to arbitrate some disputes, the Court must turn to the second issue - the scope of the agreement. It is here that the presumption of arbitration applies. "[A]s a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25. The Second Circuit has stated that certain arbitration clauses - for example those calling for the arbitration of "any controversy or claim between [the parties] arising out of or relating to the agreement" - are "classically broad" arbitration clauses. Mehkr v. Terminix Int'l Co. L.P., 205 F.3d 44, 49-50 (2d Cir. 2000) (internal quotation marks omitted). By including such a clause, the parties "presumably . . . intend all issues that touch matters within the main agreement to be arbitrated." ACE Capital Re Overseas Ltd. v. Cent. United Life Ins. Co., 307 F.3d 24, 34 (2d Cir. 2002) (internal citations and quotation marks omitted). Thus, the Court "must compel arbitration unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id. (internal citations and quotation marks omitted).

Defendants argue, and Plaintiffs do not contest, that no act of Congress precludes arbitration of any of Plaintiffs' claims. Neither party has discussed whether the court should stay the prosecution of any claims that are not arbitrable. Thus, only the first two elements of the Second Circuit's Genesco framework need to be addressed in this opinion.

II. The Seaport Defendants' Motion to Compel Arbitration is Granted in Part and Denied in Part.

The Seaport Defendants (or at least one of them) have three separate, but related, agreements with at least one of the Plaintiffs: [1] the first transaction between Aviation LLC and Global Hunter, the contract for which has not been provided to the Court; [2] the Engagement Letter for the fourth transaction between Aviation Limited, Global Hunter, and Sea Port Global Securities;³ and [3] the Seaport NDA between Aviation LLC and Global Hunter.

3 As noted above, the Complaint pleads that Aviation Limited, rather than Aviation LLC, and The Seaport Group, rather than Sea Port Group Securities, were parties to the Engagement Letter. The Engagement Letter itself lists the latter entities as its parties.

Although the Seaport Defendants urge that Aviation LLC⁴ entered into engagement letters concerning the second and third transactions - each of which contained an arbitration clause - they have not produced a copy of either letter signed by Aviation LLC, while Plaintiffs have produced a signed writing - which the Seaport Defendants do not deny receiving - in which Aviation LLC specifically refuses to do business with the Seaport Defendants in connection with the second and third transactions. The Seaport Defendants do not address this document at all in their reply papers, so I assume that they concede receiving it.

4 The engagement letters submitted by Defendants - not signed by any plaintiff - list the parties to these agreements as Aviation LLC, Global Hunter, and Sea Port Group Securities, LLC.

The party seeking to compel arbitration has the burden to demonstrate that an agreement to arbitrate exists. Mines v. Overstock.com, Inc., 380 F. App'x 22, 24 (2d Cir. 2010); Scone Investments, L.P. v. Am. Third Mkt. Corp., 992 F. Supp. 378, 381 (S.D.N.Y. 1998). The Seaport Defendants have not discharged their burden in connection with the first, second or third transactions. The Court finds, as a matter of fact for purposes of deciding this motion, that while there were negotiations between the parties about performing services in connection with the second and third transactions, they never entered into any agreement; indeed, the last communication between them - the letter discussed at page 4, supra - establishes that no such agreement was ever reached. No agreement of any sort relating to the first transaction has been provided to the Court by either side, so there is no evidence from which I can conclude that any such agreement, if one existed, included an arbitration clause.

For this reason, the motion to compel arbitration is denied insofar as it relates to claims asserted in connection with the first, second and third transactions. All such claims must be litigated.

This leaves the fourth transaction. The Engagement Letter relating to that transaction contains an arbitration clause. That clause is a broad arbitration clause, which compels arbitration of "any dispute, controversy or claim arising out of or relating to this Agreement . . .." (Engagement Letter ¶ 9.)

However, virtually simultaneously the Seaport Defendants entered into the Seaport NDA, which provides, ". . . the Parties hereby submit to the exclusive jurisdiction of the courts of the [sic] New York, NY[,]" (Seaport NDA ¶ 14). Because the Seaport NDA contains a merger clause, which states that the Seaport NDA constitutes the "entire" agreement between the parties and supersedes all others, this forum selection clause appears to contradict the arbitration clause.

In order to decide which claims, if any, are arbitrable under the arbitration agreement between contained in the Engagement Letter, the Court must address two analytically distinct questions: [1] does the forum selection clause of the Seaport NDA vitiate the arbitration clause in the Engagement Letter; and [2] assuming the arbitration clause remains in force, which causes of action are arbitrable, given that many of the claims asserted by Plaintiffs rest both on allegations that relate exclusively to the fourth transaction and the Engagement Letter, and on allegations that do not relate to the fourth transaction or the Engagement Letter?

A. The Seaport NDA's Forum Selection Clause Does Not Vitiate the Engagement Letter's Arbitration Clause

Turning to the first question, the Second Circuit has developed a body of law applicable when parties have agreed to both (1) an arbitration clause covering "any" disputes "arising out of or relating to" a certain subject and (2) a subsequent but related agreement that could be read to vitiate the prior agreement to arbitrate. That body of law derives from two decisions: Applied Energetics, Inc. v. NewOak Capital Markets, LLC, 645 F.3d 522 (2d Cir. 2011) and Bank Julius Baer & Co., Ltd. v. Waxfield Ltd., 424 F.3d 278 (2d Cir. 2005).

In Bank Julius, the defendant Waxfield opened an account with Bank Julius by executing two contracts. Both contracts contained clauses broadly agreeing to arbitrate "any unresolved dispute, controversy or claim arising out of or relating to any business relationship between [Waxfield] and [Bank Julius]." Bank Julius, 424 F.3d at 280, 282.

A third party, Shiv, subsequently obtained power of attorney over Waxfield's accounts, and used that power to pledge the assets in those accounts as security for loans from Bank Julius to three different entities with which Shiv was involved - a fraudulent arrangement that made no business sense for Waxfield. The pledge agreements signed by the bank and Shiv (on behalf of Waxfield) contained forum selection clauses specifying that "Without limiting the right of the Bank to bring any action or proceedings . . . in the courts of other jurisdictions, [Waxfield] irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City, and [Waxfield] hereby irrevocably agrees that any Action may be heard and determined in such New York State court or in such Federal court." Id. at 282 (alterations and omission in original). The pledge agreements also provided that the rights and remedies afforded thereunder were "without exception . . . cumulative and not exclusive of any rights or remedies provided under any other agreement . . .." Id.

The pledge agreements contained merger clauses, stating that they "supersede[d] all prior agreements and understandings between [Waxfield] and the [Bank Julius] . . . [and] constitute[d] the entire agreement of the parties." Id. (first alteration in original).

Shiv's fraud was discovered and the court appointed a receiver to identify and repatriate funds he had misappropriated. The receiver filed suit against Bank Julius and Waxfield, Waxfield filed a cross-claim against the Bank, and the Bank moved to stay the cross-claims pending arbitration, relying on the arbitration clause in the original account-opening agreements. Id. at 281.

The Second Circuit held that Waxfield's claims against Bank Julius were arbitrable.

The Circuit Court first rejected Waxfield's claim that the merger clause in the pledge agreements precluded arbitration. Acknowledging that a literal reading of the merger clause would lead to the conclusion proposed by Waxfield - meaning that the pledge agreements supersede "all prior agreements" between the parties, including the account opening agreements, in which the arbitration clause appeared - the Second Circuit rejected that reading. As a legal matter, the Circuit Court held that a merger clause acts, "only to require full application of the parol evidence rule to the writing in question - here, the Pledge Agreements." Id. at 283. Because "enforcement of the parties' obligations to arbitrate disputes . . . does not implicate the parol evidence rule in connection with the [Pledge Agreements]," consideration of the account opening agreements was not precluded by the merger clause in the pledge agreements. Id. (citing Primex Int'l Corp. v. Wal-Mart Stores, 89 N.Y.2d 594, 600 (1997) (a case indistinguishable on its facts from Bank Julius)).

As a textual matter, the Circuit Court further noted that the reading proposed by Waxfield would lead to an absurd result - it would supersede, and so expunge, the account-opening statements for the accounts whose assets were pledged under the pledge agreements. This would violate the settled maxim of contract construction that forbids giving a contract a nonsensical interpretation. See World Trade Center Properties, L.L.C. v. Hartford Fire Ins. Co., 345 F. 3d 154, 184 (2d Cir. 2003).⁵

5 The Court of Appeals also noted that, as a textual matter, reading the Merger Clause to preclude arbitration was at odds with the clause in the pledge agreement that provided, "without exception, all the rights an remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided under any other agreement . . .." Since similar language does not appear in either the Engagement Letter or the Seaport NDA, that particular aspect of the Second Circuit's opinion is not instructive on this motion.

The Second Circuit next turned to Waxfield's argument that the agreement to arbitrate was vitiated by the forum selection clause in the pledge agreement. After observing that, under established law, "if there is a reading of the various agreements that permits the Arbitration Clause to remain in effect, we must choose it," the Circuit Court held, as a matter of law, that a forum selection clause "cannot nullify an arbitration clause unless the forum selection clause specifically precludes arbitration." Bank Julius, 424 F.3d at 284 (quoting Personal Sec. & Safety Systems v. Motorola, 297 F.3d 388, 396 n.11 (5th Cir. 2002)). The forum selection clauses in the pledge agreements did not "specifically preclude" arbitration. Not only did those forum selection clauses not mention arbitration, but there was a way to read the arbitration and forum selection clauses consistently. Bank Julius agreed to submit to the jurisdiction of New York courts, but that agreement clearly permitted disputes to be heard in other courts; New York courts were not an exclusive forum. Read together, the two clauses meant that Bank Julius and Waxfield were required to "arbitrate their disputes, but that to the extent [Bank Julius] files a suit in court in New York - for example, to enforce an arbitral award, or to challenge the validity or application of the arbitration agreement - Waxfield could not challenge either jurisdiction or venue." Id. at 285.

