Judge Elaine Lu, Case 22STCP03920 2023-04-13 Tentative Ruling

On November 1, 2022, Plaintiff Sam Burton (“Plaintiff”) filed the instant action for breach of settlement contract against Defendants Keelson Strategic Corporation (“Keelson”), Tercio Elite, LLC (“Tercio LLC”), Tercio Elite Consulting, Inc. (“Tercio Inc.”), Nathanial A. Romero (“Romero”), and Nicholas J. Molina (“Molina”) (collectively “Defendants”). The FAC asserts seven causes of action for (1) Breach of Contract, (2) Breach of the Implied Covenant of Good Faith and Fair Dealing, (3) Fraud, (4) Fraud in the Inducement, (5) Declaratory Judgment, (6) Breach of Fiduciary Duty, and (7) Minority Shareholder Oppression.

On December 8, 2022, Defendants filed the instant motion to compel arbitration. On December 19, 2022, Plaintiff filed an opposition. On April 6, 2023, Defendants filed a reply.

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (See Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.) Under CCP § 1281, 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.”

“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:

(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. . . .” (CCP §1281.2.)

The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. (Marcus & Millichap Real Estate Inv. Brokerage Co. v. Hock Inv. Co. (1998) 68 Cal.App.4th 83, 88.) When presented with a petition to compel arbitration, the trial court's first task is to determine whether the parties have in fact agreed to arbitrate the dispute. (Id.)

“Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394] explained: ‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement—either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation (see §1281.2(a), (b))—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’ (Rosenthal, supra, at 413.) According to Rosenthal, facts relevant to enforcement of the arbitration agreement must be determined ‘in the manner . . . provided by law for the . . . hearing of motions.’ (Rosenthal, supra, at 413, quoting §1290.2.) This ‘ordinarily mean[s] the facts are to be proven by affidavit or declaration and documentary evidence, with oral testimony taken only in the court’s discretion.’ (Rosenthal, supra, at 413–414; . . .).” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 761-62.)

Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) “With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Here, Defendants contend that Plaintiff executed a confidential settlement agreement that included an arbitration agreement. In support of this contention, Defendants present the declaration of Defendant Molina, the CEO of Defendant Keelson. (Molina Decl. ¶ 1.) Molina states that Plaintiff was formerly Keelson’s Chief Financial Officer and had an ownership share in Keelson. (Molina Decl. ¶ 2.) Plaintiff is still employed by Keelson as a Qualified Manager. (Molina Decl. ¶ 2.) On December 13, 2021, Plaintiff and Molina – on behalf of Keelson – entered into a confidential agreement and release and a stock purchase agreement with regard to Plaintiff transitioning out of being Keelson’s Chief Financial Officer. (Molina Decl. ¶ 3, 7 Exhs. A-B.) The Confidential Agreement and Release included an arbitration clause that provides in relevant part under Appendix 2 that:

11. Governing Law; Binding Arbitration. This Agreement and any amendments to this Agreement executed by the parties hereto shall be governed by and construed in accordance with the laws of the California without giving effect to the conflicts of laws principles thereof. Except as otherwise note within this Agreement, any dispute, controversy or claim arising out of or relating to this Agreement or any breach of this Agreement shall be submitted to and decided by binding arbitration pursuant to the concurrently executed Arbitration Agreement and Waiver of Class/Collective Actions.

The referenced Arbitration Agreement attached as Appendix 3 provides in relevant part that:

By their signatures below, the parties hereto agree that any and all controversies, disputes, or claims arising out of Employee’s employment at Keelson Strategic Corporation (“Company”) or Employer Group (as defined below) or while providing service to a client, whether contractual, in tort, or based upon statute, shall be exclusively decided by binding arbitration held pursuant to the Federal Arbitration Act (“FAA”) before JAMS in Los Angeles County, California (or, if required by law, in the state where Employee works) and shall be administered by a single, neutral arbitrator agreed upon by the parties pursuant to the applicable tribunal's employment arbitration rules and mediation procedures. The arbitrator shall be permitted to award any relief (including injunctive relief) available in a court of law. The parties hereby waive any right to litigate such controversies, disputes, or claims in a court of law, and waive any right to trial by jury. Either party, without waiving any remedy, may seek from any court having jurisdiction any interim or provisional relief, including injunctive relief, that is necessary to protect the party's rights or property.

