Court Opinion

ID: 4658574
Source: CourtListenerOpinion
Date Created: 2021-02-09 00:02:22.61487+00
Date Added: 2024-06-11T08:01:53.967112
License: Public Domain

Filed 2/8/21 Geveran Investments v. Irell & Manella CA4/3

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE

 GEVERAN INVESTMENTS, LTD.,

        Plaintiff and Respondent,                                        G057734

           v.                                                            (Super. Ct. No. 30-2018-01007860)

 IRELL & MANELLA, LLP,                                                   OPINION

        Defendant and Appellant.

                   Appeal from an order of the Superior Court of Orange County, John C.
Gastelum, Judge. Reversed. Request for judicial notice granted in part and denied in
part.
                   Irell & Manella, Harry A. Mittleman, Iian D. Jablon, and Alaina Bird for
Defendant and Appellant.
                   Aguilera Law Group, A. Eric Aguilera, Raymond E. Brown, and Jennifer S.
Marvin for Plaintiff and Respondent.
              Irell & Manella (Irell) appeals from the trial court’s order denying its
motion to compel arbitration of an attorney fee dispute with Geveran Investments, Ltd.
(Geveran), a non-signatory to the fee agreement. Irell argues the court erred by
concluding the doctrines of agency, estoppel, and sham pleadings did not require the
dispute be arbitrated. Because we conclude agency principles require the matter be
arbitrated, we need not address Irell’s other contentions. We reverse the court’s order
denying Irell’s motion to compel arbitration.
                                          FACTS
A. Background
              The “Seatankers group” (Seatankers) includes Frontline Management Ltd.
(Frontline), Wibbert Investment Company (Wibbert), and Geveran. Frontline is a
management company organized under Bermuda law. Wibbert is an investment
company organized under Republic of Liberia law. Geveran is an investment company
organized under Cyprus law. Frontline manages Geveran and Wibbert. John Fredriksen
owns and controls Frontline, Wibbert, and Geveran.
B. Execution of Subscription Agreement
              Geveran hired Fredrik Halvorsen of Frontline to be Geveran’s investment
advisor. In April 2011, Halvorsen met with representatives of Lighting Science Group,
Inc. (LSG) and J.P. Morgan regarding Geveran purchasing stock from LSG. Halvorsen
performed due diligence for the purchase.
              Halvorsen discussed Geveran’s investment in LSG with Fredriksen before,
and after, Geveran’s investment. On May 10, 2011, Geveran purchased 6.25 million
shares of stock from LSG for $25 million. Halvorsen executed the Subscription
Agreement as the designated director of Geveran. The Subscription Agreement does not
mention Frontline.

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C. Fee Agreements
              The following year, Geveran wanted to rescind the stock purchase based on
fraud. Frontline retained Irell. Irell sent a retainer agreement to Halvorsen, care of
Frontline, “to represent Frontline . . . in connection with claims against J.P. Morgan
arising from its investment in [LSG].” Irell attached its “Standard Terms of Retention,”
which defined the client and included an arbitration provision. On April 11, 2012,
Halvorsen, on behalf of Frontline, executed the fee agreement with Irell (Fee
Agreement).
              Months later, Wibbert Investment Company (Wibbert) executed a fee
agreement with Irell (Wibbert Fee Agreement) concerning its claims against New Silk
Route PE Asia Fund, L.P. (New Silk Route). Kostas Pallaris and Irene Theocharous,
Seatankers’ Chief Administrative Officer and Geveran Director, signed the fee agreement
on behalf of Wibbert.
              The Fee Agreement, and the Wibbert Fee Agreement, defined “client” and
included a dispute resolution provision. Section 13 stated the following: “The Firm’s
client for the purpose of its representation is only the person or entity identified as the
Client in the engagement agreement accompanying these Standard Terms of Retention.
Unless expressly agreed in a signed writing, the Firm is not undertaking the
representation of any related or affiliated person or entity, nor any parent, brother-sister,
subsidiary, or affiliated corporation or entity, nor any of their or the Client’s officers,
directors, agents, partners, or employees . . . .”
              Section 26 stated, “The firm and the Client agree that any dispute between
them regarding any matter related to or arising out of the Firm’s engagement by the
Client, or any party’s performance of the agreement governing the Firm’s services,
including but not limited to the quality of the services that the Firm renders, shall be
resolved by confidential arbitration in Los Angeles, California. . . . All disputes shall be
resolved in accordance with the substantive law of the State of California . . . .”

