Filed 10/5/26 Solorzano v. Gruen CA2/5
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
EDWIN SOLORZANO, B334704
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No.
v. 19SMCV00535)
ADAM GRUEN et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Edward B. Moreton, Jr., Judge. Affirmed.
Law Office of Gary S. Adwar and Gary S. Adwar; Fernald &
Zaffos, Adam P. Zaffos, Brandon C. Fernald, and Gina McCoy for
Plaintiff and Appellant.
Milstein Jackson Fairchild & Wade, Ian T. Wade, Gillian L.
Wade, and Marc A. Castaneda for Defendant and Respondent
Niloofar Moshfegh Geller.
McCathern and Evan Selik for Defendants and
Respondents Adam Gruen and Amanda Gruen.
Appellant Edwin Solorzano (Solorzano), a minority
shareholder of Wholesale Direct Metals (WDM), filed a derivative
action against respondents Adam Gruen (Adam), Amanda Gruen
(Amanda), Niloofar “Lili” Moshfegh Geller (Lili), and others. The
trial court ordered the matter to arbitration, the arbitrator ruled
against Solorzano, and the trial court entered judgment
confirming the arbitration award. We consider Solorzano’s
challenges to the trial court’s initial order compelling arbitration
(chiefly arguing there was no agreement to arbitrate and the
underlying agreement was not enforceable) and his challenges to
the court’s subsequent order confirming the arbitration award
(chiefly arguing he and others were not proper parties to the
arbitration, the arbitrator’s disclosures were deficient, Solorzano
was wrongly prevented from taking certain discovery, and
claimed legal error).
I. BACKGROUND
A. Complaint
Solorzano is a minority shareholder in WDM, a California
corporation engaged in the retail sale of precious metals in coin
and bullion form. He became a director in May 2018 and
president “shortly thereafter.” Several months later, Solorzano
allegedly discovered a “massive and multi-faceted
embezzlement/theft” of WDM’s assets by officers of WDM and
their associates.
In March 2019, Solorzano filed a derivative action against
Lili, Adam, Amanda, and others alleging they were involved in a
scheme that drained nearly $10 million from the company. The
complaint alleged causes of action for an accounting, breach of
fiduciary duty, professional negligence, conversion, trespass to
2
chattels, intentional misrepresentation, concealment, false
promise, and constructive trust.
In September 2019, the trial court granted Solorzano’s ex
parte application for a writ of possession, and officers executing
the writ seized over $90,000 in gold from Lili’s home.
B. Proceedings to Compel Arbitration
1. Motion to compel arbitration
In August 2019, a defendant with whom Solorzano has now
settled—Ruth Cohen (Cohen)—moved to compel arbitration of
Solorzano’s derivative lawsuit. The Gruens and Lili joined the
motion. The request to compel arbitration rested on a stock
purchase and redemption agreement signed in April 2018 by
Solorzano, by Adam on behalf of WDM, and by others including
Lili’s husband, Damon Geller (Damon).
The agreement indicates there were “disputes . . . regarding
certain actions taken by [Damon] in his position as CEO of WDM,
including, among other things, the setting and payment of [his]
compensation.” The agreement recites the parties sought to
“resolve all of their differences and have WDM purchase”
Damon’s shares in WDM. The parties indicated their “desire to
start fresh and execute a full and mutual release of each other.”1
Among other things, the agreement releases Solorzano and
WDM’s claims against Damon, Lili, Adam, and Amanda.2 These
1
Damon died in December 2018.
2
The agreement does not expressly name Lili or Amanda in
the releases, but it refers to Damon and “his spouse” (among
others) collectively as the “Geller Releasors” and Adam and “his
spouse” (among others) collectively as the “Gruen Releasors.” Lili
also signed the agreement “[a]s to [p]aragraph 16 only (and to the
3
releases extend to “all claims . . . whether now known or
unknown, suspected or unsuspected, and whether or not
concealed or hidden . . . from the beginning of time through the
[a]greement [d]ate.”
The agreement further provides that “[a]ny and all claims
or controversies whatsoever brought by any [p]arty arising out of
or relating to this [a]greement shall be settled by final and
binding arbitration in Los Angeles, California by JAMS in
accordance with governing California law and JAMS’ then-
current [r]ules and [p]rocedures, with the costs of the arbitration,
including the arbitrator, to be split by the [p]arties to the
proceeding . . . . In the event any arbitration is initiated to
enforce this [a]greement, the prevailing party in any such
arbitration shall be entitled to recover his or its reasonable
attorney’s fees and costs incurred.”
A separate paragraph provides that “[s]hould any part,
term[,] or provision of this [a]greement be declared or determined
by any [c]ourt or other tribunal of appropriate jurisdiction to be
invalid or unenforceable, any such invalid or unenforceable part,
term[,] or provision shall be deemed stricken and severed from
this [a]greement and any and all of the other terms of the
[a]greement shall remain in full force and effect to the fullest
extent permitted by law. The releases . . . are of the essence of
rest of the [a]greement if [p]aragraph 16 is activated)[.]”
Paragraph 16 establishes Lili’s consent to the transfer of Damon’s
shares in WDM “to the extent of any community property rights”
and, to the extent that she in fact had such an interest in his
shares, provides for her agreement to be bound by the other
terms.
4
this [a]greement and the [p]arties would not have entered into
this [a]greement but for those respective releases.”
2. Response and Opposition
Solorzano filed both a “response” and an “opposition” to the
motion to compel arbitration of his derivative suit. In the
response, Solorzano requested the court permit discovery and
hold an evidentiary hearing. He argued the agreement was void
and subject to rescission on various grounds, including that
Adam lacked authority to contract on behalf of WDM and the
agreement was the product of self-dealing and did not fall within
any statutory safe harbor. Solorzano also argued the case
involved claims against parties not subject to the arbitration
agreement, raising the possibility of conflicting rulings on
common issues of law or fact.
