Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CAROLYN JANE BLAKELY, Case No.: 3:25-cv-02330-CAB-DEB 12 Plaintiff, 13 ORDER GRANTING MOTION TO v. COMPEL ARBITRATION OF 14 ELUTIA, INC. F/K/A AZIYO CROSSCLAIM 15 BIOLOGICS, INC., et al., 16 Defendants. [Doc. No. 31] 17 18 On February 27, 2026, Defendant Elutia, Inc., f/k/a Aziyo Biologics, Inc. (“Elutia” 19 or “Aziyo”) filed a motion to compel arbitration as to the crossclaim filed by Defendant 20 DCI Donor Services Inc., d/b/a Tennessee Donor Services (“DCI”). [Doc. No. 31.] The 21 motion has been fully briefed and the Court finds it suitable for determination on the 22 papers. See CivLR 7.1(d)(1). For the following reasons, the Court GRANTS Elutia’s 23 motion to compel arbitration. 24 I. BACKGROUND 25 This case arises out of a spinal surgery performed on Plaintiff Carolyn Jane Blakely 26 in La Jolla, California on April 13, 2023. [Doc. No. 1-2 (“Compl.” or “Complaint”) at 27 ¶ 14.] Plaintiff alleges that during this spinal surgery, she was implanted with the ViBone 28 product (the “Recalled Product”) and subsequently tested positive for tuberculosis. [Id.] 1 The Recalled Product is a human tissue allograft consisting of cryopreserved bone matrix 2 that is aseptically processed to preserve native factors that support bone repair. [Id. at 3 ¶ 18.] 4 DCI filed a crossclaim against Elutia for breach of contract, express indemnity, 5 equitable indemnity, contribution, and declaratory relief. [See generally Doc. No. 25 6 (“Crossclaim”).] Elutia now moves to compel DCI to arbitrate its crossclaim based upon 7 a Cadaveric Tissue Recovery and Services Agreement, [Doc. No. 30 (“Agreement”)], 8 which Elutia asserts includes an enforceable arbitration requirement. [Doc. No. 31 at 1.] 9 Elutia also argues, as an alternative to its motion to compel arbitration, that the Court 10 should dismiss this claim for lack of subject matter jurisdiction under Federal Rule of Civil 11 Procedure 12(b)(1). [Id.] The Court will address both subject matter jurisdiction and 12 arbitration in turn. 13 II. DISCUSSION 14 A. ELUTIA’S 12(B)(1) ARGUMENT 15 Elutia argues as an alternative to its motion to compel arbitration that the Court 16 should dismiss the crossclaim for lack of subject matter jurisdiction under Rule 12(b)(1). 17 [Doc. No. 31-1 at 14–15.] The Court begins its analysis with this argument, as it cannot 18 compel arbitration if it lacks jurisdiction over the claims. 19 1. Legal Standard 20 A party may challenge the Court’s subject-matter jurisdiction through a motion filed 21 pursuant to Rule 12(b)(1). See Fed. R. Civ. P. 12(b)(1); White v. Lee, 227 F.3d 1214, 1242 22 (9th Cir. 2000). Because “[f]ederal courts are courts of limited jurisdiction[,]” “[i]t is to 23 be presumed that a cause lies outside this limited jurisdiction[.]” Kokkonen v. Guardian 24 Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Consequently, “the burden of establishing 25 the contrary rests upon the party asserting jurisdiction[.]” Id. “Rule 12(b)(1) jurisdictional 26 attacks can be either facial or factual.” White, 227 F.3d at 1242. “A ‘facial’ attack accepts 27 the truth of the plaintiff’s allegations but asserts that they ‘are insufficient on their face to 28 invoke federal jurisdiction.’” Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014) 1 (quoting Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004)). “The 2 district court resolves a facial attack as it would a motion to dismiss under Rule 12(b)(6): 3 Accepting the plaintiff’s allegations as true and drawing all reasonable inferences in the 4 plaintiff’s favor, the court determines whether the allegations are sufficient as a legal 5 matter to invoke the court’s jurisdiction.” Id. (citing Pride v. Correa, 719 F.3d 1130, 1133 6 (9th Cir. 2013)). 