Judge: Mel Red Recana, Case: 22STCV38475, Date: 2024-04-11 Tentative Ruling

Case Number: 22STCV38475    Hearing Date: April 11, 2024    Dept: 45

Superior Court of California 

County of Los Angeles 

Hearing Date:             April 11, 2024

Moving Party:             Defendant Dr. Gilbert Varela

Responding Party:      None

Motion to Compel Arbitration and Stay Entire Action

The court considered the moving papers.  No opposition papers have been filed as of April 9, 2024.  Defendant Varela filed notice of no opposition on April 2, 2024. 

The Court GRANTS Defendant Varela’s unopposed motion to compel arbitration.  The case is stayed pending binding arbitration as to the entire action.

Background

This is an action for breach of contract and related employment claims.  On December 9, 2022, Omar Moreno (“Plaintiff”) filed his Complaint against Central City Community Health Center, Inc. (“Central City”), Gilbert Varela (“Varela”), and Does 1 to 20, asserting six causes of action for: (1) Violation of Government Code section 12653; (2) Wrongful Termination in Violation of Public Police; (3) Breach of Contract; (4) Interference with Contractual Relations; (5) Violation of Labor Code section 1102.5; and (6) Waiting-Time Penalties for Violation of Labor Code section 203.  Only Plaintiff’s fourth cause of action is asserted against Varela.

On August 3, 2023, the Court approved a Stipulation and entered an Order submitting Plaintiff’s claims against Defendant Central City only to binding arbitration and issued a temporary state of the action until the completion of mediation.  (Stipulation and Order 08/03/23.)  The Stipulation between the parties acknowledged, among other things, Defendant Varela reserved his right to compel arbitration at any time.  (Id.)

Defendant Varela has now filed his instant motion to compel arbitration and stay entire action.  Defendant Varela requests for an order compelling arbitration between Plaintiff and him on Plaintiff’s fourth cause of action for Interference with Contractual Relations.  Defendant Varela also requests an order staying the state court action pending resolution of this motion, and if granted, pending resolution of the arbitration between the parties. 

Defendant Varela’s motion is made pursuant to the agreement to arbitrate in the Employment Agreement and Plaintiff’s claims arising from and related to the Employment Agreement between Plaintiff and Defendant Central City, and the Order approving the Stipulation to arbitrate Plaintiff’s claims against Defendant Central City only. 

Defendant Varela filed a notice of no opposition on April 2, 2024.  No opposition has been filed as of April 9, 2024.  Defendant Central City’s counsel indicated he would not oppose the motion.  (Declaration of Salvator Boufadel, ¶ 9.)

Allegations

Defendant Central City is a Federal qualified health care center, which is a special designation for a community clinic.  Central City operates 16 health clinics throughout Southern California, including throughout Los Angeles County, Orange County, San Bernardino County, and Riverside County, it provides medical services to over 400 residential care facilities, and it has 4 mobile RV medical units.  Central City’s health clinics, medical services, and medical units are designed to provide safety-net health care for indigent people.  (Complaint ¶ 10.) 

Defendant Varela used to be the CEO of Central City.  He held that title for numerous years.  Varela is also a medical doctor, and while he was CEO of Central City (and afterward) he also ran his own medical clinics and other businesses, including numerous board and cares.  (Id. ¶ 11.)

Plaintiff was asked to become the CFO of Central City.  He became the CFO on November 3, 2018.  Within a couple of months, Central City made him the Central City CEO.  Plaintiff signed multiple written employment agreements.  His final written employment agreement was to be Central City’s CEO up until March 4, 2031.  (Id. ¶ 12.)  Plaintiff alleges various inappropriate conduct including financial improprieties, fraudulent activity, misappropriation and theft of funds at Central City by Varela, Central City’s Chairman of the Board—Luis Martin  (“Martin”), and Martin’s wife.  (Id. ¶¶ 13-23, 28-30)

Plaintiff reported the foregoing conduct to a member of the Central City Board, to Central City’s outside lawyer, and to Varela who had sway and complete influence over Central City.  (Id. ¶ 30.)  Shortly after this reporting, Central City suspended Plaintiff and then fired him on August 3, 2022.  ( Id. ¶ 31.)  Central City suspended and then fired Plaintiff for his objecting to, stopping some of, and reporting the numerous financial improprieties, outright fraudulent activity, misappropriation and theft of funds, including public funds, that had taken place at Central City by Martin, his wife, and Varela.  ( Id. ¶ 32.) 

