Judge: Anne Richardson, Case: 22STCV21326, Date: 2024-05-08 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 22STCV21326    Hearing Date: May 8, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

On July 19, 2023, this Court granted an April 24, 2024, motion by Defendants Behzad Ben Toubian and Brentanita, Inc. to compel arbitration of the claims in this action.

On April 11, 2024, Plaintiff Nazmifar filed a motion to lift the arbitration stay in this action and to specially set a trial date. The motion arises from the argument that, despite multiple requests for payment from Plaintiff Nazmifar and the arbitrator, Defendants have failed to pay their share of arbitration fees for more than eight months, resulting first in suspension of the arbitration proceedings, and then their closure.

On April 24, 2024, Defendant Toubian filed an opposition to Plaintiff’s motion. Defendant Toubian’s opposition argues that Brentanita was solely responsible for the half-share of arbitration fees that went unpaid and that this Court should continue the present matter 90 days to allow Brentanita to pay arbitration fees and obtain new counsel, given that Brentanita’s current counsel filed a motion to be relieved of representation, set for hearing on July 8, 2024.

The record fails to reflect an opposition to Plaintiff Nazmifar’s motion by Brentanita.

On May 1, 2024, Plaintiff Nazmifar filed a reply to Defendant Toubian’s opposition.

Plaintiff Nazmifar’s motion is now before the Court.

II. Motion for Relief from Arbitration Stay and to Specially Set Trial Date: GRANTED.

A. Relief from Arbitration Stay

1. Legal Standard

Code of Civil Procedure section 1281.4 provides for a stay of pending litigation while a related arbitration is proceeding. (Heritage Provider Network, Inc. v. Superior Court (2008) 158 Cal.App.4th 1146, 1152.) Once a stay is granted the trial court retains vestigial powers over the matters submitted to arbitration, including the power to rule on a petition to confirm, correct, or vacate an award. (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487; Finley v. Saturn of Roseville (2004) 117 Cal.App.4th 1253, 1258.) “This vestigial jurisdiction over the action at law consists solely of making the determination, upon conclusion of the arbitration proceedings, of whether there was an award on the merits (in which case the action at law should be dismissed because of the res judicata effects of the arbitration award) [citations] or not (at which point the action at law may resume to determine the rights of the parties). [Citations.]” (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796.)

2. Analysis

a. Parties’ Arguments

In his motion, Plaintiff Nazmifar argues that this Court should exercise its inherent powers pursuant to Code of Civil Procedure section 128 to lift the arbitration stay in this action. Plaintiff argues that a lifting of stay is proper here because Defendants have failed to pay arbitration fees for more than eight months after this Court granted Defendants’ motion to compel arbitration. Plaintiff argues that both he and the arbitrator requested that Defendants make payments and that, when Defendants failed to make payment, the arbitration company first suspended the arbitration and then closed the arbitration altogether. Plaintiff argues that these circumstances merit a lifting of the arbitration stay, a return of Plaintiff’s claims from arbitration, and the setting of a trial date (discussed below).

In opposition, Defendant Toubian—not joined by Brentanita—argues that Toubian was not responsible for paying the defaulted arbitration fees, but rather, that Brentanita was responsible for those fees. Defendant Toubian argues that the proper course of action here would be to (1) instruct the arbitrator to issue orders relating to payment of fees, (2) set an order to show cause hearing regarding payment of arbitration fees in 90 days, and (3) permit the 90-day continuance based on Brentanita’s counsel’s pending motion to be relieved as counsel. Plaintiff Toubian argues that failure to grant the continuance would result in prejudice, though that prejudice is not elaborated in the opposition.

In reply, Plaintiff Nazmifar argues that Defendant Toubian was equally responsible for the arbitration fees, citing emails from the arbitration company to support this position. Plaintiff Nazmifar argues that a 90-day extension would be inappropriate after more than nine months’ failure to pay fees in the arbitration, where Defendants were time and again given opportunities to pay the arbitration fees only to fail to do so, and where Brentanita has not even filed an opposition to Plaintiff’s motion. Plaintiff Nazmifar argues that the motion to be relieved as counsel is not relevant to the disposition of this motion and that a continuance for the motion to relieve counsel would unnecessarily cause delays. Plaintiff last argues that it is he, not Defendants, that suffers prejudice from being forced into arbitration, only for Defendants to drag their feet on arbitration.

b. Court’s Determination

The Court finds in favor of Plaintiff Nazmifar.

