Judge: Robert B. Broadbelt, Case: 22STCV35611, Date: 2023-12-06 Tentative Ruling

Case Number: 22STCV35611    Hearing Date: December 6, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTIES:             Defendants Joe Ko, Louisa Zhou, Predicate Holdings, Inc., Studio 88 Holdings, Inc., f/k/a Predicate Holdings, Inc., and J. Adams Fashion, LLC

RESPONDING PARTY:       Plaintiff Zooshoo, Inc.

Motion to Compel Arbitration

The court considered the moving, opposition, and reply papers filed in connection with this motion.

DISCUSSION

Defendants Joe Ko (“Ko”), Louisa Zhou (“Zhou”), Predicate Holdings, Inc. (“Predicate”), Studio 88 Holdings, Inc., f/k/a Predicate Holdings, Inc. (“Studio 88”), and J. Adams Fashion, LLC (“J. Adams”) (collectively, “Defendants”) move the court for an order compelling plaintiff Zooshoo, Inc. (“Plaintiff”) to arbitrate the claims alleged in its Complaint.

“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 the court finds that the right to compel arbitration has been waived by the petitioner or that grounds exist for rescission of the agreement.¿ (Code Civ. Proc., §¿1281.2.)¿ 

“‘ “The party seeking to compel arbitration bears the burden of proving the existence of an arbitration agreement, while the party opposing the petition bears the burden of establishing a defense to the agreement’s enforcement.” ’”¿ (Beco v. Fast Auto Loans (2022) 86 Cal.App.5th 292, 302.)¿ The burden of production as to this finding shifts in a three-step process.¿ (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.)¿ First, the moving party bears the burden of producing prima facie evidence of a written agreement to arbitrate, which can be met by attaching a copy of the arbitration agreement purporting to bear the opponent’s signature. (Ibid.)  If the moving party meets this burden, the opposing party bears, in the second step, the burden of producing evidence to challenge its authenticity.¿ (Ibid.)¿ If the opposing party produces evidence sufficient to meet this burden, the final step requires the moving party to establish, with admissible evidence, a valid arbitration agreement between the parties.¿ (Ibid.)¿ 

First, the court finds that Defendants have met their burden of producing prima facie evidence of a written agreement to arbitrate between defendant Predicate, on the one hand, and Plaintiff, on the other hand.

Defendants submit a copy of the “Amended and Restated Services Agreement” (the “Agreement”), dated March 1, 2020.  (Ko Decl., Ex. E, Agreement.)  The Agreement includes an arbitration provision which states that “[a]ny controversy or claim relating to this Agreement shall be settled by arbitration.”  (Id., p. A50, § VIII, subd. (A).)  The Agreement purports to bear Plaintiff’s electronic signature.  (Id., p. A52.)  

Thus, the court finds that Defendants have met their initial burden of producing evidence of a written agreement to arbitrate.

Second, the court finds that Plaintiff has not met its burden (1) to challenge the authenticity of the Agreement, or (2) to show that the Agreement is invalid and unenforceable.

Plaintiff does not appear to deny that it signed a version of the Agreement.  Specifically, Plaintiff contends that, through Jason Hsu, it signed an Amended and Restates Services Agreement in February 2021 and thereafter emailed to Predicate.  (Decl., Ex. B, p. B9; Opp., p. 5:6-9 [this version was signed by Plaintiff but “is NOT a valid fully executed agreement”]; Hsu Decl., ¶ 7, subd. (a).)  This agreement was not signed by Predicate or any other defendant.  (Decl., Ex. B, pp. B6, B9.)  This appears to be the Agreement attached as Exhibit E to Defendants’ motion, the agreement on which the motion is based.  (Ko Decl., Ex. E, Agreement.)  

Plaintiff next submits a purported, fully executed copy of the Agreement, which (1) includes Plaintiff’s allegedly forged signature, and (2) Predicate’s signature.  (Decl., Ex. C, p. C6.)  Thus, Plaintiff contends that the second agreement, which contains his forged signature, is void because there exists fraud in the execution.  (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415 [where there is fraud in the execution, “the promisor is deceived as to the nature of his act, and actually does not know what he is signing, or does not intend to enter into a contract at all, mutual assent is lacking, and [the contract] is void”] [internal quotations omitted].)  Plaintiff argues that, because the second agreement is void, the parties did not agree to arbitration.  (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 763-764 [“If the entire contract is void as to its inception because of fraud, then the parties have not agreed to anything, including the arbitration of any controversy”].)

