Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-00461/USCOURTS-casd-3_16-cv-00461-0/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1964 Civil Remedies: Racketeering (RICO) Act

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UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

DAN KOETTING, a California citizen, 

CAROLYN PAUL, a California citizen, 

and SORAL, LLC, 

Plaintiffs,

v. 

JASON VAN EMAN, an Oklahoma 

citizen, BENJAMIN MCCONLEY, a 

Florida Citizen, et al., 

Defendants.

 Case No.: 16-cv-00461-AJB-NLS 

ORDER GRANTING PLAINTIFFS’ 

MOTION TO CONFIRM 

ARBITRATION AWARD 

(Doc. No. 33) 

Presently before the Court is Plaintiffs Dan Koetting, Carolyn Paul, and SORAL 

LLC’s (collectively referred to as “Plaintiffs”) motion to confirm the arbitration award. 

(Doc. No. 33.) Defendants Jason Van Eman, Benjamin McConley, Weathervane 

Productions, Inc., and Forrest Capital Partners, Inc. (collectively referred to as 

“Defendants”) oppose the motion. (Doc. No. 35.) Pursuant to Civil Local Rule 7.1.d.1, the 

Court finds the matter suitable for decision on the papers and without oral argument. For 

the reasons explained more fully below, the Court GRANTS Plaintiffs’ motion. 

/// 

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BACKGROUND 

 The present action revolves around Plaintiff Dan Koetting and his mother in law, 

Plaintiff Carolyn Paul’s $1.55 million investment in the film The Scent of Rain and 

Lightning (“Scent”). (Doc. No. 33-1 at 2.) Plaintiffs were allegedly induced into investing 

in this film by Defendants Jason Van Eman and Benjamin McConley, and their respective 

businesses, WeatherVane Productions, Inc. and Forrest Capital Partners, Inc. (Id.) Plaintiff 

SORAL, LLC is the production company for Scent and is the legal entity through which 

the investment was made. (Id.) 

 On February 19, 2016, Plaintiffs filed the instant action against Defendants for 

causes of action including (1) Civil Violations of the Racketeer Influenced and Corrupt 

Organizations Act; (2) Fraud; (3) California Penal Code § 496; (4) Conversion; and (5) 

Unfair Business Practices. (Doc. No. 1.) Thereafter, Defendants filed a motion to compel 

arbitration on April 5, 2016, (Doc. No. 3), to which Plaintiffs filed a non-opposition, (Doc. 

No. 8). 

 On September 26, 2016, the parties stipulated to set aside entry of default and to stay 

the entire action pending arbitration. (Doc. No. 29.) On January 9, 2017, the Court held 

that the matter would remain stayed during a telephonic status conference. (Doc. No. 30.) 

 On October 17, 2016, Plaintiffs filed their arbitration demand against Defendants 

with the Judicial Arbitration and Mediation Services, Inc. (“JAMS”) San Diego. (Loewy 

Decl. ¶ 12, Doc. No. 33-2.) On November 14, 2016, JAMS San Diego notified the parties 

that it had selected Judge Kevin Midlam as the arbitrator. (Id. ¶ 14; Doc. No. 33-5 at 2.) 

 Subsequently, on April 11, 2017, Plaintiffs’ counsel met Defendants and their 

counsel in San Diego. (Doc. No. 33-2 ¶ 16.) However, instead of taking the scheduled 

depositions, both parties spent most of the morning and afternoon negotiating a settlement 

agreement (“the Agreement”). (Id.) 

 The Agreement provided Defendants two different settlement options: (1) an 

investment of $1,672,500 in Scent; or (2) a total cash payment of $600,000 and a release 

of any interest in Scent. (Doc. No. 33-1 at 4; Doc. No. 35 at 2–3.) Under either settlement 

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option, Defendants agreed to pay Plaintiffs $100,000 by April 19, 2017, at the latest. (Doc. 

No. 33-1 at 4; Doc. No. 35 at 3.) Additionally, the Agreement contained the following 

provision: 

If Respondents fail to timely make any of the payments set forth 

above, and provided that Respondents have not yet paid a total 

of $600,000.00 to Petitioners under this Settlement Term Sheet,

then Respondents will forfeit their entire participation interest in 

Scent and will have no legal rights or interests of any kind in 

Scent, or the profits thereof. Additionally, Respondents will not 

contest the entry of a $750,000.00 award against them (less any

amounts already paid to Petitioners under this Settlement Term 

Sheet), both jointly and severally, in the Arbitration, and 

Respondents further will not contest the petition to confirm the 

arbitration award with the Court. 

