Judge Gregory Keosian, Case Number: 23STCV02764, Date: 2023-08-29 Tentative Ruling

Defendants Gilbert Milam, Parker Berling, and Cookies Creative Consulting and Promotions, Inc.’s Motion to Stay is GRANTED.

“Trial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.” (Freiberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489.) The decision of a trial court to stay proceedings is thus generally a matter of discretion. (Bains v. Moores (2009) 172 Cal.App.4th 445, 480.)

Defendants Cookies Creative Consulting & Promotions, Gilbert Milam, and Parker Berling (Defendants) move for a stay of proceedings in this action pending resolution of an arbitration proceeding on similar facts, alleged against these same Defendants by nonparties Red Tech Holdings, LLC and Gron Ventures Fund I, LP (Claimants). This motion follows a prior application, denied on June 12, 2023, in which the court ruled that although the claims in each proceeding were very similar, the arbitration concerned different parties proceeding on contractual theories, while the present case was a derivative action brought by different parties on theories of breach of fiduciary duty. Defendants renew their previous motion based on “new or different facts, circumstances, or law,” under Code of Civil Procedure § 1008, subd. (b). (Motion at p. 12.)

Granting a stay in a case where the issues in two actions are substantially identical [citations] is a matter addressed to the sound discretion of the trial court. ‘In exercising its discretion the court should consider the importance of discouraging multiple litigation designed solely to harass an adverse party, and of avoiding unseemly conflicts with the courts of other jurisdictions. It should also consider whether the rights of the parties can best be determined by the court of the other jurisdiction because of the nature of the subject matter, the availability of witnesses, or the stage to which the proceedings in the other court have already advanced.

(St. Paul Fire and Marine Insurance Company v. AmerisourceBergen Corporation (2022) 80 Cal.App.5th 1, 14.)

The new facts and circumstances supporting the renewed motion here are the procedural history of this case and a new filing by the arbitration claimants, which Defendants contend demonstrates the overlapping nature of the arbitration and the present action and the necessity of a stay. Specifically, Defendants contend that since the prior motion to stay was denied, this court sustained their demurrer to Plaintiffs’ derivative claims with leave to amend, and has taken under submission Plaintiffs’ motions to compel further responses to discovery, which demonstrates the burdens associated with dual proceedings and their substantive infirmity. (Motion at pp. 6–7.)

Defendants further identify a declaration submitted by Thomas Linovitz, one of Plaintiff BR CO I’s managing members, in support of a provisional relief application in LASC Case No. 23STCV16410 associated with the arbitration, in which he attests that he is not only the manager of the general partner of Gron Ventures Fund, LP one of the arbitration claimants, but is also a member of Red Tech, the other arbitration claimant, and was one of those “primarily in charge of [the claimants’] investments” in Cookies, which is the subject of the arbitration. (Motion Exh. 13, ¶ 2.)

Defendants note, as with their last motion, that the arbitration claimants are represented by the same counsel as Plaintiffs here. (Motion at p. 20.) They further note that Plaintiffs sent their demand letter, founded on the same allegations of wrongdoing, on the same day that the arbitration claimants filed their demand for arbitration. (Motion at p. 8; Ward Decl. ¶¶ 3–4.)

Defendants have demonstrated new facts and circumstances justifying the stay sought. Although they pointed out in their prior motion that Linovitz was the manager of the general partner of Gron Ventures, Linovitz has only recently disclosed his membership interest in the other arbitration claimant and his role in the underlying facts supporting their contractual causes of action.

In the prior motion, Plaintiffs and this court relied on the case Gregg v. Superior Court (1987) 194 Cal.App.3d 134, in which the appellate court determined that the trial court had abused its discretion by ordering a stay in an action between a plaintiff franchisee against a defendant franchisor, where the claims asserted by the plaintiff were similar to other claims pursued by other franchisees through the same attorney against the same defendant in federal court. (Id. at pp. 137–138.) The court noted that the plaintiff before them was “not a party to a related action in another forum,” and stated, “We find no precedent for preventing a litigant in the circumstances of this case from pursuing an action because other litigants are suing the same defendants over similar grievances in another forum.” (Id. at p. 138.) The court in that case determined that the litigants were not “substantially identical,” and that the claimant in the case before it was proceeding “in the only forum which could provide him with relief.” (Id. at p. 138.)

This case is different from Gregg. That case involved an individual plaintiff seeking personal relief separate from the relief requested by other parties in a different action. As the court stated, “Significant to this case is the fact that petitioner seeks personal relief from contracts and damages for fraud and unlawful business practices directed toward him.” (Gregg, supra, 194 Cal.App.3d at p. 138.) Plaintiffs in the present case, however, seek no relief personal to them, but bring a derivative action on behalf of Cookies, for the same misconduct asserted in the arbitration. Additionally, Defendants have presented evidence showing substantial identity of the parties prosecuting this litigation and the concurrent arbitration, namely through the fact that Plaintiff BR CO I is controlled by the same individual who controls the arbitration claimants.[1] The inference of shared control is buttressed by the similar allegations in both proceedings, the fact that all claimants are represented by the same counsel, and the service of BR CO’s demand letter in conjunction with the Claimants’ initiation of arbitration. Defendants have shown sufficient identity of parties and issues to warrant the requested stay, and Plaintiffs have shown no countervailing prejudice that could result.[2]

[1] Although Plaintiffs argue that Defendants have not shown shared control as to Plaintiff Nedco, LLC (Opposition at p. 15), Nedco was only added as a Plaintiff in the First Amended Complaint, and served no prior demand letter upon Defendants. There is good reason to believe that Nedco’s role in the shaping the litigation is secondary to BR CO’s.

[2] For the same reason, Plaintiffs’ proffered authority of Farmland Irr. Co. v. Dopplmaier (1957) 48 Cal.2d 208 is likewise distinguishable. (Opposition at pp. 13–14.) The plaintiff in that case sought relief personal to itself with no inference that it was responsible for the concurrent litigation: “laintiff brought the present action, not to harass defendant with multiple litigation, but to assert interests it claimed would not be adequately represented in the Oregon action.” (Farmland Irr. Co. v. Dopplmaier (1957) 48 Cal.2d 208, 215.) The facts here are dissimilar.