Judge: Teresa A. Beaudet, Case: 23STCV01046, Date: 2023-04-20 Tentative Ruling

Case Number: 23STCV01046    Hearing Date: April 20, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

            Background

Plaintiffs Maria Luisa Trevejo (“Trevejo”) and MLT World, LLC (“MLT”) (jointly, “Plaintiffs”) filed this action on January 17, 2023 against Defendant Stephen Belafonte (“Defendant”). The Complaint asserts causes of action for (1) intentional fraud, (2) breach of fiduciary duty, (3) conversion, (4) conspiracy, (5) aiding and abetting theft and misappropriation, (6) return of usurious interest, and (7) intentional infliction of emotional distress.

Defendant now moves “for an order compelling arbitration of this matter or, in the alternative, an order referring the case to the California Labor Commissioner for administrative hearing, and in either event staying any further proceedings before this Court.” Plaintiffs oppose.

Evidentiary Objections

            On April 13, 2023, Plaintiffs filed and served evidentiary objections in support of their opposition to the instant motion. Defendant objects to Plaintiffs’ evidentiary objections and

requests that the Court strike them.  

As Defendant notes, Plaintiffs’ evidentiary objections were filed and served on April 13, 2023, after Plaintiffs’ other opposition papers were filed on April 7, 2023, and after Defendant’s reply was filed on April 12, 2023. Pursuant to Code of Civil Procedure section 1005, subdivision (b), “[a]ll papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days…before the hearing.” Plaintiffs’ evidentiary objections were filed on April 13, 2023, five court days before the April 20, 2023 hearing. Moreover, because Plaintiffs’ evidentiary objections were filed after Defendant’s reply was filed, Defendant did not have the ability to respond to the objections. Defendant asserts that Plaintiffs’ filing and service of the objections on April 13, 2023 has “prejudiced Defendants’ ability to file comprehensive Reply papers addressing all points raised in Plaintiffs’ Opposition papers.” (Defendant’s Objections at p. 2:16-18.)
            Based on the foregoing, the Court sustains Defendant’s objection to Plaintiffs’ evidentiary objections, and strikes the evidentiary objections. 

Request for Judicial Notice

The Court grants Defendant’s request for judicial notice as to Exhibit A. The Court denies Defendant’s request for judicial notice as to Exhibits B and C.

Legal Standard

In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413-414.) 

Generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2) the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. (Code Civ. Proc., § 1281.2; see Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (“FAA”), which governs all agreements to arbitrate in contracts “involving interstate commerce.” (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

            Discussion

A.    Existence of Arbitration Agreement

Defendant states that on November 17, 2020, he “entered a two-year Artist Co-Management Agreement with Maria Luisa Trevejo, commonly known as Malu Trevejo, who was an adult over the age of 18 at the time [they] both signed that Agreement.” (Belafonte Decl., ¶ 3.)

            Paragraph 23 of the Artist Co-Management Agreement concerns “Dispute Resolution Procedures. (Belafonte Decl., ¶ 3, Ex. A.)[1] Paragraph 23 provides, inter alia, that “[a]ny dispute, claim or controversy arising out of or relating to this Agreement shall be resolved in accordance with the dispute resolution procedures set forth below…” (Belafonte Decl., ¶ 3, Ex. A, ¶ 23.) Paragraph 23 sets forth procedures for “Negotiation; Notice and Response,” as well as “Mediation.” (Belafonte Decl., ¶ 3, Ex. A, ¶ 23(a)-(b).) Paragraph 23 then provides that “[i]f the dispute is not resolved through the procedures set forth above, the Parties agree that the dispute shall be submitted to the AAA, or its successor, for arbitration before a sole arbitrator in accordance with the then-current AAA arbitration procedures pertaining to the type of dispute at issue…” (Belafonte Decl., ¶ 3, Ex. A, ¶ 23(c).)

            Defendant’s counsel indicates that “between mid-December 2022, through January 10, 2023, the Parties, through Counsel, engaged in ongoing, in-depth, and extensive dispute resolution discussions wherein, toward the end of that process, a resolution seemed imminent. This included comprehensive written correspondence, telephone calls, emails, and Zoom video conferences with two attorneys from the Sanders Roberts law firm— one on December 6 and another on December 14, 2022. This process was undertaken pursuant to the express terms of the first step (‘Negotiation’) of the three-step ‘Dispute Resolution Procedures’ provision of the Artist Co- Management Agreement between the Parties.” (Martorell Decl., ¶ 8, emphasis omitted.)

