Court Opinion

ID: 6326633
Source: CourtListenerOpinion
Date Created: 2022-03-24 18:01:52.211032+00
Date Added: 2024-06-11T09:22:14.560659
License: Public Domain

Filed 3/24/22 Musighi v. Mossighi CA2/2
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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 TWO

ISAAC MUSIGHI,                                               B310927

         Plaintiff and Appellant,                            (Los Angeles County
                                                             Super. Ct. No.
         v.                                                  20STCP01325)

PARVIZ MOSSIGHI,

     Defendant and
Respondent.

     APPEAL from an order of the Superior Court of Los
Angeles County, Steven J. Kleifield, Judge. Affirmed.

      Ecoff Campain Tilles & Kay, Lawrence C. Ecoff, and
Alberto J. Campain for Plaintiff and Appellant.
     Freeman, Freeman & Smiley, Curtis A. Graham, and Dawn
B. Eyerly for Defendant and Respondent.

                            ******

       Brothers Isaac Musighi (Isaac) and Parviz “Daniel”
Mossighi (Daniel)1 arbitrated the dissolution of their wholesale
diamond business, and the trial court confirmed that arbitration
award in a $9 million judgment for Daniel. The brothers
thereafter reached a settlement resolving disputes related to
Isaac’s refusal to comply with the judgment. Still unhappy with
the results of the arbitration, Isaac petitioned the trial court to
compel 50 assorted claims to a new arbitration on the basis that
the settlement agreement included an arbitration clause. The
trial court denied the petition. Because the claims Isaac has
identified on appeal are barred by res judicata, not encompassed
within the scope of the arbitration clause, or cannot be arbitrated
because the preselected arbitrator has a conflict of interest, the
trial court was correct in denying the petition.
         FACTS AND PROCEDURAL BACKGROUND
I.     Facts
       A.    The brothers’ business
       In the early 1980s, brothers Isaac and Daniel joined forces
in the diamond wholesale business and created the company
Pacific M. International Corp. (PMI). Isaac was the self-
proclaimed “rainmaker,” while Daniel handled the finances and

1     Because the brothers share similar surnames and because
their party designations changed throughout the proceedings, we
use their first names for sake of clarity; we mean no disrespect.

                                 2
customer service. Over time, however, the brothers’ relationship
deteriorated, and they ultimately decided in 2013 to part ways.
       B.    Dissolution of PMI
             1.     Initial arbitration
       To facilitate the dissolution of PMI, the brothers
approached a senior member of the Diamond Club West Coast
Inc., a professional organization for diamond merchants to which
Isaac belongs, to arbitrate the terms of the dissolution. PMI’s
accountant was later added as a co-arbitrator. From 2013 to
2016, Isaac and Daniel signed three agreements to be “legally
bound” to the decision of the arbitrators. Isaac also
acknowledged no less than three times that the arbitration would
be “binding”; Isaac even suggested “hir[ing] a forensic
accountant” as a “preliminary step[]” for the arbitration, but for
whatever reason elected not to do so.
       The arbitrators held a hearing in November 2016, and at
the end of that hearing, the arbitrators auctioned off PMI as a
company; Isaac outbid Daniel. In December 2016, the arbitrators
issued a “binding order” (initial arbitration award). The initial
arbitration award specifies that (1) Isaac owes Daniel $9,018,291
to be satisfied by Isaac’s purchase of PMI for $800,000 and the
balance paid in installments; (2) Daniel must “cease use of the
[PMI] name immediately”; (3) each brother is to keep his own
purchased inventory, except for a prized blue diamond to be held
by Daniel but which the brothers are to work together in selling;
(4) the brothers would split the funds held in one specified bank
account; and (5) each brother is to be allocated specific
outstanding accounts receivables.