Solorzano repeated some of these arguments in his
opposition. Among other things, the oppositionargued the
moving parties had not shown Adam had authority to sign the
agreement on behalf of WDM, the moving parties had not
established the authenticity of other signatures, the claims at
issue involved defendants who were not party to the agreement,
and the agreement was the product of “[c]oncealment/[m]istake of
[f]act,” a breach of fiduciary duty, and “duress and undue
influence.” With respect to the last of these arguments,
Solorzano contended the severability provision contemplating
that “any [c]ourt” might find portions of the agreement to be
unenforceable suggested the court should decide whether the
dispute was arbitrable.
5
3. The trial court’s ruling
The trial court granted the motion to compel arbitration in
March 2020. The court found “no evidence” to support
Solorzano’s argument that Adam lacked authority to bind WDM
and determined no evidentiary hearing was needed because there
was no evidence that would even “question whether [Adam]
lacked [this] authority . . . .” The court reasoned Corporations
Code section 313, which it characterized as providing “that any
contract entered into between a corporation and any other person
is valid only if signed by two corporate officers,” did not preclude
compelling arbitration because precedent holds the signatures of
two such officers are sufficient even if they are not identified as
such on the face of the instrument—and both Damon and Adam
had signed. Moreover, a contrary ruling would mean “WDM
could not have entered into any enforceable agreement
whatsoever with anyone” because “there were no other officers or
directors at that time.”
The trial court further reasoned that, as a general matter,
whether the entire agreement was obtained by fraud or duress
was an issue for the arbitrator to determine because that would
constitute fraud in the inducement and the arbitration provision
at issue did not carve out any exception for fraud in the
inducement claims. Moreover, applicable JAMS rules provided
that “[j]urisdictional and arbitrability disputes, including
disputes over the formation, existence, validity, interpretation[,]
or scope of the agreement under which [a]rbitration is sought,
and who are proper [p]arties to the [a]rbitration, shall be
submitted to and ruled on by the [a]rbitrator. . . .”
The trial court declined to exercise its discretion to deny
the motion based on Solorzano’s claims against parties not bound
6
by the arbitration agreement. The court observed that although
“the only parties to this action probably subject to the arbitration
agreement [were Solorzano], [Adam], [Cohen,] and [WDM],” the
trial court was “not inclined” to require other parties whose
liability had “not been clearly stated” to litigate “where the
alleged embezzlement scheme” was subject to arbitration.
Solorzano’s “additional arguments, including one based on
the import of the severability clause and another based on the
cost and unfairness of arbitration,” did not “compel” a different
conclusion. The trial court accordingly ruled that “Cohen’s
motion to compel arbitration and stay the proceedings is
GRANTED.” (As we later discuss, the parties dispute the
meaning of this language as to Lili and the Gruens.)
C. The Arbitration
Cohen, the Gruens, and others thereafter filed a demand
for arbitration with JAMS asserting claims against Solorzano for
intentional interference with contractual relations, intentional
interference with prospective economic relations, slander of title,
intentional infliction of emotional distress, breach of fiduciary
duty, failure to pay wages, and abuse of process for filing his
complaint for improper purposes. Solorzano filed counterclaims
on behalf of WDM against Cohen, the Gruens, and WDM for an
accounting, breach of fiduciary duty, professional negligence,
conversion, trespass to chattels, intentional misrepresentation,
concealment, false promise, constructive trust, breach of contract
(as to Adam), common counts (as to Adam), and
rescission/restitution. Solorzano later obtained leave to file a
first amended counterclaim adding claims against Lili.
7
Before the arbitration hearing began, Solorzano submitted
a motion to exclude “[n]on-[p]arties,” including Lili and Amanda,
from the ambit of the arbitration proceedings. The arbitrator
(retired Justice Candace Cooper), however, rejected Solorzano’s
argument that the trial court “already determined” Lili and
Amanda were not proper parties to the arbitration—instead
reading the trial court’s order to compel arbitration “for all
defendants, not just those who signed the arbitration agreement.”
The arbitrator also “independently” found “that all of the parties
that Solorzano s[ought] to exclude [we]re properly within [her]
arbitral jurisdiction” because, “[u]nder California law, a
nonsignatory to an arbitration agreement may be permitted to
enforce an arbitration clause under the doctrine of equitable
estoppel,” including in cases “where the claims are based on the
same facts and are inherently inseparable from the arbitrable
claims against signatory defendants.”
Solorzano had also served discovery requests before the
arbitration hearing that sought, among other things, “asset and
liability statements” of Adam, Amanda, and Lili. The arbitrator
ruled that such requests were “premature,” and “[w]hen
appropriate, discovery on these financial topics w[ould] be
allowed in the future.”
An eight-day arbitration hearing commenced in July 2022.
During the hearing, Solorzano (represented by counsel)
“renew[ed] [his] request for financial documents that [h]e
previously requested . . . .” Solorzano maintained the documents
were relevant to demonstrating WDM was entitled to a
constructive trust over an apartment building owned by a
company associated with Adam because it was “funded with
WDM assets.” He further argued he was “entitled to net worth
8
discovery” because Adam “admitted to about one-third of
[Solorzano’s] allegations dollar amount [sic], one-third he says he
has no information, and one-third he denies.” The arbitrator
ruled Solorzano had not “shown adequate foundation” for the
requested financial materials “just yet” and suggested there was
no “reason to enlarge” the case at that point.
In a later-issued interim award, the arbitrator made a
number of factual findings but ultimately relied on the releases
in the 2018 stock purchase and redemption agreement to resolve
the dispute.
The arbitrator’s interim award found Damon and another
individual founded WDM, which sells precious metals in coin and
bullion to the public, in 2007. The arbitrator found “[t]he
Gruen/Geller/Cohen family have always controlled WDM since
inception through the board, and they have been the majority
shareholders of WDM for most of its existence, including holding
the majority of shares continuously since approximately
September 30, 2011, until [Damon’s] shares were sold . . . .”
