Judge: Gail Killefer, Case: 23STCV18082, Date: 2024-02-20 Tentative Ruling

Case Number: 23STCV18082    Hearing Date: February 20, 2024    Dept: 37

HEARING DATE:                 Tuesday, February 20, 2024

CASE NUMBER:                   23STCV18082

CASE NAME:                        Aaron Watkins, et al. v. Ascend Ecom LLC

MOVING PARTY:                 Defendants Ascend Ecom LLC, Will Bast, and Jeremy Leung

OPPOSING PARTY:             Plaintiffs Aaron Watkins, Watkin FBA, LLC, and Watkins Collaborations, LLC

TRIAL DATE:                        N/A

PROOF OF SERVICE:           OK

PROCEEDING:                      Motion to Compel Arbitration and Stay Action.

OPPOSITION:                        5 February 2024

REPLY:                                  13 February 2024

TENTATIVE:                         Defendants’ Motion to Compel Arbitration and Stay the action is granted. Defendants to give notice.

Background

On August 12, 2023, Aaron Watkins; Watkin FBA, LLC; and Watkins Collaborations, LLC (collectively “Plaintiffs”) filed a Complaint against Ascend Ecom LLC (“Ascend”); Will Basta (“Basta”); Jeremy Leung (“Leung”) (collectively “Defendants”); and Does 1 to 10.

The operative First Amended Complaint (“FAC”), filed September 13, 2024, alleges five causes of action: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) fraud; (4) accounting, and (5) unfair business practices.

On January 2, 2024, the Defendants filed a Motion to Compel Arbitration and Stay the Action. Plaintiffs oppose the Motion.

motion to compel arbitration

I.         Legal Standard

Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.¿(CCP § 1281.2; Omar v. Ralphs Grocery Co. (2004)¿118 Cal.App.4th 955, 961.)¿¿¿ 

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A party petitioning to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate.  The party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court¿(1998) 62 Cal.App.4th 348, 356-57.)¿¿¿¿ 

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“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, 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.” (CCP § 1281.4.)¿

II.        Discussion

Defendants Ascend, Basta, and Leung move to compel arbitration on the basis that Ascend entered into Management Agreements with each of the Plaintiffs, and by extension, Ascend's alter egos, Defendants Basta and Leung. (Ross Decl. Ex. A, C, D.)       Defendants maintain that the arbitration agreement into which Gerry Watkins entered is binding on Plaintiffs Watkins Collaborations LLC as a successor-in-interest. (Ross Decl. Ex. B.)

Defendants assert that the respective agreements contain the following identical provisions:

6.8 Disputes and Governing Law. The Parties agree that any dispute regarding this Agreement, and any claim made by Client for return of fees paid to Manager, shall be handled in accordance with applicable State and Federal Laws. This Agreement and the rights and obligations of the Parties hereunder shall be governed by and construed and enforced in accordance with the laws of Sheridan County in the State of Wyoming applicable to contracts made and to be performed wholly within such state.

6.9 Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, on behalf of the Client shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

(Ross Decl. Ex. A, C, D [emphasis original].)

Defendants assert that the dispute applies to the parties’ dispute because the action relates to Ascend’s performance under the Management Agreements.

Plaintiffs’ opposition does not rebut Defendants’ contentions that the Management Agreements govern this dispute and mandate arbitration of this action. Instead, Plaintiffs argue that the action should not be compelled to arbitration because neither Defendant Basta nor Leung have agreed to arbitrate this dispute, and under CCP § 1281.2(c), this could result in the possibility of conflicting rulings.

Plaintiffs’ argument is without merit because this Motion was brought by Defendants Basta and Leung with Ascend. There is no evidence that Basta and Leung oppose the Motion.

Moreover, the Management Agreements are governed by Wyoming state law, which Defendants argue does not contain an equivalent provision to section 1281.2(c).

Finally, even if the court were to find that California law governed this agreement, as the FAC alleges that Defendants Basta and Leung are alter egos of Ascend, the court could order arbitration as to Defendants Basta and Leung under the agency exception. (See Thomas v. Westlake (2012) 204 Cal.App.4th 605, 613; Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 788.)

For the reasons set forth above, the court grants Defendants’ Motion.

Conclusion

Defendants’ Motion to Compel Arbitration and Stay the Action is granted. The Court sets an OSC Re: Status of Arbitration for February 20, 2025, at 8:30 a.m. Defendants to give notice.