                                3
              2.    Further arbitration
       Dissatisfied with the initial arbitration award and
believing it was based on undisclosed and inaccurate financial
data Daniel had provided to the arbitrators, Isaac asked the
arbitrators and Daniel to reopen the arbitration to consider “64
separate questions”; they agreed to do so. The brothers then
signed a new agreement in April 2017 acknowledging that the
further hearings would be “binding” and that “there is no right to
further review.”
       The further hearings were held in April and May 2017 and
the arbitrators issued an “amended binding order” in June 2017
(amended arbitration award). The amended arbitration award
was identical to the initial arbitration award, except that (1)
Isaac was to pay Daniel the $9,018,291 owed under an “adjusted”
payment schedule, and (2) although the blue diamond was still to
be owned equally by the brothers, Isaac was required to deliver it
to Daniel within three days and the brothers were to (a) agree to
sell the diamond to a third party (with the proceeds split equally)
and (b) if a third party made an offer, any brother who refused to
sell would have to buy out the other brother at the price offered
by the third party.
              3.    Confirmation of the amended arbitration award
and entry of judgment
       In September 2017, Daniel petitioned the trial court to
confirm the amended arbitration award.2 Isaac opposed the
petition and also moved to vacate the award, both on the ground
that the award had been secured by fraud. After further briefing

2    Daniel had filed a petition to confirm the initial arbitration
award in February 2017, but filed an amended petition after the
amended arbitration award was issued in June 2017.

                                 4
and a hearing, the trial court in October 2017 entered a judgment
confirming the amended arbitration award; the judgment ordered
Isaac to pay $9,018,291 plus interest and to turn over the blue
diamond to Daniel within seven days.
       C.    Efforts to enforce and collect on the judgment
             1.    Isaacs’ efforts to stymy enforcement and
collection
       Apart from appealing the judgment itself, Isaac took
affirmative steps to interfere with Daniel’s efforts to enforce and
collect on the judgment. Specifically, Isaac filed a shareholder’s
derivative action against Daniel and PMI, and also evaded
postjudgment discovery (resulting in a court order compelling
him to respond and imposing monetary sanctions).
       Daniel was not deterred. He filed a creditor’s suit against
Isaac, Isaac’s businesses, and Isaac’s wife and family. Daniel also
filed an application for a turnover order directing Isaac to deliver
the blue diamond. The trial court granted that application and
ordered Isaac to turn over the diamond within three days or face
a contempt order. Instead of complying with the court order,
however, Isaac flouted the order by shipping the blue diamond to
New York on consignment for sale. The trial court set contempt
trial for May 24, 2018.
             2.    Settlement of collection disputes
       As the day of Isaac’s contempt trial approached, he enlisted
Gary Barnett, an “old friend,” to help him resolve all of the
pending matters regarding enforcement and collection of the
judgment. On the day before the contempt trial was to begin,
Isaac and Daniel executed a “binding” settlement agreement (the
enforcement agreement). As pertinent here, the enforcement
agreement provided that (1) Daniel would agree to accept

                                 5
approximately $2 million less from Isaac than the judgment
required, and (2) both brothers would dismiss all of their pending
lawsuits and appeals. The enforcement agreement further
provided that Isaac would satisfy his $7 million debt to Daniel as
follows: (1) Isaac and his wife would assign to Barnett their
rights in $5 million worth of real estate in an investment
“controlled by” Barnett, and Barnett would in turn pay Daniel $5
million within 90 days; (2) Isaac and his wife would pay $500,000
directly to Daniel (or more, if payment is delayed); (3) Isaac and
his wife would give up their rights to half of the balance of a joint
bank account; and (4) Isaac would give up his right to half of the
blue diamond, but if Daniel sold the diamond during the two
years after the settlement for more than $5 million, any amount
over $5 million was to be split between the brothers. The
enforcement agreement also provided that (1) Daniel was to
return five “Fancy Yellow . . . Radiant Cut” diamonds to Isaac; (2)
any recovery from a pending “Custom’s audit,” as well as “legal
fees and costs” incurred to pursue that audit, would be shared
equally by the brothers; and (3) Isaac was to “own PMI, solely
and exclusively.”
      Also as pertinent here, the enforcement agreement contains
an arbitration clause stating that “[i]f issues arise between Isaac
and [his wife], and Daniel, they agree that [Barnett] will be the
sole and binding arbitrator of all such issues.”
      As required by the enforcement agreement, Isaac and
Daniel dismissed all the pending proceedings against one
another, Isaac and his wife assigned to Barnett their $5 million
interest in the real estate venture, Isaac paid Daniel $500,000,
Isaac relinquished his rights to the bank account, and Isaac
handed over the blue diamond.

