Court Opinion

ID: 9556031
Source: CourtListenerOpinion
Date Created: 2023-08-15 21:03:43.600632+00
Date Added: 2024-06-11T15:47:12.988998
License: Public Domain

Filed 8/15/23 Internat. Fruit Genetics v. Grapery CA5

                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                       FIFTH APPELLATE DISTRICT

 INTERNATIONAL FRUIT GENETICS, LLC,
                                                                                             F085739
           Plaintiff and Respondent,
                                                                            (Super. Ct. No. BCV-22-101869)
                    v.

 GRAPERY, INC.,                                                                           OPINION
           Defendant and Appellant.

         APPEAL from an order of the Superior Court of Kern County. Bernard C.
Barmann, Jr., Judge.
         Covington & Burling, Jeffrey M. Davidson, Isaac D. Chaput, Melise Knowles, and
Yiye Fu, for Defendant and Appellant.
         Dentons US, Blake L. Osborn, Andrew Pendexter, Leah Bruno, and Brian E.
Cohen, for Plaintiff and Respondent.
                                                        -ooOoo-
         Appellant Grapery, Inc. appeals from an order denying its motion to compel
arbitration of a lawsuit filed by respondent International Fruit Genetics, LLC (“IFG”).
IFG’s complaint alleges Grapery breached two nondisclosure agreements,
misappropriated IFG’s trade secrets, and engaged in unfair competition. Grapery
contends the trial court erred in refusing to compel IFG to arbitrate under the arbitration
clause contained in IFG’s operating agreement. Grapery is not a signatory to IFG’s
operating agreement, but Grapery’s founder and controlling shareholder, Jack J. Pandol,
is.
       The arbitration clause requires arbitration of any “action to enforce or interpret”
the operating agreement and of disputes that are between or against IFG members.
Grapery argues this lawsuit is arbitrable as an “action to interpret” the operating
agreement and as a dispute between or against members. Grapery alternatively contends
it can invoke the arbitration clause under equitable estoppel and third-party beneficiary
principles.
       We are unpersuaded by Grapery’s arguments and affirm the lower court’s order.
                 FACTUAL AND PROCEDURAL BACKGROUND
       Grapery is a company that grows, markets, and ships table grapes. Jack Pandol
founded Grapery and has always been a majority owner. The record does not say when
Grapery was founded, but we know it was founded before IFG. Grapery incorporated in
2007 and Pandol is now a 51% shareholder.1

       1 On our own motion, we take judicial notice of Grapery’s articles of incorporation
from the California Secretary of State’s website, which show Grapery was incorporated
in 2007. (Evid. Code, §§ 459, subd. (a); 452, subd. (c); Jones v. Goodman (2020)
57 Cal.App.5th 521, 528, fn. 6 [taking judicial notice of articles of incorporation filed
with the California Secretary of State on appellate court’s own motion].)
       We thus deny as unnecessary IFG’s request to take judicial notice of the fact that
Grapery was incorporated in 2007. IFG requested in a footnote in its respondent’s brief
that we judicially notice this fact from the reporter’s transcript of the hearing on
Grapery’s motion to compel, where the court noted Grapery was incorporated in 2007.
IFG did not cite any authority supporting its request.
       Aside from the failure to cite supporting authority, we would deny IFG’s request
for judicial notice because it was not made by formal motion under California Rules of
Court, rule 8.54, filed separately from the moving party’s brief. (Cal. Rules of Court,
rule 8.252(a)(1); see also rule 8.809(a); Tenet Healthsystem Desert, Inc. v. Blue Cross of
California (2016) 245 Cal.App.4th 821, 834—835 [party’s argument to take judicial

