Preview
1 Collin J. Vierra (State Bar No. 322720)
EIMER STAHL LLP
2 99 Almaden Blvd., Suite 600
San Jose, CA 95113-1605
3
Telephone: (408) 889-1668
4 Email: cvierra@eimerstahl.com
5 Attorney for Plaintiffs Robert Arntsen,
Mary Lee. Arntsen Family Partnership, LP,
6 Brian Christopher Dunn Custodianship,
John Ho, and Jacky Huang
7
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 COUNTY OF SAN MATEO
10
11 Robert Arntsen; Mary Lee; Arntsen Family Case No. 22-CIV-01148
Partnership, LP; Brian Christopher Dunn
12 Custodianship, John Ho, and Quanyu Huang; Dept. 21
13 Plaintiffs, Hon. Robert D. Foiles
14 v.
PLAINTIFFS JOHN HO’S AND
15 David M. Bragg; Silicon Valley Real Ventures QUANYU HUANG’S OPPOSITION TO
LLC; SVRV 385 Moore, LLC; SVRV 387 DEFENDANTS DAVID M. BRAGG’S
16 Moore, LLC; Gregory J. Davis; Kevin Wolfe; AND SILICON VALLEY REAL
Jason Justesen; Paramont Woodside, LLC; VENTURES, LLC’S MOTION TO
17
Paramont Capital, LLC; Monks Family Trust; COMPEL ARBITRATION
18 TEH Capital LLC; Caproc III, LLC; WZ
Partners, LLC; McClan Trust; Wild Rose Date: September 15, 2023
19 Irrevocable Trust; Black Horse Holdings, Time: 9:00 a.m.
LLC; Phil Stoker; Diane Stoker; Scott O’Neil; Dept.: 21
20 Dale Huish; and DOES 1–20,
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Defendants.
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 TABLE OF CONTENTS
2 INTRODUCTION .......................................................................................................................... 5
3 FACTUAL BACKGROUND ......................................................................................................... 7
4 PROCEDURAL BACKGROUND................................................................................................. 8
5 LEGAL STANDARD ................................................................................................................... 11
6 ARGUMENT ................................................................................................................................ 11
7 I. The Court Should Deny Bragg’s Motion. ............................................................. 11
8 A. Bragg’s Motion is Facially Defective. ...................................................... 12
9 B. Bragg Has Waived His Right to Arbitrate. ............................................... 12
10 1. Bragg Materially Breached the Arbitration Agreements By
Refusing to Pay His Share of the Initiation Fee ............................ 13
11
2. Bragg Repeatedly Failed to Invoke Any Right to Arbitrate in
12 These Proceedings and Engaged in Purposeful Obstruction
and Delay ...................................................................................... 15
13
C. Because the Parties to the Arbitration Agreements Are Currently
14 Litigating Nearly Identical Actions in this Court, Compelling
Arbitration Would Create the Risk of Conflicting Rulings on Myriad
15 Common Issues of Law and Fact. ............................................................. 16
16 II. If the Court Grants Bragg’s Motion, It Should Consolidate the Arbitration
Before a Single JAMS Arbitrator and Order Bragg to Promptly Pay His Share
17 of the Arbitration, Including the Initiation Fee, Under Threat of Sanctions......... 17
18 CONCLUSION ............................................................................................................................. 17
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 TABLE OF AUTHORITIES
2 Cases
3
Adolph v. Coastal Auto Sales, Inc.
4 (2010) 184 Cal.App.4th 1443 ................................................................................................... 15
5 Augusta v. Keehn & Assocs.
(2011) 193 Cal.App.4th 331 ..................................................................................................... 15
6
Badie v. Bank of Am.
7 (1998) 67 Cal.App.4th 779 ....................................................................................................... 14
8 Berland v. Conclave, LLC
(S.D. Cal. Mar. 20, 2023) 2023 WL 2583285 .......................................................................... 13
9
Brown v. Dillard’s, Inc.
10 (9th Cir. 2005) 430 F.3d 1004 .................................................................................................. 14
11 CBA Indus., Inc. v. Circulation Mgmt., Inc.
(N.Y. App. Div. 1992) 179 A.D.2d 615 .................................................................................. 14
12
Doe v. Massage Envy Franchising, LLC
13 (2022) 87 Cal.App.5th 23 ......................................................................................................... 12
14 Granite Rock Co. v. Teamsters
(2010) 1 U.S. 287 ..................................................................................................................... 12
15
Hoover v. Am. Income Life Ins. Co.
16 (2012) 206 Cal. App.4th 1193 .................................................................................................. 15
17 L.A. Unified Sch. Dist. v. Safety Nat’l Cas. Corp.
(2017) 13 Cal.App.5th 471 ....................................................................................................... 16
18
Lloyd’s Underwriters v. Craig & Rush, Inc.
19 (1994) 26 Cal.App.4th 1194 ..................................................................................................... 13
20 Mastick v. TD Ameritrade, Inc.
(2012) 209 Cal.App.4th 1258 ............................................................................................... 6, 17
21
O’Flaherty v. Belgum
22 (2004) 115 Cal.App.4th 1044 ................................................................................................... 13
23 Sandquist v. Lebo Auto., Inc.
(2016) 376 Cal.5th 233 ............................................................................................................. 12
24
Segal v. Silberstein
25 (2007) 156 Cal.App.4th 627 ..................................................................................................... 14
26 Sink v. Aden Enters.
(9th Cir. 2003) 352 F.3d 1197 .................................................................................................. 14
27
St. Agnes Med. Ctr. v. PacifiCare of Cal.
28 (2003) 31 Cal.4th 1187 ................................................................................................. 13, 14, 15
3
OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 Trigg v. Little Six Corp.
(Ten. Ct. App. 2014) 457 S.W.3d 906 ...................................................................................... 13
2
Statutes
3
4 11 U.S.C. § 362 ............................................................................................................................... 9
5 Civ. Code § 1644 .......................................................................................................................... 14
6 Civ. Code § 1654 .......................................................................................................................... 15
7 Code Civ. P. § 1281 ............................................................................................................... passim
8 Code Civ. P. § 1284 ...................................................................................................................... 13
9 Corp. Code § 17701 ........................................................................................................................ 8
10 Rules
11 JAMS Comprehensive Rule 31..................................................................................................... 14
12 JAMS Streamlined Rule 26 .......................................................................................................... 13
13 Rule of Court 3.1330..................................................................................................................... 12
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 INTRODUCTION
2 This Court consolidated the case filed by John Ho and Quanyu (“Jacky”) Huang with the
3 case filed by the Arntsen Plaintiffs because both sets of Plaintiffs assert nearly identical claims
4 against the same Defendants. Defendants David M. Bragg and Silicon Valley Real Ventures, LLC
5 (collectively, “Bragg”) nevertheless seek to compel arbitration of the claims asserted by John and
6 Jacky while litigating the remaining claims in this Court. That makes no sense, and Bragg’s motion
7 is facially defective because it fails to attach the correct arbitration agreements and does not even
8 cite the language in Jacky’s arbitration agreement.
9 But even aside from this technical defect, the motion should be denied because Bragg has
10 waived any right to arbitrate by explicitly refusing to pay his share of the arbitration fees, as
11 required under the unambiguous terms of the relevant arbitration provisions. The arbitration
12 provision in the Effective Operating Agreements, incorporated into the Investment-Subscription
13 Agreement that John signed, provides: “The costs of the arbitration shall be borne equally by
14 the parties to the arbitration.” The arbitration in the Unapproved Operating Agreements,
15 incorporated into the Investment-Subscription Agreements that Jacky signed, provides: “The
16 parties shall share equally all initial costs of arbitration.” Those provisions mirror California’s
17 default cost-sharing rule, as well as the default rule applied by JAMS, the arbitral forum that Bragg
18 selected. Indeed, Bragg’s motion even concedes that the arbitration provision in the Effective
19 Operative Agreements—which he claims binds both John and Jacky—requires the parties to split
20 the arbitration costs. Given that the arbitration provisions unambiguously require the parties to
21 share the costs of arbitration, Bragg’s bad-faith refusal to pay his share of the fees operates as a
22 clear waiver of any right to arbitrate. It also demonstrates that this motion is nothing more than the
23 latest in a long line of delay tactics designed to forestall the day of judgment for Bragg’s unlawful
24 conduct.
25 Bragg further waived his right to arbitrate by failing to move to compel arbitration for
26 more than nine months after learning that John and Jacky intended to assert claims against him.
27 Plaintiffs informed Bragg in September 2022 that they intended to file a Second Amended
28 Complaint that would include claims by John and Jacky. Yet Bragg did not inform John or Jacky
5
OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 that he intended to invoke the arbitration provision until March 2023. By that time, John and Jacky
2 had already filed an adversary proceeding complaint in federal bankruptcy court and a separate
3 complaint in this Court (necessitated by Bragg’s default in the Arntsen case), incurring filing fees
4 and requiring significant attorney time. John and Jacky have since responded to over 100 discovery
5 requests, and their depositions are scheduled for September 25 and 26, 2023. In fact, discovery
6 should be concluded in this case by the end of October 2023. It is far too late in the day to divert
7 John’s and Jacky’s claims to arbitration.
8 Even if Bragg had not waived his right to arbitrate, the motion to compel would still have
9 to be denied under California Code of Civil Procedure 1281.2(c) because multiple “part[ies] to the
10 arbitration agreement[s] [are] also [] part[ies] to a pending court action . . . with a third party,
11 arising out of the same transaction or series of related transactions and there is a possibility of
12 conflicting rulings on a common issue of law or fact.” The same claims against Bragg for fraud,
13 breach of fiduciary duty, and other torts that John and Jacky have asserted will be resolved in this
14 case because the Arntsen Plaintiffs’ claims will proceed to final judgment. If John and Jacky are
15 forced to arbitrate, there is a risk of conflicting rulings on common issues of law or fact related to
16 Bragg’s alleged misconduct. And forcing John and Jacky to arbitrate their claims against Bragg
17 will not even obviate the need for John and Jacky to participate in this case, because their claims
18 against the Paramont Defendants will proceed. In short, compelling arbitration of John’s and
19 Jacky’s claims against Bragg will waste the parties’ time and resources and raise the possibility of
20 conflicting rulings. This case thus presents “exactly the situation that Section 1281.2[(c)] . . . was
21 designed to deal with, where there is the potential for conflicting rulings because some of the
22 defendants have an arbitration agreement with plaintiff[s] and others do not.” (Mastick v. TD
23 Ameritrade, Inc. (2012) 209 Cal.App.4th 1258, 1262.)
24 For all these reasons, the Court should deny Bragg’s motion. If for some reason the Court
25 decides to grant the motion, it should order Bragg to pay his share of the arbitration fees within 10
26 days of receiving the invoice under threat of contempt sanctions and order the arbitrations
27 consolidated.
