Collaborative Imaging Technology, LLC vs CMI Management LLC et al

Case Number

24CV05224

Case Type

Hearing Date / Time

Mon, 08/04/2025 - 10:00

Nature of Proceedings

Demurrer on Cross Complaint; Mtn to Compel; Mtn re Protective Order; Mtn to Quash; Mtns to Seal (2); Mtns to Stay (2); Mtn to Strike

Tentative Ruling

Collaborative Imaging Technology, LLC, v. CMI Management, LLC, et al. (Judge Sterne)

Case No. 24CV05224   

Hearing Date: August 4, 2025                                                

HEARING:              (1)       Motion of Collaborative Imaging Technology to Compel Arbitration of Cross-Complaint

                                    (2)       Demurrer of Collaborative Imaging Technology to Cross-Complaint

                                    (3)       Motion of Collaborative Imaging Technology to Strike Portions of Cross-Complaint

                                    (4)       Motion of Collaborative Imaging Technology for Protective Order

                                    (5)       Motion of Defendants to Stay Complaint

                                    (6)       Motion of Defendants to file Documents under Seal (I)

                                    (7)       Motion of Collaborative Imaging Technology to Quash Deposition Subpoenas to Proskauer Rose LLP and to King & Spaulding LLP

                                    (8)       Motion of Defendants to Stay the Deposition of, or Quash the Notice of Deposition of, Laura Traube, M.D., and for Protective Order

                                    (9)       Motion of Defendants to File Documents under Seal (II)

ATTORNEYS:        For Plaintiff and Cross-Defendant Collaborative Imaging Technology: Nilay U. Vora, Jeffrey A. Atteberry, Patricia H. Jun, Shenel Ozisik, The Vora Law Firm, P.C.

                                    For Defendants and Cross-Complainants CMI Management, LLC, Pueblo Radiology Medical Group, Inc., and Pueblo Radiology Associates, Inc.: Christopher B. Queally, Imran F. Vakil, Gordon Rees Scully Mansukhani, LLP

                                    For Cross-Defendant Collaborative Imaging, LLC: Noel S. Cohen, Allegra Gorchynski, Polsinelli LLP                            

TENTATIVE RULING:

(1)       The motion of plaintiff and cross-defendant Collaborative Imaging Technology, joined by cross-defendant Collaborative Imaging, LLC, is denied.

(2)       The hearing on all other matters on this calendar for this matter are continued to September 22, 2025, at 10:00 a.m.

(3)       On or before August 15, 2025, counsel for all parties are to meet and confer, in person, by telephone, or by video conference, to discuss whether any of the matters on calendar for September 22, 2025 (including matters continued by this order) are affected by the court’s disposition of the motion to compel arbitration, and, if so, to discuss an informal resolution of such disputes. On or before August 29, the parties shall file a joint report (or file and serve separate reports if a joint report is not feasible) stating the status of these matters, including any resolution of all or part of a motion, and any necessary supplemental matter or positions of the parties.

Background:

The procedural history of this matter is as follows:

On September 19, 2024, plaintiff Collaborative Imaging Technology, LLC, (CIT) filed its original complaint in this action asserting three causes of action against defendants CMI Management, LLC, (CMI), Pueblo Radiology Medical Group, Inc. (PRMG), and Pueblo Radiology Associates, Inc. (PRA) (collectively, defendants or Pueblo): (1) breach of contract; (2) declaratory relief; and (3) promissory fraud. The complaint was initially lodged with the court provisionally under seal, but was unsealed and filed in the public record following the court’s denial of CIT’s motion to seal.

On November 21, 2024, defendants filed their motion to compel arbitration of their breach of contract claims and to stay the balance of the action.

On January 8, 2025, defendants made an ex parte application to stay discovery pending disposition of their motion to compel arbitration, which was partially granted by the court on January 9 to stay discovery to February 24 or further order of the court.

On February 18, 2025, the parties filed their initial stipulation, entered as the court’s order, withdrawing the pending motion to compel arbitration and setting deadlines for responsive pleadings.

On February 21, 2025, the parties filed an amended stipulation (Amended Stipulation), entered as the court’s order, again withdrawing the pending motion to compel arbitration and setting deadlines for responsive pleadings.

On February 27, 2025, defendants filed their answer to the complaint, generally denying the allegations of the complaint and asserting 23 affirmative defenses. Defendants concurrently filed their cross-complaint against cross-defendants CIT and Collaborative Imaging, LLC (CI), asserting six causes of action: (1) breach of contract (specific performance); (2) breach of contract (damages); (3) breach of the implied covenant of good faith and fair dealing; (4) accounting; (5) breach of fiduciary duty; and (6) tortious interference with contractual relations.

