PEREZ vs SCHAAL, et al.

25CV019484: PEREZ vs SCHAAL, et al. 12/11/2025 Hearing on Motion to Compel Arbitration in Department 53

Tentative Ruling

NOTICE:

Consistent with Local Rule 1.06(B), any party requesting oral argument on any matter on this calendar must comply with the following procedure:

To request limited oral argument, on any matter on this calendar, you must call the Law and Motion Oral Argument Request Line at (916) 874-2615 by 4:00 p.m. the Court day before the hearing and advise opposing counsel. At the time of requesting oral argument, the requesting party shall leave a voice mail message: a) identifying themselves as the party requesting oral argument; b) indicating the specific matter/motion for which they are requesting oral argument; and c) confirming that it has notified the opposing party of its intention to appear and that opposing party may appear via Zoom using the Zoom link and Meeting ID indicated below. If no request for oral argument is made, the tentative ruling becomes the final order of the Court.

Unless ordered to appear in person by the Court, parties may appear remotely either telephonically or by video conference via the Zoom video/audio conference platform with notice to the Court and all other parties in accordance with Code of Civil Procedure §367.75. Although remote participation is not required, the Court will presume all parties are appearing remotely for non-evidentiary civil hearings.

The Department 53 Zoom Link is https://saccourt-ca-gov.zoomgov.com/my/sscdept53.54 and the Zoom Meeting ID is 161 4650 6749. To appear on Zoom telephonically, call (833) 568-8864 and enter the Zoom Meeting ID referenced above. NO COURTCALL APPEARANCES WILL BE ACCEPTED.

Parties requesting services of a court reporter will need to arrange for private court reporter services at their own expense, pursuant to Government code §68086 and California Rules of Court, Rule 2.956. Requirements for requesting a court reporter are listed in the Policy for Official Reporter Pro Tempore available on the Sacramento Superior Court website at https://www.saccourt.ca.gov/court-reporters/docs/crtrp-6a.pdf. Parties may contact Court- Approved Official Reporters Pro Tempore by utilizing the list of Court Approved Official Reporters Pro Tempore available at https://www.saccourt.ca.gov/court-reporters/docs/crtrp- 13.pdf.

A Stipulation and Appointment of Official Reporter Pro Tempore (CV/E-206) is required to be signed by each party, the private court reporter, and the Judge prior to the hearing, if not using a reporter from the Court’s Approved Official Reporter Pro Tempore list.

Once the form is signed it must be filed with the clerk. If a litigant has been granted a fee waiver and requests a court reporter, the party must submit a Request for Court Reporter by a Party with

25CV019484: PEREZ vs SCHAAL, et al. 12/11/2025 Hearing on Motion to Compel Arbitration in Department 53

a Fee Waiver (CV/E-211) and it must be filed with the clerk at least 10 days prior to the hearing or at the time the proceeding is scheduled if less than 10 days away. Once approved, the clerk will forward the form to the Court Reporter’s Office and an official reporter will be provided.

Moving counsel states the incorrect address in their Notice of Motion and does not provide notice of the Court’s tentative ruling system, as required by Local Rule 1.06(D). The correct address for Departments 53 and 54 (Law and Motion) of the Sacramento County Superior Court is 813 6th Street, Sacramento, California 95814. Moving counsel is directed to contact Plaintiff, in pro per, and advise him of Department 53’s correct address, Local Rule 1.06, and the Court’s tentative ruling procedure and the manner to request a hearing.

If Defendants’ counsel is unable to contact Plaintiff prior to the hearing, Defendants’ counsel is ordered to appear at the hearing in person, by Zoom or by telephone. Moving counsel failed to serve their Reply on all parties who have appeared in this matter. (Code Civ. Proc., § 1014.) Moving counsel shall properly serve their Reply and file Proof of Service before the hearing. TENTATIVE RULING: Defendants Sacramento Drilling and Jon Ferla’s (Defendants) motion to compel arbitration is ruled upon as follows.

