Case Number: BC431152 Hearing Date: May 05, 2016 Dept: 1

#1 – Banafsheha, et al. v. Banafsheha, et al. (BC 431 152); In re Banafsheha Family Trust 1992 (BP 171 696); In re Soraya Banafsheha 2011 Trust (BP 171 695)

Defendant/Petitioner Jack Banafsheha filed a Notice of Related Case on March 25, 2016 seeking to relate a civil law case and two probate cases. No relationship between cases BC 431 152 and probate case BP 171 696 is indicated on the form, but probate case BP 171695 is alleged to involve claims against the same property as BC 431 152. Brief additional information is provided in support of this contention at Attachment 1(h), indicating the civil law case concerns financial disputes being arbitrated (with the Banafsheha Family Trust as a party but not the Soraya Banafsheha 2011 Trust), and orders have been entered in the civil law case purporting to bind the Soraya Banafsheha 2011 Trust, and therefore the civil law case should be related with the two probate cases (which are already proceeding in the same department).

Plaintiffs/Objectors Mojgan Banafsheha, Pooya Banafsheha, and Payam Banafsheha, all individually and as derivative shareholders of Poushak, Inc., filed an objection on April 29, 2015, although pursuant to CRC 3.300(g) any response was due within five days after service of the March 25, 2016 Notice. The court will exercise its CRC 3.1300(d) discretion and consider this late-filed document, which argues that although the parties agreed to have a “village elder” resolve the various disputes between the parties, Jack Banafsheha is unhappy with the result and has unsuccessfully attempted to challenge it in the trial courtroom and via petition for writ of mandate. The two probate cases are merely his latest attempts to thwart the arbitration and back out of the arbitration agreement (i.e., using the probate courts to improperly act as appellate courts), are based on false allegations and sham pleadings, and the cases should be abated pending the conclusion of arbitration as Plaintiffs/Objectors have sought.

Whether cases that involve either a probate or family law matter are related is a question determined by Department 1. LASC Local Rule 3.3(f)(2). Cases are related when they (1) involve the same parties and are based on the same or similar claims, (2) arise from the same or substantially identical transactions, incidents, or events requiring the determination of the same or substantially identical questions of law or fact, (3) involve claims against, title to, possession of, or damages to the same property, or (4) are likely for other reasons to require substantial duplication of judicial resources if heard by different judges. CRC 3.300(a).

In order of filing, the cases sought to be related are:

• Banafsheha, et al. v. Banafsheha, et al. (BC 431 152) – filed February 4, 2010 when Mojgan Banafsheha, Pooya Banafsheha, and Payam Banafsheha, all individually and as derivative shareholders of Poushak, Inc., sued Jack Banafsheha, Soraya Banafsheha (individually and as trustee of the Banafsheha Family Trust), Younes Banafsheh, Kevin J. McShane, Z International Apparel Group Inc., and Poushak, Inc., for breach of fiduciary duties, conversion, fraud, conspiracy, et al. Plaintiffs, who own a combined 14.08% of Poushak, Inc., allege they have not received notice of shareholder meetings nor annual reports, but in January 2010 received documents purporting to give notice of shareholder-approved sale of Poushak, Inc. to Z International Apparel Group, Inc. (formed by Jack Banafsheha), sent after-the-fact and without identification of the assets or consideration involved and thus not complying with Corp. Code § 603(b), and containing incorrect and fraudulent representations. Plaintiffs allege Defendants burdened Poushak, Inc. with $2,000,000 in debt it could never repay and then determined to sell Poushak, Inc. for no consideration to Z International Apparel Group, Inc. – a company in which Defendants have a financial interest. On February 23, 2011 the court granted the parties’ stipulation to arbitrate their claims, with Elias Aziz-Lavi to be appointed arbitrator. On June 17, 2013 Z International Apparel Group, Inc. and, separately, Djamshid Younessi as successor trustee of the Banafsheha Family Trust and of the Soraya Banafsheha 2011 Trust, filed petitions to vacate the partial final arbitration award, and on June 21, 2013 Plaintiffs filed a competing petition to confirm that award: on November 12, 2013 the court granted Plaintiff’s petition. On September 8, 2014 Djamshid Younessi as successor trustee of the Banafsheha Family Trust and of the Soraya Banafsheha 2011 Trust filed a second petition to vacate the partial final arbitration award, which the court denied on July 24, 2015. On September 30, 2015 the court granted Jack Banafsheha’s motion for interlocutory judgment on the partial final arbitration award confirmed by the court, but denied his request to fix the time by which the final arbitration award is to be made. The case is assigned to Department 16 of the Stanley Mosk courthouse, where the case is currently stayed pending arbitration and no future hearings are currently set.