On April 17, 2025, defendants filed their first amended answer to the complaint, generally denying the allegations of the complaint and asserting 19 affirmative defenses.

On April 25, 2025, CIT filed its demurrer to the fourth, fifth, and sixth causes of action of Pueblo’s cross-complaint. Also on April 25, CIT filed a motion to strike portions of the Pueblo’s cross-complaint, and a motion for protective order relating to the number of special interrogatories. All of these motions are set for this hearing date of August 4.

On April 30, 2025, CIT filed a declaration of demurring party stating that CIT intended to file a demurrer to Pueblo’s answer to the complaint to support an automatic extension of time.

On May 15, 2025, Pueblo filed a motion to stay CIT’s complaint on the grounds that CIT has conducted intrastate business and has failed to register to do business in California. This motion is also set for this hearing date of August 4.

On May 28, 2025, Pueblo filed its second amended answer (SAA) to CIT’s complaint, generally denying the allegations of the complaint and asserting 19 affirmative defenses. Also on May 28, Pueblo filed a motion to stay portions of its motion to stay the complaint.

On June 11, 2025, CIT filed its motion to compel arbitration of the cross-complaint. This motion is also set for this hearing date of August 4.

On June 13, 2025, CIT filed its motion to quash deposition subpoenas to Proskauer Rose LLP and to King & Spaulding LLP. This motion is also set for this hearing date of August 4.

On June 18, 2025, CI filed its joinder in CIT’s motion to compel arbitration.

On July 7, 2025, Pueblo filed its combined motion to stay the deposition of, or quash the notice of deposition of, Laura Traube, M.D., and for protective order. This motion is also set for this hearing date of August 4.

On July 10, 2025, CIT filed its demurrer to Pueblo’s SAA. CIT concurrently filed a motion to strike portions of the SAA. Both the demurrer and motion to strike are set for hearing on September 22.

On July 18, 2025, CIT filed its motion for sanctions under Code of Civil Procedure sections 128.7 and 128.5. This motion is set for hearing on September 22.

On July 21, 2025, Pueblo filed an ex parte application to stay all discovery pending disposition of the motion to compel arbitration. The ex parte application was heard and granted on July 22, staying discovery pending the future hearing of all pending motions.

Also on July 21, 2025, CIT filed motions to compel further responses to interrogatories, further responses to requests for admissions, and further responses to requests for production of documents. These motions are set for hearing on September 22.

On July 22, 2025, Pueblo filed opposition to the demurrer to the cross-complaint, motion to strike portions of the cross-complaint, motion for protective order, and motion to compel arbitration. Also on July 22, CIT filed opposition to the motion to stay complaint, combined motion as to the deposition of Traube, and motion to quash deposition subpoenas as to Proskauer Rose and King & Spaulding.

Also on July 22, 2025, Pueblo filed a motion to seal certain documents lodged provisionally under seal in support of Pueblo’s motion to quash. This motion is set for this hearing of August 4.

On July 28, 2025, CIT filed replies to the demurrer to the cross-complaint, motion to strike, motion to compel arbitration, motion to quash subpoenas as to Proskauer Rose and King & Spaulding (with reply declarations), and motion for protective order. Also on July 28, Pueblo filed replies as to the combined motion as to the deposition of Traube, the motion to stay complaint (with reply declarations),

Analysis:

(1)       Motion to Compel Arbitration

This motion is brought by CIT, joined by CI, to compel arbitration of the cross-complaint. CI adopts in its joinder all legal arguments, authorities, and requests for relief in CIT’s motion. (Joinder, at p. 2.) Although CI reserved the right in its joinder to file a separate reply, CI did not do so. For convenience of writing, references to CIT in this section on arbitration are intended also to include CI where the context dictates.

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] (a) The right to compel arbitration has been waived by the petitioner.” (Code Civ. Proc., § 1281.2, subd. (a).)

“The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)

            (A)       Arbitration Agreement

There are two agreements at issue between the parties. The earlier agreement is the “Billing Services Subcontractor Agreement” (Billing Services Agreement or BSA), dated July 1, 2021. (Hedge decl., exhibit 1.) The later agreement is the “Transition Agreement” (sometimes also, TA), dated July 24, 2024. (Hedge decl., exhibit 2.)

