Case Number: BC516934 Hearing Date: April 18, 2014 Dept: 56

Case Name: Montgomery v. Little, et al.
Case No.: BC516934
Motion: Motion to Compel Arbitration
Moving Party: Cool Water Entertainment LLC
Responding Party: J.J. Little & Associates PC

Tentative Ruling: Motion is denied.

Chris Montgomery filed this action against J.J. Little and J.J. Little & Associates PC. The complaint asserts causes of action for legal malpractice and breach of fiduciary duty, arising from Little’s representation of Montgomery in two San Mateo Superior Court lawsuits.

Little filed a cross-complaint against Montgomery and six others, asserting 22 causes of action. Essentially, the cross-complaint alleges that Little represented Montgomery in a variety of legal matters from 2009 through 2013. Little seeks legal fees and other damages from Montgomery and his co-owners (Brian Messner and Arthur Nantanyan) and Montgomery’s business entities (Cool Water Entertainment LLC, ID Lifeguards Inc. and Comp-u-Fix Inc.). Little also has claims against his former legal associate Larry Peluso, seeking equitable indemnity regarding the malpractice claims asserted in Montgomery’s complaint.

Cool Water moves pursuant to CCP §1281.2 to compel arbitration of the 13th through 19th causes of action in the cross-complaint, in which Little seeks recovery of legal fees from Cool Water. Cool Water also requests the Court to order arbitration of all claims between Montgomery and Little in the complaint and cross-complaint.

The general standards which govern the motion are well settled: A petition to compel arbitration based on a written arbitration agreement must be granted unless grounds exist to revoke the agreement. CCP §§1281 & 1281.2(b). The petitioner bears the burden of proving the existence of a valid arbitration agreement, and a party opposing the petition bears the burden of proving any fact necessary to its defense. E.g. Engalla v. Permanente Medical Group Inc. (2007) 15 Cal.4th 951, 972.

In ruling on the first issue, the trial court must decide whether an enforceable arbitration agreement exists between the parties and whether the claims are within the scope of the agreement. See Omar v. Ralphs Grocery (2004) 118 Cal.App.4th 955, 961. General principles of contract law determine whether the parties have entered into a binding agreement. See Craig v. Brown & Root Inc. (2000) 84 Cal.App.4th 416, 420.

Cool Water has not presented any evidence regarding the formation of an agreement; the evidence is contained entirely within Little’s opposition. That evidence shows that Little entered into a letter agreement with Montgomery and Brian Messner; Little agreed to provide general legal counsel, which included the formation of Cool Water; and the parties agreed to binding arbitration of “any dispute arising out of or relating to this agreement, our relationship, or the services performed” [Ex 1].

Significantly, the agreement was only between Little and the two individuals, Montgomery and Messner. Cool Water was not a party to the legal services agreement. The agreement states that Montgomery and Messner wanted Little to represent Cool Water in the future, and they would “enter into an addendum to this agreement making Cool Water a party” [Ex 1 at ¶1.b]. Cool Water has presented no evidence of any addendum or other agreement between Cool Water and Little, and Little affirmatively states that no such addendum or agreement was ever made [Little Decl. at ¶3].

Under these circumstances, Cool Water has not sustained its burden of proving that it entered into an enforceable arbitration agreement with Little. Arbitration may be ordered only for “a party to an arbitration agreement”; see CCP §1281.2; Rhodes v. California Hospital (1978) 76 Cal.App.3d 606, 609 (“We are aware of the strong public policy in favor of arbitration as a means of resolving controversies, but that policy does not extend to those who are not parties to an arbitration agreement”); accord Boys Club v. Fidelity & Deposit (1992) 6 Cal.App.4th 1266, 1271. Because Cool Water was not a party to the agreement that it seeks to enforce, its motion is denied.

It should be noted that even if an enforceable agreement had been established, the Court would exercise its discretion under CCP §1281.2(c) to “refuse to enforce the arbitration agreement.” The claims between Little and Cool Water are but a small subset of the common claims with other parties, and there is a real possibility of conflicting rulings on common issues of fact and law if some claims were ordered to arbitration and others remained in court. Under these circumstances, arbitration may be refused. See Cronus Investments v. Concierge Services (2005) 35 Cal.4th 376, 383; CV Starr v. Boston Reinsurance (1987) 190 Cal.App.3d 1637, 1642.

Cool Water’s motion is denied.