Honarkar vs. Makhijani

The 5/24/21 binding term sheet, to which respondent Continuum Analytics, Inc. is a party and signatory (through Mahender Makhijani signing on behalf of Continuum), contains an identical arbitration clause. [Plaintiffs’ Prior Petition, ¶ 18 and Ex. F at 10.]

On 9/28/23, MOM AS Investor Group LLC, MOM BS Investor Group LLC, and MOM CA Investor Group LLC submitted a demand for arbitration with JAMS, Case No. 5200001122, against Honarkar. This arbitration, JAMS Case No. 5200001122, was consolidated with the arbitration initiated by Honarkar, JAMS Case No. 5220003126 (collectively, the “arbitration”). [Plaintiffs’ Prior Petition, ¶ 24.]

On 10/20/23, the Court in this action granted Plaintiff Honarkar’s motion to stay these proceedings pending completion of arbitration. [ROA #349.]

Petitioners entered into an arbitration agreement with Nano Banc on 10/11/23. [Prior Petition, ¶ 19 and Ex. G at §2.]

Respondents to Plaintiffs’ prior petition (other than Nano Banc) filed motions in the consolidated Arbitration disputing arbitrability. On 1/3/24, following briefing and oral argument of the parties, the Arbitrator issued a ruling denying those motions and ordering that Respondents arbitrate all claims asserted against them. [Prior Plaintiffs’ Petition, ¶ 25.]

In the arbitration proceedings, after discovery, days of evidentiary hearings, and much briefing, the arbitrator issued his Partial Final Award. Respondents to Plaintiffs’ prior petition brought before the arbitrator a motion for correction, which was denied. [Plaintiffs’ Prior Petition, ¶¶ 26-29 and Ex. A.]

The Partial Final Award resolved “all claims submitted to arbitration, with the exception of the issues (the “Remaining Issues”) to be resolved in further proceedings in this arbitration including: (i) the claims stayed as a result of the MOM JV Entities’ bankruptcy; (ii) the accounting; and (iii) the determination of the amounts of restitution, damages, interest, attorney fees and costs to be awarded. The Arbitrator reserves jurisdiction to determine all aspects of the Remaining Issues, together with such additional issues as may arise between the parties.” [Partial Final Award, ¶ 15.]

Plaintiffs filed a petition to confirm the Partial Final Award; the MOM Parties filed a petition to vacate or correct the award. [ROA ## 399, 413, 422.] The Court confirmed the Partial Final Award on 10/20/25. [ROA #564.] “Judgment” was entered on 12/5/25. [ROA #597.] The Judgment further dismissed with prejudice all claims asserted by respondent MOM AS Investor Group LLC, MOM BS Investor Group LLC, MOM CA Investor Group LLC. Id.

After that Judgment was entered, and prior to the issuance of the Final Award now at issue, Plaintiffs reached a settlement with Nano Banc and dismissed them from the arbitration proceeding. [Plaintiffs’ Petition (ROA #1016) at 6:17-19.]

Appeals were filed, but were dismissed. [Remittitur (ROA # 1021).]

In the meantime, in furtherance of the Partial Final Award, the Court appointed a receiver. [ROA ## 583, 591.]

Facts Pertinent to Current Petition [Arbitration Proceedings Subsequent to the Partial Final Award] The arbitrator heard the parties’ evidence as to damages at an evidentiary hearing conducted on January 26 to January 28, 2026. [Petition at ¶ 33.]. The Court notes that the Final Award notes that the further arbitration hearing was conducted on “December 26, 27

and 28, 2026.” (See Page 15, Section D of the Final Award attached as Exhibit A to the Petition.) This appears to be a typographical error.

The arbitrator then received closing, opposition, and reply briefing from the parties. The arbitrator deemed the matter closed as of March 13, 2026, when the final briefing was submitted.

As noted above, in May 2026 Plaintiffs and Nano Banc reached a settlement agreement resolving all claims against Nano Banc, so on 5/11/26 Plaintiffs filed with JAMS a request for dismissal as to Nano Banc only, which the JAMS clerk signed and entered that same day.