When Solorzano acquired a minority interest in WDM in 2008, a
shareholder agreement capped executive salaries at $250,000
each, but “there was no cap placed on commissions that
executives at WDM could earn.” The 2018 agreement was
intended to resolve a prolonged conflict concerning executive
compensation, with WDM buying Damon’s shares—representing
about 46% of outstanding shares—for a net payment of $175,000.
The arbitrator recounted that Solorzano “discovered what
he contends was a massive and multifaceted embezzlement/theft
in the amount of at least $9.59 million” “[s]ometime around July
of 2018.” The arbitrator found “it was clearly proven that the
accounting procedures at WDM were unrefined, uncareful, and
9
unsophisticated, at best” and cited evidence that executives paid
themselves and others in precious metals. Adam and Cohen
sometimes bought “metals for non-existent customers, billing the
cost of those metals to the company as ‘promotional’ (or
occasionally making no attempt to explain the purchase), and
then keeping the metal for themselves”; Adam and Cohen paid
personal expenses with company funds; and Adam and Cohen
made “payments to others for no documented business reasons.”
“Indeed,” the arbitrator found, Adam “essentially admitted to the
theft” in a recorded conversation. But the arbitrator found
Solorzano had not provided “any expert testimony
demonstrating” all disputed expenses “were unjustified or
suspicious or that all of the unaccounted-for gold involved theft.”
Although the interim award made these findings, its legal
analysis focused on the validity and scope of the releases in the
2018 stock purchase and redemption agreement. The arbitrator
determined the 2018 agreement was valid and there was “no
evidence” of misrepresentations made to induce Solorzano or
WDM to enter into the agreement (and, in any case, “Solorzano
would have serious problems establishing reliance and/or
causation since accusations about potential wrongdoing by
[Damon] and [Adam], including potential misappropriation and
theft, had been made years prior to the execution of the
[agreement]”). The arbitrator also determined the wrongdoing
alleged by Solorzano was within the scope of the agreement’s
releases: “Solorzano and WDM entered into the [agreement] with
the clear intention to release [Damon], Lili, [Adam], and Amanda
from all claims, whether known or unknown, suspected or
unsuspected, and whether or not concealed or hidden at the time
of contracting.” The arbitrator accordingly found that all causes
10
of action Solorzano asserted on behalf of WDM failed in light of
the releases.
On the other side of the matter, the arbitrator denied
essentially all of the claims brought by Cohen, the Gruens, and
others against Solorzano—only granting a request for a
declaration that the 2018 agreement is a valid, binding, and
enforceable contract. The arbitrator also granted a request for a
declaration that the causes of action set forth in Solorzano’s
complaint are subject to arbitration—at least “as they involve the
parties to the [agreement’s] arbitration provision.”
Solorzano subsequently submitted a motion to amend or
vacate the interim award. He argued the arbitrator did not
address the validity of the 2018 agreement in light of
Corporations Code section 310 (a statute addressing the validity
of contracts between corporations and either its directors or other
entities in which one or more directors has a material financial
interest), misallocated the burden of proof with respect to missing
assets, and improperly denied his discovery requests. The
arbitrator denied the motion because “no issue was omitted from
the [i]nterim [a]ward through [her] ‘mistake, inadvertence, or
excusable neglect.’” The arbitrator explained that although the
interim award did “not specifically discuss Solorzano’s arguments
pertaining to California Corporations Code section 310 or [his]
arguments pertaining to the burden of proof, those arguments
were indeed considered . . . and rejected.”
The arbitrator issued a final award in May 2023 that
incorporated the interim award and also awarded attorney fees
and costs to Lili, Adam, and Amanda as prevailing parties. The
arbitrator determined fees and costs were appropriate in light of
the express terms of the agreement and of governing JAMS rules.
11
She rejected Solorzano’s argument that Lili was not a party to
the agreement’s attorney fee provision because Lili agreed to be
bound by the agreement to the same extent as Damon. The
arbitrator determined Lili, Adam, and Amanda were prevailing
parties despite the lack of any monetary recovery against
Solorzano because she granted their requests for declaratory
relief as to the validity of the agreement and the arbitrability of
Solorzano’s claims.
The arbitrator accordingly awarded the Gruens
$340,991.14 in attorney fees and $17,337.65 in costs. She
awarded Lili $465,902.80 in attorney fees and $15,866.29 in
costs. And she ruled Solorzano and WDM would be jointly and
severally liable for the attorney fees and costs.
D. Subsequent Trial Court Proceedings
Lili, Adam, and Amanda petitioned the trial court to
confirm the arbitration award and Solorzano moved to vacate it.
Solorzano argued the award should be vacated because there was
no valid agreement to arbitrate, the arbitrator abused her
discretion in denying requested discovery, the arbitrator
misallocated the burden of proof as to the missing assets, the
award of attorney fees and costs violated consumer arbitration
rules, the arbitrator failed to disclose grounds for her
disqualification, and the award was unconscionable because it
exempted Lili, Adam, and Amanda from responsibility for their
own fraud.
The trial court confirmed the award. With respect to the
existence of an agreement to arbitrate, the trial court reasoned
the arbitrator rejected Solorzano’s arguments and he was
“essentially complaining that the arbitrator got it wrong.” That
12
was not misconduct and it was therefore no basis to vacate the
award.
As to discovery, the trial court emphasized the limited
scope of court review of discovery rulings in arbitration and
further reasoned, “[i]n any event, [Solorzano’s] stated grounds for
the discovery during the first day of the arbitration proceedings
was for a constructive trust, and not to trace the missing WMD
assets”; the arbitrator “did not preclude [Solorzano] from seeking
the discovery again, only concluding she would not grant the
discovery request at that time.”