28
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 FACTUAL BACKGROUND
2 On October 12, 2018, John signed an investment-subscription agreement for the Moore
3 Road LLCs that incorporated the Effective Operating Agreements. 1 (John Decl., Exs. A–C.) The
4 Effective Operating Agreements contain an arbitration provision that states:
5 “Except as otherwise provided in this Agreement, any controversy between the parties
arising out of this Agreement shall be submitted to binding arbitration before one arbitrator
6 in San Mateo County, California. Arbitration shall be in conformity with CCP §1280 et.
seq., including discovery. If the parties cannot agree upon an arbitrator, either party may
7 petition the Superior Court of San Mateo County for an order appointing an arbitrator. The
costs of the arbitration shall be borne equally by the parties to the
8 arbitration. However, the prevailing party shall be entitled to recover attorneys’ fees,
expert witness fees and all costs associated with the arbitration, which shall be determined
9 by and awarded by the arbitrator. The arbitrator shall not have any power to alter, amend,
modify or change any of the terms of this Agreement nor to grant any remedy which is
10 either prohibited by the terms of this Agreement, or not available in a court of law. Panelists
with the American Arbitration Association shall not be qualified to serve as arbitrators.”
11
(Id., Exs. B–C, art. XII, cl. 4 [emphasis added].) Bragg drafted the Effective Operating Agreements
12
and gave John no opportunity to comment on or revise them prior to making his passive investment
13
in the Moore Road LLCs. (Id. ¶ 2.)
14
On January 30, 2020, Jacky signed an investment-subscription agreement for the Moore
15
Road LLCs that incorporated the Unapproved Operating Agreements. (Jacky Decl., Exs. A–D.)
16
The Unapproved Operating Agreements’ arbitration provision reads in full:
17
“Any action to enforce or interpret this Agreement or to resolve disputes among the
18 Members or between a Member and the Manager or by or against any Member or Manager
shall be settled by arbitration in accordance with the rules of the American Arbitration
19 Association. Arbitration shall be the exclusive dispute resolution process in the State of
California, but arbitration shall be a nonexclusive process elsewhere. Any party may
20 commence arbitration by sending a written demand for arbitration to the other parties. Such
demand shall set forth the nature of the matter to be resolved by arbitration. Arbitration
21 shall be conducted at San Francisco, California. The substantive law of the State of
California shall be applied by the arbitrator to the resolution of the dispute. The parties
22 shall share equally all initial costs of arbitration. The prevailing party shall be entitled
to reimbursement of attorney fees, costs, and expenses incurred in connection with the
23 arbitration. All decisions of the arbitrator shall be final, binding, and conclusive on all
parties. Judgment may be entered upon any such decision in accordance with applicable
24 law in any court having jurisdiction thereof.”
25
26 1
In fact, prior to this lawsuit, John had never even seen the original Effective Operating Agreements that
were ratified and agreed to by Bragg and the Arntsen Plaintiffs. (John Decl. ¶ 2.) Bragg concealed these
27 from John as part of his fraudulent scheme. However, because the Effective Operating Agreements
presented to the Arntsen Plaintiffs on the one hand, and John on the other, including their respective
28 arbitration provisions, were materially identical (except for the attached cap tables identifying the investors
in the Moore Road LLCs), Plaintiffs refer to both as the Effective Operating Agreements.
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 (Id., Exs. C–D, art. X, cl. 10.1 [emphasis added].) Bragg gave Jacky no opportunity to comment
2 on or revise the Unapproved Operating Agreements prior to making his passive investment in the
3 Moore Road LLCs. (Id. ¶ 2.)
4 When the Moore Road properties sold, Bragg failed to pay John his share of the proceeds,
5 as set forth in the Effective Operating Agreement incorporated into his Investment-Subscription
6 Agreement. (SAC ¶¶ 104, 171–2, 180.) Bragg likewise failed to pay Jacky his share of the
7 proceeds, either pursuant to the Effective Operating Agreements that governed the Moore Road
8 LLCs or the Unapproved Operating Agreements incorporated into the Investment-Subscription
9 Agreements that he signed. (Id. ¶¶ 147, 171–72, 180.) 2
10 PROCEDURAL BACKGROUND
11 In March 2022, Plaintiffs Robert Arntsen, the Arntsen Family Partnership, LP, the Brian
12 Christopher Dunn Custodianship, and Mary Lee (the “Arntsen Plaintiffs”) initiated claims against
13 Bragg for fraud, breach of fiduciary duty, and other legal violations that Bragg perpetrated on them
14 in connection with a real-estate project that Bragg managed called the Moore Road Project.
15 (Compl. (Mar. 15, 2022).)
16 Bragg defaulted. (Entry of Dft. (June 29, 2022).)
17 In August 2022, Plaintiffs filed their First Amended Complaint (“FAC”). (FAC (Aug. 22,
18 2022).) In September 2022, Plaintiffs informed Bragg that they intended to amend their complaint
19 to add John and Jacky as Plaintiffs, as they were also defrauded by Bragg in connection with the
20 Moore Road Project. (Vierra Decl. ¶ 4; Stip. (Sept. 21, 2022).) Bragg never informed John or Jacky
21 that he intended to invoke the respective arbitration provisions. (Vierra Decl. ¶ 5.) Had he done
22 so, John and Jacky could have immediately initiated arbitration instead of waiting for all
23 Defendants to consent to the filing of Plaintiffs’ Second Amended Complaint.
24 Bragg filed for bankruptcy on the day his response to the FAC was due, automatically
25 staying these proceedings as to him and preventing John and Jacky from asserting their claims in
26
2
Although Plaintiffs allege that the Effective Operating Agreements governed the Moore Road LLCs by
27 force of law (see, e.g., SAC ¶ 96; see also Corp. Code § 17701.11(a) [corporation is “bound by” its operating
agreement]), the Investment-Subscription Agreements that Jacky signed incorporated the Unapproved
28 Operating Agreements and their arbitration provisions (SAC ¶ 147.).
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 this Court. (Bankr. Pet., In re David Matthew Bragg, No. 22-22700 (Bankr. E.D. Cal. Oct. 21,
2 2022); 11 U.S.C. § 362(a).)
3 In December 2022, John and Jacky filed proofs of claim and an adversary proceeding
4 complaint in the bankruptcy court. (Vierra Decl. ¶ 6; Compl., Arntsen et al. v. Bragg, No. 22-
5 02112 (Bankr. E.D. Cal. Dec. 22, 2022).)
6 Bragg defaulted in the bankruptcy court. (Entry of Dft., Arntsen et al. v. Bragg, No. 22-
7 02112 (Bankr. E.D. Cal. Jan. 26, 2023).)
8 Bragg subsequently filed a belated answer to the adversary proceeding complaint in the
9 bankruptcy court. (Answer, Arntsen et al. v. Bragg, No. 22-02112 (Bankr. E.D. Cal. Jan. 31,
10 2023).) He also filed a status conference statement, proposed discovery plan, and initial disclosure
11 statement. (Status Conf. Stmt., Proposed Discovery Plan, & Initial Disclosure Stmt., Arntsen et al.
12 v. Bragg, No. 22-02112 (Bankr. E.D. Cal. Feb. 21, 2023).)
13 In February 2023, the bankruptcy court then lifted the automatic stay and ordered Bragg to
14 appear in this Court—not before any other tribunal—and litigate through judgment. (Order,
15 Arntsen et al. v. Bragg, No. 22-02112 (Bankr. E.D. Cal. Feb. 24, 2023).)
16 Bragg defaulted in the case filed by the Arntsen Plaintiffs, which prevented the Arntsen
17 Plaintiffs from filing a SAC that included John and Jacky. (Entry of Dft. (Feb. 28, 2023).)
18 On March 10, 2023, John and Jacky thus filed their own complaint against Bragg in this
19 Court, incurring $435 in filing fees and many multiples of that in attorneys’ fees and costs.
20 (Compl., Ho et al. v. Bragg et al., No. 23-CIV-01099 (Mar. 10, 2023); Vierra Decl. ¶ 7.) On March
21 16, 2023, Bragg informed Plaintiffs, for the first time, that he wanted to enforce the arbitration
22 provisions against John and Jacky. (Vierra Decl., Ex. A.) In a gesture of good faith, John and Jacky
23 agreed to arbitrate on the condition that Bragg agreed to pay his half of the arbitration initiation
24 fees as required by the arbitration provisions that Bragg drafted. 3 (Id., Exs. B, C.) John and Jacky
25
3
Bragg’s assertion that “Plaintiffs already agree their claims are subject to arbitration” is misleading, and
26 mischaracterizes the cited communication. (Mot 3:14, 5:2–3.) In fact, Bragg’s counsel asked, “Will
Plaintiffs agree to a two week extension of time for Bragg/SVRV to answer or otherwise respond to the
27 complaint . . . and not seek a default for any reason during the time extended to answer/respond”? (Vierra
Decl., Ex. B.) It was in response to that question—(no other questions appear in Bragg’s email)—that
28 Plaintiffs responded, “John and Jacky agree” to grant a two-week extension of time and not to seek a default
during that time. (See id.) John and Jacky did not concede that Bragg had a right to arbitrate.
