Judge Michael E. Whitaker, Case Number: 25STCP00770, Date: 2025-05-14 Tentative Ruling

Judge: Michael E. Whitaker, Case: 25STCP00770, Date: 2025-05-14 Tentative Ruling

In or around June 15, 2020, Michael Landver (“Landver” or “Petitioner”) demanded arbitration on his own behalf and derivatively on behalf of nominal defendant, United Clinical Research, Inc. (“United”) against Peyman Banooni (“Banooni”); Stan Gershovich (“Gershovich”); Fred Shaham (“Shaham”) (Banooni, Gershovich, and Shaham shall collectively be referred to as the “Individual Defendants” or “Respondents”); and Matrix Clinical Research, Inc. (“Matrix.”)

Landver alleges he and the Individual Defendants previously formed United, a company that conducts clinical trials for drug development, in which Landver claims a 25% ownership interest. Landver alleges the Individual Defendants later stopped working with Landver and secretly formed their own company, Matrix, to conduct such clinical trials. In so doing, Landver alleges the Individual Defendants violated their fiduciary duties to Landver and misappropriated United’s business, employees, revenue, contracts, and trade secrets which they used to start Matrix so they would no longer have to share profits with Landver.

The arbitration was demanded pursuant to the United Shareholder Agreement, entered into by Landver and the Individual Defendants. (Ex. 1 to Feb. 10, 2025 Behjatnia Decl. iso Opp. to MSJ at Ex. A.)

Matrix was subsequently dismissed from the arbitration proceedings on the grounds that it was not a party to the United Shareholder Agreement. (Feb. 10, 2025 Behjatnia Decl. at ¶ 4; Dec. 3, 2024 Baranov Decl. at ¶ 9.)

On July 6, 2020, the Individual Defendants filed counterclaims against Landver and California Clinical Research (“CCR”) alleging breach of contract; breach of fiduciary duty and misappropriation of trade secrets, to which Landver answered on July 20, 2020. (Dec. 3, 2024 Baranov Decl. iso MSJ at ¶¶ 4-5.)

On or about August 16, 2021, the arbitrator dismissed the Individual Defendants’ counterclaims against CCR for lack of jurisdiction and issued sanctions against the Individual Defendants for their refusal to participate in discovery. (Dec. 3, 2024 Baranov Decl. at ¶¶ 8-9; see also July 13, 2022 Baranov Decl. at ¶ 14 and Exs. E-G attached thereto.)

According to the July 13, 2022 Baranov declaration filed in opposition to the Order to Show Cause why this case should not be stayed (“July 13, 2022 Baranov Decl.”), the arbitrator subsequently vacated all proceedings in the arbitration and stayed the arbitration pending the resolution of the civil actions. (July 13, 2022 Baranov Decl. ¶ 16.)

Based on documents Landver received in discovery in the civil actions from Matrix’s accountant, David Gadoshian, CPA, Landver submitted a prove-up packet in the arbitration, with notice to the Individual Defendants, and on August 4, 2024, the arbitrator issued a ruling in Landver’s favor, awarding a sum of $2.6M against the Individual Defendants. (Dec. 3, 2024 Baranov Decl. ¶¶ 21-22 and Ex. D.)

On August 11, 2021, United, Banooni, Gershovich, and Shaham filed a complaint in case number 21SMCV01358 against Landver and Thomas P. Hanrahan, an arbitrator for the American Arbitration Association, seeking a declaration that the arbitration proceedings were invalid because the terms of the arbitration provision had not been complied with and injunctive relief enjoining the arbitration proceedings. That case was voluntarily dismissed in its entirety without prejudice on March 13, 2023.[1]

On October 22, 2021, Landver filed a complaint in his individual capacity and derivatively on behalf of United against Matrix and the Individual Defendants in case number 21STCV39105 (“9105 action”), alleging eleven causes of action as follows:

The parties, allegations, and causes of action in the 9105 action are substantially similar to those filed in the arbitration proceedings.

On August 6, 2024, Landver requested voluntary dismissal of the Individual Defendants without prejudice, which the Court entered on August 7, 2024. On August 7, 2024, Landver requested voluntary dismissal without prejudice of Matrix, which the Court entered on August 8, 2024.

On November 29, 2021, United, Banooni, Gershovich, and Shaham filed a complaint against Landver and CCR in case number 21STCV43580 (“3580 action”) for allegedly sabotaging United. The parties and causes of action are substantially similar to the counterclaims filed in the arbitration proceedings.

The Individual Defendants Banooni, Gershovich, and Shaham subsequently dismissed their claims, leaving only United as a plaintiff. In the operative First Amended Complaint (“FAC”), filed on September 21, 2023, United alleges nine causes of action as follows:

On March 21, 2022, Landver moved to compel arbitration in the 3580 action, which the Court granted on June 24, 2022.

