Judge: Anne Richardson, Case: 22STCV21326, Date: 2023-04-11 Tentative Ruling

Case Number: 22STCV21326    Hearing Date: April 11, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Plaintiff Faramarz Nazmifar sues Defendants Behzad Ben Toubian, Brentanita, Inc., and Does 1 through 20 pursuant to a January 3, 2023 First Amended Complaint pleading (1)-(2) two Breach of Contract claims against Toubian related to the construction of two properties and (3)-(11) nine claims alleged individually and derivatively on behalf of Brentanita as against Toubian and Brentanita: Breach of Fiduciary Duty, Constructive Fraud, Negligence, Concealment, Conversion, Unfair Business Practices, Promissory Fraud, Constructive Trust, and Recovery of Payment to Unlicensed Contractor.

On January 26, 2023, Plaintiff Nazmifar filed an ex parte application seeking a stay of this action in light of Defendants having commenced arbitration in this matter or, alternatively, rescheduling to a later date pending motions for leave to amend the complaint and to expunge a lis pendens notice.

On January 26, 2023, Defendant Toubian filed a non-opposition notice to the ex parte application, in which Toubian ‘stipulated’ to a stay of this action but requested that the motion for lis pendens expungement remain on calendar based on the equitable relief sought therein.

On January 27, 2023, the ex parte application came before Department 32 (since Department 40 was dark), which continued a number of motions set for hearing on February 14, 2023 to March 20, 2023. The minute order does not reflect any decision on that date relating to Plaintiff’s ex parte application.

On February 7, 2023, Defendant Toubian withdrew the motion for lis pendens expungement within a Notice of Stay of Action During Pendency of Arbitration, which explained that, “pursuant to the written agreement of the parties, arbitration ha[d] been commenced at ARC [i.e., Alternative Resolution Centers], Century City office, and [that] the Hon. Victor Reichman, judge retired, ha[d] been appointed as the arbitrator” therefor, for which reason “this matter, and all activity [t]hereunder [was] STAYED pending completion of the arbitration.”

On February 7, 2023, Plaintiff Nazmifar objected to the Notice of Stay, arguing that the parties never agreed to a stay of this action and that Defendant Toubian was attempting to divest this Court of jurisdiction by unilaterally initiating arbitration with ARC.

On February 28, 2023, Defendant Toubian filed a Second Notice of Stay of Action Pending Completion of the Arbitration arguing that, before reassignment of the current bench officer, this case was previously stayed pending completion of the arbitration with ARC.

On March 1, 2023, Plaintiff Nazmifar objected to the Second Notice of Stay on the grounds that the superior court had never stayed this case nor ordered arbitration of the claims alleged by Plaintiff nor had the parties requested arbitration.

On March 20, 2023, the Court heard a motion by Defendant Toubian to strike portions of the original June 30, 2022 Complaint and a motion by Defendant Toubian to quash subpoenas directed by Plaintiff Nazmifar to Toubian’s present and former counsel. The Court found that the motion to strike was moot based on the subsequent filing of an amended complaint and continued the motion to quash to April 11, 2023 (later to June 21, 2023). Additionally, in light of arguments by defense counsel that Defendant Toubian’s filing of the Notices of Stay automatically divested the Court’s authority over this action, the Court requested briefing from Defendants and Plaintiff to determine whether the Court was in fact automatically divested of authority to direct matters in this action as a result of the filing of the Notices of Stay.

On March 20, 2023, Defendants Bn Toubian and Brentanita, Inc. filed a supplemental brief in the form of a declaration from defense counsel.

On April 3, 2023, Plaintiff Nazmifar filed his responsive brief.

No reply brief from either defendant appears in the record.

The supplemental briefing regarding automatic stay is now before the Court.

The Court notes that no disposition appears in the record for Plaintiff Nazmifar’s January 26, 2023 ex parte application to stay this action pending arbitration.

Order to Show Cause Re: Stay Pursuant to Arbitration

In its “brief”—really, only a seven-paragraph declaration from defense counsel Joseph S. Fischbach—Defendants argue that pursuant to (1) a self-executing arbitration clause in an agreement between the parties, (2) case law in “King v. Larsen Realty, Inc. (1981) 121 Cal.App.3d 349, 354, fn. omitted” and “Tutti Mangia Italian Grill, Inc. v. Am. Textile Maint. Co. (2011) 197 Cal.App.4th 733, 739-40,” (3) emails between the parties and other evidence showing Plaintiff Nazmifar’s assent to and participation in ARC arbitration proceedings, and (4) Plaintiff’s January 26, 2023 ex parte application acknowledging that arbitration has already been initiated as to Plaintiff’s claims, it is apparent that arbitration is ongoing between the parties. (3/20/23 Decl., ¶¶ 1-7.)

