Dial 800 v. Fesbinder

• Decision Date: 28 April 2004
• Docket Number: No. B167032.,B167032.
• Citation: 118 Cal.App.4th 32,12 Cal.Rptr.3d 711
• Court: California Court of Appeals Court of Appeals
• Parties: DIAL 800 et al., Plaintiffs and Appellants, v. David FESBINDER et al., Defendants and Respondents.

12 Cal.Rptr.3d 711

118 Cal.App.4th 32

DIAL 800 et al., Plaintiffs and Appellants, v. David FESBINDER et al., Defendants and Respondents.

No. B167032.

Court of Appeal, Second District, Division 5.

April 28, 2004.

As Modified May 5, 2004.

[12 Cal.Rptr.3d 714]

[118 Cal.App.4th 37]

Fredman, Lieberman, and Howard S. Fredman for Plaintiffs and Appellants.

Smiland & Khachigian and Stacy L. Sokol, Beverly Hills, for Defendants and Respondents David Fesbinder and Brenda Fesbinder. No appearance on behalf of Defendants and Respondents Michael Rosenblum and Perpetual International Trading Limited.

TURNER, P.J.

I. INTRODUCTION

Plaintiffs, Dial 800, LLC, a California limited liability company and Dial 800, Inc., a California corporation, appeal from an order dismissing their interpleader action filed pursuant to Code of Civil Procedure¹ section 386 against defendants, David Fesbinder, Brenda Fesbinder (the "Fesbinders"), Michael Rosenblum, and Perpetual International Trading Limited (Perpetual), a Seychelles corporation. Perpetual is wholly owned by Mr. Rosenblum. Defendants are involved in a dispute over ownership interests of shares in plaintiffs. Defendants made conflicting demands to plaintiffs for a distribution of funds in the amount of $65,824. Immediately after plaintiffs filed the interpleader action, they deposited the funds into the superior court. Plaintiffs sought discharge from liability against any claims by defendants for refusing to disburse the money. The Fesbinders have joined plaintiffs' opening brief on appeal requesting that the order dismissing the interpleader action be reversed.

Mr. Rosenblum, who is a United States citizen and resident of Israel, has not filed a respondent's brief on appeal. However, in the trial court, Mr. Rosenblum and Perpetual moved to quash service of the summons and complaint of the interpleader action for lack of personal jurisdiction. In dismissing the action, the trial court refused to adjudicate the absence of personal jurisdiction contentions posited by Mr. Rosenblum and his wholly owned corporation, Perpetual. Rather, the trial court dismissed the interpleader action sua sponte based on a private agreement by defendants to arbitrate their dispute over the ownership of the shares in plaintiffs in Israel. (Plaintiffs are not a party to the defendants' arbitration agreement.) The trial judge found that the existence an arbitration clause in defendants' agreements deprived the California superior court of jurisdiction to resolve the issues raised in the interpleader action. In so ruling, the trial court relied on the fact the arbitration before three rabbis was being conducted in Israel.

We reach four conclusions which we will discuss later in some detail. First, the sua sponte order dismissing plaintiffs' interpleader action must be reversed because the trial judge erroneously ruled that the private contractual agreement amongst defendants to arbitrate their dispute before a religious tribunal in Israel deprived the Los Angeles Superior Court of subject matter jurisdiction. Second, the trial court is to allow defendants to litigate the merits of the interpleader complaint after the remittitur issues. Third, if plaintiffs' discharge motion is granted, the trial court may exercise its discretion and decide whether to stay the remainder of the interpleader action which will ultimately resolve the allocation of the disputed funds amongst defendants pending the outcome of the arbitration in Israel. Fourth, the trial court is to deny the motion to quash on jurisdictional grounds brought by Mr. Rosenblum and Perpetual. They have sought attorney fees as the prevailing parties in the present interpleader lawsuit after the trial court dismissed the action on grounds entirely unrelated to personal jurisdiction issues thereby submitting to the jurisdiction of the Los Angeles Superior Court.

