Superior Court, State of California



DATE: January 12, 2021 TIME: 9:00 A.M.

In light of the shelter-in-place order due to COVID-19, all appearances MUST be made by Court Call, unless the Court otherwise authorizes. If any party wishes to use a court reporter, the appropriate form (CV-5100) must be submitted to the Court for approval and the reporter must work remotely and cannot be physically present in the courtroom. If the Court permits someone to personally appear for a hearing, that person must observe appropriate social distancing protocols and must wear a face covering, unless the Court authorizes otherwise.

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The public may access hearings in this department. Please check the court website for Department 6’s public access phone number.

As a reminder, state and local court rules prohibit recording a court proceeding without a court order. This includes members of the public listening in on the public access line.

Judge Folan WILL PREPARE ORDER unless counsel/prevailing party is instructed otherwise.

(SEE RULE OF COURT 3.1312 – PROPOSED ORDER MUST BE E-FILED BY COUNSEL AND SUBMITTED PER 3.1312(C))

EFFECTIVE JULY 24, 2017, THE COURT WILL NO LONGER PROVIDE OFFICIAL COURT REPORTERS FOR CIVIL TRIALS OR LAW AND MOTION HEARINGS. SEE COURT WEBSITE FOR POLICY AND FORMS.

TROUBLESHOOTING TENTATIVE RULINGS

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|LINE # |CASE # |CASE TITLE |RULING |

|LINE 1 | 19CV354135 | Jennifer Celaya vs Sandy Krikorian, LCSW et |The parties are in settlement negotiations and this demurrer is being |

| | |al |continued, per their request, to Feb 23, 2021 at 9am in Dept. 2. |

|LINE 2 | 19CV354135 | Jennifer Celaya vs Sandy Krikorian, LCSW et |The parties are in settlement negotiations and this motion to strike |

| | |al |is being continued, per their request, to Feb 23, 2021 at 9am in Dept.|

| | | |2. |

|LINE 3 | 20CV367170 |J. Baykhurazov. Friendfinder Networks, Inc. |Click Control Line 3 for Tentative Ruling |

|LINE 4 | 20CV367170 | J. Baykhurazov. Friendfinder Networks, Inc. |Click Control Line 3 for Tentative Ruling |

|LINE 5 | 19CV346992 | SN SERVICING CORPORATION et al vs WESTERN |Counsel attended an informal discovery conference with the Court on |

| | |BANCORP |12-2-20. Defense counsel agreed to provide supplemental responses to |

| | | |the 52 special interrogatories at issue by January 5, 2021 and did so.|

| | | |Plaintiff wants to preserve its right to argue for sanctions if |

| | | |current settlement negotiations do not resolve the case. Accordingly,|

| | | |the Court continues this motion to March 11, 2021 at 9am in D 2 on the|

| | | |issue of sanctions only. The parties must notify Department 2 email |

| | | |if the motion is going forward no later than March 1, 2021. If the |

| | | |Court does not hear from counsel by March 1, 2021, the motion will go |

| | | |off calendar. |

|LINE 6 | 19CV347730 | Harpal Chahal et al vs Bhupinder Dhillon et |The Petition to Consolidate the Writ of Mandate case (19CV347730) with|

| | |al |the Election case (19CV353904) is DENIED. Judge Williams issued a |

| | | |judgment and Writ of Mandate in July, 2019. The writ directed |

| | | |respondents to provide petitioners an opportunity to inspect and copy |

| | | |certain records, which was done. Judge Kirwan conducted several |

| | | |compliance hearings, including a final compliance hearing on 10-28-20.|

| | | |No future court dates are set in that matter. Indeed, for all intents|

| | | |and purposes, the Writ of Mandate matter is complete and the OSC re |

| | | |contempt was denied. Moving parties may certainly conduct discovery in|

| | | |the Election case regarding the records that were the subject of the |

| | | |Writ of Mandate. It is not necessary to consolidate the two cases. |

| | | |Also, the two matters do not share the same parties. And, given that |

| | | |there is already a judgment in the Writ of Mandate case, there is no |

| | | |chance of inconsistent adjudications or repetitive trials. The Court |

| | | |is not persuaded by any of the arguments advanced by moving parties. |

| | | |And, the Court declines to rule on the request to amend the protective|

| | | |order in the Writ of Mandate case as the only issue before this Court |

| | | |should be whether consolidation is appropriate. It is not. The Court|

| | | |will prepare the order. |

|LINE 7 | 19CV353904 | Harpal Chahal et al vs Bhupinder Dhillon et |See Ruling on Line 6. |

