Judge: Mark H. Epstein, Case: 23SMCV05901, Date: 2024-03-12 Tentative Ruling

Case Number: 23SMCV05901    Hearing Date: March 26, 2024    Dept: I

This is the continuation of a motion to compel arbitration.  At the last hearing, the court agreed with the moving party, Horne, that the retainer agreement Horne and plaintiff signed contained an arbitration provision and that the provision was broad enough to cover this complaint.  But in response, plaintiff argued that there is an exception to the general rules regarding arbitration where the plaintiff sues two parties and the facts are intertwined enough so that the issues need to be decided together, not separately, to avoid the danger of inconsistent determinations but only one defendant has an arbitration agreement.  That, plaintiff argued, is the case here because HCVT had no such agreement.  In reply, Horne argued that it provided legal advice but specifically did not provide any tax advice—and that limitation was made express in the retainer agreement.  Horne stated that its work ended in 2019 but HCVT was retained in 2021.  Therefore, Horne argues, whatever tax issues might have arisen, it was not a situation in which Horne and HCVT could be jointly responsible.

The court ordered further briefing to determine whether, as plaintiff suggested, Horne and HCVT worked together in 2021 to arrive at the specific plan that led to the adverse tax consequences.  Both sides were given leave to submit evidence showing the collaboration, or lack thereof, after HCVT was retained.

The court has reviewed that evidence.  It appears that Horne was part of a couple of email chains in 2021 and asked some questions therein, and was involved in a call.  But it is also clear that Horne’s participation was narrow and fleeting and there is nothing that suggests that Horne gave any tax advice or made any representations about the tax consequences of the proposed plan (which the contract between Horne and plaintiff expressly provided he would not do).  Horne did not approve of the plan upon which HCVT and plaintiff agreed, and it does not even appear that Horne commented on it.  It simply does not appear to the court that Horne’s conduct was significant enough so that he and HCVT can be joint tortfeasors such that the facts and legal theories are significantly intertwined or that there will be a reasonable chance of inconsistent determinations.  Critically, there is no declaration that Horne took part in a substantive call where any tax implications of any plan was discussed, that Horne sent over any written comments on any tax or tax-related issue, that Horne was asked for advice on any tax or tax-related issue (let alone that he gave it), or that Horne was asked to approve any draft of the plan or even saw the final draft. 

The court is aware that the test for whether to deny the motion is not whether a conflict will necessarily occur between the arbitration award and the jury verdict, or even that it is likely to occur; the question is only whether it is a realistic possibility.  (Birl v. Heritage Care, LLC (2009) 172 Cal.App.4th 1313.)  But neither is it enough that the case against each is from the same transaction or occurrence; the possibility of the conflict must also be present.  Here, the court is hard pressed to see how that could occur.  Given what appears to be a very minimal involvement by Horne after 2019 and the contractual provision stating that he would not give tax advice, it is hard to see how a jury would find Horne liable (but render no verdict against Horne because Horne was in the arbitration) but find HCVT not liable.  And if both are liable, the liability will stem from Horne’s involvement in 2021 and would undoubtedly be joint.  Accordingly, the court is inclined to GRANT the motion and STAY the litigation as between Horne and plaintiff pending arbitration.  That said, however, the stay does not extend to any discovery involving Horne by either HCVT or plaintiff to the extent that the discovery could be propounded were Horne a third party.  And Horne’s declaration is consistent with the foregoing.  Interestingly, there is nothing to the contrary—no declaration from anyone at Nexthome suggesting that Horne’s involvement was more significant.  (If there were, the court would be inclined to deny the motion; this is not really the time to resolve contested facts and the court would be inclined to err on the side of avoiding inconsistent judgments.)  In short, there is just no “there there.”  (Gertrude Stein, describing the Oakland of her childhood [and taken out of context], Everybondy’s Autobiography, NewYork: Cooper Square, p. 289, originally published in 1937 but the page reference is to the 1971 edition.)

All of that said, the court will discuss with plaintiff (and then Horne) the factual theoretical scenario under which inconsistent judgments could actually occur.  If there is a realistic possibility—even if not a probability and even if not even a high possibility—that such could take place, the court will likely deny the motion.  It is just that right now, as a practical matter given these facts, the court does not see it.