Llevat v. True N. Brands, LLC

• Decision Date: 22 November 2021
• Docket Number: 21-cv-656-BAS-AGS
• Parties: HERMANIO LLEVAT, Plaintiff, v. TRUE NORTH BRANDS, LLC, et al., Defendants.
• Court: U.S. District Court — Central District of California

HERMANIO LLEVAT, Plaintiff,
v.
TRUE NORTH BRANDS, LLC, et al., Defendants.

No. 21-cv-656-BAS-AGS

United States District Court, C.D. California

November 22, 2021

ORDER:

(1) GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO COMPEL ARBITRATION (ECF NO. 6);

(2) GRANTING MOTION TO TRANSFER VENUE (ECF NO. 2); AND

(3) DENYING WITHOUT PREJUDICE PLAINTIFF'S REQUEST TO STAY OR, IN THE ALTERNATIVE, DISMISS ACTION (ECF NO. 6)

HON. CYNTHIA BASHANT, UNITED STATES DISTRICT JUDGE.

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Before this Court are (1) Plaintiff Hermanio Llevat's motion to compel arbitration and stay, or in the alternative, dismiss this proceeding (“Motion to Compel”) (Mot. to Compel (“Pl.'s Mot.”), ECF No. 6) and (2) Defendants True North Brands, LLC and Thibiant Beverly Hills, LLC's motion to transfer venue (“Motion to Transfer”) (Mot. to Transfer (“Defs.' Mot.”), ECF No. 2). The parties have fully briefed both Motions. (See ECF Nos. 5, 7, 15-16.) The Court finds the Motions suitable for determination on the papers submitted and without oral argument. See Fed. R. Civ. P. 78(b); Civ. L.R. 7.1(d)(1). For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART the Motion to Compel and GRANTS the Motion to Transfer. The strand of the Motion to Compel seeking a stay or dismissal of this proceeding until resolution of the arbitral claims is DENIED without prejudice to renewal before the transferee court.

I. BACKGROUND

This action is borne from the demise of the business relationship between Defendant True North Brands, LLC (“TNB”) and its member and former manager, Plaintiff Hermanio Llevat, which already is the subject of a first-filed, breach of fiduciary lawsuit in Nevada state court. (See Reply in Supp. of Defs.' Mot. (“Defs.' Reply”) ¶ 3, ECF No. 7; see also Pl.'s Mot. 3-4.) Notably, that suit was compelled to arbitration pursuant to TNB's Second Amended and Restated Operating Agreement (“Agreement”). (Declaration of Eugene J. Geekie, Jr., Esq., (“Geekie Decl.”) ¶ 1, Ex. 1 to Defs.' Mot., ECF No. 2; Agreement, Ex. 1 to Declaration of Hermanio Llevat (“Llevat Decl.”), ECF No. 6-2.) Although the Agreement provides San Diego as the forum for arbitration, the parties agreed to arbitrate the underlying dispute in the first-filed action in Los Angeles County. (See Defs.' Reply ¶¶ 2-3.)

Plaintiff initiated this action on March 11, 2021, when he filed suit against TNB and its subsidiary, Defendant Thibiant Beverly Hills, LLC (“Thibiant”), in San Diego Superior Court. (Compl., Ex. 1 to Notice of Removal, ECF No. 1-2.) TNB is a Nevada limited liability company formed in May of 2008 that does business throughout the United States.

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(Id. ¶ 2.) According to the Agreement, Plaintiff is both the controlling member of TNB and was formerly one of TNB's two managers. (Id. § 1.)^[1]

The Complaint proffers factual allegations that form the bases of two categories of claims against Defendants. The first bucket of claims relates to Plaintiff's allegations that he provided TNB and Thibiant with “multiple loans, deferred income, [and] direct payments” that Defendants were required but failed to repay. (Compl. ¶ 7.) Specifically, Plaintiff asserts that:

• Thibiant defaulted on a $350, 000 promissory note into which it entered with Plaintiff on June 1, 2008 (“2008 Note”) (id. ¶¶ 23-32)

• TNB defaulted on a $100, 000 promissory note into which it entered with Plaintiff on October 29, 2016 (“2016 Note”) (id. ¶¶ 33-43)

• Thibiant failed to reimburse Plaintiff for paying down the outstanding portion of a $2, 500, 000 loan Thibiant had borrowed from First Republic Bank on June 5, 2008 (“2008 Loan”) (id. ¶¶ 44-55); and

• Thibiant failed to reimburse Plaintiff for paying down $111, 738.82 Thibiant had incurred on its American Express and Chase Visa credit cards, collectively (“Credit Card Debt”) (id. ¶¶ 56-64).

By this action, Plaintiff seeks damages in the amount Defendants purportedly are indebted to him.^[2] To this end, Plaintiff asserts five causes of action: breach of the 2008 Note (Count III) (id. ¶¶ 23-32); breach of the 2016 Note (Count IV) (id. ¶¶ 33-43); indemnification for the 2008 Loan (Count V) (id. ¶¶ 44-55); and unjust enrichment relating to Plaintiff's payment of Thibiant's Credit Card Debt (Counts VI (American Express) & VII (Chase Visa)) (id. ¶¶ 56-64).

