Defendant’s petition to compel arbitration is?granted.? As set forth in the Court?s Minute Order of 9/22/17, the Court finds that Defendant met its burden of establishing that ICG and Defendant entered into a written agreement to arbitrate which covers the claims in this action and that Plaintiffs, acting for ICG, refused to arbitrate. Because the gravamen of Plaintiffs’ claims is derivative, the claims belong to ICG and not to Plaintiffs and Plaintiffs are, therefore, bound by the arbitration agreement between ICG and Defendant unless they can prove a defense to its enforcement.
The Court determined that Plaintiffs had not provided evidence to support two of their three defenses (procedural unconscionability and unclean hands) but continued the hearing to allow the parties to provide supplemental briefing on Plaintiffs? third defense, specifically that Plaintiffs cannot afford arbitration.
Plaintiffs relied upon?Roldan v. Callahan & Blaine?(2013) 219 Cal.App.4th 87, 94 in asserting this defense. However,?Roldan?is factually distinguishable as, in that case, the arbitration agreement was between ?clients of limited means? and their attorneys.? As the court explained: ?given the financial condition of these clients at the time they signed those retainer agreements, Callahan could not have been confident they would ever be able to pay a great deal toward the cost of arbitration in the event of a dispute. In fact, it might be fair to say Callahan had more of a hope than an expectation that arbitration costs would ever actually be shared with these plaintiffs. And when we balance that mere hope against the very real possibility these plaintiffs might be deprived of a forum if they are accorded no relief from these costs, it is clear which consideration must prevail.?
The arbitration agreement at issue in this matter was entered into by?ICG?and Defendant.? There is no evidence to suggest inequity between the parties or that ICG was ?of limited means? at the time the agreement was reached.? As was explained in?Frederick v. First Union Securities, Inc.?(2002) 100 Cal.App.4th 694, 697: “Because shareholder derivative actions are brought to enforce a corporate cause of action against officers, directors and third parties, the shareholders, standing in the shoes of the corporation have no rights greater than those of the corporation, nor can those they choose to sue be deprived of defenses they could assert against the corporation’s claims.” (Internal citations and quotation marks omitted.) Since Plaintiffs are acting on ICG’s behalf, they are bound by its agreement.
Further, Plaintiffs have not established that they could be determined?in forma pauperis?as the plaintiffs were in?Roldan.? In her supplemental papers,?Jean Johns submitted evidence which suggested that she might have some difficulty in paying her pro rata share of the arbitration costs.? However, she did not provide any information regarding the Revocable Jean C. Johns Family Trust dated 6/1/2001 of which Jean Johns is the settlor, trustee and current beneficiary and which is a plaintiff in the related case of?Johns v. Howard, Case No. 30–2016-00861757-CU-BT-CXC.? Michael Sorci?s evidence did not convince the Court that he would be financially unable to pay his pro rata share of any arbitration costs.? Neither is the Court persuaded that a 20 day estimate for the arbitration is realistic given the nature of the claims in this action.
The Court also asked the parties to submit supplemental briefing regarding the possibility of staying the arbitration pending the outcome of the related matter.? Pursuant to CCP ? 1281.2(c), this Court has discretion to stay the arbitration despite an agreement to arbitrate if: (i) a party to the agreement is also a party to a pending court action; (ii) the pending action arises ?out of the same transaction or series of related transactions?; and (3) “there is a possibility of conflicting rulings on a common issue of law or fact.?
Here, Plaintiffs are parties to a pending court action,?Johns v. Howard, Case No. 30–2016-00861757-CU-BT-CXC, which arises out of the same series of transactions and which appears to present the possibility of conflicting rulings on a common issue of law or fact.? However, the pleadings in that case are in flux, so the Court cannot make a final determination pursuant to ? 1281.2(c) at this time.? Accordingly, the Court stays arbitration in this matter until 2/15/18 by which time, the pleadings in the?Johns v. Howard?matter may be settled.? A status conference is set 2/15/18 at 1:30 p.m. in Department CX101 to determine what action that Court will take, if any, under ? 1281.2(c).
Defendant to give notice.