Judge: Virginia Keeny, Case: 23STCV07387, Date: 2025-04-15 Tentative Ruling
Case Number: 23STCV07387 Hearing Date: April 15, 2025 Dept: 45
THE
MALITZ FAMILY TRUST, DTD JULY 12, 2000, BY TRUSTEE EUGENE MALITZ AND SJMO TIC
#11, LLC, A DELEWARE LIMITED LIABILTY CORPORATION v. VEREIT, INC., ET AL.
MOTION TO VACATE ORDER COMPELLING THE DISPUTE TO JAMS
ARBITRATION and motion for leave to file first amended complaint
Date of Hearing: April
15, 2025 Trial Date: None set
Department: 45 Case
No.: 23STCV07387
BACKGROUND
Plaintiffs bring this case, alleging that Defendants financially
exploited senior citizen consumers through a predatory sales practice scheme to
induce the victims to form special purpose entities (“SPEs”) to purchase real
estate tenant-in common (“TIC”) interests with inflated costs that were then mismanaged
by the Defendants. Plaintiffs allege Defendants failed to discharge their
fiduciary duties to act in Plaintiffs’ best interests by providing investment
advice, performing professional services and selling them the TICs in
derogation of their fiduciary duty. On
October 4, 2023, Judge Mel Recana ordered this case to binding arbitration with
JAMS (the “Order”).
Plaintiffs now move this Court for an order vacating the Order compelling
JAMS arbitration on three independent grounds. First, JAMS has refused to
classify the
arbitration under JAMS’ Consumer Minimum Standards over the
Plaintiffs’ objections because the Plaintiff SPEs do not qualify as consumers,
resulting in plaintiffs being required to pay $130,000 in arbitration fees, an
impossibility under the circumstances.
Second, plaintiffs claim the senior citizen consumers are not parties to
the arbitration agreements and so could not have been ordered to arbitration;
and Third, Defendants have now moved to bar the Plaintiff trust and trustees
from arbitrating at JAMS for lack of standing, which should be deemed a waiver
of the right to arbitrate. Defendants
counter that this is a thinly-disguised motion for reconsideration and should
be denied on that ground. Further,
defendants argue that plaintiffs have waived or forfeited these arguments.
Ruling
Motion to Vacate the Arbitration Award is denied. Motion for leave to file an Amended Complaint
is denied.
DISCUSSION
Motion to Vacate Order Compelling Case to Arbitration
Plaintiffs first contend that the court should vacate the order
sending this matter to arbitration because JAMS has deemed that the consumer
rules do not apply, forcing plaintiff to pay an estimated $130,000 in
arbitration costs. Defendants point out
that plaintiffs did not oppose the motion to compel arbitration to JAMS and
indeed joined in the motion. Notably, in
its opposition to the motion to compel arbitration, plaintiffs argued that they
wanted JAMS’ commercial rules to apply; they made no mention of wanting the
consumer rules to apply. Further,
plaintiffs argued vehemently that all decisions about what rules to apply and
what fees to charge should be decided by JAMS and not by the court. (See Opposition, at pp. 3-5.) Therefore,
the court agrees that plaintiffs have waived any claim that the arbitration
clause was unconscionable or that JAMS’ fee structure would deny them access to
the arbitration process. Their decision
to return to this court because they apparently do not like the rulings by the
JAMS arbitrator, is an attempt at forum-shopping. The request also exceeds the jurisdiction of
this court, since arbitration has been ordered of all claims presented by these
plaintiffs. (See Lew-Williams v.
Petrosian (2024) 101 Cal.App.5th 97, 105-106.)
Arguably, this motion should be viewed as a request for reconsideration
of a prior court’s order under C.C.P. Section 1008. However, defendants aptly point out that
plaintiffs have not met any of the requirements for bringing a motion under
Section 1008. Most importantly,
plaintiffs cannot allege that they were unaware of the consumer arbitration
rules and they have not alleged that they have faced any significant change in
financial circumstances. The JAMS
Consumer Minimum Standards are publicly available and plainly provide that the
Consumer Minimum Standards do not apply to cases involving “investment
transactions or real estate transactions.” Thus, Plaintiffs’ unconscionability defense is
not based on any new facts that were unavailable to Plaintiffs prior to the
Arbitration Order. For the same reason,
plaintiffs cannot argue that they did not know that senior consumers were impacted
by defendant’s scheme, as it was alleged throughout the original
complaint. If they truly thought that senior
consumers had claims which were not subject to arbitration, plaintiffs were
obligated to raise that argument in opposition to the original motion to compel
arbitration.
With regard to plaintiff’s final arguments –that defendants have
now taken a position in arbitration that is contrary to positions advanced here
– the court agrees with defendant that these arguments can only be raised in
the arbitration.
Motion for Leave to Amend Complaint
Plaintiffs request leave to amend
their complaint to bring claims by senior citizen consumers who were victims of
defendants’ financial scheme. They
contend these consumers are necessary parties to this action. They claim that they only recently learned
that senior citizens received financial advice from defendants to purchase the
subject investments. The court does not
understand what new facts plaintiffs seek to add, since their original
complaint made clear that they were claiming that defendants’ scheme had preyed
on and taken advantage of unsophisticated senior citizens, all of whom were
named in the original complaint. This
motion to amend seems to be a transparent attempt to avoid rulings taken by the
JAMS arbitrator. More significantly, the
court lacks jurisdiction to amend the complaint in this action which has been
compelled to arbitration. (See SWAB
Financial, LLC v. E*Trade Sec., LLC (2007) 150 Cal.App.4th 1181; Lew-Williams,
at pp. 105-106.)