Judge: John J. Kralik, Case: 22BBCV00550, Date: 2023-01-17 Tentative Ruling


Counsel who wish to submit on the tentative ruling may do so by emailing BURDeptB@lacourt.org

PLEASE WRITE THE CASE NUMBER AND PARTY YOU REPRESENT.  YOU MAY ONLY SUBMIT ON BEHALF OF THE PARTY YOU REPRESENT.  YOU MAY NOT SUBMIT ON BEHALF OF ANOTHER PARTY.Counsel are directed to cc all other counsel if you are submitting on the tentative ruling.

IF YOU HAVE QUESTIONS OR NEED CLARIFICATION ON THE TENTATIVE, YOU MUST APPEAR AND ADDRESS YOUR QUESTIONS TO THE COURT.

IF BOTH SIDES SUBMIT ON THE TENTATIVE RULING, THE TENTATIVE RULING THEN BECOMES THE ORDER OF THE COURT ON THE MOTION DATE AND NO APPEARANCES ARE NECESSARY.


THERE WILL BE NO RESPONSES TO ANY INQUIRIES SUBMITTED THROUGH THIS SITE.


THANK YOU!




Case Number: 22BBCV00550    Hearing Date: January 17, 2023    Dept: NCB

 

Superior Court of California

County of Los Angeles

North Central District

Department B

 

 

XML TEAM SOLUTIONS, LLC, et al.,

                        Plaintiffs,

            v.

JAMISON CALSYN, et al., 

                        Defendants.

 

 

  Case No.:  22BBCV00550

   

  Hearing Date:  January 17, 2023

 

 [TENTATIVE] order RE:

motion to compel arbitration and stay proceedings  

 

 

BACKGROUND

A.    Allegations

Plaintiffs Alan Karben is the Chief Executive Officer and Ronit Karben is the Director of Finance and Human Resources of Plaintiff XML Team Solutions, LLC (“XML LLC”).  Alan Karben founded KML Team Solutions, Inc. (“XML Inc.”) in 2003, which is a company that specializing in delivering and integrating live sports data feeds.  In 2006, XML Inc. formed XML Team Solutions Corp. of Ontario (“XML Canada”). In October 2009, XML Canada acquired Fantasy Sports Services (“FSS”). 

Defendant Icon Sportswire, Inc. (“Icon”) was allegedly formed by its two shareholders, Defendants Jamison Calsyn and Timothy Curlee. 

On April 1, 2013, XML Inc. and Icon merged through a formation of a new entity, Plaintiff XML LLC.  They entered into an Operating Agreement whereby XML Inc. would have 75% membership interest and Icon would have 25%.  Thereafter, Icon and XML Inc. dissolved and those shareholders became members of XML LLC with Alan Karben assuming 75% membership interest, Calsyn assuming 18.0555% interest, and Curlee assuming 6.9445% interest.  XML LLC assumed all of XML Inc.’s interest in XML Canada, which in turn wholly owns FSS (hereinafter, “XML Entities”).  From Spring 2013 through Spring 2016, XML LLC faced many financial challenges and diminishing revenues.

On May 14, 2021, Curlee and Calsyn, individually and as derivative claimants in their capacity as members of XML LLC, filed a demand for arbitration against Karben with JAMS.  On April 15, 2022, Plaintiffs filed a lawsuit against Calsyn and Curlee in LASC Case No. 22BBCV00249.  On May 2, 2022, Curlee, Calsyn, Alan Karben, and Ronit Karben (Alan Karben’s wife) attended a mediation, and the parties discussed the arbitration claims.  The parties reached a Short Form Settlement Agreement, which contemplated a Long Form Settlement, Separation Agreement, and Mutual Release Agreement.  The parties were not able to reach agreement on the Long Form agreements, which have never been signed. Plaintiffs allege that the failure to reach these long form agreements constituted Defendants’ repudiation of the Short Form.