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              Irell filed a lawsuit on Wibbert’s behalf in New York state court related to
Wibbert’s $37.5 million investment in New Silk Route. Irell won two preliminary
injunction orders on Wibbert’s behalf. Wibbert subsequently elected to retain new
counsel.
D. Power of Attorney
              Halvorsen e-mailed Dimitris Hannas, a Geveran Director, asking him to
execute a special power of attorney so Irell could inspect LSG’s books and records.
Hannas executed the document and returned it to Halvorsen. Irell demanded LSG make
its books, records, and documents available for inspection and copying. Hannas executed
a verification stating the demand, which “my counsel” Irell prepared, was true and
correct.
E. Geveran v. LSG et al.
              In a Florida state court, Irell, and local counsel, filed a complaint on
Geveran’s behalf against LSG, J.P. Morgan and others seeking to rescind the stock
purchase. The complaint alleged three causes of action. (Geveran Investment Limited v.
Lighting Science Group Corporation et al. (Fla. 17th Jud. Circ., case No. 12-17738,
June 22, 2012).) Halvorsen verified Geveran’s discovery responses as its “authorized
representative.”
              Theocharous advised Irell “to exclude Frontline Management from the
invoice” and to instead issue its invoices to Geveran. Geveran paid Irell’s legal fees.
              The Florida trial court granted partial summary judgment on one cause of
action for Geveran, entered a $36.7 million judgment, and dismissed without prejudice
the remaining two causes of action. Geveran filed a motion for attorney fees supported
by the Fee Agreement. The Florida trial court granted Geveran’s motion. Geveran hired
new counsel to represent it on appeal, and Irell withdrew as counsel of record. The
Florida Fifth District Court of Appeal reversed. (J.P. Morgan Securities, LLC, et al. v.
Geveran Investments Limited, et al. (2017) 224 So. 3d 316.)

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F. Attorney Fees Dispute
              Irell claimed Geveran and Wibbert owed it over $3 million in additional
attorney fees and costs. Geveran, however, believed Irell overbilled it. Paul Marchand,
Seatankers’ General Counsel, sent a letter to Irell on Frontline letterhead identifying the
Client as Frontline, Geveran, and Wibbert and demanding it refund “excessive fees and
costs.”
              In November 2016, Geveran and Wibbert filed a petition to arbitrate a fee
dispute with the Orange County Bar Association (OCBA). In the petition, Geveran
stated, “Geveran signed an engagement letter retaining Irell in connection with its claims
arising from an investment in a company called [LSG]. The . . . engagement letter and
accompanying terms of retention is attached as Exhibit B.” (Bold omitted.) The petition
included similar language concerning Wibbert and detailed its litigation with New Silk
Route. The box was checked next to the following language: “YES, Petitioner signed a
written fee agreement (retainer agreement, engagement agreement).” Geveran attached a
copy of the Fee Agreement. Irell filed a reply seeking to recover the unpaid $3.4 million
in attorney fees and costs. Sixteen months later, Geveran and Wibbert dismissed their
OCBA Petition.
              Four months later, Geveran and Wibbert filed their complaint against Irell
alleging 10 causes of action. As to Geveran, the complaint alleged claims for breach of
fiduciary duty, unfair business practices, fraud, deceit-fraudulent concealment, money
had and received, professional negligence, unjust enrichment, and accounting. The
complaint stated Irell billed it nearly $17 million and Irell was not entitled to attorney
fees because the Florida Fifth District Court of Appeal reversed. The complaint also
stated Geveran “never received a retainer agreement from Irell” and “never signed a
retainer agreement with Irell.” (All caps. omitted.)
              Irell served Geveran and Wibbert with a demand for arbitration. Geveran
and Wibbert rejected Irell’s demand to arbitrate.

                                              5
               Irell filed a motion to compel Geveran and Wibbert to arbitrate pursuant to
the Fee Agreement and the Wibbert Fee Agreement. In support of the motion, Irell
offered declarations from Irell attorneys A. Matthew Ashley (Ashley’s 2018 Declaration),
Michael G. Ermer, and Alaina A. Bird. Irell also offered numerous exhibits, including
OCBA documents, Halvorsen’s and Hannas’s deposition testimony, and Geveran’s
interrogatory responses.
               Geveran, and Wibbert, filed opposition to Irell’s motion; Geveran
submitted no evidence in support of its opposition. Geveran filed objections to Irell’s
evidence, including the OCBA documents.
               Irell filed a reply. Irell also filed a request for judicial notice of various
documents, including the OCBA documents. Geveran filed an objection to Irell’s request
for judicial notice.
               The trial court held a hearing. After hearing oral argument, the court
granted Irell’s motion as to Wibbert and took its motion as to Geveran under submission.
The following month, the court denied Irell’s motion to compel Geveran to arbitrate,
concluding principles of agency, estoppel, and sham pleading did not require arbitration.
The court also denied Irell’s request for judicial notice because it was untimely, and it
was “mostly unnecessary” to decide the issue.
                                        DISCUSSION
I. Judicial Notice
               Irell requests we take judicial notice of the following documents: the June
22, 2012, complaint in Geveran v. LSG in Florida; the November 28, 2015, final
judgment in Geveran v. LSG in Florida; the October 30, 2015, amended order for
attorney fees in Geveran v. LSG in Florida; Ashley’s declaration dated November 24,
2014 (Ashley’s 2014 Declaration), in support of Geveran’s motion for attorney fees in
Geveran v. LSG in Florida; Geveran and Wibbert’s November 4, 2016, OCBA Petition;
and Irell’s January 13, 2017, reply to the OCBA Petition.