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 suggested that their claims should be arbitrated jointly to save time and money. (Id., Ex. B.) They
2 granted Bragg a two-week extension to respond to their pending complaint so the parties could
3 work out the details of the arbitration. (Id.) Bragg proposed arbitrating before JAMS, which John
4 and Jacky accepted. (Id., Ex. C.)
5 On April 7, 2023, John and Jacky informed Bragg that the fee to initiate a joint arbitration
6 appeared to be $2,900, of which $1,450 would therefore be owed by Bragg. (Id., Ex. B.) John and
7 Jacky continued, “Next week, we’ll see if we can start to open the case with our $1,450, and then
8 send you instructions to transfer the remaining $1,450. If they require a single payment, we can
9 front the $2,900 and Bragg can cut us a check for the other half.” (Id.)
10 Bragg did not respond. (Id.)
11 On April 12, 2023, John and Jacky reached out to Bragg again, writing in relevant part,
12 “[P]lease let [us] know . . . whether Bragg/SVRV will pay his half of the arbitration initiation fee
13 ($1,450).” (Id.)
14 Bragg did not respond until April 17, 2023, at which point he asserted that he would not
15 pay his share (or any share) of the arbitration initiation fee. (Id.)
16 On April 20, 2023, John and Jacky responded to Bragg with a detailed explanation as to
17 why Bragg must pay for half of the arbitration initiation fee:
18 “As for costs, both John’s and Jacky’s Operating Agreements clearly require Bragg/SVRV
to pay for their share of costs. John’s reads, ‘The costs of the arbitration shall be borne
19 equally by the parties to the arbitration.’ Jacky’s reads, ‘The parties shall share equally all
initial costs of arbitration.’ In both cases, the prevailing party may recover their share of
20 fees from the losing party. Please let me know if Bragg/SVRV will pay their share of costs
as required by the arbitration agreements, or whether they are refusing.”
21
(Vierra Decl., Ex. C.)
22
John and Jacky also provided screenshots showing the exact text of each of the arbitration
23
provisions to which they respectively agreed. (Id.)
24
Nonetheless, Bragg again refused to pay his share of the arbitration initiation fee. (Id.)
25
Bragg threatened that he would file a motion to compel arbitration, but he declined to do so. (Id.)
26
Instead, Bragg defaulted to John’s and Jacky’s complaint. (Req. for Entry of Dft., Ho et al.
27
v. Bragg et al., No. 23-CIV-01099 (Apr. 25, 2023); Opp. to Mot. for Extension of Time, Ho et al.
28
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 v. Bragg et al., No. 23-CIV-01099 (May 16, 2023).)
2 On June 29, 2023, Bragg belatedly filed this motion. (Mot. to Compel Arb., Ho et al. v.
3 Bragg et al., No. 23-CIV-01099 (June 29, 2023).)
4 On June 30, 2023, Plaintiffs, including John and Jacky, filed a consolidated Second
5 Amended Complaint (“SAC”). (SAC (June 30, 2023); see also Order (Aug. 4, 2023).)
6 On July 31, 2023, Bragg answered the SAC by filing a general denial in this Court.
7 (General Denial (July 31, 2023).) He did not preserve, or even raise, any right to arbitrate. (See
8 id.) Nor has he preserved, or even raised, any right to arbitrate in any of his case management or
9 trial-setting conference statements in over a year.
10 LEGAL STANDARD
11 Even if a Court determines that a valid arbitration agreement exists, it may decline to
12 compel arbitration if, inter alia, “[t]he right to compel arbitration has been waived by the
13 petitioner” or “[a] party to the arbitration agreement is also a party to a pending court action or
14 special proceeding with a third party, arising out of the same transaction or series of related
15 transactions and there is a possibility of conflicting rulings on a common issue of law or fact.”
16 (Code Civ. P. §§ 1281.2(a), (c).)
17 If the Court decides to order arbitration, it may consolidate arbitrations if “(1) [s]eparate
18 arbitration agreements or proceedings exist between the same parties; or one party is a party to a
19 separate arbitration agreement or proceeding with a third party; . . . (2) [t]he disputes arise from
20 the same transactions or series of related transactions; and (3) [t]here is common issue or issues of
21 law or fact creating the possibility of conflicting rulings by more than one arbitrator or panel of
22 arbitrators.” (Id. § 1281.3.) The Court may also appoint an arbitrator and resolve any inconsistent
23 provisions between the arbitration agreements. (Id.)
24 ARGUMENT
25 I. The Court Should Deny Bragg’s Motion.
26 The Court should deny Bragg’s motion because (A) the motion is defective on its face; (B)
27 Bragg waived his right to compel arbitration; and (C) John, Jacky, and Bragg are parties to
28 proceedings that have been ongoing for more than a year, such that compelling arbitration would
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 create a risk of conflicting rulings on myriad identical issues of law and fact.
2 A. Bragg’s Motion is Facially Defective.
3 Rule of Court 3.1330 requires that a “petition to compel arbitration . . . must state, in
4 addition to other required allegations, the provisions of the written agreement and the paragraph
5 that provides for arbitration.” In addition, “[t]he provisions must be stated verbatim or a copy must
6 be physically or electronically attached to the petition and incorporated by reference.” (Id.) Yet
7 Bragg failed to attach the relevant arbitration provision that Jacky agreed to in his motion. Nor
8 does he even quote it. (See Jacky Decl., Exs. B, C.) Instead, Bragg claims that Jacky is bound by
9 the arbitration provisions in the Effective Operating Agreements even though he never even saw
10 those agreements, let alone consented to them. (Mot. 3:3–4; Jacky Decl. ¶ 2.) That argument is
11 absurd. “[A]rbitration is strictly ‘a matter of consent,’” (Sandquist v. Lebo Auto., Inc. (2016) 376
12 Cal.5th 233, 252 [quoting Granite Rock Co. v. Teamsters (2010) 1 U.S. 287, 299]), and Jacky
13 obviously could not have consented to an arbitration provision that was never presented to him
14 and that he was not even aware of until this lawsuit. (Accord Doe v. Massage Envy Franchising,
15 LLC (2022) 87 Cal.App.5th 23, 29, 31 [plaintiff did not enter into arbitration agreement because
16 she never saw it, even though she had the opportunity to see it].) To be sure, Plaintiffs allege that
17 the Effective Operating Agreements governed the Moore Road LLCs as a matter of law, but the
18 arbitration provision in those operating agreements cannot bind Jacky, who never consented to be
19 bound by them.
20 As to John, although the language in his arbitration provision is the same as that quoted in
21 Bragg’s motion, Bragg attached an incorrect version of the Effective Operating Agreements that
22 John never saw prior to this lawsuit (John Decl. ¶ 2.) The contract attached by Bragg was presented
23 only to the Arntsen Plaintiffs, as is obvious from the signature blocks and cap table, neither of
24 which mentions John or Jacky. (RVS Decl., Ex. 6, pp. 20–21.)
25 Bragg’s motion is thus procedurally defective as to both John and Jacky and can be denied
26 on that basis alone.
27 B. Bragg Has Waived His Right to Arbitrate.
28 Bragg cannot cure his defective motion because he has unambiguously waived his right to
12
OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 arbitrate by refusing to pay his share of the arbitration fees and by waiting for more than nine
2 months after learning of John’s and Jacky’s claims to move to compel arbitration.
3 In determining whether a party waived its right to arbitrate, courts consider “(1) whether
4 the party’s actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery
5 has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the
6 party notified the opposing party of an intent to arbitrate; (3) whether a party either requested
7 arbitration enforcement close to the trial date or delayed for a long period before seeking a stay;
8 (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the
9 proceedings; (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery
10 procedures not available in arbitration] had taken place’; and (6) whether the delay ‘affected,
11 misled, or prejudiced’ the opposing party.” (St. Agnes Med. Ctr. v. PacifiCare of Cal. (2003) 31
12 Cal.4th 1187, 1196 [internal citations omitted].)
13 Applying these factors here, there is no question that Bragg has waived his right to compel
14 arbitration of John’s and Jacky’s claims.
15 1. Bragg Materially Breached the Arbitration Agreements By Refusing to
Pay His Share of the Initiation Fee
16
The default rule in California is that “[u]nless the arbitration agreement otherwise provides
17
or the parties to the arbitration otherwise agree, each party to the arbitration shall pay his pro rata
18
share of the expenses and fees.” (Code Civ. P. § 1284.2.) The default rule for JAMS—the arbitral
19
provider that Bragg selected (Vierra Decl., Ex. C.)—likewise requires Bragg to pay his half of the
20
arbitration initiation fee. (See JAMS Streamlined Rule 26, https://tinyurl.com/3jjwwyxn; JAMS
21
Comprehensive Rule 31, https://tinyurl.com/mr4ch454.) Here, the parties’ arbitration agreements
22
do not override this default rule. On the contrary, they explicitly confirm that the parties are equally
23
responsible for arbitration initiation fees.
24
John’s arbitration agreement provides that “[t]he costs of the arbitration shall be borne
25
equally by the parties to the arbitration.” (Ho Decl., Exs. B–C, art. XII, cl. 4.) And Jacky’s
26
agreement similarly provides that “[t]he parties shall share equally all initial costs of arbitration.”
27
(Jacky Decl., Exs. C–D, art. X, cl. 10.1.) Bragg apparently believes that the language in John’s
28
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 arbitration provision—i.e., the provision in the Effective Operating Agreements—applies to Jacky
2 as well, even though he never saw or signed the Effective Operating Agreements. But even
3 assuming John and Jacky are both subject to the arbitration provision in the Effective Operating
4 Agreements, that provision, “understood in [its] ordinary and popular sense,” unambiguously
5 requires the parties to split all arbitration costs. (Civ. Code § 1644; see also Lloyd’s Underwriters
6 v. Craig & Rush, Inc. (1994) 26 Cal.App.4th 1194, 1197–98.) Indeed, the language used in the
7 Effective Operating Agreements is so boilerplate—and its meaning so obvious—that it has been
8 cited verbatim in multiple courts, including the Court of Appeals, without any apparent dispute as
9 to meaning: all costs must be shared equally. (See, e.g., O’Flaherty v. Belgum (2004) 115
10 Cal.App.4th 1044, 1049, 1052, 1054–55; Berland v. Conclave, LLC (S.D. Cal. Mar. 20, 2023)
11 2023 WL 2583285, at *11; Trigg v. Little Six Corp. (Ten. Ct. App. 2014) 457 S.W.3d 906, 913–
12 14; CBA Indus., Inc. v. Circulation Mgmt., Inc. (N.Y. App. Div. 1992) 179 A.D.2d 615, 616; cf.
