Judge Randolph M. Hammock, Case Number: 24STCV27130, Date: 2025-04-25 Tentative Ruling

The matter initially came for hearing on March 27, 2025. This court released a Tentative Ruling denying the motion to compel arbitration. Following argument, the court did not adopt that Tentative Ruling and, instead, invited the parties to submit supplemental briefs on why the matter should not go to arbitration. On April 7, 2025, Defendants filed two separate supplemental briefs: one by Defendants Jeffery Meng and Jaidee Capital, LLC, and another by Defendant WM Wholesale, LLC. As of the date of this Tentative, the court has not received a supplemental brief from Plaintiff.

“Under the FAA, there is a strong policy favoring arbitration. [Citations.] ‘The overarching purpose of the FAA is to ensure the enforcement of arbitration agreements according to their terms ....’ [Citation.] Therefore, ‘[a]rbitration is a matter of consent ....’ [Citations.] [¶] ‘ “Although the FAA preempts any state law that stands as an obstacle to its objective of enforcing arbitration agreements according to their terms, ... we apply general California contract law to determine whether the parties formed a valid agreement to arbitrate their dispute.” ’ [Citations.]” (Barrera v. Apple Am. Grp. LLC (2023) 95 Cal. App. 5th 63, 76.) It is settled that “[u]nder both California and federal law, arbitration is strongly favored and any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” (Balandran v. Labor Ready, Inc. (2004) 124 Cal.App.4th 1522, 1527.)

California also has a strong public policy in favor of arbitration as an expeditious and cost-effective way of resolving disputes. “Even so, parties can only be compelled to arbitrate when they have agreed to do so.” (Avila v. S. California Specialty Care, Inc. (2018) 20 Cal. App. 5th 835, 843.) “The party seeking to compel arbitration bears the burden of proving the existence of a valid arbitration agreement.” (Id.) An arbitration agreement is a contractual agreement. “General contract law principles include that ‘[t]he basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting. [Citations.] ... The words of a contract are to be understood in their ordinary and popular sense.” [Citations.] (Garcia v. Expert Staffing W., 73 Cal. App. 5th 408, 412–13.)

“[T]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence . . . .” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284). “In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.” (Weeks v. Crow (1980) 113 Cal.App.3d 350, 353). “Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.” (California Correctional Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198, 205).

“[A] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination.” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284). “If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending 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. . . .” (CCP § 1281.4.)

Defendant WM Wholesale, LLC, moves to compel this matter to arbitration. In support, Defendant relies on an arbitration provision contained in the parties’ Buy-Out Agreement. It provides, in relevant part: “All parties agree that any dispute relating to this agreement or arising hereunder shall be governed by California law and shall be exclusively brought before JAMS in California, in accordance with the JAMS Comprehensive Arbitration Rules then in effect.” (Compl., Exh. A, 19.) [FN 2]

The arbitration provision is broad and would appear to apply to the dispute here. However, as raised by Plaintiff in opposition, the Buy-Out also permits Plaintiff to seek entry of a stipulated judgment in the Los Angeles Superior Court “[i]n the event [Defendants] fail to timely deliver the Buy-Out Payment in full to Amato.” (Compl., Exh. A, 6.) The Buy-Out provides:

6. Stipulated Judgment. In the event Company Parties fail to timely deliver the Buy-Out Payment in full to Amato, Each Company Party shall stipulate to have judgment entered against them, joint and severally, in favor of Amato (the “Stipulated Judgment”): (a) for a monetary award in the amount of the total Buy-Out Payment less any portions ofthe Buy-Out Payment that Amato may have received; and (b) a determination that each Collateral Holder shall unconditionally and irrevocably transfer title of the Collateral to Amato pursuant to the IP Assignment Agreement attached hereto as Schedule 4. Should any Company Party or Collateral Holder wrongfully refuse to execute the Stipulated Judgment or any transfer document within ten (10) days after written request, a court of competent jurisdiction shall have the right and authority to execute the Stipulated Judgment on behalf of said Company Party or Collateral Holder. Company Parties waive any rights of appeal or to contest the validity of this Agreement or the Stipulated Judgment. Company Parties further agree that the Stipulated Judgment shall accrue interest at the maximum legal rate of interest from the date of execution of this Agreement. Amato shall be entitled to seek and secure entry of the Stipulated Judgment by ex parte application made to the Superior Court of the State of California, County of Los Angeles.