Factual Background

Plaintiff Joseph Perez, in pro per, commenced this action on August 18, 2025, alleging, among other asserted facts, that “[t]his action arises from a planned and coordinated scheme by [all of the] named Defendants to intentionally destroy Plaintiff’s business and personal reputation.” (Compl., ¶ 1.) Plaintiff sued twelve individuals and corporate entities, including Sacramento Drilling and Jon Ferla (“Jon Fera” in the Complaint). Plaintiff’s complaints against Defendants arise from Defendants’ allegedly tortious conduct during a construction project Plaintiff was performing for two other defendants, Schaal and Trujillo.

As part of this larger project, Plaintiff and Defendants entered into a written contract for pier excavation work (the Proposal). Plaintiff asserts eight causes of action: (1) Intentional Interference with Economic Relationship; (2) Trade Libel; (3) Slander; (4) Defamation; (5) Intentional Infliction of Emotional Distress; (6) Unjust Enrichment; (7) Conspiracy; and (8) Fraud. Plaintiff asserts only his first, fifth, seventh, and eighth causes of action against Defendants. Defendants filed their answer on September 25, 2025, and filed this motion to compel arbitration on October 2, 2025.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

25CV019484: PEREZ vs SCHAAL, et al. 12/11/2025 Hearing on Motion to Compel Arbitration in Department 53

Moving Papers. Defendants assert, pursuant to California Code of Civil Procedure Section 1280 et seq. and the Federal Arbitration Act (FAA), that an arbitration provision in the Proposal is valid, not unconscionable, has not been waived, and encompasses all of plaintiff Perez’s causes of action against them. Defendants move to compel arbitration and to stay the litigation, at least against them, pending the completion of arbitration. Defendants’ declaration of Jon Ferla, Exhibit A to their motion to compel arbitration, omits the “true and accurate copy of the finalized Proposal signed by Plaintiff.” (Ferla Decl., ¶ 1.)

However, Defendants state “the provisions of the written agreement that provides for arbitration” in their motion to compel (Cal. Rules of Court, rule 3.1330), and Plaintiff attached a copy of the Proposal as Exhibit B to his Declaration, confirming the text of the arbitration provision. Opposition. Plaintiff opposes the motion on the grounds that Defendants waived their right to compel arbitration; that the Proposal and the arbitration provision are illegal and unenforceable; that the dispute is outside the scope of the arbitration provision; and that the Court should refuse to order arbitration because of a risk of conflicting rulings pursuant to Code of Civil Procedure section 1281.2, subdivision (c).

Plaintiff moved for sanctions against Defendants and their former counsel because of “flagrant disregard for both procedural rules and substantive law.” (Opp. 3:17–18.) Plaintiff also filed his Declaration, which attached the complete Proposal, email communications with Defendants’ former counsel, and other exhibits. Reply. Defendants Reply argues that Defendants did not waive their rights; that the arbitration provision is enforceable; and that the dispute is within the scope of the arbitration provision.

Defendants also argue that Plaintiff’s request for sanctions is procedurally and substantively improper.

Legal Standard

California has a “strong public policy in favor of arbitration,” expressed by the comprehensive statutory scheme regulating private arbitration at California Code of Civil Procedure section 1280 et seq. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) Likewise, the FAA shows a federal policy favoring arbitration agreements. (Cronus Investments Inc. v. Concierge Services (2005) 35 Cal.4th 376, 384.) California’s procedural rules apply unless the parties expressly choose federal procedural rules. (Nixon v. AmeriHome Mortgage Co., LLC (2021) 67 Cal.App.5th 934, 945.) California Code of Procedure section 1281.2 is a procedural statute that is not preempted by the FAA. (Cronus Investments, supra, at p. 394.) A court must order arbitration when there is a valid, binding arbitration agreement,

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25CV019484: PEREZ vs SCHAAL, et al. 12/11/2025 Hearing on Motion to Compel Arbitration in Department 53

unless an exception applies. (Code Civ. Proc., § 1281.2; Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967.) The party seeking to compel arbitration bears an initial burden of proof as to the existence of an arbitration agreement. (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164–165.) Under Gamboa, a three-step process applies where the moving party can meet its initial burden by attaching a copy of the arbitration agreement or stating the arbitration provision verbatim in its motion. (Id. at p. 165; Cal.