                                             2.
       IFG was founded in 2001 by Pandol and four others. Pandol owns a 25%
membership interest in IFG and has served as a manager since its inception. The
company breeds and develops new varieties of tables grapes and other fruits. Its business
model relies on licensing rather than selling the fruit cultivars it develops.
       Pandol co-founded IFG to develop a pipeline for new varieties of table grapes that
Grapery would be entitled to receive licenses to grow. To that end, IFG’s operating
agreement gives Pandol or his “nominees” the option to acquire through licensing
agreements one-quarter of the new plant varieties IFG makes available. This option is in
a clause entitled “Rights to New Varieties.” Since IFG began issuing licenses to the first
of its new varieties, Grapery has been Pandol’s primary nominee to receive his share of
the plants IFG makes available.
       IFG from time to time shares data on its cultivars with its licensees, including
Grapery. Before sharing such data and other confidential information, IFG requires that
the licensee sign agreements ensuring IFG’s proprietary information is not disclosed to
others and not used for any unauthorized purpose.
       Grapery and IFG entered into many confidentiality and nondisclosure agreements,
including one in August 2020 called the “Mutual Confidentiality Agreement.” Pandol
told the other IFG managers that IFG should employ more restrictive licensing practices
with fewer growers. Pandol believed this strategy change could achieve higher market
pricing for fruit IFG was licensing and developing. The parties entered the Mutual
Confidentiality Agreement to allow Grapery increased access to Grapery’s cultivar
performance data to explore strategic initiatives for IFG. The agreement requires
Grapery to, among other things, “not use” IFG identified confidential information “for
any purpose other than” the evaluation of marketing and licensing arrangements between

notice raised in respondent’s brief insufficient for appellate court to take judicial notice of
letters where no motion filed].)

                                              3.
IFG and Grapery. It also provided Grapery would not use any disclosed information “in
any manner to [IFG’s] detriment.” IFG provided Grapery extensive proprietary
information after it signed the Mutual Confidentiality Agreement.
       In summer 2021, IFG received an unsolicited acquisition offer. With growing
tensions between Pandol and other managers regarding IFG’s licensing strategy and other
matters, all of IFG’s members and managers, except Pandol, expressed an interest in
possibly selling. As a result, IFG’s members and managers, save for Pandol, instructed
management to explore potential options. IFG solicited and received several indications
of interest and decided to start a robust auction process to evaluate offers to buy the
company’s assets.
       Grapery participated in the auction process. In August 2021, Grapery submitted a
non-binding indication of interest to buy all of the IFG membership interests held by
IFG’s majority member. As part of its participation in the sales process, Grapery signed
a nondisclosure agreement with IFG in October 2021 (“Nondisclosure Agreement”) to
receive proprietary and confidential information to help Grapery conduct due diligence.
Grapery received information about plant and breeding varietals; price, volume, and
market performance data; and revenue and expense forecasts.
       Grapery also requested and received a copy of IFG’s testing and breeding
agreement with the University of Arkansas. IFG has had an exclusive agreement with the
university since 2003 for the commercial use of the university’s proprietary grape
selections.
       In February 2022, three entities, including Grapery, submitted final bids. IFG
considered Grapery’s to be the least favorable. The next month, IFG agreed to sell its
assets to SNFL Investments LLC, and the parties signed a purchase agreement. Pandol
initiated arbitration proceedings with the American Arbitration Association against IFG
to block the sale, asserting that IFG’s operating agreement requires the unanimous

                                             4.
consent of IFG’s members.2 Pandol also filed a complaint in Kern County Superior
Court under Code of Civil Procedure section 1281.8 in aid of the arbitration, seeking to
enjoin the pending sale.3 The trial court granted Pandol’s motion for a preliminary
injunction of the sale. The arbitrator later issued a preliminary injunction of its own
preventing IFG from consummating the sale until the arbitration concludes.
       Two weeks after Pandol secured a preliminary injunction stopping the sale, IFG
filed the underlying complaint against Grapery in Kern County Superior Court. The
complaint pleads four causes of action: (1) misappropriation of trade secrets under the
California Uniform Trade Secrets Act (Civ. Code, § 3426 et seq.), (2) engaging in unfair
competition (Bus. and Prof. Code, § 17200 et seq.), (3) breach of the Nondisclosure
Agreement, and (4) breach of the Mutual Confidentiality Agreement.
       The complaint alleges Grapery has embarked on an effort to develop a new arm of
its business to compete directly with IFG. It alleges Grapery in early 2022 approached
the University of Arkansas about Grapery starting its own breeding program and entering
into a relationship with the university similar to the university’s relationship with IFG.
IFG contends that Grapery, to improve its negotiation position with the university,
improperly used information (1) that it obtained from IFG’s testing and breeding
agreement with the university and (2) that it received from IFG during the sale process.
       The complaint explains that IFG sent a cease-and-desist-letter to Grapery on
May 31, 2022, demanding that Grapery stop its efforts to secure an arrangement with the
University of Arkansas for access to the university’s germplasm. Grapery rejected the