In Applied Energetics, Inc. v. NewOak Capital Markets, LLC, 645 F.3d 522 (2d Cir. 2011), Applied entered a preliminary agreement with NewOak under which NewOak agreed to act as exclusive placement agent for Applied's anticipated private securities offering. The preliminary agreement specified "that any dispute arising out of or relating to this letter, the Indemnity Agreement and/or the transactions contemplated hereby or thereby . . . shall be resolved through binding arbitration . . .." Id. at 523 (emphasis added; first omission in original). The parties subsequently executed a more detailed formal agreement. The detailed formal agreement did not contain an arbitration clause, and expressly provided that, "Any dispute arising out of this Agreement shall be adjudicated in the Supreme Court, New York County or in the federal district court for the Southern District of New York." Id. (emphasis added). The formal agreement also contained a merger clause, which stated that it, together with several other enumerated agreements between the parties, "'constitute[d] the entire understanding and agreement between the parties' with respect to NewOak's placement of Applied securities, and that 'there [we]re no [other] agreements or understandings' that apply." Id. at 523-24 (final alteration in original). The preliminary agreement was not among the earlier agreements that were specifically incorporated into the merger clause.

The Second Circuit held that the earlier agreement to arbitrate had been superseded by the agreement containing the forum selection clause conferring exclusive jurisdiction for dispute resolution on New York courts. The court distinguished Bank Julius on the ground that its forum selection clause was non-exclusive, in that it did not require the parties to resolve disputes in a particular forum or to forego their rights and remedies under other agreements. Id. at 525. It was therefore possible to read the Bank Julius contracts as requiring that "the merits of any dispute [relating to the account relationship] . . . be resolved in the first instance by arbitration," but specifying New York as the non-exclusive jurisdiction for enforcing arbitration awards or challenging the validity of arbitration contracts. Id.

The agreements in Applied Energetics were different. Both the arbitration clause and the forum selection clause in that case were "all-inclusive" and "mandatory," applying to "any dispute" between the parties. Id. As such, neither clause "admits the possibility of the other." Id. The forum selection clause in Applied Energetics did not mention arbitration, but it required "adjudicate[ion]" of disputes in New York courts - courts of law, not arbitral tribunals. That forum selection clause thus "specifically preclude[d]" arbitration of disputes. Id. at 525-26. That was particularly true in light of the merger clause which, unlike the clause in Bank Julius "specifically identified the agreements that were in force" and thus "clear[ed] the path" for the forum selection clause to displace the arbitration agreement, which was contained in an agreement that was not identified as continuing in force. Id, at 526 n.2. Applying normal principles of contract construction, the Circuit Court concluded that the later-adopted forum selection clause effectively revoked the agreement to arbitrate. Id. at 525-26.

In Goldman, Sachs & Co. v. Golden Empire Schools Financing Authority, 764 F.3d 210 (2d Cir. 2014), the Second Circuit summarized the doctrine of Bank Julius and Applied Energetics as follows: "In this circuit, an agreement to arbitrate is superseded by a later-executed agreement containing a forum selection clause if the clause 'specifically precludes' arbitration," although it is not necessary that the forum selection clause mention arbitration expressly. Id. at 215. The Second Circuit also admonished district courts that "the presumption [in favor of arbitrability] does not apply" in cases in which "the question presented [is] whether an arbitration agreement remains in force in light of a later-executed agreement." Id.

Applying the rule articulated in Goldman Sachs to this case, I conclude that the arbitration clause in the Engagement Letter remained in full force and effect, despite the subsequent (thought virtually simultaneous) execution of the Seaport NDA.

The arbitration clause states that ". . . any dispute, controversy or claim arising out of or relating to this Agreement will be settled by mandatory, confidential, binding arbitration . . .." (Engagement Letter ¶ 9. (emphasis added)) That wording is nearly identical to other arbitration clauses that the Second Circuit has called "classically broad." See Mehler, 205 F.3d at 49 (clause requiring arbitration of "any controversy or claim between [the parties] arising out of or relating to the Agreement"). Standing alone, such a "classically broad" clause compels arbitration of any dispute in which the allegations "touch matters" covered by the Engagement Letter. Id. at 50.

Nothing in the Seaport NDA "specifically precludes" the application of the arbitration clause to non-disclosure issues that touch on the fourth transaction, in the way that the plain language of the forum selection clause precluded resort to arbitration in Applied Energetics. The Seaport NDA does not, for example, explicitly revoke the arbitration agreement relating to "any dispute, controversy or claim arising out of relating to" the Engagement Letter. Neither does it require "adjudication" of disputes, or use any other phrase suggesting that disputes must be brought in court. Its forum selection clause states only that, "the Parties hereby submit to the exclusive jurisdiction of the courts of the [sic] New York, NY." (Seaport NDA ¶ 14.) That phrasing is virtually identical to the words used in the forum selection clause in Bank Julius - words deemed insufficient to revoke an earlier agreement to arbitrate.

Furthermore, it is possible - indeed, easy - to read the arbitration clause in the Engagement Agreement and the forum selection clause in the Seaport NDA together. The arbitration clause requires arbitration of the merits of all disputes that touch on the fourth transaction - whether arising under the Engagement Letter or the Seaport NDA or both - but challenges to the agreement to arbitrate or actions to enforce an arbitration award must be brought in New York courts, and the parties consent to the jurisdiction of those courts for purposes of resolving those disputes. This reading gives effect to all of the clauses of both agreements.

Although the Seaport NDA contains a merger clause, it states only that the Seaport NDA "constitutes the entire agreement and understanding between the Parties and supersedes any and all prior agreements and understandings . . .." As Bank Julius explained, such a boilerplate clause cannot be read literally, because doing so would revoke the very Engagement Letter on which the Seaport NDA was based and in connection with which it was executed! Unlike the merger clause in Applied Energetics, the Seaport NDA's clause does not specify particular agreements that the parties intend should remain in force. Its function appears to be the same as the function of the merger clause at issue in Bank Julius: ensuring that the parol evidence rule is observed. It thus has no relevance to determining whether the agreement to arbitrate has been revoked.

I conclude that the Engagement Letter's arbitration clause remains in full force and effect; its scope is unaffected by the forum selection clause in the Seaport NDA. For that reason, Plaintiffs' claims, to the extent that they "touch matters" concerning the fourth transaction, are arbitrable - no matter the allegations supporting them. To the extent of claims touching on the fourth transaction, the Seaport Defendants' motion to compel arbitration must be granted.

B. Counts 1 and 2 Are Arbitrable in their Entirety; Counts 3, 5, and 6 Are Arbitrable in Part; Count 4 is Not Arbitrable

The Court now turns to the second Genesco question: given that the complaint pleads six causes of action, some of which assert claims in connection with more than one of the four transactions, which of Plaintiffs' claims against the Seaport Defendants are, in fact, arbitrable?

Some of the allegations in the Seaport complaint relate to the Engagement Letter, pursuant to which the Seaport Defendants were engaged to participate in the financing of the fourth transaction. These allegations concern only the fourth transaction. Plaintiffs' allegation that the presentation disclosed confidential information about the terms of the loans used to finance the fourth transaction falls into that category. (Seaport Compl. ¶ 38.)

Other allegations are pleaded generally, as concerning "the Transactions," without specifying which transaction(s). This is true, for example, of Plaintiffs' allegations that various statements in the presentation give the impression that "the Transactions" were the Seaport Defendants' work. (Seaport Compl. ¶¶ 40-41.) To the extent that such claims involve erroneous representations about the fourth transaction or the Seaport Defendants' work thereon, they are, obviously arbitrable. They are not arbitrable, however, to the extent they assert that the Seaport Defendants misrepresented their role in connection with any or all of the first three transactions. (See, e.g., Seaport Compl. ¶ 42.)

"In determining whether a particular claim falls within the scope of the parties' arbitration agreement, [the Court] focus[es] on the factual allegations in the complaint rather than the legal causes of action asserted." Genesco, Inc., 815 F.2d at 846. In their moving papers, the parties seem to assume that this action will either be litigated in court or sent to arbitration in its entirety. They are wrong. "If some claims are non-arbitrable, while others are arbitrable, then we will sever those claims subject to arbitration from those adjudicable only in court. Indeed, there is no reason why, in a proper case, we cannot sever even a part of a claim, where that claim raises both arbitrable and non-arbitrable issues." Collins & Aikman Products Co. v. Bldg. Sys., Inc., 58 F.3d 16, 20 (2d Cir. 1995). I must consider each of Plaintiffs' causes of action in turn, examining the underlying factual allegations to determine whether each cause of action is, in part or whole, arbitrable.