                                 6
II.     Procedural Background
        On April 13, 2020, Isaac filed a verified petition in the trial
court (1) to “set aside” the judgment, and (2) to compel a new
arbitration of “approximately 50 issues” to revisit the dissolution
of PMI based on a forensic audit Isaac had recently commissioned
and which, in Isaac’s view, revealed “embezzlement” by Daniel.3
The petition itself only identified 13 of the issues; the rest were
buried in a spreadsheet attached as an exhibit to Isaac’s
declaration in support of the petition. Isaac sought to invoke the
arbitration clause in the enforcement agreement. Isaac
maintained he was entitled to at least $28 million.
        After further briefing and a hearing, the trial court denied
the petition on January 20, 2021. To the extent Isaac was
attempting to overturn the amended arbitration award, the court
ruled that Isaac’s petition constituted both an untimely petition
to vacate that award and an untimely motion for reconsideration.
To the extent Isaac was attempting to initiate a new arbitration,
the court ruled that the “particular controversies raised” in the
petition “are not arbitrable” under the enforcement agreement’s
arbitration clause because that “clause applies to any disputes
regarding the enforcement of the [enforcement] agreement”—that
is, “for the collection of the judgment”—and the parties had
“already satisfied the judgment,” so there “there is nothing to be
arbitrated” pursuant to that clause.
        Isaac filed this timely appeal.

3      Isaac made a demand for this arbitration prior to filing the
petition, which Daniel refused.

                                  7
                            DISCUSSION
       Isaac argues that the trial court erred in denying his
petition to compel arbitration. Because arbitration is a “‘matter
of consent’” (Stolt-Nielsen S.A. v. AnimalFeeds Intl. Corp. (2010)
559 U.S. 662, 681), a trial court may grant a petition to compel
arbitration only if it determines that the controversy is within
the ambit of the mutually agreed upon arbitration clause (Code
Civ. Proc., § 1281.2; Vandenberg v. Superior Court (1999) 21
Cal.4th 815, 830 (Vandenberg); Douglass v. Serenivision, Inc.
(2018) 20 Cal.App.5th 376, 386 (Douglass)). To the extent the
interpretation of that scope turns on disputed facts, we review for
substantial evidence. (Banner Entertainment, Inc. v. Superior
Court (1998) 62 Cal.App.4th 348, 357; Vita Planning &
Landscape Architecture, Inc. v. HKS Architects, Inc. (2015) 240
Cal.App.4th 763, 772.) To the extent the interpretation turns on
interpretation of the agreement to arbitrate or the application of
law to undisputed facts, our review is de novo and we are not
bound by the trial court’s construction or interpretation. (Coast
Plaza Doctors Hospital v. Blue Cross of California (2000) 83
Cal.App.4th 677, 684 (Coast Plaza); Julian v. Glenair, Inc. (2017)
17 Cal.App.5th 853, 864.)
       The trial court did not err because the 19 “items and
issues” that Isaac identifies on appeal as being subject to
arbitration are (1) items he seeks to relitigate and which are thus
barred by the doctrine of res judicata, (2) outside the scope of the
arbitration clause, or (3) not subject to arbitration because the
parties’ designated arbitrator now has a conflict of interest that
Daniel has refused to waive.4

4     Furthermore, nearly all of the 19 “items and issues” Isaac
has identified on appeal were not raised in his petition to compel

                                 8
I.     Res Judicata
       A claim is barred by res judicata if it “involves (1) the same
cause of action (2) between the same parties (3) after a final
judgment on the merits in” a prior proceeding. (DKN Holdings
LLC v. Faerber (2015) 61 Cal.4th 813, 824.) Once an arbitration
award is reduced to a final judgment (and even when it is not),
the doctrine of res judicata applies and prevents relitigation of
that award. (Cal Sierra Development, Inc. v. George Reed, Inc.
(2017) 14 Cal.App.5th 663, 678 (Cal Sierra); Dial 800 v.
Fesbinder (2004) 118 Cal.App.4th 32, 50; Bucur v. Ahmad (2016)
244 Cal.App.4th 175, 186 (Bucur); Vandenberg, supra, 21 Cal.4th
at pp. 831-832; Sartor v. Superior Court (1982) 136 Cal.App.3d
322, 328; see also Code Civ. Proc., § 1287.4 [judgment on
arbitration award has same force and effect as judgment in civil
action].) This bar reaches not only claims that were actually
raised and litigated in the arbitration, but also those claims that
could have been raised and litigated. (Thibodeau v. Crum (1992)
4 Cal.App.4th 749, 755; Bucur, at pp. 185-186; Thompson v. Ioane
(2017) 11 Cal.App.5th 1180, 1191.)
       Here, nearly all of the issues that Isaac claims must be
compelled to a new arbitration are barred by res judicata.
Specifically, the following claims Isaac identifies on appeal were
either raised or could have been raised in the prior arbitration
related to the dissolution of PMI: (1) “millions of dollars in
unaccounted assets”; (2) the fact that “there was never a proper
accounting of PMI’s receivables performed during the
[a]rbitration”; (3) “division of jewelry” between Isaac and Daniel,

arbitration, such that Isaac has waived the right to pursue them
on appeal.

