Judge Robert B. Broadbelt, Case Number: 23STCV30069, Date: 2025-01-21 Tentative Ruling

Judge: Robert B. Broadbelt, Case: 23STCV30069, Date: 2025-01-21 Tentative Ruling

The court considered the moving, opposition, and reply papers filed in connection with the petition to compel arbitration.

Because the court has taken off calendar the special motion to strike for the reasons set forth below, the court did not (1) consider the moving, opposition, or reply papers filed in connection with that motion, and (2) rule on the evidentiary objections filed in connection with that motion.

The court denies plaintiff S&H Packing & Sales Co., Inc.’s request for judicial notice because the matter to be judicially noticed is not relevant to the court’s disposition of its petition to compel arbitration. (Malek Media Group LLC v. AXQG Corp. (2020) 58 Cal.App.5th 817, 825 [“Any matter to be judicially noticed must be relevant to a material issue”].)

Plaintiff and petitioner S&H Packing & Sales Co., Inc. (“Plaintiff”) moves the court for an order (1) compelling defendant Daniel Horwath (“Defendant”) to arbitrate the claims alleged in this action, and (2) staying this action pending completion of arbitration.

As a threshold matter, the court notes that Defendant asserts, in his opposition, that the court should first rule on his pending special motion to strike Plaintiff’s Complaint pursuant to Code of Civil Procedure section 425.16, i.e., the anti-SLAPP statute. The court, however, finds that it is appropriate to rule on Plaintiff’s petition to compel arbitration first, in the event that this controversy should be decided in arbitration, rather than in court.

“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.)¿ To determine the existence of an arbitration agreement, the court uses “a three-step burden-shifting process.”¿ (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755.)¿ “The arbitration proponent must first recite verbatim, or provide a copy of, the alleged agreement.¿ [Citations.]¿ A movant can bear this initial burden ‘by attaching a copy of the arbitration agreement purportedly bearing the opposing party’s signature.’”¿ (Ibid. [internal citations omitted].)¿ “If the movant bears its initial burden, the burden shifts to the party opposing arbitration to identify a factual dispute as to the agreement’s existence . . . .”¿ (Ibid.)¿ If the opposing party meets its burden to “submit sufficient evidence to create a factual dispute” as to the existence of the agreement, the burden shifts back to the arbitration proponent, who retains the ultimate burden of proving its existence by a preponderance of the evidence.¿ (Ibid.; Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165-166.)¿¿

First, the court finds that Plaintiff has met its initial burden to show that there exists an arbitration agreement between Plaintiff and Defendant. (Iyere, supra, 87 Cal.App.5th at p. 755.)

Plaintiff has submitted a copy of the “Global Agreement to Sell or Liquidate Jointly Owned Properties and Entities and Settlement Agreement and General Releases” (the “Settlement Agreement”), entered into by and between Plaintiff, Defendant, and other non-parties to this action on July 14, 2017. (Pet., Ex. A, Settlement Agreement, ¶¶ I, VII.) The Settlement Agreement includes an arbitration provision stating the following: “All future disputes between Dan and Rosa, on the one hand, and Melanie, Tim, Dona and Pat, on the other hand, shall be resolved by arbitration before JAMS. All future disputes between the Brothers’ Collectively Owned Entities [i.e., including Plaintiff], on the one hand, and Dan [i.e., Defendant], Rosa, Tim, Melanie, Pat, and Dona, on the other hand, shall be resolved by arbitration before JAMS. (Pet., Ex. A, Settlement Agreement, ¶ 9 [Arbitration provision] and pp. 1 [defining (1) Defendant to be “Dan,” and (2) “Brothers’ Collectively Owned Entities” to include, inter alia, Plaintiff], DH10 [showing signature of Defendant].)

Thus, the court finds that Plaintiff has shown that there exists an arbitration agreement between it and Defendant.

The court further finds that the arbitration provision in the Settlement Agreement encompasses the claims alleged in this action because (1) the arbitration provision is broad, applying to “[a]ll further disputes” between Plaintiff, on the one hand, and Defendant, on the other hand, and (2) this action, filed by Plaintiff and alleging two causes of action against Defendant, is a “dispute[]” between them. (Pet., Ex. A, Settlement Agreement, ¶ 9 [Arbitration provision]; Rice v. Downs (2016) 248 Cal.App.4th 175, 186 [“‘[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”’”].)

Second, the court finds that Defendant has not met his burden to identify a factual dispute as to the authenticity of the Settlement Agreement or his signature thereon, since Defendant did not present evidence to argue that (1) he did not sign the Settlement Agreement, or (2) the Settlement Agreement is not authentic for any other reason. (Iyere, supra, 87 Cal.App.5th at p. 755.)

The court therefore finds that Plaintiff has met its burden to show that there exists an agreement to arbitrate this controversy.