Claims subject to arbitration, include, without limitation, claims arising at any time (including during periods of prior employment or claims made against the Employer Group (as defined below)) under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Genetic Information Nondiscrimination Act of 2008, the Employee Retirement Income Security Act of 1974 (except for vested benefits under any tax qualified benefit plan), the Fair Labor Standards Act of 1938, the National Labor Relations Act, the California Unruh Act, the California Fair Employment and Housing Act, the California Government Code, the California Labor Code, the California Business and Professional Code, the California Constitution, the California Family Rights Act, the California New Parent Leave Act or the superseding California state leave law, SB1383, all of the above as amended, and any other applicable Federal, State or local law, Executive Order or regulation, and any other claims (including but not limited to breach of contract and common law claims) arising out of or related to Employee’s employment and/or the termination of Employee's employment. The Employer Group includes the Company and its parent companies, affiliates, subsidiaries, predecessors, successors, and assigns, owners, principals, directors, officers, shareholders, employees, managers, members, and agents as well as any client to whom the Employee provides service through the Company.

Nothing in this Arbitration Agreement shall prevent Employee from filing an administrative or other charge with a government agency, including the Equal Employment Opportunity Commission (“EEOC”) or any state or local fair employment practices agency or the Securities & Exchange Commission or from communicating or cooperating with or participating in any investigation or proceeding conducted by such administrative or governmental agency. This Arbitration Agreement does not apply to claims for unemployment insurance benefits, disability or workers’ compensation benefits (except for claims of retaliation which shall be subject to arbitration) or to disputes that are expressly excluded from arbitration by law.

THE ARBITRATOR SHALL HAVE EXCLUSIVE AUTHORITY TO RESOLVE ANY AND ALL DISPUTES OVER THE VALIDITY OR ENFORCEABILITY OF ANY PART OF THIS AGREEMENT.

The Arbitration Agreement at Appendix 3 appears to be electronically signed by Plaintiff and by Molina as the CEO on behalf of Keelson. (Molina Decl. ¶ 3, Exh. A at Appendix 3.) “[D]efendants may meet their initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party’s signature.” (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060; see also Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541 [“The party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the respondent's signature.”].) Accordingly, Defendants have met their initial burden by attaching an arbitration agreement purportedly bearing Plaintiff’s signature.

In opposition, Plaintiff does not dispute that he signed an arbitration agreement. In fact, the complaint concedes that Plaintiff did enter into an arbitration agreement with Keelson. (Complaint ¶¶ 44, 46.) Rather, Plaintiff contends that (1) the claims are not arbitrable due to Keelson’s alleged fraud and (2) the claims against Tercio LLC, Tercio Inc., Molina, and Romero are not subject to arbitration.

“A party seeking to enforce an arbitration agreement has the burden of showing FAA preemption.” (Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th 676, 684.) California law provides that parties may expressly designate that any arbitration proceeding should move forward under the FAA's procedural provisions rather than under state procedural law.^{^[1]} (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal. 4th 376, 394). Otherwise, the FAA provides for enforcement of arbitration provisions in any “‘contract evidencing a transaction involving commerce.’ (9 USC § 2.)” (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 277.) Accordingly, “[t]he party asserting the FAA bears the burden to show it applies by presenting evidence establishing the contract with the arbitration provision has a substantial relationship to interstate commerce[.]” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 234, [italics added].) Moreover, as noted above, California contract law applies to the validity of the arbitration agreement. (Winter, supra, 166 Cal.App.4th at p. 947.)

Here, the arbitration agreement specifically invokes the FAA. (Molina Decl. ¶ 3, Exh. A at Appendix 3, [“the parties hereto agree that any and all controversies, disputes, or claims arising out of Employee’s employment at Keelson Strategic Corporation (‘Company’) or Employer Group (as defined below) or while providing service to a client, whether contractual, in tort, or based upon statute, shall be exclusively decided by binding arbitration held pursuant to the Federal Arbitration Act …”].) Accordingly, the FAA applies to the instant arbitration agreement and preempts any California law in conflict.

