Judge: Mark C. Kim, Case: 22LBCV00049, Date: 2023-01-17 Tentative Ruling

Case Number: 22LBCV00049    Hearing Date: January 17, 2023    Dept: S27

1.     22LBCV00049

On 2/01/22, SEJ Properties, L.P. filed 22LBCV00049 against Defendants, 1801-1899 Willow, LLC and Alma D. Barnes for specific performance and related claims arising out of Defendants’ alleged refusal to close escrow on Plaintiff’s purchase of a commercial property.

On 3/29/22, the Court denied Defendants’ motion to expunge lis pendens, finding Plaintiff had established the probable validity of its claims against Defendants. 

2.     22SMCV00217

On 2/16/22, SEJ Properties, L.P. filed 22SMCV00217 against Defendants, Escrow L.A., Inc. and Sharon L. Sharp for breach of fiduciary duty and related claims arising out of Defendants’ refusal to release the funds that were deposited into the escrow account in connection with the transaction at issue in 22LBCV00049.

3.     Consolidation

The two above cases were deemed related on 6/22/22 and were consolidated on 12/08/22.

4.     Motion to Stay

a.     Parties’ Positions

Willow seeks to stay this action pending the outcome of binding arbitration between it and Plaintiff.  Willow initiated an arbitration proceeding seeking to recover the earnest money deposit held in escrow as liquidated damages on the ground that Plaintiff breached the purchase and sale agreement by failing to fulfill the necessary requirements to timely close escrow.  Willow notes that both this case and the arbitration require the finder of fact to determine whether Plaintiff breached the parties’ agreement and failing to stay this action pending the outcome of the arbitration could result in inconsistent verdicts.

Plaintiff argues there is no reason to stay the action, and the stay will only prejudice it in moving forward seeking the relief to which it is entitled by way of this action.  Plaintiff notes that the arbitration proceedings were continued from January to May, and contends it will suffer prejudice if the motion is granted.  Plaintiff also notes that the arbitration has been pending for almost as long as this litigation, and Willow delayed in seeking a stay of this action. 

Willow, in reply, contends the parties’ own agreement requires Plaintiff to complete the arbitration proceedings prior to litigating this action, and Plaintiff did not provide any evidence to the contrary in its opposition to the motion. 

b.     Analysis

Pursuant to McGill v. Citibank, N.A. (2017) 2 Cal.5^th 945, 966, when two parties have both arbitrable and inarbitrable claims pending between them, it is appropriate to stay the inarbitrable claims pending the outcome of the binding arbitration.  Willow correctly notes, in its moving papers, that ¶22.1 of the parties’ agreement requires any claims related to whether the seller is entitled to liquidated damages to be determined by way of binding arbitration.  It notes that the agreement goes on to make clear that the arbitration award, if in favor of the seller on the liquidated damages issue, acts as a bar against any action by the buyer for damages and/or specific performance. 

Plaintiff does not meaningfully explain how this action can go forward unless and until the arbitration proceedings are concluded.  The arbitration proceedings are contemplated by the parties’ agreement, and the outcome of the proceedings creates a potential bar to this action. 

Plaintiff’s arguments concerning prejudice are also not well-taken.  There is no trial date set in this action, which was filed just under a year ago.  The arbitration is set to go forward in May, which is only four months away.  The motion is therefore granted.  This consolidated action is stayed in its entirety pending the outcome of the parties’ arbitration. 

The Court sets an OSC re: status of the arbitration proceedings for Tuesday, 6/06/23.  The Court vacates the scheduled 4/04/23 and 4/20/23 hearing dates and sets an OSC re: status of those motions for 6/06/23; if the motions remain at issue, the Court will schedule hearing dates for them at that time.

Willow is ordered to give notice. 

Parties who intend to submit on this tentative must send an email to the court at gdcdepts27@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If the parties do not submit on the tentative, they should arrange to appear remotely.