Motion to Stay Proceedings in FFG RESTAURANT GROUP, INC. ET AL VS. SAYAT OZYILMAZ ET AL| Trellis.Law

On December 11, 2019 a Motion,Ex Parte was filed involving a dispute between Ffg Restaurant Group, Inc., Forward Food Group, Llc, Ozyilmaz, Laura, Ozyilmaz, Sayat, and Does 1 To 100 Inclusive, Ozyilmaz, Laura, Ozyilmaz, Laura Gabriela, Ozyilmaz, Sayat, for BUSINESS TORT in the District Court of San Francisco County.

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WALLACE C. DOOLITTLE (SBN 158116)
JAMES P. DOWNS (SBN 139489)
LAW OFFICES OF WALLACE C. DOOLITTLE ELECTRONICALLY
1260 B Street, Suite 220 F I L E D
Hayward, California 94541 Superior Court of California,
County of San Francisco

TELEPHONE; (510) 888-0600 06/10/2020
FACSIMILE: (510) 888-0606 Clerk of the Court
EMAIL: dooiittlew(Rdoolittlelaw.corn BY: RONNIE OTERO
Deputy Clerk
Attorneys for Plaintiffs FFG RESTAURANT GROUP, INC. and
FORWARD FOOD GROUP, LLC

SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE CITY AND COUNTY OF SAN FRANCISCO
10

12 ) Case No: CGC-19-581427
FFG RESTAURANT GROUP, INC. and )
13
FORWARD FOOD GROUP, LLC, )
) PLAINTIFFS'PPOSITION TO
14 Plaintiffs, DEFENDANTS'OTION TO COMPEL
) MEDIATION/ARBITRATION AND TO
15 STAY CLAIMS
)
16 )
vs. )
17 Date: June 23, 2020
SAYAT OZYILMAZ, LAURA GABRIELA Time: 9:30 a.m.
18 OZYILMAZ and DOES 1-100, inclusive, Dept: 302
)
19 )
)
Defendants. )
20
)
21 )
)
22

28
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEL MEDIATION/ARBITRATION
TABLE OF CONTENTS

INTRODUCTION
4 BACKGROUND
LEGAL ARGUMENT
1. THERE IS NO ARBITRATION AGREEMENT

II. CROSS-DEFENDANTS LLC, CORPORATION AND
SOLLERS ARE NOT PARTIES TO MOU AGREEMENT

III. MOVING PARTIES REPUDIATED THE MEMORANDUM OF
UNDERSTANDING AND OTHER UNEXECUTED AGREEMENTS 9
10

DEFENDANT/CROSS-COMPLAINANTS HAVE WAIVED
ARBITRATION
12
CONCLUSION 15
13

28 T1
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEL MEDIATION/ARBITRATION
TABLE OF AUTHORITIES
Cases:

AT& T Technologies v. Communications Workers (1986) 475 U.S. 643

Benaroya v. Willis (2018) 23 Cal.App.5'62
Berman v.Health Net (2000) 80 Cal.App.4th 1359 12

Boucher v. Allied Title Company Inc. (2005) 127 Cal.App. 4'" 262

Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4'035 12

Cinal v. Barna (2012) 206 Cal.App.4" 1383

County of Contra v. Kaiser Foundation Health Plan, Inc. (1996)
10
47 Cal.App.4'37

Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416
12
Crowley Maritime Corp. v. Boston Old Colony Insur. Co.
13 158 Cal.App. 4'"
(2008) 1061
14
Daniel v. Sunrise Senior Living, Inc. (2013) 212 Cal.App.4'74
15
Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951 4,6
16