13 Segal v. Silberstein (2007) 156 Cal.App.4th 627 [applying language in Jacky’s agreement].)
14 There is no reasonable reading of the arbitration provision that would allow Bragg to avoid
15 paying his half of the arbitration initiation fee, and Bragg does not even attempt to offer one.
16 Indeed, Bragg acknowledges that the operative language in the Effective Operating Agreements—
17 i.e., that “[t]he costs of the arbitration shall be borne equally by the parties to the arbitration”—
18 requires them to pay their half of the arbitration initiation fee. (Mot. 5:17–22.) He then bizarrely
19 asserts that “[n]o such obligation appears in the arbitration clause of the Effective Operating
20 Agreement, as shown above.” (Id. at 5:21–22.) But it obviously does. Indeed, Bragg copied this
21 exact language into the preceding page of his motion. (See id. at 4:19–20.) Such a flagrant
22 misstatement to the Court is borderline sanctionable.
23 Moreover, even if there were any uncertainty about the meaning of the fee-sharing
24 provision (which there is not), the language would have to be interpreted against Bragg because
25 he drafted the agreements. (Civ. Code § 1654; see Badie v. Bank of Am. (1998) 67 Cal.App.4th
26 779, 801 [holding that “a contract must be interpreted most strongly against the party who prepared
27 it” and noting that this “rule is applied with particular force in the case of adhesion contracts.”].)
28 In short, because Bragg does not (and cannot) contest that the arbitration provisions require
14
OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 him to pay his half of the arbitration initiation fee, his bad-faith refusal to pay that fee is a clear
2 waiver of his right to arbitrate. (See Brown v. Dillard’s, Inc. (9th Cir. 2005) 430 F.3d 1004, 1012–
3 13 [party waived right to compel arbitration by refusing to pay its share of the arbitration fees];
4 accord Sink v. Aden Enters. (9th Cir. 2003) 352 F.3d 1197, 1199.)
5 2. Bragg Repeatedly Failed to Invoke Any Right to Arbitrate in These
Proceedings and Engaged in Purposeful Obstruction and Delay
6
Bragg also waived his right to arbitrate by acting inconsistently with that right for nine
7
months, materially prejudicing John and Jacky. (St. Agnes, 31 Cal.4th at 1196.) Plaintiffs made
8
Bragg aware of John’s and Jacky’s claims in September 2022. (Vierra Decl. ¶ 4.) Had Bragg
9
invoked the arbitration provisions in September 2022, John and Jacky could have promptly served
10
an arbitration demand and may already have obtained an award.
11
Instead, Bragg did not even mention arbitration for six months and did not move to compel
12
arbitration for nine months. (Vierra Decl. ¶ 5 & Ex. A; see also Adolph v. Coastal Auto Sales, Inc.
13
(2010) 184 Cal.App.4th 1443, 1451–52 [no right to compel arbitration in case where defendant
14
waited six months]; Augusta v. Keehn & Assocs. (2011) 193 Cal.App.4th 331, 338-342 [similar].)
15
John and Jacky were not merely “well into preparation of a lawsuit” by that time (St. Agnes, 31
16
Cal.4th at 1196); they had already filed complaints in both state and federal court as well as proofs
17
of claim in the bankruptcy court. (Vierra Decl. ¶ 6; Compl., Ho et al. v. Bragg et al., No. 23-CIV-
18
01099 (Mar. 10, 2023).) They had also moved for default judgment and supported their
19
submissions with highly detailed evidence, incurring thousands of dollars in litigation costs, not
20
including attorneys’ fees. (Vierra Decl. ¶ 6.)
21
For his part, Bragg had already answered the federal complaint, submitted a discovery plan,
22
and submitted his initial disclosure statement before he filed this motion. (Id. ¶ 6.) Bragg has also
23
answered the consolidated SAC—which includes claims by John and Jacky—yet he did not
24
reserve, or even raise, any right to arbitrate. (Gen. Denial (July 31, 2023); see Hoover v. Am.
25
Income Life Ins. Co. (2012) 206 Cal. App.4th 1193 [affirming denial of defendant’s motion to
26
compel arbitration in part because defendant answered complaint without raising arbitration in
27
affirmative defenses].) Nor has Bragg raised arbitration in a single one of his case management or
28
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 trial-setting conference statements to date. (See Adolph, 184 Cal.App.4th at 1451 [affirming denial
2 of defendant’s motion to compel in part because defendant failed to assert arbitration in case
3 management statement].) Meanwhile, John and Jacky have responded to a whopping 112
4 interrogatories and requests for production in this action. (Vierra Decl. ¶ 3.) Discovery will be
5 completed this month or shortly thereafter. (Pls’ Trial-Setting Conf. Stmt. (Aug. 25, 2023).)
6 Clearly, the “litigation machinery has been substantially invoked,” and the Court should
7 not let Bragg derail this case yet again with a belated motion to compel arbitration. (St. Agnes, 31
8 Cal.4th at 1196 [internal citation omitted].) Given the lengthy delay that John and Jacky have
9 already endured in asserting their claims (eleven months and counting), as well as thousands of
10 dollars of litigation costs, any interruption in these proceedings would operate to John’s and
11 Jacky’s substantial prejudice, and reward Bragg’s blatant sandbagging.
12 C. Because the Parties to the Arbitration Agreements Are Currently Litigating
Nearly Identical Actions in this Court, Compelling Arbitration Would Create
13 the Risk of Conflicting Rulings on Myriad Common Issues of Law and Fact.
14 Bragg’s motion to compel arbitration should also be denied under section 1281.2(c)
15 because there is a concrete possibility of conflicting rulings if John and Jacky were required to
16 arbitrate. Notably, “[a] party relying on section 1281.2(c) to oppose a motion to compel arbitration
17 does not bear an evidentiary burden to establish a likelihood of success or make any other showing
18 regarding the viability of the claims and issues that create the possibility of conflicting rulings.”
19 (L.A. Unified Sch. Dist. v. Safety Nat’l Cas. Corp. (2017) 13 Cal.App.5th 471, 484 [citation
20 omitted].)
21 The SAC includes claims by John and Jacky against the Paramont Defendants.
22 Accordingly, John and Jacky will remain in this case regardless of whether the Court compels
23 arbitration of their claims against Bragg. The SAC also includes claims by the Arntsen Plaintiffs
24 against Bragg that are nearly identical to the claims asserted by John and Jacky. Compelling
25 arbitration would thus not relieve Bragg of the burdens of litigating these claims. And because the
26 issues Bragg purportedly seeks to arbitrate are functionally identical to the issues this Court will
27 resolve in the Arntsen Plaintiffs’ case, an order compelling arbitration would create a significant
28 risk of conflicting rulings on common issues of law and fact. Indeed, all of the issues of law and
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
1 fact decided by this Court in the Arntsen Plaintiffs’ case against Bragg (and in John’s and Jacky’s
2 case against the Paramont Defendants) will be preclusive as to John, Jacky, and Bragg. The
3 identicality and interconnectedness of these claims is an even greater concern here because
4 Plaintiffs allege joint and several liability as to many of their causes of action. (SAC pp. 67–92.)
5 Thus, “the present case is exactly the situation that Section 1281.2[(c)] . . . was designed
6 to deal with, where there is the potential for conflicting rulings because some of the defendants
7 have an arbitration agreement with plaintiff[s] and others do not. The interest of justice simply
8 would not be served by having [multiple] actions proceeding concurrently, or one after the other.”
9 (Mastick, 209 Cal.App.4th at 1262 [affirming denial of defendants’ motion to compel arbitration
10 under California law notwithstanding presence of valid arbitration agreement].)
11 The Court should therefore independently deny Bragg’s motion under section 1281.2(c).
12 II. If the Court Grants Bragg’s Motion, It Should Consolidate the Arbitration Before a
Single JAMS Arbitrator and Order Bragg to Promptly Pay His Share of the
13 Arbitration, Including the Initiation Fee, Under Threat of Sanctions.
14 Bragg’s motion to compel arbitration should be denied for the reasons set forth above. But
15 if this Court nevertheless decides to grant the motion, it should order the arbitration consolidated
16 before a single JAMS arbitrator. (Code Civ. P. § 1281.3; see Vierra Decl., Ex. C.) John’s and
17 Jacky’s disputes obviously arise from a series of related transactions and there are common issues
18 of law or fact that create the possibility of conflicting rulings if the arbitrations proceed separately.
19 (Code Civ. P. § 1281.3.) Any order compelling arbitration should also require Bragg to pay his
20 half of the initiation fee within 10 days of John and Jacky initiating the arbitration and to pay all
21 additional arbitration fees within 30 days of receiving the invoice. Should Bragg refuse to pay the
22 initiation fee or any other arbitral fees in another attempt to obstruct John’s and Jacky’s claims,
23 the Court should immediately lift the arbitral stay, declare Bragg to have waived his right to
24 arbitrate, and issue monetary, contempt, and terminating sanctions.