Prior to the issuance of the Partial Final Award, the arbitrator rejected all counter claims asserted in the arbitration against Plaintiffs. [See Final Award (Petition, Ex. A) at 19 and ex. A to the Final Award (Partial Interim Award) at 44, 48 ¶ 12.] In the Partial Final Award, the arbitrator had expressly denied the counter claims asserted by respondents MOM AS Investor Group LLC, MOM BS Investor Group LLC, and MOM CA Investor Group LLC. [Petition, Exhibit B at 44 ¶ 12.] Because of then-pending bankruptcy petitions, to the degree the same claims were asserted by the MOM LLCs, those claims were stayed. Id. The bankruptcy petitions were subsequently dismissed and, in the Final Award, the arbitrator denied all claims not expressly granted, including the counter claims asserted by the MOM LLCs against Petitioners. [Final Award (Petition Ex. A) at 19, 44 ¶ 16.]

On 5/12/26, the arbitrator’s Final Award was served on the parties. As stated in the Final Award, “This Final Award, together with the Partial Interim Award and the Partial Final Award, resolves all claims submitted to arbitration. Claims not expressly granted are denied. Arguments not discussed are either unnecessary to this Final Award or have been considered and rejected.” [Petition to Confirm, Ex. A at 44 ¶ 16.]

[Petition to Confirm, ¶¶33-35 and Ex. A.]

Complaint in Intervention Quite recently and after arbitration proceedings were completed, Preferred Bank filed a complaint in intervention on the stipulation of the parties. [ROA ## 992, 1014.] Preferred Bank intervened in order to seek removal of a lis pendens Plaintiffs placed on real property securing a loan issued by Preferred Bank. [Complaint in Intervention (ROA #1014); Motion to Expunge (ROA #1039).]

Legal Standard

A petition to correct or vacate an arbitration award must be served and filed no later than 100 days after service of a signed copy of the award on the party seeking to correct the award. Code Civ. Proc. § 1288.2. A petition to confirm an arbitration award must be filed within four years from the date of service of a signed copy of the arbitration award upon the petitioner and at least 10 days after service of the award upon the petitioner. Code Civ. Proc. §§ 1288, 1288.4.

The petition must name as respondents all parties to the arbitration and may name as respondents any other person bound by the arbitration award. Code Civ. Proc. § 1285. The petition and notice of hearing must be served at least 10 days before the hearing. Code Civ. Proc. § 1290.2. Where the arbitration agreement does not provide the manner in which service shall be made and the person on whom service is to be made has not previously appeared in the proceeding and has not previously been served in accordance with section 1290.4(a) of the Code of Civil Procedure, for service in California the petition

and notice of hearing must be served in a manner provided by law for the service of summons in an action. Code Civ. Proc. § 1290.4(b).

All of the petitions, whether to confirm, correct or vacate, were timely filed.

A petition to confirm an arbitration award must (a) set forth the substance of or attach a copy of the arbitration agreement; (b) set forth the name of the arbitrators; and (c) set forth or attach a copy of the award and the written opinion of the arbitrators, if any. Code Civ. Proc. § 1285.4.

Plaintiffs’ petition complies with these requirements. The agreements with the arbitration provisions, and prior findings of arbitrability, are alleged and attached. [Plaintiffs’ Petition to Confirm (ROA #1016), ¶14 and Exs. C-E, I, J, K. So is the Final Award. [Id., Ex. A.]

Upon petition, unless a court vacates an arbitration award it shall confirm the award. Code Civ. Proc. § 1286. Unless it vacates an award pursuant to Code Civ. Proc. § 1286.2, the court shall correct the award and confirm it as corrected if the court determines that: (1) there was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award; (2) the arbitrator exceeded his powers but the award may be corrected without affecting the merits of the decision upon the controversy submitted; or (3) the award is imperfect in a manner of form, not affecting the merits of the controversy. Code Civ. Proc. § 1286.6.

Finally, a court shall vacate an arbitration award if it determines any of the following: (1) the award was procured by corruption, fraud, or other undue means; (2) there was corruption in any of the arbitrators; (3) the rights of the party were substantially prejudiced by misconduct of a neutral arbitrator; (4) the arbitrator exceeded his powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted; (5) the rights of a party were substantially prejudiced by the refusal of the arbitrator to postpone the hearing upon sufficient cause or by the arbitrator’s refusal to hear evidence material to the controversy; or (6) the arbitrator making the award either: (a) failed to disclose a ground for disqualification or (b) was subject to disqualification. Code Civ. Proc. § 1286.2(a).

Judicial review of binding arbitration awards is generally limited to the statutory grounds for vacating or correcting an award. Moshonov v. Walsh (2000) 22 Cal. 4th 771, 775. A court may not vacate or correct an award because of the arbitrator’s legal or factual error, even if the error appears on the face of the award. Id. In addition, arbitrators do not exceed their powers within the meaning of section 1286.2(a)(4) merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the of the controversy submitted to the arbitrators. Id.