Judicial Notice

Defendant Varela has requested that the Court take judicial notice of the following:

(1)   Plaintiff Omar Moreno’s Complaint against Defendants Central City and Varela filed on December 9, 2022, commencing the above-entitled action, Los Angeles Superior Court Case No. 22STCV38475, attached as Exhibit 1 to the declaration of Boufadel; and

(2)   Stipulation and Entered Order submitting Plaintiff’s claims against Defendant Central City only to binding arbitration and related relief entered on August 3, 2023, in the above-entitled action, attached as Exhibit 2 to the declaration of Boufadel.

Pursuant to Evidence Code sections 452 and 453, the Court GRANTS Defendant Varela’s requests. 

Legal Standard

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate a controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….”  (Code Civ. Proc., § 1281.2.)  The right to compel arbitration exists unless the court finds that the right has been waived by a party’s conduct, other grounds exist for revocation of the agreement, or where a pending court action arising out of the same transaction creates the possibility of conflicting rulings on a common issue of law or fact.   (Id. § 1281.2, subd. (a)-(c).)  “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.”  (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)  

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.”  (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)  “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Id. [internal quotations omitted].)

Discussion

1.     Equitable Estoppel by Nonsignatory Defendant

“[A] nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are ‘intimately founded in and intertwined’ with the underlying contract obligations.”  (Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271.)  “By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.”  (Id. at 272.)  “The focus is on the nature of the claims asserted by the plaintiff against the nonsignatory defendant.”  (Id.)  “That the claims are cast in tort rather than contract does not avoid the arbitration clause.”  (Id.) 

Here, the Employment Agreement between Plaintiff and Defendant Central City is not disputed.  (Boufadel Decl.; Ex. “2”; Declaration of  Alma Martinez; Ex. “3.”)  Further, it is not disputed that the Employment Agreement provides a dispute resolution provision already invoked by Plaintiff, giving rise to the arbitration pending between Plaintiff and Defendant Central City.  (Boufadel Decl.; Ex. “2”; Stipulation and Order 08/03/23.)

Defendant Varela contends first that while he is a nonsignatory to the Employment Agreement between Plaintiff and Defendant Central City, the equitable estoppel exception applies entitling him to compel arbitration of Plaintiff’s fourth cause of action for Interreference with Contractual Relations.  The Court agrees with Defendant Varela.  The Court finds that the fourth cause of action concerns the underlying contract—the Employment Agreement—containing an arbitration provision.  Specifically, the fourth cause of action for Interference with Contractual Relations alleges the following: “Plaintiff has or had valid an existing written employment contract with Central City,” “Defendant Varela knew about this written employment contract between Plaintiff and Central City,”  and “Defendant Varela’s conduct caused Central City to breach its written contracts with [Plaintiff] as alleged in this complaint.”  (Complaint ¶¶ 68-71.)  These allegations are intertwined with Defendant Central City’s conduct and alleged wrongdoing, and they are founded in the employment relationship created by Defendant Central City’s Employment Agreement with Plaintiff.  Further, the alleged conduct resulted in the same amount of economic damages requested in Plaintiff’s Breach of Contract cause of action alleged against Defendant Central City.  (Id. ¶¶ 64, 72.)  Defendant Varela can therefore seek to compel arbitration of Plaintiff’s claim against him under the equitable estoppel exception. 

Based on the foregoing, the Court GRANTS Defendant Varela’s unopposed motion to compel arbitration.  The case is stayed pending binding arbitration as to the entire action.

It is so ordered.

Dated: April 11, 2024

_______________________

ROLF M. TREU

                                                                                         Judge of the Superior Court