Judge: Joel L. Lofton, Case: 22AHCV00270, Date: 2022-08-22 Tentative Ruling
Case Number: 22AHCV00270 Hearing Date: August 22, 2022 Dept: X
Tentative Ruling
Judge Joel L. Lofton, Department X
HEARING DATE: August 22, 2022 TRIAL DATE: No date set.
CASE: FRANCESCO CAMELI, an individual, v. FAKK LLC, a limited liability company; ALEXANDRE CAILLAT, an individual; KIAN FARIN, an individual, JAMIE MITCHELL, an individual, and DOES 1 through 10, inclusive.
CASE NO.: 22AHCV00270
MOTION
FOR PRELIMINARY INJUNCTION
MOVING PARTY: Plaintiff Francesco Cameli
RESPONDING PARTY: Defendants FAKK LLC, Alexandre Caillat, Karim
Hamza, Kian Farin, and Jamie Mitchell
SERVICE: Filed
June 15, 2022
OPPOSITION: Filed
July 15, 2022
REPLY: Filed August 15, 2022
RELIEF
REQUESTED
Plaintiff moves for an order preventing Defendants from denying him
access to FAKK and imposing a constructive trust on all revenues generated by
FAKK.
BACKGROUND
This case arises out of
complaints involving the operation of FAKK LLC, doing business as Zen Drive
Co., (“FAKK”). Plaintiff alleges that he, along with Alexandre Caillat
(“Caillat”), Karim Hamza (“Hamza”) and Kian Farin (“Farin”) founded FAKK to set
up a shop to provide diving equipment, lessons, and merchandise. Plaintiff
alleges that Defendant Jamie Mitchell (“Mitchell”) was added as a member of
FAKK. Plaintiff alleges that Defendants improperly conducted business by
failing to properly authorize and inspect breathing gas cylinders and
improperly storing cylinders.
Plaintiff
alleges that when he raised these concerns, Hamza. Plaintiff also alleges that
Defendants acted to improperly exclude him from FAKK. Plaintiff filed this
complaint on May 10, 2022, alleging nine causes of action for (1) breach of
contract, (2) fiduciary duty of care, (3) accounting, (4) constructive trust,
(5) unfair competition and unfair business practices in violation of Business
and Professions Code section 17200 et seq., (6) violation of California
Corporations Code section 17704.10 et seq. (7) civil assault, (8) defamation,
and (9) declaratory relief.
TENTATIVE RULING
Plaintiff’s
motion for a preliminary injunction is DENIED.
LEGAL STANDARD
Code of Civil Procedure section 526, subdivision
(a), provides:
An injunction may be granted in the following cases: [¶] (1) When it appears by the complaint that the
plaintiff is entitled to the relief demanded, and the relief, or any part thereof,
consists in restraining the commission or continuance of the act complained of,
either for a limited period or perpetually. [¶] (2) When it
appears by the complaint or affidavits that the commission or continuance of
some act during the litigation would produce waste, or great or irreparable
injury, to a party to the action. [¶] (3) When it appears, during
the litigation, that a party to the action is doing, or threatens, or is about
to do, or is procuring or suffering to be done, some act in violation of the
rights of another party to the action respecting the subject of the action, and
tending to render the judgment ineffectual. [¶] (4) When
pecuniary compensation would not afford adequate relief. [¶] (5) Where it
would be extremely difficult to ascertain the amount of compensation which
would afford adequate relief. [¶] (6) Where the restraint is
necessary to prevent a multiplicity of judicial proceedings. [¶] (7) Where the obligation arises from a trust.
DISCUSSION
Application of Defendants Motion
to Compel Arbitration
A preliminary issue presented is
whether this motion is proper based on the Court’s order for the parties to
submit the action to arbitration and to stay the proceedings. Defendants argue
that the Court should not hear this motion while Plaintiff argues that the
Court is able to hear this motion pursuant to Code of Civil Procedure section
1281.8, subdivision (b), which provides:
A party to an
arbitration agreement may file in the court in the county in which an
arbitration proceeding is pending, or if an arbitration proceeding has not
commenced, in any proper court, an application for a provisional remedy in
connection with an arbitrable controversy, but only upon the ground that the
award to which the applicant may be entitled may be rendered ineffectual without
provisional relief. The application shall be accompanied by a complaint or by
copies of the demand for arbitration and any response thereto. If accompanied
by a complaint, the application shall also be accompanied by a statement
stating whether the party is or is not reserving the party's right to
arbitration.