The complaint, filed July 28, 2022, alleges causes of action for: (1) declaratory relief; (2) breach of the short form agreement; (3) breach of the implied covenant of good faith and fair dealing – settlement; (4) breach of employment agreement; (5) breach of fiduciary duty; (6) breach of the duty of loyalty; (7) unfair competition (Bus. & Profs. Code, §§ 17200 et seq.); and (8) breach of the implied covenant of good faith and fair dealing – operating agreement.   

B.     Motion on Calendar

On October 12, 2022, Defendants Calsyn, Curlee, and Icon filed a motion to compel arbitration and stay the proceedings.

On December 29, 2022, Plaintiff filed an opposition brief.

On January 5, 2023, Defendants filed a reply brief.

REQUEST FOR JUDICIAL NOTICE

            With the opposition papers, Plaintiffs submitted a request for judicial notice of Exhibits: (A) Calsyn and Curlee’s motion to enforce the settlement in LASC Case No. 22BBCV00249 filed in this Court on July 25, 2022; (B) Calsyn and Curlee’s ex parte application for an order to enforce the settlement agreement in LASC Case No. 22BBCV00249 filed on August 11, 2022; and (C) Calsyn, Curlee, and Icon’s declaration of demurring party in support of automatic extension filed in this action on September 9, 2022.  The request is granted.  (Evid. Code, § 452(d).) 

With the reply papers, Defendants submitted a request for judicial notice of Exhibit A, which was Plaintiffs’ opposition to Defendants’ ex parte application for an order to enforce the settlement agreement in LASC Case No. 22BBCV00249.  The request is granted.  (Evid. Code, § 452(d).) 

DISCUSSION

Defendants move to compel Plaintiffs to submit to arbitration and stay this action pending the outcome of the arbitration. 

A.    Terms of the Arbitration Agreement: Is there an enforceable agreement to arbitrate?

Defendants argue that arbitration is proper pursuant to the arbitration provisions contained in XML LLC’s Operating Agreement and XML LLC’s Executive Employment Agreements with Calsyn and Curlee.  In contrast, Plaintiffs argue that the applicable document is the Short Form Settlement Agreement, which does not contain an arbitration provision but instead requires the parties to litigate their action based on the Los Angeles Superior Court’s retention of jurisdiction pursuant to CCP § 664.6. 

The Court notes that copies of the Operating Agreement and Employment Agreements were not attached to the moving papers but were attached as Exhibits A-C of the declaration of Alan Karben with the opposition papers.

The Operating Agreement at section 16 states:

16. MANDATORY BINDING ARBITRATION. Upon the request of a party to this Agreement any claim, controversy or other dispute regarding this Agreement, including any breach or interpretation of this Agreement (each a “Dispute”), shall be settled and resolved by binding arbitration in Los Angeles, California, before Judicial Arbitration and Mediation Services, Inc. (“JAMS”). The arbitration shall be conducted in accordance with JAMS’ rules and procedures, except as expressly modified by this paragraph. ln reaching a decision on any Dispute, the arbitrator shall be bound by the provisions of this Agreement and by the law that the parties have selected to govern the enforcement and interpretation of this Agreement. The arbitrator’s decision on the Dispute shall be a final and binding determination and shall be fully enforceable as an arbitration award in any court having jurisdiction and venue over the parties. The arbitrator shall also award the prevailing party such party’s reasonable attorneys’ fees, and the other party shall pay the arbitrator’s fees and expenses. For such purpose, the arbitrator shall determine the prevailing party. Each party to this Agreement submits to the exclusive jurisdiction of the courts located in Los Angeles County, California, for purposes of compelling arbitration or giving legal confirmation of any arbitration award. Each party also agrees to accept service of process for all arbitration proceedings in accordance with JAMS’ rules. Nothing in this paragraph shall prevent any party from: (i) seeking and obtaining injunctive or other equitable relief through an action in court; (ii) joining any party as a defendant in any action brought by or against a third party; (iii) bringing an action in court to effect any attachment or garnishment; or (iv) bringing an action in court to compel arbitration as required by this paragraph.