In CIT’s motion, CIT alleges the arbitration provision included in the Billing Services Agreement:

“13.6. Mediation/Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement, including any question regarding its existence, validity, interpretation, breach, or termination, whether individual, joint, or class in nature, including without limitation contract and tort disputes (‘Disputes’), will be submitted to mediation and if not settled after not less than eight hours of mediation may be submitted to binding arbitration set forth herein. Costs of mediation will be divided equally between the parties. The mediator will be provided by the American Healthcare Lawyers Association panel of mediators. If mediation is unsuccessful, Disputes will be resolved by binding arbitration administered by the American Arbitration Association under its current Commercial Arbitration Rules at the time the arbitration is filed, which are deemed to be incorporated by reference in this clause. However, no arbitrator shall have the right or power to enjoin or restrain any act of any party.

“The tribunal will consist of a single arbitrator, listed on the American Arbitration Association’s National Roster, and mutually selected by the Parties. In the event the Parties cannot agree to a single arbitrator, the parties will request and empower the American Arbitration Association to appoint the sole arbitrator in accordance with Rule 12 of the American Arbitration Association’s Commercial Arbitration Rules and Mediation Procedures for appointing arbitrators. The venue for the arbitration will be Los Angeles, California or Dallas, Texas, whichever location is closest to the responding party’s home office. The interpretation and application of this arbitration clause, as well as the conduct of the arbitral proceedings, will be governed by the laws of the state of Texas. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. The arbitration will be held in English. The Parties agree to equally split all arbitration costs and expenses pending the arbitrator’s final award, including but not limited to arbitrator compensation or expenses and reporting services.

“In the event that any dispute, claim or controversy arising out of or relating to this Agreement, including any question regarding its existence, validity, interpretation, breach, or termination, whether individual, joint, or class in nature, including without limitation contract and tort disputes, does not exceed $25,000, exclusive of interest, attorneys’ fees and arbitration costs, the dispute shall be resolved by submission of documents, unless the arbitrator determines that an oral hearing is necessary. Where cases are resolved by submission of documents, the parties will apply the American Arbitration Association’s procedures for the resolution of disputes through document submission, memorialized in Rule E-6 of the American Arbitration Association’s Commercial Arbitration Rules and Mediation Procedures for Expedited Procedures.

“Any award rendered by the arbitrators will be binding from the day it is made, and the Parties hereby waive any right to refer any question of law and right of appeal on the law or the merits to any court to the fullest extent allowed by law. The award shall be in writing and shall specify the factual and legal bases for the award. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction.

“Nothing in this arbitration provision shall preclude any Party from seeking equitable relief from a court of competent jurisdiction. No act of seeking equitable relief shall be considered a waiver of or prohibited by this arbitration provision, including without limitation, obtaining a temporary restraining order or other injunctive relief, invoking a power of sale, obtaining a writ of attachment or imposition of a receiver, or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to article 9 of the Uniform Commercial Code.

“Each party waives their right to a trial by jury to resolve Any dispute arising out of or relating to this agreement[.]

“This Section shall survive the termination or expiration of this Agreement.” (Billing Services Agreement, § 13.6, underscoring omitted and capitalization altered.)

In opposition to the motion, Pueblo points to the initial provisions of the Transition Agreement:

“Termination of Billing Agreement and this Transition Agreement. The Parties acknowledge and agree that the Billing Agreement was previously terminated solely with respect to PRMG, PRA, and their respective employed and contracted physicians and other health care professionals, effective May 31, 2024 at 11:59 PM PST (the ‘Pueblo Termination’). Pursuant to this Agreement, the Billing Agreement is hereby terminated effective as of the Effective Date with respect to all of the Parties, and no Party shall have any further rights, obligations or liabilities thereunder, except as otherwise expressly set forth in this Transition Agreement. This Transition Agreement shall terminate at the end of the Exiting Practices Transition Period (defined below), except for those provisions which, by their terms, survive such termination.” (Transition Agreement, § 1, bolding and underscoring omitted.)

The Transition Agreement itself contains no arbitration clause.

Both agreements state that they are to be construed according to Texas law (BSA, § 13.10; TA, § 13), but both the moving papers and the opposition papers cite no Texas law. The reply cites only one Texas case. The parties both cite California contract law and neither party argues that Texas law is different from California contract law with respect to the issues presented in this motion. In such instances, the court will apply California law. (Chen v. Los Angeles Truck Centers, LLC (2019) 7 Cal.5th 862, 867; Hurtado v. Superior Court (1974) 11 Cal.3d 574, 580; see also Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1515, fn. 17; Shields v. Singleton (1993) 15 Cal.App.4th 1611, 1621.) Additionally, the parties note that federal arbitration law otherwise applies. (See 9 U.S.C. § 1 et seq. [the FAA].)

