EDS Investment v. Fortrend International

Filed 4/12/06 EDS Investment v. Fortrend International CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

EDS Investment Co. I, L.L.C. (EDS I), EDS Investment Co. II, L.L.C. (EDS II), and Edwin O. DeSilva (collectively, respondents) sued Fortrend International, L.L.C. (Fortrend), Jeffrey Furman, La Cortez Ventures, L.L.C. (La Cortez), Signal Capital Associates, L.P. (Signal LP), Signal Capital Associates, L.L.C. (Signal LLC) and Atwood, L.L.C. (Atwood; collectively appellants) after DeSilva paid appellants a fee for advising him to invest in Currency Option Investment Strategies (COINS) to avoid paying taxes on his personal income of $30 million. This investment did not save him taxes but resulted in an assessment of taxes, penalties, interest, and audit expenses.

DeSilva also entered into an Investment Management Agreement (IMA or agreement) with Bricolage Capital, L.L.C. (Bricolage); this agreement contained an arbitration clause. Once appellants, who were not signatories to the IMA, learned about this agreement during discovery, they moved to compel arbitration in respondents' lawsuit against them. They asserted that the arbitration clause in the IMA should be enforced under the doctrine of equitable estoppel. The trial court denied their motion; appellants appealed. We conclude that appellants have failed to establish that an intimate relationship exists between Bricolage and them or that this lawsuit is intertwined with the IMA.

BACKGROUND

In October 1999, DeSilva's agent approached Fortrend and Furman about developing a strategy for DeSilva to minimize or avoid paying taxes on his personal income of $30 million.^[1] Fortrend was in the business of developing and implementing tax-related investment strategies for taxpayers facing potential multi-million dollar income tax liabilities. Furman formed Fortrend, a limited liability company duly organized under the laws of the State of Delaware, and he is a member and manager of Fortrend.^[2] Furman told DeSilva's agents that a COINS transaction would generate $30 million in tax-related losses for DeSilva to use to offset taxable income and that appellants would provide him with documentation that it was â€