• In re Soraya Banafsheha 2011 Trust (BP 171 695) – filed March 7, 2016 when trustee Jack Banafsheha filed a petition for instructions and order; for permanent injunction; for an order setting aside (1) the February 23, 2011 order compelling arbitration and holding Lavi harmless, (2) the March 11, 2013 arbitration award, and (3) the November 12, 2013 order confirming arbitration award entered in the above case as exceeding the court’s jurisdiction and requiring transfer of the above case to the probate court, et al. Petitioner alleges that the Trust’s main assets were membership interests in single-asset real-estate holding companies 409 LLC and BBK LLC, and that Elias Aziz-Lavi was appointed as one of three arbitrators to resolve a financial dispute regarding valuation and potential purchase or sale of membership interests in those LLCs, but the Soraya Trust was never made a party to the arbitration nor the civil action above (which confirmed Lavi’s appointment). In November 2013 Lavi ordered the Soraya Trust’s assets in the LLCs to be conveyed to the Kashfi Group – another owner of the LLCs (along with the Banafsheha Group, of which the Soraya Trust is part) – but refused to give the $2,000,000+ proceeds to the Trust, and the Kashfi Group has never accounted for the rents, issues, or profits of the LLCs (another $6,000,000+ is owing) and Lavi has failed to complete an accounting. Petitioner alleges Lavi has exceeded the scope of his duties as arbitrator by forcing the Soraya Trust to sell its assets although he lacked jurisdiction over the Trust. By holding the purse strings, Lavi has prevented Petitioner from exercising his discretion regarding the Soraya Trust and thus is interfering in its administration, and the beneficiary Soraya Banafsheha is elderly, ill, and infirm and needs the assets to move from a rehabilitation center to a home environment. On April 1, 2016 the court granted in part Petitioner’s ex parte application for temporary restraining order, ordering the arbitrator to pay the caregiver and facility directly. The case is assigned to probate law Department 5, where a May 13, 2016 hearing is scheduled on the motion to abate (Probate Code § 854) filed by Mojgan Banafsheha, Pooya Banafsheha, and Payam Banafsheha, and a May 31, 2016 hearing is scheduled on the original petition.

• In re Banafsheha Family Trust 1992 (BP 171 696) – also filed March 7, 2016 when trustee Jack Banafsheha filed a petition for instructions and order; for permanent injunction; for an order setting aside (1) the February 23, 2011 order compelling arbitration and holding Lavi harmless, (2) the March 11, 2013 arbitration award, and (3) the November 12, 2013 order confirming arbitration award entered in the above case as exceeding the court’s jurisdiction and requiring transfer of the above civil case to the probate court, et al. Petitioner alleges that the Trust’s main assets were membership interests in single-asset real-estate holding companies 409 LLC and BBK LLC, and that Elias Aziz-Lavi was appointed as one of three arbitrators to resolve a financial dispute regarding valuation and potential purchase or sale of membership interests in those LLCs (appointment confirmed in the civil case above). In November 2013 Lavi ordered the Trust’s assets in the LLCs to be conveyed to the Kashfi Group – another owner of the LLCs (along with the Banafsheha Group, of which the Trust is part) – but refused to give the $2,000,000+ proceeds to the Trust, and the Kashfi Group has never accounted for the rents, issues, or profits of the LLCs (another $6,000,000+ is owing) and Lavi has failed to complete an accounting. Petitioner alleges Lavi has exceeded the scope of his duties as arbitrator by forcing the Trust to sell its assets. By holding the purse strings, Lavi has prevented Petitioner from exercising his discretion regarding the Trust and thus is interfering in its administration, and the beneficiary Soraya Banafsheha is elderly, ill, and infirm and needs the assets to move from a rehabilitation center to a home environment. On April 1, 2016 the court granted in part Petitioner’s ex parte application for temporary restraining order, ordering the arbitrator to pay the caregiver and facility directly. The case is assigned to probate law Department 5, where a May 13, 2016 hearing is scheduled on the motion to abate (Probate Code § 854) filed by Mojgan Banafsheha, Pooya Banafsheha, and Payam Banafsheha, and a May 31, 2016 hearing is scheduled on the original petition.

Initially, the court finds that the question of whether the two probate cases should related to each other is moot, in that both cases are coincidentally already pending in the same department, which is the purpose and result of relating cases (see generally CRC 3.300(h)(1)).

The remaining question is whether either probate case should be related with the civil law case. As seen above, Jack Banafsheha, Mojgan Banafsheha, Pooya Banafsheha, Payam Banafsheha, and Elias Aziz-Lavi are parties in all the cases, with the civil law case adding additional parties as defendants. However, the primary issues originally presented in the civil law case – whether officers of Poushak, Inc. breached their fiduciary duties related to the operation of that company and then related to the sale of that company’s assets to Z International Apparel Group, Inc., which questions are being addressed in an arbitration conducted by Elias Aziz-Lavi as part of a global arbitration of issues among the parties – are different than the central issue presented in both of the probate cases, which is essentially whether Lavi is properly arbitrating the issues and handling the assets as between the Banafsheha Group (including the two named trusts) and the Kashfi Group related to their membership interests in entities 409 LLC and BBK LLC. Accordingly, the probate cases do not require resolution of the same factual or legal issues as the civil law case and no judicial economy would be gained by relating the cases, and therefore the cases are not “related” as defined by CRC 3.300(a).

Further, as seen above, the issues presented in the civil law case do not involve the internal affairs of a trust or any other matter that lies within the exclusive jurisdiction of the probate courts, and it is improper to attack the orders entered in that civil law case via requests for relief in the petitions in the probate cases.

Accordingly, the court declines to relate the three cases listed on the Notice.

To the extent there are overlapping issues in the cases due to the global manner in which the parties’ concerns are being arbitrated (i.e., in that the Poushak/Z International disputes are being arbitrated pursuant to the same arbitration agreement as the 409 LLC/BBK LLC/Banafsheha Group/Kashfi Group disputes, and those disputes are being heard by the same arbitrator and at the same time), that is likely best addressed via staying the probate cases, as appropriate, until the civil law case resolves, as has already been requested by the civil cases’ plaintiffs.