Filed 7/13/17 Stickney v. Riffey CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO



HENRY STICKNEY et al.,

Plaintiffs and Respondents,

v.

APRIL RIFFEY et al.,

Defendants and Appellants.


E066254

(Super.Ct.No. CIVDS1604499)

OPINION


APPEAL from the Superior Court of San Bernardino County. David S. Cohn, Judge. Affirmed.
Law Offices of Ben Eilenberg and Benjamin A. Eilenberg for Defendants and Appellants.
Holstein, Taylor and Unitt, Brian C. Unitt; Hafif & Associates and Cynthia D. Hafif for Plaintiffs and Respondents.
Plaintiff and appellant Todd Riffey, along with his wife, plaintiff and appellant April Riffey (collectively, the Riffeys) owned a business called AKA Interactive Entertainment (AKA). Defendant and respondent Henry E. Stickney was married to defendant and respondent Beverly Stickney (collectively, the Stickneys) and they created the Q-Tip Trust, which owned Dillstar Productions, Inc. (Dillstar). Dillstar owned the scripts to several dinner theater productions.
In July 2014 Todd, on behalf of AKA, and Henry, on behalf of Dillstar, entered into a licensing agreement in which AKA would use the scripts and produce dinner theater (Original Agreement). Dillstar would be paid royalties for the use of the scripts. In September 2014 an amended agreement was executed (Amended Agreement). The parties got into a dispute over the Amended Agreement. In March 2015, after entering into mediation, the Stickneys and the Riffeys signed a stipulation for settlement (Settlement Agreement). The Stickneys were not satisfied with the settlement and filed a lawsuit in the San Bernardino Superior Court. The Riffeys filed a motion to compel arbitration arguing, although the Settlement Agreement did not contain an arbitration clause, it incorporated the Amended Agreement, which contained an agreement to arbitrate. The motion to compel arbitration was denied.
The Riffeys contend on appeal that the trial court erred by refusing to grant their motion to compel arbitration. We affirm the trial court’s denial.
FACTUAL AND PROCEDURAL HISTORY
A. BACKGROUND
The Stickneys owned Dillstar through the Q-Tip Trust. They owned scripts for live dinner theater, which they produced. In July 2014 Henry decided to close the business because he was battling cancer. April, who worked for Dillstar, sought to license the scripts in order to produce dinner theater through AKA, which was owned by the Riffeys.
The Original Agreement was signed by Todd dba AKA and Henry for Dillstar. It allowed AKA to use the scripts owned by Dillstar to produce live performance dinner theater. In exchange, AKA would pay royalties to Dillstar. It included the following clause: “23. Mediation; Arbitration: If a dispute arises out of or relates to this Agreement and cannot be settled through negotiation, those parties agree first to settle the dispute by mediation under the Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration, litigation, or some other dispute resolution procedure. If mediation is not successful, the parties agree to submit to arbitration under the Commercial Mediation Rules of the American Arbitration Association any controversy or claim arising out of or relating to this Agreement, and any judgment upon the award rendered by the arbitrator(s) any [sic] be entered in any court having jurisdiction over the matter. Any such mediation or arbitration shall occur in San Bernardino County, California. Arbitration will be final and binding on the parties.” It was initialed by Henry and Todd.
In August 2014 issues began to arise over the Original Agreement. The parties negotiated the Amended Agreement. The Amended Agreement was between Dillstar and Todd dba AKA. In the Amended Agreement, the licensor was defined as Henry, Dillstar, Beverly and Q-Tip Trust. The licensee was defined as Todd dba AKA. It included the following clause: “After entering into the Original Agreement and after Licensee taking actions and incurring expenditures as a result of the Original Agreement, the Parties have determined that it is appropriate to clarify certain matters and to accordingly amend and restate the Original Agreement as provided herein.” It also included language, “This Agreement amends and replaces the Original Agreement as of the effective date specified above and the Parties agree that the Original Agreement shall remain effective until the effective date of this Agreement.” It contained a mediation and arbitration clause identical to the Original Agreement. The Amended Agreement was signed by Henry on behalf of Dillstar and Todd on behalf of AKA and was effective as of September 1, 2014.
