Filed 9/24/20 Yao v. Pro-Management Consulting CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions 

not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion 

has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

YU-JUNG YAO et al.,

Plaintiffs and Respondents,

v.

PRO-MANAGEMENT CONSULTING,

Defendants and Appellants.

 B293864

 (Los Angeles County

 Super. Ct. No. BC702426)

APPEAL from an order of the Superior Court of 

Los Angeles County, Mark V. Mooney, Judge. Affirmed.

Law Offices of Paul P. Cheng & Associates, John P. 

Fitzmorris, Gene S. Lizaso, David T. Ching, Rebecca Gardner and 

Paul P. Cheng for Defendants and Appellants.

Yu-Jung Yao, in pro per., for Plaintiffs and Respondents.
2

Defendants and appellants Pro Management Consulting, 

Inc. (PMC) and John Tu appeal from the denial of their motion to 

compel arbitration of their dispute with plaintiffs and 

respondents Yu-Jung Yao, Yuh-Yuan Sun, and Wen-Jye Yao. 

They contend the trial court erred in concluding that the 

arbitration provision in the operating agreement for a related 

limited liability company was unenforceable because it was not 

signed. We find no error and affirm the trial court’s order 

denying appellants’ motion to compel. 

FACTUAL AND PROCEDURAL HISTORY

We provide the following summary based on the limited 

record provided on appeal.1 

Complaint

Respondents filed a complaint in April 2018 against 

appellants, as well as attorney Blair Greene and his law firm.2

In the complaint, respondents alleged that Wen-Jye and Sun are 

a married couple residing in Taiwan with their sons Yu-Jung (an 

adult) and non-party Yu-Hao (a minor). In 2014, they became 

1The appellate record contains both a clerk’s transcript 

(requested by appellants) and an appellants’ appendix (submitted 

by appellants). It is unclear why appellants included both. The 

clerk’s transcript contains appellants’ motion to compel 

arbitration, respondents’ opposition, and appellants’ reply 

thereto, along with accompanying exhibits. The appellants’ 

appendix contains the same documents plus additional 

documents, including two earlier versions of the operating 

agreement at issue here. To the extent it is not clear that 

documents included in the appellants’ appendix were before the 

trial court in connection with the motion to compel, we will not 

consider them for the first time here.

2Greene and his law firm are not parties to this appeal.
3

interested in seeking permanent residency for their family in the 

United States. They further alleged that appellant PMC was a 

California corporation “engaged in the business of providing 

immigration consultation services,” and that Tu was the director 

and Chief Executive Officer of PMC. In 2012, Tu and PMC 

formed Procal Investment and Management, LLC (Procal), a 

California limited liability company, “for the purpose of 

managing and operating restaurants serving as investment 

targets for foreign nationals applying for U.S. permanent 

residency through the Immigration Investment Program known 

as the EB-5 Program.” Tu is the managing member of Procal; 

together, Tu and PMC “control and manage Procal” and own 88.5 

percent of the LLC. 

Respondents further alleged that they were introduced to 

Tu in June of 2014. Tu told them that PMC could “provide them 

with immigration consultation and application service [sic] that 

would enable them to obtain permanent residency by investing in 

the target project selected by PMC.” The target project was a 

Nancy’s Pizza franchise restaurant, in which respondents would 

be the sole owners. Tu advised respondents to submit two EB-5 

applications along with a required $500,000 “investment” per 

application.

Based on the representations by Tu and PMC, respondents 

alleged that they entered into four separate agreements, copies of 

which they attached as exhibits to the complaint. In July 2014, 

Wen-Jye and PMC entered into a consulting agreement (Wen-Jye 

consulting agreement), under which PMC agreed to provide 

“consulting services . . . relating to EB-5” in exchange for 

payment of $64,000. In January 2015, Sun and PMC entered 

into an identical consulting agreement (Sun consulting 
4

agreement) providing for another payment of $64,000. 

Also in July 2014, Yu-Jung entered into an investment 

agreement (Yu-Jung investment agreement), pursuant to which 

he obtained a 0.25 percent interest in Procal in exchange for a 

$500,000 investment. Sun also entered into an identical 

investment agreement (Sun investment agreement) providing for 

a 0.25 percent interest in Procal in exchange for an investment of 

$500,000. As a result, respondents alleged that Yu-Jung and Sun 

were members of Procal, each holding a 0.25 percent interest in 

the company. 

The complaint alleged that defendants Greene and his law 

firm submitted respondents’ EB-5 applications in March and 

April of 2015. Nancy’s Pizza Alhambra opened in August 2015. 

In November 2015, Tu informed respondents that the restaurant 

“was not doing well” and was relocated to La Verne, California. 

