Judge Upinder S. Kalra, Case 21STCV38957 2023-05-17 Tentative Ruling

Judge: Upinder S. Kalra, Case: 21STCV38957, Date: 2023-05-17 Tentative Ruling

Case Number: 21STCV38957 Hearing Date: May 17, 2023 Dept: 51

Tentative Ruling

Judge Upinder S. Kalra, Department 51

HEARING DATE: May 17, 2023

CASE NAME: Persevero, LLC, et al. v. Kevin Harrington, et al.

CASE NO.: 21STCV38957

MOTION TO CONFIRM ARBITRATION AWARD, AND ALTERNATIVELY, MOTION TO COMPEL ARBITRATION

MOVING PARTY: Defendants Crowdfund, LLC formerly dba Crowdfund Rescue, LLC, Michael Lauchlan, an individual, and Kevin Harrington

RESPONDING PARTY(S): Plaintiff Persevero, LLC

REQUESTED RELIEF:

1. An order affirming the arbitration award as to all Defendants, or alternative, compelling arbitration as to Defendant Harrington.

TENTATIVE RULING:

1. Defendants Motion to Confirm the Arbitration Award, or Alternatively, Compel Arbitration as to Defendant Harrington is either continued or Denied without prejudice.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

On October 21, 2021, Plaintiff Persevero, LLC, Diedre Watson, Alexander Cavano, LLC, and Daina Randle (“Plaintiffs”) filed a complaint against Defendants Kevin Harrington, Michael Lauchlan, Mark Campbell, Joe Parker, Crowdfund, LLC formerly dba Crowdfund Rescue, LLC, Inventure X (“Defendants”.) The complaint alleges seven causes of action: (1) Fraud, (2) Rescission, (3) Violation of CA Bus. & Prof. Code § 17200 et seq., (4) Violation of CA Bus. & Prof. Code § 17500, (5) Conversion, (6) Negligent Misrepresentation, and (7) Breach of Contract. The complaint alleges that Plaintiffs entered into a contract with Defendant InventureX to obtain crowdfunding assistance and expertise. Plaintiffs allege that Defendants did not perform the services promised in the contract.

On May 31, 2022, Defendants Michael Lauchlan and Crowdfund, LLC filed a Demurrer, which was SUSTAINED, with leave to amend.

Defendants filed a Motion for Sanctions on July 14, 2022, which was DENIED.

On September 14, 2022, Plaintiffs filed a First Amended Complaint.

On October 14, 2022, Defendant Harrington filed a Demurrer, which was SUSTAINED, with leave to amend.

On February 28, 2022, Plaintiff Persevero, LLC, filed a Second Amended Complaint, alleging six causes of action.

On March 29, 2023, Defendant Harrington filed a Demurrer, which was OVERRULED.

On March 20, 2023, Defendant filed a Motion for Order Confirming Arbitration Award as Binding, or Alternatively to Compel Arbitration. Plaintiff’s Opposition was filed on May 4, 2023. Defendants’ Reply was filed on May 10, 2023.

LEGAL STANDARD:

CCP § 1286 states: “If a petition or response under this chapter is duly served and filed, the court shall confirm the award as made, whether rendered in this state or another state, unless in accordance with this chapter it corrects the award and confirms it as corrected, vacates the award or dismisses the proceeding.

Once arbitration is concluded, “any arbitrator’s award is enforceable only when confirmed as a judgment of the superior court.” (O’Hare v. Municipal Resource Consultants (2003) 107¿Cal.App.4th 267, 278.). Any of the parties may file a petition with the court, which must then “confirm the award, correct and confirm it, vacate it, or dismiss the petition.” (Code¿of¿Civil¿Proc.¿§§¿1285, 1286; EHM Productions, Inc. v. Starline Tours of Hollywood,¿Inc.¿(2018) 21 Cal.App.5th 1058, 1063.) “It is well settled that the scope of judicial review of arbitration awards is extremely narrow.” (California Faculty Assn. v. Superior Court¿(1998) 63 Cal.App.4th 935, 943.) “Neither the trial court, nor the appellate court, may ‘review the merits of the dispute, the sufficiency of the evidence, or the arbitrator’s reasoning, nor may we correct or review an award because of an arbitrator’s legal or factual error, even if it appears on the award’s face.” (EHM Productions, supra, at p. 1063-64.)