| | |al | |

|LINE 8 | 20CV366503 |Spartan Tank Lines, Inc vs Anna Le et al |Plaintiff’s Motion for Leave to File Second Amended Complaint is |

| | | |UNOPPOSED and GRANTED, good cause appearing. The Second Amended |

| | | |Complaint shall be separately filed within 20 days of service of this |

| | | |order. The Court will prepare the order. |

|LINE 9 | 20CV367305 | Foresite Capital Management IV, L.P. vs |Consistent with this Court’s Sealing Order dated October 7, 2020, |

| | |Hesaam Esfandyarpour, Ph.D. et al |Foresite Capital Management IV, L.P.’s Motion to Seal Foresite’s |

| | | |September 29, 2020 Response Regarding Motion to Seal is GRANTED, good |

| | | |cause appearing pursuant to California Rule of Court 2.550 (d). The |

| | | |Court makes the requisite findings thereunder. Moving party must |

| | | |separately submit the redacted version of the September 29, 2020 |

| | | |Response to the clerk within 10 days of service of this order. Once |

| | | |the clerk’s office receives the redacted September 29, 2020 Response, |

| | | |the clerk will seal the originally filed cross- complaint pursuant to |

| | | |this order. The Court will prepare the order. |

|LINE 10 | 20CV368701 | Larry Gilberg vs Power Architects, Corp et |Click Control Line 10 for Tentative Ruling |

| | |al | |

|LINE 11 | 20CV368701 | Larry Gilberg vs Power Architects, Corp et |Click Control Line 10 for Tentative Ruling |

| | |al | |

|LINE 12 | 2015-1-CV-286493 | G. Rath vs Panasas, Inc. |Plaintiff’s Motion to Correct Clerical Error Regarding Designation in |

| | | |the Form APP-003 is DENIED. It plaintiff’s responsibility, not the |

| | | |clerk’s, to correctly check off the applicable boxes in APP-003. |

| | | |Plaintiff may wish to consider filing an amended designation of record|

| | | |on appeal once he marks the applicable boxes in the form. The Court |

| | | |will prepare the order. |

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Case Name: Baykhurazov v. FriendFinder Networks, Inc.

Case No.: 20CV367170

On June 8, 2020, plaintiff Jakhongir Baykhurazov (“JB”) filed a complaint against FriendFinder Networks, Inc. (“FFN”), asserting causes of action for discrimination and harassment, failure to prevent discrimination and harassment, unlawful retaliation in violation of public policy, intentional infliction of emotional distress, wrongful termination in violation of public policy, retaliation in violation of Government Code §§ 12650, et seq., retaliation in violation of Labor Code § 1102.5, and failure to engage in the interactive process. On July 22, 2020, FNI filed a cross-complaint (“XC”) alleging that JB failed to show up for work for several days in a row without notice and had actually taken parallel employment with another company and did not work as a full-time employee of FFN. (See XC, ¶¶ 10-15.) JB had agreed as a term of employment that he would “devote [his] full-time attention to executing the duties of [his] job, which is an essential job function.” (See XC, ¶ 6.) The XC asserted causes of action against JB for:

1) Breach of fiduciary duty;

2) Constructive fraud;

3) Breach of contract;

4) Declaratory relief for accounting and constructive trust;

5) Declaratory relief regarding extortion; and,

6) Declaratory relief regarding blackmail.

JB demurs to each cause of action of the XC against him. JB also moves to strike paragraphs 1, 9, 14-17, 19-22, 24-29, 32-34, 36, 38-40, 42-44, and 46-48 and B and F from the prayer.

I. DEMURRER TO THE CROSS-COMPLAINT

First cause of action for breach of fiduciary duty

JB demurs to the first cause of action, asserting that it fails to state facts sufficient to constitute a breach of fiduciary duty cause of action. JB acknowledges that the XC alleges that he “had fiduciary duties of exclusivity, loyalty, honesty, trust and avoidance of conflicts of interest with his employer,” and that he “was obliged to devote all his time, day and night, exclusively for FFN,” but contends that this allegation is a conclusion of law and unsupported by facts. JB argues that the complaint fails to explain who he allegedly worked for while being employed by FFN, or why simultaneous employment by several employers is prohibited under California law. In opposition, FFN asserts that the complaint alleges a breach of the duty of loyalty since it alleges action which is inimical to the best interests of the employer—the taking of other employment such that he was unable to perform his job duties as a managerial employee and then the concealment and misrepresentations regarding the reasons for lack of performance.