17
Fagelbaum & Heller LLP v. Smylie (2009) 174 Cal.App.4th 1351

18 Goldman v. KPMG, LLP (2009) 173 Cal.App.4" 209 10

19 Guess? Inc. v. Superior Court (2000) 79 Cal.App.4'" 553 11, 13

20
Hoover v.Am. Income Life Ins. Co. (2012) 206 Cal.App. 4'" 1193
21
Moncharsh v. Heily & Blasd (1992) 3 Cal.4'" 1

22
NORCAL Mutual Insurance Company v. Newton (2000) 84 CaLApp.4" 64 10
23

24 Oregel v. PacPizza, LLC 237 Cal.App.4'42 12

25 Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4'" 227 4,5
26
Pinnacle Museum Tower Assn. v. Pinnacle Market Development
27 (US), LLC (2012) 55 Cal.4th 223

28 111
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEL MEDIATION/ARBITRATION
Plat/ Pacific, Inc. v.Andelson (1993) 6 Cal.4th 307

Sprunk v. Prisma LLC (2017 14 Cal.App.5'" 785 12

St. Agnes Medical Center v. PacifiCare r&f California (2003) 31 Cal.4th 1187

Sub v. Superior Court (2010) 181 Cal.App.4'" 1504

Victoria v. Superior Court (1985) 40 Cal.3d 734

7 Vol/ info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468
8
Statutes;
9
Code of Civil Procedure I/1281
10
Code of Civil Procedure $ 1281.2 3,4, 11
11

27
1V
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEI. MEDIATION/ARBITRATION
1 INTRODUCTION
The parties to this action (and another action involving these parties) have been engaged
in a dispute regarding the management and ownership of a San Francisco Restaurant called

Noosh. The dispute arose when it became clear and evident that the defendants and cross-

complainants herein disputed their obligations pursuant to the terms of a Memorandum of
Understanding in early 2019, and began to act in a manner that contradicted their obligations as

directors and shareholders in the business.
There is no valid mediation or arbitration agreement that support the subject motion to

compel. The underlying Memorandum of Understanding (MOU) contains only a mediation
10 agreement — not an arbitration clause. The MOU references an intent to complete Shareholder
Agreements, but those agreements were never finalized or executed by Moving Parties and the

12 arbitration clause contained therein isnot binding on any party to this litigation. Moreover, the
13 parties to the MOU were only representing themselves as individuals and not the Plaintiff
14 corporation and LLC in this litigation. Yongjia Sollers who is named as a cross-defendant in

Moving Parties'ross-complaint is not a party to the MOU nor in anyway bound to the alleged
16 mediation and arbitration provisions.
17 Even in the event there was a binding mediation and/or arbitration agreement (which
there is not), Moving Party Defendants and Cross-complainants have demonstratively and
19 unequivocally waived any right to arbitrate. They failed to demand arbitration at the early stages
20 of this litigation, filed an answer that did not include the right to arbitrate as any defense to the

21 underlying complaint, they filed a Cross-complaint and a First Amended Cross-complaint, and
22 served substantial discovery upon the Plaintiffs and Cross-defendants they would not otherwise
23 be entitled in an arbitration proceeding — all of which have caused Plaintiffs herein to suffer great
24 prejudice and great expense. For these reasons, and those set forth more fully below, the motion

25 to compel arbitration must be denied.

28 1
I'LAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEL MEDIATION/ARBITRATION
BACKGIIOUND

Beginning in or about October 2017, Plaintiffs and Defendants and Cross-complainants

Laura and Sayat Ozyilmaz began negotiating terms for opening of a restaurant in San Francisco.
Plaintiff and Cross-defendant Forward Food Group, LLC ("FFGLLC"or the "LLC'*) is a

registered California limited liability company formed by Cross-defendant John Litz on October

27, 2017 that was established as the owner of a future San Francisco restaurant that would later

be known as "Noosh". Plaintiff and Cross-defendant FFG Restaurant Group, Inc. ("FFGRG" or

the *'Corporation" ) was incorporated on or about December 19, 2017 to manage and operate

Noosh. John Litz was the CEO and Chief Financial Officer of the managing corporation that

10 employed Laura and Sayat Ozyilmaz. John Litz, Laura and Sayat Ozyilmaz were to be members

of the LLC. (See Declaration of James P. Downs, "Downs Decl.", $ 3)
12 On February 19, 2019, after not being able to finalize or execute shareholder and stock

