Yu vs. JJC & CO. LLC

“In determining the existence of an agreement to arbitrate, the trial court must employ a three-step burden shifting process. The party seeking to compel arbitration bears an initial burden to show

an agreement to arbitrate; that burden can be met by providing a copy of the alleged agreement. If that initial burden is met, the burden shifts to the party opposing arbitration to identify a factual dispute as to the agreement’s existence, thereby shifting the burden back to the arbitration proponent. At that point, and “[b]ecause the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.” (Garcia v. Stoneledge Furniture LLC (2024) 102 Cal.App.5th 41, 51.)

Here, Defendants submit the Investment Agreement, attached to the Complaint as Exhibit A. The Investment Agreement contains a Dispute Resolution provision that states: “Any disputes arising under this Agreement shall first be resolved through mediation. If mediation fails, disputes shall be settled by binding arbitration in Los Angeles, California, in accordance with California state law. [followed by Chinese text].” (Exhibit A of Complaint, item 6.)

Defendants have sufficiently shown the existence of an agreement to arbitrate. However, Plaintiff challenges the validity of such arbitration agreement.

Investment Agreement

Plaintiff contends he has limited English proficiency and relied on the Chinese-language portions of the Agreement when reviewing and signing the document. (Yu Decl., ¶ 5.) He understood the dispute-resolution language to generally mean that the parties would first try to mediate disputes and attempt to resolve them informally. (Yu Decl., ¶ 9.)

Plaintiff offers the declaration of Samuel Shen Chong, a certified Mandarin Chinese court interpreter (license # 301138) who states the Chinese text used in the Investment Agreement means “evidentiary resolution” or “resolution via submission of evidence.” The Chinese text does not convey the concept of arbitration or the waiver of the right a jury trial. (Chong Decl., ¶ 7.)

Plaintiff has met his burden of demonstrating a factual dispute as to the existence of an agreement to arbitrate. The burden now shifts back to Defendants to prove the existence of a valid agreement to arbitration.

On reply, Defendants argue that Plaintiff cannot avoid arbitration based on his “limited understanding of English. Plaintiff filed this

action in English, and submitted declarations or affidavits in English. “Generally, a party may not avoid enforcement of an arbitration provision because the party has limited proficiency in the English language. If a party does not speak or understand English sufficiently to comprehend a contract in English, it is incumbent upon the party to have it read or explained to him or her.” (Caballero v. Premier Care Simi Valley LLC (2021) 69 Cal.App.5th 512, 518-519.) “An exception to the general rule applies when a party was fraudulently induced to sign the contract.” (Id. at 519.)

This exception is inapplicable here because Plaintiff does not contend Defendants defrauded him or prevented him from learning the contract’s terms. He simply attests that he did not understand the Chinese version to mean he would waive his right to proceed in superior court. But he does not state he inquired about the meaning of the provision or was denied time to clarify the meaning of the provision prior to signing it. “[A person’s] decision to sign a document he could not read is not a basis for avoiding an arbitration agreement.” (Id. at 519.)

Based on the foregoing, the court finds Defendants have demonstrated that the Investment Agreement contains a valid agreement to arbitrate.

Supplementary Agreement

Defendants seek to compel arbitration of all claims asserted by Plaintiff in the Complaint. However, Plaintiff argues that his claims are not solely based on the Investment Agreement, but also the Supplementary Agreement executed on or about May 26, 2025, concerning the pool-service business investment. The Supplementary Agreement does not contain an arbitration provision and does not incorporate the arbitration provision in the Investment Agreement.

The Supplementary Agreement creates rights and obligations separate from Plaintiff’s initial equity investment. Plaintiff’s claims regarding ownership of pool assets, repayment of poolbusiness investment funds, and Defendants’ alleged misappropriation of pool-project revenues arise directly from that separate agreement. Plaintiff contends that Defendants, therefore, cannot compel arbitration of disputes arising from a contract that contains no agreement to arbitrate, especially the breach of fiduciary duty and fraud claims.

On reply, Defendants argue that the Supplementary Agreement is merely an amendment to the Investment Agreement to provide

additional details concerning the preliminary planning and operational process of the investment project. Consistent with the language of the Investment Agreement, which states that “[a]ny amendments to this Agreement must be made in writing and signed by all parties,” the parties executed the Supplementary Agreement. The Supplementary Agreement did not displace the original terms of the Investment Agreement (including the arbitration clause) but provided further details regarding the investment project.

The allegations in the Complaint appear to corroborate Defendants’ argument. Plaintiff alleges that “the parties entered into a written ‘Supplementary Agreement’ to expand the Company’s operations into the pool cleaning business,” thus suggesting the Supplementary Agreement was merely an amendment to the Investment Agreement which established the initial relationship of the parties. (Complaint, ¶ 7 [emphasis added].) In other words, the Supplementary Agreement was predicated upon the existence of the Investment Agreement and did not arise independently from that initial agreement.

Plaintiff’s argument that its breach of fiduciary duty and fraud claims fall outside of the agreement to arbitration are not valid. “Even under a very broad arbitration provision, such as ‘any controversy or claim arising out of or relating to this agreement,’ tort claims must ‘have their roots in the relationship between the parties which was created by the contract’ before they can be deemed to fall within the scope of the arbitration provision.” (Rice v. Downs (2016) 248 Cal.App.4th 175, 188.) In this case, all of Plaintiff’s claims against Defendants were created by the Investment Agreement and the Supplementary Agreement.

Accordingly, the motion to compel arbitration is GRANTED as Defendants have sufficiently demonstrated the existence of a valid agreement to arbitrate. The matter is stayed pending completion of the arbitration.

ADR Review Hearing set March 12, 2027 at 8:30 a.m. in Department C44.

Clerk to give notice.