       2 The operating agreement’s arbitration clause dictates that arbitration proceedings
be conducted in accordance with the American Arbitration Association’s rules.
       3 Code of Civil Procedure section 1281.8, subdivision (b) provides: “[a] party to
an arbitration agreement may file in the court in the county in which an arbitration
proceeding is pending … an application for a provisional remedy in connection with an
arbitrable controversy, but only upon the ground that the award to which the applicant
may be entitled may be rendered ineffectual without provisional relief.”

                                             5.
demand and suggested that it would be permitted to enter into such a relationship because
IFG’s impending asset sale would mean IFG would no longer be part of any operating
business with which either Pandol or Grapery could even compete.
       All of IFG’s claims are based on Grapery’s alleged improper usage of IFG’s
proprietary information to start a competing breeding program and enter into a similar
arrangement with the University of Arkansas.
       Grapery moved to compel arbitration of all of IFG’s claims based on the
arbitration clause in IFG’s operating agreement. Grapery argued three grounds. First, it
contended this action is part of a broader dispute between IFG and Pandol, and therefore
should be viewed as a dispute “against [a] member” and thus arbitrable under the
operating agreement’s arbitration clause. IFG responded that Grapery is not an IFG
member and Pandol is not a named defendant in the complaint, and thus the arbitration
provision does not apply. Second, Grapery argued equitable estoppel principles
compelled arbitration because IFG’s claims are “inextricably intertwined with …
Pandol’s obligations and rights under the Operating Agreement,” as the operating
agreement allows Pandol to use IFG’s proprietary information that he learns through his
roles at IFG as he pleases. IFG responded that its claims against Grapery are not based at
all on the operating agreement. Finally, Grapery contended it can compel arbitration as a
third-party beneficiary of the operating agreement, in part because it has always been
Pandol’s “nominee” to receive licenses to IFG’s new varietals. IFG countered that
Grapery was not a third-party beneficiary of any aspect of the operating agreement. It
pointed to the operating agreement’s “No Third Party Beneficiary” clause, which
provides that no other person or entities besides the signatories “shall have or acquire any
right by virtue of this Agreement.”
       The trial court heard oral argument and at the end of the hearing stated it was
denying the motion. The court entered a written order to that effect. As to Grapery’s
first ground, the court found this is not a dispute between IFG’s members; it is a dispute

                                             6.
between IFG and Grapery, and Grapery is not a member of IFG. The court also observed
that IFG’s claims seek relief for Grapery’s alleged misappropriation of trade secrets and
other confidential information, not for any of Pandol’s conduct.
       As to Grapery’s equitable estoppel ground, the court found that none of IFG’s
claims are based on the operating agreement, and instead are based on Grapery’s alleged
breach of other agreements. The court also held that nothing in the operating agreement
permits Pandol to use IFG business information “outside of [IFG’s] business and affairs.”
       As to Grapery’s third-party beneficiary ground, the court simply stated that “this
action has nothing to do with the Operating Agreement.” The court did not explicitly
state whether Grapery was a third-party beneficiary of any aspect of the operating
agreement.
                                      DISCUSSION
I.     Standard of review
       “We review the trial court’s interpretation of an arbitration agreement de novo
when, as here, that interpretation does not depend on conflicting extrinsic evidence.”
(DMS Services, LLC v. Superior Court (2012) 205 Cal.App.4th 1346, 1352 (DMS).)
“Our de novo review includes the legal determination whether and to what extent
nonsignatories to an arbitration agreement can enforce the arbitration clause.” (Ibid.)
       A court must order a dispute to arbitration “when the party seeking to compel
arbitration proves the existence of a valid arbitration agreement covering the dispute.”
(Laswell v. AG Seal Beach, LLC (2010) 189 Cal.App.4th 1399, 1404—1405.) But
despite the strong public policy in favor of arbitration, “ ‘there is no policy compelling
persons to accept arbitration of controversies which they have not agreed to
arbitrate….’ ” ’ ” (DMS, supra, 205 Cal.App.4th at p. 1352; Avila v. Southern California
Specialty Care, Inc. (2018) 20 Cal.App.5th 835, 843.) “Because arbitration is a matter of
contract, generally ‘ “one must be a party to an arbitration agreement to be bound by it or
invoke it.” ’ ” (DMS, supra, 205 Cal.App.4th at p. 1352.) “However, both California and