13 purchase agreements on the eve of the restaurant opening, John Litz, Laura and Sayat Ozyilmaz

14 entered in a Memorandum of Understanding ("MOU") which acknowledged that the parties had

15 been unable to execute shareholder and stock purchase agreements and would thereafter attempt

16 to finalize those agreements in good faith. In addition to setting forth various terms that were

17 intended to ensure the smooth opening and subsequent operation of Noosh, the MOU included

18 the following section14:
BINDING EFFECT: This MOU is intended to create legally
19 and finalize the
binding obligations by the Parties to negotiate
20 Agreements in good faith; provided, this MOU shall be superseded
and of no legal effect once the Parties have executed the definitive
21 Agreements. If the parties are unable to resolve a material matter,
they agree to submit to a full day of mediation or such lesser time
22 as is necessary to resolve the matter, to be administered by the
23 American Arbitration Association under its Commercial Mediation
Rules, within tive (5) business days following any party's request
24 therefor,

25 Lucinda Storm Decl., Ex. A, at p. 3.)
(See Downs Decl, $ 4 and
26

27
2
28
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEL MEDIATION/ARBITRATION
The Plaintiff and Cross-defendant LLC and Corporation were not parties to the MOU.

The parties to the MOU, John Litz, Laura and Sayat Ozyilmaz, were never able to agree to final

terms in the shareholder and stock purchase agreements, and they were never executed. While

the proposed Shareholder Agreement contained a mediation and arbitration clause at section

25.13. The mediation agreement does not have any arbitration provision — only an agreement to

submit any dispute to mediation. (See Downs Decl., $ 5)
LEGAL ARGIJMENT
Code of Civil Procedure )1281.2 provides in pertinent part that a court may deny a

petition to compel arbitration if it determines that:

10 been waived the
(a) The right to compel arbitration has by
petitioner; or

12 (b) Grounds exist for rescission of the agreement.
13
(c) A party to the arbitration agreement is also a party to a pending
14 court action or special proceeding with a third party, arising out of
the same transaction or series of related transactions and there is a
15 possibility of conflicting rulings on a common issue of law or fact.

16
In the present case, there are numerous and overriding grounds that require the denial
17
Defendant and Cross-complainant's motion to compel arbitration, as set forth more fully below.
18

19 I. THERE IS NO ARBITRATION AGREEMENT
The petitioner bears the burden of proving the existence of a valid arbitration agreement
20
by a preponderance of the evidence. (Pinnacle Museum Tower Assn. v, Pinnacle Market
21
Development (US), LLC (2012) 55 Cal.4th 223, 236). [1]tis a cardinal principle that arbitration
22
under the FAA "is a matter of consent, not coercion." (Volt Info. Sciences v. Leland Stanford Jr.
23
U. (1989) 489 U.S. 468, 479.) Thus, "a party cannot be required to submit to arbitration any
24
dispute which he has not agreed so to submit." (AT& T Technologies v. Communications Workers
25
(1986) 475 U.S. 643, 648). A party cannot be required to submit to an arbitration unless there is
26

27
3
28
PLAINTIFFS'PPOSITION TO DEFENDANTS'OI'ION TO COMPEL MEDIATION/ARBITRATION
clear and unmistakable evidence they intended to do so. (Pinela v. Neiman Marcus Group, Inc.

(2015) 238 Cal.App.4'27, 239- 240).
In California, "[g]eneral principles of contract law determine whether the parties have
entered a binding agreement to arbitrate." (Craig v. Brown k Root, Inc. (2000) 84 Cal.App.4th
416, 420; see Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 — 973)
Generally, an arbitration agreement must be memorialized in writing. (Fageliiaum ck Heiier LLP
v. Smyiie (2009) 174 Cal.App.4th 1351, 1363. Although the law favors agreements for
arbitration of disputes, "there is no policy compelling persons to accept arbitration of
controversies which they have not agreed to arbitrate ..." (Victoria v. Superior Court (1985) 40
10 Cal.3d 734, 744.