25 CONCLUSION
26 The Court should deny Bragg’s belated and defective motion to compel arbitration. The
27 Court need not order Bragg to answer the SAC, because he has already done so.
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
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2 Dated: September 1, 2023 By: ______________________
3 Collin J. Vierra
EIMER STAHL, LLP
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Attorney for Plaintiffs
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OPPOSITION TO MOTION TO COMPEL ARBITRATION
Preview
1 Collin J. Vierra (State Bar No. 322720) EIMER STAHL LLP 2 99 Almaden Blvd., Suite 600 San Jose, CA 95113-1605 3 Telephone: (408) 889-1668 4 Email: cvierra@eimerstahl.com 5 Attorney for Plaintiffs Robert Arntsen, Mary Lee. Arntsen Family Partnership, LP, 6 Brian Christopher Dunn Custodianship, John Ho, and Jacky Huang 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF SAN MATEO 10 11 Robert Arntsen; Mary Lee; Arntsen Family Case No. 22-CIV-01148 Partnership, LP; Brian Christopher Dunn 12 Custodianship, John Ho, and Quanyu Huang; Dept. 21 13 Plaintiffs, Hon. Robert D. Foiles 14 v. PLAINTIFFS JOHN HO’S AND 15 David M. Bragg; Silicon Valley Real Ventures QUANYU HUANG’S OPPOSITION TO LLC; SVRV 385 Moore, LLC; SVRV 387 DEFENDANTS DAVID M. BRAGG’S 16 Moore, LLC; Gregory J. Davis; Kevin Wolfe; AND SILICON VALLEY REAL Jason Justesen; Paramont Woodside, LLC; VENTURES, LLC’S MOTION TO 17 Paramont Capital, LLC; Monks Family Trust; COMPEL ARBITRATION 18 TEH Capital LLC; Caproc III, LLC; WZ Partners, LLC; McClan Trust; Wild Rose Date: September 15, 2023 19 Irrevocable Trust; Black Horse Holdings, Time: 9:00 a.m. LLC; Phil Stoker; Diane Stoker; Scott O’Neil; Dept.: 21 20 Dale Huish; and DOES 1–20, 21 Defendants. 22 23 24 25 26 27 28 1 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 TABLE OF CONTENTS 2 INTRODUCTION .......................................................................................................................... 5 3 FACTUAL BACKGROUND ......................................................................................................... 7 4 PROCEDURAL BACKGROUND................................................................................................. 8 5 LEGAL STANDARD ................................................................................................................... 11 6 ARGUMENT ................................................................................................................................ 11 7 I. The Court Should Deny Bragg’s Motion. ............................................................. 11 8 A. Bragg’s Motion is Facially Defective. ...................................................... 12 9 B. Bragg Has Waived His Right to Arbitrate. ............................................... 12 10 1. Bragg Materially Breached the Arbitration Agreements By Refusing to Pay His Share of the Initiation Fee ............................ 13 11 2. Bragg Repeatedly Failed to Invoke Any Right to Arbitrate in 12 These Proceedings and Engaged in Purposeful Obstruction and Delay ...................................................................................... 15 13 C. Because the Parties to the Arbitration Agreements Are Currently 14 Litigating Nearly Identical Actions in this Court, Compelling Arbitration Would Create the Risk of Conflicting Rulings on Myriad 15 Common Issues of Law and Fact. ............................................................. 16 16 II. If the Court Grants Bragg’s Motion, It Should Consolidate the Arbitration Before a Single JAMS Arbitrator and Order Bragg to Promptly Pay His Share 17 of the Arbitration, Including the Initiation Fee, Under Threat of Sanctions......... 17 18 CONCLUSION ............................................................................................................................. 17 19 20 21 22 23 24 25 26 27 28 2 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 TABLE OF AUTHORITIES 2 Cases 3 Adolph v. Coastal Auto Sales, Inc. 4 (2010) 184 Cal.App.4th 1443 ................................................................................................... 15 5 Augusta v. Keehn & Assocs. (2011) 193 Cal.App.4th 331 ..................................................................................................... 15 6 Badie v. Bank of Am. 7 (1998) 67 Cal.App.4th 779 ....................................................................................................... 14 8 Berland v. Conclave, LLC (S.D. Cal. Mar. 20, 2023) 2023 WL 2583285 .......................................................................... 13 9 Brown v. Dillard’s, Inc. 10 (9th Cir. 2005) 430 F.3d 1004 .................................................................................................. 14 11 CBA Indus., Inc. v. Circulation Mgmt., Inc. (N.Y. App. Div. 1992) 179 A.D.2d 615 .................................................................................. 14 12 Doe v. Massage Envy Franchising, LLC 13 (2022) 87 Cal.App.5th 23 ......................................................................................................... 12 14 Granite Rock Co. v. Teamsters (2010) 1 U.S. 287 ..................................................................................................................... 12 15 Hoover v. Am. Income Life Ins. Co. 16 (2012) 206 Cal. App.4th 1193 .................................................................................................. 15 17 L.A. Unified Sch. Dist. v. Safety Nat’l Cas. Corp. (2017) 13 Cal.App.5th 471 ....................................................................................................... 16 18 Lloyd’s Underwriters v. Craig & Rush, Inc. 19 (1994) 26 Cal.App.4th 1194 ..................................................................................................... 13 20 Mastick v. TD Ameritrade, Inc. (2012) 209 Cal.App.4th 1258 ............................................................................................... 6, 17 21 O’Flaherty v. Belgum 22 (2004) 115 Cal.App.4th 1044 ................................................................................................... 13 23 Sandquist v. Lebo Auto., Inc. (2016) 376 Cal.5th 233 ............................................................................................................. 12 24 Segal v. Silberstein 25 (2007) 156 Cal.App.4th 627 ..................................................................................................... 14 26 Sink v. Aden Enters. (9th Cir. 2003) 352 F.3d 1197 .................................................................................................. 14 27 St. Agnes Med. Ctr. v. PacifiCare of Cal. 28 (2003) 31 Cal.4th 1187 ................................................................................................. 13, 14, 15 3 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 Trigg v. Little Six Corp. (Ten. Ct. App. 2014) 457 S.W.3d 906 ...................................................................................... 13 2 Statutes 3 4 11 U.S.C. § 362 ............................................................................................................................... 9 5 Civ. Code § 1644 .......................................................................................................................... 14 6 Civ. Code § 1654 .......................................................................................................................... 15 7 Code Civ. P. § 1281 ............................................................................................................... passim 8 Code Civ. P. § 1284 ...................................................................................................................... 13 9 Corp. Code § 17701 ........................................................................................................................ 8 10 Rules 11 JAMS Comprehensive Rule 31..................................................................................................... 14 12 JAMS Streamlined Rule 26 .......................................................................................................... 13 13 Rule of Court 3.1330..................................................................................................................... 12 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 INTRODUCTION 2 This Court consolidated the case filed by John Ho and Quanyu (“Jacky”) Huang with the 3 case filed by the Arntsen Plaintiffs because both sets of Plaintiffs assert nearly identical claims 4 against the same Defendants. Defendants David M. Bragg and Silicon Valley Real Ventures, LLC 5 (collectively, “Bragg”) nevertheless seek to compel arbitration of the claims asserted by John and 6 Jacky while litigating the remaining claims in this Court. That makes no sense, and Bragg’s motion 7 is facially defective because it fails to attach the correct arbitration agreements and does not even 8 cite the language in Jacky’s arbitration agreement. 9 But even aside from this technical defect, the motion should be denied because Bragg has 10 waived any right to arbitrate by explicitly refusing to pay his share of the arbitration fees, as 11 required under the unambiguous terms of the relevant arbitration provisions. The arbitration 12 provision in the Effective Operating Agreements, incorporated into the Investment-Subscription 13 Agreement that John signed, provides: “The costs of the arbitration shall be borne equally by 14 the parties to the arbitration.” The arbitration in the Unapproved Operating Agreements, 15 incorporated into the Investment-Subscription Agreements that Jacky signed, provides: “The 16 parties shall share equally all initial costs of arbitration.” Those provisions mirror California’s 17 default cost-sharing rule, as well as the default rule applied by JAMS, the arbitral forum that Bragg 18 selected. Indeed, Bragg’s motion even concedes that the arbitration provision in the Effective 19 Operative Agreements—which he claims binds both John and Jacky—requires the parties to split 20 the arbitration costs. Given that the arbitration provisions unambiguously require the parties to 21 share the costs of arbitration, Bragg’s bad-faith refusal to pay his share of the fees operates as a 22 clear waiver of any right to arbitrate. It also demonstrates that this motion is nothing more than the 23 latest in a long line of delay tactics designed to forestall the day of judgment for Bragg’s unlawful 24 conduct. 