As set forth above, the court shall, upon determining that an agreement to arbitrate a controversy exists, order the parties to submit the controversy to arbitration unless the court determines that “[t]he right to compel arbitration has been waived by the petitioner[.]” (Code Civ. Proc., § 1281.2, subd. (a); Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, 583 [“under California law, a party may, as a result of its litigation conduct, lose its right to compel arbitration on various grounds”].) Defendant contends that Plaintiff has waived its right to compel him to arbitrate the controversy alleged in this action.

“To establish waiver under generally applicable contract law, the party opposing enforcement of a contractual agreement must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it.” (Quach, supra, 16 Cal.5th at p. 584.) The waiving party’s “intentional relinquishment or abandonment of the right may be proved by evidence of words expressing an intent to relinquish the right or of conduct that is so inconsistent with an intent to enforce the contractual right as to lead a reasonable factfinder to conclude that the party had abandoned it.” (Ibid.)

The parties do not appear to dispute that Plaintiff knew of its contractual right to arbitrate its claims against Defendant. However, the court finds that Defendant has not presented evidence establishing that Plaintiff intended to waive its right to arbitrate.

The relevant procedural history between the parties is as follows. On January 21, 2022, Plaintiff filed a demand for arbitration against Defendant arising from his alleged interference with the sale of Plaintiff. (Pet., ¶ 11; Tomasulo Decl., Ex. L, Demand for Arbitration Form.) Thereafter, on October 4, 2022, JAMS issued a notice to all counsel in the arbitration that it had requested, but had not received, Defendant’s payment of the initial arbitration deposit. (Tomasulo Decl., Ex. M, p. 1 [“JAMS has requested, but has not received, payment for the initial deposit from Respondent. JAMS is unable to proceed with administration of this case”].) Counsel for Defendant told Plaintiff’s counsel that payment of the deposit would be made. (Tomasulo Decl., Ex. N, p. 1 [October 17, 2022 email stating, “As discussed, we will be submitting the payment and an answering statement”].) However, JAMS later closed the arbitration on January 3, 2023 “for [Defendant’s] failure to pay.” (Tomasulo Decl., ¶ 18.)

First, Defendant did not cite authority establishing, and therefore has not proven, that Plaintiff’s election not to pay Defendant’s arbitration fees—for which Plaintiff was not responsible—constitutes “an intent to relinquish [its] right” to arbitrate. (Code Civ. Proc., § 1284.2 [“Unless the arbitration agreement otherwise provides or the parties to the arbitration otherwise agree, each party to the arbitration shall pay his pro rata share of the expenses and fees of the neutral arbitrator, together with other expenses of the arbitration incurred or approved by the neutral arbitrator . . . .”]; Quach, supra, 16 Cal.5th at p. 584.)

Second, the court notes, as Defendant has pointed out, that the declaration of Plaintiff’s manager states the following: “When JAMS dismissed the First Interference Arbitration [i.e., the arbitration proceedings initiated on January 21, 2022] for [Defendant’s] failure to pay, [Plaintiff] was faced with a choice: would it make a second attempt at litigating its interference claims against [Defendant], a potentially long and costly proposition, or would it try to resolve these claims through the dissolution process that was then underway? Ultimately, [Plaintiff] thought the more prudent path was to pursue the latter.” (Artukovich Decl., ¶ 5.) However, Plaintiff’s manager further stated that, as the “dissolution proceedings continued and the substantial damages [Defendant] caused grew more evident, it became clear that there was no resolution to be found through the dissolution process. Accordingly, with the statute of limitations set to run shortly, [Plaintiff] had no choice but to file this action—this time seeking an order compelling [Defendant] to arbitrate.” (Artukovich Decl., ¶ 6.)

The court finds that the statements made by Plaintiff’s manager do not “express[] an intent to relinquish [Plaintiff’s] right” to arbitrate and instead express, at most, the hope that the dissolution proceedings would result in the resolution of its claims for damages. (Artukovich Decl., ¶¶ 5-6; Quash, supra, 16 Cal.5th at p. 584.) Moreover, Defendant did not present evidence showing that Plaintiff actually asserted the claims alleged in this action in the dissolution action, such that Defendant did not present evidence to show that Plaintiff waived its right to compel Defendant to arbitrate the claims it alleges in this action based on its conduct in the dissolution action.

Third, the court notes, as raised by Defendant, that (1) Plaintiff’s Complaint does not raise the issue of or request arbitration, and (2) Plaintiff filed this action on December 8, 2023, but filed its petition to compel Defendant to arbitration approximately nine-and-a-half months later, on September 24, 2024. The court, however, finds that the elapsed period of time, standing alone, does not establish that Plaintiff intended to waive its right to compel Defendant to arbitrate. Further, Defendant did not show that, during this time, Plaintiff engaged in discovery or other motion practice that would otherwise support a finding of waiver.[1] (Cf. Quach, supra, 16 Cal.5th at pp. 586-587 [finding waiver of right to arbitration when defendant “propounded discovery requests, suggesting it did not intend to seek arbitration[,]” did not indicate its willingness to participate in arbitration in case management documents, and “actively engaged in discovery, taking [the plaintiff’s deposition” and corresponding about discovery disputes”].)