With respect to the burden of proof, the trial court found
the arbitrator “correctly placed the burden of proof on [Solorzano]
to prove [his] claims” and observed a mistake of law would not
warrant vacating the award in any event.
The award of attorney fees did not violate consumer
arbitration rules because Solorzano and WDM are not consumers,
but rather “a business and its shareholder/officer.” In any case,
violation of consumer arbitration rules is not a ground for
vacating an award.
The arbitrator’s nondisclosure of the fact that both she and
Cohen’s attorney worked at the same firm “more than 40 years”
prior to the arbitration was not a basis for vacating the award
because this was outside the two-year limit for disqualification
under governing standards, there was no evidence they worked
together directly, Solorzano settled with Cohen before the
arbitration, and both the arbitrator and Cohen’s attorney’s
resumes were publicly available.
The trial court regarded Solorzano’s unconscionability
argument as yet another “claim that the arbitrator got it wrong,”
which “d[id] not warrant the vacation of an arbitral award.” In
13
any case, the trial court found, “the arbitrator had reasonable
grounds to conclude” the agreement’s broad release was valid
despite evidence of wrongdoing. There was no evidence “showing
[Damon, Lili, Adam, or Amanda] misrepresented anything to
[Solorzano] to induce [him] to specifically enter into the
[agreement]” and, “even if they had,” Solorzano would have been
unable to prove reliance or causation because Solorzano was
aware of purported wrongdoing and did not investigate WDM’s
books and records before signing the release.3
The trial court entered a final judgment jointly and
severally against Solorzano and WDM and in favor of Lili, Adam,
and Amanda in December 2023.
II. DISCUSSION
The smorgasbord of issues Solorzano raises on appeal all
lack merit.4
3
After issuing its order confirming the arbitration award,
the trial court partially granted a motion by Lili for release and
re-delivery of the coins seized in 2019 pursuant to Solorzano’s
writ of possession. The trial court determined Lili was not
entitled to damages, but ordered the coins to be returned to her
and awarded $28,602.56 in attorney fees and costs incurred in
moving to quash the writ of possession and in moving for release
and re-delivery.
4
Solorzano’s opening brief and reply brief in this court were
authored by different attorneys, owing to Solorzano’s substitution
of counsel. Solorzano’s reply brief asserts sanctions are not
warranted for deficiencies in his opening brief and for filing a
frivolous appeal because, among other things, he “par[ed] down
and focus[ed] the argument section on two key appellate issues”
in his reply. It is not clear whether this statement is intended to
14
With respect to the order compelling arbitration, there was
no error in finding the existence of an agreement to arbitrate.
Substantial evidence supports the trial court’s implied finding
that the signatures on the arbitration agreement are authentic;
the moving parties satisfied their initial burden with respect to
Adam’s authority to bind WDM; the arbitrator, not the trial
court, appropriately resolved Solorzano’s arguments about
enforceability of the 2018 agreement because those concerned the
validity of the agreement as a whole (Nielsen Contracting, Inc. v.
Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1107-
1108); the trial court was not required to hold an evidentiary
hearing and issue a statement of decision on the motion to compel
arbitration; and Solorzano’s claim that the trial court should have
permitted discovery is forfeited because his briefs do not include
record citations to any pre-arbitration discovery requests that
were denied.
There was no error with respect to the orders denying
Solorzano’s motion to vacate the arbitration award (and granting
the petitions to confirm the award) either. Solorzano, Lili, and
Amanda were parties to the arbitration without objection during
the arbitration proceedings (before issuance of the interim award)
and Solorzano’s argument to the contrary, advanced only now, is
forfeited. Solorzano’s argument relying on Code of Civil
Procedure section 1284.3’s rules governing disclosures and
attorney fees in consumer arbitrations fails because he is not a
withdraw other arguments raised in his opening brief, so we
address all arguments presented. Lili’s request for sanctions
against Solorzano—made in a brief she partially withdrew
because it quotes non-existent authority—is denied.
15
consumer under the statutory definition, and his related
argument that he is a consumer for purposes of the California
Rules of Court, Ethics Standards for Neutral Arbitrators in
Contractual Arbitration (Ethics Standards) fails too because this
dispute does not arise out of any employee role Solorzano had at
WDM. Solorzano’s attack on the arbitrator’s disclosures lacks
merit because he does not show the arbitrator was aware of a
former association with Cohen’s attorney and her purported
failure to make required disclosures in a different case does not
bear on her impartiality here. Finally, the arbitrator did not err
in ostensibly denying money-tracing discovery because (even
assuming this were an accurate characterization of her discovery
rulings) Solorzano was not prejudiced by the lack of money-
tracing discovery—the award rested on the scope of the
agreement’s releases.5
A. The Trial Court Properly Compelled Arbitration
1. The parties agreed to arbitrate this matter
The threshold finding a trial court must make in analyzing
a petition to compel arbitration is whether “an agreement to
arbitrate the controversy exists.” (Code Civ. Proc., § 1281.2.)
“The court makes this determination in a ‘summary proceeding’
([s]ee Code Civ. Proc., § 1290.2), sitting ‘as a trier of fact,
weighing all the affidavits, declarations, and other documentary
evidence, as well as oral testimony received at the court’s
discretion, to reach a final determination.’ [Citation.]” (Ramirez
5
Other asserted legal errors by the arbitrator are beyond the
scope of permissible review of an arbitration award.
16
v. Golden Queen Mining Co., LLC (2024) 102 Cal.App.5th 821,
829.)
General principles of contract law govern, and “[t]he party
seeking arbitration has the burden of proving the existence of an
arbitration agreement by a preponderance of the evidence” while
“[t]he party opposing arbitration bears the burden of proving by a
preponderance of the evidence any defense to the agreement’s
enforcement.” (Ramirez, supra, 102 Cal.App.5th at 829-830.) If
the party seeking arbitration “carr[ies] the initial burden of
presenting prima facie evidence of a written agreement to
arbitrate the controversy,” the party opposing arbitration must
“produc[e] evidence to challenge the authenticity of the
agreement.” (Id. at 830.) Only then must the party seeking
arbitration “prove by a preponderance of the evidence that the
parties formed a valid contract to arbitrate their dispute.” (Ibid.)