The Court deems that it may rule on
the present motion concurrently with its order to grant Defendants’ motion to
compel arbitration.
Motion for Preliminary Injunction
Plaintiff argues that Defendants
have acted improperly by shutting him out of all business operations, making
unauthorized distributions, and failing to properly investigate customers complaints
about potential safety hazards. Plaintiff asserts that he contributed $100,000
initially and advanced another $114,000 to FAKK.
“A trial court may grant a
preliminary injunction upon a showing that (1) the party seeking the injunction
is likely to prevail on the merits at trial, and (2) the ‘interim harm’ to that
party if an injunction is denied is greater than ‘the [interim] harm the
[opposing party] is likely to suffer if the ... injunction is issued.’
[citation.] These two showings operate on a sliding scale: ‘[T]he more likely
it is that [the party seeking the injunction] will ultimately prevail, the less
severe must be the harm that they allege will occur if the injunction does not
issue.’ [citation.] ” (Integrated Dynamic Solutions, Inc. v. VitaVet Labs,
Inc. (2016) 6 Cal.App.5th 1178, 1183.)
“Although preliminary injunctions are generally
designed to ‘preserve the status quo pending a determination on the merits of
the action’ [citation], they are not so limited.” (Integrated Dynamic
Solutions, Inc. v. VitaVet Labs, Inc, supra, 6 Cal.App.5th at p. 1183-84.)
Preliminary injunctions may also be issued to mandate “an affirmative action
that changes the status quo”. (City of Corona v. AMG Outdoor Advertising,
Inc. (2016) 244 Cal.App.4th 291, 299.) However, “[t]he granting of a
mandatory injunction pending trial ‘ “is not permitted except in extreme cases
where the right thereto is clearly established.” ’ ” (Ibid.)
Likelihood
of Success on the Merits
The first issue
is whether Plaintiff has established he is likely to prevail on the merits at
trial. Plaintiff asserts that he has demonstrated a likelihood of success on
his claims for breach of contract, breach of fiduciary duty, accounting,
violation of Corporations Code section 17704.10, constructive trust, and unfair
competition.
A common
issue presented in each of Plaintiff’s claims is that he never withdrew as a
member or manager of FAKK. (Cameli Decl. ¶ 17.) For example, Plaintiff asserts that Defendants have
breached the operating agreement by denying him his rights as a member and by
failing to repay Plaintiff. (Id. ¶ 20.) Plaintiff also asserts that
Defendants breached their fiduciary duty by denying him his rights as a member
and manager, failing to repay Plaintiff, and by improperly conducting business.
Plaintiff’s evidence primarily stems from his own
declaration and documents he asserts supports his position. The Court
recognizes that Plaintiff has somewhat demonstrated a likelihood of success on
the merits of his causes of action. However, Plaintiff’s claims, at this stage,
are primarily supported by his own declaration.
In opposition, Defendants submit declarations stating
that they understood Plaintiff to be withdrawing from FAKK. (Farin Decl. ¶ 8;
Hazma Decl. ¶ 8; Caillat Decl. ¶ 8.) The parties clearly disagree about whether
Plaintiff communicated an intent to withdraw or withdrew from FAKK. Ultimately,
the record before the Court demonstrates a conflict in the parties’ positions.
Balance of Interim Harm
Plaintiff asserts that the balance of hardships favors
him because he is suffering irreparable injuries caused by Defendant’s actions.
Plaintiff argues (1) he is being improperly shut out of FAKK, (2) Defendants
are improperly managing the company, increasing the likelihood of liability,
and (3) he is missing out on providing instructor services.
None of Plaintiff’s asserted injuries are irreparable as
argued. First, Plaintiff’s claim that he is being denied access to a company he
helped found may, in some circumstances, be considered a source of irreparable
harm. However, Plaintiff himself provides that he attempted to negotiate his
separation from FAKK but that the parties were unable to reach an agreement. In
the present case, Plaintiff has not demonstrated that his inability to act as a
member of FAKK is causing him harm that cannot be compensated, especially given
the fact that the parties had attempted to negotiate Plaintiff’s departure.
