DDK Hotels LLC v Williams-Sonoma Inc - United States Court of Appeals for the Second Circuit 20-2748 - 23 July 2021
Plaintiffs-appellees DDK Hotels, LLC ("DDK Hotels"), DDK/WE Hospitality Partners, LLC ("DDK Hospitality"), and DDK/WE Hotels Management, LLC ("DDK Management") entered into a joint venture with the defendants-appellants Williams-Sonoma, Inc. ("Williams-Sonoma") and Williams-Sonoma Stores, Inc. ("West Elm"). Despite a promising start, disagreements over the vision for the project soon arose. West Elm allegedly then began seeking other business partners for the same project, in violation of the parties' joint venture agreement. The plaintiffs-appellees subsequently filed suit against the defendants-appellants in the United States District Court for the Eastern District of New York, asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and unjust enrichment.
West Elm then brought an action in the Delaware Court of Chancery, seeking to dissolve the joint venture. The Delaware court dismissed the action, concluding that dissolution of the joint venture was not warranted. Following the dismissal of the Delaware action, the plaintiffs-appellees filed a supplemental complaint in the Eastern District of New York, asserting an additional claim against the defendants-appellants for breach of the prevailing party provision of Section 21(h) of the joint venture agreement, which provides that the non- prevailing party is responsible for reasonable costs, charges and expenses incurred by the prevailing party in enforcing the terms of the agreement. The defendants-appellants subsequently moved to compel arbitration of the claim for breach of the prevailing party provision. The district court (I. Leo Glasser, Judge) denied the motion to compel arbitration, and the defendants-appellants now appeal, arguing that the district court erred because the joint venture agreement delegates questions of arbitrability to the arbitrator. We conclude that the joint venture agreement does not "clearly and unmistakably" delegate arbitrability to the arbitrator and that the district court therefore correctly ruled on the scope of the arbitration agreement.