                                 9
including 776 parcels of diamonds; (4) “$70 million of
merchandise paid for by PMI [that] was not included in,
discussed during, or allocated to one of the parties during the
arbitration”; (5) “missing stones” worth “no less than $29[
million],” for which there are invoices but no inventory; (6) stones
“switched” in PMI’s computer files worth “no less than $800,000”;
(7) diamonds “missing” from “PMI’s old inventory lists” worth “no
less than $650,000”; (8) articles of jewelry “deleted from PMI’s
computer files” worth “no less than $649,575”; (9) “missing stock
numbers” associated with single stones worth “many millions of
dollars”; (10) approximately $35 million in missing sales
payments to PMI; (11) copies of invoices from two suppliers
“closely tied to” Daniel necessary to identify missing diamonds;
(12) Daniel’s use of $1,080,000 of PMI’s funds “to purchase
commercial property”; (13) a vendor identified in the arbitration
award (Grady Taylor) who refuses to pay an outstanding balance;
(14) Daniel’s forgery of Isaac’s signature to obtain “SBA loans” in
2011 which caused Isaac and PMI to become “unwitting
guarantors”; (15) Daniel’s “continued” use of the PMI name; and
(16) five “fancy yellow diamonds” Daniel has not returned.
       Isaac responds with what boils down to six arguments as to
why he should be able to relitigate all or some of his claims
involving PMI’s dissolution.
       First, Isaac argues that the doctrine of res judicata should
not be deemed to apply because he just discovered Daniel’s fraud.
This argument lacks merit. To begin, a party’s discovery of “new
evidence . . . is generally insufficient to avoid application” of res
judicata. (Direct Shopping Network, LLC v. James (2012) 206
Cal.App.4th 1551, 1561-1562; Cal Sierra, supra, 14 Cal.App.5th
at p. 675.) Further, Isaac’s late discovery of Daniel’s alleged

                                 10
misdeeds is a product of Isaac’s own dereliction. As noted above,
Isaac knew that the dissolution discussions might benefit from a
forensic review of PMI’s books, but Isaac opted not to undertake
that review until after the arbitration was completed and reduced
to a judgment. Because “[a] party cannot by negligence or design
withhold issues and litigate them in consecutive actions”
(Sutphin v. Speik (1940) 15 Cal.2d 195, 202), we reject Isaac’s
efforts to take a third bite at the apple after the initial and
reopened arbitrations.
       Second, Isaac argues that the absence of a Civil Code
section 1542 release in the enforcement agreement means that he
may relitigate all issues, including those underlying the
judgment. This argument lacks merit. In effect, Isaac is
asserting that the absence of a section 1542 release creates an
exception to res judicata. He cites no authority for this sweeping
proposition. This is not surprising, as Civil Code section 1542
concerns a party’s ability to release unknown (and hence
unlitigated) claims as part of a settlement (Casey v. Proctor
(1963) 59 Cal.2d 97, 109); it says nothing about rendering
judgments meaningless unless they are accompanied by such a
release.
       Third, Isaac argues that the enforcement agreement by its
terms “envisioned” a further arbitration as to “any lingering
issues, disputes, or open items” regarding PMI’s dissolution. But
no such language appears in that agreement. To the contrary,
Isaac specifically agreed in the April 2017 agreement for further
arbitration of PMI’s dissolution that “there is no right to further
review” of the issues pertinent to the dissolution.
       Fourth, Isaac argues that Daniel willingly accepted those
terms of the enforcement agreement favorable to him (that is,