7 “A ‘factual’ attack, by contrast, contests the truth of the plaintiff’s factual 8 allegations, usually by introducing evidence outside the pleadings.” Id. “When the 9 defendant raises a factual attack, the plaintiff must support her jurisdictional allegations 10 with ‘competent proof’” and “prov[e] by a preponderance of the evidence that each of the 11 requirements for subject-matter jurisdiction has been met.” Id. (quoting Hertz Corp. v. 12 Friend, 559 U.S. 77, 96–97 (2010)). Generally, “if the existence of jurisdiction turns on 13 disputed factual issues, the district court may resolve those factual disputes itself.” Id. at 14 1121–22. 15 2. Discussion 16 Elutia argues that the Court lacks subject matter jurisdiction over a crossclaim for 17 indemnification because it is not yet ripe, and thus presently non-justiciable. [Doc. No. 18 31-1 at 14–15.] Specifically, it argues that “[DCI’s] [crossclaim] is patently unripe for 19 review because [DCI] has not submitted to any portion of the alternative dispute resolution 20 process as required by the Agreement.” [Id. at 15.] “As a result, [DCI] cannot show any 21 concrete injury or imminent harm.” [Id.] DCI disagrees, arguing that “[t]his Court has 22 subject matter jurisdiction over the issues raised in the crossclaim since . . . there is no 23 mandatory language requiring arbitration and no exclusivity language to render arbitration 24 as the sole dispute resolution or to preclude litigation.” [Doc. No. 33 at 7.] 25 Rule 13, however, provides that a “crossclaim may include a claim that the coparty 26 is or may be liable to the crossclaimant for all or part of a claim asserted in the action 27 against the crossclaimant.” Fed. R. Civ. P. 13(g) (emphasis added). Where the action’s 28 central claims are ripe, then, a crossclaim “for indemnification or contribution need not be 1 mature at the time of pleading.” Garot v. Cnty. of San Diego, No. 19-CV-01650-H-AGS, 2 2021 WL 51415, at *4 (S.D. Cal. Jan. 5, 2021) (collecting cases); see also Glens Falls 3 Indem. Co. v. U.S. ex rel. & to Use of Westinghouse Elec. Supply Co., 229 F.2d 370, 373 4 (9th Cir. 1955) (“Claims under [Rule 13 or 14] must arise out of the transaction or 5 occurrence on which the original action is based and . . . can be asserted even if liability 6 is only contingent or a mere possibility.”). Elutia cites Cristo v. U.S. Sec. & Exch. Comm’n 7 to argue that the crossclaim is not yet ripe. No. 19CV1910-GP-MDD, 2020 WL 4040340, 8 at *5 (S.D. Cal. July 17, 2020); Doc. No. 31-1 at 15. However, Cristo did not involve a 9 Rule 13 crossclaim, and the Court finds that case irrelevant here. 10 Here, DCI alleges that “[Elutia’s] failure and refusal [to] indemnify, defend, and 11 hold harmless [DCI] in connection with the claims, demands, and losses arising out of 12 Plaintiffs’ underlying Complaint[] constitutes a breach of the very terms of the 13 Agreement.” [Crossclaim ¶ 8.] Thus, the crossclaim arises from the same transaction or 14 occurrence as the original cause of action—Plaintiffs’ allegedly defective transplant. As 15 DCI’s claims are therefore a proper crossclaim in Plaintiff’s action, the Court DENIES 16 Elutia’s motion to dismiss under Rule 12(b)(1). As to the related argument that the 17 arbitration issue is not “ripe” because of language requiring informal resolution or 18 mediation, that issue does not truly involve standing or jurisdiction, but instead rests on 19 whether the parties entered into an arbitration agreement and whether such an agreement 20 requires arbitration at this time. Thus, the Court will address it below. 21 B. ELUTIA’S MOTION TO COMPEL ARBITRATION 22 As the Court has jurisdiction, it turns to Elutia’s motion to compel arbitration. 23 1. Legal Standard 24 The Federal Arbitration Act (“FAA”) permits “[a] party aggrieved by the alleged 25 failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration 26 [to] petition any United States District Court . . . for an order directing that . . . arbitration 27 proceed in the manner provided for in [the arbitration] agreement.” 