Rules of Court, rule 3.1330.) For this step, “it is not necessary to follow the normal procedures of document authentication.” (Id. at p. 165.) Where the moving party satisfies its initial burden, “then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement.” (Ibid.) “If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties.” (Ibid.)

Where an arbitration agreement exists, the party opposing arbitration bears the burden of proving any defense by a preponderance of the evidence. (Nielson Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1106.) Where state procedural law applies, section 1281.2 contains limited exceptions to enforcing an arbitration agreement including: (1) a party waives the right to arbitration; (2) grounds exist for rescission of the arbitration agreement; (3) or pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues. (Code Civ.

Proc., § 1281.2, subds. (a)–(c); Acquire II, Ltd. v. Colton Real Estate Group, supra, 213 Cal.App.4th at p. 967.) In contrast, where the FAA governs procedural issues, it contains no similar provision as Code of Civil Procedure section 1281.2(c) which permits denial of the motion based upon pending litigation with a third party creating the possibility of conflicting ruling on common issues of fact or law. In determining whether the FAA governs, the FAA states that a written arbitration provision in “a contract evidencing a transaction involving commerce shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.)

When the FAA applies, it preempts any state law rule that “stand[s] as an obstacle to the accomplishment of the FAA's objectives.” (Muller v. Roy Miller Freight Lines, LLC (2019) 34 Cal.App.5th 1056, 1062 [citations omitted].) An arbitration provision is subject to the FAA if the agreement is a contract “evidencing a transaction involving commerce.” (9 U.S.C. § 2.) “[E]videncing a transaction involving commerce” pursuant to 9 U.S.C. § 2 means that “the ‘transaction’ in fact ‘involve’ interstate commerce, even if the parties did not contemplate an interstate commerce connection.” (Allied-Bruce Terminix Cos. v.

Dobson (1995) 513 U.S. 265, 281.) The FAA governs if the underlying contract facilitates interstate commercial transactions or directly or indirectly affects commerce between states. (Bernhardt v. Polygraphic Co. of America (1956) 350 U.S.

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198, 201; Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967) 388 U.S. 395, 401- 402.) “The statute’s language, background, and structure establish that section 2’s ‘involving commerce’ words are the functional equivalent of the phrase ‘affecting commerce,’ which normally signals Congress’ intent to exercise its commerce power to the full[.]” (Allied-Bruce Terminix Cos., supra, 512 U.S. p. 265.) “Congress’ Commerce Clause power ‘may be exercised in individual cases without showing any specific effect upon interstate commerce’ if in the aggregate the economic activity in question would represent ‘a general practice . . . subject to federal control.’ [Citations.]

Only that general practice need bear on interstate commerce in a substantial way.” (Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56-57.) The party claiming the contract involves interstate commerce under the FAA and that the FAA preempts state law has the burden of proof. (Woolls v. Superior Court (2005) 127 Cal.App.4th 197, 211-214; Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 687.) As applied here, to the extent they might assert that the FAA preempts the application of Code of Civil Procedure section 1281.2(c), Defendants, as moving parties “had the burden to demonstrate FAA coverage by declarations and other evidence.” (Hoover v.

American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1208.)

Discussion

A. Existence of the Parties’ Arbitration Agreement. Defendants’ motion to compel quotes the arbitration provision verbatim: 31. ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATED TO THE CONTRACT, OR THE BREECH [sic] THEREOF, SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE CONSTRUCTION INDUSTRY ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION, AND THE JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR OR ARBITRATORS MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. (Mot. 1:16–21.)

