Judge: Malcolm Mackey, Case: 22STCV29915, Date: 2023-04-04 Tentative Ruling
Case Number: 22STCV29915 Hearing Date: April 4, 2023 Dept: 55
BRADLEY
LAW v. EVENTUS HOLDINGS, LLC, 22STCV29915
Hearing Date: 4/4/23,
Dept. 55.
#7:
MOTION TO COMPEL ARBITRATION.
MOTION TO STAY AND TO COMPEL ARBITRATION.
Notice: Okay
Opposition
MP:
Defendants EVENTUS
HOLDINGS, LLC, NATIONAL PAYMENT SYSTEMS, LLC, SABIN BURRELL, and JOHN HYNES.
Defendant JONATHAN
BECKMAN.
RP:
Plaintiffs.
Summary
On 9/14/22, plaintiffs filed a Complaint.
On 10/28/22, plaintiffs filed a First Amended
Complaint, alleging that defendants BECKMAN, BURRELL, HYNES, NATIONAL and
EVENTUS, including as managers and membership interest owners of plaintiffs, through
their mutual and continuing scheme, including under-reporting residual income
of plaintiffs and over-reporting operating expenses, stole all assets of plaintiffs,
and 50% of Plaintiff LAW’s ownership interest therein, in violation of
operating agreements and in breach of related covenants of good faith and fair
dealing.
The causes of action are:
1. BREACH OF CONTRACT –
OPERATING AGREEMENTS;
2. BREACH OF COVENANT OF
GOOD FAITH AND FAIR DEALING - OPERATING
AGREEMENTS;
3. DECLARATORY RELIEF -
LAW IS SOLE MEMBER AND MANAGER;
4. BREACH OF FIDUCIARY
DUTY;
5. LEGAL MALPRACTICE;
6. CONSTRUCTIVE FRAUD;
7. TORTIOUS INTERFERENCE
WITH CONTRACT - OPERATING AGREEMENTS;
8. AIDING AND ABETTING
BREACH OF FIDUCIARY DUTY;
9. NEGLIGENCE;
10. IMPOSITION OF
CONSTRUCTIVE TRUST;
11. ACCOUNTING OF COMPANY
ASSETS AND PROCEEDS;
12. CIVIL PENALTIES UNDER
PENAL CODE SECTION 496(c).
MP
Positions
Moving parties request an order compelling plaintiffs’
into arbitration on the question of whether Plaintiffs’ claims are released by
the Settlement Agreement, and staying this action, on grounds including the
following:
·
A settlement agreement among some of the
parties provides that the disputes as to defendants Eventus and National
Payments Systems, LLC. are to be resolved through arbitration.
·
Plaintiff Beckman bargained for a settlement
agreement and arbitration provision on behalf of himself and Plaintiffs.
·
The arbitration provision applies to all
plaintiffs.
·
Beckman had actual authority to bind the
Plaintiff Entities based on his status as Tax & Business Manager and the majority
owner of each.
·
From Movants’ perspective, there was ample
evidence that Beckman also had authority to act as ostensible agent for
Plaintiffs who knew about it.
·
The agreement benefitted Law and Beckman. While Law did not sign the 2022
Agreement, Law was aware of the circumstances leading to the
2022 Agreement; Law met with Beckman and other key members leading up to the
mediations that gave rise to the 2022 Agreement; Law directly and materially
benefitted from the terms of the 2022 Agreement; Law supported the execution of
the 2022 Agreement; and Law was aware that the 2022 Agreement required all
disputes arising out of the 2022 Agreement to be arbitrated.
·
Beckman simply released legal claims,
which did not require approval of a majority of the members under operating
agreements.
·
The arbitration provision provides that
“[a]ny action or proceeding arising out of the interpretation or alleged breach
of this Agreement shall be resolved through confidential arbitration.” (Griffin
Decl., Ex. A, Sec. IV.).
·
The FAA does not enable discovery here,
and Plaintiffs’ complaints about non-responses to their discovery relate to
irrelevant questions about cash payments to Beckman and how it was “received and
determined” and how that value compares to Law’s perception of the value of the
Plaintiff Entities.
·
The Complaint’s claim for malpractice
against Hynes also is arbitrable. E.g., Sargon Enterprises, Inc. v. Browne
George Ross LLP, 15 Cal. App. 5th 749, 755.