            Defendant’s counsel further states that “[w]hile the Negotiation process seemed promising, it ultimately failed to achieve a resolution of the dispute, so the Parties, through counsel, started the process of engaging in the second step of the three-step Dispute Resolution process, namely selecting a neutral Mediator. In fact, the Parties had agreed upon a specific highly qualified entertainment industry Mediator through one of the premier dispute resolution firms in Los Angeles. Simultaneously, the Parties, through counsel, even discussed the idea of ‘skipping’ the Mediation requirement of the dispute resolution provision and going straight to step three of the Dispute Resolution process, meaning ‘straight to Arbitration.’” (Martorell Decl., ¶ 9.) Thereafter, on January 17, 2023, Plaintiffs filed the instant action. On January 19, 2023, Defendant’s counsel “received an email from one of Ms. Trevejo’s attorneys, Jason Ziven, herein. He wrote that ‘the mediation will not include the causes of action alleged in the complaint that Ms. Trevejo filed in the Los Angeles Superior Court.’” (Martorell Decl., ¶ 15.)

            Defendant asserts that the arbitration provision in the Artist Co-Management Agreement applies to both Trevejo and MLT. Defendant notes that Trevejo is identified as a party to the agreement, and Defendant asserts that she signed it. (Belafonte Decl., ¶ 3, Ex. A.) Defendant contends that MLT is the alter-ego of Trevejo. Defendant provides MLT’s “Articles of Organization for Florida Limited Liability Company,” electronically filed on November 30, 2020. (Defendant’s RJN, Ex. A.) Article IV of the Articles of Organization lists Trevjo as the “Manager,” and indicates that she is “authorized to manage and control the Limited Liability Company.” (Ibid.) Defendant notes that paragraph 31 of the Artist Co-Management Agreement provides as follows:

“Subject to the restrictions on assignments set forth in this Agreement, this Agreement will bind the Parties (and each of their partners, jointly and severally), together with their respective heirs, executors, successors, assigns, personal representatives, partners, parents, subsidiaries, affiliates, members, officers, directors, agents, attorneys and employees, and together with any proprietorships, corporations, partnerships or entities which any of the above parties may own or control, and any reference to the Parties will be deemed to include, where applicable, a reference to any and/or all successor proprietorships, corporations, partnerships or entities substantially owned or controlled by these parties or any of them.” (Belafonte Decl., ¶ 3, Ex. A, ¶ 31, emphasis added.)

            In the opposition, Plaintiffs do not dispute that Trevejo signed the Artist Co-Management Agreement, or that it also applies to MLT. However, Plaintiffs asserts that none of their claims are subject to the arbitration clause because “none of the tort-based causes of action pled in     Ms. Trevejo’s complaint are ‘rooted in’ her contractual relationship with [Defendant].” (Opp’n at     p. 2:5-7.) Plaintiffs cite to Ahern v. Asset Management Consultants, Inc. (2022) 74 Cal.App.5th 675, 692, where the Court of Appeal noted that “[t]he ‘rooted in’ concept for determining arbitrability applies in cases involving parties whose employment agreements or other contractual arrangements include a broad arbitration provision. Tort claims that arise from those contractual relationships—that have their roots in it—are subject to arbitration.” 

            Plaintiffs assert that Trevejo’s causes of action are not rooted in the contractual arrangement she had with Defendant. Plaintiffs note that Paragraph 1 of the Artist Co-Management Agreement concerns the “Services of Managers” and provides as follows:

“The Managers agree to render such advice, guidance, counsel, direction and other services as the Artist may reasonably require to further the Artist’s career as a musician, composer, recording and performing artist, actor, and social media influencer, and to develop new and different areas within which the Artist’s artistic talents can be developed. Managers agree to perform for Artist one or more of the following services: advise and counsel in any and all matters pertaining to publicity, public relations and advertising; advise and counsel with respect to the adoption of proper format for presentation of Artist’s artistic talents and in the determination of proper style, mood, setting, business and characterization in keeping with Artist’s talents; advise, counsel and direct in the selection of artistic talent to assist, accompany or embellish Artist’s artistic presentation; advise and counsel with regard to general practices in the entertainment and amusement industries and with respect to such matters of which Managers may have knowledge concerning compensation and privileges extended for similar artistic values; advise and counsel concerning the selection of talent agencies and persons, firms and corporations to counsel, advise, seek and procure employment and engagements for Artist. Artist acknowledges that Belafonte is a licensed talent agent under California law, holding license #TA000307971.” (Belafonte Decl., ¶ 3, Ex. A, ¶ 1.)

Plaintiffs also note that the Artist Co-Management Agreement provides that “[a]ny dispute, claim or controversy arising out of or relating to this Agreement shall be resolved in accordance with the dispute resolution procedures set forth below…” (Belafonte Decl., ¶ 3, Ex. A, ¶ 23.) 

