FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JOHN MOMOT,
Plaintiff-Appellee, No. 10-15276
v.
D.C. No.
2:09-cv-00975-RLH
DENNIS MASTRO; MICHAEL MASTRO;
JEFF MASTRO, OPINION
Defendants-Appellants.
Appeal from the United States District Court
for the District of Nevada
Roger L. Hunt, Chief District Judge, Presiding
Argued and Submitted
March 15, 2011—Davis, California
Filed June 22, 2011
Before: William A. Fletcher and Milan D. Smith, Jr.,
Circuit Judges, and George H. Wu, District Judge.*
Opinion by Judge Milan D. Smith, Jr.
*The Honorable George H. Wu, United States District Judge for the
Central District of California, sitting by designation.
8483
MOMOT v. MASTRO 8485
COUNSEL
Jerry C. Bonnett, Bonnett, Fairbourn, Friedman & Balint, PC,
Phoenix, Arizona, for the defendant-appellants.
Marc P. Cook, Bailus Cook & Kelesis, Ltd., Las Vegas,
Nevada, for the plaintiff-appellee.
OPINION
M. SMITH, Circuit Judge:
Defendants-Appellants Dennis, Jeff, and Michael Mastro
(collectively, the Mastros) appeal from the district court’s
order enjoining arbitration and denying their motion to stay
judicial proceedings under section 3 of the Federal Arbitration
Act (FAA), 9 U.S.C. § 3.
8486 MOMOT v. MASTRO
In connection with an asset purchase transaction, the
Mastros and Plaintiff-Appellee John Momot entered into an
allocation agreement (Allocation Agreement) that included an
arbitration clause. The Mastros contend that the arbitration
clause reserved the question of arbitrability for the arbitrators,
and that the district court therefore erred in determining that
the dispute was not subject to arbitration. We agree, and hold
that the arbitration clause in the Allocation Agreement clearly
and unmistakably expresses the parties’ intent that the arbitra-
tors determine questions of arbitrability, and that the district
court therefore erred in permanently enjoining the arbitration
and failing to stay judicial proceedings under section 3 of the
FAA.1
FACTUAL AND PROCEDURAL BACKGROUND
Momot, a member of the Nevada State Bar since 1974, was
an investor in three Mastros restaurants. In early 2007, the
Mastros agreed to sell several companies, including the res-
taurants in which Momot had invested. In connection with the
sale, the Mastros, Momot, and other investors entered into the
Allocation Agreement, which, among other things, allocated
the total purchase price among the selling entities, and
included the following arbitration clause:
4. Resolution of Disputes.
(a) Arbitration. If a dispute arises out of or relates
to this Agreement, the relationships that result from
this Agreement, the breach of this Agreement or the
validity or application of any of the provisions of
this Section 4, and, if the dispute cannot be settled
1
In their related appeal, Mastro v. Momot, No. 09-17698, the Mastros
contend that the Arizona district court erred in denying their motion to
compel arbitration under section 4 of the FAA, 9 U.S.C. § 4. We address
that issue in a memorandum disposition filed contemporaneously with this
opinion.
MOMOT v. MASTRO 8487
through negotiation, the dispute shall be resolved
exclusively by binding arbitration. A Party may sub-
mit the dispute to binding arbitration administered
by the American Arbitration Association under the
Commercial Arbitration Rules upon notice to the
other Party subject to the dispute . . . .
The asset sale closed on May 15, 2007. Several months
later, Momot’s counsel contacted the Mastros to complain
about the portion of the aggregate purchase price realized
from the sale that had been allocated to the three companies
in which Momot had invested. The Mastros’ counsel
responded that under the Allocation Agreement, any such dis-
putes must be arbitrated. Nevertheless, Momot sued the
Mastros in Nevada state court on April 16, 2009, alleging that
they had taken “steps over a number of years designed to
increase their own profits from the restaurant enterprises and
diminish any profits that would be realized by private inves-
tors, including Momot.” The complaint alleged breach of
fiduciary duty, accounting, conversion, theft and embezzle-
ment, monies owed, civil conspiracy, civil RICO, failure to
register securities, fraud, and usurped corporate opportunity.