Respondents alleged that they received no other information 

regarding the operation or status of the business, and were 

neither “informed nor consulted” regarding the decision to 

relocate the restaurant. 

In 2016, respondents learned that the United States 

Citizenship and Immigration Services (USCIS) had rejected their 

EB-5 applications. When respondents asked Tu about it, he 

informed them that “the rejection was caused by Nancy’s Pizza’s 

failure to maintain 10 full time employees required by the EB-5 

program.” In January 2017, Tu told respondents that appellants 

would resubmit their applications, at an additional cost of $3,000. 

In January 2017, Tu, “in his capacity as manager of 

Procal,” sent a letter to respondents “requesting an additional 

capital contribution of up to $600,000 from each member. Tu 

claimed that Procal faced challenges ‘due to the costs of our 
5

projects exceeding initial projections and the rising labor costs in 

California,’’’ and stated that the additional funds were needed to 

maintain Procal’s operations. Respondents alleged that they did 

not make the additional contributions, as they had “grown 

suspicious of Tu’s management and operation of Procal.” In 

February 2017, Tu informed respondents that Procal could not 

maintain the number of employees required by the EB-5 program 

for both applications. Accordingly, Yu-Jung withdrew his EB-5 

application so his investment could be combined with the Sun 

application. The revised Sun application was submitted to the 

USCIS by appellants in February 2017. 

Respondents alleged that from August to December, 2017, 

Tu contacted them several times threatening to close Nancy’s 

Pizza and to have Procal file for bankruptcy unless it received 

additional capital. Respondents received a notice of Procal’s 

bankruptcy filing in March 2018. Respondents also alleged that 

the status of the revised Sun application was currently unknown. 

Based on these facts, the complaint alleged nine causes of 

action. The first through fourth causes of action were brought by 

Yu-Jung and Sun against Tu and PMC, for breach of fiduciary 

duty, negligence, accounting, and breach of contract (Procal 

operating agreement), respectively. In support of these claims, 

Yu-Jung and Sun alleged that appellants were the majority and 

controlling members of Procal, while Yu-Jung and Sun were 

Procal’s minority members. They claimed that appellants 

breached their fiduciary duties to them by mismanaging Procal

and that appellants’ mismanagement resulted in Procal’s 

bankruptcy and the loss of respondents’ investments. In their 

fourth cause of action for breach of contract, Yu-Jung and Sun 

alleged that “the business of Procal was governed by an operating 
6

agreement by and among all of its members, as amended from 

time to time.” This is the first reference in the complaint to the 

Procal operating agreement, accompanied by a copy attached as 

an exhibit.

3 Yu-Jung and Sun further alleged that appellants 

materially breached their duties under the Procal operating 

agreement by, among other things, failing to maintain the 

company’s books and records, improper and unauthorized 

disposition of Procal’s assets, and improperly causing Procal to 

file for bankruptcy without the knowledge and consent of its 

other members.

In the fifth cause of action Wen-Jye and Sun alleged 

another breach of contract claim against Tu and PMC for breach 

of the consulting agreements. The complaint alleged that 

appellants mismanaged their EB-5 applications and “investment 

projects.” Respondents brought the sixth cause of action for fraud 

in the inducement and seventh cause of action for unfair business 

practices against Tu and PMC, based on Tu’s fraudulent 

representations that respondents could obtain permanent 

residency status if they hired him and PMC and invested in 

Procal. In the eighth cause of action by all respondents against 

all defendants for professional negligence, the complaint alleged 

that respondents “relied on Defendants’ knowledge and expertise” 

in “the EB-5 application process and the operation of franchise 

restaurants,” but that defendants acted negligently in providing 

3The “Amended and Restated Operating Agreement” for 

Procal attached to the complaint, as well as appellants’ motion to 

compel arbitration, lists an effective date of January 1, 2017. We 

do not consider two earlier versions of the operating agreement 

included in the Appellants’ Appendix, as there is no indication 

these were before the trial court.
7

their “professional consultation services” to respondents. Finally, 

the ninth cause of action by all respondents alleged legal 

malpractice against Greene and his law firm, related to the effort 

to obtain permanent resident status for respondents. 

Procal operating agreement

The Procal operating agreement states that it is effective as 

of January 1, 2017, “by and between the persons and entities 

identified as Members on Schedule 1 attached hereto” and those 

who later become members by executing a joinder. The purpose 

of the agreement is to “provide for the management of the 

business and the affairs of the Company, the allocation of profits 

and losses, the distribution of cash of the Company among the 

Members, the rights, obligations and interests of the Members to 

each other and to the Company, and certain other matters.” 

