Judge: John J. Kralik, Case: 24NNCV01243, Date: 2025-02-28 Tentative Ruling

Case Number: 24NNCV01243    Hearing Date: February 28, 2025    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

BACKGROUND

A.    Allegations

Plaintiff 345 North Pass, LLC (“Plaintiff”) alleges that it is the buyer under a Los Angeles Business Purchase Agreement dated May 13, 2022 (“Purchase Agreement”), for the business known as “Lotus and Light” located at 345 N. Pass Ave. in Burbank.  Defendant Sisters & Brothers, LLC (“Defendant”) is alleged to be the seller of the property.  Pursuant to the Escrow Instructions dated June 24, 2022, escrow was to close on or before June 30, 2023.  Plaintiff alleges that under the requirements of the Purchase Agreement, Plaintiff supplied an Initial Deposit and expended funds to conduct due diligence.  Plaintiff alleges that Defendant breached the Purchase Agreement and Escrow Instructions by failing to provide all necessary documentation required for escrow to close and to deliver clean title, free of monetary liens, on or before June 30, 2023.  Plaintiff alleges that on June 30, 2023, Plaintiff received a “Master Estimated Settlement Statement” from escrow confirming that Defendant failed to provide all necessary documentation and which indicated that escrow required an additional $49,722.98 to satisfy all outstanding liens.  Plaintiff alleges that on March 1, 2024, Plaintiff served Defendant with a letter demanding that Defendant perform under the Purchase Agreement, but Defendant failed to perform. 

The complaint, filed April 29, 2024, alleges a single cause of action for breach of contract.  

B.     Motion on Calendar

On November 27, 2024, Defendant filed a motion to compel mediation and/or arbitration. 

On February 14, 2025, Plaintiff filed an opposition brief.

On February 21, 2025, Defendant filed a reply brief.

DISCUSSION

            Defendant moves for an order compelling mediation and/or arbitration.

According to the Business Purchase Agreement at section 30 (Dispute Resolution), the parties agreed to mediate any dispute or claim arising out of the agreement or resulting transaction before resorting to arbitration or court action.  (Mot., Ex. 1 [Business Purchase Agreement at § 30.A].)  The agreement further states that the parties agree to attend arbitration for any dispute or claim that is not settled through mediation.  (Id. at § 30.B.) 

A.    Mediation

            Defendant moves to compel Plaintiff to mediate its claims pursuant to the purchase agreement.  In opposition, Plaintiff argues that the motion for mediation is moot because the parties agreed to attend mediation on February 26, 2025.  (Opp. at p.4.)  In the reply brief, Defendant confirms that the parties have agreed to an in-person mediation on February 26, 2025. 

In light of the parties’ agreement to attend mediation, the motion to compel mediation is moot.  The remaining issue in this motion is whether Plaintiff should be compelled to arbitration. 

B.     Arbitration

The parties dispute whether Defendant waived its right to compel arbitration. 

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].) 

First, Defendant’s actions are not inconsistent with the right to arbitrate.  Initially, Defendant’s default was entered in this action on June 28, 2024 and default judgment was entered on July 2, 2024.  In response, Defendant filed a “MOTION TO SET ASIDE ENTRY OF DEFAULT … MOTION TO COMPEL MEDIATION” on September 30, 2024.  The motion to set aside the default improperly included a motion to compel mediation attached as Exhibit 3.  Defendant has shown that since the beginning of its participation in this action, it has been seeking to enforce the dispute resolution term in the purchase agreement against Plaintiff.

Second, the litigation machinery has not been substantially invoked, and the parties are not well into preparation of the lawsuit.  Other than Plaintiff obtaining a default judgment against Defendant, no other substantive steps have been taken in this action.

Third, no trial date has been set.  A Case Management Conference is set for March 5, 2025.  Plaintiff filed the case on April 29, 2024 and the default/default judgment was set aside on November 1, 2024.  Shortly thereafter, Defendant filed this motion on November 27, 2024.  There has not been an appreciable delay in moving to compel mediation and arbitration since the time that Defendant’s default was vacated. 

Fourth, Defendant has not filed a counterclaim against Plaintiff.

Fifth, the parties have not shown that important intervening steps were taken.  The parties have not stated that they have conducted discovery.  No other motions have been filed.

Sixth, there is little-to-no indications of prejudice.  Plaintiff argues that Defendant has acted in bad faith with respect to liens and the escrow process and that Plaintiff was operating under the assumption that after the default, the escrow would be cancelled.  Defendant argues that Plaintiff delayed in depositing funds in escrow, which delayed Defendant’s ability to satisfy the liens.  These arguments are essentially directed towards the underlying merits of the case.  Although Plaintiff states that it has been operating under the assumption the escrow would be cancelled, Plaintiff has not specified what actions it took to its detriment.  Plaintiff has not shown how it has actually been prejudiced. 

Based on these factors, the Court finds that Defendant has not waived its right to compel arbitration.  As such, the motion to compel arbitration is granted.

CONCLUSION AND ORDER

Defendant Sisters & Brothers, LLC’s motion to compel mediation is denied as moot as the parties have agreed to attend mediation.  The motion to compel arbitration is granted. 

The Court sets a Status Conference re Mediation and Arbitration for August 14, 2025 at 8:30 a.m.  The Case Management Conference currently set for March 5, 2025 is continued to August 14, 2025. 

Defendant shall provide notice of this order.

DATED: February 28, 2025                                       ___________________________

                                                                              John J. Kralik

                                                                              Judge of the Superior Court