Judge: Anne Richardson, Case: 23STCV28278, Date: 2024-03-13 Tentative Ruling

Case Number: 23STCV28278    Hearing Date: March 13, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings

On November 17, 2023, American Business Bank (ABB) filed a Complaint suing Defendants D T S Enterprise, Inc. (DTSE), D T S Builders Inc. (DTSB), Leslie Dain Sorg (Sorg), Ryan Thomas Isbell (Isbell), and Does 1 through 25 pursuant to nine claims stated in the body of the Complaint—though only seven claims are stated in the caption page:

(1) Breach of Business Loan Agreement, (2) Breach of Promissory Note, and (3) Foreclosure of Security Interests against Defendants DTSE and Does 1-10;

(4) Foreclosure of Security Interests Granted by DTSB to ABB against Defendants DTSB and Does 1-10;

(5) Preliminary Injunction against Defendants DTSE, DTSB, Sorg, Isbell, and Does 5-15;

(6) Breach of Commercial Guaranty and (8) Breach of Restrictive Covenant against Defendants Sorg and Does 5-15;

(7) Breach of Commercial Guaranty against Defendants Isbell and Does 5-15;

(8) Breach of Restrictive Covenant; and

(9) Unjust Enrichment against Defendants Sorg, Isbell, and Does 5-15.

On January 8, 2024, Defendant Isbell filed a Cross-Complaint suing Cross-Defendant Leslie Dain Sorg and Roes 1 through 10 pursuant to a single claim of fraud.

The claims in the pleadings arise from a business loan made by ABB to DTSE, as secured by a loan agreement, promissory note and promissory note agreement, and commercial security agreement between these parties, and various other agreements between ABB and the remaining Defendants securing the loan or securing collateral interests.

B. Relevant Procedural History

On February 20, 2024, Defendant Isbell filed a notice of stay of proceedings as to Ryan Isbell only based on his February 19, 2024, initiation of Chapter 13 bankruptcy proceedings.

That same day, the Court stayed proceedings as to Thomas Ryan Isbell.

C. Petition Before the Court

On January 4, 2024, ABB filed a petition to compel arbitration of its claims against all Defendants. The petition arises from ABB’s invocation of arbitration clauses in agreements between ABB and DTSE (the Loan Agreement, Promissory Note, and Commercial Security Agreement), ABB and Defendant Sorg (Commercial Guaranty), ABB and Defendant Isbell (Commercial Guaranty), and ABB and DTSB (Commercial Security Agreement).

ABB’s petition was served by mail on counsel for Defendant Isbell—a party as to whom a stay has since been imposed—and on Leslie Dain Sorg on behalf of herself and DTSE and DTSB.

ABB’s petition is unopposed by all Defendants as of the date of this hearing.

ABB’s petition is now before the Court.

II. Petition to Compel Arbitration: GRANTED [DTSE, DTSB, Sorg]; DENIED, without prejudice [Isbell].

A. Legal Standard

On a petition to compel arbitration, the court must grant the petition unless it finds that (1) no written agreement to arbitrate exists, (2)¿the right to compel arbitration has been waived, (3) grounds exist for revocation of the agreement, or (4) litigation is pending that may render the arbitration unnecessary or create conflicting¿rulings on common issues. (Code Civ. Proc., § 1281.2.)

The party seeking arbitration has the “burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842) and that the claims in the challenged pleading fall within the scope of the arbitration agreement. (See Bono v. David (2007) 147 Cal.App.4th 1055, 1067; Rice v. Downs (2016) 248 Cal.App.4th 175, 186.)  “Once that burden is satisfied, the party opposing arbitration must prove by a preponderance of the evidence any defense to the petition.” (Lacayo v. Cataline Restaurant Group Inc. (2019) 38 Cal.App.5th 244, 257.

“A party required to prove something by a preponderance of the evidence ‘need prove only that it is more likely to be true than not true.’ [Citation.] Preponderance of the evidence means ‘“that the evidence on one side outweighs, preponderates over, is more than, the evidence on the other side, not necessarily in number of witnesses or quantity, but in its effect on those to whom it is addressed.”’ [Citations.] In other words, the term refers to ‘evidence that has more convincing force than that opposed to it.’ [Citations.]” (People ex rel. Brown v. Tri-Union Seafoods, LLC (2009) 171 Cal.App.4th 1549, 1567.)

