Court Opinion

ID: 9840976
Source: CourtListenerOpinion
Date Created: 2023-09-20 20:05:01.576757+00
Date Added: 2024-06-11T08:38:38.071550
License: Public Domain

Filed 9/20/23 Ashlynn Marketing Group v. Keryo CA4/1
                 NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                 DIVISION ONE

                                         STATE OF CALIFORNIA

ASHLYNN MARKETING GROUP,                                             D081029
INC. et al.,

         Plaintiffs and Respondents,
                                                                     (Super. Ct. No. 37-2022-
         v.                                                          00006413-CU-BC-CTL)

NAZAR KERYO,

         Defendant and Appellant.

         APPEAL from a judgment of the Superior Court of San Diego County,
John S. Meyer, Judge. Affirmed.
         Farivar Law Firm, Fahim Farivar, Brian Ning, and Catherine Jung for
Defendant and Appellant.
         Caldarelli Hejmanowski Page & Leer, Marisa Janine-Page, and
William J. Caldarelli for Plaintiffs and Respondents.

         Ashlynn Marketing Group, Inc. (Ashlynn Marketing), Wasem Saliman,
and Lina Saliman (Ashlynn Marketing and the Salimans collectively referred
to as Plaintiffs) brought suit against SRSupplements, Inc. (SRS), Nazar
Keryo, and Raed Matti for various causes of actions based on alleged business

wrongdoings.1 Plaintiffs averred a breach of contract against Nazar only,
claiming that he breached the subject contract by violating certain
noncompetition and nonsolicitation provisions.
      The subject contract contained an arbitration clause. Nazar moved to
compel arbitration as to all claims against him. The superior court denied
the motion, finding that the third party litigation exception under Code of

Civil Procedure2 section 1281.2, subdivision (c) applied.
      Nazar appeals the superior court’s order, contending the court erred in
applying the third party litigation exception to deny his motion to compel
arbitration. In addition, he claims the court abused its discretion by denying
the motion to compel arbitration rather than staying the litigation to allow
Nazar and Plaintiffs to arbitrate their dispute. We reject these contentions
and affirm the order.
              FACTUAL AND PROCEDURAL BACKGROUND
      Ashlynn Marketing is a California corporation engaged in the
manufacture, sale, and distribution of vaping and nutritional products,
including kratom products. The Salimans are the present owners of Ashlynn
Marketing. Previously, the Salimans jointly owned Ashlynn Marketing with
the Keryos. However, Nazar indicated that he wanted to retire and withdraw
from the business.

1     Although not a party in this action, Nazar’s wife, Wansa, played a role
in the factual underpinnings of the dispute before us. Thus, to avoid
confusion, we refer to Nazar Keryo and Wansa Keryo by their first names
when necessary.

2    Statutory references are to the Code of Civil Procedure unless
otherwise specified.
                                       2
      In July 2020, the Salimans and the Keryos entered into a stock
purchase agreement (Agreement) whereby the Salimans agreed to pay the
Keryos $2.5 million to acquire the Keryos’ entire equity interest in Ashlynn
Marketing. The Agreement included noncompete and nonsolicitation
provisions that prohibited the Keryos from directly or indirectly
manufacturing, distributing, or selling certain products (including kratom
and cannabidol (CBD)), within a defined geographic area, for a period of 20
years from the execution of the Agreement. However, after the Agreement
was signed, Nazar began competing against Ashlynn Marketing in the
kratom and CBD markets.
      In August 2021, the Salimans and the Keryos engaged in a mediation
after a dispute arose regarding Nazar’s alleged violation of his obligations

under the noncompetition and nonsolicitation provisions of the Agreement.3
That mediation proved successful, as the Salimans entered into a Stipulation
for Settlement (Settlement) that, among other provisions, modified the period

in which the Keryos would not compete with Ashlynn Marketing.4
Nonetheless, Nazar allegedly continued to compete against Ashlynn
Marketing in violation of the Settlement.
      On February 17, 2022, Plaintiffs filed suit against Nazar, Matti, and
SRS, alleging causes of action for breach of contract (against Nazar only),
breach of the implied covenant of good faith and fair dealing (against Nazar
only), unfair business practices (Bus. & Prof. Code, § 17200) (against all