The ordinary rules of contract interpretation apply equally to arbitration agreements. (Pinnacle Museum Tower Assn. v. Pinnacle Mkt. Dev. (US), LLC (2015) 55 Cal. 4th 223, 236.) It is the goal “to give effect to the parties’ mutual intent at the time of contracting,” and we do so by construing the words of the contract in their “ordinary and popular sense.” [Citations.] (Garcia, supra, 73 Cal. App. 5th at 412–13.) Moreover, “[w]e consider the contract as a whole and interpret the language in context, rather than interpret a provision in isolation.” (Am. Alternative Ins. Corp. v. Superior Ct. (2006) 135 Cal. App. 4th 1239, 1245.)

Here, the agreement expressly provides a mechanism for Plaintiff to seek and enforce a stipulated judgment in the event the Defendants failed to timely deliver the Buy-Out payment in full. The Agreement permits that action to be brought in Los Angeles Superior Court. This language is mandatory, as it requires the parties to execute a stipulated judgment. (Id.) And in the event they refuse, “a court of competent jurisdiction shall have the right and authority to execute the Stipulated Judgment on behalf of said” party. (Id.)

Construing these provisions together, it appears the parties agreed to the expedited means of entering a stipulated judgment only where there was no dispute as to the breach. But where, as here, the Complaint and briefing on the motion evince a genuine dispute over whether the company Defendants have delivered the Buy-Out payment to Plaintiff in full, that question must be arbitrated.

Plaintiff alleges that “Defendants failed to pay the agreed upon amounts per the contract schedule” and that “Plaintiff has yet to receive full payment.” (Compl. p. 3, BC-2.) But Defendant WM, in a declaration from its counsel, Thomas Frost, attests that the amount owed to Plaintiff “has been fully paid, and in fact [Plaintiff] has been overpaid.” (Frost Decl. ¶ 3.) [FN 3] Similarly, in opposition to Plaintiff’s ex parte application for entry of Judgment, Defendant Clelland attests that Plaintiff has been paid in full. (Clelland Decl. ¶¶ 6-9.)

Judge of the Superior Court

FN 1 - Defendants Meng and Jaidee Capital filed a notice of joinder to the motion to compel arbitration on February 25, 2025. They then filed a standalone reply. For a joinder to be effective, the joinder generally must (1) be timely, (2) establish the necessary factual foundation to support the motion, and (3) request affirmative relief on behalf of the joining party. (See, e.g., Barak v. Quisenberry Law Firm (2006) 135 Cal.App.4th 654, 661; Decker v. U.D. Registry, Inc. (2003) 105 Cal. App. 4th 1382, 1391 [joinder is insufficient where it "is not in the form of a motion and does not present any evidence or argument"].) A common mistake made by parties in civil litigation is to simply file a notice of joinder in the hopes that that party can simply “piggyback” on the initial moving party’s pleadings. Of course, filing a notice of joinder is certainly allowed. However, the applicable law still requires that any party attempting to join a pending motion still must file a memorandum of points and authorities, with an appropriate analysis as to the reasons why the same relief should be granted to the joining party. Because the Defendants did not do so here, their joinder might be considered ineffective, and the court would be within its discretion to disregard it. Be that as it may, because Defendants filed a standalone reply and a standalone supplemental brief, they have demonstrated they are similarly situated for purposes of this motion. Thus, the court will consider the joinder.

FN 2- It is worth noting that the location of the arbitration provision within the Buy-Out Agreement is somewhat peculiar. It appears in paragraph nineteen under the heading “Prevailing Party.” The bulk of the paragraph addresses a prevailing party’s right to recover its fees and costs.

FN 3 - As a general rule, new evidence may not be submitted in reply. But “a trial court may properly consider new evidence submitted with a reply brief ‘so long as the party opposing…has notice and an opportunity to respond to the new material.’” (Wall St. Network, Ltd. v. New York Times Co. (2008) 164 Cal. App. 4th 1171, 1183; Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1538-1538 [court can consider reply declarations that “fill[] gaps in the evidence created by the [plaintiff’s] opposition.” (Jay, supra, 218 Cal. App. 4th at 1538.) Here, Plaintiff was given the opportunity to address the reply evidence at the initial hearing and in a supplemental brief, which it did not file. To the extent he wishes to be heard, Plaintiff may address this argument at the second hearing.

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.