Judge John J. Kralik, Case Number: 23BBCV00314, Date: 2023-08-10 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.

Superior Court of California

County of Los Angeles

Department B

Plaintiff Shalva LLC (“Plaintiff”) alleges that in December 2021, Defendant Aaron Shemtov (“Shemtov”) introduced Defendant Angel Chao (“Chao”) to Plaintiff. Plaintiff alleges that Chao made representations about his formula for flipping properties with a substantial return on investment. Plaintiff alleges that on December 17, 2021, Chao entered into the Assignment of Interest in Residential Purchase Agreement with Plaintiff, such that Plaintiff would be assigned interest in property located at 7234 N. 31^st Ave., Phoenix Arizona, Plaintiff would pay Chao funds to do the necessary rehab work, and within 120 days the property would be sold for a profit where net proceeds were split 50/50 between Plaintiff and Chao. (FAC, ¶20, Ex. A.) Plaintiff alleges that it signed the agreement and wired $5,000 to Chao, and then wired $28,033.45 to Chao on December 20, 2021 to purchase the property. Plaintiff alleges that the original project overview indicated the property would be fully improved and on the market by March 2022, which was then forecasted for April 2022.

Plaintiff alleges that on July 29, 2021, Chao made similar representations about a second property located at 4512 N 48th Dr., Phoenix, Arizona, and the parties entered into the Assignment of Interest in Residential Purchase Agreement regarding the second property. (FAC, ¶26, Ex. B.) Under the second agreement, the property was to be purchased with a hard money loan in the amount of $209,000 with an additional $33,000 in disbursement/reimbursement built in for renovation. Plaintiff alleges that on December 30, 2021, it wired $63,145 plus an additional earnest deposit of $5,000 to secure its interest in the property. Although Chao represented he was not receiving renovation permits, he reassured Plaintiff of anticipated profits. On February 22, 2022, Chao sought $30,000 for repairs for the second property and Plaintiff wired the money, but had concerns about finishing the project in time. Plaintiff alleges that on March 31, 2022, Chao sought an additional $30,000. On April 4, 2022, Plaintiff wired Chao an additional $15,000 in order to aid wrapping up the project. However, on April 29, 2022, Plaintiff alleges that Chao stated the second property was “out of rotation” and that he was not working on the property. Plaintiff alleges that on June 28, 2022, Chao represented that he wanted to renege on the deals because he did not have funding. Plaintiff alleges that had it known that Chao was doing improvements without the requisite license and permits, it would not have entered not the transactions.

The first amended complaint (“FAC”), filed April 17, 2023, alleges causes of action for: (1) breach of written contract; (2) breach of written contract; (3) promissory fraud; (4) money had and received; (5) conversion; (6) breach of fiduciary duty; (7) violation of Business & Professions Code § 7031; (8) violation of Business & Professions Code § 17500; (9) negligence; and (10) accounting and declaratory relief.

On April 4 and 5, 2023, Plaintiff amended the complaint to name Doe 1 as eXp World Holdings, Inc.; Doe 2 as Joel Feldman; Doe 3 as Lisa Carrol; Doe 4 as Chao Enterprises; Doe 5 as Versatile Building Systems LLC; and Doe 6 as EXP Realty of California Enterprise, Inc.

On May 11, 2023, Defendants Exp Realty, LLC and Exp Realty of California Enterprise, Inc. (“Exp Defendants”) filed a motion to dismiss or stay Plaintiff’s action for forum non conveniens.

With the moving papers, Exp Defendants submitted a request for judicial notice of Exhibits: (A) Arizona Secretary of State filings for the Arizona entity called No Hassle Cash Sale AZ LLC dated March 4, 2016 and October 24, 2019; (B) Arizona Secretary of State filing for the Arizona entity called Versatile Building Systems, LLC dated April 2, 2022; (C) Arizona Secretary of State website for the entity known as Chao Enterprises; (D) Washington State Secretary of State filings for the Washington State entity called EXP Realty, LLC dated October 16, 2019 and November 15, 2021; and (E) California Secretary of State filings for the California entity called EXP Realty of California Enterprise, Inc. dated July 15, 2022 and January 5, 2023. In addition, Exp Defendants request judicial notice of documents filed with this Court, including the original complaint (which attached the subject contract as Exhibits A and B), the Doe Amendments, and FAC, and various proofs of service.