Under the three-part burden shifting test under Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164–165, Defendants have satisfied their minimal initial burden in demonstrating the existence of an arbitration agreement by setting forth the arbitration provision verbatim in its motion. (See also Cal. Rules of Court, rule 3.1330.) Therefore, the burden shifts to Plaintiff to challenge the authenticity of the arbitration agreement. (Gamboa, supra, 72 Cal.App.5th at 165.) Here, rather than producing evidence that no arbitration agreement exists (and thereby

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

25CV019484: PEREZ vs SCHAAL, et al. 12/11/2025 Hearing on Motion to Compel Arbitration in Department 53

shifting the burden to Defendant for the third part of the Gamboa analysis), Plaintiff’s declaration attached the entire proposal as Exhibit B, which contains the same language as Paragraph 31 of the Proposal. Thus, Plaintiff does not dispute the existence or contents of this arbitration provision or the underlying contract. Because, Defendants have carried their initial burden and Plaintiff “does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion.” (Ibid.)

B. Waiver. While not disputing the existence of the parties’ arbitration agreement, Plaintiff first argues that Defendants waived their right to compel arbitration by filing an administrative complaint with the Contractors State License Board (CSLB) and by filing an answer requesting trial by jury in this action. (Opp. 4:27–6:15.) An arbitration agreement is not self-executing; a party seeking to compel arbitration must either file a petition to compel or raise the arbitration agreement as an affirmative defense, or the right is waived. (Sargon Enterprises, Inc. v.

Browne George Ross LLP (2017) 15 Cal.App.5th 749, 768.) To establish waiver, the party opposing enforcement must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it. (Quach v. Cal. Commerce Club, Inc. (2024) 16 Cal.5th 562, 584.) Clear and convincing evidence means the opponent must show waiver is “highly probable.” (Ibid.) Intentional relinquishment or abandonment may be shown by words or by conduct “so inconsistent with an intent to enforce the [arbitration provision] as to lead a reasonable factfinder to conclude the party had abandoned it.” (Ibid.)

The waiver inquiry focuses exclusively on the waiving party’s words or conduct; prejudice to the opposing party is irrelevant. (Id. at p. 585.) Plaintiff declares that Ferla, on behalf of Sacramento Drilling, filed a formal complaint to the CSLB regarding non-payment. (Perez Decl., ¶ 3.) The CSLB is a licensing, regulatory, and disciplinary board whose highest priority is the “protection of the public.” (Bus. & Prof. Code, § 7000.6) Among its other duties, the CSLB investigates complaints and recommends discipline, such as suspending or revoking contracting licenses. (Bus. & Prof.

Code, § 7090.) The CSLB may cause a licensee to pay civil penalties in payment disputes between a contractor and a subcontractor. (Bus. & Prof. Code, § 7108.5, subd. (b).) But discipline and civil penalties are “separate from, and in addition to, all other remedies, either civil, administrative, or criminal.” (Bus. & Prof. Code, § 7108.5, subd. (c).) The CSLB’s purpose is to protect the public by licensing and regulation, not to resolve private disputes. Filing a complaint with the CSLB does not preclude any other form of dispute resolution.

Plaintiff notes that defendants demand a jury trial in their September 25 answer and

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asserts that this is an “express and unequivocal” waiver. (Opp: 5:9–11 [referring to Ans. 8:19].) However, Perez also declares that Defendants’ former counsel demanded arbitration on September 9, three weeks after this action commenced and prior to filing their answer. (Perez Decl., ¶ 5.) Further, Defendants asserted mandatory arbitration as an affirmative defense in their answer, as allowed by law. (Ans., ¶ 25; Sargon Enterprises, Inc. v. Browne George Ross LLP, supra, 15 Cal.App.5th at p. 768.)

And Defendants filed the motion to compel arbitration on October 2, only one week after their answer. Far from showing an intent “so inconsistent” with enforcement of arbitration, Defendants demonstrate an intent to assert their right. (Cf. Quach v. Cal. Commerce Club, Inc., supra, 16 Cal.5th at p. 586–587 [finding waiver in a consistent course of action to litigate, including actively engaging in discovery over 13 months.]) The Court finds that Plaintiff has failed to demonstrate by “clear and convincing” evidence that Defendants have waived their right to arbitration.