“The duty of loyalty arises not from a contract but from a relationship—here, the relationship of principal and agent.” (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 410.) “Agency is the fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act.” (Id. at pp.410-411, quoting Rest.3d Agency, § 1.01.) “Where such a relationship arises, the agent assumes ‘a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship.” (Id. at p.411, quoting Rest.3d Agency, § 8.01; id. at p.414 (stating “an employee, while employed, owes undivided loyalty to his employer… [t]he duty of loyalty is breached, and the breach “may give rise to a cause of action in the employer, when the employee takes action which is inimical to the best interests of the employer”); see also Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1579 (stating that “[a]n agent is a fiduciary”); see also Sequoia Vacuum Systems v. Stransky (1964) 229 Cal.App. 2d 281, 287 (stating that “[e]very agent owes his principal the duty of undivided loyalty… [d]uring the course of his agency, he may not undertake or participate in activities adverse to the interests of his principal”); see also Stokes v. Dole Nut Co. (1995) 41 Cal.App.4th 285, 295 (stating that “[t]he duty of loyalty is breached, and may give rise to a cause of action in the employer, when the employee takes action which is inimical to the best interests of the employer”).)

“The animating principle of a fiduciary’s duties to his charges is unfaltering loyalty and honesty.” (Center for Healthcare Education & Research, Inc. v. International Congress for Joint Reconstruction, Inc. (2020) 57 Cal.App.5th 1108, 1125.) “An agent has a duty to use reasonable effort to provide the principal with facts that the agent knows, has reason to know, or should know when [¶] (1) subject to any manifestation by the principal, the agent knows or has reason to know that the principal would wish to have the facts or the facts are material to the agent’s duties to the principal; and [¶] (2) the facts can be provided to the principal without violating a superior duty owed by the agent to another person.” (Roche v. Hyde (2020) 51 Cal.App.5th 757, 797, fn. 22, quoting Rest. 3d of Agency, § 8.11.) “An agent who, without the acquiescence of his principal, acts for his own benefit… is not entitled to compensation which otherwise would be due him. (J. C. Peacock v. Hasko (1961) 196 Cal.App.2d 353, 358 (also stating that “[t]his is true even though the conduct of the agent does not harm the principal, and even though the agent believes that his conduct is for the benefit of the principal and that he is justified in so acting… [a]n agent is entitled to no compensation for conduct which is disobedient or which is a breach of his duty of loyalty; if such conduct constitutes a willful and deliberate breach of his contract of service, he is not entitled to compensation even for properly performed services for which no compensation is apportioned… [t]he duty of fidelity to his employment imposes on the employee not simply the positive duty of reasonably skillful performance of the work intrusted to him, but the negative duty of refraining from deception and from entering into relations giving him an interest inconsistent with that of the employer… [a]n employee who violates these fundamental duties of loyalty cannot recover even for the services he has rendered”).)

Here, the complaint alleges that: an essential job function of his position as manager, JB was required to devote his full-time attention to executing the duties of his job; JB entered into employment with another employer such that it would be impossible for JB to perform his job functions; in fact, JB failed to show up to work multiple days in a row, in both January and February 2019, due to being employed by the other entity; despite never working as a FFN as a full-time employee as he was nevertheless being compensated by FFN during that time period; JB’s other employment materially interfered with his ability to perform his duties for FFN; JB failed to disclose his employment with another employer; JB instead actively concealed the true reason for his absences from employment with FFN, making up false reasons for those absences; and, JB knew that his actions would cause harm to FFN. While JB is correct that the complaint does not name the other employer(s) with whom JB was allegedly employed, the complaint adequately alleges facts supporting a fiduciary duty owed by him.

