Judge: Jon R. Takasugi, Case: 24STCV27526, Date: 2025-02-11 Tentative Ruling

Case Number: 24STCV27526    Hearing Date: February 11, 2025    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendant’s motion to compel arbitration is DENIED. However, the Court orders this action STAYED pending the completion of arbitration.

            On 10/21/2024, Plaintiff American Outdoor Advertising, LLC and Riddle Legacy, LLC (collectively, Plaintiffs) filed suit against KBS Holdbox, LLC dba Regency Outdoor Advertising, Inc (Defendant) alleging unlawful detainer.

            On 12/6/2025, Defendant moved to compel Plaintiff to arbitrate her Complaint, and stay this action. 

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).)

Factual Background

On 11/6/2023, Riddle and Regency entered into a Settlement Term Sheets (the Settlement Agreement) to resolve their lawsuit (KBS Holdco, LLC dba Regency Outdoor Advertising v. Stuart Riddle, et al., Los Angeles County Superior Court Case No. 22STCV34698; JAMS Ref No. 1220075121.) The Settlement Agreement required Regency to pay Riddle $1,335,000 within thirty days of the execution of the Settlement Agreement to resolve past claims. (Id.) Riddle dismissed their pending Unlawful Detainer complaints and agree to negotiate new lease agreements or sell one or more of the billboards to Regency at Fair Market Value. (Id.)

The Settlement Agreement specified that if the parties could not agree on lease or sale terms within 50 days, they would submit to binding arbitration before Mr. Friedman "of the lease and/or sale terms”, to be conducted per JAMS Commercial Arbitration Rules on an expedited basis. (Id.)

Regency allegedly breached the Settlement Agreement by failing to make the required $1,335,000 payment within thirty days. (Lemieux Decl., ¶ 5.) After Riddle filed a motion to enforce the Settlement, Regency made the payment on December 31, 2023, along with Riddle's attorney fees. (Id.) As a result of the delays, Regency and Riddle continued to negotiate regarding Riddle’s lease or sale of the Billboards to Regency beyond the 50 days contemplated by the Settlement Agreement. (Lemieux Decl., ¶ 6.)

Throughout the period from November 2023 to the present, Regency has continued to operate the billboards and sell advertising copy but has made no rent payments under the existing leases. (Lemieux Decl., ¶ 7.) On August 20, 2024, Riddle served Three-Day Notices to Pay or Quit regarding four properties. (Id.)

In response, Regency filed a demand for arbitration on 10/10/2024.

Discussion

1.      Defendants’ Burden

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

Defendant submitted evidence that on 11/6/2023, Regency and Plaintiffs entered into the Settlement Agreement to settle the claims between them in a prior lawsuit captioned KBS Holdco, LLC DBA Regency Outdoor Advertising v. Stuart Riddle, et al., LASC Case No. 22STCV34698.

The Settlement Agreement provides:

With respect to the billboards located at 3709 Eagle Rock Blvd, Los Angeles, CA 90065, 15172 Goldenwest Circle, Westminster, CA 92683, 2221 E. Olympic Blvd., Los Angeles, CA 90021 and 1320 S. Santa Fe Ave., Los Angeles, CA 90021 (collectively, the “Billboards”), the Riddle Parties shall have two options to choose from at their sole discretion: (1) lease these billboards to Regency on similar terms to those in the previous leases between the Parties, with updates to the terms as necessary to reflect Fair Market Value, or (2) sell one or more of the billboards to Regency at Fair Market Value. The Parties agree to negotiate the terms of the leases or sales within 50 days from the date of this Settlement Term Sheet. If the Parties cannot come to an agreement as to the terms of such leases or sales, the Parties agree that they will submit to a binding arbitration of the lease and/or sale terms to Bruce A. Friedman at JAMS. The arbitration shall be conducted according to JAMS Commercial Arbitration Rules on an expedited basis. [emphasis added.] 

Berardi Decl., ¶ 2 & Ex. A [Settlement Term Sheet, Section 5]

Defendant argues that, pursuant to this provision, Plaintiff’s claims here are subject to arbitration, arguing, “[h]ere, Plaintiffs entered a binding arbitration agreement that encompasses this dispute. As set forth above, Plaintiffs were required to sell or lease the Property to Regency, and any disputes regarding the sale or lease is required to be decided in arbitration. Plaintiffs failed to comply with their obligations to sell or lease the Property and now seek to improperly obtain possession of Property that was already supposed to be sold or leased to Regency. And as set forth above, an arbitration on these issues is already pending. Finally, to the extent there was any question regarding the scope of the arbitration clause or the arbitrability of this dispute, such issues must be decided by the arbitrator – not the Court.” (Motion, 11: 24-12:3.)

In opposition, Plaintiff argues that Defendant is improperly expanding the scope of arbitration:

This language is unambiguous and plainly limits the scope of arbitration specifically to determining the terms of the leases or sales if the parties cannot agree. If the parties intended a broader scope of arbitration, they could have easily included language to that effect.

Rather than address this clear language, Regency attempts to rewrite the provision in its motion, claiming that "Any disputes regarding the sales or leases of the Property are required to be decided via arbitration" and that "all outstanding issues relating to the Property will be decided in the pending arbitration" [italics added] (Motion, at p.2.) Regency provides no textual basis for this expansive interpretation, instead laying forth a lengthy and misleading account of post-Settlement negotiations that has no bearing on interpreting the arbitration provision's scope.

The Settlement Agreement’s plain language contradicts Regency's broad interpretation. The arbitration provision is limited to determining future lease or sale terms if the parties cannot agree - nothing more. Nothing suggests the parties intended to arbitrate broader disputes or surrender their right to pursue statutory remedies for ongoing breaches of existing lease obligations. Nothing indicates that existing lease agreements and rent obligations would be suspended during negotiations. Most significantly, nothing suggests Regency was given over one year of free rent for four properties - totaling over $300,000 - during negotiations. Such a massive concession would be illogical in the context of a settlement where Regency was agreeing to pay Riddle for years of unpaid rent.

            After review, the Court agrees with Plaintiff’s position. If the parties had intended to arbitrate "any and all disputes" or "all issues relating to the property," they could have easily included such language. Instead, they crafted a narrow, carefully negotiated compromise limited to arbitrating specific lease or sale terms if negotiations failed. Here, Plaintiffs’ claims do not concern the terms of the sale or lease of the Subject Property. Rather, Plaintiffs’ claims are based on allegations that Defendant has failed to pay owed rent during the negotiation period.

Moreover, the Settlement Agreement does not delegate arbitrability to the arbitrator. Courts should find that the parties agreed to arbitrate arbitrability only where there is clear and unmistakable evidence that they did so, resolving any ambiguity in favor of a finding that the issue is for the court to determine. (First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944.)

            However, the Court does find that this action should be stayed pending the completion of the ongoing arbitration between these parties. The ongoing arbitration will determine questions as to whether or not Defendant is entitled to the Property via a sale or lease. Given that Plaintiffs’ claim here seeks to evict Defendant from the Property, there is a risk of conflicting rulings if the Court here were to grant possession of the Property, and the arbitrator were to determine that Defendant is entitled to sale of the property.

            Based on the foregoing, Defendant’s motion to compel arbitration is denied. However, the Court orders this action stayed pending the completion of arbitration.

It is so ordered.

Dated:  February    , 2025

   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.