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Tentative Ruling
Judge Colleen Sterne
Department 5 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107

CIVIL LAW & MOTION

Montecito Care and More, Inc., et al. v. Dorota Lositzki

Case No: 19CV03247
Hearing Date: Mon Feb 03, 2020 9:30

Nature of Proceedings: Motion Enforce Arbitration Agreement

 

CASE:                                    Montecito Care & More, Inc., et al. v. Dorota Lositzki, Case No. 19CV03247 (Judge Sterne)

 

HEARING DATE:               February 3, 2020

 

MATTER:                             Motion to Enforce Arbitration Agreement

 

ATTORNEYS:                     

Jason P. Koch for Plaintiffs Montecito Care & More, Inc., Radek Laszuk, and Malgorzata Laszuk

Beatriz Pimentel Flores for Defendant Dorota Lositzki

 

TENTATIVE RULING:     The motion of defendant Dorota Lositzki to compel arbitration of the claims alleged in plaintiffs’ second amended complaint is granted. All proceedings in this court are ordered stayed pending completion of the arbitration. Defendant’s request for attorney’s fees is denied.

 

BACKGROUND:

 

Plaintiff Montecito Care & More, Inc. (“MCM”) is a California corporation that provides assisted living facilities and personal care for the elderly. MCM operates from a seven-bedroom home located at 717 Santecito Drive, Santa Barbara, California (the “Property”) that is owned by defendant Dorota Lositzki (“Lositzki”) and her husband, Walter Lositzki (not a party). Lositzki and her husband (together, “Lositzkis”) founded MCM in 2012 and were the sole owners and shareholders until December 21, 2015, when they sold a 50% interest in the company to plaintiffs Radek Laszuk and Malgorzata Laszuk (together, “Laszuks”) for $125,000.00. The sale was memorialized in a Stock Purchase Agreement (“SPA”) of the same date. On January 1, 2016, the Lositzkis and Laszuks executed a Shareholders’ Agreement (“SA”) that, among other things, identifies the parties as “employee shareholders” and obligates each couple to provide 50% of the personnel required for MCM’s business operations.    

 

On January 1, 2016, MCM and the Lositzkis entered into a 10-year written lease agreement whereby the Lositzkis agreed to lease the Property to MCM for $8,000.00 per month. The lease agreement grants exclusive use of the Property to MCM. Plaintiffs allege that Lositzki breached the lease agreement by continuing to occupy a studio apartment on the Property, rent-free and with all utilities paid, after she had promised to stay in the studio for just two months while she searched for another place to live. The studio is essentially a master bedroom that was converted into an apartment with a bathroom, kitchenette, and approximately 450 square feet of living space. The reasonable market value of the studio is $1,500.00 per month.

 

Apart from the lease, plaintiffs allege that Lositzki has disregarded the SA by failing to provide 50% of the personnel required to operate the elder care facility and by passing off to the Laszuks her responsibility for medical documentation, resident assessments, business advertising, staff training, and bookkeeping. In addition, Lositzki has allegedly interfered with contracts between MCM and a number of residents, causing the residents to terminate their relationship with MCM. Further, Lositzki has allegedly disrupted the economic relationship MCM enjoyed with various referral agencies and organizations, including Home Choices for Mom and Dad, Inc. and the Department of Social Services, by spreading malicious rumors that MCM was financially unstable and mismanaged. In response to these events, MCM called a special shareholders’ meeting and Lositzki was removed from its board of directors.

 

On June 21, 2019, MCM filed its complaint against Lositzki for trespass, breach of contract, ejectment, and breach of fiduciary duties. Lositzki did not answer the complaint and her default was entered on July 26, 2019. On October 7, 2019, the court granted Lositzki’s motion to set aside the default. On November 27, 2019, MCM filed an amended complaint (“SAC”), adding the Laszuks as plaintiffs and additional causes of action against Lositzki for breach of contract – third party beneficiaries, fraud, intentional interference with contractual relations, intentional interference with prospective economic relations, negligent interference with prospective economic relations, slander, and trade libel.

 

Lositzki now moves the court for an order compelling arbitration of the claims and staying all further court proceedings. The SPA and SA both contain arbitration provisions. MCM and the Laszuks oppose the motion.  

 

ANALYSIS:

 

The court has the authority to compel arbitration if it determines that an agreement to arbitrate a controversy exists and a party to the agreement refuses to arbitrate the matter. Code of Civil Procedure Section 1281.2 provides, in relevant part:

 

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists . . . .”

 

When presented with a petition to compel arbitration, the court’s first task is to determine whether the parties have in fact agreed to arbitrate the dispute. Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 356. “There is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate.” Engineers & Architects Association v. Community Development Department (1994) 30 Cal.App.4th 644, 653; see also, Titan Group, Inc. v. Sonoma Valley County Sanitation District (1985) 164 Cal.App.3d 1122, 1129 (absent a clear agreement by the parties to submit a dispute to arbitration, the trial court will not infer that the right to a jury trial has been waived). In Jones v. Jacobson (2011) 195 Cal.App.4th 1, 17, the court stated:

 

“Arbitration is consensual in nature. The fundamental assumption of arbitration is that it may be invoked as an alternative to the settlement of disputes by means other than the judicial process solely because all parties have chosen to arbitrate them. [Citations.] Even the strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement or who have not authorized anyone to act for them in executing such an agreement. The right to arbitration depends on a contract.” (Internal quotes omitted.)