Plaintiffs assert that an analysis of the facts pled in support of Plaintiffs’ seven causes of action shows no connection to the services to be provided under the Artist Co-Management Agreement. Plaintiffs assert that Trevejo “has not alleged causes of action for, or relating to, claims that [Defendant] failed to provide advice and counsel or perform work aimed at advancing her career. All of her claims are based on [Defendant’s] emotional abuse of [Trevejo] and stealing funds from her on the side. As the Agreement did not call for [Defendant] to manage [Trevejo’s] finances, arrange outrageous usurious loans (or any loans at all), or to engage in mental cruelty, all of the causes of action are entirely independent of the narrow scope of work described in the Agreement.” (Opp’n. at p. 5:3-8, emphasis omitted.)

Indeed, in the Complaint, Plaintiffs allege that “[f]rom a young age, [Trevejo] had been a gifted performer and gained a meaningful following after creating videos and distributing them on the app known as Music.ly.” (Compl., ¶ 14.) Plaintiffs allege that Defendant “represented that he was a licensed talent agent and a force in Hollywood, and that he could and would connect [Trevejo] with trustworthy people who would protect her best interests.” (Compl., ¶ 15.) Plaintiffs further allege that Defendant “presented [Trevejo] with a complex written management agreement that was chalked with legalese and complicated provisions…Trusting [Defendant] and believing his representations, [Trevejo] signed the agreement.” (Compl., ¶ 16.) Plaintiffs allege that “[w]hether the management agreement was legal and enforceable, in whole or in part, or whether Belafonte breached the agreement, in whole or in part, is not the subject of this Complaint. Valid or not, however, Belafonte used the agreement as one of his many tools to manipulate [Trevejo] psychologically and establish authority to exert control directly and/or indirectly over her professional relationships and financial decisions.” (Compl., ¶ 17.)

In support of the first cause of action for intentional fraud and concealment, Plaintiffs allege, inter alia, that “in November 2020, [Defendant] falsely represented he was a licensed talent agent when, in fact, he was not.” (Compl., ¶ 27.) Plaintiffs allege that “beginning in approximately late 2020 or early 2021, [Defendant] did, in fact, cause numerous transfers of money out of Plaintiffs’ accounts directly to himself and took ‘cuts’ from money he caused to be transferred to others.” (Compl., ¶ 29.) Plaintiffs also allege that “[r]egarding the home in Beverly Hills, [Defendant] knowingly misrepresented to [Trevejo] that she had entered into a short-term lease…The truth was that it was a year-long lease, and the monthly rent continued to be paid from Plaintiffs’ accounts for [Trevejo’s] benefit.” (Compl, ¶ 30.) Plaintiffs allege that “after conning [Trevejo] into believing that she no longer had use of the home, [Defendant] then converted it to his own use…” (Compl., ¶ 21.) Plaintiffs further allege that Defendant “misrepresented that [Trevejo] needed to borrow money to cover expenses,” and that Defendant “misrepresented to [Trevejo] that the only loan she could qualify for was one from his ‘friend,’ and he concealed that the interest rate would be exorbitant by any standards and amount equal to $150,000.00.” (Compl., ¶ 31.)

Plaintiffs assert that the first cause of action is not subject to the arbitration clause, as the Artist Co-Management Agreement did not involve handling Trevejo’s money and assets.

In support of the second cause of action for breach of fiduciary duty, Plaintiffs allege that Defendant breached his fiduciary duty to Plaintiffs by:

“(a) emotionally abusing [Trevejo] to convince her she ‘needed him’ so he could maintain control; (b) influencing his handpicked accountant to cause him to transfer money from Plaintiffs’ accounts directly to himself and to others acting in concert with him; (c) lying to [Trevejo] about the length of the lease for the Beverly Hills home and forcing her to stay in hotels while, with [Defendant’s] knowledge, the accountants continued to fund the monthly rental payments from [Trevejo’s] accounts; (d) converting the home to his own benefit; (e) secretly paying for personal fun and expenses from Plaintiffs’ accounts; (f) using Plaintiffs’ credit cards and money to pay for hotels and personal international travel; (g) knowingly allowing others to steal from [Trevejo] but failing to provide her with the information; (h) exploiting [Trevejo’s] youth, inexperience, and insecurities to gain dominance over her and suppress her inquiries into his management and how her finances were being handled; (i) causing [Trevejo] undue financial stress and extreme financial anxiety by misappropriating and draining her funds as he used the Plaintiffs’ accounts as if they were his own; (j) duping [Trevejo] into a $400,000.00 loan with an excessive interest rate of $150,000; and (k) disparaging [Trevejo] in the industry and picking fights and arguments with her business associates.” (Compl., ¶ 38.)