It is undisputed by both parties that Defendants have defaulted under the Agreement. 

(Doc. No. 33-1 at 2; Doc. No. 35 at 3; Doc. No. 33-7 at 2.) Consequently, Judge Midlam 

issued an arbitration award on July 12, 2017, that stated that (1) the Agreement was valid 

and binding; (2) Defendants had defaulted under the Agreement; (3) all of the Defendants 

were jointly and severally liable to Plaintiffs; (4) Defendants have no legal rights in the 

film Scent; and (5) each party was to bear its own fees and costs. (Doc. No. 33-8 at 2–3.) 

Shortly thereafter, on July 18, 2017, Plaintiffs filed the present action, their motion to 

confirm the arbitration award. (Doc. No. 33.) 

LEGAL STANDARD 

 A district court’s role in reviewing an arbitral award is limited. See United 

Steelworkers of Am. v. Am. Mfg. Co., 363 U.S. 564, 567–68 (1960). Indeed, “[t]he federal 

policy of settling labor disputes by arbitration would be undermined if courts had the final 

say on the merits of the awards.” Local Joint Exec. Bd. of Las Vegas v. Riverboat Casino, 

Inc., 817 F.2d 524, 526 (9th Cir. 1987) (citation omitted). An award will be upheld 

provided it “draws its essence from the collective bargaining agreement.” United 

Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 597 (1960). An agreement 

“may be overturned only if it violates public policy which is well-defined and dominant, 

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and . . . ascertained by reference to the laws and legal precedents and not from general 

considerations of supposed public interest.” Riverboat Casino, Inc., 817 F.2d at 527. 

(internal quotation marks and citation omitted). 

 Specifically, as held by Section 9 of the Federal Arbitration Act (“FAA”) 

If the parties in their agreement have agreed that a judgment of 

the court shall be entered upon the award made pursuant to the 

arbitration, and shall specify the court, then at any time within 

one year after the award is made any party to the arbitration may 

apply to the court so specified for an order confirming the award, 

and thereupon the court must grant such an order unless the 

award is vacated, modified, or corrected as prescribed in section 

10 and 11 of this title. If no court is specified in the agreement of 

the parties, then such application may be made to the United 

States court in and for the district within which such award was 

made. 

9 U.S.C. § 9. 

DISCUSSION 

 Plaintiffs request that the Court confirm Judge Midlam’s arbitration award arguing 

that (1) Defendants waived their penalty argument by failing to raise it during the 

arbitration; and (2) Judge Midlam’s award is not irrational. (Doc. No. 33-1 at 2; Doc. No. 

36 at 3–7.) In opposition, Defendants assert that the $150,000.00 penalty imposed on them 

through the arbitration award was an oversight by the arbitrator and as a whole 

unenforceable. (Doc. No. 35 at 2.) Thus, Defendants request that the Court vacate the 

arbitration award or modify/correct the arbitration award. (Id.) 

 The FAA empowers a court to vacate an arbitration award where the arbitrators “so 

imperfectly executed [their powers] that a mutual, final, and definite award upon the 

subject matter submitted was not made.” 9 U.S.C. § 10(a)(4). Similarly, section 1286 of 

the California Arbitration Act (“CAA”) provides that the court should confirm an 

arbitration award “unless in accordance with this chapter it corrects the award and confirms 

it as corrected, vacates the award or dismisses the proceedings.” Cal. Civ. Code Proc. § 

1286. 

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 After a careful review of the applicable law, the arguments proffered by both parties, 

and the exhibits, the Court agrees with Plaintiffs. The heart of Defendants’ reasoning for 

defaulting under the Agreement is that the $750,000.00 arbitration award, which includes 

a $150,000.00 increase, dressed as a liquidated damages provision, allegedly shares no 

reasonable relationship to the actual damages. (Doc. No. 35 at 3.) To support this argument, 

Defendants cite to Purcell v. Schweitzer, 224 Cal. App. 4th 969 (2014). 

 First, the Court notes that it finds Purcell inapposite to the present matter. In Purcell, 

the action arose out of a defendant’s default on a promissory note in the amount of $85,000. 