JB also argues that the first cause of action fails to allege facts supporting any damages caused by the breach. However, as previously stated, the first cause of action alleges facts demonstrating a willful breach of his duty of loyalty and honesty, which entitles FFN to a recovery of the compensation provided to him during the period of that breach. (See J. C. Peacock v. Hasko (1961) 196 Cal.App.2d 353, 358; see also Center for Healthcare Education & Research, Inc. v. International Congress for Joint Reconstruction, Inc. (2020) 57 Cal.App.5th 1108, 1127 (stating that “[b]reach of the duties of loyalty and full disclosure may justify forfeiture of all income”); see also Service Employees Internat. Union, Local 250 v. Colcord (2008) 160 Cal.App.4th 362, 371 (stating that “[t]he disgorgement of salary and benefits was an appropriate remedy in this case”).)

The demurrer to the first cause of action is OVERRULED.

Second cause of action for constructive fraud

JB argues that the second cause of action for constructive fraud fails to allege facts with sufficient particularity. “[F]raud actions are subject to strict requirements of particularity in pleading.” (Furia v. Helm (2003) 111 Cal.App.4th 945, 956; see also Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268 (stating same); see also Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184 (stating that “[i]n California, fraud must be pled specifically; general and conclusory allegations do not suffice”).) The specificity requirement has two purposes: to apprise the defendant of certain definite accusations against him so that he can intelligently respond to them, and also to weed out nonmeritorious actions on the basis of the pleadings. (See Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 838.) Minimally, a fraud cause of action must “allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Lazar v. Super. Ct. (Rykoff-Sexton, Inc.) (1996) 12 Cal. 4th 631, 645; see also Tenet Healthsystem Desert, supra, 245 Cal.App.4th at p.838 (stating same).) “[L]ess specificity is required of a complaint when ‘it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy….’” (Tenet Healthsystem Desert, supra, 245 Cal.App.4th at p.838.) If discovery would clear any confusion as to who made the representations and by what means, if the allegations of fraud are otherwise sufficiently detailed, defendant cannot persuasively complain that it misunderstands the fraud claim. (Charpentier v. Los Angeles Rams Football Co. (1999) 75 Cal.App.4th 301, 312.)

Here, the complaint alleges that JB made misrepresentations of illness and a need for personal time off while concealing the material fact that he was actually devoting such time to another employer. (See complaint, ¶¶ 20, 26-28.) The complaint alleges that JB took unnoticed time off in January 2019 to provide services for his other employment, and that FFN contacted him regarding these absences on January 18, 2019. (See complaint, ¶¶ 10-11, 15, 20.) However, the complaint fails to allege when the misrepresentations of illness and personal time off occurred. As it is unclear as to whether the second cause of action is premised on misrepresentations regarding the January 2019 absences, the February 2019 absences or both, the second cause of action needs to allege the approximate date of the alleged misrepresentation(s). This is a fact that is within FFN’s knowledge. The demurrer to the second cause of action for fraud is SUSTAINED with 10 days leave to amend.

Third cause of action for breach of contract

JB asserts that the third cause of action fails to state facts sufficient to constitute a cause of action for breach of contract because it fails to set forth the damages with reasonable precision and particularity and “does not even provide a name of the entity for which Mr. Baykhurazov allegedly worked while employed by FFN.” Here, neither of those are required to allege facts sufficient to constitute a breach of contract cause of action. Instead, a complaint for breach of contract must include: (1) the existence of a contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff therefrom.  (Acoustics, Inc. v. Trepte Construction Co. (1971) 14 Cal.App.3d 887, 913.)  Those elements are pled in the third cause of action.

JB also argues that the contract is void as a matter of law under Business and Professions Code section 16600 as an unlawful restraint on trade. However, while “Business and Professions Code section 16600 has consistently been interpreted as invalidating any employment agreement that unreasonably interferes with an employee's ability to compete with an employer after his or her employment ends… the statute does not affect limitations on an employee’s conduct or duties while employed.” (Angelica Textile Services, Inc. v. Park (2013) 220 Cal.App.4th 495, 509; see also Techno Lite, Inc. v. Emcod, LLC (2020) 44 Cal.App.5th 462, 471 (stating same).)

The demurrer to the third cause of action is OVERRULED.