9 U.S.C. § 4. Upon 28 a showing that a party has failed to comply with a valid arbitration agreement, the district 1 court shall issue an order compelling arbitration. Id. The FAA espouses a general federal 2 policy favoring arbitration agreements. AT & T Mobility v. Concepcion, 563 U.S. 333, 3 339 (2011). Accordingly, federal courts are required to rigorously enforce an agreement 4 to arbitrate. See id. Courts must give due regard to the federal policy favoring arbitration 5 and any “ambiguities as to the scope of the arbitration clause . . . [are] resolved in favor 6 of arbitration.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 7 U.S. 468, 475–76 (1989). 8 When determining whether to compel a party to arbitrate, the Court may not review 9 the merits of the dispute; rather, the Court’s role under the FAA is limited to determining 10 (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement 11 encompasses the dispute at issue. Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 12 (9th Cir. 2008). If the Court finds that the answers to those questions are yes, it must 13 compel arbitration. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). If 14 there is a genuine dispute of material fact as to any of these queries, a court should apply 15 a “standard similar to the summary judgment standard of Fed. R. Civ. P. 56.” Concat LP 16 v. Unilever, PLC, 350 F. Supp. 2d 796, 804 (N.D. Cal. 2004). 17 In assessing a purported arbitration agreement, “the ‘fundamental principle [is] that 18 arbitration is a matter of contract . . . [.]’” AT&T Mobility, 563 U.S. at 339 (quoting Rent– 19 A–Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67 (2010)). Accordingly, courts must apply 20 ordinary state law principles in determining an arbitration agreement’s validity. Ferguson 21 v. Countrywide Credit Indus., Inc., 298 F.3d 778, 782 (9th Cir. 2002). Agreements to 22 arbitrate are “valid, irrevocable, and enforceable, save upon such grounds as exist at law 23 or in equity for the revocation of any contract . . . [.]” 9 U.S.C. § 2. As such, arbitration 24 agreements may be invalidated by generally applicable contract defenses, such as fraud, 25 duress, or unconscionability. AT&T Mobility, 563 U.S. at 339–41. 26 2. Discussion 27 Elutia argues that the Court should compel arbitration because: (1) the Agreement 28 contains an enforceable arbitration clause; and (2) the Agreement encompasses DCI’s 1 crossclaim. [Doc. No. 31-1 at 9–14.] DCI argues in opposition that: (1) the Agreement 2 does not strictly require arbitration nor prohibit litigation; and (2) the motion to compel is 3 premature because the parties have not engaged in required predicate attempts at 4 resolution. [Doc. No. 33 at 2–7.] The parties do not dispute the Agreement’s actual 5 language or its validity, but merely the relevant clause’s interpretation. [See generally 6 Doc. Nos. 31-1, 33.] Likewise, DCI does not appear to contest that, if the Agreement 7 requires arbitration, this action would fall under its purview. [See generally Doc. No. 33.] 8 As a preliminary matter, Elutia and DCI agree that Maryland law governs the 9 Agreement, based on the choice-of-law clause within it. [Doc. No. 31-1 at 9; Doc. No. 33 10 at 4; Agreement at 9.] Seeing no reason to proceed otherwise, the Court will apply 11 Maryland law. See In re Facebook Biometric Info. Priv. Litig., 185 F. Supp. 3d 1155, 12 1167–68 (N.D. Cal. 2016) (discussing choice-of-law provisions and district courts in 13 California). 