Judge Michelle Williams Court, Case BC673421 2022-11-07 Tentative Ruling

Judge: Michelle Williams Court, Case: BC673421, Date: 2022-11-07 Tentative Ruling

Case Number: BC673421 Hearing Date: November 7, 2022 Dept: 74

BC673421 CHRIS CHEN VS GLOBAL IP CAYMAN

Plaintiff Chris Chen’s Motion for Order Lifting or Vacating Stay

TENTATIVE RULING: The motion is GRANTED. A Case Management Conference is scheduled for January 12, 2023 at 8:30 a.m.

Background

On August 23, 2017, Plaintiff Chris Chen filed this action against Defendants Global-IP Cayman, Global IP USA, Inc., Yuen Cheung Wong, Baharm Pourmand, Shiwen Fan, Zheng Wang, Shiyue Liu, Henry Fan, and Bronzelink Holdings Limited, asserting causes of action for retaliation in violation of Labor Code §1102.5, wrongful termination in violation of public policy, breach of contract, and tortious interference with contract. Plaintiff alleges Board members retaliated against him by threatening his job as General Counsel, preventing him from receiving any stock options, and demoting him from his position as the Board secretary.

On April 19, 2019, the Court granted Defendants’ request to stay the instant action pending completion of Arbitration No. HKIAC/A18194 (In the Matter of an Arbitration Under the 2018 Hong Kong International Arbitration Centre Administered Arbitration Rules Between: Bronzelink Holdings Limited (Claimant) and STM Atlantic N.V., Emil Youssefzadeh, Umar Javed, and Global-IP Cayman (Respondents)) (the “Arbitration”) pursuant to Code of Civil Procedure section 1281.4. This Court did not compel the Arbitration.

Motion

On October 13, 2022, Plaintiff Chris Chen filed the instant motion seeking to lift or vacate the stay in this action based upon the recent Court of Appeal opinion in Leenay v. Superior Court (2022) 81 Cal.App.5th 553.

Opposition

In opposition, Defendant contends Leenay conflicts with established law, should not be applied here, and, alternatively, the Court should maintain the stay under its inherent authority.

Reply

In reply, Plaintiff argues the Court must follow Leenay because it does not conflict with prior case law or the facts of this case, and the Court should not exercise its inherent authority to maintain the stay.

Request for Judicial Notice

Plaintiff requests the Court take judicial notice of the docket in Leenay. The request is DENIED as irrelevant. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422 n.2 (“any matter to be judicially noticed must be relevant to a material issue.”).)

Motion

Standard

Pursuant to Code of Civil Procedure section 1008(c), “[i]f a court at any time determines that there has been a change of law that warrants it to reconsider a prior order it entered, it may do so on its own motion and enter a different order.” Additionally, California courts assume the trial court has some amount of discretion to lift a stay entered pursuant to Code of Civil Procedure section 1281.4. (Aronow v. Superior Court (2022) 76 Cal.App.5th 865, 876; MKJA, Inc. v. 123 Fit Franchising, LLC (2011) 191 Cal.App.4th 643, 660 (“Given the purpose of the statute, the most reasonable interpretation of the stay provision is that it grants a trial court discretion to lift a stay prior to the completion of arbitration only under circumstances in which lifting the stay would not frustrate the arbitrator's jurisdiction.”).)

Furthermore, “[t]rial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.” (Freiberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489.)

The Court Finds a Stay Pursuant to Civil Code section 1281.4 is No Longer Supported by California Law

In the Court’s April 19, 2019 order, the Court found “Plaintiff’s relationship to Defendants is not defined by the terms of the arbitration agreement,” but the pending arbitration between Bronzelink Holdings Limited, STM Atlantic N.V., Emil Youssefzadeh, and Umar Javed involved a number of legal and factual controversies at issue in this action. The Court stayed the action pursuant to Code of Civil Procedure section 1281.4 based upon the case authority existing at that time.

