Judge Ralph C. Hofer, Case Number: 23GDCV01788, Date: 2024-01-12 Tentative Ruling

Plaintiff LA Stainless Kings, Inc. alleges that in February of 2023, plaintiff entered into a written Food Truck Lease Agreement with defendants Timofey Kravtsov, Elena Kravtsova, and Coffeegizer, LLC pursuant to which defendants agreed to lease a 2021 Mercedes Sprinter Food Truck for 12 months at $3,500 per month. The complaint alleges that the Lease required an initial $10,000 payment for first and last month’s lease payments and a $3,000 security deposit, which defendants paid, but that defendants have made no further payments on the Lease, breaching the Lease. Plaintiff alleges that defendants returned the truck after two months but remained obligated to pay for the remaining term of their Lease, and that plaintiff has attempted to mitigate its damages in good faith by immediately advertising the truck for lease and offering to accept assignment of the Lease from defendants to qualified friends or third parties, but that defendants did not arrange assignment of the Lease.

The complaint also alleges that starting in July of 2023, defendants Kravtsov and Kravtsova made untrue statements, including Google reviews, Facebook reviews and Yelp reviews, which they printed out and inserted into plaintiff’s brochures placed in plaintiff’s waiting room, claiming that the truck plaintiff built for defendants lacked the necessary permits and approvals to operate the truck legally, and that defendants falsely promised to assist defendant in obtaining clearances, and had engaged in other deceitful practices. Plaintiff alleges that defendants engaged in an online bullying campaign against plaintiff which has caused plaintiff to suffer direct financial harm and contract cancellations.

The complaint alleges causes of action for breach of contract, declaratory relief, business disparagement and trade libel, negligent interference with prospective economic advantages, intentional interference with prospective economic advantages, and for preliminary and permanent injunctions.

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that 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, unless it determines that:

There is a strong public policy in favor of arbitration of disputes and any doubts concerning the scope of arbitrable disputes should be resolved in favor of arbitration. Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 (“courts will ‘indulge every intendment to give effect to such proceedings.’”) (quotation omitted). “[A]rbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question.” Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189, quoting Weeks v. Crow (1980) 113 Cal.App.3d 350, 353.

“Arbitration All claims and disputes arising under or relating to this Agreement are to be settled by binding arbitration, with the condition that the arbitrator shall not have the power to commit errors of law or legal reasoning and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error, in the state of California. An award of arbitration may be confirmed in a court of competent jurisdiction. Each party to bear their own costs and fees. The arbitration fees and costs should be equally shared by the parties.”

Defendants argue that this provision applies to this controversy between the parties, that there has been no waiver and no grounds exist for revocation of the agreement, so the matter should be arbitrated.

Plaintiff in opposition argues that the court should disregard the motion to the extent it is brought by the individual defendants, as those parties have not paid their first appearance fees in this matter, so are not entitled to be heard until those fees are paid.

Plaintiff relies on CCP section 411.21, which provides procedures to be followed by the court if a filing fee tendered is voided, such as if a check is later returned without payment. The clerk is to notify the party that “the party has 20 days from the date of mailing of the notice within which to pay the filing fee and the administrative charge…” The statute provides, at subdivision (e)

“If any trial or other hearing is scheduled to be heard prior to the expiration of the 20-day period provided for in subdivision (a), the fee shall be paid prior to the trial or hearing. Failure of the party to pay the fee prior to the trial or hearing date shall cause the court to void the filing and proceed as if it had not been filed.”

It does not appear from the file that there has been any notice by the clerk concerning the failure to pay on the part of the individuals, giving rise to the remedies sought in the opposition. The court will expect the payment of first appearance fees by all appearing parties, but will not disregard the petition on this ground.

Plaintiff also argues that the petition should be denied because defendants have failed to meet their initial burden of proving the existence of a valid arbitration agreement. Plaintiff points out that the petition is not supported by any declaration or other evidentiary showing. The petition depends for defendants’ argument that an arbitration agreement exists on an agreement attached to plaintiff’s unverified complaint.

In general, the party seeking arbitration bears the burden of proving the existence of an arbitration agreement by a preponderance of the evidence. Villacreses v. Molinari (2005) 132 Cal.App.4th 1223, 1230:

“In determining whether an enforceable arbitration agreement exists, the initial burden is on the party petitioning to compel arbitration. “Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 413; see Engalla v. Permanente Medical Group (1997) 15 Cal.4th 951, 972 [64 Cal. Rptr. 2d 843, 938 P.2d 903].) Once the petitioner has met that burden, the burden shifts to the party opposing arbitration, to “produc[e] evidence of, and prov[e] by a preponderance of the evidence, any fact necessary to the defense.” (Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 413.”

