Tesser Ruttenberg etc. v. Forever Entertainment CA2/2

Filed 8/27/14 Tesser Ruttenberg etc. v. Forever Entertainment CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
TESSER RUTTENBERG & GROSSMAN B249042
LLP,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No. BC498140)
v.
FOREVER ENTERTAINMENT LLC et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los Angeles County. Michael L.
Stern, Judge. Affirmed.
Law Offices of Edward A. Hoffman and Edward A. Hoffman for Defendants and
Appellants.
Goodman & Goodman and Howard Goodman for Plaintiff and Respondent.
Defendants and appellants Forever Entertainment LLC (Forever), Forever
Entertainment Partners LLC (Partners), John Hertz and Brittney Ryan (collectively,
defendants) appeal from the trial court’s order denying their petition to compel arbitration
of an action for breach of contract, quantum meruit, and account stated by plaintiff and
respondent Tesser, Ruttenberg & Grossman LLP (plaintiff). We affirm the trial court’s
order.
BACKGROUND
The parties
Forever is a California limited liability company and a former client of the law
firm of Tesser & Ruttenberg (T&R). Partners is a wholly owned subsidiary of Forever
that was formed in July 2010. Hertz and Ryan are managing members of Forever and
Partners.
Plaintiff is the assignee of claims for unpaid legal fees assigned by T&R against
Forever, Hertz, Ryan, and Partners.
March 2009 agreement
On March 9, 2009, T&R, Forever, Hertz, and Ryan entered into an “Agreement
for Continued Representation,” in which Forever agreed to pay more than $163,345 in
outstanding fees owed to T&R in exchange for T&R’s continued legal representation.
Hertz and Ryan also agreed to pay a portion of Forever’s outstanding fees from monies
received by either of them in any transfer or assignment of their membership interests in
Forever. The March 2009 agreement contains no arbitration provision.
May 2009 agreement
On May 26, 2009, Forever, Hertz, and Ryan entered into a second agreement with
T&R. The May 2009 agreement identifies Forever as the “Client” and T&R as the
“Firm.” The agreement was signed by Ryan and Hertz as individuals and as managing
members of Forever and by attorney Brian Grossman on behalf of T&R.
The May 2009 agreement states: “This is a written fee agreement (the
‘Agreement’) between the Firm and Client to provide legal services to Client on the terms
set forth below. This Agreement supersedes any prior fee agreement between Client and
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the Firm. Notwithstanding the foregoing, each of the terms set forth in the Agreement for
Continued Representation dated March 9, 2009 shall remain in full force and effect.”
In the May 2009 agreement, T&R agreed to represent Forever in connection with
eight specified matters, including a matter indentified as the “Joel Hecht matter.” T&R
also agreed to represent Hertz and Ryan, but only in connection with the Joel Hecht
matter.
The May 2009 agreement contains an arbitration provision that states in relevant
part as follows:
“By executing this retainer agreement, Client and the Firm are
agreeing to have any and all disputes that arise out of, or relate to this
Agreement, including but not limited to claims of negligence or malpractice
arising out of or relating to the legal services provided by the Firm to
Client, decided only by binding arbitration in accordance with the rules of
the Los Angeles County Bar Association and not by court action, except as
provided by California law for review of judicial arbitration
proceedings. . . .”
“In agreeing to this arbitration provision, THE FIRM AND CLIENT
ARE SPECIFICALLY GIVING UP:
“(I) ALL RIGHTS THE FIRM AND CLIENT MAY POSSESS TO
HAVE SUCH DISPUTES DECIDED IN A COURT OR JURY TRIAL;
AND
“(II) ALL JUDICIAL RIGHTS, INCLUDING THE RIGHT TO
APPEAL FROM THE DECISION OF THE ARBITRATOR(S).”
T&R ceased representing Forever, Hertz, and Ryan in December 2010. Attorney
Frank Taboada substituted in as Forever’s counsel in the active court cases in January
2011.