The Court grants the request for judicial notice of Exhibits A-E. (Evid. Code § 452(c); Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 518.) The Court also grants the request for judicial notice of documents filed with this Court. (Evid. Code, § 452(d).)

“When a court upon motion of a party or its own motion finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just.” (CCP § 410.30(a).) CCP § 418.10(a)(2) states: “A defendant, on or before the last day of his or her time to plead or within any further time that the court may for good cause allow, may serve and file a notice of motion for one or more of the following purposes: … To stay or dismiss the action on the ground of inconvenient forum.”

"A court may, in its discretion, choose to refrain from exercising its jurisdiction to hear a case if the case may be more appropriately tried elsewhere. [Citations omitted] California codified this principle, known as forum non conveniens, in Code of Civil Procedure section 410.30. The moving party bears the burden of showing that the case should be tried elsewhere." (Chong v. Superior Court (1997) 58 Cal.App.4th 1032, 1037- 1038; Morris v. AGFA Corp. (2006) 144 Cal.App.4th 1452, 1462.) “[T]he evidence before the court, which may include affidavits of the parties, discovery responses, and the undisputed general knowledge of the nature of the action, need only be sufficient to give the court the ability to soundly exercise its discretion regarding the applicability of the general considerations of the Stangvik [citation], factors to the question of forum non conveniens.” (Morris v. AGFA Corp. (2006) 144 Cal.App.4th 1452, 1462.)

“In applying the traditional forum non conveniens analysis, the trial court must engage in a two-step process, on which the defendant bears the burden of proof. (Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744, 751.) In the first step, the court must determine whether a suitable alternative forum exists. (Id.) If the court finds that a suitable alternative forum exists, it must then balance the private interests of the litigants and the interests of the public in retaining the action in California.” (Animal Film, LLC v. D.E.J. Productions, Inc. (2011) 193 Cal.App.4th 466, 472.) “The private interest factors are those that make trial and the enforceability of the ensuing judgment expeditious and relatively inexpensive, such as the ease of access to sources of proof, the cost of obtaining attendance of witnesses, and the availability of compulsory process for attendance of unwilling witnesses. The public interest factors include avoidance of overburdening local courts with congested calendars, protecting the interests of potential jurors so that they are not called upon to decide cases in which the local community has little concern, and weighing the competing interests of California and the alternate jurisdiction in the litigation.” (Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744, 751.) The trial court’s balancing is given substantial deference. (Chong, supra, 58 Cal.App.4th at 1038.)

Exp Defendants specially appear[1] to move for an order staying or dismissing this action for the convenience of the parties and witnesses, so that the parties’ dispute can be litigated in the State of Arizona where the evidence, parties, and witnesses pertinent to the action are located other than Plaintiff itself, who Exp Defendants argue purposefully availed itself to the laws of the State of Arizona per the subject transactions.

First, Exp Defendants argue that Arizona is a suitable forum because Exp Defendants stipulate that they will submit to the jurisdiction in Arizona and to the tolling of the statute of limitations period during the pendency of this action in California if needed. Exp Defendants argue that the subject properties at issue in this action are based in Arizona, the conduct at issue (i.e., rehab work done by contractors) occurred in Arizona, and all the Defendants are located in Arizona. Plaintiff’s FAC is devoid of any information regarding where the parties are located. (See FAC, ¶¶1-11.) According to the request for judicial notice documents, No Hassle is an Arizona limited liability company and its agent Chao is located in Arizona. (Def.’s RJN, Ex. A.) Versatile and Chao Enterprises are also Arizona companies. (Id., Ex. B [Versatile], Ex. C [Chao Enterprises].) EXP Realty is a Washington state limited liability company that is authorized to and conducts business in Arizona. (Id., Ex. D.) With respect to Joel Feldman, Lisa Carrol, and Aaron Shemtov, there is no information on where these individuals are located—in the FAC or in the request for judicial notice. (See FAC, ¶¶3, 4, 11.) With respect to EXP Realty of California (a California corporation), Exp Defendants argue that the entity was fraudulently joined in an attempt by Plaintiff to defeat diversity and that the joinder is improper because EXP Realty of California did not exist at the time the contracts were entered into on December 17 and 29, 2021, as it was not formed until April 29, 2022.[2] (See Def.’s RJN, Ex. E.) They argue that they are not parties to the contracts referenced in the FAC and are only named as defendants to the 9^th cause of action for negligence. Exp Defendants argue that other than Plaintiff, which is a California entity who has purposefully availed itself to Arizona laws by entering into the subject contracts, there is no connection to California.

