Case: 20-50721 Document: 00515969079 Page: 1 Date Filed: 08/06/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
August 6, 2021
No. 20-50721 Lyle W. Cayce
Clerk
Noble Capital Group, L.L.C.; Noble Capital Fund
Management, L.L.C.,
Plaintiffs—Appellants,
versus
US Capital Partners, Incorporated; Jeffrey Sweeney;
Charles Towle; Patrick Steele,
Defendants—Appellees.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:19-CV-01255
Before Ho, Oldham, and Wilson, Circuit Judges.
Per Curiam:*
Plaintiffs entered into an agreement containing an arbitration
provision, which included a clause delegating all disputes regarding the
enforceability of that agreement to the arbitrator. Because Plaintiffs fail to
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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challenge that delegation clause specifically, we affirm the district court’s
judgment granting Defendants’ motion to compel arbitration.
I.
Plaintiff Noble Capital Group (“Noble Group”) is an Austin-based
private lending organization that specializes in making loans to real estate
entrepreneurs in Texas. Plaintiff Noble Capital Fund Management (“Noble
Management”) is a subsidiary of Noble Group and serves as its “operations
arm.” We refer to these entities collectively as “Noble.” Defendant US
Capital Partners (“US Capital”) is a San Francisco-based corporation that
provides financial advisory services related to capital formation. Defendants
Jeffrey Sweeney, Charles Towle, and Patrick Steele (“individual
defendants”) are partners and principals of US Capital.
Noble Management and US Capital entered into a series of
agreements establishing an investment fund, whereby US Capital would
administer the fund and drum up investors while Noble would make the
loans. The agreements contained arbitration provisions requiring the parties
to arbitrate any dispute arising out of or related to the agreements. The
agreements also provided that California law applies to any dispute.
Although the agreements stated that they applied to Noble Management and
its “affiliates,” “subsidiaries,” “associated companies,” “comanaged
entities,” “successors,” and “assigns,” Noble Group did not sign the
agreements.
Noble alleges that Defendants “made a whole host of fraudulent
representations” relating to their ability to raise capital in order to get Noble
to do business. Noble further alleges that, soon after the fund was
established, Defendants failed to deliver on their promise to raise capital and
that they “began efforts to string Noble along so they could continue to
extract fees from the Fund.”
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In December 2019, Noble filed this suit alleging that Defendants
engaged in fraud. When Defendants moved to compel arbitration, Noble
amended their complaint and added a new cause of action alleging that
Defendants fraudulently induced them to assent to the arbitration clauses.
Noble alleged that Defendants falsely represented that they had been subject
to only minimal litigation in the past, failing to disclose that they had a history
of confidential arbitrations. The magistrate judge granted Defendants’
motion to compel arbitration, and the district court adopted the magistrate
judge’s report and recommendation over Noble’s objections. Noble appeals.
II.
Noble argues that the district court erred by granting Defendants’
motion to compel arbitration. We review this ruling de novo. See, e.g., Kubala
v. Supreme Prod. Servs., Inc., 830 F.3d 199, 201 (5th Cir. 2016).
When determining whether to compel arbitration, “we first look to
see if an agreement to arbitrate was formed”—that is, whether the parties
actually entered into an agreement to arbitrate. Edwards v. Doordash, Inc.,
888 F.3d 738, 744 (5th Cir. 2018). “[W]here the ‘very existence of a
contract’ containing the relevant arbitration agreement is called into
question, the federal courts have authority and responsibility to decide the
matter.” Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004)
(quoting Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 218 (5th Cir.
2003)).
Each of the parties’ agreements contained arbitration clauses
providing that:
Any dispute, claim, or controversy arising out of or relating to
[the] Agreement, including the negotiation, breach, validity or
performance of the Agreement, the rights and obligations
contemplated by the Agreement, any claims of fraud or fraud
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in the inducement, and any claims related to the scope or
applicability of this agreement to arbitrate, shall be resolved [by
arbitration pursuant to JAMS/FINRA rules and procedures]. 1
Noble Management does not dispute that it entered into agreements
containing arbitration clauses. Noble Group, however, argues that because
it was not a signatory to any of the agreements containing arbitration
provisions, it cannot be compelled to arbitrate. But in its complaint, Noble
Group claimed that Defendants fraudulently induced it to assent to the
arbitration clauses. So Noble Group cannot now claim that it never assented
to the arbitration clauses. See Cohen v. TNP 2008 Participating Notes Program,
LLC, 243 Cal. Rptr. 3d 340, 358 (Ct. App. 2019) (recognizing that a non-
signatory may be bound to arbitrate by estoppel).
