Judge Marcella O. Mclaughlin, Case 37-2021-00020569-CU-NP-CTL 2023-10-20 Tentative Ruling

Judge: Marcella O. Mclaughlin, Case: 37-2021-00020569-CU-NP-CTL, Date: 2023-10-20 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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EVENT DATE:

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HALL OF JUSTICE

TENTATIVE RULINGS - October 19, 2023

10/20/2023 01:30:00 PM C-72 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Marcella O McLaughlin

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CASE TITLE: CASE TYPE:

Civil - Unlimited Non-PI/PD/WD tort - Other Motion Hearing (Civil) 37-2021-00020569-CU-NP-CTL ORLOFF VS WEISS [IMAGED] CAUSAL DOCUMENT/DATE FILED: Ex

Parte Application - Other and Supporting Documents, 09/15/2023 Tentative Ruling on Application of CCP Section 1281.2(c) 'Third Party Litigant Exception' Orloff v. Weiss, Case No. 2021-20569 Oct. 20, 2023, 1:30 p.m., Dept. 72 1. Overview and Procedural Posture.

This case 'arises from Weiss's role as a certified financial planner and investment advisor for Orloff s late mother and father, Marshall and Ann Orloff.'* After the complaint was filed, defendant brought a motion to compel arbitration, which Judge Frazier denied in March of 2022. ROA 69. Judge Frazier held that because defendant had 'not sufficiently demonstrated the existence of any valid and enforceable arbitration agreement, the court does not reach the question of whether the third party litigation exception would apply.' Defendant appealed this ruling. ROA 71.

In May of 2023, the Fourth District Court of Appeal, Div. 1, reversed Judge Frazier. The Court remanded, and ordered the trial court 'to consider an issue it expressly did not reach, namely, whether arbitration should be denied based on the third party litigant exception set forth in [CCP] section 1281.2, subdivision (c).' The remittitur issued in July of 2023. ROA 82.

Following remand, defendant challenged Judge Frazier (ROA 88), and the case was re-assigned to Dept. 72. ROA 87.

The parties appeared in Dept. 72 on Sept. 19, 2023, and the court deemed plaintiffs' ex parte application (ROA 90) to be the moving papers, set a briefing schedule, and set the matter on calendar for today.

ROA 93-94. The court has reviewed the papers (ROA 96-98), and no further submissions are authorized in connection with this discrete issue.

2. Applicable Standards.

A. A party to an arbitration agreement may seek a court order compelling the parties to arbitrate a dispute covered by the agreement. Code Civ. Proc. § 1281.2. 'The party seeking to compel arbitration has the burden of proving the existence of an enforceable arbitration agreement by a preponderance of Calendar No.: Event ID: TENTATIVE RULINGS

3036904 43 CASE NUMBER: CASE TITLE: ORLOFF VS WEISS [IMAGED] 37-2021-00020569-CU-NP-CTL the evidence, and a party opposing the petition bears the burden of proving by a preponderance any fact necessary to its defense.' Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1157. If the court finds that an agreement to arbitrate the controversy exists, it must grant the petition to compel arbitration unless (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues; or (4) the petitioner is a chartered depository institution. Code Civ. Proc.

§ 1281.2.

B. 'Under the law-of-the-case doctrine, the determination by an appellate court of an issue of law is conclusive in subsequent proceedings in the same case. [Citation.] The doctrine applies only if the issue was actually presented to and determined by the appellate court. [Citation.] The doctrine is one of procedure that prevents parties from seeking reconsideration of an issue already decided absent some significant change in circumstances.' (People v. Yokely (2010) 183 Cal.App.4th 1264, 1273 (Yokely), italics added.) Furthermore, 'the law-of-the-case doctrine governs only the principles of law laid down by an appellate court, as applicable to a retrial of fact . . . .' (People v. Boyer (2006) 38 Cal.4th 412, 442.) '[T]he doctrine applies only to an appellate court's decision on a question of law; it does not apply to questions of fact.' (People v. Barragan (2004) 32 Cal.4th 236, 246, italics added.) The doctrine applies only to rulings by appellate courts and not trial courts. (Yokely, at p. 1273; Boyer, at p. 442; Barragan, at p. 246.) The doctrine of 'law of the case' deals with the effect of the first appellate decision on the subsequent retrial or appeal: The decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in any subsequent retrial or appeal in the same case.‟ [Citation.]' (Morohoshi v. Pacific Home (2004) 34 Cal.4th 482, 491.) 'Generally, the doctrine of law of the case does not extend to points of law which might have been but were not presented and determined in the prior appeal. [Citation.] As an exception to the general rule, the doctrine is . . . held applicable to questions not expressly decided but implicitly decided because they were essential to the decision on the prior appeal.' (Estate of Horman (1971) 5 Cal.3d 62, 73.

