Judge Randolph M. Hammock, Case 22STCP03854 2023-01-24 Tentative Ruling

Petitioner 500 7th Avenue Tenant LLC (“Petitioner” or “WeWork”) brings this petition to confirm the arbitration award entered after binding arbitration between Petitioner and Respondent, Open Influence, Inc. (“Respondent” or “Open Influence”.)

Any party to an arbitration may petition the court to confirm an arbitration award. (CCP § 1285.) If a petition to confirm an arbitration award is duly served and filed, the court must confirm the award as made, unless the court corrects or vacates the award pursuant to a response to the petition or a petition to correct or vacate the award. (CCP § 1286; Valsan Partners Limited Partnership v. Calcor Space Facility, Inc. (1994) 25 Cal.App.4th 809, 818 [no authority to alter terms of award absent petition to correct].)

A petition to confirm an arbitration award must set forth the substance of or attach the arbitration agreement, include the name of the arbitrator, and attach a copy of the award and the written opinion of the arbitrator, if any. (CCP § 1285.4.) The petition must be served no earlier than 10 days, but no later than 4 years, after service of the award on the petitioner. (CCP §§ 1288, 1288.4.)

The petition, written notice of the time and place of the hearing on the petition, and any other papers upon which the petition is based must be served in the manner provided in the arbitration agreement for service of such petition and notice. (CCP § 1290.4(a).) If the arbitration agreement does not specify the required manner of service and the person being served has not yet appeared in the proceeding and has not yet previously been served, then service of the petition within the State must be made in the same manner as service of a summons and complaint pursuant to CCP section 415.10 et seq. (CCP § 1290.4(b)(1).) At least 10 days’ notice of the date set for the hearing on the petition must be given. (CCP §1290.2.) Service outside the state must be made by registered or certified mail, return receipt requested. (CCP § 1290.4(b)(2).) The proof of service must show such mailing together with the return receipt signed by the person served. (Id.) If service is made by registered or certified mail, return receipt requested, the hearing on the petition may not be held until at least 30 days after the date of such notice. (Id.)

Petitioner moves to confirm the arbitration award following binding arbitration between the parties. On November 17, 2022, Petitioner served the Petition on Respondent’s Agent for Service of Process, Eric Dahan, by personal service at 603 N. Martel Ave, Los Angeles, CA. (See Proof of Service, filed 11/18/2022.)

Petitioner represents that the “dispute concerned Respondent's payment obligations to Petitioner in connection with the Agreement, executed on or about February 22, 2018, governing Respondent's access to and use of the commercial office space and related services at 500 7th Avenue, in New York, New York.” (Petition ¶ 5.)

Except that either party may seek equitable or similar relief from any court of competent jurisdiction, any dispute, controversy or claim arising out of or in relation to this Agreement, or at law, or the breach, termination or invalidity of this Agreement, that cannot be settled amicably by agreement of the parties to this Agreement shall be finally settled in accordance with the arbitration rules of JAMS then in force, by one or more arbitrators appointed in accordance with said rules.

The award rendered shall be final and binding on both parties. Judgment on the award may be entered in any court of competent jurisdiction. In any action, suit or proceeding to enforce rights under this Agreement, the prevailing party shall be entitled to recover, in addition to any other relief awarded, the prevailing party’s reasonable attorneys’ fees and other fees, costs and expenses of every kind in connection with the action, suit or proceeding, any appeal or petition for review,

On June 29, 2022, Arbitrator Vivian B. Shelanski of JAMS ruled that “Respondent breached the Membership Agreement and is entitled to recover its accrued and unpaid Membership Fees and late fees” in the amount of 340,068.94, plus interest of $36,916.23. (See Petition, Attachment 8(c), p. 9.) The Arbitrator also concluded that the parties’ agreement entitled the prevailing party to recover its legal fees and costs in the amount of $353,389.97. (Id., p. 13.) Accordingly, the Arbitrator issued an Award in favor of Petitioner and against Respondent at the calculated amount of $730,375.14. (Petition ¶¶ 8; Attachment 8(c).)

Petitioner provided the arbitration agreement, the name of the arbitrator, and the arbitrator’s written opinion. (CCP § 1285.4.) The petition has also been served no earlier than 10 days, but no later than 4 years, after service of the award on the petitioner. (CCP §§ 1288, 1288.4.)

This petition to confirm arbitration award was first set for hearing on December 15, 2022. On December 12, 2022, this court posted a Tentative Ruling confirming the unopposed petition. Later that day, Respondent “Instabrand, Inc.,” through counsel Robert Tauler, improperly filed its second peremptory challenge to the judicial officer (Judge Randolph M. Hammock) on this case. [FN 3] Finding that “Instabrand, Inc.” and “Open Influence, Inc.” were one and the same, and that attorney Robert Tauler had filed both challenges, this court denied the peremptory challenge on December 13, 2022. (See CCP § 170.6(a)(4).) By separate Minute Order that same day, this court continued the December 15 hearing on the petition to confirm the arbitration award to January 24, 2023.

Respondent failed to oppose the motion before the originally scheduled December 15, 2022, hearing date. It did, however, then file an opposition based on the continued hearing date on January 10, 2023. But this does not change the fact that Respondent failed to file an opposition within 100 days of being served the award. (See Eternity Investments, Inc. v. Brown (2007) 151 Cal.App.4th 739, 745, [“If [the party who lost in the arbitration does] not serve and file a petition to vacate or a response to [a] petition to confirm within the 100-day period from the date of service of the award ..., the award must be treated as final.”].)

