Judge Barbara M. Scheper, Case 20STCV09036 2023-02-16 Tentative Ruling

Judge: Barbara M. Scheper, Case: 20STCV09036, Date: 2023-02-16 Tentative Ruling

Case Number: 20STCV09036 Hearing Date: February 16, 2023 Dept: 30

Dept. 30

Calendar No.

US GC Investment L.P. vs. Fu & Sons Investment Capital, LLC, et. al., Case No. 20STCV09036

Tentative Ruling re: Cross-defendant’s Motion to Compel Arbitration

Cross-Defendant Ohannes Georgian (Georgian) moves to compel arbitration of the claims in the Cross-Complaint of Fu & Sons Investment Capital, LLC, and Youhong Frank Fu (the Fu Cross-Complaint). The motion is opposed by Plaintiffs in Intervention Xiaomei Zhao, Jingyuan Di, Ai Xiao Wang, Lina Qi, and Jingmeng Sally Xie (Intervenors). The motion is granted.

As an initial matter, it is not clear to the court that the Plaintiff’s in Intervention have standing to oppose the instant motion. Assuming, for purposes of argument, that they do, the Court will address Intervenor’s arguments below.

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement.” (Code Civ. Proc. §1281.2, subds. (a), (b).)

A proceeding to compel arbitration is in essence a suit in equity to compel specific performance of a contract. (Freeman v. State Farm Mutual Auto Insurance Co. (1975) 14 Cal.3d 473, 479.) Such enforcement may be sought by a party to the arbitration agreement. (Code Civ. Proc., § 1280, subd. (e)(1).)

The petition to compel arbitration functions as a motion and is to be heard in the manner of a motion, i.e., the facts are to be proven by affidavit or declaration and documentary evidence with oral testimony taken only in the court’s discretion. (Code Civ. Proc., §1290.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413–414.) The petition to compel must set forth the provisions of the written agreement and the arbitration clause verbatim, or such provisions must be attached and incorporated by reference. (Cal. Rules of Court, rule 3.1330; see Condee v. Longwood Mgmt. Corp. (2001) 88 Cal.App.4th 215, 218 (Condee).)

Once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement, and no evidence or authentication is required to find the arbitration agreement exists. (See Condee, supra, 88 Cal.App.4th at p. 219.) However, if the existence of the agreement is challenged, “petitioner bears the burden of proving [the arbitration agreement’s] existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413; see also Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1058–1060.)

Georgian moves to compel arbitration of the Fu Cross-Complaint based on an arbitration provision in the Agreement of Limited Partnership of US GC Investment, L.P. (US GC) The provision provides as follows:

Any controversy or claim arising out of or relating to this Agreement, or the actual or alleged breach thereof, or arising out of or relating to the Partnership, or the rights or duties or obligations of the General Partner or limited Partners, or employees of the Partnership . . . will be settled by arbitration conducted in the County of Riverside, State of California, and by an arbitrator appointed pursuant to, the Rules of the Judicial Arbitration and Mediation Service in effect at that time.

(Georgian Decl. ¶ 4, Ex. A, p. 22 [29].)

The Fu Cross-Complaint alleges that Frank Fu and Georgian established US GC as the operating company for their partnership to develop a Golden Corral franchise restaurant. (Cross-Complaint ¶¶ 14-16.) The Fu Cross-Complaint asserts nine causes of action against Georgian arising out of Georgian’s alleged misconduct in connection with the partnership. There are also two causes of action asserted against US GC, related to US GC’s alleged obligation to pay rents to Cross-Complainants under a property lease. (Cross-Complaint ¶¶ 92-104.)

Intervenors first argue that the motion is untimely, citing Code Civ. Proc. § 1281.5. That section applies only to “[a]ny person who proceeds to record and enforce a claim of lien by commencement of an action,” and so is clearly inapplicable here.

Intervenors also argue that the claims in the Fu Cross-Complaint do not fall within the scope of the agreement. The Court disagrees.

“[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.’ [Citation.] 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 agreement [citation]. . . . ‘There is no requirement that the cause of action arising out of a contractual dispute must be itself contractual. At most, the requirement is that the dispute must arise out of the contract.’ ” (Rice v. Downs (2016) 248 Cal.App.4th 175, 186.) “In deciding whether a dispute has its roots in the relationship created by the contract, we ‘examine[] the nature of the agreement and of the claims and their relationship to one another...’ ” (Howard v. Goldbloom (2018) 30 Cal.App.5th 659, 664.)

“In contrast, narrow clauses requiring arbitration of claims ‘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.’ ” (Howard, 30 Cal.App.5th at 664.) Such clauses “have generally been interpreted to apply only to disputes regarding the interpretation and performance of the agreement.” (Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1052.)

The claims in the Fu Cross-Complaint against US GC are for breach of contract and for declaratory relief. Under the breach of contract claim, the Cross-Complaint alleges that US GC, as tenant, and Fu & Sons, as landlord, entered into a Land Lease Agreement under which US GC agreed to lease property and pay rents to Fu & Sons, and that US GC breached that agreement by failing to pay rents due. (Comp. ¶¶ 93-97.) The eleventh cause of action seeks declaratory relief against US GC as to the rights and obligations of Fu & Sons, US GC, and Georgian under the lease agreement and partnership. (Comp. ¶¶ 103-104.)

Georgian allegedly agreed that the partnership would bear the costs of constructing the parking lot and that the costs of construction would be paid by an SBA Loan. (Cross-Complaint ¶ 27.)

Intervenors argue that these claims are based on the lease agreement and not the Partnership Agreement. While the claims are based in part on the lease agreement, they fall within the scope of the broad arbitration provision in US GC’s Partnership Agreement, as they arise from or are related to the parties’ rights and obligations under that agreement. For example, the declaratory relief claim seeks a declaration as to “whether Fu and Georgian's Partnership agreement was such that Fu's pledge of a personal guaranty and pledge of Fu & Sons' Property as collateral for the SBA Loan satisfied the obligation to construct the parking spaces.” (Cross-Complaint ¶ 103.)

Accordingly, the motion to compel arbitration is granted. The Court stays proceedings related to the Fu Cross-Complaint pending completion of the arbitration.