AKA started making payments of royalties starting in October 2014. The parties had more disputes and entered into mediation with Judge Kamansky with IVAMS. Judge Kamansky prepared the Settlement Agreement. The parties were listed as “H. Stickney, B. Stickney, Dillstar Inc., A Riffey, T. Riffey.” It included the term “Existing amended license agreement modified effective April 1, 2015.” It included terms that there was no exclusivity on the right to produce shows, confidentiality, the parties were to make no disparaging remarks about each other, and the Riffeys were to pay $200 for each show. It also provided for a new license effective April 1, 2015, through September 30, 2017. It also included language “Parties will execute license within 30 days from the date of this agreement.” The Settlement Agreement was signed by Beverly, Henry, April and Todd.
B. MOTION TO COMPEL ARBITRATION
The Stickneys filed a lawsuit in San Bernardino County Superior Court. On May 2, 2016, April and Todd individually and doing business as AKA filed a motion to compel arbitration against the Stickneys, Dillstar and Q-Tip (Motion). It was alleged that the parties, per contract, had agreed that if mediation of a dispute was not successful, the parties agreed to arbitration under the American Association Commercial Rules. They alleged that each of the operative contracts between the parties required mediation and arbitration. They alleged the Amended Agreement was incorporated into the Settlement Agreement; the Amended Agreement contained a mediation and arbitration clause.
In addition, any challenge to the agreements was to be determined by the arbitrator. Also Dillstar was a party to the Settlement Agreement. Henry signed as an individual and on behalf of Dillstar. They also alleged that section 1 of the Settlement Agreement integrated the Amended Agreement. They referred to the language that “Existing amended license agreement modified effective April 1, 2015.”
April provided a declaration. April had worked at Dillstar starting in 2001. Henry ran Dillstar. April left Dillstar for a period of time but returned in 2013. In 2014 Henry inquired whether she wanted to buy or license the scripts. After negotiations, AKA and Henry entered into the Original Agreement. Beverly wanted the Riffeys to hire Beverly’s daughter as a sales person. The Stickneys agreed to prepare the Amended Agreement. April faxed the Amended Agreement to Henry and he made changes. Henry eventually signed the Amended Agreement on September 1, 2014. The Riffeys dba AKA made payments as detailed in the Amended Agreement.
The Stickneys then wanted changes to the Amended Agreement. They agreed to mediation with Judge Kamansky with IVAMS on March 30, 2015; the parties were represented by counsel. The matter was resolved and the Settlement Agreement was signed. However, the Stickneys were not satisfied with the Settlement Agreement and filed their lawsuit.
Henry had filed a police report alleging elder financial abuse against the Riffeys claiming he was not aware that he signed the Amended Agreement. It was investigated but determined to be unfounded.
C. OPPOSITION TO MOTION
Counsel representing Henry, Beverly, Dillstar and Q-Tip Trust filed opposition to the Motion (Opposition) on May 16, 2016. They alleged that the Amended Agreement was obtained by fraud. Further, the arbitration agreement was ambiguous and was reasonably read to provide arbitration as an alternative remedy available in addition to litigation.
In July 2014 Henry contracted cancer and had to undergo various surgeries. As a result, he was on numerous pain killers. Todd came to Henry’s house while Henry was under the influence of these pain killers. Todd had Henry sign papers but Henry did not read them. Henry later discovered he had signed the Amended Agreement. Beverly’s signature was forged.
They also alleged that the Settlement Agreement did not contain an arbitration clause and did not incorporate the prior agreements. The Amended Agreement, containing an arbitration clause, was obtained by fraud. Finally, the clauses in the Amended Agreement provided that arbitration was only one possible dispute resolution method.
Beverly submitted a declaration. She declared that Henry’s mental status on September 1, 2014, the day the Amended Agreement was signed, was affected by multiple surgeries and pain killers. She did not sign the Amended Agreement.