                                11
those giving him approximately $7 million in assets) and thus
cannot avoid application of the terms unfavorable to him (that is,
the arbitration clause). (Harris v. Superior Court (1986) 188
Cal.App.3d 475, 479 [acceptance of contract benefits constitutes
consent to all obligations in contract]; NORCAL Mutual Ins. Co.
v. Newton (2000) 84 Cal.App.4th 64, 84; see generally, Civ. Code,
§ 1589.) While this maxim obligates parties to take “the good
parts with the bad parts” of a contract, it does not preclude them
from asserting that “the bad part” of a contract is legally
inapplicable to a particular dispute; that is all Daniel has done
here in arguing that further arbitration of PMI’s dissolution is
barred by res judicata, that the enforcement agreement’s
arbitration clause does not reach issues beyond those concerned
with enforcement and collection of the judgment, and that the
anointed arbitrator is fatally conflicted.
       Fifth, Isaac argues that the general public policy favoring
arbitration mandates that he is entitled to a new arbitration of
all issues arising out of PMI’s dissolution. Isaac is correct that
California has a strong policy favoring arbitration (Coast Plaza,
supra, 83 Cal.App.4th at p. 686), but he is wrong that that policy
requires us to jettison the doctrine of res judicata in favor of
endless relitigation of issues that were—or could have been—
litigated before.
       Lastly, Isaac more narrowly argues that res judicata does
not apply to two of the 16 issues listed above—namely, Daniel’s
“continued” use of PMI’s name, and Daniel’s retention of five
“fancy yellow diamonds”—because those issues could not have
been litigated during the arbitrations involving PMI’s dissolution.
Whether or not those two issues as articulated on appeal might
fall outside the ambit of PMI’s dissolution, they were not so

                                12
articulated in Isaac’s petition as considered by the trial court. In
his petition, Isaac complained about Daniel’s use of the PMI
name “for many months” after the 2016 auction of the name,
including “well into 2017.” And in his petition, Isaac complained
about Daniels retention of a different yellow diamond. Isaac
cannot now, for the first time on appeal, object to Daniel’s use of
PMI in a different, later time frame or object to his failure to
return different gemstones. (Premier Medical Management
Systems, Inc. v. California Ins. Guarantee Assn. (2008) 163
Cal.App.4th 550, 564 [“‘“‘[I]t is fundamental that a reviewing
court will ordinarily not consider claims made for the first time
on appeal which could have been but were not presented to the
trial court.’”’” ]; Newton v. Clemons (2003) 110 Cal.App.4th 1, 11
[reviewing court will “‘ignore arguments, authority, and facts not
presented and litigated in the trial court’”].)
II.    Scope of the Arbitration Clause
       A valid agreement to arbitrate, like any contract, rests
upon “‘“mutual assent”’” (Esparza v. Sand & Sea, Inc. (2016) 2
Cal.App.5th 781, 788), which is evaluated “‘“objective[ly]”’” by
looking to “‘“the reasonable meaning of [the parties’] words and
acts, and not their unexpressed intentions or understandings”’”
(Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 381).
Only disputes that fall within the scope of an arbitration
provision are arbitrable. (Elijahjuan v. Superior Court (2012)
210 Cal.App.4th 15, 20.) In other words, “‘a party cannot be
required to submit to arbitration any dispute which he has not
agreed so to submit.’” (AT&T Technologies v. Communications
Workers (1986) 475 U.S. 643, 648; see also Civ. Code, § 1648
[“However broad may be the terms of a contract, it extends only
to those things concerning which it appears that the parties

                                13
intended to contract.’”].) The scope of an arbitration provision
must be examined “in context” and “with regard to its intended
function.” (Bank of the West v. Superior Court (1992) 2 Cal.4th
1254, 1265.) The party moving to compel arbitration bears the
burden of producing “prima facie evidence of a written agreement
to arbitrate” the specific claim at issue. (Rosenthal v. Great
Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413; Pinnacle
Museum Tower Assn. v. Pinnacle Market Development (US), LLC
(2012) 55 Cal.4th 223, 236.)
       Although the arbitration clause in the enforcement
agreement states that Barnett “will be the sole and binding
arbitrator of all such issues” if any issues arise, we decline Isaac’s
invitation to read that language in the abstract to reach each and
every issue that has in the past or might in the future arise
between the brothers during their lifetimes. That is because that
language, viewed objectively and in context, reaches only those
disputes between Isaac and Daniel concerning compliance with
the terms of the enforcement agreement. The clause was part
and parcel of that specific agreement, which was reached on the
eve of Isaac’s contempt trial with the purpose of resolving the
parties’ pending disputes over enforcement and collection of the
judgment on the amended arbitration award. Daniel was entitled
to a significant sum of money and agreed to accept $2 million less
to resolve the protracted collections litigation. The enforcement
agreement also resolved pending matters in which PMI was
involved to ensure that the brothers shared equally in any loss or
recovery (such as PMI’s pending creditor’s claim in a bankruptcy,
PMI’s pending lien on a piece of real property, and PMI’s pending
dispute with U.S. Customs). To read the clause as Isaac suggests
is to rip it out of the very context that gave it birth; to do so would