On May 19, 2009, the Mastros initiated arbitration proceed-
ings with the American Arbitration Association. On May 20,
2009, they filed a petition in the United States District Court
for the District of Arizona, seeking an order under section 4
of the FAA compelling Momot to arbitrate his claims and
staying the Nevada suit under section 3 of the FAA. Next, the
Mastros removed Momot’s state-court action to the United
States District Court for the District of Nevada based on
diversity jurisdiction, and filed a motion under section 3 of
the FAA to dismiss or stay the litigation so removed.
On July 9, 2009, the Arizona district court denied the
Mastros’ motion for a temporary restraining order and prelim-
inary injunction staying the Nevada litigation. In so doing, the
court first noted that “the Nevada action was filed first and
8488 MOMOT v. MASTRO
there is no obvious reason of economy to proceed here in
spite of that action and, for all intents and purposes, to enjoin
that action from proceeding,” especially since the court had
no reason “to assume that the Nevada court is unable to police
its own jurisdiction and stay its proceedings or transfer venue
as necessary.” Second, the court held that the Mastros had not
demonstrated a threat of irreparable harm that would justify
the issuance of a preliminary injunction, because they had
shown no likelihood that the Nevada district court would fail
to require the arbitration to proceed, assuming such a course
of action was legally correct, or that Momot would refuse to
participate in arbitration. Finally, the court concluded that
“granting the requested relief would be an encouragement of
forum shopping.” Because it concluded the Mastros “would
have no entitlement to a Temporary Restraining Order or Pre-
liminary Injunction from this Court under any arbitration
agreement,” it found it “unnecessary to consider the likely
merits of [the Mastros’] Petition to Compel Arbitration at that
stage of the proceedings.”
Meanwhile, in the Nevada district court, Momot filed an
emergency motion seeking an order denying the Mastros’
motion to dismiss, which the court denied. Instead, on August
14, 2009, the Nevada district court handed down an injunction
temporarily staying the Arizona arbitration so that the court
“may review the parties’ forthcoming simultaneous response
briefs . . . and more fully consider the nature and scope of its
jurisdiction over this case and the nature and scope of any
related arbitration.” The Mastros appealed the Nevada district
court’s temporary injunction to this court.
On July 21, 2009, the Mastros filed a motion to compel
arbitration in the Arizona district court. On November 24,
2009, the Arizona district court denied the motion, noting that
normally it would “have very little discretion when deciding
petitions to compel arbitration,” but concluding that “given
the procedural morass the parties have created, granting Peti-
tioner’s request to compel arbitration would only further com-
MOMOT v. MASTRO 8489
plicate matters.” In so concluding, the court cited the Nevada
district court’s August 14, 2009 order staying the arbitration,
and noted, “even if this Court were to grant the petition to
compel arbitration, the arbitration would not continue until
the Nevada Court or the Ninth Circuit takes further action.
There is no need to compel arbitration when another court has
stayed that arbitration.”
On February 4, 2010, the Nevada district court ordered that
Momot’s claims be adjudicated in court and issued a perma-
nent injunction staying arbitration proceedings in Arizona.
The court first noted, “Because the parties admit the Alloca-
tion Agreement contains an arbitration clause, the Court must
simply decide whether Momot’s claims fall within the scope
of the agreement.” It concluded, however:
Despite the general presumption in favor of arbitra-
tion, the Court can say with positive assurance that
Momot’s claims are not governed by the Allocation
Agreement. . . . Momot’s claims do not arise out of
or relate to the agreement because they arise out of
the Mastros’ alleged mishandling of his investment
funds prior to the Mastros’ decision to sell their res-
taurants. . . . Because Momot’s claims do not arise
out of or relate to the Allocation Agreement, he is
not required to submit his claims to arbitration and
this Court has jurisdiction to adjudicate this lawsuit.
Because the court ordered arbitration proceedings in Arizona
terminated, it denied as moot the Mastros’ motion to stay
enforcement of the injunction.
On April 14, 2010, we dismissed as moot the Mastros’
appeal of the temporary injunction. The Mastros now timely
appeal the district court’s issuance of a permanent injunction
and its failure to stay the suit under section 3 of the FAA.