C. Scope of the Arbitration Provision. Plaintiff next argues that the arbitration provision does not encompass “Defendants’ malicious, extra-contractual conduct.” (Opp. 7:10–27.) Defendants raise a threshold issue: arguing that the arbitrator, not the Court, must determine the scope of the arbitration provision. (Mot. 7:16–8:14.) By default, courts determine the scope of an arbitration provision. (Gostev v. Skillz Platform, Inc. (2023) 88 Cal.App.5th 1035, 1048.) Parties may, however, agree to delegate questions of arbitrability to the arbitrator, but the evidence of delegation must be “clear and unmistakable.” (Ibid. [quoting Ajamian v.

CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 782].) The party asserting delegation bears this heightened evidentiary standard. (See Gostev, supra, at p. 1048; Ajamian, supra, at p. 782; Rent-a-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 69, fn. 1.) The arbitration provision states that “any controversy or claim arising out of or related to the contract, or the breech [sic] thereof, shall be settled by arbitration in accordance with the construction industry arbitration rules of the American Arbitration Association.” (Mot. 1:16–18.)

Defendants argue that the broad language “arising out of or related to” shows an intent of the parties to delegate arbitrability. (Mot. 8:7–11.) While this language shows an intent to broadly apply the arbitration provision as to the types of claims and controversies it covers, the language does not specifically indicate the parties’ intention to delegate to the arbitrator all questions of arbitrability. Defendants offer no authority (nor is the Court aware of any) broadly holding that the generalized clause “arising out of or related to” alone constitutes the “clear and unmistakable” indication that the parties have delegated any issue of arbitrability to the arbitrator.

Some courts have found that the incorporation of arbitration rules, which themselves contain a delegation provision, shows a “clear and unmistakable” intent to delegate. (See Gostev v. Skillz Platform,

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Inc., supra, 88 Cal.App.5th at pp. 1050–1053 [discussing and comparing caselaw].) But here, Defendants have not submitted the construction industry arbitration rules of the American Arbitration Association into evidence, much less that such rules contain an applicable delegation clause. The Court finds that Defendants have failed to meet their burden to show “clear and unmistakable” delegation of all questions of arbitrability. Therefore, the Court will determine the scope of the arbitration provision.

Like any other contract, an arbitration agreement is construed to give effect to the intent of the parties. (Aanderud v. Super. Ct. (2017) 13 Cal.App.5th 880, 890.) But “any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Ibid.) The language “arising out of or relat[ed] to” shows an intent for a broad arbitration provision that “reaches every dispute between the parties having a significant relationship to the contract and all disputes having their origin or genesis in the contract.” (Brinkley v.

Monterey Financial Services, Inc. (2015) 242 Cal.App.4th 314, 331–332.) A claim is outside the scope of an arbitration provision only when the provision clearly does not apply to the dispute. (Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186,1190.) Intentional tort claims may fall within the scope of a contractual arbitration provision. (Ibid.) To fall outside of a broad arbitration provision, the dispute must be completely independent from the contract. (Compare Brinkley v. Monterey Financial Service, Inc., supra, 242 Cal.App.4th at 331–332 [allegedly illegal telephone recording within scope] with Moritz v.

Universal City Studios LLC (2020) 54 Cal.App.5th 238, 248 [not even a “minimal connection” between the dispute and the alleged contract].) The Proposal containing the arbitration provision is a subcontract for pier hole excavations and part of a project Plaintiff was managing for Defendants Schaal and Trujillo. (Compl., ¶ 40; Perez Decl. Exh. B.) Plaintiff alleges that Ferla approached Schaal and Trujillo directly to expand the scope of the work and later filed a CSLB complaint for non-payment at the direction of Schaal. (Compl., ¶ 40; Perez Decl., ¶ 3.)

Plaintiff states that “the gravamen of the complaint is that Ferla, acting on behalf of [Sacramento Drilling], went behind Plaintiff’s back to undermine his contractual relationship with the homeowners, sabotage the project, and conspire with the homeowners to file a false CSLB complaint.” (Opp. 7:19–22.) The allegations about expanding the scope of the work and undermining plaintiff’s role as the prime contractor are claims clearly “arising out of or related to the contract” at issue. Similarly, the CSLB complaint for non-payment is directly related to the contract.

