Judge: Lynette Gridiron Winston, Case: 23PSCV01175, Date: 2023-10-09 Tentative Ruling

Case Number: 23PSCV01175    Hearing Date: October 9, 2023    Dept: 6

CASE NAME: S. Mandilawi, M.D., Medical Corporation, et al. v. May Medical Management Corporation, et al.
 

TENTATIVE RULING
The Court GRANTS the motion to compel arbitration.
This action is STAYED pending arbitration.
The Court will set a Status Conference re Arbitration at or following the hearing on this motion.
 Defendants are ordered to give notice of the Court's ruling within five calendar days of this order.

BACKGROUND
 This is a business dispute. On April 20, 2023, Plaintiffs S. Mandilawi, M.D., Medical Corporation and Sadiq Mandilawi (Mandilawi) (collectively, Plaintiffs) filed this action against Defendants Asif Siddiq (Siddiq), Basima Latif (Latif) (collectively, Defendants)[1] and Does 1 through 50, alleging causes of action for fraudulent inducement into contract, intentional misrepresentation, negligent misrepresentation, breach of fiduciary duty, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, and financial elder abuse.[2]

On August 24, 2023, Defendants filed the instant motion to compel arbitration. On September 26, 2023, Plaintiffs opposed. On October 2, 2023, Defendants replied.

LEGAL STANDARD
Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.(Omar v. Ralphs Grocery Co. (2004)118 Cal.App.4th 955, 961.) A party moving to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 356-357.) A party seeking to compel arbitration meets their initial burden of establishing the existence of a valid arbitration agreement by attaching a copy of the agreement to the motion or petition to compel arbitration. (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (FAA), which governs all agreements to arbitrate in contracts involving interstate commerce. (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

DISCUSSION
 FAA v. CAA
"[T]he FAA's procedural provisions (9 U.S.C. §§ 3, 4, 10, 11) do not apply unless the contract contains a choice-of-law clause expressly incorporating them.” (Id. at 174, 110 Cal.Rptr.3d 180.) “[T]he question is not whether the parties adopted the CAA’s procedural provisions: The state's procedural statutes (§§ 1281.2, 1290.2) apply by default because Congress intended the comparable FAA sections (9 U.S.C. §§ 3, 4, 10, 11) to apply in federal court. The question, therefore, is whether the parties expressly incorporated the FAA’s procedural provisions into their agreements.” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345) [internal citations and quotation marks omitted].

"[P]revious cases have held that when an arbitration agreement provides that its 'enforcement' shall be governed by California law, the California Arbitration Act (CAA) governs a party's motion to compel arbitration. It follows that when an agreement provides that its' enforcement' shall be governed by the FAA, the FAA governs a party's motion to compel arbitration."(Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 346.)

While Defendants’ moving papers cite to the FAA, the Court finds that the FAA does not apply here because the Arbitration Agreements (as defined below) do not provide that their enforcement is governed by the FAA. (Motion, Ex. 1, Art. X, ¶ 17; Id., Ex. 2, Art. VI, § 6.07; see Victrola 89, supra, 46 Cal.App.5th at p. 346.) Defendants also have not cited to any evidence of the contracts at issue involving interstate commerce. (See 9 U.S.C. § 2, et seq.; Higgins, supra, 140 Cal.App.4th at p. 1247.)

Accordingly, the CAA governs this motion.

Analysis
“[T]he petitioner bears the burden of proving its existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) “If the party opposing the petition raises a defense to enforcement—either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation [citation]—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.” (Ibid.) The moving party meets their initial burden of proving the existence of a valid arbitration agreement by attaching a copy to the motion. (Espejo, supra, 246 Cal.App.4th at p. 1060.)

Defendants have attached copies of two contracts to their motion, namely a Physician Independent Contractor Agreement (Contractor Agreement) and a Partnership Agreement, both of which contain arbitration clauses (collectively, the Arbitration Agreements). (Motion, Exs. 1, 2.) Accordingly, Defendants have met their initial burden. The burden now shifts to Plaintiffs to challenge the validity of the arbitration agreements.

