OPEN MRI OF OKEECHOBEE, LLC, ANDREW GALLANT, ANDREW T. WALKER AND HENRY R. ZAYAS, APPELLANTS,
v.
PETER ALDANA, IQBAL AHMED AND JOHN CHANG, APPELLEES
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Open MRI sought to compel arbitration of a dispute with minority members who alleged wrongful termination of their ownership interests based on alleged breach of a non-compete clause. The court affirmed the trial court's denial of the arbitration motion, holding that the dispute pertained to Article 10 of the operating agreement, which was expressly excluded from the arbitration provision.
The court held that the dispute is not arbitrable because it arises under Article 10, which was expressly excluded from the arbitration clause. The non-compete dispute pertains directly to Article 10 and therefore falls outside the scope of mandatory arbitration.
[1] A dispute arises under an agreement's non-competition clause when the alleged wrongful termination of a party's interest is based on a claimed breach of that clause.
[2] A dispute is excluded from mandatory arbitration if it "pertains to" a specific article of an agreement that is explicitly exempted from arbitration.
Previewing 2 of 3 headnotes on this case. FLexlaw’s editorially structured points of law — every proposition, pinpointed — are reserved for members.
Join FLexlaw to unlock all legal intelligence“The agreement provided for arbitration of "any disputes under this agreement, except those which pertained to Articles 10 or 11."”
Establishes the scope of the arbitration clause with explicit carve-outs for Articles 10 and 11.
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Join FLexlaw to unlock all legal intelligencePlaintiffs, minority owners in Open MRI, were notified that their acquisition of an interest in a competing MRI company violated their operating agree…
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KLEIN, J.
Plaintiff appellees, who each owned a minority interest in Open MRI, sued Open MRI and its manager members for wrongfully terminating their interests in Open MRI. Open MRI appeals an order denying its motion to compel arbitration. We affirm.
In their complaint plaintiffs alleged that they had been notified by Open MRI that their recent acquisition of an ownership interest in a competing company was contrary to their agreement, and that their interests in Open MRI were “being seized for an alleged material breach of the . operating agreement of Open MRI.” Plaintiffs further alleged that Open MRI wrongfully confiscated their interests and deprived them of their distributions.
The agreement provided for arbitration of “any disputes under this agreement, except those which pertained to Articles 10 or 11.” The trial court concluded that this dispute arose under Article 10, and Open MRI was accordingly not entitled to arbitration. Article 10 is entitled “Transfer of Interest/Non-Competition/Confidentiality.” Section 10.5 of Article 10 provides that no member, without prior written consent of the management, may participate in any manner in another MRI business which performs services in the territory.
It is obvious from the complaint that, but for Open MRI’s seizure of plaintiffs interests in Open MRI, based on the alleged breach of the non-compete provision found in Article 10, this dispute would not have arisen. The allegations of the complaint clearly “pertain to” the non-compete provisions of Article 10, and we accordingly conclude that the trial court was correct in holding that the claims were not arbitra-ble.
Affirmed.
HAZOURI and DAMOORGIAN, JJ., concur.