1. Breach of Contract

Plaintiffs' breach of contract claims in the Seaport complaint (counts 1 and 2) relate only to the fourth transaction. The complaint alleges that the Seaport Defendants breached only one agreement - the Seaport NDA - and did so by disclosing confidential information. (Seaport Compl. ¶¶ 55, 60.) The only factual allegations concerning the disclosure of confidential information are contained in paragraph 38 of the Seaport complaint. That paragraph alleges the following information was disclosed: [1 ] "whether there was a senior and/or a junior loan involved in the Fourth Transaction"; [2] "the 'WAL' (weighted average life) of the loans involved in the Fourth Transaction"; [3] "whether the loans involved in the Fourth Transaction were guaranteed by the manufacturer of the airplane(s)"; [4] "whether the Fourth Transaction was guaranteed by any company"; and [5] information regarding "the structure of the guarantee(s) for the loans involved in the Fourth Transaction." (Seaport Compl. ¶ 38.)

There can be no question that those alleged breaches of confidentiality - each of which relates to the fourth transaction and only the fourth transaction - arise under the Seaport NDA and thus relate to the Engagement Letter. As explained above, the "purpose" of the Seaport NDA was to facilitate sharing of information concerning the fourth transaction. By alleging a breach of the Seaport NDA, Plaintiffs have raised a claim that is integrally related to the agreement the Seaport NDA facilitates. Therefore, the claims asserted against the Seaport Defendants in counts 1 and 2 are arbitrable and the motion to compel arbitration is granted.

2. Defamation

It is equally clear that Plaintiffs' defamation claim (count 4) is not subject to arbitration.

The allegedly defamatory statements are described in paragraph 48 of the complaint: "Non broker-deal 'arrangers' potentially have distribution limitations as they are legally prohibited from engaging in securities transactions (including bonds) in many cases"; "Relying on an unregistered arranger or an untested broker dealer increases the PDP execution risk."

Plaintiffs' defamation claim is remarkably similar to the claim asserted by the plaintiff in Coudert v. Paine Webber Jackson & Curtis, 705 F.2d 78 (2d Cir. 1983), which the Second Circuit held was not arbitrable. Coudert was employed by Paine Webber under a contract that contained an agreement to arbitrate, "Any controversy between a registered representative and any member or member organization arising out of the employment or termination of employment . . .." Id. at 80. Coudert allegedly left her job voluntarily, but her former manager told other employees that she had been fired for cause and filed termination forms with the SEC so asserting. Id. Coudert filed a lawsuit alleging (among other claims) that Paine Webber's statements were defamatory.

The Second Circuit held that Coudert's defamation claim was not arbitrable. Although the defamatory statements concerned the "termination" of Coudert's employment in the "limited sense" that the statements were about the manner in which she was terminated, "the dispute itself does not pertain to employment or termination of employment; the tortious acts are all claimed to have occurred after such termination." Id. at 82.

Here, where the allegedly defamatory statements do not even concern the fourth transaction directly, the case against arbitration is stronger. Defamation regarding the Plaintiffs' business model relates to the fourth transaction only in the most tangential sense (Plaintiffs operated under that business model while performing the fourth transaction). But as Coudert counsels, the allegedly defamataory statements are a separate tortious act, one that does not specifically pertain to the fourth transactions and that occurred after the fourth transaction was completed. See Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 28-29 (2d Cir. 1995) (holding that arbitration clause did not cover claim of defamation based on statements about a plaintiff's general business practices).

Therefore, the Seaport Defendants' motion to compel arbitration of count 4 is denied.

3. Unfair Competition and Lanham Act Violations

Counts 3, 5, and 6, asserting unfair competition under New York common law and violations of the Lanham Act, are more difficult to resolve. The critical assertions in each of these counts are that the Seaport Defendants "misappropriated," "falsely misrepresented," "falsely designated," or made "false and/or misleading statements as to" "the labors, expenditures, goodwill and services of Plaintiffs," by claiming "the Transactions" as their own. (Seaport Compl. ¶¶ 68-69 (count 3, unfair competition), ¶¶ 91-92, 94 (count 5, Lanham Act for false designation of origin), ¶¶ 99-100 (count 6, Lanham Act for false advertising).

In determining whether those claims are arbitrable, I must focus on "the factual allegations in the complaint rather than the legal causes of action asserted." Genesco, 815 F.2d at 846. The factual allegations supporting these claims are contained in paragraphs 40 through 46 of the Seaport complaint. As described above, the allegations in paragraphs 40 and 41 refer only to "the Transactions" in general, without naming specific transactions. The allegations in paragraphs 42 through 46 concern one or more particular transaction(s).

The fact that many of the factual allegations underlying counts 3, 5, and 6 do not directly relate to the fourth transaction does not settle the issue. "Where the arbitration clause is broad, there arises a presumption of arbitrability and arbitration of even a collateral matter will be ordered if the claim alleged implicates issues of contract construction or the parties' rights and obligations under it." JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 172 (2d Cir. 2004) (quoting Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218, 224 (2d Cir. 2001)). Thus, if "the dispute is in respect of a matter that, on its face, is clearly collateral to the contract, then a court should test the presumption [of arbitrability] by reviewing the allegations underlying the dispute and by asking whether the claim alleged implicates issues of contract construction or the parties' rights and obligations under it." Louis Dreyfus Negoce S.A., 252 F.3d at 224 (quoting Collins & Aikman Prods., 58 F.3d at 23).

A recent opinion of this Court is instructive. In In re Refco, Inc. Securities Litigation, No. 07 CIV. 11604, 2008 WL 2185676 (S.D.N.Y. May 21, 2008), a litigation trustee, acting on behalf of Refco, filed a suit against Ernst and Young, Refco's tax preparer and advisor. The complaint raised state-law claims of breach of fiduciary duty, fraud, malpractice, and negligent misrepresentation. Underlying those claims, the Trustee alleged that as early as 1997, Ernst and Young knew about a fraudulent scheme to inflate Refco's profits and enrich its management, and in fact participated in that scheme by helping Refco cook its books.

Refco's arrangement with Ernst and Young was governed by annual engagement letters dating back to 1991. The parties could only locate letters from 2001, 2002, and 2003. The 2001 letter contained an agreement to arbitrate "Any controversy or claim arising out of or relating to tax and tax related services now or hereafter provided . . .." Id. at *2. The 2002 and 2003 engagement letters incorporated the 2001 arbitration provision by reference. Ernst and Young moved to compel arbitration based on that language.

My colleague, Judge Lynch, held that the allegations underlying the trustee's complaint all concerned the "tax related services" provided by Refco, and thus "touch[ed] matters" covered by the arbitration clause. Id. at *6.

The trustee argued that his claims against Ernst and Young were not arbitrable because they were "based, in large part, on services and conduct that pre-date" the arbitration agreement - that is, the "bulk of the allegations regarding E & Y's wrongdoing relate to actions taken by E & Y prior" to those engagement letters, which only required the arbitration of disputes over services "now or hereafter provided." Id. Judge Lynch rejected that argument:

An examination of the complaint, moreover, reveals that the Trustee drafted his claims against EY in extremely broad strokes, alleging, in essence, that EY was an active participant in the Refco fraud from beginning to end. Specifically, the complaint describes a virtually uninterrupted stream of tax-related work that EY performed for various Refco entities beginning in the 1990s through at least 2005 . . .. Having framed his claims broadly, the Trustee cannot now construe them narrowly or piecemeal to avoid the parties' agreement to arbitrate. Id.

In Refco, the issue was timing: A party asserted that alleged misconduct occurring prior to the execution of an arbitration agreement, and thus arising under earlier agreements that had not been produced to the court, could not be swept into the scope of the arbitration clause. The Refco Court rejected that assertion. But the principle at work is even broader. "[C]ourts commonly find that contractual claims founded upon one agreement may still sufficiently relate to another agreement such that the latter agreement's arbitration clause compels arbitration of the entire dispute." China Auto Care, LLC v. China Auto Care (Caymans), 859 F. Supp. 2d 582, 589 (S.D.N.Y. 2012); see also Vermont Pure Holdings, Ltd. v. Descartes Sys. Grp., Inc., 140 F. Supp. 2d 331, 336 (D. Vt. 2001) (compelling arbitration in their entirety of claims that arose from inadequate performance of two contracts, only one of which contained an arbitration clause).

Paragraphs 40 and 41 of the Seaport complaint allege that the Seaport Defendants falsely and misleadingly claimed credit for Aviation Limited's labors, expenditures, goodwill, and services. These paragraphs are pleaded in very broad strokes. During the presentation, the Seaport Defendants stated, on a page entitled "Recently Placed PDPs" that Seaport Global "created" the market for PDP debt, had executed the most deals for that debt, and had raised the largest amount of that debt, which the Seaport Defendants demonstrated by listing "the Transactions" as examples of their work. (Seaport Compl. ¶ 40.) The complaint also alleges that the Seaport Defendants described Seaport Global as the "Largest arranger" of PDP debt, a "Pioneer" in the market, and "best qualified" to place that debt even though Plaintiffs introduced the Seaport Defendants to that market. (Seaport Compl. ¶ 41.) These assertions of fact underlie the third, fifth and sixth claims for relief.

