Judge Mark A. Young, Case Number: 23SMCV03241, Date: 2024-06-11 Tentative Ruling

Judge: Mark A. Young, Case: 23SMCV03241, Date: 2024-06-11 Tentative Ruling

Case Number: 23SMCV03241 Hearing Date: June 11, 2024 Dept: M

CASE NAME: TSG Development Investment Inc. v. Tixr

CASE NO.: 23SMCV03241

MOTION: Petition/Motion to Compel Arbitration

HEARING DATE: 6/11/2024

LEGAL STANDARD

Under California and federal law, public policy favors arbitration as an efficient and less expensive means of resolving private disputes. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 8-9; AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.) Accordingly, whether an agreement is governed by the California Arbitration Act (“CAA”) or the Federal Arbitration Act (“FAA”), courts resolve doubts about an arbitration agreement’s scope in favor of arbitration. (Moncharsh, supra, 3 Cal.4th at 9; Comedy Club, Inc. v. Improv West Assocs. (9th Cir. 2009) 553 F.3d 1277, 1284; see also Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th 951, 971-972 [“California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability [citation] and a requirement that an arbitration agreement must be enforced on the basis of state law standards that apply to contracts in general”].) “[U]nder both the FAA and California law, ‘arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’ ” (Higgins v. Superior Crout (2006) 140 Cal.App.4th 1238, 1247.)

“Code of Civil Procedure section 1281.2 requires a trial court to grant a petition to compel arbitration if the court determines that an agreement to arbitrate the controversy exists.” (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59, quotations omitted.) Accordingly, “when presented with a petition to compel arbitration, the court’s first task is to determine whether the parties have in fact agreed to arbitrate the dispute.” (Ibid.) A petition to compel arbitration is in essence a suit in equity to compel specific performance of a contract. (Id. at 71.) As with any other specific performance claim, “a party seeking to enforce an arbitration agreement must show the agreement’s terms are sufficiently definite to enable the court to know what it is to enforce.” (Ibid. [internal citations omitted].) “Only the valid and binding agreement of the parties, including all material terms well-defined and clearly expressed, may be ordered specifically performed.” (Ibid.) An arbitration agreement “must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” (Civ. Code, § 1636.) The language of the contract governs its interpretation if it is clear and explicit. (Civ. Code, § 1368.) If uncertainty exists, “the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.” (Civ. Code, § 1654.)

The party seeking to compel arbitration bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) It would then be plaintiff’s burden, in opposing the motion, to prove by a preponderance of the evidence any fact necessary to her opposition. (See Ibid.) “In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.” (Ibid.)

EVIDENTIARY ISSUES

Defendant Tixr’s request for judicial notice is GRANTED. (Evid. Code 452(h).)

SEALING ANALYSIS

Defendant Tixr Inc. (“Defendant”) moves for an order to seal records conditionally lodged with their petition to compel arbitration to protect from public disclosure its proprietary, confidential, and trade secret information. The documents include negotiations and draft agreements which pertain to the instant motion to compel arbitration. Specifically, TIXR seeks to seal the following materials: (1) the Memorandum of Points and Authorities in Support of TIXR’s Petition to Compel Arbitration; (2) the Request for Judicial Notice; (3) the Declaration of Robert Davari; (4) the Declaration of Matt Baca; (5) the Declaration of Alex Srour; (6) the Declaration of Stanford Dai; and (7) the Declaration of Patrick Stavro.

Plaintiffs AmTote International, Inc. (“AmTote”) and TSG Developments, Inc. dba the Stronach Group (“TSG”) (collectively “Plaintiffs”) also move to seal certain records, including the Declaration of George Kneisel and exhibits 4 and 5 attached to the Kneisel Declaration; and Exhibit 1 to the Declaration of Nick Hines. Plaintiffs state that the documents and redacted information contain the same or similar information to the Tixr’s lodged documents.

The sealing of trial court records is governed by California Rules of Court, rules 2.550 and 2.551. (Mercury Interactive Corp. v. Klein (2007) 158 Cal.App.4th 60, 68.) Pleadings, motions, discovery documents, and other papers may not be filed under seal merely by stipulation of the parties—a prior court order must be obtained. (CRC, Rule 2.551(a); see H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 888.) To seal a record, the following requirements are imposed:¿(1)¿the party must file a motion or application for an order sealing the record, which must be accompanied by a memorandum and a declaration containing facts sufficient to justify the sealing;¿(2)¿the party must serve a copy of the motion on all parties who have appeared in the case; and¿(3)¿the party requesting that a record be filed under seal must lodge it with the court when the motion or application is made unless the record has previously been lodged.¿(CRC,¿Rule 2.551(b).)¿¿

The Court must make the following express factual findings¿in order to¿seal records: (1) an overriding interest exists that overcomes the right of public access to the record; (2) the overriding interest supports sealing the records; (3) a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest.¿(CRC,¿Rule 2.550(d).)¿These findings embody constitutional requirements for a request to seal court records, protecting the First Amendment right of public access to civil trials. (NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1217-1218.)

An order sealing the record must specifically state the facts that support the findings and direct the sealing of only those pages and documents or, if reasonably practicable, portions of those documents and pages, that contain the material that needs to be placed under seal, and all other portions must be included in the public file.¿(CRC,¿rule 2.550(e).)¿ Once sealed, a record can only be unsealed by order of court. (CRC, Rule 2.551(h)(1).) So long as it remains under seal, all parties must refrain from filing anything not under seal that would disclose the sealed matter. (Id., Rule 2.551(c).) If a party files a new document referring to sealed matter, it must submit an unredacted version of the document under seal and a redacted one for the public record. (Id., Rule 2.551(b)(5).)