On September 28, 2022, Landver filed a notice of withdrawal of motion to compel arbitration and request to lift the stay. The Court granted the request and lifted the stay on October 4, 2022.

Subsequently, the Court consolidated for all purposes the 9105 and 3580 actions on October 11, 2023, designating the 9105 action as the lead case. (See October 11, 2023 Minute Order.)[2] Following a bench trial on the consolidated actions, the Court entered a Judgment in favor of Landver and CCR on April 28, 2025. Therefore, the consolidated actions are now fully disposed of.

On February 27, 2025, Petitioner Michael Landver (“Petitioner”) filed a petition to confirm an arbitration award. Petitioner has not yet noticed or set a hearing on the petition.

Respondents Peyman Banooni, Stan Gershovich, and Faramarz [Fred] Shaham (“Respondents”) now move for an order vacating the arbitration award. Petitioner opposes the motion and Respondents reply.

“Any party to an arbitration in which an award has been made may petition the court to confirm, correct or vacate the award. The petition shall name as respondent all parties to the arbitration and may name as respondents any other persons bound by the arbitration award.” (Code Civ. Proc. § 1285.)

“A petition under this chapter shall: (a) Set forth the substance of or have attached a copy of the agreement to arbitrate unless the petitioner denies the existence of such an agreement; (b) Set forth the names of the arbitrators; and (c) Set forth or have attached a copy of the award and the written opinion of the arbitrators, if any.” (Code Civ. Proc. § 1285.4.)

“If a petition or response under this chapter is duly served and filed, the court shall confirm the award as made, whether rendered in this state or another state, unless in accordance with this chapter it corrects the award and confirms it as corrected, vacates the award or dismisses the proceeding. (Code Civ. Proc. § 1286.)

Subject to Section 1286.4, the court shall vacate the award if the court determines any of the following:

(3) The rights of the party were substantially prejudiced by misconduct of a neutral arbitrator.

(4) The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.

(5) The rights of the party were substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefor or by the refusal of the arbitrators to hear evidence material to the controversy or by other conduct of the arbitrators contrary to the provisions of this title.

(6) An arbitrator making the award either: (A) failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware; or (B) was subject to disqualification upon grounds specified in Section 1281.91 but failed upon receipt of timely demand to disqualify himself or herself as required by that provision. However, this subdivision does not apply to arbitration proceedings conducted under a collective bargaining agreement between employers and employees or between their respective representatives.

Respondents argue that the arbitrator exceeded its powers because (1) at the time the arbitration award was entered, Petitioner had already waived its right to arbitrate by substantially participating in the litigation; and (2) Petitioner lacked standing to recover the damages awarded by the arbitrator.

“[A] court should apply the same principles that apply to other contracts to determine whether the party seeking to enforce an arbitration agreement has waived its right to do so.” (Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, 569 (hereafter Quach).) “To establish waiver under generally applicable contract law, the party opposing enforcement of a contractual agreement must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it.” (Id. at p. 584.) “Under the clear and convincing evidence standard, the proponent of a fact must show that it is ‘highly probable’ the fact is true.” (Ibid.)

“The waiving party's knowledge of the right may be “actual or constructive.” (Quach, supra, 16 Cal.5th at p. 584.) “Its intentional relinquishment or abandonment of the right may be proved by evidence of words expressing an intent to relinquish the right or of conduct that is so inconsistent with an intent to enforce the contractual right as to lead a reasonable factfinder to conclude that the party had abandoned it.” (Ibid.)

“To establish waiver, there is no requirement that the party opposing enforcement of the contractual right demonstrate prejudice or otherwise show harm resulting from the waiving party's conduct.” (Quach, supra, 16 Cal.5th at p. 585.)

In the arbitration context, “[i]f a party to an arbitration agreement files a complaint in court raising a claim covered by the agreement, the defendant can file a motion asking the court to stay the lawsuit and send the dispute to arbitration. A defendant who instead litigates the case risks losing the contractual right to compel arbitration.” (Quach, supra, 16 Cal.5th at p. 569.)

Participation in litigation that has been deemed to constitute a waiver includes answering the complaint, propounding discovery requests, and actively engaging in discovery for thirteen months instead of moving to compel arbitration at the outset of the case. (Quach, supra, 16 Cal.5th at pp. 586-587.)