Plaintiff relies upon the Fourth District Court of Appeal decision in Leenay v. Superior Court (2022) 81 Cal.App.5th 553 to argue the stay pursuant to Code of Civil Procedure section 1281.4 is no longer supported by California law. The Court agrees.

In Leenay, the Court of Appeal addressed the following question: “does [Section 1281.4] authorize the court to stay a plaintiff's action on the basis of a pending arbitration to which the plaintiff is not a party?” (Leenay, supra, 81 Cal.App.5th at 559.) This question directly applies to the stay order entered on April 19, 2019 as it is undisputed that Plaintiff Chen is not a party to any relevant arbitration. (Kelly-Kilgore Decl. ¶ 2; Kreindler Decl. ¶ 6.)

After a thorough and persuasive review of the California Arbitration Act, Code of Civil Procedure section 1281.4, and existing case authority, the Court of Appeal in Leenay concluded “Section 1281.4 does not authorize a stay based on a nonparty’s arbitration claim.” (Leenay, supra, 81 Cal.App.5th at 572.) Accordingly, pursuant to Leenay, the Court’s April 19, 2019 stay order pursuant to Code of Civil Procedure section 1281.4 is no longer supported by California law.

In opposition, Defendant contends “Leenay is not controlling on this case because it conflicts with decades of existing case law” and cites authority for the proposition that a trial court may choose between conflicting decisions from the various districts of the Court of Appeal. (Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal.2d 450, 455-456 (“Under the doctrine of stare decisis, all tribunals exercising inferior jurisdiction are required to follow decisions of courts exercising superior jurisdiction. . . . the rule under discussion has no application where there is more than one appellate court decision, and such appellate decisions are in conflict. In such a situation, the court exercising inferior jurisdiction can and must make a choice between the conflicting decisions.”).)

Defendant contends Leenay directly conflicts with Heritage Provider Network, Inc. v. Superior Court (2008) 158 Cal.App.4th 1146 and Marcus v. Superior Court (1977) 75 Cal.App.3d 204, 207. In Heritage, the trial court ordered the plaintiff Eastland’s claims against four physicians to arbitration and denied the co-defendant’s request to stay the litigation pending the conclusion of Eastland’s arbitration with the physicians despite the trial court’s determination that “ similar issues were involved in the arbitration and court proceedings.” (Heritage, supra, 158 Cal.App.4th at 1148–1149.) Thus, the plaintiff whose claims were stayed was a party to the relevant arbitration. The Court of Appeal found, under those circumstances, the stay under Section 1281.4 was mandatory.

Similarly, in Marcus, supra, the plaintiff sued Cut & Curl Inc. for fraudulent inducement related to a franchise agreement and added several individuals as alter-ego defendants. (Marcus, supra, 75 Cal.App.3d at 207–208.) The trial court ordered the plaintiff’s claims against Cut & Curl to arbitration and subsequently denied the individuals’ motion to stay the litigation pending plaintiff’s arbitration with Cut & Curl and the individuals appealed. (Id. at 208 (“What is disputed, is the propriety of the trial court's refusal to stay proceedings on motion of the petitioners pending the outcome of the arbitration proceeding.”).) The only argument before the Court of Appeal in Marcus that is relevant here, was whether the individual defendants, who were not parties to the arbitration agreement, could file a motion for a stay pursuant to Section 1281.4. (Ibid. (“Petitioners contend that section 1281.4 requires the proceedings to be stayed. Real party in interest urges that: (1) Section 1281.4 is inapplicable as petitioners are not parties to the arbitration agreement.”).) The court found Section 1281.4 could be invoked by any party to the litigation. (Ibid. (“It is irrelevant under the statute whether the movant is a party to the arbitration agreement.”).) Thus, as in Heritage, the plaintiff in Marcus had been ordered to arbitrate their claims in the litigation against one, but not all, of the defendants.