The allegations in paragraphs 40 and 41 relate to all four transactions. (Seaport Compl. ¶ 19.) When the Seaport complaint alleges that the Seaport Defendants falsely claimed credit for and appropriated the "Transactions" as their own work, it necessarily alleges that the Seaport Defendants falsely claimed credit for the fourth transaction. That particular claim touches on the transaction contemplated by the Engagement Letter, even if it is not entirely subsumed by that transaction. Following Judge Lynch's opinion in Refco, claims about the misleading nature of these statements are arbitrable - even if claims less broadly drawn, so as to relate specifically to the first, second, or third transaction individually, might not be arbitrable. While the allegations in paragraphs 40 and 41 of the complaint also relate to the first, second, and third transactions, these collateral matters are still arbitrable because the "claim alleged" - that is, the misstatements in paragraphs 40 and 41 - "implicates . . . the parties' rights and obligations," JLM Indus., 387 F.3d at 172, under the fourth transaction and the Engagement Letter - namely, what services the Seaport Defendants performed as part of that transaction and whether they could properly claim credit for the transaction.

Plaintiffs here have chosen to draw their complaint very similarly to the pleading in Refco. Having "framed [their] claims broadly," Plaintiffs "cannot now construe them narrowly or piecemeal to avoid the parties' agreement to arbitrate." Refco, 2008 WL 2185676, at *6.⁶

6 Paragraph 46 alleges that the presentation falsely described the involvement of a major Swiss aviation company in the third and fourth transactions. It is unclear why the Seaport Defendants believe this misstatement is actionable. In any event, the Seaport complaint does not allege that this misleading statement can be parsed so that the claimed involvement of the Swiss company in the fourth transaction could be arbitrated separately from its involvement in the third transaction. Thus, counts 3, 5, and 6, to the extent they concern this allegation, are arbitrable.
The ruling that the purported misstatements in paragraphs 40, 41 and 46 are arbitrable modifies the Court's general holding that matters arising out of the first, second and third transactions are not arbitrable. Because Plaintiffs chose to plead broadly, to this limited extent those matters are arbitrable.

The factual allegations contained in paragraphs 42 through 45 are a different matter.

Paragraphs 42 and 43 allege that the Seaport Defendants made statements designed to give the impression that they were responsible for the financing of the first transaction, when in fact they were not. Those allegations are specific to the first transaction, as to which there is no evidence of any arbitration agreement. Therefore, so much of counts 3, 5, and 6 as implicate the allegations in paragraphs 42 and 43 are not arbitrable.

The same is true of paragraph 44, in which Plaintiffs allege (without quoting any particular statement) that the Seaport Defendants gave the impression that they were involved in the second and third transactions. And paragraphs 45 alleges that the presentation misstated a particular detail of the third transaction. So much of counts 3, 5, and 6 as implicate the allegations in paragraphs 44 and 45 are not arbitrable, because the Seaport Defendants have failed to prove the existence of an arbitration agreement applicable to those transactions.

The facts alleged in these four paragraphs do not "implicate[] issues of contract construction or the parties' rights and obligations under" the Engagement Letter. JLM Indus., 387 F.3d at 172. Each paragraph refers to a transaction other than the fourth transaction; the statements complained of relate only to those distinct transactions. These paragraphs are not pleaded "broadly," as was the case in Refco; indeed, they are quite specific. And while the alleged misrepresentations pleaded in paragraphs 42, 43, 44, and 45 were made in the same presentation as the statements pleaded in paragraphs 40 and 41, they are not so intertwined with the paragraph 40 and 41 statements as to require consideration of the latter statements when deciding the actionability of the former. Quite the opposite, in fact. The Seaport Defendants could, for example, be found liable for misleadingly and falsely claiming credit for the first transaction (paragraphs 42 and 43) when they (allegedly) referred to Global Hunter as "sole placement agent" for that deal, while being found not liable for claiming to be the "largest arranger" of PDP debt (in connection with all four transactions) if the facts show that they were fully involved in the fourth transaction (which plaintiffs dispute). (Seaport Compl. ¶ 41.)

The Court therefore grants Defendants' motion to compel arbitration of counts 3, 5, and 6 to the extent that those claims arise from the allegations in paragraphs 40, 41, and 46 of the Seaport Complaint. The motion to compel arbitration of counts 3, 5, and 6 is otherwise denied. See Norcom Elec. Corp. v. CIM USA Inc., 104 F. Supp. 2d 198, 204-05 (S.D.N.Y. 2000) (compelling arbitration of tortious interference claim except as it relates to one particular allegation).

III. The Seaport Defendants' Motion in the Alternative To Dismiss Non-Arbitrable Claims is Granted

To the extent that Plaintiffs' claims asserted in counts 3, 4, 5 and 6 are properly before this Court, the Court must next turn to the motion to dismiss those claims under Fed. R. Civ. P. 12(b)(6).

For the reasons set forth below, count 4 (defamation) and those portions of counts 3, 5, and 6 (unfair competition and Lanham Act violations) that are not arbitrable are dismissed for failure to state a claim on which relief may be granted.

A. Defamation

There are two allegedly defamatory statements described in the Seaport complaint: "Non broker-deal 'arrangers' potentially have distribution limitations as they are legally prohibited from engaging in securities transactions (including bonds) in many cases," and "Relying on an unregistered arranger or an untested broker dealer increases the PDP execution risk." (Seaport Compl. ¶ 48.)

These statements are not actionable as a matter of law.

"Expressions of opinion, as opposed to assertions of fact, are deemed privileged and, no matter how offensive, cannot be the subject of an action for defamation." Mann v. Abel, 10 N.Y.3d 271, 276 (2008). In determining whether a particular statement is an expression of opinion rather than a statement of fact, courts must consider "(1) whether the specific language in issue has a precise meaning which is readily understood; (2) whether the statements are capable of being proven true or false; and (3) whether either the full context of the communication in which the statement appears or the broader social context and surrounding circumstances are such as to signal readers or listeners that what is being read or heard is likely to be opinion, not fact." Id. (quoting Brian v. Richardson, 87 N.Y.2d 46, 51 (1995)) (internal alterations omitted). Further, courts cannot first "search . . . for particular factual statements and then to hold such statements actionable unless couched in figurative or hyperbolic language." Id. Rather, "courts must consider the content of the communication as a whole, as well as its tone and apparent purpose" and in particular "should look to the over-all context in which the assertions were made and determine on that basis whether the reasonable reader would have believed that the challenged statements were conveying facts about the libel plaintiff." Id. (quoting Brian, 87 N.Y.2d at 51). Under New York law "resolution of the fact/opinion issue is a matter for the court." Levin v. McPhee, 119 F.3d 189, 196 (2d Cir. 1997).

The presentation of course contains statements of fact, some of which are alleged to be misstatements. But the allegedly defamatory statements, read in context, are plainly statements of opinion. In particular, the statement that relying on "unregistered arranger[s]" or "untested broker dealer[s]" increases "execution risk" is not a statement with a readily understood precise meaning that can be proven true or false. The "risk" of a transaction, at least as the term is used here, conveys the meaning that a party using an unregistered arranger may face complications or be less satisfied with results. But those are vague and possibly subjective consequences that cannot be proven true or false. They are also mere predictions. While a description of a past transaction that misstates undesirable features of the transaction might be actionable, speculation about future transactions and their associated risks falls outside the category of actionable defamatory statements. T.S. Haulers, Inc. v. Kaplan, 295 A.D.2d 595, 597 (2d Dep't. 2002).

The context of the presentation also shows why the allegedly defamatory statements are not actionable. The Seaport Defendants allegedly made the statements described in the complaints during a sales presentation in which they were seeking customers. People do lie to obtain business. But the context also suggests that the Seaport Defendants were not objectively describing the aviation finance market. Rather, they aimed to persuade customers to hire them - and were offering opinions about the market and their competitors as part of that pitch. A "reasonable reader" encountering the presentation in its context would readily understand that the Seaport Defendants were making arguments why a customer should prefer their business model to that of Plaintiffs. Those arguments are quintessential opinions in a context where one would expect opinions to predominate the discussion.

B. Lanham Act Violations

Section 43 of the Lanham Act, 15 U.S.C. § 1125(a)(1), makes civilly liable:

Any person who, on or in connection with any goods or services, . . . uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities . . ..

The Lanham Act thus establishes two distinct causes of action: one for false designation of origin, under § 1125(a)(1)(A), and a separate cause of action for false designation of origin under § 1125(a)(1)(B).

Plaintiffs' false advertising claim (count 6 of the Seaport complaint) is disposed of easily.

To state a claim or for false advertising, a plaintiff must show that: (1) "the statement in the challenged advertisement is false"; (2) "the defendants misrepresented an inherent quality or characteristic of the product"; (3) "the defendant placed the false or misleading statement in interstate commerce"; and (4) "the plaintiff has been injured as a result of the misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with its products." Merck Eprova AG v. Gnosis S.p.A., 760 F.3d 247, 255 (2d Cir. 2014) (internal citations, quotation marks, and alterations omitted). The false advertisement must concern the "nature, characteristics, qualities, or geographic origin" of either the plaintiff's or another party's products. 11 U.S.C. § 1125(a)(1)(B).