Henry also provided a declaration. He started Dillstar in 2001. He purchased numerous dinner theater scripts for a total of two million dollars. April was working for him in July 2014 when he told her about his cancer and that he was shutting down the business because of his medical condition. Henry insisted April and Todd took advantage of his medical condition in order to take over his business. He signed the Amended Agreement without any knowledge of its contents based on his medical condition.
D. REPLY TO THE OPPOSITION
The Riffeys dba AKA filed a reply to the Opposition. They contended that each agreement signed between the parties contained a mediation and arbitration clause. The Federal Arbitration Act (FAA) governed the agreement. The licensing agreements affected interstate commerce because Dillstar licensed scripts throughout the United States. The Riffeys argued that the FAA was binding and preempted contrary state law.
The Riffeys also argued that since the Stickneys dba Dillstar contested the validity of the Amended Agreement and Settlement Agreement, the arbitrator must determine arbitrability prior to addressing the validity of the agreements. Moreover, even if the Amended Agreement and Settlement Agreement were found invalid, the Original Agreement would be enforceable and it contained an arbitration clause.
E. HEARING AND RULING ON MOTION
The trial court initially noted at the hearing that it agreed there was an arbitration clause in the Amended Agreement and the only parties to the Amended Agreement were Todd and Dillstar. The trial court noted that assuming the arbitration clause in the Amended Agreement applied, it would only apply to Todd and Dillstar. The trial court was confused as to what to do with the other parties who would be subject to litigation. The trial court felt it was a “stretch” to say that by signing the Settlement Agreement, April, Henry and Beverly all agreed to be bound by arbitration. California law required that the agreement for arbitration be clear and unambiguous. It tentatively ruled that trying to include the nonsignatories subject to the arbitration agreement was not proper under California law.
Counsel for the Riffeys argued that all the parties signed the Settlement Agreement. Once the Stickneys and Dillstar signed the Settlement Agreement, they were subject to the arbitration clause. The trial court again noted that both California and Federal law required that agreement to an arbitration clause must be clear and unambiguous. Counsel for the Riffeys argued that the clause in the Amended Agreement was “100 percent unambiguous.” The trial court felt the language of the Settlement Agreement was too convoluted to apply. Counsel argued that the arbitrator would determine the validity of the Amended Agreement. Even if the Amended Agreement was invalid, the Original Agreement was valid.
Counsel for the Stickneys and Dillstar disagreed that there was a valid arbitration agreement between any of the parties. They disagreed that the Settlement Agreement incorporated by reference any document that preceded it. First, the Settlement Agreement included language that the parties were to prepare a new document, which would be the new licensing agreement. The new licensing agreement was to be prepared within 30 days and it had not been done.
The trial court ruled, “I find that there is no arbitration agreement involving April Riffey, the trust, William Stickney, sorry Henry Stickney or Beverly Stickney. [¶] The issue is whether there is an arbitration agreement between Dillstar and Todd Riffey. And there are colorable arguments on both sides here about why the arbitration clause is or is not incorporated in this [Settlement Agreement]. [¶] I think the fact that we are having this discussion with colorable arguments on both sides makes it clear to me that it is not clear and unambigious. [¶] I don’t know that Todd Riffey and Dillstar, knew at the time they were signing this that they were agreeing to arbitrate anything. . . . [¶] . . . [¶] I am going to deny the motion to compel arbitration.”
DISCUSSION
The Riffeys claim that the trial court erred by (1) finding that Dillstar and Todd were the only parties who agreed to the arbitration clause in the Amended Agreement; (2) failing to address the rule of incorporation and finding that the Amended Agreement and Original Agreement were not incorporated as part of the Settlement Agreement; and (3) the principle of agency requires that Q-Tip Trust and Dillstar were parties to the Amended Agreement and Original Agreement. The Riffeys have failed to meet their burden that a valid agreement to arbitrate existed.
“Both the CAA and the FAA recognize ‘ “ ‘arbitration as a speedy and relatively inexpensive means of dispute resolution’ ” ’ [citation] and require that agreements to arbitrate be rigorously enforced.” (Hernandez v. Ross Stores, Inc. (2016) 7 Cal.App.5th 171, 176.)