The court finds that this evidence is insufficient (1) to challenge the authenticity of the Agreement and (2) to show that the Agreement is void.  Although Plaintiff has argued that the second, fully executed agreement is void because it contains Plaintiff’s forged signature, Defendants have not relied on that agreement in support of their motion.  Defendants have instead submitted the first version of the Agreement, which Plaintiff has admitted that it, through Jason Hsu, signed on February 17, 2021.  (Ko Decl., Ex. E, Agreement; Hsu Decl., ¶ 7, subd. (a) [the Agreement “was signed only by me on February 17, 2021”].) 

Thus, as to the Agreement that is the subject of this motion, Plaintiff (1) does not dispute that its CEO and owner signed it, and (2) has not shown that the subject Agreement was signed by Plaintiff as a result of fraud in the inception or execution. 

Moreover, to the extent that Plaintiff contends that the Agreement is invalid because it was signed only by Plaintiff, the court disagrees.  “[T]he writing memorializing an arbitration agreement need not be signed by both parties in order to be upheld as a binding arbitration agreement.”  (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 176.)  “Evidence confirming the existence of an agreement to arbitrate, despite an unsigned agreement, can be based, for example, on ‘conduct from which one could imply either ratification or implied acceptance of such a provision.’”  (Ibid.)  The court finds that Defendants’ conduct “evinces an intent to be bound by the arbitration agreement” by moving to compel arbitration, irrespective of the fact that Predicate did not sign the Agreement.  (Id. at pp. 176-177.)

The court therefore finds that Plaintiff has not met its burden to show that the Agreement is not authentic or invalid.

Third, the court notes that the Agreement was executed by and between Predicate (i.e., defendants Predicate Holdings, Inc. and Studio 88 Holdings, Inc., f/k/a Predicate Holdings, Inc.), on the one hand, and Plaintiff, on the other hand, but that all Defendants move to compel Plaintiff to submit its claims to arbitration.  (Ko Decl., Ex. E, Agreement, p. 1; Mot., p. 2:1-4.) 

“‘There are circumstances in which nonsignatories to an agreement containing an arbitration clause can be compelled to arbitrate under that agreement.  As one authority has stated, there are six theories by which a nonsignatory may be bound to arbitrate: “(a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or alter ego; (e) estoppel; and (f) third-party beneficiary” [citations].’”  (Benaroya v. Willis (2018) 23 Cal.App.5th 462, 469.)  Plaintiff has alleged that (1) defendants Predicate, Studio 88, and J. Adams were and are the alter egos of defendant Ko, or vice versa, and (2) all Defendants were “the agent, servant, representative, partner, joint venturer and/or employee of each of the remaining Defendants and in doing the things alleged herein were acting within the scope of said agency, service, representative, partnership, joint venture and/or employment.”  (Compl., ¶¶ 8-9, 11.)  Thus, the non-signatory defendants may rely on the Agreement to compel Plaintiff to submit its claims to arbitration as an alter ego of the signatory defendants (Ko and J. Adams) or as agents of the signatory defendants (Ko, J. Adams, and Zhou).  (Benaroya, supra, 23 Cal.App.5th at p. 469.)

Fourth, the court finds that all of Plaintiff’s causes of action are encompassed by the Agreement.

“‘ “[T]he decision as to whether a contractual arbitration clause covers a particular dispute rests substantially on whether the clause in question is ‘broad’ or ‘narrow.’ ” ’  [Citations.]  A broad clause includes language that requires arbitration of ‘ “ ‘any claim arising from or related to’ ” ’ the agreement.”  (Ahern v. Asset Management Consultants, Inc. (2022) 74 Cal.App.5th 675, 689 [emphasis in original].)  Here, as set forth above, the Agreement states that “[a]ny controversy or claim relating to this Agreement shall be settled by arbitration.”  (Ko Decl., Ex. E, Agreement, p. A50, § VIII, subd. (A) [emphasis added].)  The court therefore finds that the arbitration clause in the Agreement is broad.  (Ahern, supra, 74 Cal.App.5th at p. 689.)

“It has long been the rule in California that a broadly worded arbitration clause . . . may extend to tort claims that may arise under or from the contractual relationship.  There is no requirement that the cause of action arising out of a contractual dispute must be itself       contractual . . . .  Put another way, [f]or a party’s claims to come within the scope of such a clause, the factual allegations of the complaint need only touch matters covered by the contract containing the arbitration clause.  [Citation.]  Broad arbitration clauses are interpreted to apply to extracontractual disputes between the contracting parties, so long as they have their roots in the relationship between the parties which was created by the contract.”  (Howard v. Goldbloom (2018) 30 Cal.App.5th 659, 663-664 [internal quotations omitted] [internal citations omitted].)