II. BACKGROUND

On July 22, 2002, the Fesbinders filed a petition for a court order to appoint a third arbitrator in the Israeli arbitration. (Fesbinder v. Rosenblum, (Super.Ct.L.A.County, July 22, 2002, No. BS077340).) The petition alleged that the Fesbinders and Mr. Rosenblum and Perpetual entered into a securities and voting rights purchase agreement on July 5, 1998. The Fesbinders and Mr. Rosenblum are all Israeli residents. According to the petition, the Fesbinders were to sell and transfer securities and voting rights in plaintiffs to Mr. Rosenblum and Perpetual for $500,000. The funds were payable to a trustee in three equal installments of $166,666.66 due July 5, 1998, and March 5, and July 5, 1999. The July 5, 1998, purchase agreement provided that notices were to be sent to the attorneys for the parties. All notices and communications were to be sent on behalf of Mr. Rosenblum and Perpetual to Barry L. Burten, an attorney with law firm of Jeffers, Mangels, Butler & Marmaro in Los Angeles. Notices and other communications to the Fesbinders were to be sent to Stacy Sokol, an attorney in Beverly Hills, California. The July 5, 1998, purchase agreement also contains an arbitration clause which states: "Any controversy or dispute arising out of this Agreement . . . shall be submitted through Rabbi Shuchatowitz upon the mutual consent of the parties or, if no such consent has been reached, to an Orthodox Bais Din selected through the process of zavla (`Bais Din') for binding resolution. If permitted by the Bais Din and applicable law, the decision of the Bais Din may be entered as a judgment in any court of competent jurisdiction and enforced according to the laws of such jurisdiction." (Original italics.) Further, the parties entered into a trust agreement to handle the transactions which were to occur under the July 5, 1998, purchase contract. The trust agreement provided that any dispute concerning a default was to be resolved as follows, "Any determination hereto made by the Trustee as to the rights of the parties pursuant to this Trust Agreement shall be binding upon the parties and enforceable as an arbitration award in any court of competent jurisdiction in Israel or in Los Angeles County, California." The trust agreement required notices to go to the same attorneys in Los Angeles and Beverly Hills, California as the July 5, 1998, purchase contract. Paragraph 11 of the trust agreement states, "This Trust shall be construed, administered and enforced in accordance with the laws of the State of California."

A dispute arose between the parties to the July 5, 1998, agreement after the first installment was paid. The parties ultimately entered into an arbitration agreement that required resolution of the disputes between the parties would be resolved by a panel of three orthodox Jewish rabbis. The arbitration agreement provided for the selection of three arbitrators. The first arbitrator was to be chosen by the Fesbinders. The second arbitrator was to be selected by Mr. Rosenblum and Perpetual. The third arbitrator was to be chosen by the other two selected by the parties. The arbitration proceedings began before the panel of three arbitrators on July 14, 1999. However, before a final decision was reached, the arbitrator selected by Mr. Rosenblum and Perpetual resigned. The parties then became embroiled in a dispute over the appointment of a successor arbitrator. This led to the Fesbinders filing on July 22, 2002, the aforementioned petition for appointment of a third arbitrator in the aforementioned case. The Fesbinders' petition, filed in Los Angeles Superior Court, sought appointment of the arbitrator on the grounds: the securities are partnership interests in a California limited partnership and shares in a California corporation which served as the general partner of the limited partnership; voting rights of the partnership and corporation are involved; and paragraph 11 of the trust agreement calls for the trust to be governed by California law. On September 13, 2002, Mr. Rosenblum and Perpetual moved to quash service of summons and petition for appointment of the third arbitrator for lack of personal jurisdiction. The motion to quash was made on the ground the California court lacked personal jurisdiction over Mr. Rosenblum, an Israeli resident, and Perpetual which is a Seychelles corporation. Plaintiff is not a party to the arbitration clauses at issue in the proceeding filed by the Fesbinders seeking the appointment of a third arbitrator.

On October 7, 2002, plaintiffs filed their interpleader complaint. The interpleader complaint alleged that plaintiffs hold and are required to distribute the sum of $65,824 to the "appropriate member of the limited liability company." However, the Fesbinders and Rosenblums had made conflicting demands for the funds with accompanying threats of lawsuits for failure to distribute the funds or for the distribution to the inappropriate party. Plaintiffs alleged they were indifferent with respect to which defendants are entitled to the funds. After filing the complaint, plaintiffs deposited $65,824 with the court clerk.

On October 28, 2002, the Fesbinders filed, in the present interpleader action, a motion to compel arbitration and for a stay. The Fesbinders sought to stay the present interpleader lawsuit until after the arbitration had been completed. On November 4, 2002, the trial court ordered the arbitration petition proceeding and the interpleader action consolidated. On November 5, 2002, plaintiffs filed a motion for discharge and attorneys fees. Plaintiffs also filed a limited opposition to the motion to compel arbitration and stay the pending interpleader action. Plaintiffs indicated that they only opposed a stay of its hearing on and resolution of the discharge motion. This was so that plaintiffs, consistent with the interpleader statutes, could be released from liability to defendant. On November 18, 2002, Mr. Rosenblum and Perpetual filed a motion to quash service of the summons and interpleader complaint for defective service...