Judge Lisa K. Sepe-Wiesenfeld, Case Number: 22SMCV01767, Date: 2024-04-04 Tentative Ruling

Judge: Lisa K. Sepe-Wiesenfeld, Case: 22SMCV01767, Date: 2024-04-04 Tentative Ruling

“[I]n considering a . . . petition to compel arbitration, a trial court must make the preliminary determinations whether there is an agreement to arbitrate and whether the petitioner is a party to that agreement (or can otherwise enforce the agreement).” (M & M Foods, Inc. v. Pac. Am. Fish Co. (2011) 196 Cal.App.4th 554, 559; see also Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284 [“petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence”].) In deciding a petition to compel arbitration, trial courts must first decide whether an enforceable arbitration agreement exists between the parties, and then determine whether plaintiff’s claims are covered by the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The burden then shifts to the opposing party to prove, by a preponderance of evidence, a defense to enforcement of the agreement. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.)

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

“The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract.” (Eng’rs & Architects Ass’n v. Cmty. Dev. Dep’t (1994) 30 Cal.App.4th 644, 653.) General principles of contract law determine whether the parties have entered a binding agreement to arbitrate. (Chan v. Drexel Burnham Lambert, Inc. (1986) 178 Cal.App.3d 632, 640-641 [“The existence of a valid agreement to arbitrate involves general contract principles”].)

Defendant Kelly Marie Madej dba King the Jeweler (“Defendant”) moves the Court for an order compelling Plaintiff Pinnacle Consultation Group LLC (“Plaintiff”) to arbitrate its claims against Defendant in accordance with paragraph G.10 of the Agency Agreement between the parties. The provision in the Agency Agreement provides as follows:

Any controversy or claim arising from or relating to this Agreement or the breach thereof shall be settled by arbitration conducted in Los Angeles County, California, and administered by a single American Arbitration Association arbitrator under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

(Mot., Madej Decl. ¶ 5, Ex. 1.) The text of this agreement indicates that it related to Defendant’s purchase of jewelry products directly from Plaintiff. (Ibid.) However, in the complaint, Plaintiff alleges that in July 2022, the parties entered into an oral agreement for Plaintiff to purchase a diamond from Defendant. (Compl. ¶ 9.) Defendant points to the allegation in the complaint that Plaintiff informed a different party, Yianni Pappas, that payments would not be returned due to an alleged breach of an unrelated contract. (Compl. ¶ 17.) The chronology of events in the complaint is confusing, as Plaintiff appears to allege a lack of payment two years before entry into the oral agreement, but in any event, it is clear that the agreement provided by Defendant here related to Defendant’s purchase of items from Plaintiff, while the claims in the complaint relate to Plaintiff’s purchase of items from Defendant, which is not contemplated by the Agency Agreement. While it appears the Agency Agreement may have some relevance to Plaintiff’s claims (see Compl. ¶ 17), it is not clear that Plaintiff’s claims arise out of the Agency Agreement.

Further, if the Court were to order arbitration between Plaintiff and Defendant, Defendant John Michael Pappas aka Yianni Pappas would remain outside the scope of the agreement, and he has made no motion to compel arbitration. The Court cannot require Plaintiff to submit to arbitration with Pappas where he has not so moved. It follows that splitting this action between the superior court and arbitration may defeat the purposes of the arbitration statute (Code Civ. Proc., § 1281.2), as it would duplicate efforts and increase costs where the claims against all defendants are intertwined. (See Abaya v. Spanish Ranch I, L.P. (2010) 189 Cal.App.4th 1490, 1497 [“The legislative history of section 1281.2 defines the problem the Legislature intended to address: ‘In actions involving multiple parties with related claims, where some claimants agree to arbitrate their differences and others remain outside the agreement, arbitration is unworkable’”].) Defendant’s representation that “it is highly likely” that all defendants will submit to arbitration does not establish definitely that Pappas will so submit. Each of Plaintiff’s claims is alleged against both defendants, Plaintiff alleges failure to pay by both defendants, and both defendants are alleged to have been parties to the same oral agreement underlying Plaintiff’s claims, which leads the Court to conclude that the claims against the two defendants are substantially intertwined, and litigating in two forums would require the parties to duplicate their efforts while risking inconsistent outcomes.