Here, the moving parties submitted a copy of the written
agreement signed by Solorzano, by Adam on behalf of WDM as its
CFO, and by others. Solorzano’s argument that the moving
parties were required to prove the authenticity of the signatures
appended to the agreement electronically in some specific—but
unspecified—manner lacks merit. The moving parties submitted
a copy of the electronically-signed agreement, which included
details concerning the email address associated with each
signature, and the agreement recites on its face the
circumstances under which it was negotiated. This was sufficient
to support the trial court’s implied finding that the signatures
were authentic. (Civ. Code, § 1633.9, subd. (a) [“An electronic
record or electronic signature is attributable to a person if it was
the act of the person. The act of the person may be shown in any
manner, including a showing of the efficacy of any security
17
procedure applied to determine the person to which the electronic
record or electronic signature was attributable”].)
Solorzano’s arguments concerning Adam’s authority to bind
WDM are also unavailing. The moving parties satisfied their
prima facie burden on this issue. Although the appellate record
does not appear to include WDM’s articles of incorporation or
bylaws, the agreement itself indicates Solorzano, Adam, and
Cohen (as a trustee) were shareholders after Damon’s shares
were sold back, and all of them signed the agreement—with
Solorzano signing after Adam executed the agreement on WDM’s
behalf. Rather than providing any evidence that Adam lacked
authority to bind WDM,6 Solorzano assumes he lacked authority
and argues the moving parties did not satisfy Corporations Code
section 313—which provides that a contract “is not invalidated as
to the corporation by any lack of authority of the signing officers”
under certain circumstances. Whether or not the moving parties
satisfied the requirements of this statutory safe harbor proves
nothing with respect to Adam’s actual authority.
2. The trial court properly delegated questions
regarding enforceability of the agreement to the
arbitrator
“It has long been settled that when parties have agreed to
arbitration, challenges to the validity of the underlying contract,
6
Solorzano’s reliance on Corporations Code section 300 to
suggest that only the board of directors could bind WDM lacks
merit. The statute provides, in pertinent part, “the business and
affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board.”
(Corp. Code, § 300, subd. (a), italics added.)
18
including contract defenses such as fraud in the inducement or
illegality, are for the arbitrator to decide. [Citations.] This is
because the arbitration clause is viewed as separate from the
underlying contract. [Citation.] Thus, allegations that the main
contract is unlawful or unconscionable does not affect the
enforceability of the arbitration clause. [Citation.] [¶] However,
challenges to the validity of the arbitration clause itself are
generally resolved by the court in the first instance. [Citations.]”
(Nielsen, supra, 22 Cal.App.5th at 1107-1108.)
Solorzano’s arguments that the arbitration agreement was
not “just and reasonable” under Corporations Code section 310
and constituted fraud under Civil Code section 2306 reduce to the
general claim that arbitration favors defendants. This argument
runs squarely counter to California’s policy favoring arbitration.
(Haworth v. Superior Court (2010) 50 Cal.4th 372, 380 [the
California Arbitration Act “reflects a ‘strong public policy in favor
of arbitration as a speedy and relatively inexpensive means of
dispute resolution’”].)
Solorzano alternatively argues the trial court, not the
arbitrator, should have considered his arguments concerning the
validity of the agreement as a whole for two reasons: (1) the
agreement to arbitrate disputes is not severable from the
agreement’s releases and (2) the agreement as a whole is illegal
under various statutes. These arguments also lack merit.
Relying on the rationale for the rule that courts do not
consider general challenges to the validity of contracts that
include arbitration provisions, i.e., that “the arbitration clause is
viewed as separate from the underlying contract” (Nielsen, supra,
22 Cal.App.5th at 1108), Solorzano highlights the agreement’s
qualified severability provision. As we have already mentioned,
19
the agreement included the following language in a paragraph
with the heading “Severability”: “Should any part, term[,] or
provision of this [a]greement be declared or determined by any
[c]ourt or other tribunal of appropriate jurisdiction to be invalid
or unenforceable, any such invalid or unenforceable part, term[,]
or provision shall be deemed stricken and severed from this
[a]greement and any and all of the other terms of the [a]greement
shall remain in full force and effect to the fullest extent permitted
by law. The releases . . . are of the essence of this [a]greement
and the [p]arties would not have entered into this [a]greement
but for those respective releases.” According to Solorzano, the
final sentence of this paragraph means the arbitration provision
is only enforceable if the releases are enforceable.
Solorzano’s proposed construction of the severability
provision would practically swallow the arbitration agreement
and its broad provision for arbitration of “[a]ny and all claims or
controversies whatsoever . . . arising out of or relating to this
[a]greement.” Construing the agreement to give effect to both the
arbitration provision and the severability provision, the
severability provision must be limited to substantive terms
including the releases, the stock purchase, Damon’s resignation
from WDM, and a non-solicitation provision. (Civ. Code, § 1652
[“Repugnancy in a contract must be reconciled, if possible, by
such an interpretation as will give some effect to the repugnant
clauses, subordinate to the general intent and purpose of the
whole contract”].)
Solorzano’s argument that the agreement as a whole is
illegal rests largely on Duffens v. Valenti (2008) 161 Cal.App.4th
434. In Duffens, the Court of Appeal affirmed the denial of a
petition to compel arbitration pursuant to an agreement in a
20
dating services contract that did not include statutorily required
terms. (Id. at 456.) The Court of Appeal held the statutory
violations made the entire contract (including the arbitration
provision) void. (Id. at 454.) The arbitration provision could not
be severed because the statutes “represent the Legislature’s
intent to regulate in a particular manner such contracts for
dating services, and the statutes operate to exclude such
contracts for dating services from the scope of the general rule
that a court will refrain from determining the legality of voidable
contracts that contain an arbitration clause, and will instead
allow an arbitrator to do so.” (Id. at 456.)