In the present case, Defendants failed to show the existence of a written agreement to
12 arbitrate or a clear and unmistakable intent to do so. (Code of Civ. Proc. IJ 1281.2.) The
13 February 19, 2020 Memorandum of Understanding ("MOU) signed by Defendant and Cross-
14 complainants and Cross-defendant John Litz does not contain an arbitration agreement — ~onl a
15 requirement for mediation:

16
This MOU is intended to create legally binding obligation by the
17 Parties to negotiate and finalize the Agreements in good faith....
If the parties are unable to resolve a material matter, they agree to
18 submit to a full day of mediation or such lesser time as necessary
to resolve the matter, to be administered by the American
19 Arbitration Association under its Commercial Mediation Rules,
20 within five (5) business days following any party*s request
therefor. (Storm Dec., Ex. A, at p. 3.)
21
Defendants falsely equate mediation with arbitration. (Motion at p. 4) The MOU does
22
state that the parties will finalize the attached Shareholders'greement but that agreement was
23
never finalized or even executed by the parties. While the Shareholders'greement attached to
24
the MOU includes an arbitration agreement, that agreement was never executed by the parties
25
and the arbitration clause is therefore not operative or enforceable. There exists no "clear and
26

PLAINTIFFS'PPOSITION TO DEFENDAN i''OTION I'0 COMPFl. MEDlAT ION/AI&BI i RATION
unmistakable" agreement to arbitrate as required in order for a Court to compel parties to

arbitrate. (See Pine!a v.Neiman Marcus Group, Inc. (2015) 238 Cal.App.4'" 227, 239, 240)

Moving Parties Laura Ozyilmaz and Sayat Ozyilmaz negotiated employment and

potential shareholder terms with Cross-defendant John Litz, but the shareholder agreements were

never finalized, and the overwhelming evidence is that there was no meeting of the minds

between those parties. In late October 2018, Moving Parties Sayat Ozyilmaz informed JohnLitz
7 that he and Laura Ozyilmaz did not the terms set forth in the written
agree to agreements they
8 had been provided early in that year. Throughout 2018, while the restaurant premises were being
9
remodeled and set up for operation, there was repeated acrimony in the interactions between
10
John Litz and Defendants and Cross-complainants, often to the point that they ceased
11
communications. (See Declaration of John Litz in Opposition to Motion to Compel
12
Mediation/Arbitration, "Litz Decl." $ f[2 —
4) As a result of the parties inability to come to
13
agreement on the terms of the shareholder agreement, and in order to open the restaurant, in
14
December 2018 the parties each consulted there legal counsel agreed to enter into the MOU that
15
confirmed the parties intent to continue their attempts to finalize shareholder agreements. (See
16
Litz Decl. $$ 5 —
6)
17
The MOU attached as an exhibit to the Declaration of Lucinda Storm in Support of
18
Defendants'nd Cross-complainants'otion to Compel mediation/arbitration, signed by John
19
Litz on February 18, 2019 and by the Defendants and Cross-complainants on February 19, 2019,
20
does not contain an arbitration agreement. At the time the MOU was signed, none of the
21
documents referenced in the MOU had been finalized. While the proposed (but unfinalized
22

23
Shareholders'greement, contained an arbitration clause, no arbitration clause was included in

24
the MOU that was signed, nor would John Litz have agreed to arbitrate the MOU had such been

25 proposed. The MOU did not have any binding effect as to the terms of the therein referenced

26 agreements nor could it have any binding effect as to the additional anticipated employment

28 5
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEL MEDIATION/AltBITitATION
agreements where that language meant any term could be subject to change. Moreover, the

Confidentiality and Invention Assignment Agreements, and Intellectual Property Assignment

Agreements referenced in the MOU as of the date of signing had not even been drafted and

presented to the parties. (See Litz Decl. $ 7) After the MOU was signed the restaurant opened,

but John Litz never signed any of the agreements referenced in the MOU in any form.