25 Bragg further waived his right to arbitrate by failing to move to compel arbitration for 26 more than nine months after learning that John and Jacky intended to assert claims against him. 27 Plaintiffs informed Bragg in September 2022 that they intended to file a Second Amended 28 Complaint that would include claims by John and Jacky. Yet Bragg did not inform John or Jacky 5 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 that he intended to invoke the arbitration provision until March 2023. By that time, John and Jacky 2 had already filed an adversary proceeding complaint in federal bankruptcy court and a separate 3 complaint in this Court (necessitated by Bragg’s default in the Arntsen case), incurring filing fees 4 and requiring significant attorney time. John and Jacky have since responded to over 100 discovery 5 requests, and their depositions are scheduled for September 25 and 26, 2023. In fact, discovery 6 should be concluded in this case by the end of October 2023. It is far too late in the day to divert 7 John’s and Jacky’s claims to arbitration. 8 Even if Bragg had not waived his right to arbitrate, the motion to compel would still have 9 to be denied under California Code of Civil Procedure 1281.2(c) because multiple “part[ies] to the 10 arbitration agreement[s] [are] also [] part[ies] to a pending court action . . . with a third party, 11 arising out of the same transaction or series of related transactions and there is a possibility of 12 conflicting rulings on a common issue of law or fact.” The same claims against Bragg for fraud, 13 breach of fiduciary duty, and other torts that John and Jacky have asserted will be resolved in this 14 case because the Arntsen Plaintiffs’ claims will proceed to final judgment. If John and Jacky are 15 forced to arbitrate, there is a risk of conflicting rulings on common issues of law or fact related to 16 Bragg’s alleged misconduct. And forcing John and Jacky to arbitrate their claims against Bragg 17 will not even obviate the need for John and Jacky to participate in this case, because their claims 18 against the Paramont Defendants will proceed. In short, compelling arbitration of John’s and 19 Jacky’s claims against Bragg will waste the parties’ time and resources and raise the possibility of 20 conflicting rulings. This case thus presents “exactly the situation that Section 1281.2[(c)] . . . was 21 designed to deal with, where there is the potential for conflicting rulings because some of the 22 defendants have an arbitration agreement with plaintiff[s] and others do not.” (Mastick v. TD 23 Ameritrade, Inc. (2012) 209 Cal.App.4th 1258, 1262.) 24 For all these reasons, the Court should deny Bragg’s motion. If for some reason the Court 25 decides to grant the motion, it should order Bragg to pay his share of the arbitration fees within 10 26 days of receiving the invoice under threat of contempt sanctions and order the arbitrations 27 consolidated. 28 6 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 FACTUAL BACKGROUND 2 On October 12, 2018, John signed an investment-subscription agreement for the Moore 3 Road LLCs that incorporated the Effective Operating Agreements. 1 (John Decl., Exs. A–C.) The 4 Effective Operating Agreements contain an arbitration provision that states: 5 “Except as otherwise provided in this Agreement, any controversy between the parties arising out of this Agreement shall be submitted to binding arbitration before one arbitrator 6 in San Mateo County, California. Arbitration shall be in conformity with CCP §1280 et. seq., including discovery. If the parties cannot agree upon an arbitrator, either party may 7 petition the Superior Court of San Mateo County for an order appointing an arbitrator. The costs of the arbitration shall be borne equally by the parties to the 8 arbitration. However, the prevailing party shall be entitled to recover attorneys’ fees, expert witness fees and all costs associated with the arbitration, which shall be determined 9 by and awarded by the arbitrator. The arbitrator shall not have any power to alter, amend, modify or change any of the terms of this Agreement nor to grant any remedy which is 10 either prohibited by the terms of this Agreement, or not available in a court of law. Panelists with the American Arbitration Association shall not be qualified to serve as arbitrators.” 11 (Id., Exs. B–C, art. XII, cl. 4 [emphasis added].) Bragg drafted the Effective Operating Agreements 12 and gave John no opportunity to comment on or revise them prior to making his passive investment 13 in the Moore Road LLCs. (Id. ¶ 2.) 14 On January 30, 2020, Jacky signed an investment-subscription agreement for the Moore 15 Road LLCs that incorporated the Unapproved Operating Agreements. (Jacky Decl., Exs. A–D.) 16 The Unapproved Operating Agreements’ arbitration provision reads in full: 17 “Any action to enforce or interpret this Agreement or to resolve disputes among the 18 Members or between a Member and the Manager or by or against any Member or Manager shall be settled by arbitration in accordance with the rules of the American Arbitration 19 Association. Arbitration shall be the exclusive dispute resolution process in the State of California, but arbitration shall be a nonexclusive process elsewhere. Any party may 20 commence arbitration by sending a written demand for arbitration to the other parties. Such demand shall set forth the nature of the matter to be resolved by arbitration. Arbitration 21 shall be conducted at San Francisco, California. The substantive law of the State of California shall be applied by the arbitrator to the resolution of the dispute. The parties 22 shall share equally all initial costs of arbitration. The prevailing party shall be entitled to reimbursement of attorney fees, costs, and expenses incurred in connection with the 23 arbitration. All decisions of the arbitrator shall be final, binding, and conclusive on all parties. Judgment may be entered upon any such decision in accordance with applicable 24 law in any court having jurisdiction thereof.” 25 26 1 In fact, prior to this lawsuit, John had never even seen the original Effective Operating Agreements that were ratified and agreed to by Bragg and the Arntsen Plaintiffs. (John Decl. ¶ 2.) Bragg concealed these 27 from John as part of his fraudulent scheme. However, because the Effective Operating Agreements presented to the Arntsen Plaintiffs on the one hand, and John on the other, including their respective 28 arbitration provisions, were materially identical (except for the attached cap tables identifying the investors in the Moore Road LLCs), Plaintiffs refer to both as the Effective Operating Agreements. 7 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 (Id., Exs. C–D, art. X, cl. 10.1 [emphasis added].) Bragg gave Jacky no opportunity to comment 2 on or revise the Unapproved Operating Agreements prior to making his passive investment in the 3 Moore Road LLCs. (Id. ¶ 2.) 4 When the Moore Road properties sold, Bragg failed to pay John his share of the proceeds, 5 as set forth in the Effective Operating Agreement incorporated into his Investment-Subscription 6 Agreement. (SAC ¶¶ 104, 171–2, 180.) Bragg likewise failed to pay Jacky his share of the 7 proceeds, either pursuant to the Effective Operating Agreements that governed the Moore Road 8 LLCs or the Unapproved Operating Agreements incorporated into the Investment-Subscription 9 Agreements that he signed. (Id. ¶¶ 147, 171–72, 180.) 2 10 PROCEDURAL BACKGROUND 11 In March 2022, Plaintiffs Robert Arntsen, the Arntsen Family Partnership, LP, the Brian 12 Christopher Dunn Custodianship, and Mary Lee (the “Arntsen Plaintiffs”) initiated claims against 13 Bragg for fraud, breach of fiduciary duty, and other legal violations that Bragg perpetrated on them 14 in connection with a real-estate project that Bragg managed called the Moore Road Project. 15 (Compl. (Mar. 15, 2022).) 16 Bragg defaulted. (Entry of Dft. (June 29, 2022).) 17 In August 2022, Plaintiffs filed their First Amended Complaint (“FAC”). (FAC (Aug. 22, 18 2022).) In September 2022, Plaintiffs informed Bragg that they intended to amend their complaint 19 to add John and Jacky as Plaintiffs, as they were also defrauded by Bragg in connection with the 20 Moore Road Project. (Vierra Decl. ¶ 4; Stip. (Sept. 21, 2022).) Bragg never informed John or Jacky 21 that he intended to invoke the respective arbitration provisions. (Vierra Decl. ¶ 5.) Had he done 22 so, John and Jacky could have immediately initiated arbitration instead of waiting for all 23 Defendants to consent to the filing of Plaintiffs’ Second Amended Complaint. 24 Bragg filed for bankruptcy on the day his response to the FAC was due, automatically 25 staying these proceedings as to him and preventing John and Jacky from asserting their claims in 26 2 Although Plaintiffs allege that the Effective Operating Agreements governed the Moore Road LLCs by 27 force of law (see, e.g., SAC ¶ 96; see also Corp. Code § 17701.11(a) [corporation is “bound by” its operating agreement]), the Investment-Subscription Agreements that Jacky signed incorporated the Unapproved 28 Operating Agreements and their arbitration provisions (SAC ¶ 147.). 8 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 this Court. (Bankr. Pet., In re David Matthew Bragg, No. 22-22700 (Bankr. E.D. Cal. Oct. 21, 2 2022); 11 U.S.C. § 362(a).) 3 In December 2022, John and Jacky filed proofs of claim and an adversary proceeding 4 complaint in the bankruptcy court. (Vierra Decl. ¶ 6; Compl., Arntsen et al. v. Bragg, No. 22- 5 02112 (Bankr. E.D. Cal. Dec. 22, 2022).) 6 Bragg defaulted in the bankruptcy court. (Entry of Dft., Arntsen et al. v. Bragg, No. 22- 7 02112 (Bankr. E.D. Cal. Jan. 26, 2023).) 8 Bragg subsequently filed a belated answer to the adversary proceeding complaint in the 9 bankruptcy court. (Answer, Arntsen et al. v. Bragg, No. 22-02112 (Bankr. E.D. Cal. Jan. 31, 10 2023).) He also filed a status conference statement, proposed discovery plan, and initial disclosure 11 statement. (Status Conf. Stmt., Proposed Discovery Plan, & Initial Disclosure Stmt., Arntsen et al. 12 v. Bragg, No. 22-02112 (Bankr. E.D. Cal. Feb. 21, 2023).) 13 In February 2023, the bankruptcy court then lifted the automatic stay and ordered Bragg to 14 appear in this Court—not before any other tribunal—and litigate through judgment. (Order, 15 Arntsen et al. v. Bragg, No. 22-02112 (Bankr. E.D. Cal. Feb. 24, 2023).) 16 Bragg defaulted in the case filed by the Arntsen Plaintiffs, which prevented the Arntsen 17 Plaintiffs from filing a SAC that included John and Jacky. (Entry of Dft. (Feb. 28, 2023).) 18 On March 10, 2023, John and Jacky thus filed their own complaint against Bragg in this 19 Court, incurring $435 in filing fees and many multiples of that in attorneys’ fees and costs. 20 (Compl., Ho et al. v. Bragg et al., No. 23-CIV-01099 (Mar. 10, 2023); Vierra Decl. ¶ 7.) On March 21 16, 2023, Bragg informed Plaintiffs, for the first time, that he wanted to enforce the arbitration 22 provisions against John and Jacky. (Vierra Decl., Ex. A.) In a gesture of good faith, John and Jacky 23 agreed to arbitrate on the condition that Bragg agreed to pay his half of the arbitration initiation 24 fees as required by the arbitration provisions that Bragg drafted. 