14 “Maryland follows the law of objective contract interpretation.” Sy-Lene of 15 Washington, Inc. v. Starwood Urb. Retail II, LLC, 829 A.2d 540, 546 (Md. Ct. App. 2003) 16 (collecting cases); Freedman v. Comcast Corp., 988 A.2d 68, 76 (Md. Ct. Special App. 17 2010). “A court construing an agreement under this objective test must first determine 18 from the language of the agreement itself what a reasonable person in the position of the 19 parties would have meant at the time it was effectuated.” Freedman, 988 A.2d at 76 20 (quoting Koons Ford of Balt., Inc. v. Lobach, 919 A.2d 722, 728 (Md. Ct. App. 2007)); 21 see also Sy-Lene of Washington, Inc., 829 A.2d at 546–47. “[W]hen the language of the 22 contract is plain and unambiguous there is no room for construction, and a court must 23 presume that the parties meant what they expressed.” Freedman, 988 A.2d at 76 (quoting 24 Koons Ford of Balt., Inc., 919 A.2d at 728). 25 /// 26 /// 27 /// 28 /// 1 Here, the relevant language is in § 7.4 of the Agreement in a section entitled 2 “Dispute Resolution” and states as follows: 3 In the event of any dispute, claim, question, or disagreement arising from or relating to this Agreement or the breach thereof, the Parties hereto shall use 4 their best efforts to settle the dispute, claim, question, or disagreement. To 5 this effect, the Parties shall consult and negotiate with each other in good faith and, recognizing their mutual interests and acknowledging the purpose of the 6 Agreement, attempt to reach a just and equitable solution satisfactory to both 7 [P]arties. If the parties are unable to reach a solution, the Parties agree to submit the dispute to a mediator, selected and agreed upon by both Parties. If 8 such mediation is unsuccessful in the resolution of the dispute, either Party 9 may, upon notice to the other Party, demand that the dispute be resolved by arbitration in accordance with the Rules of the American Arbitration 10 Association. Each Party hereby consents to any such dispute being so 11 resolved, and agrees that any court of competent jurisdiction may enter any judgment rendered by the Arbitrator(s) as a final judgment, binding on both 12 Parties. 13 [Agreement at 9.] 14 According to Elutia, § 7.4 “[b]y its plain language, . . . covers [DCI’s crossclaim], 15 [which is] rooted in conditional claims that, to the extent Elutia breached the Agreement, 16 it may be obligated to indemnify [DCI] under the terms of the Agreement” and that “[a]s 17 a result, [DCI’s crossclaim is] subject to the Agreement’s alternative dispute resolution 18 procedure and thus [is] not properly asserted in this Court.” [Doc. No. 31-1 at 13.] 19 DCI, to the contrary, reads the provision to: 20 merely provide[] options and steps to deal with disputes . . . [.] The parties 21 choice of verbiage must be considered. The first step uses the word “shall” 22 negotiate in good faith. The second step indicates [they] agree to seek mediation. The third step uses the word “may” seek arbitration. The use of 23 the permissive term “may” indicates the intent to only propose arbitration as 24 an option, not as a requirement, and only after other resolution attempts have failed. Therefore, any decision to forgo arbitration does not prevent [DCI] 25 from pursuing its [crossclaim] . . . [.] 26 [Doc. No. 33 at 5–6.] Elutia rejects this reading. [See Doc. No. 36 at 2–5.] 27 28 1 The language at issue here is not novel. The court in Freedman examined a nearly 2 identical term, rejecting an argument that “the clause ‘you or Comcast may elect to 3 arbitrate that [d]ispute’ implies that, because ‘Appellant acted first, electing to litigate in 4 court,’ the dispute must be heard in court.” 