Defendants and Cross-complainants never provided John Litz with any signed any of the

agreements referenced in the MOU in any form. (See Litz Decl. $ 8)
The MOU was intended merely as a demonstration of good faith that the Defendants and
9
Cross-complainants and John Litz were intent on reaching formal agreements to govern terms of
10
employment, ownership, management relations, respective responsibilities, and other issues.

Shortly after the MOU was signed, the parties'elationship again turned highly acrimonious,
12
with each accusing the other of violating the terms of the MOU. (See Litz Decl. $ 9) It is without
13
question that when the MOU was signed there had been no meeting of the minds as to the terms
14
of the agreements the parties had agreed to try and finalize, or even the terms set forth in the
15
body of the MOU itself.
16
Engalla v. Permanen/e Medical Group (1979) 15 Cal.4'" 951, cited by Moving Parties,
17
does not support arbitration in this matter. The EngaBa plaintiffs argued the defendant
18
fraudulent represented the underlying arbitration clause and that defendant's dilatory conduct to
19
delay arbitration waived the right to arbitration. The Appellate Court held that plaintiffs
20
successfully established defendants'ntent to induce reliance on the misrepresentations and
21
remanded the case back to the Trial Court to make factual determinations on whether defendant
22
waived the right to arbitration. Unlike this case, Engalla did not involve an agreement that only
23
required mediation and not arbitration, and also did not involve an arbitration agreement that was
24
in the process of negotiation not executed by the parties. MoncJ/arsh v. Heily Ck Blase (1992) 3
25
Cal.4'" I, cited by Moving Parties, isnot relevant to this matter because itinvolved an appeal of
26
an arbitrator's award and, as set forth below, Moving Parties'ctions during this litigation do not
27

28 6
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEL MEDIATION/ARBITRATION
intention to avoid contact with the court's, especially when considering they have filed an

answer which does not contain an arbitration claim, filed a cross-complaint naming new parties

not party to any claimed agreement, and propounded substantial discovery not provided for in an
arbitration proceeding.

II. CROSS-DEFENDANTS LLC, CORPORATION AND SOLLERS ARE NOT
PARTIES TO MOU AGREEMENT
California case law is clear that "an arbitrator has no power to determine the rights and

obligations of one who is not a party to the arbitration agreement. Denaroya v. Willis (2018) 23

Cal.App.5'" 462, 467. In the context of Code of Civil Procedure section 1281.2(c), "A third party

10 is one who is neither bound by nor entitled to enforce the arbitration agreement." (Danie! v.

Sunrise Senior Living, inc. (2013) 212 Cal.App.4'" 674, 679.) Only under certain conditions cab

12 a nonsignatory be bound to arbitrate; "(a) incorporation by reference; (b) assumption; (c) agency;
13 (d) veil-piercing or alter ego; (e) estoppel; and (f) third-party beneficiary." (Sub v. Superior
14 Court (2010) 181 Cal.App.4'" 1504, 1513.) None of these conditions exist in this matter.
15 In the present case, Moving Party Defendants and Cross-complainants are basing their
16 claim for arbitration on the MOU section 14 mediation provision. The MOU was only signed by
17 John Litz, Sayat Ozyilmaz and Laura Ozylimaz. The Plaintiff I.LC or the Corporation are not
18 parties to the MOU. Yongja Sollers is not referenced in the MOU or Shareholder Agreements,
19 and nowhere is it alleged that she is an agent or representative of any entity. In this case, Moving
20 Party Cross-complainants cannot compel Yonga Sollers who never signed the so-called
21 arbitration or mediation agreement. Yon~&'a Sollers has never been an employee, officer,
22 director, or shareholder Plaintiff Corporation that owns Noosh Restaurant. She has never signed
23 any agreement of any kind with either Laura Ozyilmaz or Sayat Ozylmaz. (See Declaration of
24 Yongja Sollers, tjtj 3 & 4)
25 In addition, the MOU does not state that either John Litz, Sayat Ozyilmaz and Laura
26 Ozylimaz are signing on behalf of the Plaintiff LLC or the Corporation. They are signing as
27
7
28
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEL MEDIATION/ARBITRATION
individuals who are engaged in negotiations to finalize their relationship to the LLC or the
Corporation, and the character of those entities. Moving Party Defendants and Cross-
complainants cannot enforce a mediation provision against entities that were neither signatories
nor fully operational at the signing of the MOU.
Crowley Maritime Corp. v. Boston Old Colony Insur. Co. (2008) 158 Cal.App. 4'061,
cited by Moving Parties is also not on point. Crvwley in fact supports denial of Moving Parties
motion to compel arbitration against Plaintiffs LLC and Corporation. Crowley denied a motion
to compel arbitration who were not parties to an arbitration agreement where those nonparties
were not suing to enforce the terms of the contract containing the arbitration agreement. As set
10 forth in Crowley, nonparties must be seeking the benefits ot a contract in order to be compelled
to arbitrate their claims. Id. at 1070 — 107. In the present case, Plaintiffs LLC or the Corporation
12 are not seeking to obtain the benefits of the MOU or any other agreement, executed or otherwise.