(Operating Agreement, § 16 at p.24.)  Each page of the Operating Agreement is initialed by “CW” (Chris Williams), “EM” (Elliot Markman), “JKC” (Jamison K. Calsyn), “AK” (Alan Karben), and “TIC” (Tim Curlee), and signed by the same individuals at the end of the document. 

            Curlee and Calsyn each executed an Employment Agreement.  The Employment Agreements at section 11 include the same arbitration provision:

11. BINDING ARBITRATION. Upon the request of either party to this Agreement, any claim, controversy or other dispute (a “Dispute”) arising from or relating to this Agreement or the breach thereof shall be settled and resolved by binding arbitration in Los Angeles, California, before Judicial Arbitration and Mediation Services, Inc. (“JAMS”). The arbitration shall be conducted in accordance with JAMS’ rules and procedures, except as expressly modified by this paragraph. The arbitrator’s decision on the Dispute shall be a final and binding determination and shall be fully enforceable as an arbitration award in any court having jurisdiction and venue over the parties. The arbitrator shall also award the prevailing party such party’s attorneys’ fees, and Company shall pay the arbitrator’s fees and expenses. For such purpose, the arbitrator shall determine the prevailing party. Each party to this Agreement submits to the exclusive jurisdiction of the courts located in Los Angeles County, California, for purposes of compelling arbitration or giving legal confirmation of any arbitration award. Each party also agrees to accept service of process for all arbitration proceedings in accordance with JAMS’ rules. Nothing in this paragraph shall prevent any party from: (i) seeking and obtaining injunctive or other equitable relief through an action in court; (ii) joining any party as a defendant in any action brought by or against a third party; (iii) bringing an action in court to effect any attachment or garnishment; or (iv) bringing an action in court to compel arbitration as required by this paragraph.

(Employment Agreements at § 11 at pp.9-10.) 

            A copy of the Short Form agreement is not provided.  Calsyn states in his declaration that the Short Form explicitly stated: “To the extent that there is any dispute as to the meaning or purpose of any of the foregoing terms, the parties hereto will attempt to resolve such disputes through consultation with mediator Jeff Kichaven.”  (Calsyn Decl., ¶8.)  Plaintiffs argue that the Short Form expressly stated that the Los Angeles Superior Court shall retain jurisdiction over the parties to enforce the agreement pursuant to CCP § 664.6 and that it did not include an arbitration provision.  (Opp. at pp. 1 and 3.) 

            As pointed out by Defendants in their reply brief, Plaintiffs are estopped from arguing that CCP § 664.6 conferred upon this Court jurisdiction concerning enforcement of the Short Form.  Defendants provide Plaintiffs’ opposition to Defendants’ ex parte application for an order to enforce the settlement agreement pursuant to CCP § 664.6 in LASC Case No. 22BBCV00249, wherein Plaintiffs argued:

In this instant Application, Defendants cite to the Short Form to support their claim that the parties agreed for the Court to retain jurisdiction to enforce the Short Form. This argument is flawed on multiple levels. The Court did not and could not have retained jurisdiction pursuant to CCP § 664.6. Nor can the Court set aside the dismissal and retain jurisdiction.

 

Notwithstanding the language in the Short Form, the parties did not request the court to retain jurisdiction prior to the dismissal as required by CCP §664.6.

(Def.’s Reply RJN, Ex. A [Pl.’s Opp. to Def.’s Mot. to Enforce Settlement at p.8].)  As such, by Plaintiffs’ own admission, the Court did not undertake to retain jurisdiction of the enforcement of the Short Form as such a request was not previously made in LASC Case No. 22BBCV00249 prior to dismissal. 

            Further, Plaintiffs’ own complaint alleges:

·         “Plaintiffs further contend that the Short Form is void and unenforceable also because it is too vague, ambiguous, lacks critical provisions and was entered into through the Mediation Parties’ mistake.”  (Compl., ¶73.)

·         “Plaintiffs further contend, that even if the Short Form was binding, it became voidable at Plaintiff’s option because Defendants explicitly repudiated and breached the agreement. Indeed, the Short Form does not contain a severability clause.”  (Id., ¶74.)