“The trial court sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Ruiz, supra, at p. 842.)

“California law, ‘like [federal law], reflects a strong policy favoring arbitration agreements and requires close judicial scrutiny of waiver claims.’” (Wagner Const. Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 31.)

If the court orders arbitration, then the court shall stay the action until arbitration is completed. (See Code Civ. Proc., § 1281.4.)

B. Analysis

1. Preliminary Discussion – Defendant and Cross-Complainant Isbell

Given that a stay has been entered as to Defendant Isbell (2/20/23 Minutes, p. 1), the Court’s order here does not apply to him. Nevertheless, for the sake of completeness, the Court discusses the arbitration petition in full, including its references to Defendant Isbell.

2. Preliminary Discussion – Service and Nonappearance

Here, the Complaint and summons were served on all four Defendants—DTSE, DTSB, Sorg, and Isbell—on November 21, 2023. (11/28/23 Proofs of Service [DTSE, DTSB, Sorg, Isbell].)

Service was effected on Defendants DTSE, DTSB, and Sorg by personal service on Defendant Leslie Dain Sorg personally at 4530 Crestview Drive, Norco, California 92860, with service effected on her individually and as President of DTSE and DTSB. (11/28/23 Proofs of Service [DTSE, DTSB, Sorg].)

Service was effected on Defendant Isbell personally at 8521 Kendor Drive, Buena Park, California 90620. (11/28/23 Proof of Service [Isbell].)

Defendants DTSE, DTSB, and Sorg have since altogether failed to make any filings in these proceedings and have not appeared at any of the three hearings in this action, which took place on December 12, 2023, and February 20, 2024, in Department 82, and on December 12, 2023, in Department 40. (12/12/23 & 2/20/24 Minutes.)

Defendant Isbell has only participated in these proceedings by filing answers, his Cross-Complaint, and his notice of stay of proceedings based on ongoing bankruptcy proceedings. (1/8/23 Answer; 1/8/24 Cross-Complaint; 1/16/24 Verified Answer; 2/20/24 Notice of Stay.) He has not appeared at any of the hearings. (12/12/23 & 2/20/24 Minutes.)

The instant Petition was served on Defendants DTSE, DTSB, and Sorg on January 4, 2024 by mail to the same address where service of the Complaint and summons was effected: 4530 Crestview Drive, Norco, California 92860. (Petition, Proof of Service, Service List.)

Thus, the Court determines that Defendants DTSE, DTSB, and Sorg have had adequate notice of this proceeding or this petition, even if they have elected to not participate in the proceedings.

3. Agreement to Arbitrate

When seeking to compel arbitration, the initial burden lies with the moving party to demonstrate the existence of a valid arbitration agreement by preponderance of the evidence. (Ruiz v. Moss Bros. Auto Group (2014) 232 Cal.App.4th 836, 841-842; Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164-165 (Gamboa).) It is sufficient for the moving party to produce a copy of the arbitration agreement or set forth the agreement’s provisions. (Gamboa, supra, at p. 165.) Subsequently, the moving party must establish with the preponderance of admissible evidence a valid arbitration agreement between the parties. (Id. at pp. 165-166.)

Here, ABB attaches copies of agreements separately entered into with each Defendant, each of which contain an arbitration clause. (Petition, Pyle Decl., Exs. 1-6.) This evidence carries ABB’s initial burden. (Gamboa, supra, 72 Cal.App.5th at p. 165.) And because there is no opposition to this petition, ABB sufficiently meets its burden as to this issue. (Ibid.)