Plaintiffs assert that the second cause of action is not subject to the arbitration clause, as the Artist Co-Management Agreement did not involve working with Trevejo’s accounts or managing her finances. Plaintiffs also assert that the Artist Co-Management Agreement did not encompass Defendant “making himself a ‘loan broker’ or skimming high interest rates.” (Opp’n at p. 6:18-20.)

            In support of the third cause of action for conversion, Plaintiffs allege, inter alia, that Defendant “took possession of funds and assets belonging to Plaintiffs in amounts of at least $500,000, and likely higher.” (Compl., ¶ 43.) In support of the fourth cause of action for conspiracy, Plaintiffs allege, inter alia, that “beginning as early as late 2020 and early 2021, Belafonte and Does 1 through 50, and each of them, entered into agreements with two or more people to engage in unlawful conduct including, but not limited to, defrauding Plaintiffs and stealing and misappropriating assets and money belonging to [Trevejo] individually, MLT World, LLC, separately, and the two of them jointly.” (Compl., ¶ 47.)

            In support of the fifth cause of action for aiding and abetting conversion, theft, and misappropriation, Plaintiffs allege, inter alia, that “beginning as early as late 2020 and early 2021, third parties whose identities are yet unknown to Plaintiffs, stole and wrongfully converted assets and money belonging to [Trevejo] individually, MLT World, LLC, separately, and the two of them jointly.” (Compl., ¶ 51.) Plaintiffs allege that “instead of stopping the illegal activity, [Defendant] and Does 1 through 50, by acts and advice, intentionally promoted the conduct and gave substantial aid and assistance to the perpetrators in furtherance of their goals, and himself profited as a result.” (Compl., ¶ 52.)

            In support of the sixth cause of action for return of usurious loan funds, Plaintiffs allege, inter alia, that Defendant “caused Plaintiff to pay $150,000 for a $400,000 loan only two months after the loan was funded. Plaintiff is informed and believes, and thereon alleges, [Defendant] received all or part of the $150,000 interest payment.” (Compl., ¶ 58.) Plaintiffs allege that “the $150,000 constituted usurious interest and seeks forfeiture of the entire amount from Defendants Belafonte and DOES 1 through 50…” (Compl., ¶ 59.) In support of the seventh cause of action of intentional infliction of emotional distress, Plaintiffs allege, inter alia, that Defendant’s “emotional abuse included, but was not limited to, making disparaging and discrediting statements to [Trevejo] and behind her back, isolating [Trevejo] from people who might stop him, using her fears and triggers to control her, misappropriating her funds and raising her depleted financial condition to create anxiety and worry, and a barrage of criticism. [Defendant] knew his behavior would result in emotional harm to [Trevejo] and intentionally engaged in it specifically for that purpose so he could stay in control by pummeling her self-esteem.” (Compl., ¶ 61.)

            Plaintiffs also assert that the third, fourth, fifth, sixth, and seventh causes of action do not arise out of the services that Defendant was to provide under the Artist Co-Management Agreement.

            In the reply, Defendant cites to Howard v. Goldbloom (2018) 30 Cal.App.5th 659, 663, where the Court of Appeal noted that “[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.’…A ‘broad’ clause includes those using language such as ‘any claim arising from or related to this agreement.’…or ‘arising in connection with’ the agreement’…” (Emphasis in original.) As set forth above, the Artist Co-Management Agreement here provides that “[a]ny dispute, claim or controversy arising out of or relating to this Agreement shall be resolved in accordance with the dispute resolution procedures set forth below…” (Belafonte Decl., ¶ 3, Ex. A, ¶ 23, emphasis added.) Thus, under the rationale in Howard, the subject arbitration clause is “broad.”

The Howard Court noted that “[i]t 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. At most, the requirement is that the dispute must arise out of [the] contract. 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. 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, supra, 30 Cal.App.5th at pp. 663-664 [internal quotations, citations, and emphasis omitted].)

