LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

 

MOTION TO DISMISS

 

MP:	Javier Montoya (Defendant)
RP:	Salvador Rios Guzman (Plaintiff)

 

NOTICE:

 

The Court is not requesting oral argument on this matter.  The Court is guided by California Rules of Court, Rule 3.1308(a)(1) whereby notice of intent to appear is requested.  Unless the Court directs argument in the Tentative Ruling, no argument is required and any party seeking argument should notify all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no argument is received.  

 

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

 

ALLEGATIONS: 

 

Salvador Rios Guzman (Plaintiff) brings this action against Granada Restaurant, Inc. (Granada), Sergio Ugalde Hernandez (Hernandez), and Javier Montoya (Montoya). In 2011 Hernandez, Montoya, Jose Angel Gomez (Gomez), and Plaintiff formed Granada for the purposes of operating a restaurant. Each of the founding members was a shareholder of Granada. Gomez negotiated a buyout of his shares in 2022, and Hernandez passed away in January 2024. As a result, Plaintiff and Montoya are the only living shareholders of Granada.

 

Plaintiff’s action arises from a dispute between himself and Granada/Montoya. Plaintiff alleges that Montoya and Hernandez improperly used funds loaned by Plaintiff and failed to accurately report earnings of the business. Plaintiff also alleges that his access to the business and its accounts were frozen after he requested a buyout of his shares and a return of his loan monies. Plaintiff seeks the involuntary dissolution of Granada alongside various other causes of action resulting from his improper removal.

 

Plaintiff’s First Amended Complaint (FAC) contains eight causes of action for: (1) involuntary dissolution, (2) wrongful removal of corporate owner, (3) intentional infliction of emotional distress, (4) negligent infliction of emotional distress, (5) breach of fiduciary duty, (6) negligent misrepresentation, (7) fraud and deceit, and (8) appointment of receiver.

 

On June 7, 2024, the Court conducted a hearing on a motion by Montoya to compel Plaintiff’s claims to arbitration. This motion was unopposed by Plaintiff. Having reviewed the arbitration agreement and Plaintiff’s FAC, the Court was satisfied that agreement required Plaintiff to arbitrate each of his claims. This decision stemmed from the extremely broad language of the shareholder agreement between Plaintiff and Montoya, which provided for the arbitration of:

 

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 Granada, or the rights or duties or obligations of the Shareholders as shareholders, lenders, directors, officers, or employees.

 

Having received no opposition, the Court found Montoya’s motion sufficiently demonstrated that each of plaintiff’s claims were subject to arbitration and, thus, the motion was granted. The Court further ordered the entire action stayed pending arbitration pursuant to C.C.P. § 1281.4. Lastly, the Court set a Status Conference re: Arbitration for January 27, 2025. 

 

Before the Court is a motion by Montoya to dismiss Plaintiff’s Complaint. Montoya asks the Court to exercise its discretion under C.C.P. § 583.410 to dismiss the case for delay in prosecution. Montoya argues that, to date, Plaintiff has failed to submit any of his claims to arbitration. Plaintiff opposes the motion, arguing that they have paid arbitration fees and are in compliance with the Court’s order.

 

Although the Court finds Plaintiff’s arguments to be without merit, it nevertheless must deny Montoya’s motion. Case law is clear that a motion to dismiss may not be predicated on an opposing party’s failure to proceed with arbitration after the issuance of a stay. The Court’s reasoning is discussed in greater detail below. 

 

ANALYSIS: 

 

I.                LEGAL STANDARD 

 

Montoya seeks an order from the Court dismissing Plaintiff’s action pursuant to C.C.P. § 583.410, which provides:

 

(a)   The court may in its discretion dismiss an action for delay in prosecution pursuant to this article on its own motion or on motion of the defendant if to do so appears to the court appropriate under the circumstances of the case.

 

(b)   Dismissal shall be pursuant to the procedure and in accordance with the criteria prescribed by rules adopted by the Judicial Council.

 

II.              MERITS

 

Facts

 

In support of his motion, Montoya submits the declaration of his counsel Michelle Seltzer (Seltzer). Seltzer states that on August 5, 2024, Montoya submitted a claim to the American Arbitration Association (AAA). (Seltzer Decl. ¶ 2, Exh. A.) Seltzer states, and the submission request form makes clear, that this request was submitted by Montoya strictly for the valuation of Granada’s shares. (Id. ¶ 3-4, Exh. A.)

 

Seltzer states that she began working with AAA to commence Montoya’s arbitration. (Id. ¶ 5.) Plaintiff’s counsel, Richard Rosiak (Rosiak), was included on an email chain between AAA’s representatives and Seltzer. (Id. Exh. B.) On August 20, 2024, Rosiak replied to the email chain for the first time, addressing the following message to AAA’s representative:

 

This office represents Mr. Salvador Rios. A full liquor license attached to a restaurant (type 47 & 48) can go as high as $400,000 alone. This does not factor in the actual medical restaurant business; furnishings/fixtures, this at least $1,000,000. [sic]  Further is this binding arbitration?