3     The Agreement contained specified dispute resolution procedures,
including mediation and arbitration.

4     The Stipulation modified the dispute resolution procedure set forth in
the Agreement to delete the mediation requirement. The Agreement’s
arbitration provision otherwise remained unchanged.
                                       3
defendants), inducing breach of contract (against Matti and SRS only),
interference with contract (against Matti and SRS only), and conspiracy to
defraud (against all defendants). The gravamen of Plaintiffs’ complaint is
that Nazar, Matti, and SRS are working together to improperly compete
against Ashlynn Marketing by manufacturing, marketing, distributing, and
selling kratom products as well as soliciting Ashlynn Marketing’s customers
through a wrongfully obtained customer list.
      Matti and SRS filed a joint answer to the complaint. That answer did

not allege that the complaint was subject to arbitration.5
      The same day that Matti and SRS filed their answer, Nazar filed a

motion to compel arbitration regarding all claims alleged against him.6 In
opposing the motion, Plaintiffs argued the matter should proceed in superior
court under the third party litigation exception pursuant to section 1281.2,
subdivision (c). In support of their opposition, Plaintiffs submitted evidence

5     Matti and SRS are represented by the same counsel. Nazar is
represented by separate counsel.

6      Nazar also submitted an ex parte application for an order staying all
further proceedings in the instant matter pending determination of the
motion to compel arbitration. The superior court granted the application in
part, staying all discovery propounded on Nazar as well as any third party
subpoenas relating to him. However, the court allowed all other discovery
propounded by or to the other parties in the action, including discovery aimed
at third parties, to proceed on a limited basis “so long as they do not seek
discovery of documents and/or information relating to the underlying dispute
between [Nazar] and Plaintiffs.” Subsequently, in response to an ex parte
application filed by Plaintiffs, the court modified its order to allow Plaintiffs
to “pursue discovery from other, non-arbitrable defendants (Matti and SRS),
and from third-parties, so long as such discovery is relevant to Plaintiffs’
claims against Matti and SRS, even if such discovery may also touch in some
way upon or relate to [Nazar].”
                                       4
that they asked Matti and SRS to arbitrate the dispute multiple times, but
Matti and SRS would not agree to do so.
      The superior court denied the motion to compel arbitration on the
ground that the third party litigation exception applied. In doing so, the
court discussed its options under section 1281.2, including denying the
motion to compel arbitration, staying the arbitration pending disposition of
nonarbitrable claims in the court, and staying the litigation pending
completion of the arbitration, and opted to deny the motion outright. To this
end, the court explained:
         “The complaint is based on allegations that [Nazar] and
         Matti jointly conspired to form SRS to compete with
         Ashlynn [Marketing] in violation of the non-compete/non-
         solicitation provision. [Nazar] argues the claims against
         SRS and Matti are ‘derivative’ and depend on the existence
         of his breach, and therefore staying the litigation is the
         better approach. However, the stay [Nazar] proposes would
         not solve the problem. For example, assuming the
         arbitrator concluded that [Nazar] did breach the
         agreement, that same issue would still need to be
         relitigated in court where a jury could find no such breach
         ever occurred. The claims and issues raised by the
         complaint are simply too inextricably mixed, and the
         possibility of conflicting rulings cannot reasonably be
         avoided by a stay. A stay would also be inefficient and
         inconsistent with the other policy underlying section
         1281.2- avoiding duplication of efforts. The entire case
         should be resolved in a single forum, and given SRS and
         Matti’s refusal to stipulate to arbitration, the only available
         forum is court, where litigation against those two
         defendants has already been underway for months.”

      Nazar timely appealed.
                                 DISCUSSION
      “California law reflects a strong public policy in favor of arbitration as a
relatively quick and inexpensive method for resolving disputes. [Citation.]