4. Scope of Agreement

“[T]he decision as to whether a contractual arbitration clause covers a particular dispute rests substantially on whether the clause in question is ‘broad’ or ‘narrow.’” (Bono, supra, 147 Cal.App.4th at p. 1067.) “‘A “broad” clause includes those using language such as “any claim arising from or related to this agreement”’ [Citation] or ‘arising in connection with the [a]greement’ [Citation.]” (Rice, supra, 248 Cal.App.4th at p. 186, italics omitted.) “But clauses requiring arbitration of a claim, dispute, or controversy ‘arising from’ or ‘arising out of’ an agreement, i.e., excluding language such as ‘relating to this agreement’ or ‘in connection with this agreement,’ are ‘generally considered to be more limited in scope than would be, for example, a clause agreeing to arbitrate “‘any controversy … arising out of or relating to this agreement[.]’” [Citations.]” (Id. at p. 186-87 [italics omitted].) “Several Ninth Circuit cases have held that agreements requiring arbitration of ‘any dispute,’ ‘controversy,’ or ‘claim’ ‘arising under’ or ‘arising out of’ the agreement are intended to encompass only disputes relating to the interpretation and performance of the agreement.” (Id. at p. 187.)

Here, the arbitration clauses in the six agreements are nearly identical and provide: “[A]ll disputes, claims and controversies between [ABB and each respective Defendant,] whether individual, joint, or class in nature, arising from [the agreement at issue] or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to the Rules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party.” (Petition, Pyle Decl., ¶¶ 4-5, 7-8, 9-10, 11-12, 13-14, 15-16; Petition, Pyle Decl., Ex. 1, p. 4, § Arbitration & Ex. 2, p. 2, § Arbitration & Ex. 3, p. 4, § Arbitration & Ex. 4, p. 2, § Arbitration [Sorg] & Ex. 5, p. 2, § Arbitration [Isbell] & Ex. 6, p. 4, § Arbitration [DTSB].)

A review of the Complaint’s claims show that they arise from the agreements with Defendants because all the claims arise from Defendants’ breaches of those agreements. (Complaint, ¶¶ 34-98.)

 Based on the above, the Court determines that the claims alleged in the Complaint fall within the scope of the arbitration clauses at issue.

5. Defenses

A “party opposing arbitration must prove by a preponderance of the evidence any defense to the petition” to compel arbitration in the matter. (Lacayo v. Cataline Restaurant Group Inc., supra, 38 Cal.App.5th at p. 257.)

Here, because no Defendant filed an opposition, there are no defenses to ABB’s petition, for which reason there is no valid ground to determine that ABB may not invoke the arbitration clause in the agreements between itself and each respective Defendant.

6. Arbitration Conclusion

ABB’s petition is GRANTED as to Defendants DTSE, DTSB, and Sorg.

However, based on the preliminary discussion at Section II.B.1., ABB’s petition is DENIED as to Defendant/Cross-Complainant Isbell without prejudice, because of the stay.

7. Stay

“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.)

Here, the Court has granted ABB’s petition, for which reason the Court STAYS this action as to the Complaint against Defendants D T S Enterprise, Inc., D T S Builders Inc., and Leslie Dain Sorg until arbitration is had in accordance with this order or until such earlier time as the Court specifies. This order does not apply to Defendants/Cross-Complainant Isbell, as to whom a stay has been entered on other grounds. (2/20/24 Minutes, p. 1.)

III. Conclusion

A. Arbitration

Plaintiff America Business Bank’s Petition for An Order Compelling Arbitration is GRANTED in part and DENIED in part as follows:

(1) GRANTED as to Defendants D T S Enterprise, Inc., D T S Builders Inc., and Leslie Dain Sorg; and

(2) DENIED as to Defendant Ryan Thomas Isbell, without prejudice.

The Court ORDERS Defendants D T S Enterprise, Inc., D T S Builders Inc., and Leslie Dain Sorg to arbitration in relation to the claims alleged against them in Plaintiff America Business Bank’s Complaint.

B. Stay

The Court STAYS this action as to the Complaint against Defendants D T S Enterprise, Inc., D T S Builders Inc., and Leslie Dain Sorg until arbitration is had in accordance with this order or until such earlier time as the Court specifies. (Code Civ. Proc., § 1281.4.) This order does not apply to Defendants/Cross-Complainant Isbell, as to whom a stay has been entered on other grounds. (2/20/24 Minutes, p. 1.)