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Oeschger v. Genethera, Inc.

United States District Court, D. Vermont

June 18, 2019

FREDRIC OESCHGER, Plaintiff,
v.
GENETHERA, INC., Defendant.

          ORDER ON MOTION TO RECONSIDER (DOC. 33)

          Geoffrey W. Crawford, Chief Judge

         Defendant GeneThera, Inc. ("GeneThera") has filed an "Omnibus" brief (Doc. 33) in response to the court's April 24, 2019 Order (Doc. 32) denying in part GeneThera's Motion to Dismiss (Doc. 8) and denying GeneThera's Motion to Dissolve (Doc. 19) a temporary restraining order (TRO) that the court entered on April 11, 2019 (Doc. 16). The April 24, 2019 Order extended the TRO until July 24, 2019 to allow the parties to conduct jurisdictional discovery. (See Doc. 32 at 14.) In an Order dated May 16, 2019, the court ruled on the portion of the Omnibus brief seeking to shorten the effective period of the TRO and to impose a security bond. (Doc. 37.) The court reserved ruling on the remaining issue in the Omnibus brief: GeneThera's motion to reconsider the April 24, 2019 Order. Briefing on that issue is now complete, and the court addresses it here.

         Background

         The court recited the following background in its April 24, 2019 Order. GeneThera and FOGT entered into a "Milestones Investment Agreement" ("MIA") on March 1, 2018. (Doc. 8-4 at 3.) Mr. Oeschger's signature appears on the agreement as "Manager" of FOGT. (Id. at 10.) In a provision regarding the "governing law," the MIA states, in pertinent part: "The parties hereto hereby submit to the exclusive jurisdiction of the United States federal courts located in Denver, Colorado with respect to any dispute arising under this agreement. . . ." (Id. at 6.)

         The agreement also includes the following provision: "Any claim or controversy arising out of or relating to the performance of this Agreement, which has not been settled by mediation, shall be settled by arbitration in Denver, Colorado, in accordance with the Commercial Arbitration Rules of the American Arbitration Association [AAA], as herein amended." (Id. at 9.) The relevant AAA arbitration rules include the following provisions:

R-7. Jurisdiction
(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.
(b) The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part. Such an arbitration clause shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitrator that the contract is null and void shall not for that reason alone render invalid the arbitration clause.

         American Arbitration Association, Commercial Arbitration Rules and Mediation Procedures, Rule 7 (amended and effective Oct. 1, 2013).

         On or about February 19, 2019, GeneThera filed a demand against FOGT for arbitration in Colorado with the AAA. (See Doc. 8-1 ¶ 9.) In an order entered on March 8, 2019, an emergency arbitrator found that GeneThera had a reasonable probability of success on its contract claim. (Doc. 8-13 at 3.) The emergency arbitrator found that GeneThera had presented undisputed evidence that FOGT had refused to make a $1.2 million payment under the MIA, and that GeneThera was accordingly unable to pay $25, 186.50 in rent under a lease. (See Id. at 3-4.) The emergency arbitrator found that if FOGT "is not held to its obligations under the MIA, Claimant will become insolvent and be forced to close its doors, resulting in catastrophic loss that cannot be remedied by money alone." (Id.) The emergency arbitrator enjoined FOGT from breaching the MIA and ordered it to immediately pay $25, 186.50 to GeneThera so that GeneThera could satisfy its rent obligations. (Id. at 4.)

         GeneThera submitted a First Amended Demand for Arbitration to the AAA on or about March 12, 2019. (Doc. 8-14.) The demand named FOGT as the sole respondent. The First Amended Demand added a new claim for "Piercing the Corporate Veil / Alter Ego," alleging that FOGT is the alter ego of Mr. Oeschger and asserting that Mr. Oeschger is personally liable for GeneThera's alleged damages. (Id. at 9-10.)

         FOGT filed for bankruptcy under Chapter 7 on March 15, 2019. (See Doc. 8-16 at 3.) Mr. Oeschger filed his complaint in the district court on March 18, 2019. (Doc. 1.) Then, in the bankruptcy action, GeneThera filed an emergency motion for relief from the automatic stay on March 22, 2019. (Doc. 8-16 at 1.) GeneThera submitted a Second Amended Demand for Arbitration to the AAA on or about March 22, 2019. (Doc. 8-15.) The Second Amended Demand was "to add Respondent Fred Oeschger as a captioned party and to clarify Claimant's claims against Respondent Fred Oeschger individually." (Id. at 2.) In an order dated April 5, 2019, the Bankruptcy Court granted GeneThera relief from the automatic stay so that it could pursue its claims in the Colorado arbitration. (Doc. 8-18 at 2.)

         Having been granted relief from the automatic stay, GeneThera returned to the arbitration and requested emergency injunctive relief against Mr. Oeschger. (See Doc. 14-3 at 2.) In an order dated April 9, 2019, the emergency arbitrator found as follows:

In light of Mr. Oeschger's control of FOGT, its thin capitalization, its representations to Claimant that it had the resources to meet its obligations to Claimant, Mr. Oeschger's knowledge of those representations, and financial transactions in which the interests of Mr. Oeschger and FOGT were not kept separate, the Arbitrator concludes that Claimant has a reasonable probability of success on the merits of its alter ego claims against Mr. Oeschger.

(Doc. 14-3 at 2-3.) The arbitrator accordingly amended the March 8, 2019 order "to include Fred Oeschger as a Respondent" and ordered that Mr. Oeschger "immediately pay $25, 186.50 to Claimant so that Claimant may satisfy its rent obligations under the Lease." (Id., at 3.)

         Procedural History

         Mr. Oeschger filed his complaint against GeneThera in this court on March 18, 2019, seeking the following declaration:

(i) that he is not liable to GeneThera or its shareholders for any actions or failures to act in the capacity of a member of the Board of Directors of GeneThera, and (ii) that he is not personally liable on obligations, if any, owed by FOGT, LLC to GeneThera, or otherwise.

(Doc. 7 ΒΆ 5.) Mr. Oeschger also seeks "preliminary and permanent injunctive relief precluding GeneThera from taking actions to compel him to arbitrate in the Arbitration any of the claims that are the ...


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