Here, there is no evidence offered by defendants to establish the existence of a valid arbitration agreement, plaintiff has objected on this ground, and the court may find that defendants have accordingly failed to prove, either by admissible evidence, or by a preponderance of the evidence, the existence of a valid arbitration agreement.

Plaintiff goes on to argue, however, that “albeit” plaintiff and defendant Coffeegizer agreed to arbitrate contract related disputes, the individual defendants are not signatories of the agreement, and plaintiff did not agree to arbitrate disputes arising from the individual defendants’ alleged tortious misconduct. This appears to concede the existence of the arbitration agreement between plaintiff and defendant Coffeegizer. The Second District observed in Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 that if the moving party submits an unauthenticated agreement to meet its prima facie burden, “and the opposing party does not dispute the existence of the arbitration agreement,” then nothing more is required on the initial burden. The court accordingly will consider the agreement as submitted with the complaint.

Plaintiff argues that while at the time of the signing of the agreement, it may have been foreseeable that a dispute would arise from plaintiff’s denial of return of Coffeegizer’s security agreement in case of a breach, it was not foreseeable that the individual defendants would start an online storm creating fake negative reviews to destroy plaintiff’s business.

It does appear that the individual defendants executed the Lease which includes the arbitration provision on behalf of Coffeegizer, LLC and not in their capacity as individuals. [Complaint, Ex. A, pp. 1, 2, 9]. Defendants have failed to make any argument in the petition establishing how the individuals, who are sued only in their individual capacities in connection with the four tort causes of action in the complaint, are entitled to arbitrate those claims when they are not signatories to any agreement to arbitrate.

Under the circumstances, the court will grant the petition as brought by defendant Coffeegizer, LLC, as plaintiff concedes in the opposition that plaintiff entered into the subject arbitration agreement with that party and compel that defendant to arbitrate its dispute with plaintiff as agreed.

Plaintiff also argues in opposition that it would be unfair to enforce the agreement in connection with the tort claims because plaintiff will need third party discovery to establish those claims, when third party discovery is somewhat limited in arbitration proceedings. Since the tort claims are not brought against a signatory to the arbitration agreement, however, and the court will not enforce the agreement as against non-signatories, this argument is irrelevant.

While plaintiff appears to concede that there are claims before the court which are subject to the arbitration clause, in effect, the contract-based claims against Coffeegizer, plaintiff argues that this court should not sever the issues to be arbitrated in this matter, as there is a possibility of conflicting rulings on common issues of law or fact.

The argument is based on CCP section 1281.2(c) which provides that on appropriate petition of a party to an arbitration agreement to arbitrate, alleging the existence of an agreement to arbitrate and a refusal to arbitrate, the court shall order arbitration "unless it determines that..."

"(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact."

"If the court determines that a party to the arbitration is also a party to the litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c) herein, the court (1) may refuse to enforce the arbitration agreement and may order intervention of joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding."

The standard of review of such determination is "abuse of discretion, which looks to see whether the trial court exceeded the bounds of reason." Mercury Ins. Group v. Superior Court (1998) 19 Cal.4th 332, 349 (internal citation, quotations omitted).

Plaintiff argues vaguely that there is a possibility of conflicting rulings but does not specify how the contract-based dispute between the arbitrating parties could result in an outcome or legal determinations which would be inconsistent with any of the issues arising from the tort-based claims against the individuals. The argument seems to be, again, that enforcement of the arbitration clause on the tort claims would be unconscionable, but once those claims are severed, any unfairness argued would no longer be an issue. In the absence of any clear argument showing how there is a risk of inconsistency between the proceedings, the court does not find any reason to decline to order the arbitration between the parties who agreed to arbitrate their disputes.

“shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate, or until such earlier time as the court specifies.”

The Court finds that an agreement to arbitrate the controversy exists between plaintiff LA Stainless Kings, Inc. and defendant Coffeegizer, LLC, that there is no showing that there has been any waiver of the right to compel arbitration, and no showing that the agreement has been rescinded or that grounds exist for rescission of the agreement.

The petition as brought by defendants Timofey Kravtsov and Elena Kravtsova is denied, as defendants have failed to establish that an agreement between plaintiff and these defendants to arbitrate the controversy exists.

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