13 In fact the underlying complaint does not contain a breach of contract cause of action. Quite the

14 opposite. The Sixth Cause of Action for Declaratory Relief seeks orders and/or judgment that the

15 MOU has no fore and affect based on Moving Parties repudiation of the MOU. Yongja Soller
16 was also not a party to the MOU, or even the underlying complaint, and is only in this litigation
17 pursuant to Moving Parties Cross-complaint, and even there, not for any breaches of contract.
18 Similarly, County of Contra v. Kaiser Foundation Health Plan, /nc. (1996) 47 Cal.App.4 '37 is

19 not on point. No benefit was conferred upon Plaintiffs LLC and Corporation, nor Cross-

20 defendant Yongja Soller. The MOU references Plaintiffs LLC and Corporation, but the only

21 beneficiaries were the signatories who identified their intentions to eventually finalize
22 Shareholder Agreements and gain the benefits for themselves if ever they should be finalized.

23 Moreover, as set forth above, Plaintiffs LLC and Corporation's complaint seeks to repudiate not
enforce the MOU, and does not contain any causes of action I'r breach of contract.
25

28 8
PLAINTIFI'S'PPOSITION 'I'0 DEFENDANTS'OTION TO COMPEL MEDIATION/ARBITRATION
III. MOVING PARTIES REPUDIATED THE MEMORANDUM OF
UNDERSTANDING AND OTHER UNEXECUTED AGREEMENTS
Moving Party Defendants and Cross-complainants base their motion to compel arbitration

upon the false premise that Plaintiffs are estopped from avoiding the mediation clause in the
4
MOU and the arbitration clause in the unexecuted Shareholder Agreement because they are
5
relying on the MOU and Shareholder Agreements and seeking to enforce the terms therein. In
6
fact, Plaintiffs are alleging that Defendants repudiated the MOU and the Shareholder
7
Agreements, and that the MOU and the Shareholder Agreements no longer have any force or
8
effect. Plaintiffs'ixth Cause of Action for Declaratory Relief in the First Amended Complaint
9
at paragraph 70 specifically alleges, as follows:
10
"Plaintiffs request from the Court a Declaration that the
Shareholders'greement and the respective stock purchase
12 agreements for Defendants attached to the MOU have been
repudiated, and that they are of no force or effect and that
13 Defendants are not shareholders of FFGRG."
14 For this reason, Plaintiffs estoppel argument is not on point. A party*s actions which
15 serve as a repudiation of a contract serves as a waiver of the arbitration provision in the contract.