Although one may argue that plaintiff Perez’s allegations of a conspiracy to harm him are not a natural outgrowth of the underlying contract, there is at least a minimal connection to the dispute. And importantly, the arbitration provision is not restricted to

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contract claims and as referenced earlier, even intentional tort claims may fall within the scope of a contractual arbitration provision. (Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186,1190.) Resolving any doubts in favor of arbitration, as the Court is required to do, the Court finds that the claims are within the scope of this broad arbitration provision. D. Illegality. Plaintiff Perez next argues that the underlying contract is unenforceable because defendant Ferla was not a licensed home improvement salesperson at the time the Proposal was executed, citing Business & Professions Code section 7153, and that the arbitration provision is unenforceable because it does not comply with Business & Professions Code section 7191. “Generally a contract made in violation of a regulatory statute is void.” (Asdourian v.

Araj (1985) 38 Cal.3d 276, 291.) Business & Professions Code section 7153, subdivision (a), states in relevant part: It is a misdemeanor for any person to engage in the occupation of salesperson for one or more home improvement contractors without having, at the time of the sales transaction, a current and valid home improvement salesperson registration . . . . [¶] It is a misdemeanor for any person to engage in the occupation of salesperson of home improvement goods or services without having, at the time of the sales transaction, a current and valid home improvement salesperson registration. “Home improvement contractor,” “home improvement goods or services,” and “home improvement salesperson” are each defined in statute. (Bus. & Prof., §§ 7150.1, 7151, subd. (b), 7152.)

Petitioner alleges that defendant Ferla was not a registered home improvement salesperson (Compl., ¶ 40.) and declares that he did not find Ferla’s name listed in the online CSLB database of registrants (Perez Decl., ¶ 7). Plaintiff has not provided any authority indicating that Business & Professions Code sections 7150 et seq. apply to contracts between a contractor and a subcontractor. The evident intent of the statutes is to protect homeowners or tenants. For instance, a “home improvement contract” is an agreement between “a contractor and an owner or tenant.” (Bus. & Prof.

Code, § 7151.2; see also Bus. & Prof. Code, §§ 7152, subd. (c); 7153, subd. (b); 7156, subd. (c), etc. [regulating relations between contractors and owners.) Furthermore, Plaintiff has not submitted evidence or argument to show that Ferla acted as a “salesperson,” that the contract dealt with “home improvement goods or services,” or that Sacramento Drilling was acting as a “home improvement contractor,” as these terms are used in the statutes. None of Plaintiff’s conclusions are self-evident based on the statutory language.

Plaintiff has not satisfied his burden of proof to show that the Business & Professions Code section 7153 applies to the

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Proposal between Plaintiff and Defendants. Plaintiff’s argument that the arbitration provision itself is unenforceable fails for similar reasons. Business & Professions Code section 7191 requires that when “a contract for work on residential property with four or fewer units contains a provision for arbitration of a dispute between the principals in the transaction,” the arbitration provision has a specific form and contents. A noncompliant arbitration provision is unenforceable, except against the licensee. (Bus. & Prof.

Code, § 7191, subd. (c).; Woolls v. Super. Ct. (2005) 127 Cal.App.4th 197, 207 [dismissing contractor’s substantial compliance argument].)[1] Plaintiff has not submitted evidence that the Proposal was a contract “for work on residential property with four or fewer units,” that he and Defendants Ferla or Sacramento Drilling are “principals in the transaction” within the meaning of the statute (see Woolls v. Super. Ct., supra, 127 Cal.App.4th 197 [noncompliant arbitration provision in contract between homeowner and contractor]), or that even if section 7191 applies to this contract, Plaintiff is not a “licensee” against whom the arbitration provision could be enforced.

Plaintiff has not satisfied his burden to prove that the underlying contract or the arbitration provision is illegal and unenforceable. E. Code of Civil Procedure Section 1281.2(c). Finally, Plaintiff argues that This case involves a multi-defendant civil conspiracy. Forcing the claims against [Sacramento Drilling] and Ferla into a separate arbitration while the claims against their co-conspirators proceed here creates a significant risk of inconsistent rulings on common questions of fact and law, justifying denial under Code of Civil Procedure § 1281.2(c). (Opp. 3:10–15.)