 

Here, the SPA and the SA both contain mandatory arbitration provisions. Paragraph 6.7 of the SPA provides:

 

“Any dispute between the parties arising out of this Agreement or the transactions contemplated hereby shall be fully and finally resolved by binding arbitration in Santa Barbara County, California, in accordance with the Commercial Arbitration Rules and Practices of the American Arbitration Association (‘AAA’) from time to time in force.”

 

(SAC, Ex. A, Stock Purchase Agreement, ¶6.7.)

 

Paragraph 12.6 of the SA provides:

 

“If controversy shall exist between the parties hereto, their successors or assigns, arising under or out of this Agreement which they cannot resolve among themselves, any party to the controversy shall have the right to submit the same to arbitration in accordance with the commercial rules of the American Arbitration Association. Such arbitration shall be conducted in Santa Barbara County, California.”

 

(SAC, Ex. B, Shareholders’ Agreement, ¶12.6.)

 

MCM and the Laszuks and defendant Lositzki are all signatories to the SA, but only the Laszuks and Lositzki signed to the SPA. (SAC, Ex. A, Stock Purchase Agreement, p. 1; Ex. B, Shareholders’ Agreement, p. 1.) The SPA sets forth the terms for the sale of 50% of MCM’s stock (5,000 shares) to the Laszuks for $125,000.00 and specifically references the lease agreement between MCM and the Lositzkis. (SAC, Ex. A, Stock Purchase Agreement, ¶5.) The SA, on the other hand, is mostly devoted to rules governing stock transfers (SAC, Ex. B, Shareholders’ Agreement, Articles 1-8), but also addresses how to resolve situations where the shareholders are “deadlocked” and unable to agree on a decision (Art. 8), permitted actions should MCM elect to proceed as a Subchapter S corporation (Art. 9), termination of the Shareholders’ Agreement (Art. 10), the status of the shareholders as employees and the requirement that the Laszuks and the Lositzkis each provide 50% of the personnel required to operate MCM (Art. 11), and miscellaneous provisions (Art. 12).

 

Plaintiffs argue that the terms of the arbitration clauses in the SPA and SA are too narrow to cover the claims alleged in the SAC. “[T]he terms of the specific arbitration clause under consideration must reasonably cover the dispute as to which arbitration is requested.” Laymon v. J. Rockcliff, Inc. (2017) 12 Cal.App.5th 812, 820; see also, Blatt v. Farley (1990) 226 Cal.App.3d 621, 625 (a party cannot be required to arbitrate a dispute it has not agreed would be subject to arbitration). Broad arbitration clauses have generally been interpreted to apply to both tort and contractual disputes so long as the disputes have their origins in the relationship between parties that was created by the contract. Howard v. Goldbloom (2018) 30 Cal.App.5th 659, 664. In contrast, narrow arbitration clauses requiring arbitration of claims “arising from” or “arising out of” an agreement, i.e., excluding language such as “relating to this agreement” or “in connection with this agreement,” are generally considered to be more limited in scope and have been interpreted to apply only to disputes regarding the interpretation and performance of the agreement itself. Id.

 

The arbitration clause in the SPA uses the language “arising out of this Agreement or the transactions contemplated hereby.” (SAC, Ex. A, Stock Purchase Agreement, ¶6.7.) Plaintiffs argue that this is a narrow arbitration clause and applies only to disputes arising directly out of the sale of 50% of the MCM stock to the Laszuks, but the court disagrees. The phrase “or the transactions contemplated hereby” clearly encompasses other transactions or agreements, including the SA and the lease agreement between MCM and the Lositzkis. Indeed, Paragraph 5 of the SPA specifically refers to MCM’s lease of the premises at 717 Santecito Drive, Santa Barbara, California. (SAC, Ex. A, Stock Purchase Agreement, ¶5.) Plaintiff’s first two causes of action for breach of contract and breach of contract – third party beneficiaries both spring from the lease agreement. (SAC, ¶¶ 75- 94.) However, MCM did not sign the SPA and therefore Lositzki has no right to require MCM to submit these claims to arbitration.

 

The SA agreement is different, however, as it was signed by all the parties – MCM, the Laszuks, and the Lositzkis. While the arbitration clause in the SA uses the narrow language “arising under or out of this Agreement,” the agreement itself is quite broad and encompasses not only the rules relating to stock transfers, but also the status of the shareholders as employees and the requirement that the Laszuks and the Lositzkis each provide 50% of the personnel required to operate the elder care facility. (SAC, Ex. B, Shareholders’ Agreement, Art. 11.) In addition, Article 12, Section 12.1, of the SA broadly provides that “[t]he parties shall perform any and all acts as well as execute any and all documents that may reasonably be necessary to fully carry out the provisions and intent of this Agreement.” (Id., Art. 12, Sec. 12.1.) Because all of the claims in the SAC arise out of either the lease agreement, Lositzki’s alleged disregard of her obligation to provide 50% of the required personnel for the business, Lositzki’s alleged interference with the contracts between MCM and its residents, Lositzki’s alleged disruption of MCM’s relationship with various referral agencies and organizations, and Lositzki’s alleged defamation of plaintiffs, the court finds that the parties broadly agreed to arbitrate these claims under the terms of the SA.

 

Based on the foregoing, the court will grant defendant Lositzki’s motion to compel arbitration of this dispute. All proceedings in this court are ordered stayed pending completion of the arbitration, pursuant to Code of Civil Procedure Section 1281.4. Lositzki’s request for attorney’s fees will be denied as the SA does not contain an attorney’s fees provision.     

 
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