The court finds that the causes of action alleged in Plaintiff’s Complaint are covered by the Agreement’s arbitration clause.[1]

The first cause of action for breach of oral contract alleges that Plaintiff and Predicate orally agreed that Plaintiff would pay to Predicate 6.5 percent of Amazon deposits, less the costs of marketing, and Defendants have breached the agreement by claiming that Plaintiff owes 6.5 percent of its gross sales based on the allegedly fraudulent agreement that contains the forged signature of Plaintiff.  (Compl., ¶¶ 28, 30, 26.)  The court finds that this cause of action is “relat[ed] to” the Agreement because (1) the terms of the oral agreement appear to be related and identical to the terms of the Agreement, and (2) the oral agreement appears to have arisen out of the contractual relationship initially created by the Services Agreement and continued by Plaintiff’s signing of the Agreement.  (Ko Decl., Ex. E, Agreement, p. A50, § VIII, subd. (A); Compl., ¶¶ 23, subd. (c) [the Agreement stated that compensation to be paid by Plaintiff was 6.5 percent of Amazon’s deposits, less marketing], 21.) 

The third cause of action for fraud (misrepresentation), fourth cause of action for fraud (false promise), and sixth cause of action for negligent misrepresentation each alleges that Defendants misrepresented, either intentionally or negligently, to Plaintiff that Predicate would be paid 6.5 percent of Amazon’s deposits, less the marketing costs.  (Compl., ¶¶ 40, subd. (a), 50, subd. (a), 53, 68-69.)  As set forth above, this representation appears to reflect a term of the Agreement, and therefore the court finds that the third, fourth, and sixth causes of action are related to (1) the Agreement and (2) the contractual relationship between the parties that was created by this Agreement.  (Compl., ¶ 23, subd. (c).)  Similarly, the fifth cause of action for fraud (concealment) is based on the allegation that Defendants concealed from Plaintiff that Predicate would not accept payments reflecting 6.5 percent of Amazon’s deposits, less marketing costs, and would instead request and demand 6.5 percent of the gross sales.  (Compl., ¶ 59.)  The court finds that this cause of action is related to the Agreement because (1) the alleged concealment of the material fact appears to represent a term of the Agreement (i.e., that Plaintiff would pay to Predicate 6.5 percent of Amazon’s deposits, less marketing), and (2) the concealment is alleged to have occurred as a result of the contractual relationship created by the Agreement.   (Id., ¶¶ 59, 23, subd. (c).)

The seventh, eighth, and ninth causes of action for intentional interference with contractual relations, intentional interference with prospective economic advantage, and negligent interference with prospective economic advantage, respectively, are based on the allegations that (1) Defendants knew of two agreements, including the oral agreement that Plaintiff would pay to Predicate 6.5 percent of Amazon’s deposits, less marketing costs, and interfered with those agreements by creating the forged and fraudulent second agreement, and (2) Plaintiff and Predicate had an economic relationship pursuant to their agreements, with which Defendants interfered by creating the forged and fraudulent second agreement.  (Compl., ¶¶ 72-74, 84-86, 93-97.)  The court finds that the interference causes of action are related to the Agreement because they appear to be based on the oral agreement, which reflects the terms of the Agreement as set forth above, and the parties’ contractual relationship that was created and/or continued thereby. 

            Thus, the court finds that (1) Defendants have met their burden to show that they may enforce the arbitration clause in the Agreement against Plaintiff; (2) Plaintiff has not met its burden to show that the Agreement is invalid; and (3) the causes of action alleged in Plaintiff’s Complaint are encompassed by the Agreement.

            The court therefore grants Defendants’ motion to compel arbitration.

ORDER

            The court grants defendants Joe Ko, Louisa Zhou, Predicate Holdings, Inc., Studio 88 Holdings, Inc., f/k/a Predicate Holdings, Inc., and J. Adams Fashion, LLC’s motion to compel arbitration.

            The court orders (1) plaintiff Zooshoo, Inc. and defendants Joe Ko, Louisa Zhou, Predicate Holdings, Inc., Studio 88 Holdings, Inc., f/k/a Predicate Holdings, Inc., and J. Adams Fashion, LLC to arbitrate the claims alleged in plaintiff Zooshoo, Inc.’s Complaint, and (2) this action is stayed until arbitration is completed.

            The court vacates the trial set for October 16, 2024, and the Final Status Conference set for October 4, 2024.

The court sets an Order to Show Cause re completion of arbitration for August 8, 2024, at 8:30 a.m., in Department 53.

The court orders defendants Joe Ko, Louisa Zhou, Predicate Holdings, Inc., Studio 88 Holdings, Inc., f/k/a Predicate Holdings, Inc., and J. Adams Fashion, LLC to give notice of this ruling.

IT IS SO ORDERED.

DATED:  December 6, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court