Pharmainvest, LLC v. Aminopterin, LLC

• Decision Date: 30 January 2017
• Docket Number: A147334
• Parties: PHARMAINVEST, LLC, Plaintiff and Respondent, v. AMINOPTERIN, LLC et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

PHARMAINVEST, LLC, Plaintiff and Respondent, v. AMINOPTERIN, LLC et al., Defendants and Appellants.

A147334

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION TWO

January 30, 2017

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(San Francisco County Super. Ct. No. CGC-14-540584)

Defendants Aminopterin, LLC and Dr. John Zebala appeal from the order denying their motion to compel plaintiff PharmaInvest, LLC to arbitrate their dispute. We affirm.

BACKGROUND

Historical information concerning the dispute is well set forth in the exhaustive 13-page statement of decision by the Honorable Mary E. Wiss on the order denying defendants' motion to compel. Her decision merits quotation at length (with our addition of minor, nonsubstantive editorial modifications):

"This is an action by plaintiff PharmaInvest, LLC (PharmaInvest), a member of defendant Aminopterin LLC (Aminopterin) and against defendant Dr. John A. Zebala as an individual. Dr. Zebala is the Managing Director of Aminopterin and the CEO of its other member, non-party Syntrix Biosystems, Inc. (Syntrix). Aminopterin is a Delaware limited liability company formed to develop (L/D)-aminopterin (AMT) . . . for the treatment of certain autoimmune diseases. PharmaInvest and Syntrix are the only two members of Aminopterin. Aminopterin is governed by a Board of Managers. The Boardconsists of five directors, two appointed by each PharmaInvest and Syntrix, who then decide on a fifth neutral director.

"Between 2007 and 2010, Dr. Zebala and two principals of PharmaInvest (Peter Georgiopoulos and Jonathan Singer) discussed pooling resources to develop AMT. On March 31, 2010, PharmaInvest and Aminopterin entered into a Limited Liability Company Agreement (Agreement). The Agreement was executed by PharmaInvest. Dr. Zebala executed the Agreement in three different capacities: as President and Chief Executive Officer of Syntrix, as Managing Director of Aminopterin, and individually for purposes set forth in . . . the Agreement.

"Pursuant to the Agreement, Syntrix contributed intellectual property to Aminopterin and PharmaInvest contributed capital. By early 2014, a dispute arose between Dr. Zebala and PharmaInvest over the direction of Aminopterin and its funding by PharmaInvest. Various demands were made by both sides.

"The Agreement provides for arbitration of certain disputes. Article XVI, Sections 16.1 and 16.2 of the Agreement, entitled 'Dispute Resolution and Arbitration,' states:

" 'Section 16.1 Disputes: Any dispute, claim or controversy (a "Dispute") arising out of, in connection with or relating to this Agreement between PharmaInvest and Syntrix shall be resolved first by referring the Dispute to a senior representative of each party, as applicable, who shall meet to resolve the matter. If the senior representatives cannot resolve the disagreement after thirty (30) days of first meeting, then the Dispute shall be finally and exclusively resolved by arbitration administered by the American Arbitration Association (AAA) in accordance with its Commercial Arbitration Rules and Section 16.2 hereto.

" 'Section 16.2 Arbitration. Within fifteen (15) days after the commencement of arbitration, PharmaInvest and Syntrix shall each select one (1) person to act as arbitrator and the two (2) selected shall select a third arbitrator within seven (7) days of their appointment. If the arbitrators selected by PharmaInvest and Syntrix are unable or fail to agree upon the third arbitrator, the third arbitrator shall be selected by the AAA. Thearbitration shall take place in San Francisco, California. The parties agree that the arbitration shall be conducted expeditiously; to that end, if reasonable, PharmaInvest and Syntrix intend for a final award to be issued within 120 days from the date of the filing of the written demand to arbitrate, and in no event more than 365 days from the date of the filing of the written demand to arbitrate. The final award shall be reasoned and in writing, which shall be final, conclusive and binding. . . . Except as provided in the preceding sentence, each party to the arbitration shall bear its own costs and expenses.'