Arbitration notice
Attorney Taboada received five documents entitled “Notice of Client’s Right to
Arbitration” by mail in April or May of 2012. The notices all listed claims by plaintiff
against Forever totaling $289,571.30 in five different matters that did not include the Joel
Hecht matter.
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Motion to compel arbitration
Plaintiff filed the instant action against Forever, Partners, Hertz and Ryan on
December 27, 2012. The complaint alleged that Partners and Forever were alter egos of
each other. The complaint further alleged that T&R had assigned its claims against
defendants to plaintiff, that defendants owed $349,011.82 in outstanding fees, that
plaintiff had served arbitration notices on Forever, and that Forever had not responded to
the notices.
Defendants’ counsel emailed plaintiff’s counsel on March 12, 2013, demanding
arbitration of the case pursuant to the arbitration provision in the May 2009 agreement.
Plaintiff’s counsel responded: “My clients have decided not to arbitrate. There are
several defendants who are not parties to the contract and who are also not parties to the
arbitration agreement including Forever Entertainment Partners, John Hertz and Brittney
Ryan. The non contracting parties cannot compel arbitration and the plaintiff can refuse
to arbitrate with the parties who are not subject to the arbitration agreement.”
Defendants thereafter filed a motion to compel arbitration. In its opposition,
plaintiff stated that it “has no objection to binding arbitration” so long as the arbitration
included “all causes of action against all defendants including causes of action based on
the law of alter ego liability.” In the alternative, plaintiff requested “that the arbitration
be limited to issues and parties subject to arbitration and that issues and parties not
subject to arbitration be reserved and litigated at the conclusion of the arbitration.”
In reply, defendants argued that the parties’ agreement did not allow arbitration of
the alter ego liability claim. They pointed out that the arbitration agreement specified
that the arbitration would be governed by the Los Angeles County Bar Association rules.
Those rules, defendants argued, do not allow the arbitrators to decide alter ego claims.
April 25, 2013 hearing
At the outset of the hearing on defendants’ motion to compel arbitration,
defendants’ counsel asked whether the trial court had received defendants’ reply brief and
proposed order. The court stated that it had not received it and therefore had not read any
reply brief. The parties then proceeded to argue their respective positions. Plaintiff
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expressed its willingness to arbitrate, noting that the only issue in dispute was whether
the arbitration would include the alter ego claim. The trial court stated that if the parties
“really want to arbitrate, I’ll let you stipulate to arbitrate” but emphasized that any
arbitration must be “all or nothing.” In response, defendants argued that the parties had
contractually agreed to arbitrate their claims in accordance with the rules of the Los
Angeles County Bar Association, and those rules did not allow arbitration of the alter ego
claim. Defendants further argued that because the parties had also contractually agreed to
give up all rights to a court action, plaintiff was not entitled to adjudication of its alter ego
claim.
The trial court announced that its tentative ruling had been to deny the motion to
compel arbitration. When defendants expressed surprise at the tentative ruling, the trial
court directed them to the email correspondence between the parties and noted that the
correspondence “was a deciding factor” in its decision. The court further stated: “You
all decided not to arbitrate.” Defendants argued in response that only the plaintiff had
decided against arbitration. The trial court asked: “You all want to arbitrate?” Plaintiff’s
counsel responded, “Only if we arbitrate everything; otherwise, no.” The trial court then
asked: “All or nothing?” When plaintiff’s counsel responded in the affirmative, the trial
court stated: “As far as I’m concerned, arbitration would also be all or nothing, too.”
Defendants’ counsel then suggested that the parties first determine whether the
Los Angeles County Bar Association would agree to arbitrate the alter ego claim. The
court responded: “I understand the possible -- possible logistics or strategy as you detail
them, but that is not the consideration, in terms of whether you’re in or out of the
arbitration based on the clause and the subsequent conduct of the parties.” The trial court
then denied the motion to compel arbitration. This appeal followed.