In arbitration proceedings other than consumer or employment arbitrations, an arbitrator may terminate the arbitration proceedings for nonpayment of required fees. To illustrate, in Cinel v. Christopher, a securities fraud action, a trial court granted the defendants’ petition to compel arbitration. The arbitrator terminated the arbitration proceedings because some of the defendants failed to pay their share of the required arbitration fees and the unpaid fees were not advanced by the paying parties. One defendant, who had paid his share of the fees, moved to confirm the arbitrator’s “award.” However, the trial court denied the motion because the termination was not an award, lifted the stay[,] and ordered the case set for trial. On appeal, the court of appeal affirmed, determining that the trial court did not err in lifting the stay “because the arbitration had been terminated and the trial court did not confirm, correct or vacate Christopher's petition, but instead dismissed the petition, the stay terminated[,] and the trial court properly set the matter for trial.” (See Cinel v. Christopher (2012) 203 Cal.App.4th 759, 762-764, 769 (Cinel).)

Here, the arbitration that the Court ordered on July 19, 2023, has been closed by the arbitration service provider, Alternative Resolution Centers (ARC). (Mot., Comer Decl., Ex. E [“ARC has closed its file for non payment of Arbitration fees. We will not re-open our file until the parties stipulate to billing in writing and pay the entire Arbitration fee.”].) While the arbitration may be reopened, all parties must stipulate to that reopening. (Ibid.) Here, Plaintiff has elected instead to withdraw the claims from arbitration and proceed in state court by way of this motion. A stipulation to reopen arbitration thus clearly does not exist. Thus, the Court finds that there has been, in effect, a termination of arbitration proceedings as with Cinel.

Because there has been a closure (termination) of arbitration proceedings, the Court is empowered to lift the stay of arbitration in this action. (See Cinel, supra, 203 Cal.App.4th at p. 769.) In the alternative, the Court’s July 19, 2023, order specifically provided that a stay was imposed on “this action until arbitration [wa]s had in accordance with th[e] order or until such earlier time as the Court specifie[d].” (7/19/23 Minutes, p. 14 at § IV.) Here, either the arbitration was already “had” in accordance with the July 19, 2023, order because ARC closed the arbitration proceedings, or ARC’s closure of the arbitration proceedings amounts to an appropriate “earlier time” to lift the arbitration stay in this action and permit Plaintiff’s claims to proceed in state court. (Code Civ. Proc., § 1281.4.) Either way, the Court is not inclined to allow a continuance to give Brentanita another chance to pay the very bills that it has refused thus far to pay. Without any appearance by Brentanita this Court has no basis to believe that such payment will be forthcoming.

The Court does not accept Defendant Toubian’s representation that he was not responsible for part of the arbitration fees at issue here. Defendant Toubian’s opposition cites a March 19, 2024, email from ARC to the parties indicating that fees were to be split between Plaintiff and Brentanita, specifically based on an instruction given to ARC by the parties regarding who should be billed for arbitration fees. (See Opp’n, Rudman Decl., ¶ 3, citing Mot., Comer Decl., Exs. A, March 19, 2024, Email [“ARC was told in January 2023 to split all fees between two Counsels. Mr. Gilardi was to be billed on behalf of the Plaintiffs and Defendants’ entire fee to your office, Mr. Fox [Brentanita’s counsel], which we did. Two previous invoices were billed and paid by both parties in this way.”].) This argument has some support in the attachments to the moving papers. (Mot., Comer Decl., Ex. C, March 21, 2024, Email [“This email confirms that the Defendant [in the singular, but not identifying which Defendant] did not make payment yesterday by EOD.”].) However, the March 19, 2024, email is clear: ARC billed half of the arbitration fees to Brentanita based on the parties’ instructions. The opposition does not clarify who gave those instructions and what agreements underlay those instructions. For example, the opposition does not attach a declaration from Defendant Toubian or an attachment showing that Defendants entered an agreement pursuant to which only Brentanita was liable for arbitration fees. Under these circumstances, the Court agrees with Plaintiff Nazmifar’s reply argument that it appears irrelevant that the parties instructed ARC to only bill Brentanita for Defendants’ share of arbitration fees. (Reply, p. 2.) The Court does not have any evidence showing that ARC specifically chose to only bill Brentanita, thereby absolving Defendant Toubian of the need to pay arbitration fees.