Plaintiff even acknowledges that the reason the parties did not reach an
agreement regarding his separation from FAKK was because Defendants refused to
provide security for their offer of $215,000. (Cameli Reply Decl. ¶ 3.)
Second, Plaintiff’s claim that Defendants’ mismanagement
of FAKK is causing him irreparable harm is unavailing. Plaintiff asserts that
Defendant’s mismanagement could open him up to liability. Plaintiff does not
explain what type of potential liability could cause him to harm that monetary
damages could not cure. If Plaintiff faces an administrative fine or negative
civil verdict, monetary damages, potentially in a cross suit against
Defendants, could potentially compensate Plaintiff.
Third, Plaintiff’s argument that his inability to provide
his instructor services is causing him irreparable harm is rejected. Plaintiff
is claiming he is being denied the right to market and be paid for a service he
can provide. Plaintiff’s essential claim is for lost economic damages, which can
be remedied by monetary compensation.
On the other hand, Defendants would be forced to allow
Plaintiff, a party with adverse interest, to access all corporate records and
engage in all decision-making activities. The record is not entirely clear as
to how much access and control Plaintiff currently has of FAKK records and
decision making. Additionally, Plaintiff seeks a constructive trust over all of
FAKK’s revenue until the resolution of his lawsuit, which would place an
immense burden on Defendants in the course of running a business that both
parties recognize as financially distressed. Plaintiff has not established that
his interim harm is greater than the harm Defendants face.
Ultimately, Plaintiff has marginally demonstrated a
likelihood of success on the merits of his claims but has failed to demonstrate
the balance of harm weighs in his favor.
.
CONCLUSION
motion for a preliminary injunction is denied. Moving party to give notice.
MOTIONS TO COMPEL ARBITRATION AND FOR STAY OF PROCEEDINGS
MOVING PARTY: Defendants FAKK LLC, Alexandre Caillat, Karim Hazma, Kian Farin, and Jamie Mitchell (collectively “Defendants”)
RESPONDING PARTY: Plaintiff Francesco Cameli
SERVICE: Filed May 26, 2022
OPPOSITION: Filed August 9, 2022
REPLY: Filed August 15, 2022
RELIEF REQUESTED
Defendants move to compel arbitration to for an order staying the proceedings of the present case.
BACKGROUND
This case arises out of complaints involving the operation of FAKK LLC, doing business as Zen Drive Co., (“FAKK”). Plaintiff alleges that he, along with Alexandre Caillat (“Caillat”), Karim Hamza (“Hamza”), and Kian Farin (“Farin”) founded FAKK to set up a shop to provide diving equipment, lessons, and merchandise. Plaintiff alleges that Defendant Jamie Mitchell (“Mitchell”) was added as a member of FAKK. Plaintiff alleges that Defendants improperly conducted business by failing to properly authorize and inspect breathing gas cylinders and improperly storing cylinders.
Plaintiff alleges that when he raised these concerns, Hamza. Plaintiff also alleges that Defendants acted to improperly exclude him from FAKK. Plaintiff filed this complaint on May 10, 2022, alleging nine causes of action for (1) breach of contract, (2) fiduciary duty of care, (3) accounting, (4) constructive trust, (5) unfair competition and unfair business practices in violation of Business and Professions Code section 17200 et seq., (6) violation of California Corporations Code section 17704.10 et seq. (7) civil assault, (8) defamation, and (9) declaratory relief.
TENTATIVE RULING
Defendants’ motion to compel arbitration is GRANTED.
The present proceedings are ordered stayed pending the outcome of the arbitration proceedings.
LEGAL STANDARD
“California and federal law both favor enforcement of valid arbitration agreements.” (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 889.) “A party who files a motion to compel arbitration ‘bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.’’ (Cisnero Alverez v. Altamed Health Services Corporation (2021) 60 Cal.App.5th 572, 580.) “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.” (Code Civ. Proc. section 1281.)
