Judge: Jon R. Takasugi, Case: 23STCV21862, Date: 2024-05-30 Tentative Ruling

Case Number: 23STCV21862    Hearing Date: May 30, 2024    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendant’s motion to compel arbitration is GRANTED. This matter is ordered stayed pending the completion of arbitration proceedings.

            On 9/11/2023, Paul Morris (Plaintiff) initiated this action. On 1/4/2024, Plaintiff filed a first amended complaint (FAC) against Gary Keller, Tom R. Lamphere, Jan S. Richey, Caltex Millennium, LLC, and Keller Williams Realty, Inc., alleging: (1) intentional interference with prospective business advantage; (2) negligent interference with prospective business advantage; and (3) unfair competition.

            On 4/2/2024, Defendants Gary Keller, CalTex Millennium, LLC, and Keller Williams Realty (collectively, Defendants) moved to compel Plaintiff to arbitrate this action, and stay proceedings.

Legal Standard

Where the Court has determined that an agreement to arbitrate a controversy exists, the Court shall order the petitioner and the respondent to arbitrate the controversy …unless it determines that…  grounds exist for rescission of the agreement.” (Code Civ. Proc., § 1281.2.) Among the grounds which can support rescission are fraud, duress, and unconscionability. (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.) The Court may also decline to compel arbitration wherein there is possibility of conflicting rulings on a common issue of law or fact. (Code Civ. Proc., § 1281.2 (c).)

Discussion

The party moving to compel arbitration “bears the burden of proving [the] existence [of an arbitration agreement] by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) The moving party also bears the burden of demonstrating that the claims fall within the scope of the arbitration agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.)

A.    Existing Agreement

Here, Defendants submitted evidence that Plaintiff is compelled to arbitrate under two different agreements: (1) a Letter Agreement signed on 5/7/2006; and (2) a Regional Representative Agreement (RRA) entered into on 1/8/2016.

As for the Letter Agreement, the Letter Agreement stated:

Arbitration. Any dispute or controversy arising under or in connection with this agreement shall be settled exclusively by binding arbitration to be held in Dallas County, Texas, in accordance with the rules of the American Arbitration Association then in effect.

            (Lamphere Decl., Exh. A., ¶ 12.)

            While the Letter Agreement contained a provision—paragraph two—which states that it expired after five years—Defendants submitted evidence that Plaintiff continued to be Regional Director for CalTex long after that five year period and CalTex and Morris continued to operate under the Letter Agreement until CalTex terminated Morris’s role as noticed in June 2021. (See e.g. Lamphere Decl., ¶ 7.) To show a clear intent and belief to extend the Letter Agreement, Defendants note that “Lamphere specifically referenced the Letter Agreement in his termination email to Morris and gave Morris the 90 days’ advance notice of termination required under the Letter Agreement. If the Letter Agreement were not still in effect at that time, Morris could have been terminated with no notice, and CalTex could have avoided paying Morris for an extra three months’ of services.” (Motion, 8: 20-23.) 

            Defendants submitted case law to show that where the parties’ actions manifest a clear and unequivocal intent to continue performing under the contract, the prior, written contract is extended and the arbitration clause survives with the rest of the agreement. (Sieber & Calicutt, Inc. v. La Gloria Oil & Gas Co., 66 S.W.3d 340, 347 (Tex. App.—Tyler 2001, pet. denied) (contract and its terms continued past expiration date due to parties’ continued performance; “The extension of a term of a contract is the extension of all of its provisions.”); ALCOA v. Hydrochem Indus. Services, Inc., No. 13-02- 00531-CV, 2005 WL 608232, at *2 (Tex. App.—Corpus Christi–Edinburg Mar. 17, 2005, pet. denied) (“[T]he course of dealings between the parties showed that contracts had frequently been extended beyond their express expiration date.”); see also Double Diamond, Inc. v. Hilco Elec. Co-op., Inc., 127 S.W.3d 260, 267 (Tex. App.—Waco 2003, no pet.) (“We find no authority, and Hilco has directed us to none, prohibiting parties from impliedly extending an agreement or entering into a new agreement after a written agreement expires.”). This also can be thought of as the parties agreeing to waive only the expiration clause of the agreement. See Celadon Trucking Services, Inc. v. Lugo’s Sec. Agency, No. 04-05-00018-CV, 2005 WL 2401886, at *2 (Tex. App.—San Antonio Sept. 28, 2005, no pet.) (“A contract provision for an exact date of performance can be waived by the parties.”)