DISCUSSION
I. Governing legal principles
An “order denying a petition to compel arbitration, like any other judgment or
order of a lower court, is presumed to be correct, and all intendments and presumptions
are indulged to support the order on matters as to which the record is silent. [Citation.]”
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(Gutierrez v. Autowest, Inc. (2003) 114 Cal. App. 4th 77, 88.) The presumption of
correctness is particularly applicable when, as was the case here, defendants failed to
request a statement of decision explaining the factual and legal basis for the trial court’s
ruling denying their motion to compel arbitration. (Acquire II, Ltd. v. Colton Real Estate
Group (2013) 213 Cal. App. 4th 959, 970-971 (Acquire II).)
“A party’s failure to request a statement of decision when one is available has two
consequences. First, the party waives any objection to the trial court’s failure to make all
findings necessary to support its decision. Second, the appellate court applies the
doctrine of implied findings and presumes the trial court made all necessary findings
supported by substantial evidence. [Citations.] This doctrine ‘is a natural and logical
corollary to three fundamental principles of appellate review: (1) a judgment is presumed
correct; (2) all intendments and presumptions are indulged in favor of correctness; and
(3) the appellant bears the burden of providing an adequate record affirmatively proving
error.’ [Citation.]” (Acquire II, supra, 213 Cal.App.4th at p. 970) Accordingly, if the
record is inadequate for meaningful review, the appellant defaults and the decision of the
trial court must be affirmed. (Gee v. American Realty & Construction, Inc. (2002) 99
Cal. App. 4th 1412, 1416 (Gee).)
As we discuss, defendants failed to meet their burden of establishing any
reversible error by the trial court because they failed to provide an adequate record
demonstrating such error.
II. Defendants fail to establish reversible error
Defendants contend the order denying their motion to compel arbitration must be
reversed because (1) Hertz and Ryan had a statutory right to compel arbitration pursuant
to Business and Professions Code section 6200; (2) Hertz, Ryan, and Partners had
standing to invoke the arbitration clause in the May 2009 agreement; (3) the trial court
improperly found they had waived the right to arbitrate; (4) the trial court’s failure to read
their reply brief before the hearing was a violation of their due process rights; and (5) the
trial court improperly applied an “all or nothing” rule for arbitration of the claims.
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A. Statutory right to arbitration
Defendants did not invoke a statutory right to arbitration under Business and
Professions Code section 6200 et seq. in the trial court below and they make no argument
in their opening brief that they may do so for the first time on appeal. They accordingly
forfeited the right to do so in this appeal. (Dietz v. Meisenheimer & Herron (2009) 177
Cal. App. 4th 771, 798.)
B. Standing
Whether Hertz, Ryan, and Partners had standing to compel arbitration under the
May 2009 agreement is an issue that was before the trial court. The standing issue was
raised in email correspondence between the parties and the trial court stated that this
correspondence was “a deciding factor” in its decision to deny the motion to compel
arbitration.
The trial court could have determined that the defendants who were not signatories
to the arbitration provision lacked standing to compel arbitration under that provision.
(M & M Foods, Inc. v. Pacific American Fish Co., Inc. (2011) 196 Cal. App. 4th 554,
561.) The record, however, contains no such finding by the trial court. Given the
absence of any finding on standing to compel arbitration, defendants have established no
reversible error based on standing. (Acquire II, supra, 213 Cal.App.4th at p. 970; Gee,
supra, 99 Cal.App.4th at p. 1416.)