·
Moving parties are not required to provide
a complete and unredacted copy of the Settlement Agreement.
RP
Positions
Opposing parties advocate denying, for reasons
including the following:
·
Movants failed to meet the burden to show
arbitration compelling grounds. They
present a substantially redacted copy of the contract and without its exhibits,
including a term sheet. Plaintiffs demanded an unredacted copy and offered
Defendants a confidentiality stipulation but Defendants refused.
·
Mr. Law and none of the Plaintiffs are a
party to the Settlement Agreement nor signed the arbitration agreement therein.
·
Beckman did not have authority as Tax and
Business Manager to sign the disputed
Settlement Agreement (Griffin Decl., Ex. "A") because Section
4.2 of each Operating Agreement required approval of the majority of members.
·
Movants proffered no evidence Law and
Plaintiff Entities are/were members, managers, shareholders, directors,
officers, partners, employees, representatives, agents, attorneys, heirs,
affiliates, subsidiaries, successors, transferees and assigns of JDB at the
time of the agreement's execution. Nor are they. (Law Decl., ¶¶ 13-15).
·
None of Plaintiffs' claims arise out of an
interpretation of the Settlement Agreement nor a breach thereof. The Settlement Agreement's arbitration clause
is particularly narrow both omitting a general reference to disputes
"related to" the agreement and specifically providing for arbitration
only of two types of disputes: those "arising out of the interpretation or
alleged breach of this Agreement". (Griffin Decl., Ex. A, §IV.P).
·
Plaintiffs request they be permitted their
right to conduct limited discovery in relation to the Motion to compel them to
arbitrate. See Bouton v. USAA Casualty Ins. Co. (2008) 167 Cal.App.4th
412,427. Plaintiffs served their
November 18, 2022 limited discovery requests on Movants and Beckman seeking in part an unredacted version
of the Settlement Agreement and other
information related to the Settlement Agreement's internal arbitration
agreement that Movants and Beckman are attempting to force on Plaintiffs.
·
Pursuant to the FAA, which movants contend
applies, courts employ a summary judgment standard under 12 FRCP 56, with all
inferences to be drawn in the non-moving party's favor, and that if a
genuine issue of material facts exists
the court must hold a trial. Hansen v. LMB Mortgage Services, Inc. (9th Cir.
2021) 1 F4th 667,670. If a jury trial is demanded, then the court must proceed
with a jury trial. Ibid. Plaintiffs demand a jury trial and have already posted
jury fees.
·
Plaintiffs' claims against attorney Hynes
are not arbitrable. As such, the Court should exercise its discretionary powers
under CCP § 1281.2( c) to avoid inconsistent rulings. T
·
Since the Settlement Agreement's
arbitration clause does not "clearly and unmistakably" empower the
arbitrator to decide the issue of arbitrability, it is an issue for this court
to decide. AT & T Technologies, Inc. v. Communications Workers of America
(1986) 475 U.S. 643, 649.
Tentative
Ruling
Both motions are granted.
Moving defendants and opposing plaintiffs shall
arbitrate the controversies between them as to the First Amended Complaint, in
accordance with the agreement to arbitrate.
This entire case is stayed until such arbitration has been completed.
The moving parties’ evidence suffices to meet the
burden to show the arbitration agreement, without them needing to file an
unredacted agreement.
Parties seeking to compel arbitration meet their
initial burden simply by reciting the terms of the governing provision, or by attaching
a copy of the provisions, unless there is a dispute over authenticity that is
beyond merely contesting the preliminary showing. Sprunk v. Prisma LLC (2017) 14
Cal.App.5th 785, 793; Ruiz v. Moss
Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 846 (“In the face of … failure to recall signing
… had the burden of proving by a preponderance of the evidence that the
electronic signature was authentic….”). See also
Condee v. Longwood Mgt. Corp. (2001) 88 Cal.App.4th 215, 219
(once petitioners allege that an arbitration agreement exists, the burden
shifts to respondents to prove the falsity of the purported agreement, and no
evidence or authentication is required to find the arbitration agreement
exists); Espejo v. So. Cal.