“Code of Civil Procedure section 1281.2 requires a trial court to grant a petition to compel arbitration ‘if [the court] determines that an agreement to arbitrate the controversy exists.’ [Citation.] Accordingly, ‘ “when presented with a petition to compel arbitration the trial court’s first task is to determine whether the parties have in fact agreed to arbitrate the dispute. [¶] . . .” [Citation.]’ [Citations.] ‘A party seeking to compel arbitration has the burden of proving the existence of a valid agreement to arbitrate. [Citations.] Once that burden is satisfied, the party opposing arbitration must prove by a preponderance of the evidence any defense to the petition.’ ” (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59.)
“Arbitration is . . . a matter of contract. [Citation]. The ‘ “ ‘ “ ‘ . . . policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate.’ ” [Citation.] “Although ‘[t]he law favors contracts for arbitration of disputes between parties’ [citation], ‘ “there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate. . . .” ’ [Citations.]” ’ [Citation.] ‘Absent a clear agreement to submit disputes to arbitration, courts will not infer that the right to a jury trial has been waived.’ ” ’ ” (Avery v. Integrated Healthcare Holdings, Inc., supra, 218 Cal.App.4th at p. 59.) In making this determination, we apply general California law. (Wolschlager v. Fidelity National Title Ins. Co. (2003) 111 Cal.App.4th 784, 789 (Wolschlager).)
“ ‘ “ ‘It is, of course, the law that the parties may incorporate by reference into their contract the terms of some other document. [Citations.] But each case must turn on its facts. [Citation.] For the terms of another document to be incorporated into the document executed by the parties the reference must be clear and unequivocal, the reference must be called to the attention of the other party and he must consent thereto, and the terms of the incorporated document must be known or easily available to the contracting parties.’ ” ’ ” (Wolschlager, supra, 111 Cal.App.4th at p. 790.)
“ ‘In these summary proceedings, the trial court sits 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.’ ” (Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1282.) “ ‘ “We will uphold the trial court's resolution of disputed facts if supported by substantial evidence. [Citation.] Where, however, there is no disputed extrinsic evidence considered by the trial court, we will review its arbitrability decision de novo.” ’ ” (Id. at pp. 1282-1283.) Here, there was not a dispute of the evidence. We review whether there was an enforceable arbitration clause de novo.
The Riffeys do not contend that the Settlement Agreement contained an arbitration clause. Rather, they argue that the Amended Agreement was clearly incorporated into the Settlement Agreement. We disagree that there was clear evidence the parties intended to incorporate the preexisting agreements into the Settlement Agreement. There was language in the Settlement Agreement that the “Existing amended license agreement modified effective April 1, 2015.” However, the Riffeys essentially ignore on appeal the fact that there was an additional clause: “Parties will execute license within 30 days from the date of this agreement.” As such, the incorporation of the Amended Agreement was not clear and unequivocal. The Settlement Agreement is reasonably interpreted to mean that the parties would execute an entirely new licensing agreement and the evidence does not establish if the same mediation and arbitration agreement would be included.
We also note that in preparing the Amended Agreement, the parties clearly included language that the Amended Agreement “amends and replaces the Original Agreement.” (Italics added.) It is possible the parties would include this language in the new license to be prepared. However, there was no clear agreement in the Settlement Agreement to arbitrate disputes and the Settlement Agreement was ambiguous as to whether the new license agreement would incorporate the Amended Agreement, including the arbitration clause.
Based on the foregoing, the Riffeys failed to meet their burden of showing by a preponderance of the evidence that a valid arbitration clause was included in the Settlement Agreement.
DISPOSITION
We uphold the trial court’s denial of the motion to compel arbitration. As the prevailing party, the Stickneys are entitled to their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS


MILLER
Acting P. J.


We concur:


SLOUGH
J.


FIELDS
J.