Judge: Stephen I. Goorvitch, Case: 23STCP03880, Date: 2024-02-29 Tentative Ruling

Case Number: 23STCP03880    Hearing Date: February 29, 2024    Dept: 39

Shimon Ben-Shushan v. David Ohana

Case No. 23STCP03880

Petition to Compel Joinder of David Ohana in Pending Arbitration Action

            Petitioner Shimon Ben-Shushan (“Petitioner”) is engaged in arbitration with M&D Development & Construction, Inc. (“M&D”).  Petitioner moves to compel Respondent David Ohana (“Respondent”) to join the arbitration as the alter ego of M&D.  Respondent opposes the petition.

The moving party on a petition to compel arbitration “bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.  The trial court sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.”  (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842, internal quotations and citations omitted.) 

Petitioner moves to compel Respondent to arbitrate as the alter ego of M&D.  However, Respondent did not sign the arbitration agreement in his individual capacity.  A party that did not sign an arbitration agreement is not required to arbitrate a dispute against an affiliated corporation unless the trial court determines that an alter ego relationship exists.  (See Benaroya v. Willis (2018) 23 Cal.App.5th 462, 464-465, 469-470.) 

“In California, two conditions must be met before the alter ego doctrine will be invoked.  First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist.  Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.  Among the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other.  Other factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers.  No one characteristic governs, but the courts must look at all the circumstances to determine whether the doctrine should be applied.  Alter ego is an extreme remedy, sparingly used.”

(Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538-539, internal quotations and citations omitted.) 

Petitioner advances no competent evidence from which the Court could conclude that Respondent is the alter ego of M&D.  Petitioner relies on the declaration of his counsel, Christopher L. Mass (“Counsel”).  Counsel acknowledges that Petitioner lacks proof that Respondent is the alter ego of M&D, but states that Petitioner will make such a showing at trial.  (Declaration of Christopher L. Mass, ¶ 8.)  The Court cannot compel Respondent to arbitrate absent a showing on this petition that Respondent is the alter ego of M&D.

Petitioner also advances his own declaration stating that Respondent is the president, only officer, and sole shareholder of M&D.  (Declaration of Shimon Ben-Shushan, ¶ 4.)  Petitioner also states that Respondent participated in the construction project that is the subject of the underlying dispute.  (Ibid.)  This evidence does not establish that Respondent is the alter ego of M&D. 

Petitioner also cites Code of Civil Procedure section 1281.2, which applies when, as here, Petitioner is engaged in arbitration with M&D based on the same transaction for which Petitioner seeks to hold Respondent liable.  Under Section 1281.2, the Court may: refuse arbitration and order intervention or joinder of all parties in the pending litigation; consolidate the arbitration and litigation into the court action; stay the court action and order arbitration to proceed among the parties who have agreed to arbitration; or stay the arbitration pending the outcome of the pending court action.  (Code Civ. Proc., § 1281.2, subds. (c), (d).)  Nothing in Section 1281.2 gives the Court the power to require Respondent to arbitrate when he did not agree to do so. 

Based upon the foregoing, the Court orders as follows:

1.         The petition is denied.

2.         The Court sets no future dates, as the Court has ruled on the only issue presented in this petition.

3.         Petitioner shall provide notice and file proof of such with the Court.