Unlike the statutes at issue in Duffens, the statutes upon
which Solorzano relies—Civil Code section 2306 and
Corporations Code sections 309 and 310—at most render a
contract voidable rather than void. Civil Code section 2306
provides that “[a]n agent can never have authority, either actual
or ostensible, to do an act which is, and is known or suspected by
the person with whom he deals, to be a fraud upon the principal.”
However, a contract executed under these circumstances may be
ratified by the principal (Corp. Code, § 310), and “[u]nlike a
voidable transaction, a void one cannot be ratified or validated by
the parties to it even if they so desire” (Yvanova v. New Century
Mortgage Corp. (2016) 62 Cal.4th 919, 936). Corporations Code
section 309 requires, among other things, directors to perform
their duties “in good faith, in a manner such director believes to
be in the best interests of the corporation and its shareholders
and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under
similar circumstances.” (Corp. Code, § 309, subd. (a).) Although
a corporation may well have defenses to enforcement of contracts
21
executed by directors who fall short of this standard, the statute
does not itself establish a contract defense. Corporations Code
section 310 is not proscriptive and cannot be violated. As we
have discussed, it is a safe harbor statute that, among other
things, sets forth conditions under which a transaction between a
director and a corporation is “[n]either void [n]or voidable.”
(Corp. Code, § 310, subd. (a).) The statute does not itself
establish that failure to satisfy these conditions affirmatively
renders a contract void or voidable.
Solorzano is therefore wrong to argue the 2018 agreement
was a “specialized type[ ] of contract[ ] that must meet certain
statutory standards in order to be valid.” (Duffens, supra, 161
Cal.App.4th at 455.)
3. The trial court did not err in denying
Solorzano’s request for a statement of decision
or abuse its discretion in denying his request for
an evidentiary hearing, and his discovery
argument is forfeited
Solorzano relies on Code of Civil Procedure section 1291 for
the proposition that the trial court was required to hold an
evidentiary hearing and issue a statement of decision on the
motion to compel arbitration. A statement of decision is only
required, however, if requested in connection with “an order or
judgment, except a special order after final
judgment, . . . appealable under [Code of Civil Procedure, Part 3,
Title 9].” (Code Civ. Proc., § 1291.) An order granting a motion
to compel arbitration is not appealable. (See Code Civ. Proc.,
§ 1294 [listing appealable orders].)
22
Although a trial court has discretion to hold an evidentiary
hearing on the existence or enforceability of an agreement to
arbitrate, it is not required to do so. (Rosenthal v. Great Western
Fin. Securities Corp. (1996) 14 Cal.4th 394, 414 [“There is simply
no authority for the proposition that a trial court necessarily
abuses its discretion, in a motion proceeding, by resolving
evidentiary conflicts without hearing live testimony”].) Holding
an evidentiary hearing is “the better course” where “the
enforceability of an arbitration clause may depend upon which of
two sharply conflicting factual accounts is to be believed” (ibid.),
but that is not the case here.
When Solorzano’s attorney informed the trial court at the
hearing on the motion to compel arbitration that Solorzano and
another witness were present and ready to testify, the trial court
asked what this testimony would add to the record. Solorzano’s
attorney initially suggested the witnesses would testify regarding
“[t]heft and nondisclosure,” i.e., that the agreement was
fraudulently induced—which, as we have already explained, was
a question for the arbitrator. Solorzano’s attorney later
suggested there would be testimony that Adam threatened to
expose Damon’s marital infidelity if he did not sign the
agreement, which was an “alternative” theory of invalidity apart
from his other contention that “[t]here is zero evidence,
admissible evidence, that Damon Geller signed that agreement.”
In its written order granting the motions to compel arbitration,
the trial court also noted Solorzano wanted an evidentiary
hearing on whether Adam had authority to sign the agreement
(though Solorzano did “not provide any evidence for the [c]ourt to
question” Adam’s authority). None of these rationales present
“sharply conflicting factual accounts” (Rosenthal, supra, 14
23
Cal.4th at 414) to be resolved in the summary proceeding—just a
hodgepodge of alternative theories that Solorzano wanted to
present through live testimony for no compelling reason.
Solorzano additionally contends the trial court was
required to permit discovery, but his briefs do not cite any pre-
arbitration discovery requests that were denied. This argument
is forfeited. (Del Real v. City of Riverside (2002) 95 Cal.App.4th
761, 768 [“The appellate court is not required to search the record
on its own seeking error. Again, any point raised that lacks
citation may, in this court’s discretion, be deemed waived”].)
B. The Trial Court Properly Confirmed the Arbitration
Award
1. The trial court properly confirmed the award as
to Lili and Amanda
Solorzano contends the trial court erred in confirming the
award as to Lili and Amanda at a minimum because they were
not proper parties to the arbitration. He believes the issue is
controlled by preclusion principles because the trial court denied
the motion to compel arbitration as to Lili and Amanda and they
did not timely appeal. This argument mischaracterizes the trial
court’s order on the motion to compel arbitration. Although the
trial court at that time remarked that “the only parties to this
action probably subject to the arbitration agreement are
[Solorzano], [Adam], [Cohen,] and [WDM],” it granted the motion
without qualification and made no finding that Lili and Amanda
would not be proper parties to the subsequent arbitration. (DKN
Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 825 [“issue
preclusion applies: (1) after final adjudication (2) of an identical
issue (3) actually litigated and necessarily decided in the first
24
suit and (4) asserted against one who was a party in the first suit
or one in privity with that party”].)
Alternatively, Solorzano argues the trial court
“impermissibly deferred to the arbitrator’s finding[ ]” that Lili
and Amanda were proper parties to the arbitration in its order
confirming the award. This is not, however, one of the statutory
grounds for vacating an arbitration award.7 (Code Civ. Proc.,
§ 1286.2 [listing grounds].)