                                             7.
federal courts have recognized limited exceptions to this rule, allowing nonsignatories to
an agreement containing an arbitration clause to compel arbitration of, or be compelled to
arbitrate, a dispute arising within the scope of that agreement.” (Id. at p. 1353.) “ ‘ “As
one authority has stated, there are six theories by which a nonsignatory may be bound to
arbitrate: ‘(a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or
alter ego; (e) estoppel; and (f) third-party beneficiary.’ ” ’ ” (Cohen v. TNP 2008
Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 859.)
II.    Arbitrability under the plain terms of the operating agreement
       IFG’s operating agreement arbitration clause reads in part:

              “Any action to enforce or interpret this Agreement or to resolve
       disputes between the Members or by or against any Member shall be settled
       by arbitration in accordance with the rules of the American Arbitration
       Association. Arbitration shall be the exclusive dispute resolution process in
       the State of California[.]” !(AA 88)!
       Grapery argues that IFG’s claims are arbitrable under the operating agreement’s
“plain text” because this lawsuit is both (1) an action to interpret the operating agreement
and (2) a dispute between IFG members. We disagree.
       A.     Not an action to interpret the operating agreement
       Grapery first contends IFG’s lawsuit is an “action to interpret” the operating
agreement.4 It reasons that two provisions of the operating agreement can be interpreted
to provide Grapery a complete defense to all of IFG’s claims, and thus resolving IFG’s
claims will require interpreting the operating agreement. The question is whether

       4 In its trial court motion, Grapery did not argue that this is an action to interpret
the operating agreement, only that this is a dispute against a member. IFG does not
object to Grapery’s raising a new theory. While we generally do not allow appellants to
raise theories on appeal that were not raised in the trial court, we can relax this rule in our
discretion when the new theory “pertains only to questions of law on undisputed facts,
which could not be altered by the presentation of additional evidence.” (Glassman v.
Safeco Ins. Co. of America (2023) 90 Cal.App.5th 1281, 1326.) We will allow Grapery
to raise this new theory.

                                              8.
asserting these provisions as a defense to IFG’s claims constitutes an “action” for
purposes of compelling arbitration under the operating agreement. We conclude
asserting the provisions as a defense does not constitute an “action.”
       The first operating agreement provision Grapery references is:

               “Business Operation. Except as provided in this Agreement, no
       provision of this Agreement shall be construed to limit in any manner the
       Members in the carrying on of their own respective businesses or
       activities.”
       The second provision, entitled “Time Devoted to Company,” addresses how much
time IFG’s managers must devote to IFG business. The general manager must devote
substantially all of his time and effort to IFG exclusively. As for the other managers, the
time provision says the fact they “have other business interests to which they devote their
time and their position as a Manager of [IFG] shall not preclude or limit outside business
activities. Such other Managers shall devote such time to the conduct of the business of
the Company as each believes in good faith and discretion is necessary.” Pandol is a
manager, but not the general manager of IFG.
       Grapery contends these provisions together mean that IFG’s members
“contemplated from the formation of the company that they would be entitled to carry on
their own independent businesses without their roles in IFG ‘limit[ing] them in any
manner.’ Thus, absent a specific contrary statement in the Operating Agreement, Mr.
Pandol is entitled to use the information he obtained as a manager and member of IFG
while conducting business as Grapery.” In other words, Grapery contends the operating
agreement allows Pandol to do whatever he wants with IFG’s trade secrets, and since
Pandol is involved with Grapery, by extension Grapery can also do what it likes with
those secrets. Grapery asserts this reasoning as a complete defense to all of IFG’s claims.
       Even if these operating agreement provisions could be interpreted as providing a
complete defense to IFG’s claims, this still would not be an “action to interpret” the
operating agreement because the assertion of a defense is not an “action.” The Supreme