·         “Plaintiffs further contend that the Short Form is certainly not binding on XML, as XML is not a signatory to the Short Form, did not participate in the Mediation and was not represented by legal counsel.” (Id., ¶75.) 

·         “Moreover, Plaintiffs further contend that the Short Form alone cannot be binding as according to XML’s Operating Agreement, XML cannot enter into some of the obligations listed in the Short Form without adequate corporate resolutions as well as the necessary transfer, assignment and license agreements (also of which Defendants refused to consider or sign).”  (Id., ¶76.) 

Thus, based on Plaintiffs’ allegations in the complaint, Plaintiffs’ position is that the Short Form is invalid and unenforceable.  Thus, their position that dispute resolution should be governed by the Short Form (i.e., its lack of an arbitration provision) is contravened by their own pleadings in which they seek to invalidate the Short Form in its entirety.

            The Court finds that Defendants have shown that there is a valid agreement to arbitrate between the parties based on the terms of the Operating Agreement and the Employment Agreements.  The scope of the arbitration provisions in these agreements are sufficiently broad to include the claims of this action, as arbitration may be compelled for any claim, controversy, or dispute regarding the Operating Agreement and Employment Agreements, including any breach thereof.  For example, the 4th and 5th causes of action are for breach of the Employment Agreements and breach of fiduciary duties based on the Employment Agreements.  (See Compl., ¶¶112, 122.)  The 6th cause of action for breach of the duty of loyalty also arises from the individual Defendants’ duty owed to XML LLC as employees and executives of the company, which is a byproduct of the Employment Agreements and the Operating Agreement.  (Id., ¶¶128, 130(i).)  The 7th cause of action is for breach of the implied covenant of good faith and fair dealing regarding Defendants’ breach of the Operating Agreement.  (Id., ¶141.)  While the 1st to 3rd causes of action for declaratory relief, breach of the Short Form Agreement, and breach of the covenant of good faith and fair dealing (Settlement) are regarding the Short Form and Settlement, these three causes of action relate to and arise from the Operating Agreement and Employment Agreements—without these documents, the parties’ initial dispute would not have arisen. 

            As such, the Court finds there is an enforceable agreement to arbitrate the claims asserted in the complaint and the scope of the arbitration provisions are sufficiently broad to cover the claims in this action between Plaintiff Alan Karben, Plaintiff XML LLC, Defendant Calsyn, and Defendant Curlee.    

B.     Non-signatories

In opposition, Plaintiffs argue that the Court should not compel arbitration because Plaintiff Ronit Karben and Defendant Icon are not parties to the Operating Agreement or Employment Agreements. 

With respect to Icon, Icon has shown its assent to arbitration by filing the instant motion to compel arbitration.  Further, Defendants argue that Plaintiff cannot have it both ways by alleging in the complaint that Icon breached the Short Form, Operating Agreement, and Employment Agreements, and now contradictorily arguing in opposition that Icon was not a signatory to the aforementioned agreements.  (Reply at p.6.)  “[I]f a plaintiff relies on the terms of an agreement to assert his or her claims against a nonsignatory defendant, the plaintiff may be equitably estopped from repudiating the arbitration clause of that very agreement. In other words, a signatory to an agreement with an arbitration clause cannot ‘have it both ways'; the signatory ‘cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed by the agreement, which contains an arbitration provision, but, on the other hand, deny arbitration's applicability because the defendant is a non-signatory.’”  (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 220.)  “Under the doctrine of equitable estoppel, as applied in both federal and California decisional authority, a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are intimately founded in and intertwined with the underlying contract obligations.”  (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495.)