The second bucket of claims in the Complaint relates to TNB's allegedly unlawful procurement of Plaintiff's private electronic communications from a domain entitled

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“truenorthinv.com, ” of which Plaintiff claims sole ownership. Specifically, Plaintiff avers that in approximately 2019, TNB falsely represented itself as truenorthinv.com's “true owner” to the hosting service on which that domain operates and, “through threats and cajoling, ” secured “dominion over the . . . domain, ” along with access to Plaintiff's email account. (Id. ¶¶ 9-15.) Consequently, Plaintiff alleges that TNB has “intercepted communications that belong to [Plaintiff], ” that “were in many instances private” and, in some instances, attorney-client privileged. (Id. ¶ 8.) In so doing, Plaintiff claims TNB violated both the Electronic Communications Privacy Act (“ECPA”), 18 U.S.C. § 1511 et seq., (id. ¶¶ 9-15) (Count I) and the Stored Communications Act (“SCA”), 18 U.S.C. § 2701 et seq. (id. ¶¶ 16-22) (Count II).

Defendants removed this action to federal court on April 14, 2021. (Notice of Removal, ECF No. 1.) Since then, Plaintiff and Defendants have filed competing Motions to compel arbitration and transfer venue to the Central District of California, respectively. Plaintiff brings his Motion to Compel pursuant to Section 16 of the Agreement (“Arbitration Provision”), which provides:

16. Arbitration. In the event of any dispute arising hereunder, the parties hereto agree to resolve such dispute through arbitration in San Diego, California conducted in accordance with the commercial arbitration rules of the American Arbitration Association (“AAA”). The decision of the arbitrator shall be final, binding and conclusive, may be filed in any court of competent jurisdiction and there shall be no right of appeal or otherwise to seek an alternative adjudication of such matter.

(Agreement § 16.) Defendants oppose the Motion to Compel only to the extent Plaintiff seeks to arbitrate Counts I and II, arguing, in essence, that those claims do not “arise under” any provision of the Agreement. (Defs.' Opp'n to Mot. to Compel (“Defs.' Opp'n”), ECF No. 15.) Conversely, Plaintiff avers that Counts I and II relate to “management” of TNB and, thus, arise under the Agreement's Section 1, Management by Managers. (Reply in Supp. of Pl.'s Mot. to Compel (“Pl.'s Reply”) 2, ECF No. 16.) Plaintiff further argues arbitration should be compelled in the interest of efficiency, for splitting this action into

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arbitrable and inarbitrable claims risks “piecemeal litigation.” (Id. 3.) It also is that basis upon which Plaintiff seeks to stay or, in the alternative, dismiss this action pending resolution of all arbitral claims. (Pl.'s Mot. 7.)

Defendants bring their Motion to Transfer principally in the interest of convenience to the parties and witnesses and in light of the nexus between the events underlying the Complaint and the proposed venue. (See Defs.' Mot.) Specifically, they argue transfer to the Central District of California is warranted because: (1) “all events that form the basis of the Complaint occurred . . . in Los Angeles County”; (2) “Plaintiff resides in Los Angeles County”; (3) TNB's “headquarters during the time of the alleged events was in Los Angeles County”; and (4) upon information and belief, “most of the witnesses to the events which form the basis of the Complaint reside within [Los Angeles County].”^[3] Plaintiff does not dispute these facts. Instead, citing the portion of the Arbitration Provision that states the parties “agree to arbitration in San Diego, California” (“Forum Selection Clause”), he argues the Southern District of California is the proper venue for this matter. (Pl.'s Opp'n to Mot. to Transfer (“Pl.'s Opp'n”) 2, ECF No. 5; Agreement § 16.) Defendants respond that the parties' selection of the forum in which to arbitrate the dispute “bear[s] no relationship to the proper venue” in which to litigate a federal case, and that Plaintiff waived the Forum Selection Clause when he agreed to arbitrate the first-filed action in Los Angeles County. (Defs.' Reply ¶¶ 2-3.)

II. LEGAL STANDARD

A. Arbitration

The Federal Arbitration Act (“FAA”) applies to contracts involving interstate commerce. 9 U.S.C. §§ 1, 2. If a party is bound to an arbitration agreement that falls within the scope of the FAA, the party may move to compel arbitration in a federal court. Id. §§ 3-4; see also Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004).

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“Generally, the [FAA] establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Portland Gen. Elec. Co. v. Liberty Mut. Ins. Co., 862 F.3d 981, 985 (9th Cir. 2017), as amended (Aug. 28, 2017) (citation omitted).

Given this strong federal preference for arbitration and the contractual nature of arbitration agreements, “a district court has little discretion to deny an arbitration motion” once it determines that a claim is covered by a written and enforceable agreement to arbitrate. Republic of Nicar. v. Standard Fruit Co., 937 F.2d 469, 475 (9th Cir. 1991). “In determining whether to compel a party to arbitration, a district court may not review the merits of the dispute[.]” Esquer v. Educ. Mgmt. Corp., 292 F.Supp.3d 1005, 1010 (S.D. Cal. 2017) (quotations omitted). Instead, a district court's determinations are limited to (1) whether a valid arbitration exists and, if so, (2) whether the agreement covers the relevant dispute. See 9 U.S.C. § 4; ...