ANALYSIS:

Defendants Crowdfund, LLC formerly dba Crowdfund Rescue, LLC, Michael Lauchlan, and Kevin Harrington move for an order confirming the arbitration award already issued as binding against all Defendants, or alternatively, to compel arbitration as to Kevin Harrington.

Binding Arbitration:

Defendant argues that under CCP § 1286, the arbitration award should be binding on all Defendants.

Here, on July 1, 2021, the AAA arbitrator awarded Plaintiff Persevero. Defendants argues that res judicata applies to arbitration proceedings. Specifically, Defendant Harrington, while not a party to the arbitration agreement can demand arbitration under equitable estoppel. The causes of action against Harrington are “intimately founded in and intertwined with the underlying contractual obligations.” (Motion 7: 17-18.) Therefore, the Court should confirm the arbitration that already occurred as binding the remaining Plaintiff and all Defendants. Additionally, Defendant s argue that arbitration should be compelled because the arbitration clause applies to the causes of action raised by Plaintiff. Again, even though Defendant Harrington is not a signatory, the actions against him are “intimately founded in and intertwined with the underlying contractual obligations.” (Motion 8: 20-23.)

Plaintiff argues that the motion should be denied for 3 reasons. First, the arbitration award is not binding on all parties. Defendants Lauchlan or Harrington were not parties to the arbitration (Opp. 4: 8-9), and are not considered privies to invoke the doctrine of res judicata. (Id. at 5: 16-25.) Second, Defendant Harrington does not have a right to compel arbitration because the facts are not intertwined, as a business or corporate relationship is insufficient to allow the causes of action against the non-signatories to be considered “intertwined.” (Opp. 6: 23-28.) Lastly, Defendant waived his right to compel arbitration, because Defendant Harrington waited 11 months to file the current motion, and has filed 2 demurrers, a motion to strike, and a motion for sanctions. In any of these motions, Defendant made no argument that the matter should be stayed to allow for arbitration.

The Court finds that Defendant are filing three separate motions under the guise of a single motion. The first remedy requested is to confirm the arbitration award. The second remedy is seeking a dismissal through res judicata. The third remedy is to compel arbitration. The latter two remedies are premature. As such the Court will address the first remedy only.

Ordinarily, party files a Petition to confirm an award. (See CCP § 1288 et. seq.)

Code of Civil Procedure, § 1285.4 states: “A petition under this chapter shall:

(a) Set forth the substance of or have attached a copy of the agreement to arbitrate unless the petitioner denies the existence of such an agreement.

(b) Set forth the names of the arbitrators.

Defendants have attached a copy of the arbitration agreement between Persevero, LLC, and Inventure X, the name of the arbitrator, and a copy of the award dated July 1, 2021. (Decl. Talkov.) Thus, Defendant Inventure X has satisfied the filing requirements of § 1285.4.

Code of Civil Procedure § 1283.6 provides that: “The neutral arbitrator shall serve a signed copy of the award on each party to the arbitration personally or by registered or certified mail or as provided in the agreement.” (Emphasis added.). Defendants have not provided any proof of service of the award. As such, they have failed to satisfy the requirement of § 1283.6.

“Once a petition to confirm an award is filed, the superior court must select one of only four courses of action: it may confirm the award, correct and confirm it, vacate it, or dismiss the petition.” (EHM Productions, Inc. v. Starline Tours of Hollywood, Inc.¿(2018) 21 Cal.App.5th 1058, 1063.)

Conclusion:

For the foregoing reasons, the Court decides the pending motion as follows:

Since Defendants filed a Motion, the Court will either continue the matter or deny the motion without prejudice. The remaining issues are not ripe.

Moving party is to give notice.

IT IS SO ORDERED.

Dated: May 17, 2023 __________________________________ Upinder S. Kalra

Judge of the Superior Court