Judge Gail Killefer, Case BC661823 2023-03-02 Tentative Ruling

Judge: Gail Killefer, Case: BC661823, Date: 2023-03-02 Tentative Ruling

Case Number: BC661823 Hearing Date: March 2, 2023 Dept: 37

HEARING DATE: March 2, 2023

CASE NUMBER: BC661823

CASE NAME: Betsy Merritt, et al. v. John D. Cartwright, et al.

MOVING PARTIES: Petitioners and Plaintiffs, Betsy Merritt and Joseph Singleton

OPPOSING PARTIES: Respondents and Defendants, John D. Cartwright and Jan Cartwright

TRIAL DATE: None

PROOF OF SERVICE: OK

MOTION: Petition to Confirm Arbitration Award

OPPOSITION: January 30, 2023

REPLY: February 15, 2023

TENTATIVE: Plaintiffs’ motion is granted. The Award is confirmed. Plaintiffs are to give notice.

Background

This action arises out of an alleged contract of Plaintiff Betsy Merritt ("Merritt")("Contract") to sell her financial advisory practice to Plaintiff Joseph Singleton ("Singleton"). Plaintiffs allege that Defendants John and Jan Cartwright (collectively the "Cartwrights") were the Co-Regional Directors overseeing the financial advisory practices of both Merritt and Singleton. According to Plaintiffs, Defendants used information disclosed to them in confidence to interfere with Plaintiffs' rights under the Contract by secretly meeting with individual members of the financial advisory practice, secretly soliciting the members to work with and join other financial advisory practices, improperly providing management level sales and payout information to individual members of Merritt's financial advisory practice, and leaking information concerning the suitability of Singleton's financial advisory practice. In the Complaint, Plaintiffs allege two causes of action for: (1) interference with contract; and (2) interference with prospective economic advantage. The Complaint was initially filed in the Superior Court for the County of San Diego on November 16, 2016 and was transferred to the Superior Court for the County of Los Angeles on May 18, 2017.

On October 13, 2017, the court granted Defendants’ motion to compel arbitration.

On November 7-9 and December 14-15, 2022, the parties attended arbitration before the Benjamin F. Breslauer, Eric Beatty, and Thomas Mason Harwood (the “Arbitrators”) The Arbitrators made their award on January 9, 2023 (the “Award”). The Award requires payment to Plaintiff Merritt and dismissal of Singleton’s claims.(Petition, Attachment 8(c).) The Award also provides in pertinent part as follows:

“The Arbitrators acknowledge that they have each read the pleadings and other materials filed by the parties. On November 2, 2022, Claimants filed a notice of voluntary dismissal with prejudice of all claims asserted against Cetera. Therefore, the Panel made no determination to any of the relief requests contained in the Statement of Claim against Cetera.

AWARD

After considering the pleadings, the testimony and evidence presented at the hearing, and any post-hearing submissions, the Panel has decided in full and final resolution of the issues submitted for determination as follows:

1. Claimant Singleton’s claims are denied in their entirety.

2. The Cartwrights are jointly and severally liable for and shall pay to Claimant Merritt the sum of $512,500.00 in compensatory damages.

3. Any and all claims for relief not specifically addressed herein, including any requests for punitive damages and attorneys’ fees, are denied.” (Petition, Exhibit 8(c), p. 2-3.)

On January 20, 2023, Merritt filed the instant Petition to Confirm Arbitration Award. Defendants oppose the petition.

Merritt’ Petition comes on for hearing.

Discussion

I. Procedural Requirements

CCP § 1285 provides: “Any party to an arbitration in which an award has been made may petition the court to confirm, correct or vacate the award. The petition shall name as respondents all parties to the arbitration and may name as respondents any other persons bound by the arbitration award.” Merritt’ Petition was filed on January 20, 2023 and names Defendants as respondents. This is sufficient to comply with the requirements of section 1285. (See CCP § 1285.)

The petition must: “(a) Set forth the substance of or have attached a copy of the agreement to arbitrate unless the petitioner denies the existence of such an agreement. (b) Set forth the names of the arbitrators. (c) Set forth or have attached a copy of the award and the written opinion of the arbitrators, if any.” (CCP § 1285.4.)

Plaintiff’s Petition names Benjamin F. Breslauer, Eric Beatty, and Thomas Mason Harwood as the Arbitrators. (Petition, ¶ 6.). Plaintiff attaches a copy of their Agreement for Legal Services as Exhibit 4(b) to the Petition, and a copy of the Award as Exhibit 8(c) to the Petition. Merritt’s Petition complies with the requirements of CCP § 1285.4.

The Petition may not be served and filed until at least 10 days after service of the signed copy of the award upon the Petitioner. (CCP § 1288.4.) The Award was served on all parties on January 9, 2023. (Petition, ¶ 9.) Merritt’s Petition was filed on January 20, 2023. The Petition complies with the requirements of CCP § 1288.4.

II. Legal Standard

California law favors the resolution of disputes in arbitration “as a speedy and relatively inexpensive means of dispute resolution.” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 (Moncharsh), internal quotations omitted.) As a consequence, the grounds for challenging an arbitration aware are limited: “[I]t is the general rule that, with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors of fact or law.” (Id. at p. 11.) The court must confirm the award as made unless, in accordance with the Code of Civil Procedures, it corrects the award and confirms it as corrected, vacates the award, or dismisses the proceeding. (CCP § 1286.)