            In opposition, Plaintiff did not submit any evidence to show that there was no intent to continue performing under the Letter Agreement, nor did Plaintiff address any of Defendant’s caselaw or attempt to distinguish those cases from the facts here. Rather, Plaintiff argued in full:

The Letter Agreement which contained the arbitration clause expired before Plaintiff filed suit. Any course of dealing after expiration did not in any way reflect an agreement to the original terms. Simply put there was no agreement to arbitrate in this case. The California Supreme Court has held that "[t]o presumes [sic] arbitrability without first establishing, independently, consent to arbitration is to place the proverbial cart before the horse." (Sandquist v. Lebo Auto., Inc., 1 Cal. 5th 233, 252 (2016); (See also, Litton Financial Printing Div. v. NLRB, (1991) 501 U. S. 190) .

            (Opp., 8: 19-9:7.)

As such, the only oppositional argument advanced by Plaintiff is a conclusory one that the agreement expired, and a recitation of generic caselaw concerning the need to establish the existence of an agreement to arbitrate. (“This failure to cite pertinent legal authority is enough reason to reject the argument”); Akins v. State of California (1998) 61 Cal.App.4th 1, 50, 71 (contention waived by failure to cite legal authority).

            As for the RRA, Defendant submitted evidence that while it was signed by KWRI and CalTex, “Morris, Lamphere, and Richey, as Controlling Principals and Representatives’ Principals each agreed to be bound on their individual behalf to perform under the RRA.” (Motion, 4: 10-12; Id. at Ex. A.)

            Plaintiff did not address this contention at all in opposition, but rather argued “[a]s established, Plaintiff is not a signatory to the RRA. Indeed, CalTax and KWI are the only parties to the agreement.” As such, Plaintiff has not refuted Defendants’ contention that Plaintiff agreed to individually undertake the obligations to perform under the RRA. Nor does Plaintiff respond to Defendants’ arguments with respect to equitable estoppel claims. 

            Accordingly, the Court concludes that the preponderance of evidence indicates the existence of an arbitration agreement.

            The Court also finds Plaintiff’s claims to be covered within the scope of the arbitration clause.

The RRA contains a broad scope of arbitration covering disputes that “arise[] under or in relation to this Agreement or between or among Representative, any member of Representative’s Group [of which Morris was a member and was a signatory to the RRA] and Company, [etc.] . . . .” (Lamphere Decl., Exh. A.) The Letter Agreement contains a broad arbitration clause that applies to all disputes “arising under or in connection with this agreement.” (Ibid.)

Throughout the Complaint, Morris’ focus is his role as Regional Director of CalTex which was put into place by the Letter Agreement and which is a role required and noted specifically by the RRA:

Morris’ allegations focus on whether that role would be changed in some way—i.e., to a different role of Regional Operating Principal of certain regions, including CalTex’s Region (¶ 12.C); to remain as Regional Director of certain regions, including CalTex’s Region (¶ 12.D); or whether Morris would become majority owner of the CalTex Region (¶ 12.E). [Compl. ¶¶ 13- 21.] Morris alleges that in May 2021, Keller (of KWRI) changed his position about Morris and would not approve him to be Regional Operating Principal of certain regions, including CalTex’s Region, and would not “help Morris with the purchase of Lamphere’s region.” [Id. at ¶¶ 22-23.] Ultimately, Morris alleges (but Keller denies) that Keller told Lamphere (and thus CalTex) “to fire Morris from the Regional Director role” of CalTex, which Lamphere then did in June 2021

when he terminated the Letter Agreement. [Id. at ¶¶ 24-28.]

                        (Motion, 10: 6-7.)

            All of these allegations (which are incorporated into and form the basis of each of the causes of action) relate to the Letter Agreement as they relate to Morris’ role of Regional Director that was put into place by the Letter Agreement. [Id. at ¶¶ 29, 37, 43.]

Given that Defendant has established by a preponderance of the evidence that an arbitration agreement exists, and that Plaintiff’s claims are covered by that agreement, the burden shifts to the Plaintiff to establish that the arbitration clause should not be enforced. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236. (Pinnacle).)

II.               Plaintiff’s Burden 

The party opposing arbitration bears the burden of proving, by a preponderance of the evidence any defense, such as unconscionability or duress. (Pinnacle, supra, 55 Cal.4th at p. 236.)

            Here, Plaintiff did not advance any defense to enforceability. As such, he has not met his burden to show that the arbitration agreement should be not be enforced.

Based on the foregoing, Defendant’s motion to compel arbitration is granted. This matter is ordered stayed pending the completion of arbitration proceedings.

It is so ordered.

Dated:  May    , 2024

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.  For more information, please contact the court clerk at (213) 633-0517.