3 (Id., Exs. B, C.) John and Jacky 25 3 Bragg’s assertion that “Plaintiffs already agree their claims are subject to arbitration” is misleading, and 26 mischaracterizes the cited communication. (Mot 3:14, 5:2–3.) In fact, Bragg’s counsel asked, “Will Plaintiffs agree to a two week extension of time for Bragg/SVRV to answer or otherwise respond to the 27 complaint . . . and not seek a default for any reason during the time extended to answer/respond”? (Vierra Decl., Ex. B.) It was in response to that question—(no other questions appear in Bragg’s email)—that 28 Plaintiffs responded, “John and Jacky agree” to grant a two-week extension of time and not to seek a default during that time. (See id.) John and Jacky did not concede that Bragg had a right to arbitrate. 9 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 suggested that their claims should be arbitrated jointly to save time and money. (Id., Ex. B.) They 2 granted Bragg a two-week extension to respond to their pending complaint so the parties could 3 work out the details of the arbitration. (Id.) Bragg proposed arbitrating before JAMS, which John 4 and Jacky accepted. (Id., Ex. C.) 5 On April 7, 2023, John and Jacky informed Bragg that the fee to initiate a joint arbitration 6 appeared to be $2,900, of which $1,450 would therefore be owed by Bragg. (Id., Ex. B.) John and 7 Jacky continued, “Next week, we’ll see if we can start to open the case with our $1,450, and then 8 send you instructions to transfer the remaining $1,450. If they require a single payment, we can 9 front the $2,900 and Bragg can cut us a check for the other half.” (Id.) 10 Bragg did not respond. (Id.) 11 On April 12, 2023, John and Jacky reached out to Bragg again, writing in relevant part, 12 “[P]lease let [us] know . . . whether Bragg/SVRV will pay his half of the arbitration initiation fee 13 ($1,450).” (Id.) 14 Bragg did not respond until April 17, 2023, at which point he asserted that he would not 15 pay his share (or any share) of the arbitration initiation fee. (Id.) 16 On April 20, 2023, John and Jacky responded to Bragg with a detailed explanation as to 17 why Bragg must pay for half of the arbitration initiation fee: 18 “As for costs, both John’s and Jacky’s Operating Agreements clearly require Bragg/SVRV to pay for their share of costs. John’s reads, ‘The costs of the arbitration shall be borne 19 equally by the parties to the arbitration.’ Jacky’s reads, ‘The parties shall share equally all initial costs of arbitration.’ In both cases, the prevailing party may recover their share of 20 fees from the losing party. Please let me know if Bragg/SVRV will pay their share of costs as required by the arbitration agreements, or whether they are refusing.” 21 (Vierra Decl., Ex. C.) 22 John and Jacky also provided screenshots showing the exact text of each of the arbitration 23 provisions to which they respectively agreed. (Id.) 24 Nonetheless, Bragg again refused to pay his share of the arbitration initiation fee. (Id.) 25 Bragg threatened that he would file a motion to compel arbitration, but he declined to do so. (Id.) 26 Instead, Bragg defaulted to John’s and Jacky’s complaint. (Req. for Entry of Dft., Ho et al. 27 v. Bragg et al., No. 23-CIV-01099 (Apr. 25, 2023); Opp. to Mot. for Extension of Time, Ho et al. 28 10 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 v. Bragg et al., No. 23-CIV-01099 (May 16, 2023).) 2 On June 29, 2023, Bragg belatedly filed this motion. (Mot. to Compel Arb., Ho et al. v. 3 Bragg et al., No. 23-CIV-01099 (June 29, 2023).) 4 On June 30, 2023, Plaintiffs, including John and Jacky, filed a consolidated Second 5 Amended Complaint (“SAC”). (SAC (June 30, 2023); see also Order (Aug. 4, 2023).) 6 On July 31, 2023, Bragg answered the SAC by filing a general denial in this Court. 7 (General Denial (July 31, 2023).) He did not preserve, or even raise, any right to arbitrate. (See 8 id.) Nor has he preserved, or even raised, any right to arbitrate in any of his case management or 9 trial-setting conference statements in over a year. 10 LEGAL STANDARD 11 Even if a Court determines that a valid arbitration agreement exists, it may decline to 12 compel arbitration if, inter alia, “[t]he right to compel arbitration has been waived by the 13 petitioner” or “[a] party to the arbitration agreement is also a party to a pending court action or 14 special proceeding with a third party, arising out of the same transaction or series of related 15 transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” 16 (Code Civ. P. §§ 1281.2(a), (c).) 17 If the Court decides to order arbitration, it may consolidate arbitrations if “(1) [s]eparate 18 arbitration agreements or proceedings exist between the same parties; or one party is a party to a 19 separate arbitration agreement or proceeding with a third party; . . . (2) [t]he disputes arise from 20 the same transactions or series of related transactions; and (3) [t]here is common issue or issues of 21 law or fact creating the possibility of conflicting rulings by more than one arbitrator or panel of 22 arbitrators.” (Id. § 1281.3.) The Court may also appoint an arbitrator and resolve any inconsistent 23 provisions between the arbitration agreements. (Id.) 24 ARGUMENT 25 I. The Court Should Deny Bragg’s Motion. 26 The Court should deny Bragg’s motion because (A) the motion is defective on its face; (B) 27 Bragg waived his right to compel arbitration; and (C) John, Jacky, and Bragg are parties to 28 proceedings that have been ongoing for more than a year, such that compelling arbitration would 11 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 create a risk of conflicting rulings on myriad identical issues of law and fact. 2 A. Bragg’s Motion is Facially Defective. 3 Rule of Court 3.1330 requires that a “petition to compel arbitration . . . must state, in 4 addition to other required allegations, the provisions of the written agreement and the paragraph 5 that provides for arbitration.” In addition, “[t]he provisions must be stated verbatim or a copy must 6 be physically or electronically attached to the petition and incorporated by reference.” (Id.) Yet 7 Bragg failed to attach the relevant arbitration provision that Jacky agreed to in his motion. Nor 8 does he even quote it. (See Jacky Decl., Exs. B, C.) Instead, Bragg claims that Jacky is bound by 9 the arbitration provisions in the Effective Operating Agreements even though he never even saw 10 those agreements, let alone consented to them. (Mot. 3:3–4; Jacky Decl. ¶ 2.) That argument is 11 absurd. “[A]rbitration is strictly ‘a matter of consent,’” (Sandquist v. Lebo Auto., Inc. (2016) 376 12 Cal.5th 233, 252 [quoting Granite Rock Co. v. Teamsters (2010) 1 U.S. 287, 299]), and Jacky 13 obviously could not have consented to an arbitration provision that was never presented to him 14 and that he was not even aware of until this lawsuit. (Accord Doe v. Massage Envy Franchising, 15 LLC (2022) 87 Cal.App.5th 23, 29, 31 [plaintiff did not enter into arbitration agreement because 16 she never saw it, even though she had the opportunity to see it].) To be sure, Plaintiffs allege that 17 the Effective Operating Agreements governed the Moore Road LLCs as a matter of law, but the 18 arbitration provision in those operating agreements cannot bind Jacky, who never consented to be 19 bound by them. 20 As to John, although the language in his arbitration provision is the same as that quoted in 21 Bragg’s motion, Bragg attached an incorrect version of the Effective Operating Agreements that 22 John never saw prior to this lawsuit (John Decl. ¶ 2.) The contract attached by Bragg was presented 23 only to the Arntsen Plaintiffs, as is obvious from the signature blocks and cap table, neither of 24 which mentions John or Jacky. (RVS Decl., Ex. 6, pp. 20–21.) 25 Bragg’s motion is thus procedurally defective as to both John and Jacky and can be denied 26 on that basis alone. 27 B. Bragg Has Waived His Right to Arbitrate. 28 Bragg cannot cure his defective motion because he has unambiguously waived his right to 12 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 arbitrate by refusing to pay his share of the arbitration fees and by waiting for more than nine 2 months after learning of John’s and Jacky’s claims to move to compel arbitration. 3 In determining whether a party waived its right to arbitrate, courts consider “(1) whether 4 the party’s actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery 5 has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the 6 party notified the opposing party of an intent to arbitrate; (3) whether a party either requested 7 arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; 8 (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the 9 proceedings; (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery 10 procedures not available in arbitration] had taken place’; and (6) whether the delay ‘affected, 11 misled, or prejudiced’ the opposing party.” (St. Agnes Med. Ctr. v. PacifiCare of Cal. (2003) 31 12 Cal.4th 1187, 1196 [internal citations omitted].) 13 Applying these factors here, there is no question that Bragg has waived his right to compel 14 arbitration of John’s and Jacky’s claims. 15 1. Bragg Materially Breached the Arbitration Agreements By Refusing to Pay His Share of the Initiation Fee 16 The default rule in California is that “[u]nless the arbitration agreement otherwise provides 17 or the parties to the arbitration otherwise agree, each party to the arbitration shall pay his pro rata 18 share of the expenses and fees.” (Code Civ. P. § 1284.2.) The default rule for JAMS—the arbitral 19 provider that Bragg selected (Vierra Decl., Ex. C.)—likewise requires Bragg to pay his half of the 20 arbitration initiation fee. (See JAMS Streamlined Rule 26, https://tinyurl.com/3jjwwyxn; JAMS 21 Comprehensive Rule 31, https://tinyurl.com/mr4ch454.) Here, the parties’ arbitration agreements 22 do not override this default rule. On the contrary, they explicitly confirm that the parties are equally 23 responsible for arbitration initiation fees. 24 John’s arbitration agreement provides that “[t]he costs of the arbitration shall be borne 25 equally by the parties to the arbitration.” (Ho Decl., Exs. B–C, art. XII, cl. 4.) And Jacky’s 26 agreement similarly provides that “[t]he parties shall share equally all initial costs of arbitration.” 