Fourth, the court finds that Plaintiff’s election not to mention the parties’ arbitration agreement in a separate case does not show that, and is not relevant to determining whether, Plaintiff intended to relinquish or abandon its right to compel Defendant to arbitrate the claims alleged in this action. (Opp., p. 7:6-8 [“Plaintiff also never claimed it was entitled to arbitrate any claims between it and [Defendant] after [Defendant] filed a fraudulent transfer suit against Plaintiff and others on November 23, 2022 in LASC Case No. 22STCV37042].)

Finally, the court notes that Defendant has asserted that Plaintiff’s conduct prejudiced him. (Opp., pp. 6:20-7:12.) However, courts no longer consider prejudice when determining whether a party has waived its right to compel arbitration. (Quach, supra, 16 Cal.5th at pp. 569 [“Because our state-law arbitration-specific prejudice requirement is based upon the federal precedent that [Morgan v. Sundance, Inc. (2022) 596 U.S. 411] overruled, we now abrogate it”], 585 [“neither the effect of that conduct on the party seeking to avoid enforcement of the contractual aright nor that party’s subjective evaluation of the waiting party’s intent is relevant[;]” “To establish waiver, there is no requirement that the party opposing enforcement of the contractual right demonstrate prejudice or otherwise show harm resulting from the waiving party’s conduct”].) Even if prejudice were a relevant consideration, the court finds that Defendant has not presented evidence showing substantial prejudice that would be sufficient to support his contention that Plaintiff has waived its right to arbitrate.

Thus, the court finds that Defendant has not met his burden to “prove by clear and convincing evidence that [Plaintiff] knew of the contractual right [to compel Defendant to arbitrate] and intentionally relinquished or abandoned it.” (Quach, supra, 16 Cal.5th at p. 584.) The court therefore finds that Defendant has not met his burden to show that the court should not enforce the arbitration provision in the parties’ Settlement Agreement.[2] (Code Civ. Proc., § 1281.2, subd. (a).)

For the reasons set forth above, the court finds that (1) Plaintiff has met its burden to prove the existence of an agreement between Plaintiff and Defendant to arbitrate the controversy alleged in this action, and (2) Defendant has not met his burden to establish a defense to the enforcement of that agreement. (Beco, supra, 86 Cal.App.5th at p. 302.)

The court therefore grants Plaintiff’s petition to compel arbitration. (Code Civ. Proc., § 1281.2, subd. (a).)

Defendant filed the pending motion on February 13, 2024, moving the court for an order striking the claims alleged in Plaintiff’s Complaint pursuant to the anti-SLAPP statute.

As set forth above, the court has granted Plaintiff’s petition to compel Defendant to arbitrate the claims alleged in this action and will therefore order the parties to submit this action to binding arbitration.

The court therefore takes off calendar Defendant’s special motion to strike Plaintiff’s Complaint.

The court grants plaintiff S&H Packing & Sales Co., Inc.’s petition to compel arbitration.

The court orders (1) plaintiff S&H Packing & Sales Co., Inc. and defendant Daniel Horwath to arbitrate the claims alleged in plaintiff S&H Packing & Sales Co., Inc.’s Complaint, and (2) this action is stayed until arbitration is completed.

The court orders that the hearing on defendant Daniel Horwath’s special motion to strike complaint is taken off calendar.

The court orders that the Case Management Conference scheduled for January 28, 2025 is vacated.

The court sets an Order to Show Cause re completion of arbitration for hearing on August 26, 2025, at 8:30 a.m., in Department 53.

The court orders plaintiff S&H Packing & Sales Co., Inc. to give notice of this ruling.

[1] The court notes that Plaintiff could not have conducted discovery after February 13, 2024, i.e., the date that Defendant filed his special motion to strike, since the filing of that motion stayed all discovery in this action. (Code Civ. Proc., § 425.16, subd. (g) [“All discovery proceedings in the action shall be stayed upon the filing of a notice of motion made pursuant to this section”].)

[2] Defendant did not raise any other defenses to the enforcement of the arbitration provision in his opposition.

s&h packing & sales co., inc. ; Plaintiff, vs. daniel horwath , et al.; Defendants.	Case No.:	23STCV30069

	Hearing Date:	January 21, 2025

	Time:	10:00 a.m.

	[tentative] Order RE: (1) plaintiff’s petition to compel arbitration and stay action (2) defendant’s special motion to strike complaint