“‘[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’ [Citations.]” (Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83.) “It is well established that a court will not grant a petition to compel arbitration filed pursuant to Code of Civil Procedure section 1281.2 if the subject matter to be arbitrated is not within the scope of the arbitration agreement. [Citation.] Generally, a court will look to the arbitration agreement itself to determine its scope.” (United Teachers of Los Angeles v. Los Angeles Unified School Dist. (2012) 54 Cal.4th 504, 516.)

However, “[t]he question whether the parties have submitted a particular dispute to arbitration, i.e., the ‘question of arbitrability,’ is ‘an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.’ [Citations.]” (Howsam supra, 537 U.S. at p.83.)

Here, the arbitration agreement does not clearly and unmistakably delegate the question of arbitrability to the arbitrator. Thus, the Court must determine whether the claims at issue fall within the scope of the arbitration agreement.

“In determining the scope of an arbitration clause, ‘[t]he court should attempt to give effect to the parties’ intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.’ ” (Victoria v. Superior Court (1985) 40 Cal.3d 734, 744.) “As a general rule, arbitration should be upheld ‘ “ ‘unless it can be said with assurance that the arbitration clause is not susceptible to an interpretation covering the asserted dispute.’ ” ’[Citations.]” (Ahern v. Asset Management Consultants, Inc. (2022) 74 Cal.App.5th 675, 688.) “Nonetheless, this policy does not override ordinary principles of contract interpretation.” (Rice v. Downs (2016) 248 Cal.App.4th 175, 185.) “[T]he terms of the specific arbitration clause under consideration must reasonably cover the dispute as to which arbitration is requested.” (Bono v. David (2007) 147 Cal.App.4th 1055, 1063.)

Here, the arbitration agreement provides in relevant part that “[c]laims subject to arbitration, include, without limitation, claims arising at any time (including during periods of prior employment or claims made against the Employer Group under the Age Discrimination in Employment Act of 1967, … and any other claims (including but not limited to breach of contract and common law claims) arising out of or related to Employee’s employment and/or the termination of Employee's employment.” (Molina Decl. ¶ 3, Exh. A at Appendix 3.) Under Appendix 2, the Arbitration Agreement provides that it also covers “any dispute, controversy or claim arising out of or relating to this Agreement or any breach of this Agreement shall be submitted to and decided by binding arbitration pursuant to the concurrently executed Arbitration Agreement and Waiver of Class/Collective Actions.” (Molina Decl. ¶ 3, Exh. A at Appendix 2 § 11.)

The first four causes of action for (1) Breach of Contract, (2) Breach of the Implied Covenant of Good Faith and Fair Dealing, (3) Fraud, and (4) Fraud in the Inducement all directly arise from the Confidential Agreement and General Release and Stock Purchase Agreement. The first two claims allege that Keelson breached the Confidential Agreement and General Release and Stock Purchase Agreement by failing to perform its tax obligations under the agreements. (Complaint ¶¶ 23-33.) The third and fourth causes of action for fraud allege that Keelson induced Plaintiff into the Confidential Agreement and General Release, and Stock Purchase Agreement by making false statements about its’ financial condition in 2020 and 2021. (Complaint ¶¶ 34-51.) As these claims are clearly related to the Confidential Agreement and General Release, and Stock Purchase Agreement, these claims fall within the scope of the Arbitration Agreement. (See Molina Decl. ¶ 3, Exh. A at Appendix 2 § 11.)

Plaintiff contends that the allegations of fraud in the complaint prohibit Keelson from enforcing the arbitration agreement. The Court disagrees.

California law distinguishes between fraud in the “execution” or “inception” of a contract and fraud in the “inducement” of a contract. In brief, in the former case “ ‘the fraud goes to the inception or execution of the agreement, so that the promisor is deceived as to the nature of his act, and actually does not know what he is signing, or does not intend to enter into a contract at all, mutual assent is lacking, and [the contract] is void. In such a case it may be disregarded without the necessity of rescission.’ ” (Ford v. Shearson Lehman American Express, Inc. (1986) 180 Cal.App.3d 1011, 1028.) Fraud in the inducement, by contrast, occurs when “ ‘the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable. In order to escape from its obligations the aggrieved party must rescind....’ ” (Ibid.)

(Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415.)