27 (Jacky Decl., Exs. C–D, art. X, cl. 10.1.) Bragg apparently believes that the language in John’s 28 13 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 arbitration provision—i.e., the provision in the Effective Operating Agreements—applies to Jacky 2 as well, even though he never saw or signed the Effective Operating Agreements. But even 3 assuming John and Jacky are both subject to the arbitration provision in the Effective Operating 4 Agreements, that provision, “understood in [its] ordinary and popular sense,” unambiguously 5 requires the parties to split all arbitration costs. (Civ. Code § 1644; see also Lloyd’s Underwriters 6 v. Craig & Rush, Inc. (1994) 26 Cal.App.4th 1194, 1197–98.) Indeed, the language used in the 7 Effective Operating Agreements is so boilerplate—and its meaning so obvious—that it has been 8 cited verbatim in multiple courts, including the Court of Appeals, without any apparent dispute as 9 to meaning: all costs must be shared equally. (See, e.g., O’Flaherty v. Belgum (2004) 115 10 Cal.App.4th 1044, 1049, 1052, 1054–55; Berland v. Conclave, LLC (S.D. Cal. Mar. 20, 2023) 11 2023 WL 2583285, at *11; Trigg v. Little Six Corp. (Ten. Ct. App. 2014) 457 S.W.3d 906, 913– 12 14; CBA Indus., Inc. v. Circulation Mgmt., Inc. (N.Y. App. Div. 1992) 179 A.D.2d 615, 616; cf. 13 Segal v. Silberstein (2007) 156 Cal.App.4th 627 [applying language in Jacky’s agreement].) 14 There is no reasonable reading of the arbitration provision that would allow Bragg to avoid 15 paying his half of the arbitration initiation fee, and Bragg does not even attempt to offer one. 16 Indeed, Bragg acknowledges that the operative language in the Effective Operating Agreements— 17 i.e., that “[t]he costs of the arbitration shall be borne equally by the parties to the arbitration”— 18 requires them to pay their half of the arbitration initiation fee. (Mot. 5:17–22.) He then bizarrely 19 asserts that “[n]o such obligation appears in the arbitration clause of the Effective Operating 20 Agreement, as shown above.” (Id. at 5:21–22.) But it obviously does. Indeed, Bragg copied this 21 exact language into the preceding page of his motion. (See id. at 4:19–20.) Such a flagrant 22 misstatement to the Court is borderline sanctionable. 23 Moreover, even if there were any uncertainty about the meaning of the fee-sharing 24 provision (which there is not), the language would have to be interpreted against Bragg because 25 he drafted the agreements. (Civ. Code § 1654; see Badie v. Bank of Am. (1998) 67 Cal.App.4th 26 779, 801 [holding that “a contract must be interpreted most strongly against the party who prepared 27 it” and noting that this “rule is applied with particular force in the case of adhesion contracts.”].) 28 In short, because Bragg does not (and cannot) contest that the arbitration provisions require 14 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 him to pay his half of the arbitration initiation fee, his bad-faith refusal to pay that fee is a clear 2 waiver of his right to arbitrate. (See Brown v. Dillard’s, Inc. (9th Cir. 2005) 430 F.3d 1004, 1012– 3 13 [party waived right to compel arbitration by refusing to pay its share of the arbitration fees]; 4 accord Sink v. Aden Enters. (9th Cir. 2003) 352 F.3d 1197, 1199.) 5 2. Bragg Repeatedly Failed to Invoke Any Right to Arbitrate in These Proceedings and Engaged in Purposeful Obstruction and Delay 6 Bragg also waived his right to arbitrate by acting inconsistently with that right for nine 7 months, materially prejudicing John and Jacky. (St. Agnes, 31 Cal.4th at 1196.) Plaintiffs made 8 Bragg aware of John’s and Jacky’s claims in September 2022. (Vierra Decl. ¶ 4.) Had Bragg 9 invoked the arbitration provisions in September 2022, John and Jacky could have promptly served 10 an arbitration demand and may already have obtained an award. 11 Instead, Bragg did not even mention arbitration for six months and did not move to compel 12 arbitration for nine months. (Vierra Decl. ¶ 5 & Ex. A; see also Adolph v. Coastal Auto Sales, Inc. 13 (2010) 184 Cal.App.4th 1443, 1451–52 [no right to compel arbitration in case where defendant 14 waited six months]; Augusta v. Keehn & Assocs. (2011) 193 Cal.App.4th 331, 338-342 [similar].) 15 John and Jacky were not merely “well into preparation of a lawsuit” by that time (St. Agnes, 31 16 Cal.4th at 1196); they had already filed complaints in both state and federal court as well as proofs 17 of claim in the bankruptcy court. (Vierra Decl. ¶ 6; Compl., Ho et al. v. Bragg et al., No. 23-CIV- 18 01099 (Mar. 10, 2023).) They had also moved for default judgment and supported their 19 submissions with highly detailed evidence, incurring thousands of dollars in litigation costs, not 20 including attorneys’ fees. (Vierra Decl. ¶ 6.) 21 For his part, Bragg had already answered the federal complaint, submitted a discovery plan, 22 and submitted his initial disclosure statement before he filed this motion. (Id. ¶ 6.) Bragg has also 23 answered the consolidated SAC—which includes claims by John and Jacky—yet he did not 24 reserve, or even raise, any right to arbitrate. (Gen. Denial (July 31, 2023); see Hoover v. Am. 25 Income Life Ins. Co. (2012) 206 Cal. App.4th 1193 [affirming denial of defendant’s motion to 26 compel arbitration in part because defendant answered complaint without raising arbitration in 27 affirmative defenses].) Nor has Bragg raised arbitration in a single one of his case management or 28 15 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 trial-setting conference statements to date. (See Adolph, 184 Cal.App.4th at 1451 [affirming denial 2 of defendant’s motion to compel in part because defendant failed to assert arbitration in case 3 management statement].) Meanwhile, John and Jacky have responded to a whopping 112 4 interrogatories and requests for production in this action. (Vierra Decl. ¶ 3.) Discovery will be 5 completed this month or shortly thereafter. (Pls’ Trial-Setting Conf. Stmt. (Aug. 25, 2023).) 6 Clearly, the “litigation machinery has been substantially invoked,” and the Court should 7 not let Bragg derail this case yet again with a belated motion to compel arbitration. (St. Agnes, 31 8 Cal.4th at 1196 [internal citation omitted].) Given the lengthy delay that John and Jacky have 9 already endured in asserting their claims (eleven months and counting), as well as thousands of 10 dollars of litigation costs, any interruption in these proceedings would operate to John’s and 11 Jacky’s substantial prejudice, and reward Bragg’s blatant sandbagging. 12 C. Because the Parties to the Arbitration Agreements Are Currently Litigating Nearly Identical Actions in this Court, Compelling Arbitration Would Create 13 the Risk of Conflicting Rulings on Myriad Common Issues of Law and Fact. 14 Bragg’s motion to compel arbitration should also be denied under section 1281.2(c) 15 because there is a concrete possibility of conflicting rulings if John and Jacky were required to 16 arbitrate. Notably, “[a] party relying on section 1281.2(c) to oppose a motion to compel arbitration 17 does not bear an evidentiary burden to establish a likelihood of success or make any other showing 18 regarding the viability of the claims and issues that create the possibility of conflicting rulings.” 19 (L.A. Unified Sch. Dist. v. Safety Nat’l Cas. Corp. (2017) 13 Cal.App.5th 471, 484 [citation 20 omitted].) 21 The SAC includes claims by John and Jacky against the Paramont Defendants. 22 Accordingly, John and Jacky will remain in this case regardless of whether the Court compels 23 arbitration of their claims against Bragg. The SAC also includes claims by the Arntsen Plaintiffs 24 against Bragg that are nearly identical to the claims asserted by John and Jacky. Compelling 25 arbitration would thus not relieve Bragg of the burdens of litigating these claims. And because the 26 issues Bragg purportedly seeks to arbitrate are functionally identical to the issues this Court will 27 resolve in the Arntsen Plaintiffs’ case, an order compelling arbitration would create a significant 28 risk of conflicting rulings on common issues of law and fact. Indeed, all of the issues of law and 16 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 fact decided by this Court in the Arntsen Plaintiffs’ case against Bragg (and in John’s and Jacky’s 2 case against the Paramont Defendants) will be preclusive as to John, Jacky, and Bragg. The 3 identicality and interconnectedness of these claims is an even greater concern here because 4 Plaintiffs allege joint and several liability as to many of their causes of action. (SAC pp. 67–92.) 5 Thus, “the present case is exactly the situation that Section 1281.2[(c)] . . . was designed 6 to deal with, where there is the potential for conflicting rulings because some of the defendants 7 have an arbitration agreement with plaintiff[s] and others do not. The interest of justice simply 8 would not be served by having [multiple] actions proceeding concurrently, or one after the other.” 9 (Mastick, 209 Cal.App.4th at 1262 [affirming denial of defendants’ motion to compel arbitration 10 under California law notwithstanding presence of valid arbitration agreement].) 11 The Court should therefore independently deny Bragg’s motion under section 1281.2(c). 12 II. If the Court Grants Bragg’s Motion, It Should Consolidate the Arbitration Before a Single JAMS Arbitrator and Order Bragg to Promptly Pay His Share of the 13 Arbitration, Including the Initiation Fee, Under Threat of Sanctions. 14 Bragg’s motion to compel arbitration should be denied for the reasons set forth above. But 15 if this Court nevertheless decides to grant the motion, it should order the arbitration consolidated 16 before a single JAMS arbitrator. (Code Civ. P. § 1281.3; see Vierra Decl., Ex. C.) John’s and 17 Jacky’s disputes obviously arise from a series of related transactions and there are common issues 18 of law or fact that create the possibility of conflicting rulings if the arbitrations proceed separately. 19 (Code Civ. P. § 1281.3.) Any order compelling arbitration should also require Bragg to pay his 20 half of the initiation fee within 10 days of John and Jacky initiating the arbitration and to pay all 21 additional arbitration fees within 30 days of receiving the invoice. Should Bragg refuse to pay the 22 initiation fee or any other arbitral fees in another attempt to obstruct John’s and Jacky’s claims, 23 the Court should immediately lift the arbitral stay, declare Bragg to have waived his right to 24 arbitrate, and issue monetary, contempt, and terminating sanctions. 25 CONCLUSION 26 The Court should deny Bragg’s belated and defective motion to compel arbitration. The 27 Court need not order Bragg to answer the SAC, because he has already done so. 28 17 OPPOSITION TO MOTION TO COMPEL ARBITRATION 1 2 Dated: September 1, 2023 By: ______________________ 3 Collin J. Vierra EIMER STAHL, LLP 4 Attorney for Plaintiffs 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18 OPPOSITION TO MOTION TO COMPEL ARBITRATION