DISCUSSION
Overview
Defendants move for an order compelling arbitration based on the language present in the operating agreement for FAKK. The pertinent language in the operating agreement provides:
Any dispute, controversy or claim arising out of or in connection with this Agreement or any breach or alleged breach hereof shall, upon the request of any party involved, be submitted to, and settled by, arbitration in the city in which the principal place of business of the Company is then located, pursuant to the commercial arbitration rules then in effect of the American Arbitration Association (or at any other time or place or under any other form of arbitration mutually acceptable to the parties involved). Any award rendered shall be final and conclusive upon the parties and a judgment thereon may be entered in a court of competent jurisdiction. The expenses of the arbitration shall be borne equally by the parties to the arbitration, provided that each party shall pay for and bear the cost of its own experts, evidence and attorneys’ fees, except that in the discretion of the arbitrator any award may include the attorney’s fees of a party if the arbitrator expressly determines that the party against whom such award is entered has caused the dispute, controversy or claim to be submitted to arbitration as a dilatory tactic or in bad faith.
(Motion, Exhibit A, at pp. 13-14, section 14.)
The parties disagree about which forum is proper for the arbitration of the present claims. Defendants argue that the operating agreement requires that the case be arbitrated by the American Arbitration Association (“AAA”). Plaintiff, on the other hand, asserts that arbitration through the Judicial Arbitration and Mediation Services (“JAMS”) is also proper. Plaintiff, in accordance with his interpretation of the operating agreement, filed arbitration in JAMS on March 31, 2022. (Sheik Decl. ¶ 5, Exhibit B.)
Defendants provide that Plaintiff agreed to refile the arbitration in AAA, but Plaintiff steadfastly refuses he made any such representation.
Enforcement of Arbitration Provision
Plaintiff first argues that the arbitration clause in the operating agreement should not be enforced because the parties do not agree on the proper arbitration forum. (Opposition at p. 4:19-21.)
“The party opposing arbitration has the burden of demonstrating that an arbitration clause cannot be interpreted to require arbitration of the dispute.” (Rice v. Downs (2016) 248 Cal.App.4th 175, 185.) “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”. (Bono v. David (2007) 147 Cal.App.4th 1055, 1063.)
Plaintiff additionally argues that arbitration should not be ordered because there is a possibility of conflicting rulings.
The operating agreement requires the arbitration proceedings to be “in the city in which the principal place of business of the Company is then located, pursuant to the commercial arbitration rules then in effect of the American Arbitration Association (or at any other time or place or under any other form of arbitration mutually acceptable to the parties involved).” (Motion, Exhibit A, at pp. 13-14, section 14.)
Here, the arbitration provision does not support Plaintiff’s interpretation that the parties must agree to a forum to compel arbitration. Similarly, Defendants’ argument that the operating agreement mandates AAA as the sole proper forum for arbitration is unsupported by the language in the contract. The plain language of the operating agreement requires that arbitration (1) take place in the same city as FAKK’s principal place of business and (2) be conducted pursuant to AAA’s arbitration rules. The operating agreement also provides that the parties may agree to a separate time or place.
The next issue is which forum is proper. Defendants argue that AAA is the only proper forum. Plaintiff counters that JAMS is also proper. Plaintiff additionally provides that because he filed the case in JAMS prior to Defendants’ motion, he should not be required to forfeit the filing fees.
While the Court agrees that Plaintiff’s interpretation that the operating agreement allows for arbitration to be conducted in a different forum, as long as the forum uses AAA rules, Plaintiff has not established that he complied with the requirements of the operating agreement.
First, Plaintiff has not submitted evidence to establish that JAMS would conduct the arbitration pursuant to AAA rules for the dispute at issue. In reply, Defendants highlight how the AAA’s rules and procedures in R-2, provide that “[a]rbitrations administered under these rules shall only be administered by the AAA or by an individual or organization authorized by the AAA to do so.” (Reply, Exhibit A at p. 11, R-2.) Defendants assert that JAMS is not authorized to conduct arbitrations pursuant to AAA rules and that therefore, JAMS is an improper forum.
Second, the operating agreement requires that a party seeking arbitration submit the dispute to arbitration in the “city in which the principal place of business of the Company is then located.” (Motion, Exhibit A, at pp. 13-14, section 14.) According to the operating agreement, the principal place of business for FAKK is at 2020 Lincoln Avenue, Pasadena, California. (Opposition, Exhibit A at p. 1, section 1.) However, Plaintiff’s demand for arbitration form requested that the hearing take place in Los Angeles, California. (Opposition, Exhibit B at p. 4.) Plaintiff has not established that he complied with the requirements of the operating agreements for the proper arbitration forum, and therefore, his argument that the Court should compel arbitration through JAMS is unavailing.
Although there may be another proper forum, the record before the Court supports the conclusion that Defendants’ assertion that JAMS is an improper forum is correct.