See Cinal v. Barna (2012) 206 Cal.App.4" 1383, 1390. Moving Party Defendants and Cross-
17 complainants'epudiation of the MOU and Shareholder denial of this
Agreements support
18
motion to enforce mediation and arbitration provisions therein.
19
Defendants failed to honor the terms of the MOU. Despite their promise to sign the 2019
20 "in
Shareholders'greement and the 2019 Stock Purchase Agreements substantially the form"
21
in which they were attached to the MOU, and despite the Defendants having agreed that "time
22
was of the essence" in completing and executing the referenced agreements, as of the date of the
23
filing of this Complaint, Defendants have never signed the 2019 Shareholders* Agreement or the
24
2019 Stock Purchase Agreements, and have never paid for their stock. In addition to their failure
25
to comply with their promises made in the MOU in a timely manner, since the signing of the
26
MOU, Defendants have repeatedly and consistently acted in a manner contrary to and/or
27
9
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMPEL MEDIATION/ARBITRATION
inconsistent with, the obligations set forth in the agreements they promised to sign but did not.

For example, under Section 6 of the 2019 Shareholder's Agreement, Defendants were to agree

that Litz was to serve as the Chief Executive Officer and the Chief Financial Officer of the
Corporation, and in such capacity, "will supervise, direct, and control the general business and
5 financial operations of the Corporation, although Sayat and Laura shall have the right to provide
6 advice and input with respect to such matters, and will perform such specific duties as the
7
Management Committee of the Corporation may from time to time request. Defendants have
8
acted to undermine Plaintiff s management and have sought to harm Plaintiff's operations and
9
economic viability. Defendants have repeatedly acted in a manner contrary to and in breach of
10
their obligations under the MOU, and have therefore waived any and all rights therein, including
to enforce the mediation provision. (See Downs Decl, $ 7 — 8)
12
NORCAL Mu/ual insurance Company v. New/on (2000) 84 Cal.App.4'" 64, cited by
13
Moving Parties, for the theory that Plaintiff's are estopped from opposing arbitration. In
14
NORCAL, involved a psychiatrist and his wife (who was involved in counseling patients but not
15
a named insured) claims against their insurer over whether a malpractice settlement paid by the
16
insurer covered the wife. The wife initially demanded arbitration along with her husband but
17
upon his death withdrew her demand. The Appellant Insurer filed a petition demanding
18
arbitration. The appellate court overturned the trial court denial of a petition to compel
19
respondent to arbitrate her claims against plaintiff despite the fact that she was not a party to the
20
arbitration clause because she had tendered her defense to the appellant insurer, allowed the
21
appellant to pay for her del'ense and participated in the settlement. She was therefore estopped
22

23 from disavowing the arbitration clause. In the present cause, as set forth above, Plaintiffs are not

24 seeking to enforce the MOU or any of its terms, and are, in fact, seeking to repudiate the MOU.

25 There's no basis for estoppel. For this same reason, Goldman v. KPMG, LLP (2009) 173

28 10
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION TO COMI'EL MEDIATION/ARBITRATION
Cal.App.4" 209 and Boucher v. Allied Title Company Inc. (2005) 127 Cal.App. 4'" 262, cited by
Moving Parties, are also not controlling or persuasive in this matter.
IV. DEFENDANT/CROSS-COMPLAINANTS HAVF. WAIVED ARBITRATION

Contractual rights are subject to waiver, and waiver may be express or implied by the

parties'onduct. (tj 1281.2; St. Agnes Medical Center v. PacifiCare of California (2003) 31

Cal.4th 1187, 1195, fn. 4) "[A] petition to compel arbitration will be denied when the right has
been waived by the proponent's failure to properly and timely assert it." (Guessy Inc. v.