Article 13 of the agreement contains a dispute resolution 

provision, which provides for alternative dispute resolution 

procedures, including mediation and then arbitration, as the “sole 

and exclusive” procedure for resolving “any dispute arising out of 

or relating to this Agreement.” The agreement contains two 

pages on which bracketed language suggests signature pages will 

be attached, but does not include any signature pages. In the 

attached Schedule I, Tu is listed an initial member and Yu-Jung 

and Sun are listed as “investing members.” 

Investment agreements

The Yao investment agreement between Yu-Jung and 

Procal, lists an effective date of July 3, 2014. Pursuant to the 

agreement, Yu-Jung agreed to purchase a membership interest in 

Procal for $500,000, pursuant to the terms and conditions set 

forth therein. For its part, Procal agreed to “reasonably 

cooperate with and assist” Yu-Jung with the application for 
8

lawful permanent resident status, including “us[ing] reasonably 

commercial efforts to expand its business and hire at least 10 

additional employees as quickly as is commercially reasonable.” 

The agreement also provided that Procal would buy back YuJung’s interest once he obtained permanent resident status. 

Additionally, the agreement contained a provision in which 

the parties agreed to “irrevocably submit[ ]” any action or 

proceeding “arising out of or related to this agreement or any 

other instrument, document, or agreement executed or delivered 

in connection herewith and the transactions contemplated hereby

. . . to the exclusive jurisdiction of any federal or state court 

sitting in the county of Los Angeles, California,” and further 

agreed that “all claims in respect of the action or proceeding may 

be heard and determined in any such court.” The agreement was 

signed by both parties. The Sun investment agreement, dated 

January 20, 2015, contained the same terms and was signed by 

Sun and an officer for Procal. 

Motion to compel arbitration

Appellants moved to compel arbitration of the entire case in 

July 2018. They argued that the Procal operating agreement was 

the “umbrella agreement governing the parties’ overall 

relationship,” and therefore the court should enforce the 

arbitration provision in that agreement. They attached copies of 

the operating agreement, both consulting agreements, and both 

investment agreements as exhibits. 

Respondents opposed the motion, arguing that the Procal 

operating agreement was not signed and was therefore 

unenforceable. Respondents also argued that several of the 

parties—plaintiff Wen-Jye and defendants Greene and his law 

firm—were not parties to the operating agreement. Thus, 
9

respondents contended arbitration was improper under Code of 

Civil Procedure section 1281.2, subdivision (c),4 as there was a 

possibility that a court and arbitrator could issue conflicting 

rulings. 

In reply, appellants argued, as they do on appeal, that 

respondents were members of the LLC and therefore bound by 

the provisions of the operating agreement even if it was 

unsigned, citing Corporations Code section 17701.11, subdivision 

(b), which provides that “[a] person that becomes a member of a 

limited liability company is deemed to assent to the operating 

agreement.” They did not address respondents’ alternative 

argument regarding parties who were not Procal members.

The court held a hearing on the motion on October 4, 2018.5

On November 8, 2018, the court issued an order denying the 

motion. After briefly outlining the arguments of the parties, the 

court ruled as follows: “Having read the motion, the memoranda 

and the declarations filed by the parties, and having heard 

argument of counsel, the Court finds that because the Bylaws6 of 

Procal Investment and Management, LLC, were not signed, the 

arbitration agreement within will not be enforced.” The court did 

not reach respondents’ argument pursuant to section 1281.2, 

subdivision (c).

4All further statutory references are to the Code of Civil 

Procedure unless otherwise indicated.

5There is no transcript of this hearing in the record and it 

does not appear that a court reporter was present. 

6It appears that the court’s reference to Procal’s “Bylaws” 

was intended to reflect the Procal operating agreement, as that is 

the only document at issue containing an arbitration agreement.
10

Appellants timely appealed. (§ 1294, subd. (a).) 

Respondents have not filed a responding brief.

DISCUSSION

Appellants contend the trial court erred in denying their 

motion to compel arbitration. We conclude appellants have not 

met their burden to establish error.

Section 1281.2 authorizes petitions to compel arbitration, 

providing in part: “On petition of a party to an arbitration 

agreement alleging the existence of a written agreement to 

arbitrate a controversy and that a party thereto refuses to 

arbitrate such controversy, the court shall order the petitioner 

and the respondent to arbitrate the controversy if it determines 

that an agreement to arbitrate the controversy exists.” 

Therefore, in considering a section 1281.2 petition to compel 

arbitration, a trial court must make the preliminary 

determination whether there is an agreement to arbitrate. (See 

Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396 [“‘[T]he 

threshold question presented by a petition to compel arbitration 

is whether there is an agreement to arbitrate.’”]; City of Hope v. 

Bryan Cave, L.L.P. (2002) 102 Cal.App.4th 1356, 1369 [“[I]n 

addition to determining whether an arbitration agreement exists, 

the court needs to determine who has standing to demand 

arbitration.”].)

