2014-00159147-CU-NP

Carol Kane vs. Elco Mutual Life and Annuity

Nature of Proceeding:    Petition to Compel Arbitration and Stay the Action

Filed By:  Vance, Natalie P.

The motion of Defendant Robert A. Scrivano, individually and d/b/a Assets & Aging
(“Scrivano”) to compel arbitration and stay the instant action is DENIED.

The case against Scrivano arises from his provision of financial services and,
specifically, his alleged retention for the purpose of qualifying Plaintiff Philip Kane (“Mr.
Kane”) for long-term Medi-Cal benefits.  Mr. Kane and Co-Plaintiff Carol Kane (“Mrs.
Kane”) (collectively “Plaintiffs”) allege that Scrivano caused them to liquidate two IRA
accounts unnecessarily as part of a scheme to peddle an unsuitable annuity product
and obtain a large commission for himself.  Mrs. Kane brings this action on her own
behalf and as her husband’s attorney in fact.  Based on their allegations, Plaintiffs
have pleaded causes of action against Scrivano for financial elder abuse, negligence,
negligent infliction of emotional distress, breach of fiduciary duty, violation of the
Consumers Legal Remedies Act (“CLRA”) at CC §§ 1750 et seq., and unfair business
practices in violation of B&P Code §§ 17200 et seq.  Plaintiffs advance all but one of
these causes of action against at least one of the other defendants as well.  And there
is one cause of action against a defendant other than Scrivano.

Scrivano now moves to compel arbitration of all causes of action against him and stay
the entire action.  The arbitration provisions appear in the financial planning agreement
(“Agreement”) executed by Scrivano and Mrs. Kane; Mr. Kane did not execute the
Agreement.  None of the defendants other than Scrivano are parties to the Agreement
either.  The arbitration provisions in the Agreement read:

Mandatory Arbitration: Any material breach of this contract or claimed
act of negligence by one party gives the other party the right to demand
arbitration against the other for damages, according to the rules and
statutes governing arbitration and damages in the State of California.
The prevailing party is to be awarded reasonable attorney fees and costs
and disbursements incurred in the arbitration.  The parties waive their
right to a jury trial.  The parties waive their right to appeal the arbitration
award except as provided by California law.

(See Compl., Exh. E thereto at 3 [bold in original].)

Plaintiffs oppose the motion on several grounds.  First, they argue that the arbitration
provisions do not apply to their causes of action against Scrivano.  They observe that,
by their terms, the arbitration provisions only authorize a party to compel arbitration of  the other party’s breach of contract or negligence: “[a]ny material breach of this
contract or claimed act of negligence by one gives the other party the right to demand
arbitration… .”  (Emphasis added.)  Because Plaintiffs allege that Scrivano is the one
who committed negligence (among other wrongs), they contend that they are the non-
breaching, non-negligent “other party” entitled to demand arbitration, not Scrivano.

The court agrees with Plaintiffs.  The arbitration provisions unambiguously confer upon
the party alleging breach of contract or negligence the right to demand arbitration of
those claims.  In reaching this conclusion, the court rejects Scrivano’s argument that
the arbitration provisions are not specific as to which party may demand arbitration.
That argument does not square with the terms of the Agreement.

The court also rejects Scrivano’s argument that the phrase “claimed act of negligence
by one party” refers to the party claiming breach of contract or negligence, such that
the right to demand arbitration lies with the other party, i.e., the breaching/negligent
one.  The court rejects this argument because the phrase “by one party” as it appears
in the Agreement can only be construed to modify both “material breach of this
contract” and “claimed act of negligence.”  In other words, the Agreement distinguishes
between a breach of contract or act of negligence “by one party” and the “other” party’s
right to demand arbitration.  Such a construction forecloses any argument that
Scrivano possesses the right to demand arbitration of Plaintiffs’ causes of action.

Even if Scrivano were entitled to demand arbitration, the court would deny the motion
because the Agreement only contemplates arbitration of claims arising from
contractual breaches or negligence.  The Agreement does not confer any right to
compel arbitration of intentional torts, breaches of fiduciary duty or statutory causes of
action based on intentional conduct.  As Plaintiffs note in their Opposition, they have
filed a voluntary request for dismissal of their negligence and NIED causes of action
against Scrivano.  Accordingly, even if Scrivano possessed a right to compel
arbitration of negligence claims under the Agreement, there would be nothing for him
to compel at this point.

Finally, the court is aware of Scrivano’s argument that, notwithstanding Plaintiffs’
dismissal of their negligence and NIED causes of action against him, the remaining
causes of action against him contain claims based on his allegedly negligent conduct.
Thus, for example, he argues that he is entitled to demand arbitration of Plaintiffs’
breach of fiduciary duty cause of action because it is based on allegations of
negligence.  The court rejects this argument for two reasons, the first of which is that,
for reasons stated above, the Agreement does not entitle Scrivano to demand
arbitration of causes of action brought by Plaintiffs.

Secondly, Plaintiffs’ claims against Scrivano are based upon transactions on which his
claims against the other defendants are also based.  If Plaintiffs were required to
arbitrate against Scrivano and litigate separately against the other defendants, the two
proceedings could give rise to inconsistent rulings on issues of fact and law.  Thus,
even if Scrivano possessed a right to demand arbitration, the court would exercise its
discretion under CCP § 1281.2(c) and refuse to compel such an arbitration.

Because the court denies the motion for the reasons above, it does not reach the
parties’ further arguments in support of and in opposition to the motion.

Scrivano’s request for judicial notice of the complaint and its attachments is             GRANTED.

Plaintiff’s request for judicial notice of their request for voluntary dismissal dated May
14, 2014 is GRANTED.

The minute order is effective immediately.  No formal order pursuant to CRC 3.1312 or
further notice is required.