Next, we “determine if [the agreement to arbitrate] contains a
delegation clause.” Edwards, 888 F.3d at 744. A delegation clause exists if
there is “clear and unmistakable evidence” that the parties “agreed to
arbitrate arbitrability.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,
944 (1995) (brackets and quotation omitted).
We agree with the district court that such evidence exists here. The
agreements delegate to the arbitrator the exact challenges that Noble brings
in this case: claims of “fraud or fraud in the inducement.” The agreements
also delegate to the arbitrator questions relating to the “validity” of any part
of the agreements.
Because we conclude that there is a delegation clause, we next ask
whether there is a “challenge to the delegation clause itself.” Edwards, 888
F.3d at 744. In Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010), the
1
The clauses are substantially the same, except that two of the agreements provide
that the arbitration is to be conducted under JAMS rules, and one of the agreements
provides that it is to be conducted under FINRA rules.
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Supreme Court held that delegation clauses—even those that are contained
within an arbitration provision or a broader agreement—are severable. Id. at
71–72. See also id. at 72 (“Application of the severability rule does not depend
on the substance of the remainder of the contract.”). Because delegation
clauses are severable, they must be challenged “specifically.” Id. at 71.
Accordingly, “absent a challenge to the delegation clause itself, [courts] will
consider that clause to be valid and compel arbitration.” Edwards, 888 F.3d
at 744. “Challenges to the arbitration agreement as a whole are to be heard
by the arbitrator.” Id.
The district court correctly concluded that Noble’s fraudulent
inducement claim fails to challenge the delegation clauses in particular, and
as a result their enforceability challenges must be sent to the arbitrator. Just
like the employee in Rent-A-Center failed to challenge the specific delegation
clause by arguing that the entire arbitration agreement was unconscionable,
Noble similarly fails to challenge the specific delegation provision by arguing
that the entire arbitration provision was procured by fraud. “Nowhere in
[their] opposition to [Defendants’] motion to compel arbitration did [Noble]
even mention the delegation provision.” Rent-A-Center, 561 U.S. at 72.
Accordingly, the district court correctly granted Defendants’ motion
to compel arbitration. See Arnold v. Homeaway, Inc., 890 F.3d 546, 554 (5th
Cir. 2018) (“[Noble’s] contention is that the arbitration provision as a whole
is unenforceable under [California] law. Because [their] challenge is not
specific to the delegation clause, [Noble] must present it to an arbitrator.”).
Finally, Noble argues that even if the arbitration provisions are
enforceable, they cannot be compelled to arbitrate against individual
defendants Sweeney, Towle, and Steele because those parties did not sign
the agreements in their personal capacity and are therefore not entitled to
enforce them. The district court held that equitable estoppel prevented
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Noble from arbitrating its claims against US Capital, while litigating in court
its claims against the individual defendants.
We review the district court’s decision to apply equitable estoppel for
abuse of discretion. See, e.g., Grigson v. Creative Artists Agency L.L.C., 210
F.3d 524, 528 (5th Cir. 2000). We hold that the district court did not abuse
its discretion because Noble alleges that US Capital and the individual
defendants acted together as a single unit to defraud Noble and because such
allegations are connected with the obligations of the parties’ agreements. See
Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1128–29 (9th Cir. 2013)
(holding that equitable estoppel applies “when the signatory alleges
substantially interdependent and concerted misconduct by the nonsignatory
and another signatory and ‘the allegations of interdependent misconduct
[are] founded in or intimately connected with the obligations of the
underlying agreement’”) (alteration in original) (quoting Goldman v. KPMG
LLP, 92 Cal. Rptr. 3d 534, 541, 544 (Ct. App. 2009)).
***
For the foregoing reasons, we affirm.
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