“[C]laims of fraud in the execution of the entire agreement are not arbitrable under either state or federal law. If the entire contract is void ab initio because of fraud, the parties have not agreed to arbitrate any controversy; under that circumstance, Prima Paint does not require a court to order arbitration.” (Id. at p.416.) However, “fraud in the inducement relating to other contractual terms does not render the arbitration agreement unenforceable, even when it might justify rescission of the contract as a whole. By entering into the arbitration agreement, the parties established their intent that disputes coming within the agreement's scope be determined by an arbitrator rather than a court; this contractual intent must be respected even with regard to claims of fraud in the inducement of the contract generally.” (Ibid.)

In sum, “an arbitration clause is separable from other portions of a contract, such that fraud in the inducement relating to other contractual terms does not render an arbitration clause unenforceable, even when such fraud might justify rescission of the contract as a whole.” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1199.)
Here, the Complaint alleges fraud in the inducement – not in the execution. The complaint alleges that “in late 2021, Keelson made false representations of material fact regarding its financial condition to Mr. Burton in order to induce Mr. Burton to enter into the Settlement Agreement and Stock Purchase Agreement and the arbitration clauses in the Contracts.” (Complaint ¶ 44.) Plaintiff was not misled as to what document he was signing. Instead, Plaintiff alleges that he would not have entered into the agreements if Keelson had not made those misrepresentations. Accordingly, the arbitration agreement is still enforceable notwithstanding Plaintiff’s allegations of fraud in the inducement.

The Claims against Tercio LLC, Tercio Inc., Molina, and Romero Are Not Subject to Arbitration

Plaintiff claims that Tercio LLC, Tercio Inc., Molina, and Romero are not parties to the agreement and lack standing to enforce the arbitration agreement. Plaintiff also asserts that “the claims against [Tercio LLC, Tercio Inc., Molina, and Romero] do not arise out of [Plaintiff]’s employment with Keelson and are unrelated to the matters that are the subject of the Settlement Agreement, which is the purchase of [Plaintiff]’s Shares in Keelson and his resignation as CFO of Keelson.” (Opp. at p.9:17-20.)

First, the Court notes that Tercio LLC, Tercio Inc., Molina, and Romero have standing to enforce the arbitration agreement. The arbitration agreement covers claims against the “Employer Group” which includes Keelson and “and its parent companies, affiliates, subsidiaries, predecessors, successors, and assigns, owners, principals, directors, officers, shareholders, employees, managers, members, and agents as well as any client to whom the Employee provides service through the Company.” (Molina Decl. ¶ 3, Exh. A at Appendix 3.) Defendants Molina and Romero are owners and officers of Keelson and are thus expressly covered under the Arbitration Agreement. (Molina Decl. ¶¶ 1, 6; Complaint ¶ 10.) As to Tercio LLC and Tercio Inc., the Complaint alleges that they are affiliates of Keelson.

“[T]he terms ‘affiliate’ and ‘affiliated company’ are unambiguous and ‘refer[ ] to a relationship that is closer than a mere arm's length contractual relationship.’ ([Citation] see also Satterfield v. Simon & Schuster, Inc. (9th Cir. 2009) 569 F.3d 946, 955 [‘The plain and ordinary meaning of ‘affiliate’ supports this definition as ‘a company effectively controlled by another or associated with others under common ownership or control’].)” (Grande v. Eisenhower Medical Center (2020) 44 Cal.App.5th 1147, 1165.)

Here, the Complaint alleges that Plaintiff, Defendant Molina, and Defendant Romero had the same ownership interest in Tercio LLC as they did in Keelson. (Complaint ¶ 53, [“In late 2020, Mr. Romero, as President of and the Managing Member of Tercio LLC, stated that [Plaintiff] and Mr. Molina were now owners of Tercio the LLC, with the same percentage of ownership interest as Mr. Romero, [Plaintiff], and Mr. Molina shared in Keelson…”].) As Tercio LLC has common identical ownership as Keelson, it is an affiliate of Keelson. As to Tercio Inc. the Complaint alleges that Tercio Inc. was made as an alter ego of Tercio LLC to take over and deprive Plaintiff his share of the profits of Tercio LLC. (Complaint ¶ 54.) Thus, the complaint asserts that Tercio Inc. is in essence Tercio LLC and therefore also an affiliate of Keelson.