                                        5
To further that policy, section 1281.2 requires a trial court to enforce a
written arbitration agreement unless one of three limited exceptions applies.
[Citation.] Those statutory exceptions arise where (1) a party waives the
right to arbitration; (2) grounds exist for revoking the arbitration agreement;
and (3) pending litigation with a third party creates the possibility of
conflicting rulings on common factual or legal issues. (§ 1281.2,
subds. (a)-(c).)” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213
Cal.App.4th 959, 967 (Acquire II).) Here, we are concerned with the third
statutory exception.
      The third party litigation exception, which is codified at section 1281.2,
subdivision (c), may apply if the following conditions are met: (1) “[a] party to
the arbitration agreement is also a party to a pending court action or special
proceeding with a third party”; (2) the third party action “aris[es] out of the
same transaction or series of related transactions”; and (3) “there is a
possibility of conflicting rulings on a common issue of law or fact.” (§ 1281.2,
subd. (c).) “If all three of these conditions are satisfied, then section
1281.2[, subdivision] (c) grants a trial court discretion to either deny or stay
arbitration despite an agreement to arbitrate the dispute. [Citation.]
Specifically, section 1281.2 identifies four options from which the court may
choose: (1) ‘refuse to enforce the arbitration agreement and . . . order
intervention or joinder of all parties in a single action or special proceeding’;
(2) ‘order intervention or joinder as to all or only certain issues’; (3) ‘order
arbitration among the parties who have agreed to arbitration and stay the
pending court action or special proceeding pending the outcome of the
arbitration proceeding’; and (4) ‘stay arbitration pending the outcome of the
court action or special proceeding.’ (§ 1281.2.)” (Acquire II, supra, 213
Cal.App.4th at pp. 967-968.)

                                         6
        A superior court does not have discretion to deny a motion to compel or
to stay arbitration unless all three of section 1281.2, subdivision (c)’s
conditions have been satisfied. (Acquire II, supra, 213 Cal.App.4th at p. 968.)
“When section 1281.2[, subdivision] (c) applies, ‘the trial court’s discretionary
decision as to whether to stay or deny arbitration is subject to review for
abuse.’ [Citations.] The trial court’s decision whether section
1281.2[, subdivision] (c) applies, however, is reviewed under either the
substantial evidence standard or the de novo standard. If the court based its
decision on a legal determination, then we adopt the de novo standard.
[Citations.] If the court based its decision on a factual determination, then
we adopt the substantial evidence standard of review. [Citation.] Whether
there are conflicting issues arising out of related transactions is a factual
determination subject to review under the substantial evidence standard.”
(Id. at pp. 971-972.)
        Here, Nazar raises two primary challenges. First, he claims the
superior court erred in determining that the third party exception applies.
Second, in the alternative, he argues that even if the third party exception
applies, the court abused its discretion by denying the motion to compel
arbitration instead of staying the court action while allowing the arbitration
between Plaintiffs and Nazar to proceed. We address each contention in
turn.
        Nazar does not dispute that the second condition of the third party
exception under section 1281.2, subdivision (c) was satisfied. Indeed, Nazar
acknowledges that Plaintiffs’ “claims against Matti and [SRS] are
intertwined with and inherently dependent on their claims against [Nazar]
(unfair business practice, inducing breach of contract, interference with
contract, and conspiracy to defraud).”

                                         7
      Additionally, Nazar appears to offer, at most, a superficial challenge to
the superior court’s finding that inconsistent rulings were possible if the
arbitration were to proceed. To this end, he faults the court for “ignoring its
own power and obligation to confirm or vacate the arbitrator’s award” under
section 1286 in concluding that the arbitrator’s ruling on whether Nazar
breached the Agreement could conflict with the jury’s finding on the same
issue. Yet, section 1286 merely states: “If a petition or response under this
chapter is duly served and filed, the court shall conform the award as made,
whether rendered in this state, or another state, unless in accordance with
this chapter it corrects the award and confirms it as corrected, vacates the
award or dismisses the proceedings.” It does not address the potential of
conflicting rulings, and Nazar offers no explanation how section 1286

supports his position here.7 In this sense, he has not carried his burden on
appeal regarding this issue.
      “ ‘In order to demonstrate error, an appellant must supply the
reviewing court with some cogent argument supported by legal analysis and
citation to the record.’ [Citation.] Although we exercise our discretion to
consider arguments for which we can discern a legal or factual basis in the
briefs, there are many instances when no such basis is apparent. ‘We are not
obliged to make other arguments for [appellant] [citation], nor are we obliged
to speculate about which issues counsel intend to raise.’ [Citations.] We may
and do ‘disregard conclusory arguments that are not supported by pertinent
legal authority or fail to disclose the reasoning by which the appellant