Fourth cause of action for declaratory relief for constructive trust

JB argues that the fourth cause of action fails to state facts sufficient to constitute a cause of action for declaratory relief because there is no continuing relationship. Indeed, if “the rights of the complaining party have crystallized into a cause of action for past wrongs [such] that a money judgment will fully resolve the dispute, and that no continuing relationship exists to justify a declaration of future rights… an actual controversy which can be resolved by means of declaratory judgment” is not presented.  (See Roberts v. Los Angeles County Bar Assn. (2003) 105 Cal.App.4th 604, 618 (stating that “[d]eclaratory procedure operates prospectively, and not merely for the redress of past wrongs”); see also Code Civ. Proc. § 1061 (stating that “[t]he court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances”); see also General of America Ins. Co. v. Lilly (1968) 258 Cal.App.2d 465, 470 (stating that “[t]he declaratory relief statute should not be used for the purpose of anticipating and determining an issue which can be determined in the main action”; also stating that “[t]he availability of another form of relief that is adequate will usually justify refusal to grant declaratory relief”); see also Pacific Electric Ry. Co. v. Dewey (1949) 95 Cal.App.2d 69, 73 (stating that “declaratory relief is unavailable for the determination of issues involved in an already pending action or to prevent such issues from being presented to a jury”); see also Warren v. Kaiser Foundation Health Plan, Inc. (1975) 47 Cal.App.3d 678, 683 (stating that “the court may refuse to entertain the action where ‘the rights of the complaining party have crystallized into a cause of action for past wrongs, [and] all relationship between the parties has ceased to exist’”).)

However, JB also acknowledges that the fourth cause of action may construed as one for constructive trust, and indeed, the Court is “not bound by the label attached to a cause of action by the pleader; rather, [the Court] examine[s] the factual allegations to determine whether a cause of action is (or can be) stated on any available legal theory.” (North American Chemical Co. v. Super. Ct. (Trans Harbor, Inc.) (1997) 59 Cal.App.4th 764, 786; see also Saunders v. Cariss (1990) 224 Cal.App.3d 905, 908 (stating that “[e]rroneous or confusing labels attached by the inept pleader are to be ignored if the complaint pleads facts which would entitle the plaintiff to relief… [o]ur task is to determine whether the pleaded facts state a cause of action on any available legal theory”); see also Ram v. OneWest Bank, FSB (2015) 234 Cal.App.4th 1, 9 (stating that “[r]egardless of the label given to a cause of action, ‘[o]ur task is to determine whether the pleaded facts state a cause of action on any available legal theory’”).) Nevertheless, JB argues that a constructive trust requires a wrongful act and FFN cannot allege that the monies gained by JB belonged to FFN. As previously stated, the complaint alleges a breach of fiduciary duty. The compensation provided to JB during the alleged period of his dual employment in breach of his fiduciary duty belongs to FFN. This argument is ultimately unconvincing and states facts sufficient to constitute a cause of action for constructive trust. (See Michaelian v. State Compensation Ins. Fund (1996) 50 Cal. App. 4th 1093, 1114 (stating that “[a] cause of action for constructive trust is not based on the establishment of a trust, but consists of fraud, breach of fiduciary duty or other act which entitles the plaintiff to some relief”).)

The demurrer to the fourth cause of action is OVERRULED.

Fifth and sixth causes of action for declaratory relief regarding extortion and blackmail

JB argues that the fifth and sixth causes of action for declaratory relief regarding extortion and blackmail respectively, like the fourth cause of action, regard past wrongs such that a declaratory relief cause of action is improper. Again, however, like the fourth cause of action, the Court must “determine whether the pleaded facts state a cause of action on any available legal theory.”

JB also argues that the fifth and sixth causes of action fail to state facts sufficient to constitute a cause of action for declaratory relief because it does not call for a determination of FFN’s rights or duties. As JB apparently acknowledges that these causes of action can state causes of action for extortion and blackmail, this argument also is of no import since the Court determines whether the pleaded facts state a cause of action on any available legal theory.

JB then argues that the fifth cause of action cannot state a cause of action for extortion because it does not allege that he actually received any monies from FFN and therefore the cause of action fails to allege the elements as stated in Penal Code section 518, subdivision (a). (See Def.’s memorandum of points and authorities in support of demurrer, p.11:23-28, citing Pen. Code § 518, subd. (a) (stating that “[e]xtortion is the obtaining of property or other consideration from another, with his or her consent, or the obtaining of an official act of a public officer, induced by a wrongful use of force or fear, or under color of official right”).) However, Penal Code section 524 also provides punishment for “[e]very person who attempts, by means of any threat… to extort property or other consideration from another.” (See Pen. Code § 524.) “[T]he elements of attempted extortion are (1) a specific intent to commit extortion—i.e., to obtain property from another, with his or her consent, induced by a wrongful use of fear and (2) a direct but ineffectual act done towards its commission.” (Cross v. Cooper (2011) 197 Cal.App.4th 357, 386-387.) Here, those facts are alleged.