Courts in this district have repeatedly held that "no claim for false advertising will stand where the statements of which a plaintiff complains is directed at the authorship of a work." Broughel v. Battery Conservancy, No. 07 CV 7755, 2010 WL 1028171, at *3 (S.D.N.Y. Mar. 16, 2010); accord Romero v. Buhimschi, 396 F. App'x 224 (6th Cir. 2010). Thus, a plaintiff will not be heard to argue that a defendant engaged in false advertising merely because the defendant claimed credit for a plaintiff's work by failing to attribute authorship of the work to the plaintiff, whether that work is software, Thomas Publ'g Co., LLC v. Tech. Evaluation Centers, Inc., No. 06 CIV.14212, 2007 WL 2193964, at *3 (S.D.N.Y. July 27, 2007), photographs, Agence France Presse v. Morel, 769 F. Supp. 2d 295, 308 (S.D.N.Y. 2011), sculptures and architectural work, Broughel, 2010 WL 1028171, at *3, or a novel, Antidote Int'l Films, Inc. v. Bloomsbury Pub., PLC, 467 F. Supp. 2d 394, 399 (S.D.N.Y. 2006). These holdings are supported by the text of the Lanham Act. If origin were a feature of a good or service subject to false advertising claims there would be no need for a separate cause of action for false designation of origin.

The allegedly misleading statements in paragraphs 42-44 (the allegations relating to counts 3, 5, and 6 that are not arbitrable) are all claims of authorship, origination, and responsibility. Plaintiffs claim that the Seaport Defendants overstated their role in each of the first three transactions, thereby taking credit for work that was not theirs. These statements have nothing to do with the "nature" or "qualities" of the transactions themselves - only who was responsible for them. Under the cases cited above, the role the Seaport Defendants played in the transactions does not concern the "nature, characteristics, qualities, or geographic origin" of the transactions. Plaintiffs' false advertising claim therefore fails.⁷

7 Paragraph 45 does concern the "characteristics" of the transaction - it alleges that the Seaport Defendants misstated the number of planes involved in the third transaction. That claim fails for a different reason: Plaintiffs have not plausibly alleged how slightly understating the number of planes involved in a transaction for which the Seaport Defendants improperly sought to take credit would be material to the decision of any purchaser, much less how it could operate to Plaintiffs' detriment. See Nat 7 Basketball Ass'n v. Motorola, Inc., 105 F.3d 841, 855 (2d Cir. 1997).

That leaves false designation of origin (count 5 of the Seaport complaint). Plaintiffs' claim for false designation of origin sounds in "reverse passing off because it alleges that the Seaport Defendants appropriated Plaintiffs' work and passed it off as their own. Am. Movie Classics Co. v. Turner Entm't Co., 922 F. Supp. 926, 934 (S.D.N.Y. 1996). (A standard passing off claim involves the opposite deceit - a defendant selling its own work while claiming that it is actually the work of the plaintiff.) To prove a claim for false designation of origin based on reverse passing off, a plaintiff must establish four elements: "(1) that the work at issue originated with the plaintiff; (2) that origin of the work was falsely designated by the defendant; (3) that the false designation of origin was likely to cause consumer confusion; and (4) that the plaintiff was harmed by the defendant's false designation of origin." Upton v. Nature Co., 71 F.3d 464, 473 (2d Cir. 1995).

In Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), the Supreme Court clarified the limited scope of liability for false designation of origin under the Lanham Act. Dastar concerned a television series, Crusade in Europe, based on General Dwight Eisenhower's written account of the liberation of Europe. Fox acquired the film and television rights to the book, which it used to produce a 26-episode television series in 1949. Fox never renewed its copyright and the television series fell into the public domain in 1977. Fox reacquired the television rights to Crusade in 1988.

In 1995, Dastar produced a shorter version of Crusade based on beta tapes of the original version released by Fox in 1949, which it edited, and released as its own product on video cassette, without referring to or crediting the original Crusade series. Fox then sued Dastar, alleging violations of the Lanham Act by "reverse passing off on the basis that Dastar sold its version of Crusade "without proper credit" to Fox for the original series. Id. at 27-28.

The Court held that Fox failed to state a claim under the Lanham Act. The Court relied on the word "origin" in the Lanham Act's false designation of origin provisions. It began by acknowledging that Fox would have had a claim if Dastar merely bought tapes of the original Crusade series and repackaged them as Dastar's own product. Id. at 31. But that was not the allegation at issue. Fox alleged that Dastar used and edited Crusade - in effect that Dastar took Fox's idea for the Crusade television series which Fox originated - without attribution. The Court, after reviewing the history and purpose of the Lanham Act, and the prospective difficulty of resolving claims likes Fox's, held that "reading . . . the Lanham Act as creating a cause of action for, in effect, plagiarism - the use of otherwise unprotected works . . . without attribution - would be hard to reconcile with our previous decisions." Id. at 36. Rather, it concluded that the "origin of goods" as used in the act "refers to the producer of the tangible goods . . . and not the author of any idea, concept, or communication embodied in those goods." Id. at 37.

Although Dastar was decided in the context of tangible goods, its reasoning applies equally well to reverse palming off of services, as is alleged here. See Williams v. UMG Recordings, Inc., 281 F. Supp. 2d 1177, 1184 (C.D. Cal. 2003). Indeed, several courts in this circuit have extended Dastar beyond the context of tangible goods. In Radolf v. University of Connecticut, 364 F. Supp. 2d 204 (D. Conn. 2005), the court held that Dastar foreclosed a medical professor's claim that other professors "falsely attributed his data and findings as their own" because those claims "center[ed] around [the professor's] claim that he was the 'author' or originator" of the data and findings, which Dastar held was not a viable Lanham Act claim. Id. at 222-23. In Thomas Publishing Co., LLC v. Technology Evaluation Centers, Inc., No. 06 Civ. 14212, 2007 WL 2193964 (S.D.N.Y. July 27, 2007), the court dismissed a plaintiff's claim that the defendant had violated the Lahnam Act when it duplicated on its own website substantial portions of the plaintiff's "directory" - an online service that allowed software users to compare products and services based on particular needs - and misrepresented "that it is the developer, creator or owner" of the directory. Id. at *1. Thomas Publishing held that Dastar was not limited to tangible goods; rather, the plaintiff's Lanham Act claim failed because it "center[ed] around [the plaintiff's] contention that it originated certain ideas and concepts" in the directory, which were used by the Defendant. Id. at *3.

The cases most closely analogous to this one comes from outside this circuit. In ZS Associates, Inc. v. Synygy, Inc., No. 10 Civ. 4274, 2011 WL 2038513 (E.D. Pa. May 23, 2011). Synygy issued a press release stating that it "created the market for sales compensation management (SCM) software and services more than 18 years ago . . .." Id. at *1. The press release further claimed that Synygy "ha[d] invested many years and a lot of money in product development, which led to Synygy creating the SCM software that has propelled our success year after year." Id. ZS argued that Synygy's press release violated the Lanham Act's prohibition on false designation of origin by claiming credit for products that were actually ZS's - i.e., that ZS created the SCM software and the associated market. Id. at *6. The Court held that the quoted language from the press release was not actionable. It explained that those statements "can only be false insofar as they assert that Synygy, and not ZS, created the products and services offered by Synygy. Such claims of false attribution of authorship are barred by the reasoning underlying Dastar." Id. at *9.

Similarly, in Romero v. Buhimschi, 396 F. App'x 224 (6th Cir. 2010), the Sixth Circuit rejected a doctor's claim that another doctor and her employer had violated the Lanham Act by "failing to acknowledge [the plaintiff doctor's] contrib[ution] to the research underlying [a] manuscript" published in a medical journal. Id. at 227. The plaintiff in that case alleged that the defendants had "passed off research and results as [their own] findings" rather than as collaborations with the plaintiffs, that the defendants "failed to identify" the defendants as collaborators, and made misleading and false statements "about where and how the research was conducted and funded." Id. at 232. The Sixth Circuit Court of Appeals held that this claim straightforwardly failed under Dastar. The only difference between the two cases, according to the court, was that Dastar involved a video and Romero involved a manuscript. But that distinction made no difference - the plaintiff's claim "fail[ed] in as much as it alleges that [the defendants] failed to credit [the plaintiff's] work in the manuscript." Id. at 232-33.

The allegations in paragraphs 42-44 fail to state a claim under Dastar and the cases cited above. Just as Fox alleged in Dastar, each of these paragraphs alleges that the Seaport Defendants claimed "responsibility" or "involve[ment]" in the transactions, when they were either less responsible or uninvolved in those transactions. It is irrelevant that the Plaintiffs here made the semantic choice not to use the words "credit" or "authorship" as the Plaintiffs did in Dastar because the substance of the allegation is the same; Plaintiffs assert that the Seaport Defendants in effect plagiarized their work on the transactions by representing it as the Defendants' work. That is a cause of action the Lanham Act does not cognize. See Dastar, 539 U.S. at 36.

Indeed, the facts of this case are quite similar to the facts of the cases cited above. Research findings and data - much like the financial deals at issue here - are work products to which one can attribute responsibility and improperly claim credit by passing off others' research as one's own. And like financial deals, research findings are not tangible, although they can be reflected in some tangible writing, such as a contract or a manuscript. But that sort of passing off by stealing concepts and ideas is not actionable under the Lanham Act. See Romero, 396 F. App'x at 232-33; Radolf, 364 F. Supp. 2d at 222-23.

ZS Associates provides a particularly persuasive precedent because the language in the press release at issue is similar to the language discussed in the Seaport complaint. The defendant Synygy stated that it "created the market for sales compensation management" software and had "creat[ed] the SCM software" that ZS actually invented. 2011 WL 2038513, at *1. The language in the Seaport complaint, in particular paragraph 40, refers to the "creat[ion]" of a market, and the specific assertions of responsibility for the first three transactions support that general claim. Just as in ZS Associates, there is no way to understand paragraphs 42-44 as anything other than a claim that "[Plaintiffs], and not [the Seaport Defendants], created the products and services offered by [the Seaport Defendants]." Id.at *9. Here, as in ZS Associates, that "claim[] of false attribution of authorship [is] barred by . . . Dastar." Id.