                                  14
be contrary to the law. (See Civ. Code, § 1647 [“A contract may
be explained by reference to the circumstances under which it
was made, and the matter to which it relates.”].)
       Properly construed, the clause does not reach two of the
three the claims Isaac correctly identifies on appeal as being
outside the dispute regarding PMI’s dissolution (and hence
outside the reach of res judicata): (1) “personal family issues,”
including Daniel owing Isaac more than $1 million “in personal
loans” and owing Isaac half of $558,000 in “personal expenses
[Isaac] paid on behalf of their parents”; and (2) Daniel’s
postarbitration acts in “corrupt[ing] and alienat[ing] [Isaac’s]
business and customer relationships with several well-known
jewelers.” Neither of these claims concerns enforcement or
collection of the judgment.
       Isaac resists this conclusion with three further assertions.
       First, he asserts it is for the arbitrator—not the trial
court—to decide whether a particular claim falls within the ambit
of an arbitration clause. He is wrong. Unless the contract
“clearly and unmistakably” delegates the question of arbitrability
to the arbitrator, that threshold task is for the trial court to
decide. (Sandoval-Ryan v. Oleander Holdings LLC (2020) 58
Cal.App.5th 217, 222-223; Douglass, supra, 20 Cal.App.5th at pp.
386-387; Rodriguez v. American Technologies, Inc. (2006) 136
Cal.App.4th 1110, 1123; Dream Theater, Inc. v. Dream Theater
(2004) 124 Cal.App.4th 547, 552.) The enforcement agreement
here does not assign that task to Barnett (who is the sole
arbitrator the agreement designates), so the default rule applies
and it is for the trial court to decide the issue of arbitrability.
       Second, Isaac asserts that the arbitration clause must
broadly apply to “resolve all family matters” because Isaac’s wife

                                15
was included as a party to the enforcement agreement. This
assertion ignores that Isaac’s wife was a party, not due to her
family ties, but because she was a co-owner of Isaac’s assets that
were subject to collection and because she had been sued by
Daniel as part of his then-pending creditor’s suit.
      Lastly, Isaac asserts that several canons of contractual
interpretation—some of which do not even apply to the facts
here5—dictate that the arbitration clause must be given the
broadest possible interpretation. Isaac’s assertions rest on a
misapplication of those canons. Properly applying those canons
and evaluating the arbitration clause objectively, Isaac’s claims
regarding personal family matters and business torts are not
within the scope of the enforcement agreement’s arbitration
clause for the reasons stated above. (See, e.g., Civ. Code, §§ 1636,
1638, 1639, 1641, 1647.) To accept Isaac’s position that the
clause reaches the two disputes not subject to res judicata, we
would have to rewrite the parties’ agreement; this we will not do.
(Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1143
(Sonic-Calabasas); Series AGI West Linn of Appian Group
Investors DE, LLC v. Eves (2013) 217 Cal.App.4th 156, 164
[“courts will not rewrite contracts to relieve parties from bad
deals nor make better deals for parties than they negotiated for
themselves”].)
III. Arbitrator’s Conflict of Interest
      An arbitrator is disqualified if he has a financial interest in
the subject matter of the proceeding or in a party to the

5      For instance, Isaac cites the canon that a contract should
be interpreted against the drafter (Sandquist v. Lebo Automotive,
Inc. (2016) 1 Cal.5th 233, 248), but it is undisputed that Barnett
drafted the agreement, not Daniel.