 

(Id., Exh. B at p. 10-11.)

 

Seltzer states in her declaration that this email was an attempt by Rosiak to piggyback arbitration of Plaintiff’s claims on to Montoya’s arbitration of the value of shares. (Id. ¶ 5.) AAA’s representative responded to Rosiak’s email, directing his attention to an August 22, 2024 letter in which AAA provided notice of Montoya’s request for arbitration. (Id., Exh. C.) This letter specifically informed Plaintiff that if he wished to file any counterclaims, he should file those claims with AAA’s representative alongside the appropraite administrative fee. (Id., Exh. C at p. 16.)

 

On January 27, 2025, the Court held the Status Conference re: Arbitration. At the status conference, the Court was informed that Plaintiff had not set an arbitration date and that no fees had been paid. (See January 27, 2024 Minute Order.) The Court ordered that Plaintiff set a date, pay the fees, and thereafter file proof of having done so. The Court set a date for an OSC to ensure these steps were taken, but provided that the OSC could be vacated upon Plaintiff filing proof of an arbitration date and his payment of the arbitration fees.

 

On February 10, 2025, Rosiak filed his declaration as to the state of the case. The Court notes this declaration states Rosiak is a Defendant in this action, when in fact he is not. (See February 10, 2025 Rosiak Decl. ¶ 1.) Rosiak further states the following:

 

At the 2/3/2025 hearing, it was represented that Plaintiff was delaying the case by not paying fees to the arbitrator. Plaintiffs records show that on 11/6/2024, Plaintiff paid the requested $600. (Exhibit 1)

 

On 2/3/2025, this declarant reached out to the case manager, Ms. Ochoa by email inquiring whether any further monies were due. (Exhibit 2.)

 

On 2/10/2025, Ms. Ochoa advised “your client does not have a payment due at this time.” (Exhibit 3.)

 

At about the same time, Ms. Ochoa advised by way of a letter that the arbitrator has set preliminary hearing for 2/25/2025 at 3:00 p.m. (Exhibit 4.) The case is moving along.

 

On the basis of these representations, the Court ordered the OSC date advanced and vacated. (See April 7, 2025 Order.)

 

Discussion

 

The Court begins by discussing Plaintiff’s failure to proceed with arbitration. It is abundantly clear from the evidence presented by both sides that Plaintiff has not initiated arbitration of his claims. The only arbitration matter evidenced by the moving/opposing papers is Montoya’s request for arbitration as concerns the value of Granada’s shares. Any argument by Plaintiff that he is in compliance with the Court’s June 7, 2024 order is entirely unsupported.

 

Exhibit 1 to the Rosiak declaration (also Exhibit 1 to Plaintiff’s opposition) is a receipt from AAA for $600 purportedly paid by Plaintiff on November 6, 2024. Upon review, this payment was clearly rendered for Plaintiff’s portion in defending Montoya’s request for arbitration. The case number on the receipt, 012400071113, is the same as that appearing in the AAA letter and the email thread for Montoya’s claim. Plaintiff has clearly filed no counterclaim in that case or shown evidence that he submitted his claims separately.

 

Rosiak was informed multiple times of the fact that the Montoya arbitration did not include Plaintiff’s claims. Despite both AAA and Seltzer confirming this to him, he has persisted in arguing that Plaintiff complied with the Court’s order compelling arbitration. To be absolutely clear, Plaintiff has not complied with this order. Plaintiff has not sought arbitration of his claims and instead has only paid fees in connection with defending the arbitration sought by Montoya. Rosiak’s statement that “the case is moving along” simply is not true. At best Rosiak’s statements are a substantial misstatement of the case, at worst they are an outright misrepresentation. Without opining further, the Court will simply conclude that Plaintiff’s case remains in the same position it has since the issuance of the Court’s order compelling arbitration over a year ago.

 

Despite the fact that Plaintiff has not proceeded to arbitration for almost a year following a Court order to do so, the Court must deny Montoya’s motion to dismiss. This is not an endorsement of the behavior of Plaintiff and his counsel so much as it is a function of jurisdiction. The Court explains further below.

 

Once a court orders a controversy to arbitration, it must, “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.” (C.C.P.§ 1281.4; Gaines v. Fidelity National Title Ins. Co. (2016) 62 Cal.4th 1081, 1096.) Here, a stay of Plaintiff’s action was issued as part of the Court’s June 7, 2024 ruling.

 

“The purpose of the statutory stay is to protect the jurisdiction of the arbitrator by preserving the status quo until arbitration is resolved.” (Federal Ins. Co. v. Superior Court (1998) 60 Cal.App.4th 1370, 1374.) “Once a court grants the petition to compel arbitration and stays the action at law, the action at law sits in the twilight zone of abatement with the trial court retaining merely a vestigial jurisdiction over matters submitted to arbitration. This vestigial jurisdiction over the action at law consists solely of making the determination, upon conclusion of the arbitration proceedings, of whether there was an award on the merits…or not…” (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796; Gaines, supra, 62 Cal.4th at 1096.) “The court also retains a separate, limited jurisdiction over the contractual arbitration” to consider subsequent petitions relating to the same arbitration agreement filed in the same proceeding. (Brock, supra at p. 1796, citing § 1292.6.)