2. Solorzano forfeited any objection to arbitration
against himself in an individual capacity
Cohen, Adam, and Amanda named both Solorzano as an
individual and WDM as respondents in their statement of claims
in support of their demand for arbitration. Solorzano contends he
was not a proper party to the arbitration, but he cites nothing in
the record to indicate he objected to his inclusion in the
arbitration prior to the interim award against him. This
argument is accordingly forfeited. (Moncharsh v. Heily & Blase
(1992) 3 Cal.4th 1, 30 [“we cannot permit a party to sit on his
rights, content in the knowledge that should he suffer an adverse
decision, he could then raise the . . . issue in a motion to vacate
the arbitrator’s award”].)
7
Any argument that the arbitrator “exceeded [her] powers”
under Code of Civil Procedure section 1286.2, subdivision (a)(4)
by arbitrating claims involving Lili and Amanda has not been
presented on appeal and is accordingly forfeited.
25
3. The arbitration was not a consumer arbitration
Solorzano contends the arbitration was a consumer
arbitration within the meaning of Code of Civil Procedure section
1284.3, which, among other things, prohibits an arbitrator from
proceeding “under any agreement or rule requiring that a
consumer who is a party to the arbitration pay the fees and costs
incurred by an opposing party if the consumer does not prevail in
the arbitration, including, but not limited to, the fees and costs of
the arbitrator, provider organization, attorney, or witnesses.”
(Code Civ. Proc., § 1284.3, subd. (a).) Solorzano characterizes
himself as an employee of WDM and suggests this renders him a
consumer within the meaning of the statute. Code of Civil
Procedure section 1280 is clear, however, that “‘[c]onsumer’
means an individual who seeks, uses, or acquires, by purchase or
lease, any goods or services for personal, family, or household
purposes.” (Code Civ. Proc., § 1280, subd. (c).) Solorzano does
not fit that definition.
Alternatively, Solorzano contends he is a “consumer” as
that term is used in arbitration ethics standards adopted
pursuant to statute. (Code Civ. Proc., § 1281.9, subd. (a)(2);
Ethics Standard 8.) Specifically, Solorzano cites Ethics Standard
2(e)(4) for its provision that a “‘[c]onsumer party’” includes “[a]n
employee or an applicant for employment in a dispute arising out
of or relating to the employee’s employment or the applicant’s
prospective employment that is subject to the arbitration
agreement.” Even if Solorzano is correct to characterize himself
as an employee of WDM, this is a shareholder dispute that does
not arise out of or relate to his employment in any way.
26
4. Solorzano’s challenges to the arbitrator’s
disclosures lack merit
Turning to the next of Solorzano’s arguments, he contends
the arbitrator violated generally applicable disclosure
requirements, including the requirement that a “proposed
neutral arbitrator shall disclose all matters that could cause a
person aware of the facts to reasonably entertain a doubt that the
proposed neutral arbitrator would be able to be
impartial . . . .” (Code Civ. Proc., § 1281.9, subd. (a).) Although
Solorzano does not state when he learned the relevant facts he
believes should have been disclosed (and has potentially waived
the issue for that reason (Honeycutt v. JPMorgan Chase Bank,
N.A. (2018) 25 Cal.App.5th 909, 927)), we will address his
arguments on the merits.
Solorzano suggests the arbitrator’s “‘[n]o’” response on a
disclosure form asking whether she has or has had a professional
relationship with a lawyer for a party was inaccurate because,
“upon information and belief,” she “worked at Gibson, Dunn &
Crutcher LLP for approximately five years with Philip W.
Boesch, Jr., Esq. [(Boesch)] the lead attorney for opposing party
Ruth Cohen . . . .” Relatedly, Solorzano argues the arbitrator’s
“‘[n]o’” response to whether she has or has had a significant
personal relationship with a lawyer for any party was inaccurate
because, again “upon information and belief,” “[b]oth a personal
and professional relationship between [the arbitrator] and
[Boesch] appears to have continued after their mutual
employment ended . . . and continued to this day.” Boesch
submitted a declaration in the trial court averring he “did not
ever work with [the arbitrator] directly” before he left Gibson
27
Dunn some 43 years earlier and “never socialized to [his]
knowledge” with the arbitrator.
Solorzano did not meet his burden under Code of Civil
Procedure section 1286.2 to demonstrate the arbitrator “failed to
disclose within the time required for disclosure a ground for
disqualification of which the arbitrator was then aware.” (Code
Civ. Proc., § 1286.2, subd. (a)(6); Honeycutt, supra, 25
Cal.App.5th at 928-929 [“the party challenging the arbitration
award . . . ha[s] the burden of proving actual awareness”].)
Assuming for argument’s sake the arbitrator was even aware
that she and Boesch worked at the same large firm decades
earlier, the Ethics Standards only require disclosure of the fact
that “[t]he arbitrator . . . was associated in the private practice of
law with a lawyer in the arbitration within the preceding two
years.” (Ethics Standard 7(d)(2)(B).) The asserted association
between the arbitrator and Boesch was decades earlier, and
Solorzano’s conclusory assertion of an ongoing personal
relationship between the arbitrator and Boesch (contradicted by
Boesch, in any event) is insufficient to satisfy his burden to
demonstrate a failure to disclose a ground for disqualification.8
Solorzano also contends the arbitrator should have
disclosed that she was “the unnamed ‘retired judge’ [who] failed
to make required disclosures and had her award vacated in
Honeycutt v. JPMorgan Chase Bank, N.A. (2018) 25 Cal.App.5th
909” and she “exercised her Fifth Amendment Rights and refused
8
Solorzano’s unsupported assertion that the arbitrator “has
been in financial distress since at least September 16, 2019,” is
similarly insufficient. To the extent Solorzano complains he
requested and the trial court should have allowed discovery
concerning undisclosed conflicts, there was no abuse of discretion.