Of course, even after Dastar, the Lanham Act recognizes claims for passing off. The Supreme Court, for example, stated that Dastar's actions would have subjected it to liability if Dastar had taken physical copies of Fox's Crusade in Europe, substituted its own name, and resold the tapes as its own. That fact pattern, however, does not describe Plaintiffs' allegations. The deals for which the Seaport Defendants allegedly claimed credit are not being literally resold with a substitution of names. Such an act would be physically impossible because those deals have already concluded and cannot be "resold" in the way a physical good can. Nor does the Seaport complaint allege that the Seaport Defendants are performing what would be an analogous act for services - for example, purchasing wholesale financing from Plaintiffs and reselling that financing as though it were supported entirely by the Seaport Defendants. Rather, the allegations in the Seaport complaint fall squarely in Dastar's ambit. The Seaport Defendants seek to capitalize on the concept of PDP debt - the relatively novel idea of distributing debt financing for aviation transactions - by overstating their role in important PDP deals. The Lanham Act does not allow such a claim to proceed.⁸

8 Paragraph 45 of the complaint does not allege false designation of origin at all - it alleges a misstatement concerning the substance of a transaction. I explained above why this allegation also does not support a claim for false advertising. See supra n.7.

C. State Law Unfair Competition

Count 3 asserts that the Seaport Defendants engaged in common law unfair competition by reverse palming off. (Seaport Compl. at 10.) As described above, reverse passing off under the Lanham Act requires a plaintiff to establish that the defendant appropriated a work that originated with the plaintiff and that the defendant falsely designated the work as its own in a way that is likely to cause consumer confusion and harm the plaintiff. The parties' briefing - which has generally been of little assistance in resolving these motions - is particularly unhelpful in explaining the contours and requirements of unfair competition by reverse passing off under New York law.

Based on the Court's own research, however, Plaintiffs' unfair competition must be dismissed.

First, Plaintiffs have not established that New York even recognizes a cause of action for unfair competition by reverse passing off. New York, of course, has long recognized claims for traditional passing off - a claim that a defendant passed off its own goods as the plaintiff's goods, in effect misappropriating the plaintiff's trademark or goodwill - as a form of unfair competition. See, e.g., ITC Ltd. v. Punchgini, Inc., 9 N.Y.3d 467, 476 (2007). But reverse competition has a distinct history. "[A]lthough passing off was actionable at common law, reverse passing off was not." Lori H. Freedman, Reverse Passing Off: A Great Deal of Confusion, 83 TRADEMARK REP. 305, 307 (1993). Indeed, reverse passing off was not recognized in many circuits as actionable under the Lanham Act until the early 1970s. Id.

The Court has located several federal court opinions in this circuit that considered reverse palming off allegations under the rubric of New York unfair competition law. See, e.g., Carson Optical, Inc. v. Prym Consumer USA, Inc., No. CV 11-3677, 2014 WL 1315255 (E.D.N.Y. Mar. 28, 2014); Ward v. Andrews McMeel Pub., LLC, 963 F. Supp. 2d 222, 239 (S.D.N.Y. 2013). None of these opinions, however, cites any New York case law recognizing such a claim. Ultimately, the cases cited in these opinions (or the cases at the next level in the citation chain) turn out to be Lanham Act cases of relatively recent vintage. Nowhere in the chain of precedents purporting to define a cause of action based on reverse palming off does any court in this district rely on New York state court cases.

To the extent that New York courts have addressed the issue, it appears that they would not recognize a cause of action for reverse passing off. In Mastro Plastics Corp. v. Emenee Industries, Inc., 16 A.D.2d 420 (1st Dep't), aff'd, 12 N.Y.2d 826 (1962), the defendant was accused of unfair competition by purchasing bongo drums manufactured by the plaintiff, removing the plaintiff's trademark and substituting the defendant's mark, using those drums as samples on which to sell its own drums, and using photographs of plaintiff's drums (with plaintiff's trademark concealed) to advertise its own drums. Id. at 421. The court held that the complaint failed to state a cause of action for unfair competition. It recognized that the defendant's actions would have constituted unfair competition if the defendant had exploited the plaintiff's mark to sell its own drums or passed off its own drums in some other way as plaintiff's drums. Id. at 421-22. That would amount to traditional passing off - long recognized as a form of unfair competition. But "The use of [the defendant's] own trade-mark amounted to a representation that defendant and not the plaintiff stood behind the sample chattel . . .. This is the antithesis of palming off and the plaintiff demonstrates no actionable rights in the defendant's use of its own trade-mark on a product it bought to use in promoting its own products . . .." Id. at 422.

Mastro was affirmed by the New York Court of Appeals without an opinion. That Court, however, granted "leave to the plaintiff, if he so desires, to serve an amended complaint based on the Lanham Act . . .." Mastro Plastics Corp., 12 N.Y.2d at 828. In so doing, the New York Court of Appeals implied that reverse passing off might be actionable under the Lanham Act, but not under common law.

Mastro has not been disapproved by any New York state court or federal district court sitting in New York of which I am aware. To the contrary, several district court opinions issued about the same time as Mastro relied on that opinion to reject claims of unfair competition by reverse palming off. In PIC Design Corp. v. Sterling Precision Corp., 231 F. Supp. 106 (S.D.N.Y. 1964), the plaintiff alleged - among other wrongs - that the defendants had purchased custom springs manufactured by the plaintiff, removed plaintiff's markings, replaced them with defendants' marks, and resold them. The court recognized this claim as one of reverse passing off. Id. at 113. After stating that normal passing off was actionable at common law, the court stated that the same was not true of the reverse passing off alleged by the plaintiff: "We are unable to find any actionable wrong at common law under the facts of this case insofar as defendants' actions in purchasing items from plaintiff for resale are concerned." Id. at 114 (citing Mastro Plastics Corp., 16 A.D.2d at 420); see also Crossbow, Inc. v. Dan-Dee Imports, Inc., 266 F. Supp. 335, 340 (S.D.N.Y. 1967); Blazon, Inc. v. Deluxe Game Corp., 268 F. Supp. 416, 424-26 (S.D.N.Y. 1965); Wolf& Vine, Inc. v. Pioneer Display Fixture Co., 1964 WL 8091, at *2 (N.Y. Sup. Ct. June 24, 1964).

Plaintiffs have not cited any case law suggesting that New York recognizes reverse palming off as a species of unfair competition. Rather, Plaintiffs simply assume such a tort exists, and rely on cases describing unfair competition in general as similarly defined under New York and federal law. That is inadequate. If Plaintiffs cannot show that the cause of action they assert is recognized by state law then they have failed to state a claim. Alexander Hamilton Life Ins. Co. of Am. v. James River Corp. of Virginia, No. 3:96CV1100, 1997 WL 13053, at *5 (D. Conn. Jan. 14, 1997); Spock v. United States, 464 F. Supp. 510, 514-16 (S.D.N.Y. 1978).

Second, even assuming New York does recognize reverse palming off as a form of unfair competition, Plaintiffs' claim would still fail. Both Plaintiffs and the Seaport Defendants state that the elements of unfair competition under New York law are the same as those under the Lanham Act, except that a plaintiff must also show bad faith or intent by the defendants. (Seaport Mem. at 14; Seaport Mem. Opp. at 20.) Though this formulation does not account for the absence of reverse passing off claims under New York unfair competition law, it is appears to be otherwise correct. See, e.g., Medisim Ltd. v. BestMed LLC, 910 F. Supp. 2d 591, 606 (S.D.N.Y. 2012); Marvullo v. Gruner & Jahr AG & Co., No. 98CIV.5000, 2001 WL 40772, at *7 (S.D.N.Y. Jan. 17, 2001).

If unfair competition under New York law is equivalent to a Lanham Act claim plus an allegation of bad faith, then Plaintiffs' state law claim must fail along with the Lanham Act claim. Plaintiffs, as explained above, cannot show that the Seaport Defendants engaged in false designation of origin - the Lanham Act's version of passing off - because they cannot show that the Seaport Defendants falsely designated the actual origin of the services they provided, as opposed to merely misrepresenting authorship of the underlying ideas. Therefore, they cannot state a claim under a state law cause of action requiring them to show the same elements as the Lanham Act.

Count 3 of the Seaport complaint is dismissed.

IV. Chaput's Motion To Compel Arbitration is Denied

Individual defendant Chaput was not a signatory to either the Engagement Letter or the Seaport NDA. He was, however, a signatory of a separate non-disclosure agreement with Aviation Limited, signed in his capacity as an independent consultant to Aviation Limited. Chaput was concededly an independent consultant under contract to Aviation Limited during the period when the third and fourth transactions took place; he was not employed by the Seaport Defendants until after the fourth transaction was concluded.

The Chaput NDA includes a clause requiring that "Any dispute arising under or in connection with this Agreement shall be brought in a court in New York." (Chaput NDA ¶ 12.) This forum selection clause, like the forum selection clause at issue in the Applied Energetics, "specifically precludes" arbitration. Applied Energetics, 645 F.3d at 525 (quoting Bank Julius, 424 F.3d at 284). Although it does not use the word "adjudicate," the Chaput NDA requires suits to be "brought in a court," which means the same thing. Nothing in the Chaput NDA suggests that parties have the option to arbitrate those disputes, or that the forum selection clause's scope is limited to disputes over enforcement or validity of any arbitration clause.