 

Upon motion of a party, the Court may take limited steps “to aid in the prosecution of an arbitration.” (Blake v. Ecker (2001) 93 Cal.App.4th 728, 738, fn. 8, disapproved on other grounds in Le Francois v. Goel (2005) 35 Cal.4th 1094.) For example, at a party’s request, the Court may appoint an arbitrator (§ 1281.6); grant a provisional remedy to give effect to future arbitrable awards (§ 1281.8(b)); disqualify neutral arbitrators (§ 1281.91(b)(2)); and compel a drafting party to pay arbitration fees to continue an ongoing arbitration (§ 1281.98, subd. (b)(3)). (Blake supra, 93 Cal.App.4th at 738.) “Absent an agreement to withdraw the controversy from arbitration, however, no other judicial act is authorized. It is the job of the arbitrator, not the court, to resolve all questions needed to determine the controversy.” (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487.)

 

In Blake, the trial court ordered the matter into arbitration. (Blake supra, 93 Cal.App.4th at 735.) For nearly two years, the plaintiff took no steps to initiate the arbitration. (Id.) The trial court granted the defendants’ motion to dismiss for failure to prosecute. (Id. at p. 737.) The Second Division Court of Appeal reversed, finding the trial court lacked jurisdiction to grant the motion. (Id. at p. 738.) Citing Brock, the court concluded: “Once the trial court stayed plaintiff’s civil action, it was stayed for all purposes during the arbitration proceedings. Defendants’ only avenue for redress when plaintiff failed to timely prosecute the arbitration was in the arbitration proceeding.” (Id. at 737.)

 

This reasoning was also employed by the Seventh District Court of Appeal in Lew-Williams v. Petrosian (2024) 101 Cal.App.5th 97. There, the trial court dismissed claims against one set of defendants because the plaintiffs failed to initiate arbitration for nearly two years after the court granted a motion to compel arbitration. (Lew-Williams supra, 101 Cal.App.5th at 100-104.) The reviewing court reversed. (Id. at 101.) Citing Brock, the court held the trial court exceeded its vestigial jurisdiction by dismissing the plaintiffs’ claims for failure to prosecute. (Id. at 101, 105-106, 107.) The power to terminate proceedings for dilatory tactics was solely within the arbitrator’s purview. (Id. at p. 106.) The Lew-Williams court further reasoned that the defendants had “recourse within the arbitration process to prevent unreasonable or abusive delay.” (Id. at p. 109.) The rules of the parties’ chosen arbitral forum allowed a defendant to initiate arbitration, provided a means for the defendants to ask the arbitrator to issue orders to “control and expedite” the arbitration, and authorized the arbitrator to issue sanctions. (Id.)

 

The Court finds the logic from Blake and Lew-Williams controls in this situation. While Plaintiff’s delay in proceeding to arbitration is clear, the Court is without jurisdiction to dismiss his case on those grounds. The discretion which Montoya asks the Court to exercise is simply not within the vestigial jurisdiction of a trial court which has stayed a matter pending arbitration. Whether Plaintiff’s delay in proceeding to arbitration is a barrier to his claims appears to be a matter in sole control of the arbitrator. Accordingly, Montoya’s motion to dismiss is DENIED.

 

However, the Court’s analysis does not end there.   Regardless of the arbitration of the underlying case, this Court did order Plaintiff to pay the arbitration fees, and a prima facie showing has been made that Plaintiff may have violated the Court’s order.  This Court does have jurisdiction concerning violations of its orders, separate and apart from the issues concerning the underlying litigation.  

 

As such, the Court is setting an Order to Show Cause Re Sanctions for PLAINTIFF’S Violation of Court’s order in the amount of $1,000.  Should the arbitration fees be paid as to Plaintiff’s case against Defendant, the parties may file a stipulation and order to vacate the OSC hearing date.

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RULING:

 

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

 

ORDER 

 

Javier Montoya’s Motion to Dismiss came on regularly for hearing on June 13, 2025, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows: 

 

THE MOTION TO DISMISS IS DENIED.

 

THE COURT ADVANCES THE STATUS CONFERENCE RE: ARBITRATION AND CONTINUES IT TO SEPTEMBER 29, 2025 AT 9:00 AM. 

 

OSC RE SANCTIONS UP TO $1,000 FOR PLAINTIFF’S VIOLATION OF COURT’S ORDER TO PAY ARBITRATION FEES IS SET FOR JUNE 27, 2025 AT 9:00 AM.

 

DEFENDANT TO GIVE NOTICE.

 

IT IS SO ORDERED.