"On April 10, 2014, PharmaInvest wrote a letter to Syntrix giving notice of a dispute under Section 16.1 of the Agreement. On the same day, in response to various claims and requests for information, Aminopterin wrote to PharmaInvest regarding the parties' disputes. This April 10 letter, on Aminopterin letterhead, was signed by Dr. Zebala on behalf of Aminopterin and non-party Syntrix. The letter states that '[t]his matter is between Aminopterin and PharmaInvest, not between Syntrix and PharmaInvest' and went on to say 'I [Dr. Zebala] also acknowledge the April 10, 2014 letter from PharmaInvest to Syntrix giving notice of a dispute under section 16.1 of the Agreement. This Notice is improper and not recognized. The matter is a dispute between Aminopterin and PharmaInvest as set forth above.'

"On July 16, 2014, PharmaInvest filed its complaint against Aminopterin and Dr. Zebala, which is still the operative pleading. The complaint asserts breach of contract claims against all defendants, and seeks damages as well as injunctive and declaratory relief. Dr. Zebala is sued in his individual capacity for inducing breach of contract, as well as for fraud in inducing PharmaInvest to enter into the Agreement. And, PharmaInvest seeks a declaration of its rights as to both defendants.

"Since the filing of the complaint, the parties have been embroiled in vigorous litigation. PharmaInvest points out that this Court has issued no less than 25 orders since the action was filed, including the issuance of a preliminary injunction and a denial of Dr. Zebala's motion to dissolve the preliminary injunction (in which Aminopterin joined). The parties have engaged in hard-fought discovery. By written order filed July 15, 2015, this Court scheduled the following matters:

" 'Week of August 17, 2015': Deposition of Dr. Zebala.

" 'Week of August 17, 2015': Deposition of Dee Hoeke, bookkeeper for Syntrix.

"September 3, 2015: Hearing On PharmaInvest's Motion to Amend its Complaint

"October 2, 2015: Hearing on Zebala's Motion for Judgment on the Pleadings

"November 2, 2015: Trial.

"Dr. Zebala's motion to compel arbitration was filed on August 17, 2015, the same week that his deposition and that of Syntrix's bookkeeper were to commence. Defendant Aminopterin filed a joinder in the motion on August 21, 2015. Prior to these filings, neither Dr. Zebala nor Aminopterin complied with the pre-arbitration deadlines and requirements set forth in section 16.1 of the Agreement. . . .

"Applicable Legal Standards

"As a general matter, '[a] strong public policy favors the arbitration of disputes, and doubts should be resolved in favor of deferring to arbitration proceedings.' (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97.) The party opposing arbitration has the burden to establish that the arbitration provisions do not cover the dispute at issue. (Buckhorn v. St. Jude Heritage Medical Group (2004) 121 Cal.App.4th 1401, 1406 ['The party opposing arbitration has the burden to show that the agreement does not apply to the dispute'].)

"Arbitration is a matter of contract. However, the policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate. (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59.) The strong policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement, and a party cannot be compelled to arbitrate a dispute that he has not agreed to resolve by arbitration. (Bensara v. Marciano (2001) 92 Cal.App.4th 987, 990.)

"The right to arbitration may, however, be waived. Code of Civil Procedure section 1281.2 provides in pertinent part: 'On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that anagreement to arbitrate the controversy exists, unless it determines that: [¶] (a) The right to compel arbitration has been waived by the petitioner . . . .' (emphasis added).

" 'No single test defines the conduct that will constitute waiver of an arbitration right. Rather, courts look to a number of factors to determine whether waiver has occurred. (St. Agnes Medical Center v. Pacificare of California (2003) 31 Cal.4th 1187, 1195-1196 [St. Agnes].) In St. Agnes, the Supreme Court confirmed that a court may consider the following six factors in assessing a waiver claim: " ' "(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether 'the litigation machinery has been substantially invoked' and the parties 'were well into preparation of a lawsuit' before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of proceedings; (5) "whether important intervening steps [e.g., taking advantage of judicial discovery proceedings not available in arbitration] had taken place"; and (6) whether the delay "affected, misled, or prejudiced" the opposing party.' " [Citation.]' (Id. at p. 1196; see also Sobremonte v. Superior Court [(1998)] 61 Cal.App.4th [980], 982.)" (Oregel v. PacPizza, LLC (2015) 237 Cal.App.4th 342, 354-355 [Oregel].)

"A party seeking to...