Chaput, however, argues that Aviation Limited's claims against him must be arbitrated under the Engagement Letter because of the well-established general rule that "employees or disclosed agents of an entity that is a party to an arbitration agreement are protected by that agreement." Dunmire v. Hoffman, No. 05 CIV. 4852, 2006 WL 2466248, at *3 (S.D.N.Y. Aug. 24, 2006). In such cases it is of no moment that the agent was not himself a signatory to the arbitration agreement. The Second Circuit has repeatedly held that courts may "estop a signatory from avoiding arbitration with a nonsignatory when the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed." Choctaw Generation Ltd. P'ship v. Am. Home Assur. Co., 271 F.3d 403, 406 (2d Cir. 2001); see also Astra Oil Co., Inc. v. Rover Navigation, Ltd., 344 F.3d 276, 279-80 (2d Cir. 2003); Ouedraogo v. A-1 Intern. Courier Serv., Inc., No. 12 Civ. 5651, 2014 WL 1172581 (S.D.N.Y. Mar. 21, 2014) (compelling signatory plaintiff to arbitrate with nonsignatory employees of signatory company).

The problem for Chaput is that, even assuming some of his claims are within the scope of the Engagement Letter's arbitration clause - and as explained below, most of them are not - those claims also fall within the scope of the Chaput NDA's forum selection clause, because they arise "in connection with" the Chaput NDA. Indeed, those claims relate directly to the misuse of information obtained while Chaput was working with Plaintiff Aviation Limtied, before he ever worked for Defendants.

The cases on which Chaput relies do not involve a separate agreement between the party seeking to compel arbitration and the agent of the other party to the arbitration agreement. Instead, they involve only a single agreement with an arbitration clause. Thus, those cases are of little use here, where Chaput was a consultant to Plaintiffs - and was in that capacity subject to a separate agreement, one that precluded arbitration of disputes - before he worked for the signatories to the later-executed arbitration agreement. Plaintiff's relationship with Chaput is entirely independent of the later relationship between the Plaintiffs in the Seaport Action and the Seaport Defendants, and is governed by its own set of rules.

With those principles in mind, I once again turn to the specific claims, this time as they are alleged by Plaintiff Aviation Limited in the Chaput Complaint.

A. Breach of Contract

Plaintiff's breach of contract claims against Chaput are not arbitrable.

The Chaput complaint alleges that the financial and other details of each of the four transactions constituted confidential information subject to the Chaput NDA. (Chaput Compl. ¶¶ 12-16.) That assertion is supported by the text of the Chaput NDA, which defines "Confidential Information" as any information supplied to Chaput by Aviation Limited "including . . . know-how, trade-secrets, . . . finances, marketing plans, business opportunities." (Chaput NDA at 1.) The "Subject Matter" of the Chaput NDA is not confined to any particular transaction, but includes "transactions of mutual interest concerning raising and or investment of capital into AFC or affiliates . . . related [sic] aviation finance." (Chaput NDA at 1.) The Chaput complaint alleges that certain terms of each of the transactions - the character of the loans, the weighted average life of the loans, the loans' guarantors, and the structure of those guarantees - were disclosed in the presentation. (Chaput Compl. ¶ 32.)

The disclosed information - in fact, all information about the transactions - was allegedly supplied by Aviation Limited to Chaput, and thus constitutes "Confidential Information" subject to the Chaput NDA's confidentiality provisions. Further, that information concerns "transactions . . . related [to] aviation finance," and so fits squarely within the subject matter of the Chaput NDA.

On these facts, it is obvious that the breach of contract claims against Chaput fall within the scope of the Chaput NDA's forum selection clause and so must be litigated, not arbitrated. The breach of contract claims against him arise solely and simply from the contract Chaput had with Plaintiffs before he affiliated himself with the Seaport Defendants. Aviation Limited does not allege that Chaput breached any of the terms of the Engagement Letter, and Plaintiff's claim for breach of the NDA against Chaput does not implicate any of the Seaport Defendants' rights and obligations under the Engagement Letter. Indeed, the Engagement Letter itself contains no provisions concerning disclosure of confidential information - that is why the Seaport Defendants signed a separate NDA after signing the Engagement Letter.

B. Defamation

Plaintiff's defamation claim against Chaput is substantially identical to the defamation claims against the Seaport Defendants. It is not arbitrable for the same reasons. The allegedly defamatory statements about Plaintiff's business model do not arise under or relate to the Engagement Letter, and Plaintiff does not argue otherwise.

C. Unfair Competition and Lanham Act

Aviation Limited's unfair competition and Lanham Act claims against Chaput rest on substantially the same allegations as the unfair competition and Lanham Act claims against the Seaport Defendants. Thus, absent the Chaput NDA, the same result would occur: all of these three claims would be arbitrable in part and non-arbitrable in part.

Paragraphs 36 through 40 of the Chaput complaint are almost identical to paragraphs 42-45 of the Seaport complaint. These paragraphs all allege misleading and false statements with respect to the first three transactions and not the fourth transaction. Since these statements do not relate at all to the fourth transaction and are not intertwined with a broadly pleaded allegation that also relates to the fourth transaction, they are not subject to arbitration, and would not be subject to arbitration even without the Chaput NDA.

Paragraphs 34 and 35 of the Chaput complaint allege the same misleading or false statements as paragraphs 40 and 41 of the Seaport complaint. These statements describe the Seaport Defendants' leading role in the PDP market and claim credit for "the Transactions" in general. As discussed above, these allegations relate to all four transactions and thus arise, in part, under the Engagement Letter. Because these statements cannot be parsed so as to evaluate the first three transactions separately from the fourth, the allegations in paragraphs 34 and 35 - although they concern some matters collateral to the Engagement Letter - would be arbitrable absent the Chaput NDA.⁹

9 Paragraph 41 of the Chaput complaint is identical to paragraph 46 of the Seaport complaint, alleging a misstatement about the involvement of a major Swiss aviation company in the third and fourth transactions. Paragraph 41 of the Chaput complaint would also be subject to arbitration for the same reasons as paragraph 46 of the Seaport Complaint is arbitrable, absent the Chaput NDA. --------

The Chaput NDA, however, compels a different result.

The reason that the Lanham Act and unfair competition claims against Chaput are not arbitrable is because those claims fall within the scope of the Chaput NDA's forum selection clause, even though they also relate - at least tangentially - to the Engagement Letter. The Chaput NDA's broad language requires that any disputes "arising under or in connection with" it be brought in a New York court. (Chaput NDA ¶ 12.) The phrase "in connection with" incorporates a wide range of disputes - roughly equivalent to the phrase "related to." It "is not necessarily tied to the concept of a causal connection[,]" but rather conveys any "established or discoverable relation." Coregis Ins. Co. v. Am. Health Found., Inc., 241 F.3d 123, 128 (2d Cir. 2001).

Plainly, the unfair competition and Lanham Act claims have a "discoverable relation" with the Chaput NDA. The purpose of the NDA was to regulate Chaput's use of confidential information about transactions entered by Plaintiffs - exactly the sort of information that he allegedly misused in the presentation. Counts 3, 5, and 6 allege that Chaput distorted information and lied about transactions of which he learned and in which he was involved only because of the Chaput NDA. Absent the Chaput NDA, Chaput would not have worked as a consultant for Plaintiffs, and would not have been in a position to allegedly misinform competitors through the presentation. Of course, the specific prohibitions in the Chaput NDA relate to the disclosure of confidential information about the transactions, not misuse or distortion of that information. But that only means that the "connection with" the Chaput NDA is slightly more attenuated for the Lanham Act and unfair competition arguments than for Plaintiffs' breach of contract claims. It does not mean that the former causes of action are not connected with the Chaput NDA.

Thus, the matter is not as simple as Chaput claims. If only the Engagement Letter existed, then the Lanham Act and unfair competition claims against Chaput would be arbitrable, because agents of a principal signatory to an arbitration agreement "may use the arbitration provision as a sword to compel arbitration, which is to say, a shield against litigation before a court." McKenna Long & Aldridge, LLP v. Ironshore Specialty Ins. Co., No. 14-CV-6633, 2015 WL 144190, at *7 (S.D.N.Y. Jan. 12, 2015); see also Ross v. Am. Exp. Co., 547 F.3d 137, 144-45 (2d Cir. 2008); Roby v. Corp. of Lloyds, 996 F.2d 1353, 1360 (2d Cir. 1993). But in no case the Court has located has an employee seeking to wield his or her employer's arbitration agreement signed a separate contract, while working in another capacity, that precludes arbitration of those same claims.

To reconcile these two contract provisions, the Court applies normal principles of contract interpretation. These principles apply to arbitration agreements just like any other contract. Haviland v. Goldman, Sachs & Co., 736 F. Supp. 507, 509 (S.D.N.Y. 1990) aff'd, 947 F.2d 601 (2d Cir. 1991). "Generally, when interpreting a contract or multiple contracts in a transaction, we strive to give effect to all of the terms of the relevant documents, reading them together." Kelso Enterprises Ltd. v. A.P. Moller-Maersk, 375 F. App'x 48, 49 (2d Cir. 2010); see CooperVision, Inc. v. Intek Integration Technologies, Inc., 7 Misc. 3d 592, 599 (Sup. Ct. Monroe Cnty. 2005).