                                 16
proceeding or if “a person aware of the facts might reasonably
entertain a doubt that the [arbitrator] would be able to be
impartial.” (Code Civ. Proc., §§ 1281.91, subd. (d); 170.1, subd.
(a)(3), (a)(6)(A)(iii).)
       Here, Barnett—the person Isaac and Daniel identified as
the “sole and binding arbitrator”—is disqualified from serving as
arbitrator. As noted above, the brothers agreed that Isaac would
transfer $5 million of a joint investment with Barnett to Barnett
so that Barnett could then pay Daniel that full amount within 90
days. As it turns out, however, Barnett only paid Daniel $3
million; over one year after the agreed-upon due date, Barnett
still owes Daniel $2 million. This outstanding debt renders
Barnett disqualified for two reasons. First, Barnett’s
indebtedness to Daniel regarding a portion of the money owed to
settle the dispute between Isaac and Daniel means that Barnett
has a financial interest in the outcome of the continued
arbitration of that very same dispute. Second, Barnett’s
indebtedness creates an incentive for him to issue a monetary
award in favor of Isaac because it would extinguish Barnett’s
debt to Daniel, which is derivative of Isaac’s debt. Under these
circumstances, “an objective, reasonable person aware of the[se]
facts reasonably could entertain a doubt that [Barnett] could be
impartial” in a future arbitration. (Speier v. The Advantage
Fund, LLC (2021) 63 Cal.App.5th 134, 148.) What is more, these
grounds for disqualification exist regardless of whether Barnett’s
reasons for withholding the $2 million was to “determin[e] . . .
unresolved issues discussed in the [enforcement] agreement” (as
Isaac contends) or because Barnett lacked the funds to pay
Daniel the $2 million (as Daniel contends). Thus, the only claim
Isaac asserts on appeal that is not barred by res judicata and is

                                17
within the scope of the enforcement agreement’s arbitration
clause—namely, whether Daniel has complied with the
enforcement agreement’s mandate regarding the still-pending
audit by U.S. Customs—is not subject to arbitration due to the
arbitrator’s disqualification. (See People v. Zapien (1993) 4
Cal.4th 929, 976 [noting “firmly established” rule that appellate
courts review the trial court’s ruling, not its rationale].)
       To be sure, a party must timely move to disqualify an
arbitrator with a conflict. (Code Civ. Proc., § 1281.91, subds. (b),
(c).) Here, however, Daniel has already argued that Barnett
“cannot act as an arbitrator of any dispute between the parties”
due to this “unresolvable conflict.” It would be pointless to
remand Isaac’s petition to compel arbitration of the U.S. Customs
claim for further proceedings in the trial court when it is a
foregone conclusion that, so long as Barnett owes Daniel money,
he is disqualified from serving as an arbitrator. (Ena North
Beach, Inc. v. 524 Union Street (2019) 43 Cal.App.5th 195, 215
[remand unnecessary where “the result of a remand is a foregone
conclusion”]; Stafford v. People (1956) 144 Cal.App.2d 79, 82 [“It
would be an idle act to remand the case to the trial court for
further proceedings when . . . plaintiff could not in any event
prevail through any further proceedings in that court”].)
       Isaac raises two contentions in response.
       First, he contends that the parties waived any conflict of
interest by selecting Barnett in the first place. He is wrong.
Although the parties agreed that Barnett would hold $5 million
in escrow for 90 days, they did not contemplate that Barnett
would retain any funds beyond that agreed-upon deadline.
Indeed, Isaac’s own petition acknowledges that Barnett withheld

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the $2 million “on his own volition.” Thus, the parties did not
waive the conflict.
       Second, Isaac contends that the trial court may simply
appoint a different arbitrator. (See Code Civ. Proc., § 1281.6.)
His argument is not faithful to the parties’ agreement. To be
sure, the governing statute permits a trial court to “appoint[] an
arbitrator” where the parties do not have an “agreed method” for
selecting an arbitrator, where “the agreed method fails or for any
reason cannot be followed,” or where “the arbitrator appointed
fails to act.” (Ibid.) But here, the parties did not agree upon a
method; instead, they agreed to have Barnett serve as the “sole
and binding arbitrator.” As written, the arbitration clause
effectively says: Barnett or no one. Because arbitration exists
only by virtue of the parties’ consent, we cannot rewrite the
clause to insert a backup plan of appointing someone else when
that plan is one to which the parties themselves never consented.
(Sonic-Calabasas, supra, 57 Cal.4th at p. 1143.)

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                        DISPOSITION
     The order is affirmed. Daniel is entitled to his costs on
appeal.
     NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

                                     ______________________, J.
                                     HOFFSTADT

We concur:

_________________________, Acting P. J.
ASHMANN-GERST

_________________________, J.
CHAVEZ

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