Permanente Med. Group (2016) 246 Cal.App.4th 1047, 1060 (“defendants … met
their initial burden by attaching to their petition a copy of the purported
arbitration agreement bearing … electronic signature. Once … challenged …,
defendants were then required to establish by a preponderance of the evidence
that the signature was authentic.”); Brodke
v. Alphatec Spine Inc. (2008) 160 Cal.App.4th 1569, 1575-76 (petition or
motion to compel arbitration must allege arbitration agreement exists, and
cannot contest it). But see Avila v. So. Cal. Specialty Care, Inc.
(2018) 20 Cal.App.5th 835, 844 (“The
party seeking to compel arbitration bears the burden of proving the existence
of a valid arbitration agreement.”); Molecular
Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th
696, 705 (“To satisfy the moving party's initial burden, the petition or motion
must be ‘accompanied by prima facie evidence of a written agreement to
arbitrate the controversy’ in question.”);
Toal v. Tardif (2009) 178 Cal. App. 4th 1208, 1219 (“To the extent Condee conflicts with
Rosenthal, our Supreme Court's decision is controlling.”); Bouton v. USAA Casualty Ins. Co.
(2008) 167 Cal.App.4th 412, 423-24 (“in considering a Code of Civil Procedure
section 1281.2 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).”); Segal v. Silberstein (2007) 156 Cal.App.4th 627, 633 (“petitioner
bears the burden of proving the existence of a valid arbitration
agreement….”); 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….’”); Rosenthal v. Great
Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413 (as to
a petition to compel arbitration, “petitioner bears the burden of proving its
existence by a preponderance of the evidence.”); Banner Ent., Inc. v. Sup. Ct. (1998)
62 Cal.App.4th 348, 356 (citing Rosenthal, supra).
The subject arbitration provisions are expressly
applicable to a wide array of third parties that includes plaintiffs.
A non-signatory can be compelled to arbitrate where
there was intent to benefit that third party under the contract. Benasra v. Marciano (2001) 92
Cal.App.4th 987, 991-93.
Arbitration agreements are binding upon third party beneficiaries, and
third parties having an agency or similar relationship with the signatory
party. Matthau v. Sup. Ct. (2007)
151 Cal.App.4th 593, 599. Parties
seeking to compel arbitration on the ground of agency have the burden to show
an agent’s express or implied consent to have the contracting party act as an
agent in agreeing to arbitration. Warfield,
v. Summerville Senior Living, Inc. (2007) 158 Cal.App.4th 443, 448.
"A nonsignatory to an agreement to arbitrate may be required to
arbitrate, and may invoke arbitration against a party, if a preexisting
confidential relationship, such as an agency relationship between the
nonsignatory and one of the parties to the arbitration agreement, makes it
equitable to impose the duty to arbitrate upon the nonsignatory." Westra v. Marcus & Millichap Real
Estate Investment Brokerage Co., Inc. (2005) 129 Cal. App. 4th 759,
765. Accord Smith v.
Microskills San Diego L.P. (2007) 153 Cal. App. 4th 892, 897. “When a plaintiff brings a claim which relies
on contract terms against a defendant, the plaintiff may be equitably estopped
from repudiating the arbitration clause contained in that agreement…. There is
no reason why this doctrine should not be equally applicable to a nonsignatory
plaintiff.” JSM Tuscany, LLC v. Sup.
Ct. (2011)193 Cal. App. 4th 1222, 1239, 1241 (“there is no rational basis to limit this
conclusion to claims expressly based on … breach …. The equitable estoppel
doctrine extends to claims that are dependent upon or inextricably intertwined
with the obligations imposed by the contract containing the arbitration
clause.”).
The arbitration provision’s
scope encompasses settlement agreement releases, and so plaintiffs’ claims
arise out of interpretation and breach of the agreement.
In order to determine
arbitration-clause scope, courts should give effect to the parties’ intentions,
in light of the usual and ordinary meaning of the language, and the
circumstances of the agreement. Titolo
v. Cano (2007) 157 Cal.App.4th 310, 317.
“‘Doubts as to whether an arbitration clause
applies to a particular dispute are to be resolved in favor of sending the
parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration
clause cannot be interpreted to cover the dispute.’” California Correctional
Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198,
205.