Thus, it still appears the response is untimely. However, given the continued date, and the fact that Petitioner thereafter had sufficient time to file a Reply, the court will consider Respondent’s opposition to the extent it has the discretion to do so. (See Correia v. NB Baker Electric, Inc. (2019) 32 Cal. App. 5th 602, 613 [courts may consider late-filed opposition papers for good cause if there is no undue prejudice to the moving party].) Be that as it may, whether considered or not, the opposition makes no difference to the outcome of this ruling.

In opposition, Respondent first contends that the arbitration award is against public policy because it names the wrong entity. Respondent argues that Petitioner commenced the arbitration against the entity “Instabrand Agency, Inc.” (Tauler Decl., Exh. A, Statement of Claim.”) Thus, “at no time, Respondent contends, “was the respondent ‘Open Influence, Inc.’ or ‘Instabrand Inc.’ ever a party to the underlying proceedings.” (Opp. 3: 2-3.) And “the Final Award does not explain why ‘Open Influence, Inc.’ should be liable for claims asserted against ‘Instabrand Agency Inc.’” (Opp. 3: 16-17.)

Upon closer inspection, Petitioner asserted its Statement of Claims against not just “Instabrand Agency Inc.,” but also “instaBrand Agency, Inc., a.k.a. instaBrand Inc., a.k.a. instaBrand, Inc., d/b/a Open Influence.” (Tauler Decl., Exh. A., Statement of Claims.”) Thus, the Statement treated the entities as one and the same. And for good reason. As this court previously noted when ruling on the peremptory challenge, “Instabrand, Inc.” and “Open Influence, Inc.,” are for all intents and purposes, the same entity. This is confirmed by Instabrand’s filing of the October 3, 2019, “Certificate of Amendment” with the Delaware Secretary of State, changing its corporate name to Open Influence, Inc. (See Petitioner’s RJN, Exh. 1.) It did the same in California. (See id., Exh. 2.)

Respondent tried and failed to present a similar argument during the arbitration. The Arbitrator rejected that argument, noting that “Mr. Dahan, the head of Instabrand, confirmed the name change [from Instabrand to Open Influence] in his deposition testimony.” (Petition, Attachment 8(c), p. 10.)

Finally, in any event, the Petition itself identifies Open Influence as Respondent. This is consistent with the statute’s requirement that “[t]he petition shall name as respondents all parties to the arbitration and may name as respondents any other persons bound by the arbitration award.” (Cal. Civ. Proc. Code § 1985.)

Second, Respondent argues the underlying contract is against public policy because it is unlawful and illusory, as it “does not impose any obligation on WeWork to do anything at all.” (Opp. 4: 11-12.) Specifically, Section 5(d) of the underlying contract provides:

Termination or Suspension by Us. We may withhold Services or immediately terminate this Agreement…(v) at any other time, when we, in our sole discretion, see fit to do so. You will remain liable for past due amounts, and we may exercise our rights to collect due payment, despite termination or expiration of this Agreement.

Respondent says this makes the contract “illusory” because “it allows for WeWork to not provide any services at all,” to “terminate the agreement when WeWork, in its ‘sole discretion’ sees fit,” and therefore, Petitioner “assumes no obligations under the contract.” (Opp. 4: 24-26.)

The ‘illegality’ argument fails because the Membership Agreement does not purport to be a commercial lease and is not illegal for failing to comply with unspecified requirements for such leases. The argument that the Membership Agreement is ‘illusory’ fails because the parties complied with the Agreement for a year before Respondent committed the breach, demonstrating by their conduct that the Agreement was not illusory.

This court cannot and does not second-guess the Arbitrator’s analysis and finding that the contract was not illegal or illusory. Respondent cites no authority, and devotes little discussion, to the law of illusory contracts. Be that as it may—beyond a citation for the general proposition that an illusory contract is unenforceable (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 797)—Respondent does little here to show the contract was, in fact, illusory under the law of California or any other state. Moreover, “[i]t has long been settled that when parties have agreed to arbitration, challenges to the validity of the underlying contract, including contract defenses such as fraud in the inducement or illegality, are for the arbitrator to decide.” (Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal. App. 5th 1096, 1107.)

More importantly, even if the contract was illusory, Respondent has not demonstrated that an illusory contract under these facts falls within the “very limited ‘public policy exception’ to the stringent rule ordinarily requiring courts’ enforcement of arbitrators’ decisions.” (Asarco LLC v. United Steel, Paper & Forestry, Rubber, Mfg., Energy (9th Cir. 2018) 910 F.3d 485, 490–492.) After all, the arbitration occurred in New York, under New York law, based on a dispute over a co-working space property in New York City. Thus, Respondent has not shown any grounds to oppose the award.

Judge of the Superior Court

FN 1 - The current [Proposed] Judgement reflects the previous judge and department, as it was filed before the case was reassigned per a 170.6 challenge.

FN 2 - Although courts generally do not consider new evidence or arguments in a reply brief, it is within a court’s discretion to do so, provided the other party has the opportunity to respond. (See Alliant Ins. Servs., Inc. v. Gaddy (2008) 159 Cal. App. 4th 1292, 1308.) Accordingly, respondent may present oral argument at the hearing to challenge the judicially noticed documents, if any good-faith basis exists for doing so.

FN 3 - One would hope that such a clearly-improperly filed peremptory challenge was not designed to merely to delay this hearing, or in other words, to delay the inevitable entry of a judgment in this matter. But given the specious nature of the opposition, such hope would appear to be misplaced.

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.