At most, the opposition refers to the parties’ partnership agreement incorporated as Exhibit A to the FAC for the purpose of showing that Brentanita agreed to indemnify Defendant Toubian, a partner, for “any and all claims of any nature, whatsoever, arising out of a Partner’s participation in Partnership affairs.” (Opp’n, p. 2 & fn. 1, citing FAC, Ex. B [not Ex. A], § 68 at p. 12.) However, this language does not on its face state that Brentanita would pay any fees for its partners upfront as opposed to indemnifying partners after the partners incurred liability. Moreover, section 68 of the partnership agreement also provides that indemnification will not apply “for liability arising out of gross negligence or willful misconduct of the Partner or the breach by the Partner of any provisions of this Agreement.” (Ibid.) And here, the opposition does not clarify whether the claims in this action involve gross negligence, willful misconduct, or breach of partnership agreement by Defendant Toubian, which would eliminate any basis for indemnification from Brentanita. Thus, the partnership agreement at section 68 does not contain terms convincing this Court that Defendant Toubian was not responsible for a share of the defense arbitration fees.

Even if, arguendo, Toubian was not responsible for paying fees, the fact is that his co-defendant, Brentanita, failed to make the payment. The arbitration cannot move forward without fees being paid – that is the hallmark of private dispute resolution. It would be unfair to preclude a plaintiff from having his day in “court” in arbitration due to the failure to pay by defendant. Fundamentally, if Toubian wanted to avoid the closure of the matter due to non-payment by Brentanita, Toubian could have paid the fees instead.

Last, a 90-day continuance here is not justified. As of the time of this hearing, Brentanita remains a represented party. If Brentanita’s counsel is relieved of representation, the Court can address outstanding issues at that time. However, Brentanita’s possible need for substitute counsel in the near future is not a ground to continue the hearing on this motion. Moreover, Defendant Toubian’s request for a 90-day continuance so that Brentanita can pay the outstanding arbitration fees is not appropriate at this time. ARC has specified that it will not reopen arbitration unless the parties stipulate to the same and the outstanding fees are paid. (Mot., Comer Decl., Exs. A, March 19, 2024, Email.) In filing this motion, Plaintiff has elected not to stipulate to reopening arbitration.

Moreover, it is not clear that Brentanita or even Defendant Toubian will pay arbitration fees in the next 90 days, or that they should be given more time to make such payment. Defendant Toubian did not submit a declaration with his opposition. Brentanita has made no filings in relation to this motion. The Court therefore does not have declarations from the two Defendants who appear to be liable for the outstanding defense arbitration fees. Neither does the sole declaration from counsel attached to the opposition explain why Brentanita failed to pay the defense arbitration fees for more than eight months prior to this action being filed. Instead, counsel’s declaration adds confusion by providing that “[t]o date, the other shareholders in Brentanita have not advised how they want to proceed.” (Opp’n, Rudman Decl., ¶ 7.) Under these circumstances, it is not clear that Brentanita will pay fees or how Brentanita’s shareholders wish to proceed in relation to this action, either in state court or in arbitration. A continuance cannot be justified on these grounds.

Based on the above, Plaintiff’s motion is GRANTED insofar as it requests that the Court lift the arbitration stay in this action and permit Plaintiff’s claims to proceed in state court.

B. Specially Setting Trial Date

1. Legal Standard

A party seeking to advance, specially set, or reset a case for trial must make this request by noticed motion or ex parte application under the rules in chapter 4 of [Division 11, Chapters 1-8 re: Law and Motion].” (Cal. Rules of Court, rule 3.1335(a).)

“The request may be granted only upon an affirmative showing by the moving party of good cause based on a declaration served and filed with the motion or application.” (Cal. Rules of Court, rule 3.1335(b).)

2. Analysis

a. Parties’ Arguments

Here, the Court summarized the entirety of the papers’ arguments above in Section II.A.2.a. The opposition principally opposes lifting of the arbitration stay while failing to specifically address the setting of a trial date.

b. Court’s Determination

The Court finds in favor of Plaintiff Nazmifar.

The Court adopts its discussion at Section II.A.2.b. above to determine that because Plaintiff’s claims have languished in arbitration and have now been brought back to state court, the setting of a trial date in this more than two-year-old action is appropriate.

Plaintiff’s motion is thus GRANTED insofar as it requests the special setting of a trial date. 

III. Conclusion

Plaintiff Faramarz Nazmifar’s Motion for Relief from Arbitration and to Specially Set Trial Date is GRANTED.

The parties should come to oral argument with their calendars prepared to set a trial date.