8490 MOMOT v. MASTRO
STANDARD OF REVIEW AND JURISDICTION
We review de novo the district court’s decisions about the
arbitrability of claims. Simula, Inc. v. Autoliv, Inc., 175 F.3d
716, 719 (9th Cir. 1999). Because “[a] district court’s decision
to grant a permanent injunction involves factual, legal, and
discretionary components,” we review a decision to grant
such relief under several different standards. Walters v. Reno,
145 F.3d 1032, 1047 (9th Cir. 1998). We review legal conclu-
sions underlying the decision de novo, factual findings for
clear error, and the scope of injunctive relief for an abuse of
discretion. Id.
We have jurisdiction under 28 U.S.C. § 1292(a)(1) and 9
U.S.C. § 16(a)(1)(A).
DISCUSSION
The Mastros argue that the Nevada district court erred in
issuing a permanent injunction terminating the pending Ari-
zona arbitration, and in failing to stay the suit pending arbitra-
tion under section 3 of the FAA.2 Because we hold that the
Allocation Agreement clearly and unmistakably indicates the
parties’ intent to arbitrate the question of arbitrability, we
reverse and remand.
[1] Because arbitration is fundamentally a matter of con-
tract, “the central or ‘primary’ purpose of the FAA is to
ensure that ‘private agreements to arbitrate are enforced
according to their terms.’ ” Stolt-Nielsen S.A. v. AnimalFeeds
2
Momot contends that these questions are not properly before us
because we previously found the same issue to be moot. However, the pre-
vious appeal was moot because the preliminary injunction that was the
subject of that appeal was no longer in effect. In contrast, the Mastros now
appeal issuance of the permanent injunction, and relief remains available
in that setting because the claim has not “lost its character as a present,
live controversy.” Am. Rivers v. Nat’l Marine Fisheries Serv., 126 F.3d
1118, 1123 (9th Cir. 1997).
MOMOT v. MASTRO 8491
Int’l Corp., 130 S. Ct. 1758, 1773 (2010) (quoting Volt Info.
Sciences, Inc. v. Bd. of Trs. of Leland Stanford Junior Univ.,
489 U.S. 468, 479 (1989)). Thus, “[w]hether enforcing an
agreement to arbitrate or construing an arbitration clause,
courts and arbitrators must ‘give effect to the contractual
rights and expectations of the parties.’ ” Stolt-Nielsen S.A.,
130 S. Ct at 1773-74 (quoting Volt, 489 U.S. at 479). In con-
ducting that analysis, “as with any other contract, the parties’
intentions control.” Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985).
[2] Section 2 of the FAA, the “primary substantive provi-
sion of the Act,” Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24 (1983), provides that “[a] writ-
ten provision in . . . a contract evidencing a transaction
involving commerce to settle by arbitration a controversy
thereafter arising out of such contract . . . shall be valid, irrev-
ocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.” 9 U.S.C.
§ 2. The FAA also establishes procedures by which federal
courts implement section 2’s substantive rule. Thus, section 4
of the FAA provides that a court “shall” order arbitration, on
petition of a party, “upon being satisfied that the making of
the agreement for arbitration or the failure to comply there-
with is not in issue.” 9 U.S.C. § 4. Section 3 provides that a
court “shall . . . stay the trial of the action,” on petition of a
party, “upon any issue referable to arbitration under an agree-
ment in writing for such arbitration.” 9 U.S.C. § 3.
Accordingly, whether the Nevada district court should have
stayed judicial proceedings pending arbitration turns on
whether the parties agreed to arbitrate their dispute. Gener-
ally, when examining an arbitration contract, “the [FAA]
establishes that, as a matter of federal law, any doubts con-
cerning the scope of arbitrable issues should be resolved in
favor of arbitration . . . .” Moses H. Cone Mem’l Hosp., 460
U.S. at 24-25.
8492 MOMOT v. MASTRO
Certain issues, however—the kind that “contracting parties
would likely have expected a court to have decided”—remain
within the province of judicial review. Howsam v. Dean Wit-
ter Reynolds, Inc., 537 U.S. 79, 83 (2002). Such issues con-
cern gateway questions of arbitrability, such as whether the
parties have a valid arbitration agreement or are bound by a
given arbitration clause, and whether an arbitration clause in
a concededly binding contract applies to a given controversy.
See Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452
(2003) (plurality opinion); Howsam, 537 U.S. at 84. But,
the law treats silence or ambiguity about the question
“who (primarily) should decide arbitrability” differ-
ently from the way it treats silence or ambiguity
about the question “whether a particular merits-
related dispute is arbitrable because it is within the
scope of a valid arbitration agreement”—for in
respect to this latter question the law reverses the
presumption.
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,
944-45 (1995). This is so because questions about the scope
of an agreement arise when the parties have entered into an
agreement providing for the arbitration of some issues, and
therefore presumably have contemplated that an arbitrator
will decide at least some disputes. See id. at 945. Given the
general presumption in favor of arbitration, “one can under-
stand why the law would insist upon clarity before concluding
that the parties did not want to arbitrate a related matter.” Id.
In contrast,
given the principle that a party can be forced to arbi-
trate only those issues it specifically has agreed to
submit to arbitration, . . . courts might hesitate to
interpret silence or ambiguity on the “who should
decide arbitrability” point as giving the arbitrators
that power, for doing so might too often force
unwilling parties to arbitrate a matter they reason-
MOMOT v. MASTRO 8493
ably would have thought a judge, not an arbitrator,
would decide.
Id.
[3] Although gateway issues of arbitrability presumptively
are reserved for the court, the parties may agree to delegate
them to the arbitrator. See, e.g., Howsam, 537 U.S. at 83-85;
Green Tree Fin. Corp., 539 U.S. at 452. The Supreme Court
recently reaffirmed this principle in Rent-A-Center, West, Inc.
v. Jackson, holding that courts must enforce the parties’
“agreement to arbitrate threshold issues” regarding the
arbitrability of their dispute, and may do so by staying federal
litigation under section 3 of the FAA or compelling arbitra-
tion under section 4. 130 S. Ct. 2772, 2777-78 (2010).
Because such issues would otherwise fall within the prov-
ince of judicial review, we apply a more rigorous standard in
determining whether the parties have agreed to arbitrate the
question of arbitrability. Rather than applying “ordinary state-
law principles that govern the formation of contracts” as we
would when determining, for example, the scope of a conced-
edly binding contract, the Supreme Court has cautioned that
“[c]ourts should not assume that the parties agreed to arbitrate
arbitrability unless there is ‘clear and unmistakable’ evidence
that they did so.” First Options of Chicago, Inc., 514 U.S. at
944 (quoting AT&T Techs., Inc. v. Commc’ns Workers, 475
U.S. 643, 649 (1986) (alterations omitted)).
[4] Accordingly, the question of arbitrability is left to the
court unless the parties clearly and unmistakably provide oth-
erwise. Such “[c]lear and unmistakable ‘evidence’ of agree-
ment to arbitrate arbitrability might include . . . a course of
conduct demonstrating assent . . . or . . . an express agreement
to do so.” Rent-A-Center, 130 S. Ct. at 2783 (Stevens, J., dis-
senting) (citing First Options of Chicago, Inc., 514 U.S. at
946). Here, there is no evidence that the parties engaged in
conduct demonstrating assent, so we turn to the terms of their
8494 MOMOT v. MASTRO
agreement. As previously noted, the arbitration clause in the
Allocation Agreement provides, in relevant part:
4. Resolution of Disputes.
(a) Arbitration. If a dispute arises out of or
relates to this Agreement, the relationships that result
from this Agreement, the breach of this Agreement
or the validity or application of any of the provisions
of this Section 4, and, if the dispute cannot be settled
through negotiation, the dispute shall be resolved
exclusively by binding arbitration.
(Emphasis added.) We hold that this language, delegating to
the arbitrators the authority to determine “the validity or
application of any of the provisions of” the arbitration clause,
constitutes “an agreement to arbitrate threshold issues con-
cerning the arbitration agreement.” Rent-A-Center, 130 S. Ct.
at 2777. In other words, the parties clearly and unmistakably
agreed to arbitrate the question of arbitrability.
[5] Because the parties’ agreement clearly and unmistak-
ably indicates their intent for the arbitrators to decide the
threshold question of arbitrability, we hold that the district
court erred in failing to stay the action under section 3 of the
FAA and in enjoining the arbitration.
REVERSED AND REMANDED with instructions to
grant the motion to stay proceedings under 9 U.S.C. § 3
and dissolve the permanent injunction.