On reply, defendants fail to address plaintiff’s argument that denial is warranted under Code of Civil Procedure section 1281.2(c). Defendants’ failure in this regard constitutes a concession on the merits of the argument. (See D.I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723, 728, n.4.) In any event, as discussed below, the Court agrees with plaintiff’s opposition in this regard. As a preliminary matter, defendants offer no evidence or argument that the parties agreed that the FAA preempts the application of state procedural law in this instance.

Nor have defendants established that preemption occurs here as a matter of law. Therefore, state procedural law applies, including Code of Civil Procedure section 1281.2. Section 1281.2, subdivision (c), is the “third-party litigation exception.” (Acquire II, Ltd. v. Colton Real Estate Group, supra, 213 Cal.App.4th at p. 967.) The exception applies when “[(1) a] party to the arbitration agreement is also a party to a pending court

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action with a third party, [(2) the action arises] out of the same transaction or series of related transactions and [(3)] there is a possibility of conflicting rulings on a common issue of law or fact.” (Code Civ. Proc., § 1281.2, subd. (c) [emphasis added].) When all three conditions are satisfied, then the court has discretion to deny or stay arbitration despite a valid and enforceable arbitration agreement. (Acquire II, supra, at p. 968.) A “third party” is a party not bound by the arbitration agreement. (Acquire II, Ltd. v.

Colton Real Estate Group, supra, 213 Cal.App.4th at p. 977.) The record evidence shows that only plaintiff and defendants are parties to the Proposal and the arbitration provision. (Perez Decl., Exh. B.) The ten defendants other than Ferla and Sacramento Drilling are “third parties” for purposes of section 1281.2, subdivision (c). A party asserting the third-party litigation exception bears no evidentiary burden to establish the possibility of conflicting rulings. (Abaya v. Spanish Ranch I, L.P. (2010) 189 Cal.Ap.4th 1490, 1499.)

Instead, the issue is solely “whether the allegations in the parties’ pleadings or other evidence in the record support an implied finding that Plaintiffs’ claims arise out of a series of related transactions and create the possibility of conflicting rulings on common factual and legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group, supra, 213 Cal.App.4th at p. 972.) Among other allegations, Plaintiff alleges that Ferla approached defendants Schaal and Trujillo to expand the scope of a project that plaintiff had already negotiated with Schaal and Trujillo and that Ferla “filed a complaint at the direction of Defendant Schaal.” (Compl., ¶ 40.)

Or, as plaintiff summarizes, “Ferla, acting on behalf of [Sacramento Drilling], went behind Plaintiff’s back to undermine his contractual relationship with the homeowners, sabotage the project, and conspire with the homeowners to file a false CSLB complaint.” (Opp. 7:19–22.) These allegations are among those that form the basis for plaintiff’s alleged conspiracy, the seventh cause of action asserted in the Complaint. Conspiracy is not a separate tort but is instead a form of vicarious liability by which one defendant can be held liable for the acts of another. (IIG Wireless, Inc. v.

Yi (2018) 22 Cal.App.5th 630, 652.) To establish a conspiracy, a plaintiff must allege that a defendant knew about, agreed with, and intended to accomplish a wrongful course of action. (Id.) Here, Plaintiff alleges that Defendants Ferla and Sacramento Drilling collaborated in a conspiracy with Defendants Schaal and Trujillo (and other defendants) to disrupt plaintiff’s business relationships (Compl., ¶¶ 56–61); to cause plaintiff severe emotional distress (Compl., ¶¶ 71–75); and to commit fraud (Compl., ¶¶ 83–87).