The demurrer to the fifth and sixth causes of action is OVERRULED.

II. MOTION TO STRIKE PORTIONS OF THE CROSS-COMPLAINT

In light of the above ruling regarding the demurrer to the second cause of action, the motion to strike paragraphs 24-29 from the XC is MOOT.

Also, in light of the above ruling regarding the demurrer, the motion to strike paragraphs 1, 9, 14-17, 19-22, 32-34, 36, 38-40, 43, 47, and paragraphs B and F from the prayer of the XC is DENIED.

The motion to strike the sentence “Said controversy is subject to declaratory relief pursuant to Section 1060 of the California Code of Civil Procedure” from paragraphs 42 and 46 of the XC is GRANTED. The sentence “Said controversy is subject to declaratory relief pursuant to Section 1060 of the California Code of Civil Procedure” is hereby stricken from paragraphs 42 and 46 of the XC. The motion to strike paragraphs 44 and 48 from the XC is also GRANTED. Paragraphs 44 and 48 are hereby stricken from the XC.

The Court will prepare the Order.

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Case Name: Larry Gilberg v. Power Architects Corporation

Case No. 20CV268701

I. Factual and Procedural Background

Plaintiff Larry Gilbert (“Gilbert”) filed his first amended complaint against defendants Power Architects Corporation (P.A.) and Alex Mednik (“Mednik”) and Mark Kesel (“Kesel”) on August 27, 2020 alleging causes of action for: 1) Wrongful Termination in Violation of Government Code Sections 12940 et seq; 2) Breach of Written and Implied in Fact Contract based upon the Shareholder Agreement signed; 3) Violation of Business and Professions Code Section 17200; 4) Failure to Prevent Sexual Harassment in Violation of Government Code Section 12940 (k); 5) Hostile Work Environment in Violation of Government Code Section 12940 (b) and 6) Whistleblower Retaliation in Violation of Labor Code Section 1102.5 (b).

P.A. filed a Petition to Compel Arbitration and Stay Action on October 5, 2020. Individual defendants Mednik and Kesel filed a Joinder Request to said Petition on October 23, 2020 and subsequently filed an Amended Joinder.

Defendants Mednik and Kesel’s Request for Joinder in the Petition to Compel Arbitration is GRANTED. No competent evidence has been submitted establishing that Kesel or Mednik have actually been divested of their shares of Power Architects Corporation stock. It appears they remain shareholders until formal action is taken pursuant to the terms of the Shareholder Agreement to divest them of their shareholder status. Both Mednik and Kesel have standing to join in P.A’s Petition to Compel Arbitration.

The Court will not entertain their request to compel arbitration of their counterclaims as it is not properly before this court.

On or about August 21, 1998, plaintiff Gilbert, defendant Power Architects and individual defendants Mednik and Kesel (as well as two other individuals) signed a Shareholder Agreement. There is an arbitration provision in the Shareholder Agreement which states:

“OPTIONAL PROVISION 21. Dispute Resolutions. Should any dispute arise

between any one or more of the parties to this agreement as to their rights under

any provisions of this agreement, the parties hereby agree to refer such dispute to the American Arbitration Association, whose decision on the questions shall be binding on the parties and shall be without appeal.”

II. Legal Analysis

In determining whether to grant the Petition to Compel Arbitration, the Court must examine whether there is an agreement to arbitrate between the parties and whether the agreement covers the dispute at issue. Omar v. Ralphs Grocery Co. (2004) 118 CA4th 955,960. Petitioner bears the burden of proof in this regard by a preponderance of evidence. Rosenthal v. Great Western Financial Securities Corp (1996) 14 Cal. 4th 394, 413. Gilbert does not deny the existence of the arbitration provision in the Shareholder Agreement but contends it does not cover the causes of action asserted in the first amended complaint for a host of reasons discussed below.

There is a presumption of arbitrability where an agreement contains an arbitration clause, particularly when the arbitration clause is broad. AT&T Techs v. Commc’ns Workers of Am. (1986) 475 U.S.643,650. Indeed, both California and federal law both favor enforcement of valid arbitration agreements. Aanderud v. Superior Court (2017) 13 Cal. App. 5th 880. Any doubts in favor or arbitrating a dispute are resolved in favor of arbitration. Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal. App. 4th. 677,686.