28
to testify in connection with Honeycutt.” Honeycutt involved an
arbitrator who provided a disclosure worksheet to parties that
was missing a page indicating the arbitrator would entertain
offers from a party or lawyer for a party to serve as a dispute
resolution neutral in another case and who subsequently failed to
disclose their acceptance of several such offers. (Honeycutt,
supra, 25 Cal.App.5th at 916-917, 927-928.)
Even assuming Justice Cooper was the arbitrator in
Honeycutt, Solorzano fails to explain why she would have been
required to disclose that fact in this case. Solorzano appears to
believe such information “could cause a person aware of the facts
to reasonably entertain a doubt that the proposed neutral
arbitrator would be able to be impartial.” (Code Civ. Proc.,
§ 1281.9, subd. (a).) There is no reasonable basis, however, to
assume an arbitrator who fails to make required disclosures in
one case will be partial to one side in another case involving
separate parties. (Haworth, supra, 50 Cal.4th at 393 [“The
disclosure requirements . . . are intended only to ensure the
impartiality of the neutral arbitrator,” and “[t]hey are not
intended to mandate disclosure of all matters that a party might
wish to consider in deciding whether to oppose or accept the
selection of an arbitrator”].)
5. Solorzano was not prejudiced by the arbitrator’s
discovery orders
Solorzano contends the trial court should have vacated the
award because his rights were “substantially prejudiced” by the
arbitrator’s “refusal . . . to hear evidence material to the
controversy.” (Code Civ. Proc., § 1286.2, subd. (a)(5).)
Specifically, he contends the arbitrator denied his requests for
29
“money-tracing discovery” and subsequently found the lack of
money-tracing evidence fatal to Solorzano’s claims. The
argument lacks merit for several reasons.
First, Solorzano mischaracterizes the arbitrator’s discovery
rulings. She initially ruled discovery concerning Adam, Amanda,
and Lili’s finances was “premature,” but would be allowed
“[w]hen appropriate.” When Solorzano’s attorney renewed the
request during the arbitration, however, he focused on its
relevance to establishing WDM’s right to a constructive trust over
an apartment building owned by a company associated with
Adam. The arbitrator’s ruling that Solorzano had not “shown
adequate foundation” for this “just yet” and there was no “reason
to enlarge” the case beyond “the charges and the parties at hand”
did not preclude money-tracing discovery generally.
In any case, Solorzano was not prejudiced by the lack of
money-tracing discovery. “‘To find substantial prejudice the court
must accept, for purposes of analysis, the arbitrator’s legal theory
and conclude that the arbitrator might well have made a
different award had the evidence been allowed.’ [Citation.]”
(Schlessinger v. Rosenfeld, Meyer & Susman (1995) 40
Cal.App.4th 1096, 1110-1111 [construing predecessor to section
1286.2, subdivision (a)(5)]; accord Heimlich v. Shivji (2019) 7
Cal.5th 350, 369 [“[Code of Civil Procedure] section 1286.2,
subdivision (a)(5) does not contemplate vacation of an award
merely because arbitrators refuse to consider evidence they find
legally irrelevant, even if the irrelevance determination rests
upon an incorrect legal foundation”].) The arbitrator’s decision
ultimately rested on the broad releases set forth in the 2018
agreement and she rejected Solorzano’s argument the agreement
was fraudulently induced partly because she found he was on
30
notice of alleged financial improprieties. The availability of
money-tracing discovery would not have altered the outcome.
6. Asserted legal errors by the arbitrator do not
warrant reversal
Solorzano contends the trial court should have vacated the
award because the arbitrator manifestly disregarded the law in
putting Solorzano to the burden of identifying stolen assets and
in holding Solorzano and WDM jointly and severally liable for
attorney fees. In so arguing, Solorzano rejects as “implausible”
our Supreme Court’s consistent holding that, “with narrow
exceptions, an arbitrator’s decision cannot be reviewed for errors
of fact or law.” (Moncharsh, supra, 3 Cal.4th at 11; accord Richey
v. AutoNation, Inc. (2015) 60 Cal.4th 909, 916 [“Generally, courts
cannot review arbitration awards for errors of fact or law, even
when those errors appear on the face of the award or cause
substantial injustice to the parties”]; Heimlich, supra, 7 Cal.5th
at 370 [“‘“[I]t is within the power of the arbitrator to make a
mistake either legally or factually. When parties opt for the
forum of arbitration they agree to be bound by the decision of
that forum knowing that arbitrators, like judges, are fallible”’”].)
This case does not fall within any exception to the general rule,
and Solorzano does not contend that it does. (See, e.g., Richey,
supra, at 916 [“Arbitrators may exceed their powers by issuing an
award that violates a party’s unwaivable statutory rights or that
contravenes an explicit legislative expression of public policy”].)
The arguments of legal error therefore fail.
31
7. The trial court properly entered judgment in
favor of the moving parties on all of Solorzano’s
causes of action
Solorzano contends, in support of his argument that some
of his claims against Lili and the Gruens survived arbitration,
that “[t]here was no finding that all claims in the [c]omplaint
[we]re arbitrable.” This argument mischaracterizes the trial
court’s order compelling arbitration, in which it expressly
determined the exhibits attached to Solorzano’s complaint
“support[ed] . . . Cohen’s position that [Solorzano’s] claims in this
action [we]re covered by the April 25, 2018, agreement to which
he is a party.” Solorzano’s arguments casting the trial court’s
judgment confirming the award as a disguised summary
judgment lack merit.
32
DISPOSITION
The judgment is affirmed. Lili, Adam, and Amanda are
awarded costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
BAKER, Acting P. J.
We concur:
MOOR, J.
KUMAR, J.*
*
Retired Judge of the Superior Court of Los Angeles County,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
33