                                             9.
Court of California’s reasoning in Mountain Air Enterprises, LLC v. Sundowner Towers,
LLC (2017) 3 Cal.5th 744 (Mountain Air) supports this conclusion. The question in that
case was whether the successful assertion of an affirmative defense triggered the attorney
fee provision in a contract that entitled the prevailing party in “any legal action …
brought for the enforcement of” the contract to attorney fees. (Id. at p. 752.) The
Supreme Court held it did not. (Id. at pp. 755—756.)
       In Mountain Air, the seller of real property sued prospective purchasers for breach
of a repurchase agreement. (Mountain Air, supra, 3 Cal.5th at pp. 748—749.) The
prospective purchasers asserted in defense that a subsequent option agreement had
created a novation of the initial repurchase agreement, granting them the right, but not the
obligation, to buy the property. (Id. at p. 749.) The prospective purchasers prevailed at
trial and moved to recover their attorney fees based on a provision in the option
agreement that authorized attorney fees and costs to the prevailing party in any legal
action or proceeding brought to enforce the option agreement. (Ibid.) The question was
whether the prospective purchasers’ assertion of the option agreement as an affirmative
defense triggers the attorney fees provision in that agreement. (Id. at pp. 749—750.) The
Supreme Court held it did not. (Id. at p. 750.)
       The Mountain Air parties “agree[d] that an ‘action’ is synonymous with a lawsuit
(Code Civ. Proc., § 22), and includes the assertion of any affirmative defenses.”
(Mountain Air, supra, 3 Cal.5th at pp. 752—753.) The defendant prospective purchasers
“reason[ed] that because an action includes the assertion of an affirmative defense, the
asserted defense, therefore, constitutes an action.” (Id. at p. 753.) The plaintiff seller
“counter[ed] that the assertion of an affirmative defense is a discrete procedural event
within a lawsuit and is not itself a separate action[,]” and therefore “it is erroneous to
equate an affirmative defense with an action or proceeding.” (Id. at p. 753.)
       The Supreme Court began its analysis by “address[ing] the underlying supposition
that the assertion of an affirmative defense equates to or constitutes an action because it is

                                              10.
encompassed within the latter.” (Mountain Air, supra, 3 Cal.5th at p. 753.) The Court
stated that although an action may refer to the “entire judicial proceeding,” each
individual occurrence within an action is not itself an action. (Id. at p. 753.) The Court
observed that in the attorney fees context, “ ‘courts generally treat the term “action,” as
defined by Code of Civil Procedure section 22, as referring to the whole of a lawsuit
rather than to discrete proceedings within a lawsuit.’ ” (Id. at p. 753.) Thus, the Court
held that while the assertion of an affirmative defense is a “ ‘real part of an action,’ ” “it
does not, in and of itself, constitute an ‘action’ for purposes of recovering attorney fees.”
(Id. at p. 753.)
       Even though Mountain Air was decided in the attorney fees context, its holding
that the assertion of a defense is not an action is also applicable in the arbitration context.
We see no reason why the assertion of a defense should be considered an “action” in the
arbitration context here when it is not so considered in the attorney fee context. Indeed,
the principles of contract interpretation are the same in both the attorney fees context and
the arbitration context. (Mountain Air, supra, 3 Cal.5th at p. 753 [determining whether
attorney fees provision applies involves “traditional rules of contract interpretation”];
Fleming v. Oliphant Financial, LLC (2023) 88 Cal.App.5th 13, 21 [arbitration
agreements “subject to same rules of construction as any other contract”].) We also see
no difference whether the defense is asserted as an affirmative defense or in the form of a
denial; Mountain Air’s holding would apply just the same.
       In sum, this is not an “action” to interpret IFG’s operating agreement.
       B.      Not an action between members
       Grapery also argues IFG’s claims must be arbitrated because this is a dispute
“between the Members or by and against any Member” of IFG. It asserts that IFG’s
claims “are part of a broader dispute between” Pandol and other IFG members. It
acknowledges Pandol is not a named defendant in the complaint but contends IFG’s
claims are based on Pandol’s conduct as a link between IFG and Grapery. Grapery also