The alleged conspiracy and claims arise from the same transaction: Defendants’ work on the Schaal and Trujillo project. From that transaction, Defendants allegedly undermined plaintiff’s

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25CV019484: PEREZ vs SCHAAL, et al. 12/11/2025 Hearing on Motion to Compel Arbitration in Department 53

contractual relationship with Schaal and Trujillo and Schaal and Trujillo allegedly caused Defendants to file a complaint with the CSLB. At the same time, however, Plaintiff’s cause of action for conspiracy, as alleged, is not restricted only to Defendants’ relationship with Schaal and Trujillo as Plaintiff also asserts a conspiracy was formed by “all named Defendants” in this action. (Compl. ¶ 79-82.) To rule on these claims, a tribunal—whether court or arbitrator—will have to determine based upon the evidence and among other related issues, what defendants Ferla, Sacramento Drilling, Schaal, and Trujillo (as well as other defendants to the extent necessary to ascertain liability) knew and when they knew it; what contacts and communications they had; if the four defendants agreed to a common plan; and ultimately, whether any of their actions and communications were wrongful.

There is at least the possibility of inconsistent rulings of fact and law if these common questions are answered by an arbitrator as against defendants Ferla and Sacramento Drilling and answered separately by the trial court as against defendants Schaal and Trujillo, as well as other defendants. (See Metis Development LLC v. Bohacek, (2011) 200 Cal.App.4th 679, 692 [finding a possibility of conflicting rulings with fraud and conspiracy claims asserted against third parties]). When the possibility of inconsistent rulings exists, the trial court has discretion to choose from four options: (1) refuse to enforce the arbitration agreement and order joinder of all parties in a single action; (2) order joinder as to only certain issues; (3) order arbitration among the parties to the arbitration agreement and stay the court action pending conclusion of arbitration; or (4) stay arbitration pending the outcome of the court action. (Code Civ.

Proc., § 1281.2.) In exercising its discretion, the court must primarily attempt to avoid the possibility of inconsistent rulings, not to further judicial economy. (Metis Development LLC v. Bohacek, supra, 200 Cal.App.4th at pp. 692–693; Acquire II, Ltd. v. Colton Real Estate Group, supra, 213 Cal.App.4th at p. 978). Here, options 2, 3, and 4 are not workable or applicable. That is, all of Plaintiff’s claims asserted against Defendants Ferla and Sacramento Drilling are inextricably intertwined with Defendants Schaal and Trujillo, as well as the allegations pertaining to all named defendants.

It is not possible to order joinder as to only certain issues. Nor will ordering arbitration of the claims against Ferla and Sacramento Drilling while staying the litigation as to all other defendants solve the possibility of inconsistent rulings given that the court action, once the stay is lifted, may still result in inconsistent factual and/or legal rulings. Nor is it advisable to stay the arbitration pending outcome of the court action for the similar reasons. In the Court’s view, only the first option is advisable: i.e., to not enforce the arbitration agreement and to order joinder of all parties in a single action, or as is the case here, to allow the action which already involves all parties to proceed.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

25CV019484: PEREZ vs SCHAAL, et al. 12/11/2025 Hearing on Motion to Compel Arbitration in Department 53

For the reasons stated, Defendants’ motion to compel arbitration is DENIED. Plaintiff’s Request for Sanctions Plaintiff’s request for sanctions against defendants and defendants’ counsel is DENIED. A motion for sanctions under Code of Civil Procedure section 128.7 must be filed separately from all other motions and may not be filed with the Court less than 21 days after service, which allows a 21-day safe harbor. (Code Civ. Proc., § 128.7, subd. (c)(1).) Plaintiff did not follow these procedures, and the Court denies the request on that basis.

Even if plaintiff had followed the correct procedures, the Court would deny the motion. As indicated by the discussion in this order, Defendants’ motion to compel arbitration was neither legally nor factually frivolous, nor was the motion submitted for an improper purpose. (Kumar v. Ramsey (2021) 71 Cal.App.5th 1110, 1120 [standard is objective unreasonableness, that any reasonable attorney would agree the filing is totally and completely without merit].) This minute order is effective immediately.

No formal order or other notice is required. (Code Civ. Proc., § 1019.5; Cal. Rules of Court, rule 3.1312.)

Defendants’ substantial compliance argument (Reply 4:28–5:3) is foreclosed by

Woolls.