However, the Arbitration Agreement only covers claims “arising out of or related to Employee’s employment and/or the termination of Employee's employment.” (Molina Decl. ¶ 3, Exh. A at Appendix 3.) Appendix 2 slightly expands the scope of the Arbitration Agreement such that “any dispute, controversy or claim arising out of or relating to this Agreement or any breach of this Agreement shall be submitted to and decided by binding arbitration pursuant to the concurrently executed Arbitration Agreement and Waiver of Class/Collective Actions.” (Molina Decl. ¶ 3, Exh. A at Appendix 2 § 11.) Thus, only claims related to Plaintiff’s employment or termination or arising out of or relating to the agreements are subject to arbitration.

Plaintiff’s claims against Tercio LLC, Tercio Inc., Molina, and Romero do not arise from Plaintiff’s employment or termination. Nor do Plaintiff’s claims against Tercio LLC, Tercio Inc., Molina, and Romero arise out of or relate to the agreements. Rather, these claims arise from Plaintiff’s ownership interest in Tercio LLC and Tercio LLC’s failure to distribute profits. (Complaint ¶¶ 53, 59, 61, 64.) As the moving parties, Defendants bear the burden of showing that the claims are covered under the arbitration agreement. (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165–166 [“The burden of proving the agreement by a preponderance of the evidence remains with the moving party.”].) However, Defendants fail to present any evidence showing that Plaintiff’s ownership interest in Tercio LLC and the failure to distribute profits are arise out of or are related to the Confidential Agreement and Release, the Stock Purchase Agreement, or Plaintiff’s employment/termination with Defendants.

“Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

“California courts analyze unconscionability as having a procedural and a substantive element.” (Kinney v. United Healthcare Services, Inc. (1999) 70 Cal.App.4th 1329.) “[B]oth elements must be present before a contract or contract provision is rendered unenforceable on grounds of unconscionability.” (Id.) The doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of procedural and substantive components, “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” (Ibid.) Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present in the same degree. (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114.) “Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves. [Citations.] In other words, the more substantively unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.) “The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223, 247.)

Here, Plaintiff fails to raise any issue of unconscionability in the opposition. Accordingly, Plaintiff fails to meet his burden of showing that the arbitration clause is unconscionable. Therefore, the claims against Keelson are subject to arbitration.

“[W]hen there is a severance of arbitrable from inarbitrable claims, the trial court has the discretion to stay proceedings on the inarbitrable claims pending resolution of the arbitration.” (Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 320.) However, “[a] stay is appropriate where ‘[i]n the absence of a stay, the continuation of the proceedings in the trial court disrupts the arbitration proceedings and can render them ineffective.’ [Citation.]” (Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 693.)

Here, the arbitrable claims, namely, Plaintiff’s claims against Keelson arising from the Confidential Agreement and Release and the Stock Purchase Agreement are distinct and severable from Plaintiff’s claims against Tercio LLC, Tercio Inc., Molina, and Romero relating to Plaintiff’s ownership interest in Tercio LLC. There is no overlap of parties, and the allegations involve separate conduct. Thus, there appears to be no risk of inconsistent judgment. For example, Plaintiff could lose the claims against Keelson but still prevail on the claims against Tercio LLC, Tercio Inc., Molina, and Romero. Accordingly, a stay as to the remaining claims does not appear warranted.

Based on the foregoing, Defendants Keelson Strategic Corporation, Tercio Elite, LLC, Tercio Elite Consulting, Inc., Nathanial A. Romero, and Nicholas J. Molina’s motion to compel arbitration is GRANTED only as to the first, second, third, and fourth causes of action against Keelson Strategic Corporation. The motion is otherwise denied.

Defendants Keelson Strategic Corporation, Tercio Elite, LLC, Tercio Elite Consulting, Inc., Nathanial A. Romero, and Nicholas J. Molina’s request for a stay is granted as to the first, second, third, and fourth causes of action and otherwise DENIED.

[1] “But the parties may ‘expressly designate that any arbitration proceeding [may] move forward under the FAA's procedural provisions rather than under state procedural law.’ [Citation.] Absent such an express designation, however, the FAA’s procedural provisions do not apply in state court.” (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 174; see also Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1122.)

County of Los Angeles

Department 26