Here, the two contracts can easily be harmonized: claims relating to Chaput's use of confidential information - which is the subject of the Chaput NDA - are subject to the forum selection clause, even if they also implicate issues that arise under the Engagement Letter (to which Chaput is not technically a party). Claims against Chaput that arise from his conduct as a consultant to the Seaport Defendants but not relating to his use of confidential information would be subject to arbitration. Aviation Limited has not brought any claims of the latter variety. Thus, its claims against Chaput are not subject to arbitration.

V. Chaput's Motion in the Alternative to Dismiss is Granted in Part and Denied in Part

Chaput makes the same arguments as do the Seaport Defendants with respect to Plaintiff's defamation, unfair competition and Lanham Act claims, and with respect to the hold harmless provision. The results are the same.

Plaintiff has not adequately pleaded actionable defamatory statements for the reasons stated above. Count 4 of the Chaput complaint is therefore dismissed.

So too for counts 3, 5 and 6, alleging unfair competition and Lanham Act violations. I have already explained why the misstatements in paragraphs 42, 43, 44, and 45 of the Seaport complaint, which are virtually identical to the allegations in paragraphs 36, 37, 38, 39, and 40 of the Chaput complaint, do not support a cause of action under the Lanham Act or New York unfair competition law. That explanation need not be repeated here.

Paragraphs 34 and 35 of the Chaput complaint track paragraphs 40 and 41 of the Seaport complaint, which are subject to arbitration as among Plaintiffs and the Seaport Defendants. But since no claims against Chaput are subject to arbitration, I must determine whether the allegations in these paragraphs of the Chaput complaint state a claim on which relief can be granted.

They do not.

First, the only allegation in these paragraphs concerning particular services or deals is that the presentation "list[ed] the Transactions of [sic] examples of [the Seaport Defendants'] work." (Chaput Compl. ¶ 34.) That allegation is very similar, though cast in more general terms, to the allegations in paragraphs 42-44 of the Seaport complaint and paragraphs 36-39 of the Chaput complaint that the presentation overstated the involvement of the Seaport Defendants in the first three transactions. It is not actionable for the same reasons. This allegation does not constitute false advertising because it does not concern the "nature, characteristics, qualities, or geographic origin" of the services at issue. It does not constitute false designation of origin under Dastar because it involves a claim to authorship of ideas or concepts, rather than a physical repackaging of goods or services. And it does not constitute unfair competition under New York law, which either does not recognize reverse passing off at all, or recognizes it only as co-terminous with a reverse passing off claim under the Lanham Act (which plaintiff fails to state).

The remaining allegations in these paragraphs do not support a Lanham Act claim. The Lanham Act is concerned with false designation of origin or false advertising of "goods, services, or commercial activities." 11 U.S.C. § 1125(a)(1). Paragraphs 34 and 35 of the Chaput complaint allege that the presentation falsely referred to the Seaport Defendants as "creat[ing] the capital markets PDP product," "executing the most PDP deals and raising the largest amount of PDP debt," as the "Largest arranger of privately placed aviation PDP debt," "Pioneer[s]" in the market, and "best qualified to place capital markets PDPs." Not one of those claims refers to a particular good, service, or commercial activity. Each statement concerns the Seaport Defendants qualifications and their general status in the PDP market.

The elements of false advertising as described above require a plaintiff to show that a defendant misrepresented a "quality or characteristic of the product" at issue, while false designation of origin requires a plaintiff to show that "the work at issue originated with the plaintiff." Since the statements just described do not concern any product or any work - only status in a market - they are not actionable under the Lanham Act.

Because the elements of the Lanham Act and unfair competition under New York law are the same (except that New York requires a showing of bad faith) paragraphs 34 and 35 also fail to support a claim for unfair competition.

Counts 3, 5, and 6 of the Chaput complaint are dismissed.

That leaves counts 1 and 2 for breach of contract. The breach of contract claims against the Seaport Defendants were subject to arbitration, but the claims against Chaput are not, so I must decide whether they are adequately pleaded. They are. Chaput had a contract - the Chaput NDA - that required him to keep Aviation Finance's confidential information to himself. He allegedly shared that information with the Seaport Defendants in violation of the NDA. That states a claim for breach of contract.

It is hard to understand Chaput's argument for dismissing counts 1 and 2. He seems to believe that only confidential information concerning the third and fourth transactions could provide a basis for Plaintiff's breach of contract claim, because Chaput entered the Chaput NDA after the first two transactions were completed. Chaput claims Plaintiff failed to identify confidential information that was "unique" to the third and fourth transactions. He also asserts that Plaintiff has failed to allege that Chaput learned confidential information about the transactions from Plaintiff or that he included confidential information in the presentation.

Chaput's first argument is illogical. The Chaput NDA defines "Confidential Information" as any information supplied to Chaput by Aviation Limited "including . . . know-how, trade-secrets, . . . finances, marketing plans, business opportunities." Chaput NDA at 1. That information does not have to be "unique" to transactions on which Plaintiff consulted; that the same Confidential Information may have been applied in connection with transactions that pre-date Chaput's relationship with Aviation Finance does not in any way vitiate his contractual duty to keep that information confidential. Plaintiff might well have disclosed information (such as financial details and business opportunities) about the first two transactions to Chaput, even though those transactions had already closed. Nothing in the Chaput NDA suggests information about pre-existing transactions was excluded from the definition of confidential information.

Each of Chaput's other assertions is false on the face of the complaint. The complaint specifically alleges that while the NDA was in effect "Chaput was privy to . . . the details, financial and otherwise, of the Transactions." (Chaput Compl. ¶ 18.) Those details, according to the complaint, qualified as confidential information within the meaning of the Chaput NDA. (Chaput Compl. ¶¶ 12-16.) The fair inference to be drawn from that allegation is that Chaput learned of this information from Plaintiffs during the course of his consultancy relationship with them. The Chaput complaint then alleges that the presentation included confidential information, to wit: details of the loans involved in "the Transactions." (Chaput Compl. ¶¶ 31-32.) However, Chaput did not have to include Confidential Information in any presentation in order to breach his contact; all he had to do was divulge it (even privately) to his new employer. The complaint adequately alleges that he did.

Chaput also argues that this action must be dismissed because he cannot be liable under the "hold harmless" provision contained in the Annex to the Engagement Letter. That provision reads:

In connection with the engagement of the Agents [Global Hunter and Sea Port Global] securities to assist the Company [Aviation LLC] . . . the Company agrees that it will indemnify and hold harmless the Agents and their affiliates . . . to the full extent lawful, from and against any losses, expenses, claims or proceedings . . . (i) related to or arising out of (A) the contents of oral or written information provided by the Company . . ., or (B) any other action or failure to act by the Company . . ., or (ii) otherwise related to or arising out of the engagement or any transaction or conduct in connection therewith, except that this clause (ii) shall not apply with respect to any losses that are finally judicially determined to have
resulted solely from the gross negligence, bad faith or willful misconduct of such indemnified party. Engagement Letter at 8.

This provision does not apply to the breach of contract claim(s) against Chaput, because those claims arise solely from Chaput's breach of the Chaput NDA. They have nothing to do with the rights and obligations of the Seaport Defendants, let alone Chaput, under the Engagement Letter.

It is true, as Chaput notes, that the hold harmless provision indemnifies not only the Seaport Defendants but also their "agents." This, however, is irrelevant. Agents and principal alike are indemnified only with respect to actions arising out of or in connection with the Engagement Letter. That is not the case with Plaintiff's breach of contract claims, which, as discussed above, arise under an entirely separate agreement. The hold harmless provision applies to those claims no more than to any other claim against Chaput in his individual capacity as a consultant to Aviation Limited.

CONCLUSION

For the foregoing reasons, Docket #14 in the Chaput action (No. 14 Civ. 8313) and Docket #20 in the Seaport action (No. 14 Civ. 8315) are GRANTED IN PART and DENIED IN PART.

The Seaport Defendants' motion to compel arbitration of the Seaport action (Docket #20) is granted with respect to counts 1 and 2 of the Seaport complaint and counts 3, 5, and 6 insofar as they concern the allegations in paragraphs 40, 41, and 46 of the complaint, and is otherwise denied. To the extent that the Seaport Defendants' complaint is not subject to arbitration, it is dismissed in its entirety for failure to state a claim on which relief may be granted. This means that count 4 of the Seaport complaint and those portions of counts 3, 5, and 6 that are not arbitrable are dismissed with prejudice.

The Seaport action (No. 14 Civ. 8315) is stayed pending the result of final binding arbitration between the parties. Thus, Docket #26 in the Seaport Action, the Seaport Defendants' pending motion to stay, is granted.

Chaput's motion to compel arbitration (Docket #14) is denied. Chaput's motion in the alternative to dismiss is granted as to counts 3, 4, 5, and 6, and is otherwise denied.

Litigation will continue in this Court only as to counts 1 and 2 of the Chaput complaint. If Chaput wishes to continue the stay of the Chaput action entered on February 5, 2015 (Docket #21), he should move to continue the stay by March 20, 2015. Otherwise, the Court will lift the stay at that time and litigation will proceed on Aviation Limited's breach of contract claims against Chaput.

The Clerk of the Court is directed to terminate Docket #14 in No. 14 Civ. 8313 and to terminate Docket ##20 and 26 in No. 14 Civ. 8315. Dated: March 12, 2015

/s/_________

U.S.D.J.
BY ECF TO ALL COUNSEL