In opposition, Plaintiff does not discuss whether Arizona is or is not a suitable forum. Rather, Plaintiff’s opposition focuses on the second part of the discussion regarding the private and public interests in the litigation.

Second, Exp Defendants argue that the private and public interest factors warrant dismissal of the action in California. They argue that the private interests include the two contracts with Arizona citizens concerning Arizona properties with breaches that occurred in Arizona (i.e., unlicensed contractor rehab work that occurred in Arizona), plus Plaintiff purposefully availed itself to Arizona’s laws when it entered into the subject contracts. They argue that public interest factors also weigh in favor of granting this motion because Plaintiff’s claims could potentially clog the California court system and place an unfair burden on California jurors and taxpayers for non-local concerns, California lacks a local interest in the controversy while Arizona has a significant interest in the litigation, Plaintiff was injured in Arizona, witnesses and potential experts would be located in Arizona, the alleged tortious conduct occurred in Arizona, the FAC cites to Arizona law (see FAC, ¶ 70 at page 11, lines 3-5, and ¶71 at page 11, lines 24-28), and there are comparable laws in Arizona for California Business & Professions Code claims.

In opposition, Plaintiff argues that the suit is brought by a California Plaintiff as to causes of action that arose in California. Plaintiff argues that this action arises from a promissory fraud surrounding contracts Chao entered into with Plaintiff and thus the wrongful conduct occurred in California. Plaintiff argues that every interaction between Plaintiff and Chao was done in California across state lines via videoconference and that the contracts were “entered into” in California. Plaintiff argues that litigating the case in California would not be much more expensive to Defendants because the focus of the case would be on Chao’s intent at the time he communicated with California Plaintiff and entered into the contracts in California, whether Chao and his legal entities had licensure to do the work, and what representations/omissions Exp Defendants made in California. Plaintiff argues that these issues can be easily litigated via written discovery and remote depositions and Plaintiff having to pursue Defendants in Arizona would impose an undue burden and expense on Plaintiff.

At this time, the Court lacks evidence to determine whether this action should be dismissed on forum non conveniens grounds and would be better litigated in Arizona. For example, as acknowledged by Exp Defendants, it is unclear where the individual Defendants Joel Feldman, Lisa Carrol, and Aaron Shemtov reside and whether they are located in Arizona versus California. Plaintiff’s complaint and FAC do not allege any facts regarding the parties’ residence or place of business. Further, it does not appear that any discovery has been done at this early stage of the proceeding to determine where the individual Defendants reside. In addition, as none of the other parties in this action have joined in with Exp Defendants in their motion to dismiss, the other Defendants have not informed the parties or the Court whether this case would best be litigated in Arizona based on the convenience of the parties, witnesses, and experts in this action. Exp Defendants have not named any persons of who would be potential witnesses, the cost of obtaining attendance of witnesses, etc. or why written discovery and remote depositions would not be adequate. As such, the Court finds that Exp Defendants have not established their burden of showing that the private interests weigh in favor of dismissing this action in California. As for the public interest concerns, Exp Defendants’ arguments are general and conclusory regarding the California court system and about Arizona law equally applying to the facts of the case. Thus, Exp Defendants have also not established that the public interests weigh in favor of dismissing this action on forum non conveniens grounds at this time.

Thus, the Court denies the motion to dismiss or stay the action for forum non conveniens. The motion will be denied without prejudice as Exp Defendants may discover further facts that would better support this motion.

Defendants Exp Realty, LLC and Exp Realty of California Enterprise, Inc.’s motion to dismiss or stay Plaintiff’s action for forum non conveniens is denied without prejudice.

[1] Exp Defendants argue that they have not been properly served and that EXP Realty of CA has not yet been served with any papers in this action. The Court notes that Exp Defendants have not filed a motion to quash service of the summons and complaint.

[2] In opposition, Plaintiff argues that joining the Exp Defendants was done based on good cause because Exp Realty “clothed” Chao with authority and, thus, Plaintiff was justified in believing that it was dealing with an agent of Exp Realty under the principles of ostensible agency. (Opp. at p.10.) However, Plaintiff has not explained why it added Exp Realty (California) to the action though it was not formed at the time the contracts were entered into in December 2021 and was only created on April 29, 2022 and thus would not have been an “agent” of Chao at that time.