Judge Daniel M. Crowley, Case Number: 24STCV02330, Date: 2024-12-24 Tentative Ruling

Defendants Andrew Clapkin’s, Dina Marshall’s, Marci Clapkin Weiser’s, and Karen Callan’s, individually and as trustees of The Irwin Babbit Clapkin and Sheila Clapkin Grantor Trust, motion to compel arbitration of Plaintiffs Shana Levin’s and Tamara Levin’s claims in their complaint and the 5th cause of action in Defendants’ cross-complaint in this action is denied.

Defendants Andrew Clapkin (“Andrew”), Dina Marshall (“Marshall”), Marci Clapkin Weiser (“Weiser”), and Karen Callan (“Callan”), individually and as trustees of The Irwin Babbit Clapkin and Sheila Clapkin Grantor Trust (“Trust”) (collectively, “Defendants”) move for an order compelling arbitration of Plaintiffs Shana Levin’s (“Shana”) and Tamara Levin’s (“Tamara”) (collectively, “Plaintiffs”) complaint (“Complaint”) and Defendants’ 5th cause of action in their Cross-Complaint (“CC”) because they involve claims that cannot be decided without resolution of the parties’ disputes relating to the 1994 Buy-Sell Agreement (“BSA”) and to stay the action pending arbitration. (Notice of Motion, pgs. 2-3; C.C.P. §§1281 et seq.)

On January 29, 2024, Plaintiffs filed their operative Complaint against Defendants alleging one cause of action for breach of contract, requesting specific performance and injunctive relief.

On March 14, 2024, Defendants filed their CC against Plaintiffs and Joslevin Realty Corp. of LA (“Joslevin”) (collectively, “Cross-Defendants”) alleging five causes of action: (1) violation of Corporations Code §§700(a), 708(a); (2) breach of fiduciary duty; (3) declaratory relief; (4) Corporations Code §709; and (5) breach of contract.

Defendants filed the instant motion on October 8, 2024. Plaintiffs filed their opposition on December 11, 2024. Defendants filed their reply on December 17, 2024.

Plaintiffs’ 12/11/24 request for judicial notice of (1) Plaintiffs’ Complaint filed on September 20, 2022, against Defendants Weiser, Andrew, and Marshall in LASC Case No. 22STV30789, attaching as Exhibit 3 the Buy-Sell Agreement (P-RJN, Exh. A); (2) the June 18, 2024, notice of appeal filed by Plaintiffs in the Probate Division in LASC Case No. 23STPB06674 (“Probate Action”) to the Probate Court’s order granting Defendants’ petition for confirmation of successor trustee (P-RJN, Exh. B); (3) the July 15, 2024, notice of appeal filed by Plaintiffs in the Probate Action to the Probate Court’s orders determining objectors’ standing (P-RJN, Exh. C); (4) the September 3, 2024, Minute Order staying all six proceedings in Department 50 pending the resolution of the appeals filed in the Probate Action, in the lead case, LASC Case No. 22STCP02372 (P-RJN, Exh. D); and (5) the November 1, 2024, Minute Order continuing the hearing on Defendants’ Moton to Compel Arbitration to May 15, 2025, in LASC Case No. 23NWCV01813 (P-RJN, Exh. E) is granted.

Defendants’ 12/17/24 request for judicial notice of (1) Plaintiffs’ October 3, 2024, Opposition to Defendants’ Ex Parte Application for an Order Advancing the Hearing Date on Defendants’ Motion to Compel Arbitration in the Interpleader Action, LASC Case No. 23NWCV01813 (D-RJN, Exh. N); and (2) Plaintiffs’ February 8, 2024, Opposition to Defendants’ Ex Parte Application for an Temporary Restraining Order to Ensure a Fair JLR Shareholder Election in Los Angeles Superior Court Case No. 23STCP00436 (“Case 6”) (D-RJN, Exh. Q) is granted; however, the Court does not take judicial notice of the truth of the matters asserted.

Defendants’ 12/17/24 request for judicial notice of (1) Plaintiffs’ June 18, 2024, notice of appeal of the Probate Court’s order granting Defendants’ petition for confirmation of successor trustee in the Probate Action (D-RJN, Exh. O); and (2) Plaintiffs’ July 15, 2024, notice of appeal of the Probate Court’s order granting Defendants’ Motion for Judgment on the Pleadings and denying reconsideration in the Probate Action (D-RJN, Exh. P) is granted.

C.C.P. §916 provides that “the perfecting of an appeal stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby, including enforcement of the judgment or order, but the trial court may proceed upon any other matter embraced in the action and not affected by the judgment or order.” (C.C.P. §916(a), emphasis added.)

Plaintiffs’ argument that this Court is divested of jurisdiction to rule on the instant motion is unavailing. Plaintiffs’ appeal of this Court’s ruling on the Anti-SLAPP Motion they filed against Defendants’ CC only affected the 1st, 2nd, 3rd, and 4th causes of action in the CC, not the 5th cause of action at issue in this motion. Further, Plaintiffs’ appeal does not embrace any issues related to their Complaint.