                                                6
              Irell included all of these documents, except Ashley’s 2014 declaration, as
exhibits to its motion to compel arbitration, and they are included in Irell’s Appellant’s
Appendix. Because all the records except Ashley’s 2014 Declaration were before the
trial court and are included in the record on appeal, we deny Irell’s request for judicial
notice as unnecessary. (Davis v. Southern California Edison Co. (2015) 236 Cal.App.4th
619, 631-632, fn. 11 [judicial notice unnecessary where documents part of trial court and
appellate record].) As to Ashley’s 2014 Declaration, we take judicial notice of the fact it
was filed but not judicial notice of the truth of facts contained in the declaration. (Arce v.
Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 483; Evid. Code,
§ 452, subd. (d).)
II. Evidentiary Objections
              Relying on People v. Abel (2012) 53 Cal.4th 891, 924 (Abel), Geveran
argues the trial court erred by failing to rule on its evidentiary objections and it may raise
the issue on appeal. What the Abel court stated, however, was “if the court overrules the
objection, the objecting party may argue on appeal that the evidence should have been
excluded for the reason asserted at trial[.]” (Id. at p. 924.) Geveran objected to
admission of Ashley’s 2018 Declaration, Halvorsen’s and Hannas’s deposition testimony,
and Geveran’s interrogatory responses, but the trial court declined to rule on any of the
objections. After the court issued its ruling, in Geveran’s favor, Geveran did not request
the court rule on its objections. Objections to evidence in support of a motion to compel
arbitration that the trial court does not rule on are waived on appeal. (EFund Capital
Partners v. Pless (2007) 150 Cal.App.4th 1311, 1319.) Thus, we decline Geveran’s
invitation to rule on its evidentiary objections in the first instance.
III. Motion to Compel Arbitration
              Irell concedes Geveran was a non-signatory to the Fee Agreement but
argues it should be compelled to arbitrate based on the theories of agency, estoppel and

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sham pleading. Agency principles required arbitration, and thus we limit our discussion
accordingly.
A. Arbitration Principles
               Generally, one must be a party to an arbitration agreement to be bound by it
or to invoke it. (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 300
(Jensen).) However, there are exceptions to this general rule that allow non-signatories
to be compelled to arbitrate. (Id. at pp. 300-301.) One of the exceptions is agency. (Id.
at pp. 300-301.)
               “‘In general, “[t]here is no uniform standard of review for evaluating an
order denying a motion to compel arbitration. [Citation.] If the court’s order is based on
a decision of fact, then we adopt a substantial evidence standard. [Citations.]
Alternatively, if the court’s denial rests solely on a decision of law, then a de novo
standard of review is employed.”’ [Citation.] In the absence of conflicting extrinsic
evidence, ‘“[w]hether and to what extent [non-signatories] can also enforce the
arbitration clause is a question of law, which we review de novo.”’ [Citation.]” (Jensen,
supra, 18 Cal.App.5th at p. 300.) The party seeking arbitration bears the burden of
proving the existence of an arbitration agreement, and the party opposing arbitration
bears the burden of proving any defense. (Rosenthal v. Great Western Fin. Securities
Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal).)
               Relying on van’t Rood v. County of Santa Clara (2003) 113 Cal.App.4th
549 (van’t Rood), Geveran argues we review the trial court’s ruling on agency for
substantial evidence. It cites to the van’t Rood court’s statement, “Agency is generally a
question of fact.” (Id. at p. 562.) But the court continued, “‘When the essential facts are
not in conflict and the evidence is susceptible to a single inference, the agency
determination is a matter of law for the court. [Citation.]’ [Citations.]” (Ibid.)

