eNotes: Liability – November 2022 – Washington, DC

SIGNIFICANT CASE SUMMARIES

Washington, DC Case Summary

BDO USA, LLP v. Jia-Sobota
District of Colombia Court of Appeals
Nos. 20-CV-536 & 20-CV-696

Decided: October 6, 2022

Arbitration clauses allowing a party to seek provisional remedies through concurrent litigation are enforceable.

Background

Eric Jia-Sobota, a partner at the accounting firm BDO USA, LLP, resigned to launch a competing firm, EverGlade Consulting. Disputes immediately arose regarding Jia-Sobota’s attempts to bring BDO clients and personnel to his new firm. Pursuant to the employment contract between BDO and Jia-Sobota, BDO invoked its right to arbitrate all disputes attendant to his departure. That agreement stated that “[a]ny controversy or dispute relating to this Agreement or the Partnership and its affairs or otherwise arising between a Partner and the Partnership . . . shall be considered and decided by an arbitration panel consisting of two (2) members of [BDO’s] Board of Directors,” and three BDO 4 partners who did not sit on the board. Notwithstanding the arbitration clause, the agreement also expressly permitted either party to “seek provisional remedies from a court.”

Pursuant to the provision in its arbitration agreement with Jia-Sobota that allowed either party to “seek provisional remedies” in court, BDO also filed a Complaint in Superior Court seeking to enjoin Jia-Sobota from doing business with or soliciting BDO’s clients, or otherwise using its proprietary information, while the arbitration proceedings were pending. When BDO simultaneously moved to compel arbitration, the Trial Court denied the Motion, ruling that BDO had implicitly waived its right to enforce the arbitration clause by “engag[ing] in conduct inconsistent with the arbitration right.” BDO challenged that ruling in an appeal. Jia-Sobota, in his opposition to the appeal, urged the Court to hold the arbitration clause was unenforceable by BDO because it was unconscionable and because it was against public policy to allow BDO’s partners to effectively sit in judgment of their own case.

Holding

The District of Colombia Court of Appeals found that the arbitration agreement between BDO and Jia-Sobota allowed either party to pursue an injunction without waiving its arbitration rights and, because Jia-Sobota has not shown that BDO took any action inconsistent with its intent to arbitrate its underlying claims, it found with BDO that it did not waive its right to arbitrate, contrary to the Trial Court’s ruling. The District of Colombia Court of Appeals remanded the issue of whether the arbitration clause was unconscionable back to the Trial Court.

Questions about this case can be directed to Nicholas Schaufelberger at (202) 945-9502 or nschaufelberger@tthlaw.com.