The Court notes that Plaintiffs do not dispute the existence or validity of the Arbitration Agreements. Instead, Plaintiffs contend the Arbitration Agreements do not apply here because Defendants are not parties to the Contractor Agreement or the Partnership Agreement. Plaintiffs also contend that the claims against Defendants are outside the scope of the Arbitration Agreements and there is a risk of inconsistent rulings under Code of Civil Procedure section 1281.2, subdivision (c). Plaintiffs further contend the First, Second, Third, and Seventh causes of action are outside the scope of the Arbitration Agreements, and that public policy favors the dispute being tried as one action. The Court finds these arguments unavailing.

First, although not raised by the parties in their respective briefs, the Court notes that both Arbitration Agreements provide the question of arbitrability is determined by the arbitrator. An arbitration clause that “clearly and unmistakably” empowers the arbitrator to decide issues of arbitrability is enforceable. (B.D. v. Blizzard Entertainment, Inc. (2022) 76 Cal.App.5th 931, 957.) “There are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. [Citation.] Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.’ [Citations.] The ‘clear and unmistakable’ test reflects a ‘heightened standard of proof’ that reverses the typical presumption in favor of the arbitration of disputes.’ [Citation.]” (Id., at p. 957, italics in original.)

Here, the Contractor Agreement expressly provides that, “[a]ny dispute or controversy arising between Contractor and/or Physician on the one hand, and Company, on the other hand (‘Claims’) relating to the validity, enforcement, performance, or interpretation of this Agreement, including a dispute relating to the enforceability of this provision (including any claims by Physician against Company's officers, directors, shareholders, partners, contractors including a dispute relating to the enforceability of this provision (including any claims by Physician against Company’s officers, directors, shareholders, or agents) as long as such Claims would otherwise be subject to a lawsuit in court, will be settled by binding arbitration…” (Motion, Ex. 1, Art. X, ¶ 17, italics added]. The arbitration provision from the Partnership Agreement similarly provides that, “[a]ny dispute or controversy arising between or among Partners and/or Partnership (‘Claims’) relating to the validity, enforcement, performance, or interpretation of this Agreement, including a dispute relating to the enforceability of this provision, as long as such Claims would otherwise be subject to a lawsuit in court, will be settled by binding arbitration…” (Id., Ex. 2, Art. VI, § 6.07, italics added.) The Court finds these terms to be clear and unmistakable expressions of intent to submit issues of arbitrability to the arbitrator. Neither party has presented evidence or argued that this delegation provision is unenforceable on grounds of fraud, duress, or unconscionability. Accordingly, whether Plaintiffs’ claims are arbitrable must first be determined by the arbitrator, and the Court declines to address the parties’ respective arguments about the scope of Plaintiffs’ claims.

Second, the contention that Siddiq is not a party to the Contractor Agreement is demonstrably false, as he signed that particular agreement both on behalf of his corporation, ASA Healthcare Consulting, Inc., and individually as Asif Siddiq, M.D. (Motion, Ex. 1, p. 12.) Plaintiffs’ claims against Defendants are also predicated on those contracts. (See, e.g., Compl., ¶¶ 47, 61, 76.) All of the facts, circumstances and transactions arise out of the Contractor Agreement and/or Partnership Agreement. Third, as to the public policy argument, public policy also strongly favors arbitration. (Gordon v. Atria Management Co., LLC (2021) 70 Cal.App.5th 1020, 1026.) Finally, with respect to the risk of inconsistent rulings, that is not for the Court to decide at this time given the issue of arbitrability is to be determined by the arbitrator as discussed above. If the arbitrator finds that any of Plaintiffs’ claims are outside the scope of the Arbitration Agreements, those issues can be revisited later with the Court.

Based on the foregoing, the Court will GRANT the motion to compel arbitration. The Court will further stay this action pending arbitration, and set a Status Conference re Arbitration.

CONCLUSION
The Court GRANTS the motion to compel arbitration.
This action is STAYED pending arbitration.
The Court will set a Status Conference re Arbitration at or following the hearing on this motion.
 Defendants are ordered to give notice of the Court's ruling within five calendar days of this order.

[1] The complaint also named Defendant May Medical Management Corporation as a party, but Plaintiffs dismissed May Medical Management Corporation from this action on September 14, 2023.

[2] The complaint included three other causes of action for dissolution of corporation, dissolution of general partnership, and appointment of a provisional director, but those causes of action were directed solely toward May Medical Management Corporation, who is no longer a party to this action. Thus, those causes of action were dismissed as well.