Where the Federal Arbitration Act applies, state
procedural rules nonetheless govern the determination of a motion to compel
arbitration. Vivid Video Inc. v. Playboy Ent. Group, Inc. (2007) 147
Cal.App.4th 434, 440. “[S]ection 9 of
the FAA is procedural in nature and does not apply to state court
litigation.” Swissmex-Rapid S.A. de
C.V. v. SP Systems, LLC (2012) 212 Cal.App.4th 539, 546. “Even when the Federal Arbitration Act
applies, state law governs such matters as who is bound by and who may enforce
an arbitration agreement.” Thomas v.
Westlake (2012) 204 Cal.App.4th 605, 614 n. 7.
Parties’ following statutes providing for arbitration
or references, results in a waiver of a jury trial, without the need for predispute
agreements to expressly so state. Woodside
Homes of California, Inc. v. Sup.Ct. (2006) 142 Cal. App. 4th 99, 103, 104. Predispute arbitration agreements are
specifically authorized by statute. (Code Civ. Proc., § 1281 [“A written
agreement to submit to arbitration an existing controversy or a controversy
thereafter arising is valid, enforceable and irrevocable, save upon such
grounds as exist for the revocation of any contract”].)…. Contracting parties
can voluntarily agree to waive their constitutional right to have their dispute
resolved in a judicial forum by a jury.”
Murrey v. Sup.Ct. (2023) 87 Cal. App. 5th 1223, 1236.
Where the Federal Arbitration Act applies, state
procedural rules nonetheless govern the determination of a motion to compel
arbitration. Vivid Video Inc. v. Playboy Ent. Group, Inc. (2007) 147
Cal.App.4th 434, 440. “[S]ection 9 of
the FAA is procedural in nature and does not apply to state court litigation.” Swissmex-Rapid S.A. de C.V. v. SP Systems,
LLC (2012) 212 Cal.App.4th 539, 546.
The Court finds that there is no presence of a
nonarbitrable claim, nor any possibility of conflicting rulings.
The ground for
denying arbitration based on there being a third party, and a possibility of
conflicting rulings (CCP §1281.2(c)), does not apply where all nonsignatories are
subject to arbitration agreements. Laswell
v. AG Seal Beach, LLC (2010) 189 Cal.App.4th 1399, 1405. “[T]he presence of a nonarbitrable cause of
action is not sufficient by itself to invoke the trial court's discretion to
deny arbitration under Code of Civil Procedure section 1281.2, subdivision
(c)….” Laswell v. AG Seal Beach, LLC
(2010) 189 Cal.App.4th 1399, 1409.
In applying Code of Civil Procedure Section 1281.2(c) judges may rely on
complaint allegations to determine that there is a possibility of conflicting
rulings if a motion to compel arbitration were granted, and evidence is not
required. Abaya v. Spanish Ranch I, L.P. (2010) 189 Cal.App.4th 1490,
1498-99. Under Code of Civil Procedure
Section 1281.2(c), judges have broad discretion as to whether to deny
arbitration where there are third parties to a pending court action arising out
of the same transaction or series of related transactions, in which there is a
possibility of conflicting rulings on a common issue of law or fact. Molecular Analytical Systems v. Ciphergen
Biosystems, Inc. (2010) 186 Cal.App.4th 696, 704-05; Birl v. Heritage Care, LLC (2009) 172
Cal. App. 4th 1313, 1318; Best
Interiors, Inc. v. Millie & Severson, Inc. (2008) 161 Cal.App.4th 1320,
1329; Cronus Investments, Inc.
v. Concierge Services (2005) 35
Cal.4th 376, 383, 394; Whaley
v. Sony Computer Entm't Am. (2004) 121 Cal.App.4th 479, 488; Powers
v. Dickson, Carlson & Campillo
(1997) 54 Cal.App.4th 1102, 1115 (citing CCP §1281.2(c)).
Where a court has ordered arbitration, it shall stay
the pending action, until an arbitration is had in accordance with the order to
arbitrate, or another earlier time, and the stay may be with respect to an
issue that is severable. CCP
§1281.4; Cruz v. PacifiCare Health
Systems, Inc. (2003) 30 Cal. 4th 303, 320;
Twentieth Century Fox Film Corp. v. Sup. Ct. (2000) 79 Cal.App.4th
188, 192; Heritage Provider Network,
Inc. v. Sup. Ct. (2008) 158 Cal.App.4th 1146, 1152, 1154 n. 12.