7     To the extent Nazar is implying that the superior court has broad
discretion to vacate an arbitration award to avoid conflicting rulings with an
ongoing superior court case, he is mistaken. Generally, a superior court may
only vacate an arbitration award under specific circumstances. (See
§§ 1286.2, 1286.4.)
                                       8
reached the conclusions he wants us to adopt.’ [Citation.]” (United Grand
Corp. v. Malibu Hillbillies, LLC (2019) 36 Cal.App.5th 142, 153.)
      Here, Nazar does not sufficiently develop his assertion that the
superior court erred in concluding there was the possibility of conflicting

rulings on a common issue of law or fact.8 “The absence of cogent legal
argument or citation to authority allows this court to treat the contentions as
waived.” (In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814,

830.)9
      In contrast to his treatment of the second and third conditions of the
third party litigation exception under section 1281.2, subdivision (c), Nazar

8      Also, we are not persuaded by Nazar’s assertion that there is no need to
be concerned about conflicting rulings because the arbitrator’s decisions
regarding a breach of the Agreement and/or Settlement “should have a res
judicata effect” on Plaintiffs’ claims against Matti and SRS. He provides no
authority to support this assertion; thus, he has waived this argument on
appeal. (See In re Marriage of Falcone & Fyke, supra, 164 Cal.App.4th at
p. 830.) Moreover, Nazar ignores the unfairness of applying an arbitrator’s
finding of breach of contract on Matti and SRS without those two defendants
being given the opportunity to defend themselves in superior court on that
very issue. Such a situation is exactly the circumstance the third party
litigation exception is meant to avoid. (Cf. Acquire II, supra, 213 Cal.App.4th
at p. 968.)

9      Nazar also claims the superior court erred in finding the third party
exception applicable because its ruling was “partly based on its evidentiary
findings on a combination of [Plaintiffs’] allegations and their discovery
already performed in this [c]ase.” Additionally, he argues the court played a
role in creating the possibility of conflicting rulings by allowing Plaintiffs to
take discovery against Matti and SRS. Neither of these arguments is
supported by any relevant legal authority. We thus find them waived. (See
In re Marriage of Falcone & Fyke, supra, 164 Cal.App.4th at p. 830.) Further,
we see no issue with a superior court considering the evidence submitted in
support of or in opposition to a motion to compel arbitration when it bears on
the possibility of conflicting rulings between an arbitration and the
underlying superior court action.
                                       9
focuses most of his brief on the first condition—that Plaintiffs, as signatories
to an arbitration agreement, are also parties to a pending court action with a
third party. Specifically, Nazar argues the superior court erred in
determining that Matti and SRS were third parties. We disagree.
      For purposes of section 1281.2, subdivision (c), a third party is one who
is neither bound by nor entitled to enforce the arbitration agreement.
(Thomas v. Westlake (2012) 204 Cal.App.4th 605, 612.) Here, there is no
evidence or argument in the record that either Matti or SRS signed the
Agreement or the Settlement. Indeed, it is undisputed that the only
signatories were Plaintiffs and Nazar. Nonetheless, Nazar insists the court
erred in considering Matti and SRS third parties for purposes of his motion to
compel arbitration.
      Here, Nazar claims: “The trial court’s primary issue was its failure to
consider the third-party litigation exception in the posture of a signatory
attempting to enforce his explicit arbitration right.” In this sense, Nazar
contends that the trial court did not appropriately contemplate the fact that
he, as a signatory to a valid arbitration agreement, was seeking to arbitrate
against other signatories. This argument borders on nonsensical.
Section 1281.2, subdivision (c) often arises under circumstances, like the one
here, where a party to an arbitration agreement is seeking to enforce
provisions against other signatories but non-signatories are also parties to
the underlying lawsuit. (See Cronus Investments, Inc. v. Concierge Services
(2005) 35 Cal.4th 376, 393 (Cronus) [“Section 1281.2(c) addresses the peculiar
situation that arises when a controversy also affects claims by or against
other parties not bound by the arbitration agreement”].) Thus,
section 1281.2, subdivision (c) allows a court discretion not to enforce an
arbitration agreement under certain enumerated circumstances. (Cronus, at