            With respect to Ronit Karben, Defendants argue that her claims are in an official capacity as an agent and Director of Finance and Human Resources of XML LLC.  (Reply at p.7.)  An arbitration agreement cannot bind nonsignatories, absent a judicial determination that the nonsignatory falls within the limited class of third-parties who can be compelled to arbitrate.  (Benaroya v. Willis (2018) 23 Cal.App.5th 462, 468.)  “There are circumstances in which nonsignatories to an agreement containing an arbitration clause can be compelled to arbitrate under that agreement. As one authority has stated, there are six theories by which a nonsignatory may be bound to arbitrate: ‘(a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or alter ego; (e) estoppel; and (f) third-party beneficiary’ [citations].” (Id. at 469.)  Plaintiffs’ own complaint alleges that Ronit Karben is the Director of Finance and Human Resources of XML LLC.  (Compl., ¶3.) 

            Thus, the Court finds that non-signatories Icon and Ronit Karben are bound by the arbitration agreement. 

C.     Waiver

 Plaintiffs also argue that the Court should deny this motion because Defendants waived their right to arbitrate the claims. 

Public policy favors arbitration such that claims of waiver receive “close judicial scrutiny” and the party seeking to establish waiver bears a heavy burden.  (Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 444.)  Waiver in the arbitration context does not require a voluntary relinquishment of a known right; rather, a party may be said to waive its right to arbitration by an untimely demand, without intending to give up that remedy.  (Id.)  In this context, waiver is more like a forfeiture arising from the nonperformance of a required act.  (Id.)  Relevant factors to consider in determining whether a party waived its right to arbitrate claims include: “(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay ‘affected, misled, or prejudiced’ the opposing party.”  (Id. at 444 [internal quotation marks omitted].) 

Plaintiffs argue that Defendants filed a motion to enforce the terms of the Short Form in LASC Case No. 22BBCV00249 on July 25, 2022, and then filed an ex parte application on August 11, 2022 to enforce the Short Form.  (Pl.’s RJN Exs. A-B.)  They argue that Defendants then engaged in meet and confer efforts to discuss a demurrer on September 8, 2022 and filed a Declaration of Demurring Party in Support of Automatic Extension on September 9, 2022 in this action.  (Id., Ex. C.)  Plaintiffs argue that Defendants delayed in filing this motion 5 months after this action was commenced, Plaintiffs already served Defendants with discovery such that important intervening steps have occurred, and Defendants’ delay misled or prejudiced Plaintiffs.  They argue that these actions indicate that Defendants believed that the Los Angeles Superior Court had jurisdiction over the parties’ disputes. 

Plaintiffs filed this action on July 28, 2022.  Whatever happened in LASC Case No. 22BBCV00249 is separate and distinct from this action and Defendants’ actions in moving or failing to move to compel arbitration in that action will not be counted against Defendants in this action.  Defendants argue that they did not wait 5 months to file this motion, but served a demand for arbitration on October 7, 2022 (before engaging in any discovery or filing a responsive pleading themselves) and filed this motion on October 12, 2022.  Defendants’ actions are not inconsistent with the right to arbitrate, as a review of the docket shows that this is the first motion Defendants filed with the Court.  Trial has not yet been set and Defendants did not delay the filing of this motion for a long period.  Defendants have not filed a counterclaim against Plaintiffs.  While Plaintiffs may have propounded discovery on Defendants, Defendants have not yet engaged in discovery.  Based on the Court’s review, it does not appear that the “litigation machinery has been substantially invoked.”  Finally, Plaintiffs have not shown how they were materially prejudiced by this motion. 

Thus, the factors weigh in finding that Defendants did not waive their right to seek arbitration.

D.    Stay of the Proceedings

Under CCP § 1281.4, when the Court has ordered the arbitration of a controversy, the Court 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.

Since the Court orders the arbitration of this matter, the Court also stays the action until the arbitration is completed.

CONCLUSION AND ORDER

Defendants Jamison Calsyn, Timothy Curlee, and Icon Sportswire, Inc.’s motion to compel arbitration and stay the action pending the resolution of the arbitration is granted. 

In light of the ruling on this motion, the Case Management Conference set for this date of January 17, 2023 is taken off-calendar.

The Court sets an Order to Show Cause re: Status of the Arbitration for September 7, 2023 at 8:30 a.m.

Defendant shall provide notice of this order.