Plaintiff’s Tort Claims
The next step is to determine which of Plaintiff’s claim are required to be submitted to arbitration pursuant to the operating agreement. Plaintiff provides that he initially included his tort claims in his petition for arbitration but is now seeking to sever the tort claims from the contract claims. (Opposition at p. 3:4, fn. 1.) Plaintiff requests this Court to retain jurisdiction over the tort claims.
“[T]he decision as to whether a contractual arbitration clause covers a particular dispute rests substantially on whether the clause in question is ‘broad’ or ‘narrow.’ ” (Rice v. Downs, supra, (248 Cal.App.4th 175, 186 “Rice”.) “A ‘broad’ clause includes those using language such as ‘any claim arising from or related to this agreement’ ” [citation] or “arising in connection with the [a]greement”. (Ibid.) “But clauses requiring arbitration of a claim, dispute, or controversy ‘arising from’ or ‘arising out of’ an agreement, i.e., excluding language such as “relating to this agreement” or ‘in connection with this agreement,’ are 'generally considered to be more limited in scope than would be, for example, a clause agreeing to arbitrate “ ‘any controversy ... arising out of or relating to this agreement,’ ” which might thus cover misconduct arising out of the agreement as well as contractual issues.” ’ ” (Ibid.)
The arbitration clause at issue covers “[a]ny dispute, controversy or claim arising out of or in connection with this Agreement or any breach or alleged breach”. (Motion, Exhibit A, at pp. 13-14, section 14.) The first portion of the arbitration clause is like a “broad” arbitration clause as highlighted in Rice.
However, “even under a very broad arbitration provision, such as ‘any controversy or claim arising out of or relating to this agreement,’ tort claims must ‘ “have their roots in the relationship between the parties which was created by the contract ” ’ before they can be deemed to fall within the scope of the arbitration provision.” (Rice, supra, 248 Cal.App.4th at p. 188.)
Here, Plaintiff’s seventh cause of action for civil assault alleges that Hamza charged Plaintiff with the intent to cause harm. (Complaint ¶ 71.) Plaintiff alleges that the dispute arose after he attempted to address certain operational matters with Hamza. (Complaint ¶ 21.) Plaintiff’s eight cause of action for defamation alleges that Hazma made false, negative statements about Plaintiff (Complaint ¶¶ 77-79.) Plaintiff alleges that Hazma made the allegedly defamatory statements about Plaintiff within the diving community, which caused personal and business harm to Plaintiff. (Complaint ¶ 29-30.)
The allegations relate to the business relationship created by the operating agreement. The assault allegations and the defamation allegations similarly stem from Plaintiff’s interactions with Hazma in the context of the business relationship created by the operating agreement. Thus, because the operating agreement contains a broad arbitration clause and Plaintiff’s claims “have their roots in the relationship between the parties which as created by the contract” (Rice, supra, 248 Cal.App.4th at p. 188) Plaintiff’s seventh and eighth causes of action are also ordered to be submitted to arbitration.
Plaintiff additionally argues that arbitration should not be compelled in the present case because his tort claims create the possibility of contrasting rulings.
Code of Civil Procedure section 1281.2, subdivision (c), provides: “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. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.”
Plaintiff asserts that arbitration should not be compelled because the arbitration proceeding may produce a finding of fact surrounding Plaintiff’s tort claims if Defendants assert their actions were justified. However, Plaintiff has not established how that would produce a conflicting ruling. Further, because Plaintiff’s tort claims are encompassed within the broad language of the arbitration provision, there is no risk of conflicting rulings.
CONCLUSION
Defendants’ motion to compel arbitration is granted.
The Parties are ordered to select an arbitration service located in the City of Pasadena which complies with the commercial arbitration rules of the American Arbitration Association or any other forum and location mutually acceptable to the parties.
The present proceedings are ordered stayed pending the outcome of the arbitration proceedings.
The court vacates the case management conference set for October 11, 2022, and sets the matter for a hearing regarding the status of arbitration on March 15, 2022 at 8:30am .
Moving party to give notice.
Dated: August 22, 2022 ___________________________________
Joel L. Lofton
Judge of the Superior Court
Parties who intend to submit on this tentative must send an email to the court indicating their
intention to submit. Parties intending to appear are strongly encouraged to appear remotely.