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Inception Mining, Inc. v. Danzig, Ltd.

United States District Court, D. Utah, Central Division

January 24, 2018

INCEPTION MINING, INC., a Nevada Corporation; MICHAEL AHLIN, an individual; and TRENT D'AMBROSIO, an individual, Plaintiffs,
v.
DANZIG, LTD., a North Carolina Corporation; ELLIOT FOXCROFT, an individual; and BRETT BERTOLAMI, an individual, Defendants.

          MEMORANDUM DECISION AND ORDER ON MOTION TO DISMISS

          David Nuffer, District Judge

         Plaintiffs initiated this case seeking declaratory and injunctive relief relating to arbitration proceedings pending in Salt Lake City, Utah and Boston, Massachusetts (respectively, the “SLC Arbitration” and the “Boston Arbitration”).[1] Defendants seek dismissal of Plaintiffs' Complaint arguing (1) subject matter jurisdiction is lacking or venue is improper based on the Federal Arbitration Act and the parties' binding agreements to arbitrate; and (2) jurisdiction should be declined in favor of a first-filed federal case pending in the Western District of North Carolina (the “North Carolina Case”).[2]

         Because subject matter jurisdiction exists and venue is proper to determine whether Plaintiffs Michael Ahlin and Trent D'Ambrosio (the “Individual Plaintiffs”) may be required to arbitrate in the SLC Arbitration, Defendants' Motion to Dismiss[3] is DENIED in part. However, because issues of arbitrability in the SLC Arbitration are to be decided by the arbitrator, Defendant's Motion to Dismiss[4] is GRANTED in part. Additionally, determination on Defendants' Motion to Dismiss[5] is STAYED as to Plaintiffs' claims concerning the Boston Arbitration pending the resolution of a motion to dismiss for lack of personal jurisdiction filed in the North Carolina Case.

         Contents

         BACKGROUND ............................................................................................................................ 3

The Contracts ...................................................................................................................... 3
The SLC Arbitration ........................................................................................................... 3
The Boston Arbitration ....................................................................................................... 4
The North Carolina Case .................................................................................................... 4
Plaintiffs' Complaint ........................................................................................................... 5

         DISCUSSION ................................................................................................................................. 6

Subject matter jurisdiction exists and venue is proper to determine whether the Individual Plaintiffs may be required to arbitrate in the SLC Arbitration ............................... 6
The arbitrator determines arbitrability of claims against signatories to the Foxcroft Agreement ................................................................................................... 7
This court has jurisdiction to decide whether the Individual Plaintiffs may be required to arbitrate in the SLC Arbitration ................................................ 9
Issues of arbitrability concerning the signatories to the Foxcroft Agreement are to be decided by the arbitrator in the SLC Arbitration .................................................. 10
Determination on Defendants' Motion to Dismiss is stayed as to Plaintiffs' claims concerning the Boston Arbitration ........................................................................ 10

         ORDER ......................................................................................................................................... 14

         BACKGROUND

         Plaintiffs' claims in this case relate to four contracts, two arbitration proceedings, and a first-filed federal case.[6]

         The Contracts The four contracts at issue in this case are:

• a consulting agreement entered between Inception Mining, Inc. and Elliot Foxcroft on March 27, 2014 (the “Foxcroft Agreement”);[7]
• a consulting agreement entered between Gold American Mining Corp. and Danzig, Ltd. on February 25, 2013 (the “Danzig Agreement”);[8]
• an asset purchase agreement entered between Inception Resources, LLC and Gold American Mining Corp., Inception Development Inc., and Brett Bertolami on February 25, 2013 (the “Asset Purchase Agreement”);[9] and
• a debt exchange agreement entered between Gold American Mining Corp. and Bret Bertolami on February 25, 2013 (the “Debt Exchange Agreement”).[10]

         The SLC Arbitration

         On July 20, 2017, Elliot Foxcroft initiated an arbitration proceeding with the American Arbitration Association (“AAA”) in Salt Lake City, Utah against Inception Mining, Inc., Michael Ahlin and Trent D'Ambrosio (the “SLC Arbitration”).[11] In the SLC Arbitration, Mr. Foxcroft alleges claims relating to the Foxcroft Agreement, including: federal securities fraud; Utah securities fraud; breach of contract; unjust enrichment; common law fraud; breach of fiduciary duty; negligent misrepresentation; and breach of the implied covenant of good faith and fair dealing.[12]

         The Boston Arbitration

         On June 12, 2017, Danzig, Ltd. initiated an arbitration proceeding with the AAA in Boston, Massachusetts against Inception Mining, Inc., Michael Ahlin and Trent D'Ambrosio (the “Boston Arbitration”).[13] In the Boston Arbitration, Danzig, Ltd. alleges claims relating to the Danzig Agreement, the Asset Purchase Agreement, and the Debt Exchange Agreement, including: federal securities fraud; North Carolina securities fraud; breach of contract; unjust enrichment; common law fraud; breach of fiduciary duty; and negligent misrepresentation.[14]

         The North Carolina Case

         On January 23, 2017, Danzig, Ltd. and Brett Bertolami filed a lawsuit in the United States District Court, for the Western District of North Carolina against Inception Mining, Inc., Michael Ahlin, and Trent D'Ambrosio (Danzig, Ltd. et al. v. Inception Mining, Inc. et al., case no. 5:17-cv-00018-RJC-DSC-the “North Carolina Case”).[15] In the North Carolina Case, Danzig, Ltd. and Mr. Bertolami allege claims relating to the Danzig Agreement, the Asset Purchase Agreement, and the Debt Exchange Agreement, including: federal securities fraud; North Carolina securities fraud; breach of contract; unjust enrichment; common law fraud; breach of fiduciary duty; and negligent misrepresentation.[16]

         Plaintiffs' Complaint

         Plaintiffs initiated this case on August 22, 2017.[17] Plaintiffs' Complaint alleges three claims against Defendants.[18] Plaintiffs' first claim seeks declaratory judgment that:

(a) the Individual Plaintiffs are not proper parties to the SLC Arbitration; and
(b) only disputes between Inception Mining, Inc. and Elliot Foxcroft may be arbitrated in the SLC Arbitration.[19]

         Plaintiffs' second claim seeks declaratory judgment that:

(a) the Individual Plaintiffs are not proper parties to the Boston Arbitration;
(b) claims under the Asset Purchase Agreement and the Debt Exchange Agreement are not properly the subject of the Boston Arbitration;
(c) the exclusive dispute resolution forum under the Danzig Agreement is arbitration; and
(d) the exclusive dispute resolution forum for claims under the Asset Purchase Agreement is arbitration in Salt Lake City, Utah before an arbitrator with five years of experience in the gold mining industry.[20]

         And Plaintiffs' third claim seeks injunctive relief:

(a) enjoining Danzig, Ltd. and Brett Bertolami from asserting claims under the Asset Purchase Agreement in any court;
(b) enjoining Danzig, Ltd. and Brett Bertolami from asserting claims under the Danzig Agreement in any court;
(c) enjoining Defendants from asserting claims under the Debt Exchange Agreement in any arbitration brought under the Foxcroft Agreement, the Danzig Agreement or the Asset Purchase Agreement; and
(d) enjoining Defendants from asserting any claims under the Foxcroft Agreement, the Danzig Agreement, the Asset Purchase Agreement or the Debt Exchange Agreement against the Individual Plaintiffs.[21]

         DISCUSSION

         Subject matter jurisdiction exists and venue is proper to determine whether the Individual Plaintiffs may be required ...


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