988 A.2d at 78. Instead, the Freedman court 5 found that “the plain and common-sense reading of the clause . . . is that if either party 6 elects to arbitrate the dispute, it must be arbitrated.” Id.; see also McCrea v. Drs. 7 Copeland, Hyman & Shackman, P.A., 945 F. Supp. 879, 881–82 (D. Md. 1996) (assessing 8 similar language and collecting cases). Thus, under Maryland law, this usage of “may” is 9 not permissive, as DCI argues, but instead renders arbitration mandatory upon a party’s 10 timely request.1 Additionally, as Elutia argues, it appears that at least two other district 11 courts have reached this same conclusion in a dispute between DCI and Elutia over this 12 language. See Wilcox v. Aziyo Biologics, Inc., No. 1:23-CV-619, 2023 WL 11717093, at 13 *2–3 (E.D. Va. Aug. 30, 2023); See LaBarge v. Elutia, Inc., No. 3:24-CV-1857-MMA- 14 DEB, 2025 WL 2440724, at *5–6 (S.D. Cal. Aug. 25, 2025). As the language here is the 15 same as in those other district court cases, the Court adopts the same interpretation. 16 DCI’s arguments to the contrary are unconvincing. Its interpretation, that the 17 arbitration clause is permissive and allows for litigation instead of arbitration, requires 18 contorting the clause and rendering it meaningless. Were the Court to interpret the 19 Agreement accordingly, neither party could truly invoke arbitration, they could merely 20 suggest it subject to the other’s agreement. Specifically identifying arbitration as a means 21 of resolution then serves no purpose, as any other resolution would ostensibly be equally 22 available once mediation fails. DCI’s version also renders the notice and consent language 23 of the arbitration clause mere surplusage, despite a plain reading imposing substantive 24 duties and consents. [See Agreement at 9 (“[E]ither Party may, upon notice to the other 25 26 27 1 Courts interpreting similar language according to California law have agreed. See, e.g., Boudreau v. Am. Home Shield Corp., No. 23-CV-681-WQH-BGS, 2024 WL 2786048, *4–5 (S.D. Cal. Feb. 28, 28 1 Party, demand that the dispute be resolved by arbitration . . . [.] Each Party hereby 2 consents to any such dispute being so resolved . . . [.]”).] In short, the Agreement 3 unambiguously requires arbitration, and DCI’s argument cannot withstand scrutiny. See 4 also Freedman, 988 A.2d at 78 (“We will not discuss every permutation because it suffices 5 to say that the clause gives either party the option to compel arbitration, but . . . neither 6 party the option to compel litigation.” (emphasis in original)). 7 DCI also argues that “[Elutia] has not engaged in informal negotiations, has never 8 responded to [DCI]’s tender, and has not requested to mediate[,]” nor made demands for 9 arbitration. [Doc. No. 33 at 7.] According to DCI, “[a] notice to seek arbitration is 10 specifically reserved after exhaustion of informal negotiations and failure of resolution 11 through mediation[,]” and thus Elutia may not demand arbitration. Id. Elutia argues that 12 DCI, not itself, has refused to engage and negotiate as the Agreement requires. [Doc. No. 13 31-1 at 8; Doc. No. 36 at 5–6.] Regardless of who failed to satisfy their duties to whom, 14 “any issues about whether those pre-conditions to arbitration have been satisfied are to be 15 decided by the arbitrator, not this Court.” Wilcox, 2023 WL 11717093, at *3 (citing John 16 Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557–58 (1964)); see also Howsam v. Dean 17 Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (citing same). Thus, the Court GRANTS 18 Elutia’s motion to compel arbitration. 19 III. CONCLUSION 20 For the foregoing reasons, the Court DENIES Elutia’s motion to dismiss the 21 crossclaim for lack of jurisdiction under Fed. R. Civ. P. 12(b)(1) and GRANTS Elutia’s 22 motion to compel arbitration. [Doc. No. 31.] The Court ORDERS Elutia and DCI to 23 arbitration to address DCI’s crossclaim. 24 /// 25 /// 26 /// 27 /// 28 /// 1 Elutia and DCI shall file a joint status report within 7 days of the conclusion of 2 || arbitration proceedings. 3 Itis SO ORDERED. 4 Dated: May 21, 2026 € Z 5 Hon. Cathy Ann Bencivengo 6 United States District Judge 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28