Id. at 971. Both parties then agreed to settle the action in the sum of $38,000, along with 

an interest rate of 8.5%, in installments over 24 months. Id. One section in particular stated 

that if defendant failed to make a payment on time, $85,000 would be the “agreed upon 

amount of monies actually owed, jointly and severally, by the [d]efendant [] to the 

[p]laintiff [] and is neither a penalty nor is it a forfeiture.” Id. at 972. In sum, the court 

found that the $85,000 amount was an unenforceable penalty as it “bore no reasonable 

relationship to the damages that it could be expected that [plaintiff] would suffer as a result 

of a breach by [defendant].” Id. at 975–76. Specifically, the court found nothing in the 

record to support the fact that obtaining a judgment and instituting post-judgment 

procedures would cost $85,000. Id. at 976. 

 In contrast to Purcell, where the $85,000 late fee penalty was nearly triple the 

amount that plaintiff and defendant agreed to settle to in their agreement, in the present 

matter, the $150,000.00 penalty provision is only 25% of the original settlement agreement 

amount of $600,000. Moreover, the Court notes that in Purcell, the court found that the 

stipulation of almost $60,000 was unenforceable as it carried no rational relationship to the 

damages as evidenced by the $750.00 monthly payments. Id. at 975–76. However, the 

Court notes that in the present matter, the first installment under the Agreement was for 

$100,000. (Doc. No. 33-1 at 4; Doc. No. 35 at 3.) Thus, a penalty of $150,000 seems to be 

reasonably related to the damages that Plaintiffs are expected to suffer. 

Second, “it is well settled that a party may not sit idle through an arbitration 

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procedure and then collaterally attack that procedure on grounds not raised before the 

arbitrators when the result turns out to be adverse.” Marino v. Writers Guild of Am., E., 

Inc., 992 F.2d 1480, 1484 (9th Cir. 1993); see also Ficek v. Southern Pac. Co., 338 F.2d 

655, 657 (9th Cir. 1964) (cert denied, 380 U.S. 988 (1965)) (“A claimant may not 

voluntarily submit his claim to arbitration, await the outcome, and, if the decision is 

unfavorable, then challenge the authority of the arbitrators to act.”). This rule even extends 

to questions such as arbitrator bias, which goes to the very heart of arbitral fairness. See 

Carr v. Pac. Maritime Ass’n, 904 F.2d 1313, 1317 (9th Cir. 1990) (holding that plaintiffs’

failure to exhaust grievance procedures not excused because of alleged lack of neutrality 

of arbitration). Thus, as Defendants did not protest to the penalty during settlement 

negotiations, failed to challenge the authority of Judge Midlam to impose such a penalty, 

agreed to the Agreement, and finding that the Agreement clearly states that Defendants 

“will not contest the entry of a $750,000 award against them,” the Court concludes that 

Defendants have waived their objections against the $150,000 penalty. (Doc. No. 35 at 3.) 

On a final note, “[a]n arbitrator’s decision must be upheld unless it is ‘completely 

irrational,’ or it constitutes a ‘manifest disregard of law.’” Todd Shipyards Corp. v. Cunard 

Line, Ltd., 943 F.2d 1056, 1060 (9th Cir. 1991) (citation omitted). Here, the Court finds no 

such situation, nor have Defendants produced evidence that Judge Midlam wholly 

disregarded the law or that the foregoing penalty within the Agreement is unfounded. Thus, 

the Court must affirm the award. See Romero v. Citibank USA, No. 1:07-CV-00549 OWWSMS, 2007 WL 2688848, at *3 (E.D. Cal. Sep. 13, 2007); see also Thompson v. Tega-Rand 

Int’l, 740 F.2d 762, 763 (9th Cir. 1984) (“The reviewing court should not concern itself 

with the ‘correctness’ of an arbitration award.”); Rostad & Rostad Corp. v. Inv. Mgmt. & 

Research, Inc., 923 F.2d 694, 697 (9th Cir. 1991) (“Deference to the arbitrators is the 

rule.”). 

 Based on the foregoing, finding Defendants’ case law inapposite to the instant 

matter, that Defendants’ inaction during settlement discussions constitutes waiver of its 

objections, and cognizant that the review of arbitration awards is “extremely limited[,]” the 

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Court GRANTS Plaintiffs’ motion to confirm the arbitration award. A.G. Edwards & Sons, 

Inc. v. McCollough, 967 F.2d 1401, 1403 (9th Cir. 1992). 

CONCLUSION 

 As discussed more thoroughly above, the Court GRANTS Plaintiffs’ motion to 

confirm the arbitration award, CONFIRMS the arbitration award and all of its terms, and 

DIRECTS the Clerk of Court to enter judgment in Plaintiffs’ favor in accordance with the 

terms of the Agreement. 

IT IS SO ORDERED. 

Dated: September 19, 2017 

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