                                              11.
argues that IFG’s filing of this action after Pandol commenced an arbitration proceeding
to stop IFG’s asset sale shows that IFG’s other members are retaliating against Pandol.
Grapery also asserts that had IFG sued Pandol, those claims would surely have to be
arbitrated as a dispute “against any Member.” Grapery contends this is why IFG has
“strategically” not sued Pandol.
       Grapery discusses this to show that even though IFG is the named plaintiff and
Grapery the named defendant, the underpinning of this action is a feud between Pandol
and the rest of IFG’s members. But even were this true, it does not mean this is a dispute
“between the Members” or “against any Member.” Who the dispute is between is based
on who the complaint lists as the parties, and the complaint names IFG and Grapery as
the plaintiff and defendant, respectively. Neither Grapery nor IFG are members of IFG,
so this is not a dispute between members or against any member. Grapery does not
explain how we are allowed to look beyond the complaint’s named parties to determine
whether this action’s impetus was a personal dispute between members, and if we
determine it was, to declare this an arbitrable dispute “between members” or “against any
member.”
       Grapery also directs attention to the fact that the operating agreement’s first
sentence lists “Jack J. Pandol, dba the Grapery” as one of the parties “enter[ing] into” the
operating agreement.5 Grapery asserts this makes Pandol and Grapery “equivalent.” We
observe that section 1.15 of the operating agreement provides that IFG’s “Initial
Members” are the entities listed in the operating agreement’s first sentence. !(AA 72)!
But this means only that Pandol was an Initial Member. The designation “DBA,” short
for “doing business as,” signals use of a fictitious business name. (Bus. & Prof. Code, §

       5 The words “dba the Grapery” do not appear anywhere else in the operating
agreement, including in the signature blocks at the bottom of the agreement where
“JACK J. PANDOL” signed twice: once as a member and once as a manager. !(AA 90)!

                                             12.
17900.) Use of a fictitious business name does not create a separate legal entity. (Muddy
Waters, LLC v. Superior Court (2021) 62 Cal.App.5th 905, 920.) Also, Grapery was not
incorporated until after IFG was formed. Thus, Grapery has always been a separate legal
entity from Pandol; they are not “equivalent.”
       Grapery cannot compel arbitration of IFG’s claims under the plain text of the
arbitration clause.
III.   Equitable estoppel
       Grapery next argues that even if IFG’s claims are not arbitrable under the plain
text of the operating agreement, IFG should be equitably estopped from avoiding
arbitration. We disagree.
       Under the equitable estoppel doctrine, a party to an arbitration agreement may be
required to arbitrate with a nonparty. (See JSM Tuscany, LLC v. Superior Court (NMS
Properties, Inc.) (2011) 193 Cal.App.4th 1222, 1237.) The doctrine applies in two
circumstances: (1) when the signatory must depend on the written agreement providing
for arbitration in asserting claims against the nonsignatory; or (2) when the signatory
alleges “substantially interdependent and concerted misconduct” by the nonsignatory and
a signatory and the alleged misconduct is “founded in or intimately connected with the
obligations of the underlying agreement.” (Goldman v. KPMG, LLP (2009)
173 Cal.App.4th 209, 217—219 (Goldman).) Neither circumstance is present here.
       As to the first circumstance, IFG does not “depend on” the operating agreement
“in asserting” any of its claims. (Goldman, supra, 173 Cal.App.4th at p. 218.) Indeed,
IFG’s claims for breaches of two confidentiality agreements, trade secret
misappropriation, and unfair competition have nothing to do with the operating
agreement.
       As to the second circumstance, IFG is alleging wrongful conduct by Grapery that
is neither “founded in [n]or intimately connected with the obligations [of] the [operating]
agreement.” (Goldman, supra, 173 Cal.App.4th at pp. 218—219.) Again, IFG is not