C. Waiver
The record contains no finding by the trial court that defendants waived the right
to arbitrate. The trial court’s statement at the April 25, 2013 hearing that “You all
decided to not arbitrate” appears to be directed at both parties. The statement was made
after defendants’ counsel argued that plaintiff’s alter ego claim could not be arbitrated
under the Los Angeles County Bar Association rules and neither party responded to the
court’s suggestion that they stipulate to arbitration. When defendants’ counsel responded
that it was plaintiff and not defendants that had decided not to arbitrate, the trial court
again asked the parties: “You all want to arbitrate?” Plaintiff’s counsel replied: “Only if
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we arbitrate everything; otherwise, no. If we’re going to reserve an alter ego issue for
trial after the arbitration, it makes sense just to keep the entire matter here.”
Given the absence of any express finding by the trial court that defendants waived
the right to arbitrate, defendants have established no reversible error based on waiver.1
(Acquire II, supra, 213 Cal.App.4th at p. 970; Gee, supra, 99 Cal.App.4th at p. 1416.)
D. Due process violation
Defendants claim the trial court’s failure to read their reply brief before oral
argument was a violation of their due process rights. The reply brief included a copy of
the Los Angeles County Bar Association rules, and defendants argue that the trial court’s
failure to read those rules resulted in the court’s inability to determine the scope and
applicability of the parties’ arbitration agreement.
The record discloses no due process violation. The trial court allowed both parties
to present their arguments at the April 25, 2013 hearing. At the outset of the hearing,
plaintiff’s counsel informed the trial court that the only issue in dispute was whether the
alter ego claim against Partners would be included in any arbitration between the parties.
Defendants argued that the Los Angeles County Bar Association rules do not allow
arbitration of the alter ego claim -- the principal argument made in their reply brief in
support of the motion to compel arbitration. Defendants were thus accorded the
opportunity to be heard on the issue regarding arbitrability of the alter ego claim under
the Los Angeles County Bar Association rules and the parties’ arbitration agreement.
1 There is substantial evidence to support an implied finding that Partners, a
nonsignatory to the arbitration agreement who nevertheless moved to compel arbitration
of all claims, subsequently decided against arbitrating the alter ego claim asserted against
it. Defendants’ counsel insisted at the hearing that the alter ego claim could not be
arbitrated and did not respond to the trial court’s suggestion that the parties stipulate to
arbitration.
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E. “All or nothing” rule for arbitration
Defendants contend the trial court mistakenly concluded arbitration could be
ordered only if it encompassed all of plaintiffs’ claims, including the alter ego claim.
They argue that there is no legal basis for the “all or nothing” rule the trial court imposed.
Code of Civil Procedure section 1281.2, subdivision (c) provides a legal basis for
the trial court’s ruling. The statute applies when “[a] party to the arbitration agreement is
also a party to a pending court action or special proceeding with a third party, arising out
of the same transaction or series of related transactions and there is a possibility of
conflicting rulings on a common issue of law or fact.” (Code Civ. Proc., § 1281.2, subd.
(c).) In such cases, the court has discretion to pursue one of several options, including
denying arbitration so that all issues between all parties are resolved in the judicial
proceeding. (Ibid.)
In the instant case, a party to the arbitration agreement (Forever), was also a party
to litigation claims asserted against others (Partners, Hertz, and Ryan) that were not
subject to the arbitration provision but that arose out of the same transaction or series of
transactions. The trial court could thus have determined that there was a possibility of
conflicting rulings on a common issue of law or fact, if the parties arbitrated some of the
claims and proceeded with litigation as to the other claims.
Defendants argue that the record contains no ruling under Code of Civil Procedure
section 1281.2 and no findings to support such a ruling. Their failure to request a
statement of decision resulted in the forfeiture on appeal of any objection based on the
absence of such findings or ruling. (Acquire II, supra, 213 Cal.App.4th at p. 971.)
Defendants failed to meet their burden of establishing any reversible error by the
trial court.
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DISPOSITION
The order denying the petition to compel arbitration is affirmed. Plaintiff is
awarded its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
____________________________, J.
CHAVEZ
We concur:
__________________________, P. J.
BOREN
__________________________, J.
ASHMANN-GERST
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