Judge: William A. Crowfoot, Case: 22AHCV00604, Date: 2023-01-31 Tentative Ruling

Case Number: 22AHCV00604    Hearing Date: January 31, 2023    Dept: 3

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - NORTHEAST DISTRICT

I.         INTRODUCTION

          On August 24, 2022, Plaintiff Encore Automotive, Inc. (“Plaintiff”) filed a complaint against Defendants Robert Y. Lee (“Lee”), Stephanie Lin (“Lin”), and Wellcharter International Corp. for three causes of action: (1) breach of fiduciary duty (conflict of interest) against Lee; (2) breach of fiduciary duty (usurpation of corporate entity) against Lee; and aiding and abetting breach of fiduciary duty against Lin and Wellcharter.  The complaint alleges that between 2019 and September 2021, Defendant Lee served as an officer, director, and or the secretary of Encore, and as an officer of Wellcharter, and caused Encore to engage in transactions with Wellcharter without disclosing the material terms of the transaction to Encore. Encore is a California corporation engaged in the business of distributing genuine original equipment (OE) and aftermarket automotive parts. 

          On October 10, 2022 Defendants filed a motion for an order compelling all claims of Plaintiff to arbitration, and staying this action pending arbitration.

          On January 18, 2023, Plaintiff filed an opposition.

          On January 24, 2023, Defendants filed a reply.  

Moving Arguments

          Defendants request that the Court grant its motion to compel arbitration and stay this action. Defendants contend the following:

(1)  California has a strong public policy favoring arbitration, and doubts are to be resolved in favor of ordering arbitration;

(2)  Plaintiff is a party to the binding Shareholder Agreement that has a broad arbitration clause, and, even if it were somehow not a party, the agreement is still enforceable against Plaintiff because it is a third-party beneficiary of that agreement;

(3)  the arbitrator, not the Court, should resolve whether the claims asserted here are within the scope of the arbitration clause. But, in any event, the claims fall within the scope because they “touch matters” in the agreement; and

(4)  all Defendants are entitled to enforce the arbitration clause against Plaintiff because they are alleged agents of Defendant Lee, who is a signatory.  

Opposition Arguments

          In opposition, Plaintiff disputes that the claims in this action are arbitrable.  Notwithstanding, to spare the Court and the Parties duplicative motion practice regarding arbitrability, Plaintiff submitted a Demand for Arbitration to the AAA requesting that an arbitrator determine whether the Shareholder Agreement requires the arbitration of any claim, and providing that only if the arbitrator determines that a claim is arbitrable, shall the arbitrator then proceed to a merits adjudication of that claim.  Plaintiff requests that the Court:

(1)  stay this action pending the arbitrator’s determination on arbitrability;

(2)  continue the January 31, 2023 case management conference by two months, and

(3)  in the event that the arbitrator agrees with Plaintiff that the claims should be adjudicated in this Court, lift the stay.

Reply Arguments

          In reply, Defendants contend that Plaintiff has effectively filed a non-opposition because its opposition seeks materially the same order that Defendants sought in their motion to compel.  In the interest of preserving the Court’s resources, Defendants request that the Court:

(1)  stay the action pending arbitration; and

(2)  take the case management conference off calendar.

If any party moves to lift the stay, the issue of further scheduling may be addressed at that point.

II.        DISCUSSION

          Defendants request that the Court grant its motion to compel arbitration and stay this action.  In opposition, Plaintiff disputes that any of the claims asserted in the action is arbitrable yet submitted a demand for arbitration to the AAA requesting that an arbitrator determine whether the Shareholder Agreement requires arbitration. The AAA acknowledge receipt and notified the parties.  Plaintiff requests that the Court stay this action pending the arbitrator’s determination on arbitrability. 

          Plaintiff’s opposition reads as a non-opposition because it effectively requests the same order as Defendant’s motion.  Therefore, the Court grants Defendants’ motion to compel arbitration and stay.

III.      CONCLUSION

            Defendants’ motion to compel arbitration and stay action is GRANTED.

Moving party to give notice. 

            Parties who intend to submit on this tentative must send an email to the Court at alhdept3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court’s website at www.lacourt.org.  Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter.  Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue.  If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.