Judge: Thomas D. Long, Case: 22STCV39220, Date: 2024-05-28 Tentative Ruling

Case Number: 22STCV39220    Hearing Date: May 28, 2024    Dept: 48

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

On December 19, 2022, The Greenspan Co. filed this action against Jennifer McCullum.  Greenspan later dismissed its complaint.

On December 6, 2023, Jennifer McCullum filed a cross-complaint against Greenspan and others.

On January 9, 2024, Greenspan filed a motion to compel arbitration.  Cross-Defendants Matthew Blumkin, Matthew Goldstein, and Sydney Greenspan filed a notice of joinder to the motion.[1]

The Court must grant a petition to compel arbitration unless the defendant has waived the right to compel arbitration or if there are grounds to revoke the arbitration agreement.  (Ibid.; Code Civ. Proc., § 1281.2.)  Under California law and the Federal Arbitration Act, an arbitration agreement may be invalid based upon grounds applicable to any contract, including unconscionability, fraud, duress, and public policy.  (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 165-166.)

In opposition to the motion, McCullum argues that the agreement containing the arbitration provision is illegal because Greenspan was not licensed to act as public insurance adjuster in accordance with New Mexico law.

The arbitration provision provides that “[t]he validity, construction, interpretation and enforcement of this agreement, and services rendered thereunder, shall be governed by California law.”  Under California law, “the CAA calls for the enforcement of an arbitration agreement unless there are grounds for revoking that agreement.  (Moncharsh [v. Heily & Blase (1992) 3 Cal.4th 1, 29]; see Code Civ. Proc., § 1281.2.)  ‘If a contract includes an arbitration agreement, and grounds exist to revoke the entire contract, such grounds would also vitiate the arbitration agreement.  Thus, if an otherwise enforceable arbitration agreement is contained in an illegal contract, a party may avoid arbitration altogether.’  (Moncharsh, at p. 29, 10 Cal.Rptr.2d 183, 832 P.2d 899, italics added.)”  (Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59, 76-77.)

McCullum’s evidence of illegality is a print-out from the website of the National Association of Insurance Commissioners, which “supports Cross-Complainant’s contention that Greenspan was not so licensed and, as a consequence, the putative arbitration agreement is illegal, void, and unenforceable here.”  (See McCullum RJN.)  Greenspan argues that “the printout alleged as Exhibit 1 to the Opposition does not show that TGC was not licensed.  It shows that it was, indeed, licensed.  Cross-Complainant has provided no evidence that TGC was ever not licensed.”  (Reply at p. 2.)  However, McCullum’s Exhibit 1 appears to show that Greenspan was licensed as a Public Adjuster only as of March 10, 2023, long after the agreement was executed.

The Court orders supplemental briefing on the issue of the alleged illegality of the underlying contract, including whether Greenspan was licensed in accordance with applicable law, and whether the arbitration provision is unenforceable on this ground.

Each party may file a supplemental brief, no longer than 10 pages, and supplemental declarations with exhibits no later than June 28, 2024.

The Hearing on Motion to Compel Arbitration is CONTINUED to July 18, 2024 at 8:30 a.m. in Department 48 at Stanley Mosk Courthouse.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit.  If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

         Dated this 28th day of May 2024