This Court does not find Leenay in conflict with any relevant Court of Appeal authority. The court in Leenay thoroughly addressed both Heritage and Marcus noted why they were inapplicable and not in conflict with its holding. As stated by the court in Leenay:

The other cases on which Lowe's relies are similarly inapposite. In those cases, the plaintiffs were bound by an arbitration agreement with at least one defendant, but the plaintiffs had combined their arbitrable claims with claims against third parties. The courts compelled the plaintiffs to arbitration on the arbitrable claims and stayed their nonarbitrable claims against the third parties. (Heritage Provider Network, Inc. v. Superior Court (2008) 158 Cal.App.4th 1146, . . . Marcus v. Superior Court (1977) 75 Cal.App.3d 204 . . . Thus, while the judicial proceedings included defendants who were not parties to the arbitration, the stays nevertheless were based on arbitrations between the plaintiffs and at least one defendant.

None of those cases assists Lowe's. In each of those cases, both of the parties in the underlying arbitration were parties in the judicial proceedings, and they had agreed to arbitrate a question that arose in the judicial proceedings. That is what section 1281.4 requires. None of the cases held that an arbitration proceeding may be used to stay an action brought by a plaintiff who is not a party to the arbitration. None of the cases even considered that proposition, so they are not authority for it.

(Leenay, supra, 81 Cal.App.5th at 570–571.) Moreover, to the extent they could be found to be in conflict, this Court follows Leenay, which contains a persuasive and extensive discussion of the exact issue presented here: whether Code of Civil Procedure section 1281.4 “authorize[s] the court to stay a plaintiff's action on the basis of a pending arbitration to which the plaintiff is not a party.” (Leenay, supra, 81 Cal.App.5th at 559.) Defendant’s attempt to highlight factual differences between Leenay and the instant litigation is unpersuasive. (Opp. at 13:24-16:8.) The court in Leenay resolved a question of statutory interpretation, which is not diminished by the factual differences raised by Defendant.

Defendant also theorizes that Leenay conflicts with the doctrine of equitable estoppel, (Opp. at 13:1-10), which is not at issue here. This Court shall not issue an advisory opinion regarding the application of Leenay to a hypothetical case involving equitable estoppel.

Pursuant to Leenay, “Section 1281.4 does not authorize the court to stay an action on the basis of an arbitration to which the plaintiff is not a party.” (Leenay, supra, 81 Cal.App.5th at 562.) Accordingly, the Court shall not maintain a stay of Plaintiff’ Chen’s action pursuant to Code of Civil Procedure section 1281.4.

Defendant Has Not Demonstrated the Court Should Maintain the Stay under its Inherent Authority

Alternatively, Defendant contends the Court should maintain the stay as an exercise of its inherent authority. (Opp. at 16:9-18:2; Freiberg, supra, 33 Cal.App.4th at 1489 (“Trial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.”).) The Court has the authority to stay an action where Section 1281.4 does not apply. (See e.g. OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 141.)

Defendant notes the court previously found similar issues between the arbitration and the instant action and “staying the case until the conclusion of the arbitration would preserve judicial resources by allowing the Court to accord res judicata to the factual findings of the arbitration proceeding.” (Opp. at 17:9-11.) However, Defendant does not cite any authority supporting its contention that res judicata could apply where, as here, Plaintiff is not a party to the arbitration. (Fenton v. City of Delano (1984) 162 Cal.App.3d 400, 410 (“A point totally unsupported by argument and authority may be rejected by the reviewing court without discussion.”).) Defendant also fails to provide any evidence or authority supporting its claim that vacating the stay in this action would have any affect on the arbitrator’s jurisdiction. As noted by Plaintiff in reply, the arbitrator does not have jurisdiction over Plaintiff’s claims in this action. Defendant has not demonstrated a further stay of this matter is in the interests of justice or judicial efficiency. The Court declines to exercise its inherent authority to maintain the stay of this action, which has prevented Plaintiff from pursuing his claims for several years.