Defendant demonstrates that there exists an overriding proprietary, confidential, and trade secret interest that overcomes the right of public access to the records here. Defendant explains that it provides a platform and a suite of services to manage live entertainment events with a core focus on ticketing systems for live streams, merchandise sales, hospitality packages, and touchless food and beverage ordering. (Davari Decl., ¿ 1.) The industry is highly competitive/ (Id.) Tixr treats the following information as confidential, and does not publicly disclose its confidential offerings to clients: (i) the identity of clients, (ii) the terms of TIXR’s contract with the clients, (ii) TIXR fee payment structures, including payment tiers, (iii) amounts of processing charges, (iv) sponsorship arrangements, if any, and related sponsorship payments, (v) and available platform features including those provided by TIXR’s proprietary software natively or through further development (collectively, “Confidential Information”). (Davari Decl., ¿¿ 1-2.) If this confidential information were disclosed on the public record, there is a substantial probability that Defendant’s proprietary and trade secret interest will be injured. Disclosure will also serve little to no public purpose, as the specific confidential information is not relevant to the outcome of the motion to compel. The proposed sealing is narrowly tailored, as all information which is relevant is not redacted. Therefore, no less restrictive means exist to protect Defendant’s overriding privacy interest.

Accordingly, the motions to seal are GRANTED.

ANALYSIS

Defendant Tixr Inc. moves to compel Plaintiff Amtote International Inc.’s claims to arbitration. Defendant asserts that the instant claims are required to go to arbitration because Plaintiff signed an arbitration agreement covering their claims.

As with any contract, mutual assent or consent is necessary for the formation of a valid arbitration agreement. (Civ. Code, §§ 1550, 1565.) “Consent is not mutual, unless the parties all agree upon the same thing in the same sense.” (Civ. Code, § 1580.) The moving party bears the initial burden of showing the existence of an agreement to arbitrate by a preponderance of the evidence. (Mitri v. Arnel Mgmt. Co. (2007) 157 Cal.App.4th 1164, 1169 [“Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.”].)

Defendant claims that on October 7, 2021, the parties entered into an agreement governing Plaintiff’s use of Defendant’s ticketing services for live events promoted, hosted, sponsored and/or run by Plaintiff. Defendant claims that Plaintiff ratified the agreement on October 12, 2021. (Davari Decl., Ex. M.) Defendant presents a timeline of the negotiations between the parties in September/October, culminating in a purported ratification on October 12, 2021. (Davari Decl., ¶¶ 2-11.) Following several revisions to the draft agreement, on October 4, 2021, Plaintiff’s agent, Mr. Hines, presented Davari with the “latest” version of the Agreement. On October 5, 2021, Tixr accepted “most” of the changes. On October 7, 2021, plaintiff made “minor edits” to the Agreement. At 5:30AM on October 7, 2021, Mr. Hines emailed Mr. Davari, in part, “If aligned, we are good to execute.” At 8:54 a.m., Mr. Davari wrote to Mr. Hines that the agreement “Looks good. Can you guys send for digital signature now? Or we can do it on our end just let me know who it needs to go to.” (Ex. E.) On October 12, 2021, Davari sent Mr. Hines a reminder email, which stated, “Nick, checking in here. Let’s get this signed!” (Id., Ex. F.) Mr. Hines promptly replied that the CEO/Chairwoman had the Agreement “on [her] desk” and its signing was imminent. (Id.)

With this showing, Defendant does not meet its burden to demonstrate that Plaintiff agreed to the material terms of the Agreement, including the arbitration agreement. Defendant admits that the parties never executed the Agreement. (Davari Decl., 12.) Critically, the Agreement provides:

11. REPRESENTATIONS AND WARRANTIES Each Party hereby represents and warrants (i) that it is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation or organization; (ii) that the execution and performance of the Agreement will not conflict with or violate any provision of any law having applicability to such Party; and (iii) that the Agreement, when executed and delivered, will constitute a valid and binding obligation of such Party and will be enforceable against such Party in accordance with its terms.

(Ex. M, §11, emphasis added.) Considering these terms, the parties’ admitted failure to execute the Agreement would necessarily imply that the parties did not yet intend to have a binding and enforceable obligation. As such, the Court cannot find a meeting of the minds.

Defendant’s citations to the record only underscores this fact. Defendant merely demonstrates that the parties were contemplating and negotiating the terms of a written contract, which happened to include an arbitration provision, but not the formation of a valid written agreement. For instance, the cited stray comments show that the parties were waiting on the execution (e.g., “we are good to execute” or that the contract had been approved by “legal”).

Defendant provides no specific evidence which would demonstrate that Plaintiff ratified the Agreement or that they performed pursuant to the Agreement. Defendant does not identify who ratified the Agreement and how this person ratified the Agreement. Defendant does not show how they provided services pursuant to the October Agreement, as opposed to the pled oral contract. To the contrary, Plaintiff shows that the contract negotiations continued after October 12, 2021. (Kneisel Decl. ¶¶ 7-15.) If the parties intended the October 2021 agreement to be valid and enforceable, and Tixr performed pursuant to its terms, Defendant fails to explain why the parties still negotiated the terms of the same agreement even into February 2022. (Id., Ex. 5 [January draft agreement]; Exs. 3, 4, 6 [email chains from Nov. 9, 2021, to February 4, 2022, suggesting that the parties were still in active negotiations re: Agreement], Exs. 7-8.) The Court concludes that Defendant’s stated Agreement was merely a draft, and the parties never consented to its terms. The record therefore shows that there was never a meeting of the minds between the parties on the material terms of an agreement containing an arbitration clause.

Accordingly, the motion is DENIED.