In this case, the language of the arbitration provision is extremely broad, applying to any dispute between any party to the agreement as to their rights under any provisions of the agreement.

There can be no doubt that Gilbert’s cause of action for breach of Shareholder Agreement is subject to the arbitration. However, plaintiff characterizes this case as essentially a wrongful termination action based on statutory claims and asserts those claims are not subject to arbitration.

In contrast, P.A., Mednik and Kesel contend that the wrongful termination statutory claims are indeed covered by the arbitration provision. They refer to language in the Shareholder Agreement at Optional Provision 2 which states that Gilbert will be one of the “persons appointed and elected as an officer of the Corporation” as long as he remains a shareholder and “performs faithfully, efficiently and competently for the Corporation.” They argue Gilbert’s breach of his fiduciary duties resulted in his termination which directly implicates a dispute between the parties as to their rights under Provision 2 of the agreement. Additionally, they argue the claims in the first amended complaint and issues in dispute touch matters covered by the contract containing the arbitration clause and have “their roots in the relationship between the parties which was created by the contract. Howard v. Goldbloom (2018) 30 CA 5th 659, 664 quoting Khalatian v. Prime Time Shuttle Inc. 237 CA 4th 651,660.

The Court agrees. The First Amended Complaint contains at least five references to the Shareholder Agreement in paragraphs 47,48,68,79 and 80. Gilbert alleges he has been left out of the last profit sharing in May 2020 and that his profit sharing has been greatly reduced by defendants. He alleges he was removed as a director in breach of the agreement. All of these issues and Gilbert’s rights thereon are unquestionably covered by the Shareholder Agreement. See, Opt. Provisions 1,4,10,11,12,13,16, 18 and 19 in the Shareholder Agreement. P.A. Mednik and Kesel have met their burden of proof.

Once petitioners have met their burden of proof, the burden shifts to the party opposing arbitration to show that the arbitration provision cannot be interpreted to cover the claims asserted in the complaint by a preponderance of evidence. Efund Capital Partners v. Pless (2007) 150 CA4th 1311, 1321.

The Court rejects Gilbert’s assertion that the arbitration provision was imposed as a condition of employment under a mandatory employment agreement as the evidence does not support that argument. All participants had equal bargaining power when entering into the Shareholder Agreement. There is no evidence that Gilbert did not voluntarily execute the Agreement or that Gilbert’s employment was contingent upon agreeing to the arbitration clause in the Shareholder Agreement. There is no evidence of unconscionability or fraud. Gilbert’s reliance on Armendariz v. Foundation Health Psychcare Services Inc. (2000)24 Cal. 4th 83 is misplaced. The subject agreement is not a mandatory employment agreement requiring employees to waive their un-waivable statutory rights and thus Armendariz is inapplicable in that regard. See, Sanchez v. Valencia Holding Co, LLC (2015) 61 Cal 4th 899. And, even if Armendariz did apply, there is nothing in the arbitration clause that is contrary to the five-factor Armendariz standard as many terms not expressly stated are implied as a matter of law. Sanchez v. Western Pizza Enterprises, Inc. (2000() 172 CA 4th 154,177; Farrar v. Direct Commerce, Inc. (2017) 9 CA 5th 1257

Gilbert’s statutory claims are arbitrable. A party does not forgo substantive statutory rights afforded to him by agreeing to arbitration. He only submits the resolution of those statutory claims to an arbitral, rather than judicial, forum. Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 473 US 614,628; Lane v. Francis Capital Management LLC (2014) 224 CA 4th 676,687.

The Court cannot consider the application of Assembly Bill 51 as a federal district court has enjoined enforcement of AB 51 on the ground that the FAA preempts it. Chamber of Commerce of US, et al v. Xavier Becerra et al. (2020) 438 F Supp. 3d 1078. That ruling is on appeal to the Ninth Circuit.

The Court finds that petitioners did not waive their right to seek arbitration. The petition to compel arbitration was filed in response to the first amended complaint and petitioners have not taken actions that this Court considers to be inconsistent with invoking their right to arbitration under the shareholder agreement.

The Petition to Compel Arbitration and Stay Action is GRANTED.

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