The court may vacate an arbitration award only on the grounds set forth in CCP § 1286.2. (Moncharsh, supra, 3 Cal.4th at pp. 12-13.) Section 1286.2 provides that the court shall vacate the award if it determines any of the following:

1. The award was procured by corruption, fraud, or other undue means;

2. There was corruption in any of the arbitrators;

3. The rights of the party were substantially prejudiced by misconduct of a neutral arbitrator;

4. The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted;

5. The rights of the party were substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefore or by the refusal of the arbitrators to hear evidence material to the controversy or by other conduct of the arbitrators contrary to the provisions of this title; or

6. An arbitrator making the award either failed to disclose a ground for disqualification or was subject to disqualification but failed upon receipt of timely demand to disqualify himself or herself.

(CCP § 1286.2(a).)

III. Analysis

In opposition, Defendants assert they seek to oppose “Plaintiffs’ attempt to obtain a judgment for the entire amount of the arbitration award in violation of the terms of the settlement agreement entered into by Plaintiffs which reduced the requested judgment at issue by the amount of the settlement reached by co-respondents.” (Opp., 2.) They contend the settlement agreement entered into with Defendant Cetera contained the following language:

“any settlement payment made pursuant to Paragraph ‘2’ of this Agreement shall be treated as an offset of any liability that the Cartwrights may have to Claimants pursuant to any Arbitration Award that may issue after a hearing on the merits in the Action.” (Vourakis Decl. ¶2.)

Defendants argue Cetera was a respondent in the arbitration and Plaintiffs agreed to dismiss Cetera from the arbitration in exchange for a settlement payment. (Opp., 3.) Defendants contend the offset provision was discussed and negotiated with Plaintiffs’ counsel prior to the execution of the Settlement and the offset provision should be enforced. (Opp., 4; Vourakis Decl. ¶5.) Defendants further argue that no evidence is presented to show that the Arbitrators considered the offset provision in making their final Award. (Opp., 4-5.) Further, Defendants contend Plaintiffs were denied an award of the costs of suit in the Award, and Plaintiffs cannot now ask the court to alter the Award to include costs. (Opp., 5; citing Corona v. Amherst Partners (2003) 107 Cal.App.4th 701, 706.) Lastly, Defendants contend no interest should be awarded on the final Award as FINRA provisions do not provide for the accumulation of interest and the Award “did not specify interest and it has not been 30 days since receipt of the [Award].” (Opp., 6.)

In reply, Plaintiffs contend “Petitioners’ understanding of the terms of the settlement was that the setoff had to be applied by the arbitrators in the final award as the settlement agreement was excluded from future claims to enforce the arbitration award.” (Reply, 2.) Specifically, Plaintiffs point to the last sentence of paragraph 3 of the settlement agreement which states:

“Notwithstanding the foregoing, moreover, any future claims relating to enforcement of an arbitration award in connection with the Action, including collections and/or fraudulent transfer actions, are expressly excluded from this agreement and release.” (Vourakis Decl., Exh. A.)

Plaintiffs therefore contend the “setoff issue was submitted to the arbitrators and the arbitrators issued an award based on it. The arbitrators already applied the offset and the final award already reflects it.” (Reply, 2.) Plaintiffs further correctly explain that the court should confirm the arbitration award unless it is vacated or corrected pursuant to CCP § 1286. (Reply, 3.) Outside of challenges to the Award based on section 1286, Plaintiffs contend the “arbitration awards are immune from judicial review in proceedings to challenge or enforce the award.” (Id.; citing Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 12-13; Zazueta v. County of San Benito (1995) 38 Cal.App.4th 106, 110.) Therefore, Plaintiffs contend Defendants have not set forth any grounds to correct the Award pursuant to CCP §1286.6 as there are no arguments which meet the criteria to correct the Award here. (Reply, 4.)

“Defendants have not asserted any facts or arguments that would meet any of the reasons to correct the award. They have not asserted that the award is imperfect as to form not affecting the merits pursuant to subsection (c).

They are not asserting that the arbitrators exceeded their powers pursuant to subsection (b), or in any way did something they were not empowered to do. In fact, they confirmed that the arbitrators knew about the settlement and were provided a copy of the agreement.

Finally, they are not arguing that there was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award pursuant to subsection (a). Indeed, all Defendants are asserting is that it is ‘speculation’ to assume that it was considered.” (Reply, 4.)

Plaintiffs further correctly explain that Defendants carry the burden of establishing the invalid award, and fail to do so here as the Arbitrators received the settlement agreement and received testimony regarding the settlement. (Reply, 5-6.) Plaintiffs also explain that they seek court costs, which CCP § 1032(b) provides, and not costs of the arbitration as Defendants contend. (Reply, 7.) Lastly, Plaintiffs contend “Defendants do not assert that the award was paid within the 30 days, or at any time, as it has not been paid.” (Reply, 7; Buchwalter Decl. ¶14.)

The court agrees. Defendants here carry the burden of invalidating the Award, or contesting the Award pursuant to CCP §§ 1286.2, et seq. Defendants fail to provide sufficient evidence to meet any of the criteria to contest the Award, and further concede the Award but only attempt to contest the setoff provision. There, the court finds Defendants have failed to show that the setoff provision was not considered by the Arbitrators, or how an enforcement of the setoff provision would not amount to a correction of the Award which would require a showing of one of the criteria needed. Lastly, the court also agrees with Plaintiffs that Defendants have failed to show here that the costs of suit are not recoverable, or that payment within 30 days has been made to not justify the imposition of interest. Therefore, the court finds Plaintiffs have made a sufficient showing to confirm the submitted arbitration Award.

Because the court finds that no basis to vacate or correct the Award exists, Plaintiffs’ motion is granted.

Conclusion

Plaintiffs’ motion is granted. The Award is confirmed. Plaintiffs are to give notice.