                                            13.
alleging any breach of the operating agreement, and IFG’s claims in no way implicate
any operating agreement obligations. Grapery argues that IFG’s claims are intimately
connected with the operating agreement because the trial court must interpret the
operating agreement to determine whether certain of its provisions provide Grapery a
complete defense to the claims. But this misunderstands the scope of the inquiry. We
look only at the allegations in IFG’s complaint in determining whether IFG’s claims are
intimately connected to the operating agreement. (Id. at p. 219.) It is irrelevant if the
operating agreement is later implicated by an asserted defense.
       Grapery cites Metalclad Corp. v. Ventana Environmental Organizational
Partnership (2003) 109 Cal.App.4th 1705 (Metalclad), to argue IFG’s claims depend on
the operating agreement. There, the appellate court ordered arbitration of a plaintiff’s
breach of contract and related claims against a nonsignatory defendant because the claims
were “intimately founded in and intertwined with” the contract containing the arbitration
clause. (Id. at p. 1717.) But Metalclad is distinguishable.
       Metalclad, the plaintiff, entered into a stock purchase agreement to sell its
subsidiary to Geologic, a subsidiary of defendant Ventana. (Metalclad, supra,
109 Cal.App.4th at pp. 1709—1710.) The stock purchase agreement included an
agreement to arbitrate. (Id. at p. 1710.) Metalclad sued Ventana, Geologic and others for
breach of contract, fraud, and other claims, and later dropped Geologic from the suit.
(Ibid.) After its motion to compel arbitration was denied, Ventana appealed. (Id. at
p. 1711.) The appellate court concluded that Ventana had successfully demonstrated its
right to compel arbitration under Geologic’s contract with Metalclad, even though
Ventana was not a signatory. (Id. at pp. 1717—1719.) The appellate court concluded
that Metalclad’s tort claims against Ventana were “ ‘intimately founded in and
intertwined with’ ” the underlying Geologic contract because Metalclad alleged that
Ventana caused Geologic to breach the contract. (Id. at p. 1717.) Ventana’s parent-

                                             14.
subsidiary relationship with Geologic was thus an “integral relationship” in Metalclad’s
claims. (Id. at pp. 1717—1718.)
       Those facts are significantly different from the facts here. The Metalclad plaintiff
alleged that one defendant caused the other to breach the contract containing the
arbitration clause, and the plaintiff’s claims all stemmed from that alleged breach. In
contrast, IFG is not alleging a breach of the contract containing the arbitration clause—
that is, the operating agreement—and none of IFG’s claims against Grapery depend on
the operating agreement at all. Thus, IFG’s claims are not “ ‘intimately founded in and
intertwined with’ ” the contract containing the arbitration clause.
       Unlike in Metalclad, this is not a situation where IFG seeks to rely on the terms of
the operating agreement as the basis for its claims against Grapery while refusing to
arbitrate its claims because Grapery is a nonsignatory. We therefore conclude Grapery
may not compel arbitration under equitable estoppel principles.
       Alternative estoppel argument
       Grapery briefing posits an alternative estoppel argument. It asserts that IFG “has
repeatedly argued,” to obtain the issuance of a third-party discovery subpoena to Grapery
in Pandol’s arbitration proceeding, that Grapery is a third-party beneficiary of the
operating agreement. Indeed, IFG argued in a motion for the issuance of the subpoena
that “Grapery is a third-party beneficiary of the Operating Agreement and, thus, is subject
to the arbitrator’s power.” Grapery argues IFG should now be estopped from arguing
Grapery is not a third-party beneficiary of the operating agreement. This argument
dovetails with Grapery’s third-party beneficiary argument.
       This contention is forfeited because it is under a heading in the opening brief
which asserts only that IFG is equitably estopped from avoiding arbitration because its
claims are intertwined with Pandol’s rights and obligations under the operating
agreement. There is no heading anywhere in the opening brief contending that IFG
should be estopped from taking inconsistent legal positions. Legal arguments not