Here, after initiating arbitration, Petitioner initiated the 9105 action, ostensibly because Matrix was dismissed as a party to the arbitration proceedings, and litigation was the only way Petitioner could seek redress against Matrix. Notwithstanding, Petitioner also named the Respondents Shaham, Banooni, and Gershovich, who were still parties to the arbitration, and against whom Petitioner had already received evidentiary sanctions. The parties then litigated the 9105 action for nearly three years, until Petitioner utilized evidence obtained in discovery from Matrix in the 9105 case to submit the prove-up package to the arbitrator. Respondents apparently ignored their deadlines to oppose the arbitration prove-up, and an award was issued against them August 4, 2024. Petitioner then dismissed Respondents from the 9105 action a few days later.

Indeed, Respondents may well have had an argument that Petitioner waived and/or abandoned the arbitration proceedings by naming them in the 9105 case and heavily litigating against them for the next three years, but the time to raise that issue was, at the latest, in response to the arbitration prove-up request (or any time in the preceding three years, including immediately after they were named in the duplicative 9105 litigation). Yet, Respondents failed to raise the issue until now.

But by not raising the issue before a final arbitration award was issued against them, and by not raising the issue while the civil actions were pending (9105 and 3580), Respondents effectively gave the arbitrator the continued authority to issue an award against them. As such, the Court does not find on the record before it that the Arbitrator exceeded its authority by issuing an award against Respondents.

Respondents next argue that Petitioner lacked standing to recover damages from Respondents for the alleged loss of the value of his shares in United because a shareholder cannot sue officers or other shareholders directly for injury caused to the corporation; rather they must bring a derivative action on the corporation’s behalf. (See Schuster v. Gardner (2005) 127 Cal.App.4th 305, 312-313.)

In contrast to a derivative suit, which “is brought to enforce a cause of action which the corporation itself possesses against some third party,” an individual suit is one to enforce a right the stockholder possesses as an individual. For example, although a plaintiff may allege the value of her stock has been diminished by the defendants’ actions, if the gravamen of the injury is to herself has a stockholder as opposed to the corporation and its depreciation in stock, it is an individual action. (Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 107.)

1. Claimant brings this action because Respondents have illicitly transferred United’s business to a new entity which they have secretly established—Matrix. In doing so, they have run roughshod over their fiduciary duties to Claimant and United, committed fraud, seized corporate opportunities, embezzled funds, and stole trade secrets. Claimant asserts shareholder derivative claims brought for the benefit of Nominal Respondent United as well as individual claims.

It is hornbook law that directors, while not strictly trustees, are fiduciaries, and bear a fiduciary relationship to the corporation, and to all the stockholders. They owe a duty to all stockholders, including the minority stockholders, and must administer their duties for the common benefit. The concept that a corporation is an entity cannot operate so as to lessen the duties owed to all of the stockholders. Directors owe a duty of highest good faith to the corporation and its stockholders. It is a cardinal principle of corporate law that a director cannot, at the expense of the corporation, make an unfair profit from his position. He is precluded from receiving any personal advantage without fullest disclosure to and consent of all those affected. (Remillard Brick Co. v. Remillard-Dandini (1952) 109 Cal.App.2d 405, 421; Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108[“Majority shareholders may not use their power to control corporate activities to benefit themselves alone or in a manner detrimental to the minority. . . .”].)

Thus, the Court does not find the arbitrator exceeded its authority by issuing an award in Petitioner’s favor and against Respondents.

For the foregoing reasons, the Court denies Respondents’ motion to vacate the arbitration award.

Respondents shall provide notice of the Court’s order and file the notice with a proof of service forthwith.

[1] “[A]s a general rule, a voluntary dismissal of an action deprives the court of both subject matter and personal jurisdiction in that case. Based on this general rule, most orders entered after the dismissal are void and have no effect.” (See Manhan v. Gallagher (2021) 62 Cal.App.5th 504, 509 [cleaned up]; see also Paniagua v. Orange County Fire Authority (2007) 149 Cal.App.4th 83, 89 [“it is a well-settled proposition of law that where the plaintiff has filed a voluntary dismissal of an action . . ., the court is without jurisdiction to act further [citations], and any subsequent orders of the court are simply void”].)

[2] “[T]here are thus two types of consolidation: a consolidation for purposes of trial only, where the two actions remain otherwise separate; and a complete consolidation or consolidation for all purposes, where the two actions are merged into a single proceeding under one case number and result in only one verdict or set of findings and one judgment.” (Hamilton v. Asbestos Corp., Ltd. (2000) 22 Cal.4th 1127, 1147.)

DEPARTMENT	207
HEARING DATE	May 14, 2025
CASE NUMBER	25STCP00770
MOTION	Motion to Vacate Arbitration Award
MOVING PARTY	Respondents Peyman Banooni, Stan Gershovich, and Faramarz [Fred] Shaham
OPPOSING PARTY	Petitioner Michael Landver