Defendant asserts that here, Plaintiffs’ causes of action “all have roots in the relationship between Plaintiffs and Defendant, and as such, all of these claims are subject to the arbitration agreement.” (Reply at p. 8:7-8, emphasis omitted.) But Defendant does not explain how each of the causes of action alleged in the Complaint “have their roots in the relationship between the parties which was created by the contract.” (Howard v. Goldbloom, supra, 30 Cal.App.5th at     p. 664 [emphasis added].) The Court agrees with Plaintiffs that their causes of action do not arise out of the services that Defendant was to provide under the Artist Co-Management Agreement pursuant to paragraph 1 of the agreement. (See Belafonte Decl., ¶ 3, Ex. A, ¶ 1.) In addition, the Court notes that the Recitals section of the Artist Co-Management Agreement provides, inter alia, that “the Parties desire this Agreement to govern their mutual understanding of the arrangement between them with respect to the Managers’ co-management of the artistic pursuits of the Artist, including the Parties’ respective rights and obligations.” (Belafonte Decl., ¶ 3, Ex. A, Recitals.) The causes of action of Plaintiffs’ Complaint does not concern a dispute pertaining to Defendant’s management of Trevejo’s artistic pursuits.

Defendant also asserts that Plaintiffs “do not dispute the fact that every single Cause of Action in the Complaint was under negotiation and comprehensive discussion between the Parties after Plaintiff illegally terminated [Defendant] as her Manager. In other words, the Parties, through their counsel, were attempting to resolve all disputes and had contemplated Mediation and Arbitration from at least November 2022 through January 2023, right before Plaintiffs blindsided Defendant and his counsel by filing the subject Complaint.” (Reply at         p. 9:11-16.) In connection with the motion, Defendant’s counsel indicates that “[w]hile the details of the above-mentioned dispute resolution negotiations and discussions that preceded the sudden and unexpected filing of the within Superior Court lawsuit are protected from disclosure by Evidence Code Section 1152, et. seq. it can be stated that the topics and focus of those discussions were factually and legally identical to the allegations of the seven causes of action alleged in the Complaint before this Court.” (Martorell Decl., ¶ 12, emphasis omitted.) But the Court does not find that the fact that the parties previously negotiated the claims that are the subject of Plaintiffs Complaint demonstrates that such claims are covered by the arbitration provision at issue.

Based on the foregoing, the Court does not find that Defendant has shown that the dispute here is covered by the subject arbitration provision in the Artist Co-Management Agreement. (See Cal. Prac. Guide Alt. Disp. Res. Ch. 5-G (The Rutter Group 2021) ¶ 5:320, [“[t]he moving party must prove by a preponderance of evidence the existence of the¿arbitration¿agreement and that the dispute is covered by the agreement.”] see also Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653 [“[i]n ruling on a petition to compel arbitration, the trial court may consider evidence on factual issues relating to the threshold issue of arbitrability, i.e., whether, under the facts before the court, the contract excludes the dispute from its arbitration clause or includes the issue within that clause.”].)  

            Lastly, Defendant requests in the alternative that the Court issue an order “referring the case to the California Labor Commissioner for administrative hearing.” (Mot. at p. 2:6-7.) Defendant cites to Styne v. Stevens (2001) 26 Cal.4th 42, 46, where the California Supreme Court noted that “[s]ections 1700 to 1700.47 of the Labor Code (hereafter sometimes the Talent Agencies Act, or Act) regulate [t]alent agenc[ies]…persons or corporations that procure professional employment or engagements…for creative or performing artists…in the entertainment media, including theater, movies, radio, and television…All cases of controversy arising under [the Act] must be refer[red] by the parties to the Labor Commissioner (Commissioner) for resolution, subject to de novo appeal to the superior court.” (Internal quotations and citations omitted.)

            Labor Code section 1700.44, subdivision (a) provides, inter alia, that “[i]n cases of controversy arising under this chapter, the parties involved shall refer the matters in dispute to the Labor Commissioner, who shall hear and determine the same, subject to an appeal within 10 days after determination, to the superior court where the same shall be heard de novo. To stay any award for money, the party aggrieved shall execute a bond approved by the superior court in a sum not exceeding twice the amount of the judgment. In all other cases the bond shall be in a sum of not less than one thousand dollars ($1,000) and approved by the superior court.”

The Court does not find that Defendant has demonstrated how Plaintiffs’ causes of action in this case “arise under” the Talent Agencies Act. Defendant asserts that the Talent Agencies Act “governs all disputes related to Artist-Talent Management Agreements.” (Mot. at p. 8:7-8, emphasis omitted.) As set forth above, the Court does not find that Defendant has demonstrated that the dispute here is covered by the arbitration provision in the subject Artist Co-Management Agreement. In addition, as set forth above, Plaintiffs allege that “[w]hether the management agreement was legal and enforceable, in whole or in part, or whether Belafonte breached the agreement, in whole or in part, is not the subject of this Complaint.” (Compl., ¶ 17.)

Conclusion

For the foregoing reasons, Defendant’s motion is denied.

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Plaintiffs are ordered to provide notice of this Order.¿ 

DATED:  April 20, 2023                               

________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court