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              Here, Irell offered evidence, but Geveran did not. The essential facts are
not in conflict, and the evidence is susceptible to a single inference. Thus, we
independently decide whether Frontline was Geveran’s agent.
B. Agency Principles
              An agency may be actual or ostensible. (Civ. Code, § 2298.) “An agency
is actual when the agent is really employed by the principal.” (Civ. Code, § 2299.)
Actual agency typically arises by express agreement, but it may be implied from the
parties’ conduct. (van’t Rood, supra, 113 Cal.App.4th at p. 571.) “An agency is
ostensible when the principal intentionally, or by want of ordinary care, causes a third
person to believe another to be his agent who is not really employed by him.” (Civ.
Code, § 2300.)
              “‘“Agency is the relationship which results from the manifestation of
consent by one person to another that the other shall act on his behalf and subject to his
control, and consent by the other so to act.” [Citation.] “The principal must in some
manner indicate that the agent is to act for him, and the agent must act or agree to act on
his behalf and subject to his control.” [Citation.]’ [Citations.] Thus, the ‘formation of an
agency relationship is a bilateral matter. Words or conduct by both principal and agent
are necessary to create the relationship . . . .’ [Citations.]” (van’t Rood, supra,
113 Cal.App.4th at p. 571.)
              “[T]he proper inquiry is not only whether there is any sort of preexisting
agency relationship with one of the signatories to the arbitration agreement . . . but also
whether that preexisting relationship is of such a nature that it supports a finding of
‘implied authority for [one of the signatories] to bind [the non-signatory] by their
arbitration agreement.’ [Citation.] It is critical to ask who is seeking to bind whom, and
on what basis; the question of whether a principal’s acts bind an agent is fundamentally
different from the question of whether an agent’s acts bind a principal.” (Jensen, supra,
18 Cal.App.5th at p. 303.)

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C. Analysis
              Here, Irell submitted evidence establishing Geveran indicated Frontline was
to act for it, and Frontline acted on Geveran’s behalf and subject to its control. The
evidence demonstrated Frontline, Geveran, and Wibbert were commonly owned and
closely affiliated entities that were part of Seatankers. In Ashley’s 2018 declaration, he
stated, “Frontline managed the day-to-day activities of Geveran and routinely took
actions on its behalf, both directly and also through another affiliated and commonly-
owned entity called Frontline Corporate Services Limited.” This was evidence Geveran
consented to Frontline acting on its behalf, and Frontline consented to act for Geveran.
              In his deposition testimony, Halvorsen stated Frontline Corporate Services
employed him, and in its interrogatory responses, Geveran admitted it “engaged . . .
Halvorsen to represent [Geveran’s] interest in the purchase of LSG stock from LSG.”
Additionally, in its interrogatory responses Geveran stated Halvorsen had “a managerial
interest” in Geveran, was “an authorized representative of” Geveran, and “at all relevant
times, was personally responsible in overseeing [Geveran’s] investment in LSG.”
Halvorsen signed the Subscription Agreement on Geveran’s behalf and later signed the
Fee Agreement on Frontline’s behalf. Indeed, in his deposition, Hannas stated Halvorsen
had the authority to sign any agreements on Geveran’s behalf. This was evidence though
Halvorsen’s conduct of a bilateral agreement between Geveran and Frontline created an
ostensible agency relationship.
              The Fee Agreement that Halvorsen signed on behalf of Frontline provided,
“We are pleased that you have asked [Irell] to represent Frontline . . . (the ‘Client’) in
connection with claims against J.P. Morgan arising from its investment in [LSG].” The
“its” in “its investment” could only refer to Geveran because Geveran, not Frontline, had
invested in LSG. Geveran, not Frontline, was the only entity that had “claims against J.P.
Morgan arising from its investment.” Thus, the Fee Agreement only makes sense if it
bound Geveran, which refutes Geveran’s claim Irell’s representation of it was based only

                                              10
on an attorney-client relationship. The only plaintiff in the Florida litigation was
Geveran. Accordingly, Irell represented Geveran in that action.
              When considered in its entirety, this evidence establishes Geveran,
intentionally or through want of ordinary care, caused Irell to believe Frontline was
Geveran’s agent. Frontline and Geveran gave the impression they worked in conjunction
on the Subscription Agreement and the Florida litigation, and Frontline had the authority
to engage Irell through the Fee Agreement to represent Geveran. This was evidence of a
preexisting relationship of such a nature that it supported a finding of implied authority
for Frontline to bind Geveran by the arbitration agreement. Geveran submitted no
evidence to rebut this conclusion. Therefore, we conclude, an ostensible agency
relationship was created. To the extent Geveran asserts the equal dignities rule, Civil
Code section 2309, applies in the ostensible agency context to require a writing, it cites to
no authority, and we found none, to support that proposition.
                                      DISPOSITION
              The order is reversed. Appellant is awarded its costs on appeal.

                                                  O’LEARY, P. J.

WE CONCUR:

ARONSON, J.

FYBEL, J.

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