                                       10
p. 393; § 1281.2, subd.(c).) It logically follows that a court would determine
whether section 1281.2, subdivision (c) applies when a party petitions to
compel arbitration under a valid arbitration provision. This is precisely what
happened below.
      Nazar also insists the superior court erred in concluding that Matti and
SRS were third parties because the court’s finding that Matti and SRS
refused to arbitrate is not supported by substantial evidence. In support of
his position, Nazar points to a joinder Matti and SRS filed wherein they
requested the court grant the motion to compel arbitration as to Nazar and
Plaintiffs only and to stay the superior court action as to them pending the
outcome of the arbitration. Here, it appears Nazar is confusing a willingness
to arbitrate a dispute with an inclination to allow other parties to arbitrate
their dispute. Below, the trial court found that “SRS and Matti have
steadfastly refused to arbitrate, as made particularly apparent by their
separate counsel during oral argument.” That finding was supported by an
abundance of evidence in the record. For example, Plaintiffs offered a
declaration from their attorney as well as correspondence showing the
unsuccessful efforts Plaintiffs undertook to persuade Matti and SRS to agree
to arbitrate Plaintiffs’ claims against them.
      In fact, in the joinder on which Nazar relies here, Matti and SRS
vigorously argued that they were not signatories to any arbitration
agreement and should not be compelled to arbitrate Plaintiffs’ claim against
them. Clearly, the trial court’s finding that Matti and SRS have refused to
arbitrate is supported by substantial evidence.
      Next, Nazar maintains that estoppel undermines the trial court’s
conclusion that Matti and SRS were third parties. Accordingly, relying on
Rowe v. Excline (2007) 153 Cal.App.4th 1276 (Rowe), Nazar contends “a party

                                       11
may be estopped from asserting he is a third party where he also seeks to
receive the benefits of an arbitrable agreement against that non-signatory.”
That argument is inapplicable here as is Rowe. In that case, individual
nonsignatory defendants were allowed to require arbitration against a
signatory plaintiff, but the plaintiff had sued the nonsignatory defendants as
alter egos to a corporate signatory on causes of action directly based on a
contract and sought recovery under contract terms. (See id. at pp. 1279-
1281.) No analogous factual scenario exists before us. The instant action
does not concern Matti and SRS trying to enforce an arbitration agreement
against Plaintiffs.
      Nevertheless, Nazar insists the rationale of Rowe and estoppel should
apply here with equal force: “[I]f estoppel would operate to prevent a plaintiff
from disclaiming a third party’s benefit to an arbitration agreement due to
plaintiff’s acts impleading them and making claims arising from that
agreement, then that plaintiff must also be estopped to disclaim the
arbitration agreement with this counter-signatory under the same
circumstances.” We find this argument unpersuasive. Plaintiffs are not
attempting to disclaim the subject arbitration provision. In fact, they
attempted to get all defendants in the underlying lawsuit to arbitrate the
dispute. However, Matti and SRS consistently refused to do so. So, the
instant action consists of Plaintiffs, who are parties to an arbitration
agreement, suing a signatory defendant and two nonsignatory defendants.
Thus, the instant matter here presents the “peculiar situation” that
section 1281.2, subdivision (c) covers. (See Cronus, supra, 35 Cal.4th at
p. 393.) Nothing in Rowe or the principle of estoppel changes the nature of
the case before us. Again, this is not a case, like Rowe, where nonsignatory