Plaintiffs’ argument that this matter is stayed is based on an incorrect understanding of Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180. In Varian, the California Supreme Court held that the “perfecting of an appeal from the denial of a special motion to strike automatically stays all further trial court proceedings on the merits upon the causes of action affected by the motion.” (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 186, emphasis added.) The Varian Court went on to clarify that “[s]uch an appeal does not, however, stay proceedings relating to causes of action not affected by the motion.” (Id. at pg. 195 n.8, emphasis added.)

In Varian, the anti-SLAPP motion that was the subject of the appeal covered all of that plaintiff’s claims, so there was no claim on which the trial court might have permissibly acted. (Id. at pg. 200.) The facts in Varian are not like the situation presented here. Therefore, this Court is not divested of its jurisdiction to rule on the instant motion.

California law favors arbitration for dispute resolution. The California Arbitration Act (“CAA”), codified at C.C.P. §1281 et seq., provides, “A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (C.C.P. §1281; see also Grafton Partners L.P. v. Superior Court (2005) 36 Cal.4th 944, 955 [“[U]nlike predispute jury waivers, predispute arbitration agreements are specifically authorized by statute.”].)

“California law, like federal law, favors enforcement of valid arbitration agreements.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97, 99.) The public policy in favor of arbitration is so strong that California courts have held that an employee is “bound by the provisions of the [arbitration] agreement regardless of whether [he] read it or [was] aware of the arbitration clause when [he] signed the document.” (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, citing Macaulay v. Norlander (1992) 12 Cal.App.4th 1.) The only prerequisite for a court to order arbitration is a determination that the parties have entered into an agreement to arbitrate the dispute. (United Transportation Union v. Southern California Rapid Transit District (1992) 7 Cal.App.4th 804, 808.) Thus, arbitration must be ordered “unless the agreement clearly does not apply to the dispute in question.” (Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189.)

Defendants proved the existence of an arbitration agreement with Plaintiffs. Defendants submitted evidence that on or around April 1, 1994, the then-three owners of JLR, Sheila; along with Plaintiffs’ father, Michael Levin (“Michael”); and the parties’ uncle, Ronald Levin (“Ronald”), executed the BSA for the purpose of establishing “consistent and harmonious policies” to be invoked following the death of a JLR shareholder or the occurrence “of certain other events” to “assure continuity of management by persons who have a proprietary interest” in the Company. (Decl. of Andrew ¶8, Exh. A.) Plaintiffs and Defendants are successors-in-interest to Ronald and own their shares of JLR pursuant to a transfer from Ronald to Martin Levin (“Martin”), the parties’ grandfather, and then to Martin’s grandchildren (i.e. the parties). (Decl. of Andrew ¶¶4-7; see also Decl. of Haas, Exh. L at ¶¶10-11.)

Plaintiffs do not dispute that the BSA contains an arbitration provision. However, Plaintiffs argue Defendants waived their right to arbitration. The Court agrees with Plaintiffs.

“To establish waiver, there is no requirement that the party opposing enforcement of the contractual right demonstrate prejudice or otherwise show harm resulting from the waiving party’s conduct.” (Campbell v. Sunshine Behavioral Health, LLC (2024) 105 Cal.App.5th 419, 427.) Rather, the waiver inquiry is exclusively focused on the waiving party’s words or conduct. (Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, 585.)

In Quach, the California Supreme Court abrogated the law that imposed a heavier burden to show waiver for arbitration contracts than all other contracts, including the requirement that the party opposing arbitration show prejudice in order to find waiver by the party moving to compel arbitration. (Quach, 16 Cal.5th at pg. 582 [“Because the state law arbitration-specific prejudice requirement finds no support in statutory language or legislative history, we now abrogate it.”].)

Under the applicable waiver standard, courts hold a party waives arbitration where it acts inconsistently with the intent to arbitrate or has unreasonably delayed in enforcing the right to arbitrate. (Campbell, 105 Cal.App.5th 419 [holding the defendant waived its right to arbitrate by “engaging in negotiations over the joint stipulation [to mediate] and representing to the court that it intended to mediate” during the five months it delayed before moving to compel arbitration); Semprini v. Wedbush Securities Inc. (2024) 101 Cal.App.5th 518, 527 [“It is well established that a four-to six-month delay in enforcing the right to arbitrate may result in a finding of waiver if the party acted inconsistently with the intent to arbitrate during that window.”].)

Here, Defendants have known about the arbitration provision in the BSA for at least two years. Plaintiffs attached a copy of that agreement as an exhibit to their shareholder derivative action they filed in 2022. (P-RJN, Exh. A.) Also, on July 2, 2023, Defendants themselves demanded that Plaintiffs agree to arbitrate. On that date, Defendants’ counsel, Jason Haas, wrote to Plaintiffs’ counsel:

Please let us know if your clients will agree to the arbitration or if a motion to compel will be necessary. We intend to raise the issue in our portion of the Joint Report if your clients do not agree to arbitrate, since any discovery as to the issues relating to the BSA should be decided by the arbitrators, not by Judge Beaudet. We would anticipate moving quickly to compel arbitration and would ask Judge Beaudet at the July 11 hearing to set a hearing date for that motion in August.

Since then, Defendants have delayed seeking arbitration for more than 17 months. Defendants have acted inconsistently with their intent to arbitrate by

Hon. Daniel M. Crowley

Judge of the Superior Court