This is true even where the agreement provides that California law applies and the party contends that the arbitrator failed to correctly apply California law. Baize v. Eastridge Companies (2006) 142 Cal. App. 4th 293, 301-02. To obtain judicial review of the merits of an arbitration award, the arbitration agreement “must clearly [provide] that legal errors are an excess of arbitral authority that is reviewable by the court.” Cable Connection, Inc. v. DirecTV, Inc. (2008) 44 Cal. 4th 1334, 1361.

Discussion

MOM Parties’ Repetition and/or Preservation of Issues and Arguments Previously Raised

and Decided

The Arbitrator Exceeding His Authority by Award Punitive Damages Barred by the Parties’ Agreement As they did in the petition proceedings on the Partial Final Award, the MOM Parties argue that the Final Award should be vacated or corrected because the arbitrator awarded punitive damages in contravention of the parties’ agreement.

The Court previously rejected this argument when ruling on the dueling petitions to confirm or vacate the Partial Final Award. [See 10/20/25 Minute Order (ROA #564).] For the reasons stated therein, the Court stands on its finding that the arbitrator did not exceed his authority by awarding punitive damages and declines to vacate or correct the Final Award on this ground.

Jurisdiction over Makhijani/The Arbitrator Exceeded His Authority by Imposing Individual Liability on Makhijani Based on Third-Party Status Unlike with the prior petitions to confirm/vacate, Mahender Makhijani and Continuum Analytics, Inc. have not responded to the petition to confirm and are not parties to the opposition/motion to vacate.

Nonetheless, the current Mom Parties again argue – as they all argued in the prior petition proceedings – that the award is improper as to Mahender Makhijani because he did not sign an arbitration agreement and – contrary to the findings of the arbitrator -- was not a third party beneficiary of a contract with an arbitration agreement.

The Court previously found the arbitrator did not exceed his authority in finding, and ruling, that Makhijani was required to arbitrate the claims against him in this action. [ROA # 564 at 4.] This order, and the arbitrator’s findings, addressed the same third-party issues raised by the Mom Parties now. [Id.]

For the reasons stated in its prior order, the Court stands on its prior ruling that the arbitrator did not exceed his authority in finding, and ruling, that Makhijani was required to arbitrate the claims against him in this action.

Failure to Disclose Ground for Disqualification In the prior petition proceedings on the Partial Final Award, the then-MOM Parties and Defendant Nano Banc contended that the Partial Final Award must be vacated because the arbitrator failed to disclose his relationship with a lawyer that had represented Plaintiff Honarkar in other, since completed, matters. [Honarkar Decl. (ROA # 437), ¶¶ 2-3.] They pointed to the fact that the arbitrator presented at seminars with the lawyer and the lawyer attended a celebration put on by the Orange County Bar Association when the arbitrator was appointed to the Court of Appeal. [Leipzig Decl. (ROA #387) Exs. A (see page 26) and B. See also Mortimer Decl. (ROA #420), Exs. 17, 18 (same).]

On the current petition to confirm the Final Arbitration Award, the current MOM Parties again raise this issue, apparently as a ground to vacate the Final Arbitration Award.

The Court previously found that the arbitrator did not fail to disclose a ground for disqualification. [ROA # 564 at 4-5.] For the same reasons set forth in the 10/20/25 minute order, the Court finds that the arbitrator did not fail to disclose a ground for disqualification. Thus, there is no such basis to vacate the Final Award.

MOM Parties’ New Issues and Arguments for Vacating the Final Award

Rights Substantially Prejudiced by Use of Sanctions rather than Proof The MOM Parties contend that the arbitrator used sanctions to supply missing damages proof, barred material defenses, and converted an incomplete accounting into a billiondollar award.

Essentially, they argue that their rights were substantially prejudiced by the arbitrator’s refusal to hear evidence due to the MOM Parties failures to comply with discovery obligations. [See Final Award at 22-23.] The MOM Parties contend they were thus deprived of a meaningful opportunity to be heard on the central issue reserved for the damages phase. [See Final Award at 10-14, 22-23, 43-44.]

The MOM Parties contend that the arbitrator’s rulings were essentially terminating sanctions. Other than arguing such sanctions should generally be rare, however, the MOM Parties do not make any showing that the arbitrator exceeded his authority in issuing such sanctions. Code of Civil Procedure section 1283.05(c) grants arbitrators the power to issue discovery orders including “sanctions, and penalties,” and states that “such orders shall be as conclusive, final, and enforceable as an arbitration award on the merits...” As a result, “arbitrator discovery orders,” such as sanctions, enjoy “the same degree of finality and thus, by implication, the same scope of judicial review” as arbitral awards. Berglund v. Arthroscopic & Laser Surgery Ctr. of San Diego, L.P. (2008) 44 Cal. 4th 528, 537.

