Judge: Curtis A. Kin, Case: BC506921, Date: 2023-03-21 Tentative Ruling
Case Number: BC506921 Hearing Date: March 21, 2023 Dept: 72
MOTION TO STAY DISSOLUTION ACTION
Date: 3/21/23
(9:30 AM)
Case: William E. Rice et al. v. Gary P. Downs et al. (BC506921)
TENTATIVE RULING:
On February 14, 2023, the Court issued a tentative ruling
finding that the issue of whether Rice is a member of Highland Property
Development LLC (“HPD”) must be resolved in arbitration pursuant to Section
13.5 of the Amended and Restated Operating Agreement (“Operating Agreement”). (See
Rice Decl. ¶ 2 & Ex. 14 at § 13.5 [“Except as otherwise provided in this
Agreement, any controversy between the parties arising out of this Agreement
shall be submitted to the American Arbitration Association for arbitration in
Los Angeles, California or San Francisco, CA”].) For the reasons stated in that tentative
ruling, the Court still finds that to be the case. (2/14/23 Minute Order.)
However, Kristoffer J. Kaufmann and Gary P. Downs seek to
arbitrate before JAMS, not the American Arbitration Association as contemplated
in paragraph 13.5 of the Operating Agreement. Before the 2/14/23 hearing, Kaufmann
and Downs did not provide evidence of an agreement to arbitrate before JAMS. The
Court thus continued the hearing to allow the parties to file supplemental
briefing concerning whether Rice agreed to arbitrate before JAMS.
After reviewing the supplemental briefing filed by defendants
Kaufmann and Downs and plaintiff Rice, the Court finds that Rice did not agree
to arbitrate any and all claims that are governed by paragraph 13.5 of the
Operating Agreement before JAMS.
On July 29, 2014, Rice, through counsel, signed an Agreement
Regarding Arbitration of Claims (“2014 Arbitration Agreement”). (Hyam Decl. ¶ 4
& Ex. A.) Paragraph 9 of the 2014 Arbitration Agreement states:
“The Parties agree that they would
prefer to have all contemplated claims that are subject to arbitration
submitted to JAMS rather than to the American Arbitration Association, and that
they should avoid multiple arbitration proceedings.”
Paragraph 10 of the 2014 Arbitration Agreement states:
“The Parties hereby agree, through
their respective counsel, that all contemplated claims between and among them,
as referred to above, may be submitted to JAMS in Los Angeles, California
before a single arbitrator. Paragraph 13.5 of the Operating Agreement…are
hereby modified to so allow, and in no other respect.”
Pursuant to paragraphs 9 and 10 of the Arbitration
Agreement, Rice agreed that all claims subject to arbitration under paragraph
13.5 of the Operating Agreement are to be resolved in arbitration before JAMS
instead of the American Arbitration Association.
Rice argues that the phrases “as referred to above” and “and
in no other respect” limit the application of the 2014 Arbitration Agreement to
claims that were contemplated at the time the 2104 Arbitration Agreement,
namely, in 2014. Rice refers to claims referenced in paragraphs 7 and 8 of the 2014
Arbitration Agreement, including claims VVA-Two, LLC asserted against Impact
Development Group, LLC in a separate action and claims that Rice intended to
assert against Downs and/or Kaufmann, respectively.
“A contract may be explained by reference to the
circumstances under which it was made, and the matter to which it relates.”
(Civ. Code § 1647.) “However broad may be the terms of a contract, it extends
only to those things concerning which it appears that the parties intended to
contract.” (Civ. Code § 1648.)
Paragraphs 7 and 8 of the 2014 Arbitration Agreement state
how each party to the agreement either “has asserted claims” or “intend[s] to
assert claims” against certain other parties to the 2014 Arbitration Agreement.
Immediately thereafter, in paragraph 9, the 2014 Arbitration Agreement states the
intent of such parties “to have all contemplated claims” submitted to JAMS
instead of the American Arbitration Association. Further, paragraph 10 makes clear the
“contemplated claims” to be submitted to JAMS are the claims between them “as
referred to above,” i.e., in paragraphs 7 and 8. “The whole of a contract is to be taken
together, so as to give effect to every part, if reasonably practicable, each
clause helping to interpret the other.” (Civ. Code § 1641.) In using the words
“all contemplated claims . . . as referred to above” the parties clearly
intended to limit the application of the agreement before JAMS to the claims set
forth in paragraphs 7 and 8 of the Arbitration Agreement.
Had the parties intended to arbitrate any and all future claims
arising from the Operating Agreement before JAMS, instead of the American
Arbitration Association, they could have simply said so, instead of referring
to the claims subject to arbitration before JAMS as “contemplated claims…as
referred to above” and describing such claims in paragraphs 7 and 8 of the
Arbitration Agreement. (Filtzer v. Ernst (2022) 79 Cal.App.5th 579, 584
[“We must also assume that the parties did not intend any of the language in
the contract to be surplus, redundant, or to give rise to an absurd outcome”].)
As recounted in the February 14, 2023 minute order, the issue
of whether Rice cured a charging order by January 28, 2020, from which Kaufmann
and Downs are claiming Rice is no longer a member of HPD, was raised during a
July 21, 2020 hearing. (2/14/23 Minute Order at 2.) Under these circumstances,
it cannot be said that the issue of Rice’s membership in HPD was contemplated
at the time the Arbitration Agreement was executed in 2014. Accordingly, the
issue of whether Rice is still a member of HPD is not governed by the 2014 Arbitration
Agreement.
Downs argues that Rice submitted three amended cross-claims
that arose after the execution of the Arbitration Agreement. (Hyam Decl. ¶¶ 7-9
& Exs. D-F.) Even if true, the Arbitration Agreement is clear and
unambiguous as to what claims may be arbitrated before JAMS instead of the
American Arbitration Association. “If a contract's language is clear and
unambiguous, intent is determined solely by the language within the four
corners of the contract.” (Filtzer v. Ernst (2022) 79 Cal.App.5th 579,
584; see also Civ. Code § 1639 [“When a contract is reduced to writing,
the intention of the parties is to be ascertained from the writing alone….”].)
Consequently, the parties cannot expand the claims that are subject to
arbitration before JAMS under the 2014 Arbitration Agreement based on
activities occurring after the execution of the agreement.
Downs also argues that the issue of whether Rice is a member
of HPD is already before JAMS. (Downs Supp. Brief at 4:24-5:1.) The only
evidence that Rice’s membership is before JAMS is a demand for arbitration that
was served and filed on November 16, 2022. (Hyam Decl. ¶ 7 & Ex. H.) This
is the same demand that is at issue in the instant motions.
For the foregoing reasons, the Court finds that Kaufmann and
Downs cannot seek to stay the dissolution action based on demand for arbitration
before JAMS because Rice never agreed to arbitrate the issue of his membership
in HPD before JAMS. (American Home Assurance Co. v. Benowitz (1991) 234
Cal.App.3d 192, 200-01 [“A selection [of an arbitrator] that is not authorized
by the arbitration contract…confers no authority on the person selected”].)
Conversely, Rice is entitled to an order enjoining Kaufmann and Downs from
pursuing the claim they made in arbitration against Rice on November 16, 2022
in JAMS. Insofar as Rice seeks an order
from the Court to stay that arbitration, the Court does not believe it has the
authority (and Rice cites none) over that arbitration (or non-party JAMS) to do
so.
Defendants Kristoffer J. Kaufmann and Gary P. Downs’ Motion
to Stay Dissolution Action is DENIED.
Plaintiff William E. Rice’s Motion to Stay and Enjoin
Arbitration is GRANTED IN PART.