                                            15.
included in the argument section of an appellant’s opening brief under appropriate
headings are forfeited. (Cal. Rules of Court, rule 8.204(a)(1)(B); see also Pizarro v.
Reynoso (2017) 10 Cal.App.5th 172, 179 [“Failure to provide proper headings forfeits
issues that may be discussed in the brief but are not clearly identified by a heading”].)
This rule of appellate procedure is not a mere technicality. It “ensure[s] that opposing
parties are fairly apprised of contentions so as to afford a full and fair opportunity to
respond.” (Golden Door Properties, LLC v. County of San Diego (2020) 50 Cal.App.5th
467, 555.)
       Forfeiture aside, this argument fails on the merits. True, IFG argued in its motion
for a subpoena that Grapery was a third-party beneficiary of the operating agreement
because it was Pandol’s “nominee” for licensing rights under the “Rights to New
Varieties” provision. But IFG never asserted Grapery was a third-party beneficiary of the
operating agreement’s arbitration clause. As we have explained, even if Grapery were a
beneficiary of the licensing provision, that does not mean it is a beneficiary under the
entire operating agreement. Thus, it is immaterial for purposes of this issue that Grapery
may be considered a beneficiary of the licensing provision. What matters is whether
Grapery is a beneficiary under the arbitration clause, and Grapery cannot establish that it
is.
IV.    Third-party beneficiary
       Grapery next contends the court erred in finding arbitration cannot be compelled
under third-party beneficiary principles. We disagree.
       A third party may enforce a contract made expressly for its benefit. (Civ. Code,
§ 1559.) To enforce a contract, the third party must establish these elements: (1) the
third party would in fact benefit from the contract; (2) a motivating purpose of the
contracting parties was to provide a benefit to the third party; and (3) permitting the third
party to enforce the contract against a contracting party is consistent with the objectives
of the contract and the reasonable expectations of the contracting parties.

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(Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.) The third party “ ‘bears the
burden of proving that the promise he seeks to enforce was made to him personally or to
a class of which he is member.’ ” (Spinks v. Equity Residential Briarwood Apartments
(2009) 171 Cal.App.4th 1004, 1024.)
       A third-party beneficiary may enforce only those terms of the contract that were
made for its benefit. (Clark v. California Ins. Guarantee Assn. (2011) 200 Cal.App.4th
391, 398.) Thus, to compel arbitration of a dispute, the third party must show that the
arbitration provision included in the contract, and not just some other part of that
contract, was made expressly for the third party’s benefit. (Fuentes v. TMCSF, Inc.
26 Cal.App.5th 541, 552 (Fuentes).)
       Grapery contends it is a third-party beneficiary of the operating agreement because
of the “Rights to New Varieties” provision allowing Pandol to assign licensing rights to
it. Grapery also points to IFG’s arguments in support of its request for the issuance of a
discovery subpoena to Grapery in Pandol’s arbitration proceeding, where IFG asserted
Grapery was a third-party beneficiary to the operating agreement. We note, however,
that IFG did not specify which aspect of the agreement Grapery was a beneficiary of. In
any event, Grapery now asserts that IFG admitted in that motion that Grapery is a third-
party beneficiary of the operating agreement. We address this argument while ignoring
the operating agreement’s “No Third Party Beneficiary” clause in addressing Grapery’s
arguments.6
       Even if Grapery were a third-party beneficiary under that part of the operating
agreement, Grapery cannot compel arbitration because it has not shown that the

       6 We note that Grapery argues that this clause does not prohibit Grapery from
being considered a third-party beneficiary. Grapery cites authority for the proposition
that a “generic no-third-party-beneficiaries” provision does not control over a specific
provision giving rights to a third party. But we need not address the no-third-party-
beneficiary clause’s effect.

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arbitration clause was made expressly for its benefit. (Fuentes, supra, 26 Cal.App.5th at
p. 552.) IFG’s founders could have given Grapery arbitration rights under the operating
agreement, but they did not. Grapery’s third-party beneficiary argument therefore fails.
       Grapery’s briefing overlooks a separate dispositive point. Even if Grapery were a
third-party beneficiary under the arbitration clause, it still could not compel arbitration of
IFG’s claims because “[f]or a nonsignatory to invoke an arbitration provision in an
agreement based on a third party beneficiary theory, the nonsignatory beneficiary …
must establish the agreement was applicable to the controversy.” (Jones v. Jacobson
(2011) 195 Cal.App.4th 1, 22.) As we earlier discussed, there is no nexus between the
operating agreement, which contains the arbitration provision, and IFG’s claims against
Grapery. Indeed, IFG’s claims against Grapery have nothing to do with the operating
agreement. For this independent reason, the claims are not arbitrable under third-party
beneficiary principles.
       For all these reasons, we conclude Grapery cannot enforce the arbitration
provision as a third-party beneficiary.
                                      DISPOSITION
       The trial court’s January 24, 2023, order denying Grapery’s motion to compel
arbitration is affirmed. Respondent is awarded its costs on appeal.

                                                                              SNAUFFER, J.
WE CONCUR:

SMITH, Acting P. J.

DE SANTOS, J.

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