Superior Court (2000) 79 Cal.App.4" 553,557; Code of Civ. Proc. 8 1281, 1281.2(a).) ln the
9
arbitration context, waiver does not require relinquishment of a known right, but arises from a
10
party's failure to perform an act it is required to perform, regardless of the party's intent to

relinquish the right to arbitration. Ibid. "[T]he failure to make a timely demand for arbitration
12
results in a 'waiver'f the right to compel arbitration...." Plan Pacific, Inc. v.Andelson (1993)
13
6 Cal.4th 307, 314. "A party seeking to prove waiver of a right to arbitration must demonstrate
14
"(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing
15
right; and (3) prejudice to the party opposing arbitration.*'/Hoover v. Am. Income Life Ins. Co.
16
(2012) 206 4'" Medical Center PacifiCare
Cal.App. 1193, 1203. St. Agnes v. of California at
17
page 1196 sets forth the following factors that a court must consider when determining whether a
18
party has waived its right to compel arbitration:
19
(1) whether the party's actions are inconsistent with the right to arbitrate;
20
(2) whether "the litigation machinery has been substantially invoked" and the parties "were
21
well into preparation of a lawsuit" before the party notified the opposing party of an
22
intent to arbitrate;
23
(3) whether a party either requested arbitration enforcement close to the trial date or delayed
24
for a long period before seeking a stay;
25
(4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of
26
the proceedings;
27

28 11
PLAINTIFFS'PPOSITION TO DEFENDANTS'OTION 'I'0 COMPFL Ml DIATION/ARBITRATION
(5) "whether important intervening steps [e.g., taking advantage of judicial discovery
procedures not available in arbitration] had taken place";

(6) whether the delay "affected, misled, or prejudiced" the opposing party.'*

In Zamora v. Lehman (2010) 188 Cal.App.4'" I, 17, the court found waiver where
defendants delayed in bringing their motion to compel arbitration and engaged in discovery not
available under the arbitration provision. "An attempt to gain a strategic advantage through
litigation in court before seeking to compel arbitration is a paradigm of conduct that is
inconsistent with the right to arbitrate." SPrunk v. Prisma LLC (2017 14 Cal.App.5'" 785, 798.
As set forth in Berman v. Health Net (2000) 80 Cal.App.4th 1359, 1372, "the crucial inquiry is

10 ... whether the party has availed itself of discovery not available in arbitration". In Bower v.

Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4'" 1035, 1043-1049, the Appellate Court
12 found that the defendant had waived its right to arbitration where they had engaged in discovery
13 and attempts to settle the claims, despite having asserted its right to arbitration in its answer to
14 the complaint and itsdiscovery responses. Defendants herein did not assert a right to arbitration
15 in their answer or discovery responses. In Oregel v. PacPizza, LLC 237 Cal.A

Case Info

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Garrett L. Wong Track Judge’s New Case

Case No.

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Document Filed Date

June 10, 2020

Case Filing Date

December 11, 2019

County

Parties

DOES 1 TO 100 INCLUSIVE Defendant
DOOLITTLE, WALLACE C. Attorneys for Plaintiffs
DOOLITTLE, WALLACE C. Attorney for the Plaintiff
FFG RESTAURANT GROUP, INC. Cross Defendant
FFG RESTAURANT GROUP, INC. Plaintiff
FORWARD FOOD GROUP, LLC Cross Defendant
FORWARD FOOD GROUP, LLC Plaintiff
LITZ, JOHN Cross Defendant
OZYILMAZ, LAURA Cross Complainant
OZYILMAZ, LAURA Defendant
OZYILMAZ, LAURA GABRIELA Defendant
OZYILMAZ, SAYAT Cross Complainant
OZYILMAZ, SAYAT Defendant
ROES 1 THROUGH 30 Cross Defendant
SCHWARTZ, DAVID HERMAN Attorneys for Plaintiffs
SOLLERS, YONGJIA Cross Defendant
STORM, LUCINDA L Attorneys for Defendants
STORM, LUCINDA L Attorney for the Defendant
James Downs Attorneys for Plaintiffs
Kenneth Hollenbeck Attorneys for Defendants
Nancy Chung Attorneys for Plaintiffs
David Yu Attorneys for Defendants
Carolyn Tawasha Attorney
Roberta Economidis Attorney
Jerry Sutter Attorney
Debra Mellinkoff Attorney

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Motion,Ex Parte: FFG RESTAURANT GROUP, INC. ET AL VS. SAYAT OZYILMAZ ET AL

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