The MOM Defendants attempt an end-run around this standard of review by re-casting the arbitrator’s sanctions orders as a refusal to hear evidence under Code of Civil Procedure section 1286.2(a)(5). That provision, “ ‘if not properly limited, could swallow the rule that arbitration awards are generally not reviewable on the merits.’ The provision is not ‘a back door to Moncharsh through which parties may routinely test the validity of legal theories of arbitrators.’ (Hall v. Superior Court (1993) 18 Cal.App.4th 427, 438–439, 22 Cal.Rptr.2d 376.)” Heimlich v. Shivji (2019) 7 Cal.5th 350, 368.

The Court finds that the arbitrator did not refuse to hear evidence for purposes of Code of Civil Procedure section 1286.2(a)(5) and declines to vacate or correct the Final Award on the basis asserted.

Denial of Due Process by Imposing both Punitive Damages and Treble Damages under Penal Code §496 The Final Award awards $233,474,574 in Penal Code section 496 treble damages on derivative claims and separately awards $652,167,468 in punitive damages on direct claims. [Final Award (Petition to Confirm, Ex. A) at 43-44.]

The MOM Parties contend this award improperly awards duplicative recovery for the same harm. They also assert that the amount of the punitive damages award is “suspect” in light of the amount of compensatory damages.

The arbitrator considered the MOM Parties’ argument regarding “duplicative recovery.” [Final Award at 37 (“they insist the MOM JV Entities must elect between treble damages and punitive damages to avoid unconstitutional duplication. These arguments fall short. . . . [T] the MOM Respondents have not cited any authority to support their election and duplication arguments.”).]

Further, treble damages and punitive damages were awarded on different claims. The Arbitrator awarded punitive damages to Honarkar and 4G in connection with the fraud claim, and section 496 treble damages to the MOM LLCs in connection with the conversion

claim, for specific funds taken from those entities. Final Award at 37, 39, 43-44.]

The Court finds that the arbitrator did not exceed his powers in awarding treble damages and punitive damages and thus declines to vacate or correct the Final Award on this ground.

No Entry of Judgment Until Plaintiffs Disclose Nano Banc Settlement The MOM Parties object that no judgment should be entered until Plaintiffs disclose the terms of their settlement with Nano Banc.

As presented, this is not a statutory ground for vacating or correcting an arbitration award. Accordingly, it is also not a ground for refusing to enter judgment on an arbitration award that has been confirmed.

The MOM Parties refer to Code of Civil Procedure section 877, which provides a good faith settlement by a joint tortfeasor reduces the claims against co-obligors. This was an issue to be raised to, and decided by, the arbitrator when he was deciding damages. The MOM Parties make no showing or argument that this issue was raised in arbitration and the arbitrator exceeded his authority in how he dealt with it – or that there are any other grounds for vacation or correction of an arbitration award.

Receiver Language in Final Award Should Be Corrected Finally, the MOM Parties ask the Court to correct the arbitrator’s statement in the Final Award that a receiver is necessary, because the arbitrator does not (as he noted) have the power to appoint a receiver. They further argue that the issue of appointment of a receiver should be left to an application to this Court that meets the statutory requirements.

But this court has already appointed a receiver. [ROA ## 583, 591.] The arbitrator’s advice on this point is now moot.

Intervenor’s Limited Opposition [ROA #422.] Intervenor Preferred Bank was not a party to the arbitration but is a recent intervenor in the proceedings before the Court in order to remove a lis pendens Plaintiffs placed on real property that secured a loan issued by Preferred Bank. [Complaint in Intervention (ROA #1014); Motion to Expunge (ROA #1039).]

Preferred does not oppose confirmation of the Final Award but objects to judgment being entered prior to its motion to expunge being heard on 9/14/26 because the judgment sought by Plaintiffs, as described in their petition, would be in their favor and include relief beyond judgment against Mahender Makhijani, Continuum, and the MOM Parties and the claims addressed in the arbitration.

The Court will hear from counsel on this issue.

Conclusion

The petition to confirm the Final Award is granted.

Subject to discussion with counsel, the Court will enter judgment on the Final Award, as well as the Partial Final Award.

Plaintiff is ordered to give notice.