In his opposition brief, Plaintiff Nazmifar argues that any self-executing arbitration clause in the parties’ agreement does not divest this Court of its authority over this action because the case law cited by Defendant Toubian simply makes clear that, under circumstances where no relevant court action was pending, a party moving to compel arbitration pursuant to a self-executing arbitration clause need not move for court approval to commence binding arbitration. (4/3/23 Brief, 4:20-6:24.)

Plaintiff further argues that: (1) pursuant to Code of Civil Procedure section 1281.2, and where a matter is already pending before a state court, a motion to compel arbitration must be filed and granted to divest the Court of jurisdiction thereover (4/3/23 Brief, 3:1-4:19); (2) Plaintiff Nazmifar will meet with ARC arbitration in April or May 2023 to explain that the parties’ dispute is already being litigated in state court and cannot be arbitrated until there is a court order directing the parties to resolve their disputes through arbitration (4/3/23 Brief, 6:25-7:9); and (3) any representations that Plaintiff Nazmifar has assented to arbitration are false where communications between the parties show that Nazmifar awaits a court order directing the action to arbitration before continuing with such proceedings. (4/3/23 Brief, 7:10-8:22.)

The Court finds that it has not been, and will not be, divested of authority over matters in this lawsuit until the Court itself enters an order directing the parties to resolve their disputes pursuant to binding arbitration. The reasoning for this conclusion has been provided by Plaintiff Nazmifar: This action has been filed in state court and, pursuant to Code of Civil Procedure section 1281.2, requires a court order to compel matters into arbitration. Any arguments by Defendant Toubian or Defendant Brentanita that the Court has been automatically divested of its authority over this action through Defendant Toubian’s filing of Notices of Stay is unavailing where the cited authority—King v. Larsen Realty, Inc. (1981) 121 Cal.App.3d 349 and Tutti Mangia Italian Grill, Inc. v. Am. Textile Maint. Co. (2011) 197 Cal.App.4th 733—simply involved cases answering in the affirmative the question of whether a party could move for arbitration pursuant to a self-executing arbitration clause and without court approval, under circumstances where no state court action relating to the matters to be litigated was already pending. (See King v. Larsen Realty, Inc., supra, 121 Cal.App.3d at pp. 354-56; Tutti Mangia Italian Grill, Inc. v. Am. Textile Maint. Co., supra, 197 Cal.App.4th at pp. 739-40.)

Further, the Court’s cursory review of the record fails to show—contrary to Defendant Toubian’s written representations on February 28, 2023—that the superior court at any time stayed this action pending arbitration with ARC.

Thus, while Defendant is correct that a self-executing arbitration clause in certain circumstances allows a party to go straight to arbitration without obtaining a court order, it does nothing to resolve a dispute between the parties as to what to do when there is a pre-existing superior court action and one party disputes the other’s right to go to arbitration.

The Court thus DENIES any request to relinquish authority over matters in this action absent a proper basis for doing so, e.g., the grant of a motion to compel arbitration of the claims advanced by Plaintiff in this action. Among other things, this Court has not been presented with the arbitration agreement itself, nor has it ruled on any argument of waiver that Plaintiff contends he will make.

Having said that, the procedural posture of this matter is far from clear, where Plaintiff filed in January 2023 an Ex Parte Application seeking to stay this action pending arbitration in ARC at a time when there was no judicial officer in Department 40 to rule on the matter (and it was not ruled on expressly by Department 32). If Plaintiff opposes a future motion to compel arbitration, it will have to satisfactorily answer why it took that step and why it should not be judicially estopped from taking a contrary position just a few months later.

Conclusion

Briefing submitted in relation to this Order to Show Cause Re: Stay Pursuant to Arbitration leads the Court to conclude that THE COURT HAS NOT been divested of its authority over this action through Defendant Toubian’s filing of his Notices of Stay.

Motions and other hearings in this action will remain on calendar until such time as the Court is divested of its authority over the action, e.g., the grant of a motion to compel arbitration of the claims advanced by Plaintiff in this action.