“In California, ‘[g]eneral principles of contract law 

determine whether the parties have entered a binding agreement 

to arbitrate.’” (Pinnacle Museum Tower Assn. v. Pinnacle Market 

Development (US), LLC (2012) 55 Cal.4th 223, 236.) “An 

essential element of any contract is the consent of the parties or 

mutual assent.” (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 

270.) The “right to arbitration depends on a contract, and a party 
11

can be compelled to submit a dispute to arbitration only if the 

party has agreed in writing to do so.” (Matthau v. Superior Court

(2007) 151 Cal.App.4th 593, 598; see also Rowe v. Exline (2007) 

153 Cal.App.4th 1276, 1284.) “There is no public policy favoring 

arbitration of disputes which the parties have not agreed to 

arbitrate.” (Engineers & Architects Assn. v. Community 

Development Dept. (1994) 30 Cal.App.4th 644, 653.) 

As the moving party, appellants have the burden of proving 

the existence of an agreement to arbitrate. (Aanderud v. 

Superior Court (2017) 13 Cal.App.5th 880, 890.) “Where the trial 

court’s decision on arbitrability is based upon resolution of 

disputed facts, we review the decision for substantial evidence,” 

but if no facts are in dispute, “we review the trial court’s decision 

de novo.” (NORCAL Mutual Ins. Co. v. Newton (2000) 84 

Cal.App.4th 64, 71-72.)

Here, appellants sought to compel arbitration based on the 

arbitration provision contained in the Procal operating 

agreement. They do not dispute that the agreement is unsigned. 

Instead, they rely on Corporations Code, section 17701.11, 

subdivision (b), which provides that “[a] person that becomes a 

member of a limited liability company is deemed to assent to the 

operating agreement.” It is undisputed that Yu-Jung and Sun 

became members of Procal when they entered into the 

investment agreements; indeed, respondents alleged as much in 

the complaint. Consequently, appellants contend that 

respondents are bound by the operating agreement, including the 

arbitration provision, regardless of whether they signed it.

However, appellants have not shown that respondents’ 

automatic assent to be bound by the general terms of the 

operating agreement, as related to the management of the entity 
12

and the rights among its members, translates to specific consent 

to arbitrate their claims. 

In other settings, courts have distinguished between a 

party’s consent to an entire agreement and an arbitration 

provision within it, where circumstances indicated a lack of 

consent to the latter. For example, in Romo v. Y–3 Holdings, Inc. 

(2001) 87 Cal.App.4th 1153, 1157, the plaintiff signed an 

employee handbook that had an arbitration provision, but did not 

separately sign the arbitration section. The Court of Appeal 

concluded that the arbitration provision was properly read as a 

separate agreement and therefore not enforceable unless signed.

(Id. at pp. 1159–1160; see also Marcus & Millichap Real Estate 

Investment Brokerage Co. v. Hock Investment Co. (1998) 68 

Cal.App.4th 83, 91 [“read as a whole, the purchase agreement in 

this case contemplated that the arbitration of disputes provision 

would be effective only if both buyers and sellers assented to that 

provision. Since the sellers did not assent to this provision the 

parties did not agree to binding arbitration.”].) Although not 

cited by appellants, we also note that Corporations Code section 

17701.17, subdivision (b) expressly provides that a member may 

consent in writing to be subject to arbitration.

Under the circumstances present here, we are not 

persuaded that it was error for the trial court to conclude there 

was no mutual agreement to arbitration between the parties. 

The operating agreement is unsigned, although it contains pages 

suggesting that signatures were expected.7 Moreover, the 

7During oral argument, appellants’ counsel cited to a 

document purporting to be an “Operating Agreement Joinder” 

signed by Yu-Jung. This document is contained in the appellants’ 
13

investment agreements that two of respondents actually signed 

do not incorporate the operating agreement or reference 

arbitration in any way. Indeed, the investment agreements 

contain an express provision requiring the parties to submit all 

claims to the jurisdiction of the court, in apparent conflict with a 

purported agreement to arbitrate. As such, we conclude 

appellants have not met their burden to establish the existence of 

a valid arbitration agreement.8

DISPOSITION

The order denying appellants’ motion to compel arbitration 

is affirmed. The parties are to bear their own costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

COLLINS, J.

We concur:

WILLHITE, ACTING P.J. CURREY, J.

appendix but not the clerk’s transcript. Based on the record 

before us, there is no indication that this document was 

submitted to the trial court for consideration with the motion to 

compel arbitration. We therefore do not consider it for the first 

time on appeal.

8Because we affirm the denial of the motion to compel, we 

need not consider the alternate argument raised below that the 

case involved parties and/or claims not subject to arbitration and 

therefore that the court could have denied the motion under 

section 1281.2, subdivision (c).