                                       12
defendants are seeking to enforce an arbitration agreement against a
signatory plaintiff.
      Finally, Nazar claims the trial court erred in determining Matti and
SRS are third parties because the operative complaint contains allegations,
on information and belief, that each of the named defendants were the
“principal, partner, member, agent, employer, representative, and/or
employee of the others, and was acting within the scope of said agency and/or
employment, and was aware of and ratified the acts of the others.” Nazar
argues these agency allegations “constitute judicial admissions and should be
taken as true for purposes of the” motion to compel arbitration. This
argument, however, appears to be based on another misapplication of Rowe.
There, the appellate court concluded that the nonsignatory defendants were
entitled to enforce the subject arbitration agreement against the signatory
plaintiff because that plaintiff alleged that the nonsignatory defendants were
the alter egos of the signatory defendant and were liable for breach of
contact. (Rowe, supra, 153 Cal.App.4th at pp. 1284-1285.) Here, we have no
such situation. Plaintiffs are not suing Matti and SRS for breach of contract.
More importantly, neither Matti nor SRS are attempting to force Plaintiffs to
arbitrate their claims against them. Rather, it is quite the opposite situation
in that Matti and SRS have refused to submit the dispute to arbitration and
both argued below that they “should not be forced to arbitrate as non-
consenting, non-signatories to the arbitration agreement.” Moreover, Matti
and SRS did not “concede that they were the alter ego or agent of one
another, and in fact, vehemently deny such accusations.”
      We acknowledge that the operative complaint includes boilerplate
agency allegations. However, these agency allegations have no bearing on
the issue at hand. In a proceeding on a motion to compel arbitration, the

                                      13
superior “court sits as a trier of fact, weighing all the affidavits, declarations,
and other documentary evidence, as well as oral testimony received at the
court’s discretion to reach a final determination.” (Engalla v. Permanente
Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) Here, evidence was
submitted bearing on the issue of agency. For example, in opposing the
motion to compel arbitration, Plaintiffs did not argue that Matti and/or SRS
were the agents of Nazar. Indeed, they conceded a lack of agency by offering
evidence that they asked Matti and SRS to arbitrate the dispute, but Matti

and SRS declined to do so.10 Additionally, below, Matti and SRS submitted
evidence and argument that they were not Nazar’s agents, did not sign the
Agreement or Settlement, and did not agree to arbitrate the dispute. Against
this backdrop, the complaint’s allegations do not trump the evidence before
the superior court.
      Again, we observe that the boilerplate agency allegations could be
relevant under Rowe if Matti and SRS were seeking to enforce the subject
arbitration provision against Plaintiffs. (See Rowe, supra, 153 Cal.App.4th at
p. 1290.) But they are not. The context in which we find this case on appeal
remains a defendant, who is a signatory to an arbitration agreement, seeking
to arbitrate its dispute with signatory plaintiffs. The wrinkle here is that two
of the other defendants in the underlying action are not parties to the
arbitration agreement and refuse to arbitrate. They are third parties under
section 1281.2, subdivision (c).
      Having concluded that the superior court did not err in determining
that the third party litigation exception applies, we next turn to Nazar’s
claim that the superior court abused its discretion in electing to deny the

10    If Plaintiffs had evidence that Matti and SRS were Nazar’s agents, they
could have moved to compel arbitration rather than asking Matti and SRS to
agree to arbitration.
                                        14
motion to compel arbitration and have the litigation proceed in superior
court. “Under [the abuse of discretion] standard, ‘[t]he trial court’s
“application of the law to the facts is reversible only if arbitrary and
capricious.” [Citation.]’ ” (Cummings v. Dessel (2017) 13 Cal.App.5th 589,
597.)
        Nazar simply argues the court chose the wrong option under
section 1281.2, subdivision (d). He therefore claims the court abused its
discretion by “waiv[ing] [Nazar’s] arbitration right for the sake of
convenience, rather than order[ing] a more equitable and reasonable order
respecting each party’s rights.” Yet, he does not provide any cogent
argument in support of his position. He merely insists there was a better
way to ensure that his bargained for right to arbitrate was enforced. But the
existence of a valid arbitration agreement does not eclipse section 1281.2,
subdivision (c). Indeed, the entire reason that statutory provision exists is
that, despite the public policy favoring arbitration, there are times where it
can do more harm than good, such as when some parties must arbitrate while
others litigate the same issues in court. And simply because the court had
another option, it does not follow that the option it chose was an abuse of
discretion. In short, Nazar has not demonstrated any abuse of discretion,
and therefore the superior court’s order is affirmed.

                                        15
                               DISPOSITION
     The order is affirmed. Plaintiffs are entitled to their costs on appeal.

                                                                HUFFMAN, J.

WE CONCUR:

McCONNELL, P. J.

IRION, J.

                                      16