3. Discussion and Ruling.

The motion to compel arbitration is granted.

A. The Court of Appeal has already concluded that Weiss met burden of establishing '(1) Orloff is subject to the arbitration provisions for those claims brought in her capacity as the special administrator of Marshall's estate; and (2) Weiss is subject to the arbitration provisions due to her role as an agent of Lincoln Financial to the extent the claims against her are connected to the services she provided to Marshall and Ann as an agent of Lincoln Financial.' (Slip. Op. at 16-17.) Accordingly, the court must enforce the arbitration agreement unless it finds that the third-party litigation exception applies. Code Civ. Proc. § 1281.2(c).

B. The third-party litigation exception applies when (1) '[a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party'; (2) the third-party action 'aris[es] out of the same transaction or series of related transactions'; and (3) 'there is a possibility of conflicting rulings on a common issue of law or fact.' Code Civ. Proc. § 1281.2(c). All three requirements must be satisfied. Williams v. Atria Las Posas (2018) 24 Cal.App.5th 1048, 1054.

Here, it is undisputed that Kenneth is a 'third party' within the meaning of section 1281.2(c) as he is neither bound by nor entitled to enforce the arbitration agreement. Thomas v. Westlake (2012) 204 Cal.App.4th 605, 612.

As for the second element, the court finds that the aiding and abetting claim against Kenneth arises out of 'the same transaction or series of related transactions' as the arbitrable claims against Joan. (See FAC at ¶¶ 47-53.) Unlike the other claims against Kenneth – which are based 'primarily on his services Calendar No.: Event ID: TENTATIVE RULINGS

3036904 43 CASE NUMBER: CASE TITLE: ORLOFF VS WEISS [IMAGED] 37-2021-00020569-CU-NP-CTL as Marshall and Ann's accountant and as trustee for the Trusts' (Slip. Op. at 18 fn. 11) – the aiding and abetting claim is based on the assistance Kenneth allegedly provided to Joan in connection with her breaches of fiduciary duty as a registered representative of Lincoln Financial. '[A] person not himself a fiduciary may be liable for breach of a fiduciary duty as a result of colluding with a disloyal fiduciary.' Certified Grocers of California, Ltd. v. San Gabriel Valley Bank (1983) 150 Cal.App.3d 281, 289.

Finally, with respect to the third element, there is a possibility of conflicting rulings regarding whether Joan breached her fiduciary duties. Aiding and abetting liability 'depends on upon the actual commission of a tort.' Richard B. LeVine, Inc. v. Higashi (2005) 131 Cal.App.4th 566, 574. The court can easily envision a scenario in which different triers of fact in different proceedings could come to different and inconsistent conclusions on this issue. This could result in a finding no liability for Joan, but a finding aiding and abetting liability for Kenneth. And in the pretrial phases of the litigation, there might well also be inconsistent rulings regarding discovery directed at Kenneth and Joan.** In sum, the court finds that the third-party litigation exception applies.

C. On a finding that the third-party litigation exception under section 1281.2(c) applies, 'the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.' Code Civ. Proc. § 1281.2.

'What the trial court chooses to do in this situation is a matter of its discretion, guided largely by the extent to which the possibility of inconsistent rulings may be avoided.' Metis Development LLC v. Bohacek (2011) 200 Cal.App.4th 679, 692-63.

In this case, the court elects to exercise its discretion in favor of the third option. The court is persuaded that proceeding in such a manner is consistent with California's strong public policy in favor of arbitration (Gordon v. Atria Management Co., LLC (2021) 70 Cal.App.5th 1020, 1026) and section 1281.2(c)'s primary purpose of avoiding conflicting rulings (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 978). Accordingly, plaintiff is ordered to arbitrate her claims against Joan as set forth in the Court of Appeal's decision. Plaintiff's remaining claims against Joan, as well as her claims against Kenneth and his company, are hereby stayed while the arbitration is conducted. Code Civ. Proc.

1281.2. An arbitration status conference will be held on October 18, 2024 at 10:00 a.m. in Department 72.

_________________________ * This sentence, and other portions of this ruling, draw heavily from Justice Irion's thoughtful opinion filed May 15, 2023 in Case No. D080535 ('Slip. Op.').

**The court uses given names not out of disrespect, but for clarity. See Marriage of Smith (1990) 225 Cal.App.3d 469, 475-76 (endorsing this practice where parties share the same surname).

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