“Although ‘[t]he law favors contracts for arbitration between parties’ [Citation], ‘ “ there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate....” ’ [Citations.]” (Victoria v. Superior Court (1985) 40 Cal.3d 734, 744.) “ ‘An arbitration agreement is governed by contract law. It is construed like other contracts to give effect to the intention of the parties and the ordinary rules of contract interpretation apply. [Citation.]’ [Citation.]” (Arzate v. ACE American Ins. Co. (2025) 108 Cal.App.5th 1191, 1199.)

Pueblo argues that the arbitration provision of the Billing Services Agreement is superseded by the Transition Agreement’s termination provision and the Transition Agreement’s failure to include an arbitration agreement, constituting a novation. CIT argues that the survival clause of the arbitration provisions of the Billing Services Agreement control.

“ ‘Novation is the substitution of a new obligation for an existing one.’ [Citation.] The substitution is by agreement and with the intent to extinguish the prior obligation. [Citations.] The substitution of a new obligation for an existing one may be either (1) a new obligation between the same parties, or (2) a new obligation arising because of new parties, either a new debtor or new creditor. [Citations.] ‘Novation is made by contract, and is subject to all the rules concerning contracts in general.’ [Citation.] A novation thus amounts to a new contract which supplants the original agreement and ‘completely extinguishes the original obligation....’ [Citations.] [¶] It must ‘ “clearly appear” that the parties intended to extinguish rather than merely modify the original agreement.’ [Citation.]” (Wells Fargo Bank v. Bank of America (1995) 32 Cal.App.4th 424, 431-432.)

The Transition Agreement expressly states that no party shall have “any further rights, obligations or liabilities” under the Billing Services Agreement, except as expressly set forth in the Transition Agreement. From this language, it clearly appears that the parties intended to extinguish the Billing Services Agreement and replace the Billing Services Agreement entirely with the obligations set forth in the Transaction Agreement.

CIT argues that the express survival provision of the arbitration section of the Billing Services Agreement means that the arbitration provisions continue notwithstanding the Transition Agreement’s provisions. This argument is inconsistent with both the provisions of both agreements and the practical construction by the parties.

“Termination” is expressly discussed in the Billing Services Agreement. (BSA, § 9.) The Billing Services Agreement provides for termination where there is an uncured default (BSA, § 9.2), upon notice 90 days prior to expiration (§ 9.3), immediately upon certain events (§ 9.4), or upon 90 days’ notice after certain other events (§ 9.5). “Upon termination of the Agreement, Client shall have the right to require Company to continue providing the Services to Client for the applicable accounts receivable in existence on the applicable date of termination for a period of up to four (4) calendar months. This Section shall survive the termination or expiration of this Agreement.” (BSA, § 9.6.) Moreover, other provisions of the Billing Services Agreement expressly survive termination in addition to the arbitration provision, including inspection and audit rights (BSA, § 8.1-8.6) and indemnification (§§ 10.1, 10.2). The comprehensive express termination provisions imply that the survival provisions relate to termination as otherwise provided by the Billing Services Agreement.

When these provisions are compared with the Transition Agreement, it is clear that the Billing Services Agreement was intended to be fully superseded. The recitals to the Transition Agreement demonstrate the existence of disputes between the parties as to their continuing obligations. (TA, recitals.) The termination paragraph of the Transition Agreement, quoted above, exhaustively eliminates rights, obligations, or liabilities of the Billing Services Agreement except as expressly stated in the Transition Agreement. The Transition Agreement releases claims by the respective parties, reserving fees for services performed under the Billing Agreement but not then yet paid. (TA, § 6.) The Transition Agreement contains an integration clause expressly superseding all prior written agreements. (TA, § 10.) Because the Transition Agreement intends to resolve disputes arising under the Billing Services Agreement, which would necessarily fall within the scope of the arbitration provision of the Billing Services Agreement, and the absence of an arbitration provision in the Transition Agreement, a reasonable inference is that the parties intended any future disputes not to be governed by the superseded Billing Services Agreement and so to be addressed, if necessary, in the usual manner by court action.

Apart from the language of the agreements, the subsequent conduct of the parties, discussed below in the context of waiver, provides additional inferences to support this construction. Taken together, the court finds on the evidence and arguments of the parties that the arbitration agreement upon which the motion to compel arbitration is based, i.e., the provision of the Billing Services Agreement, was superseded and invalidated by the subsequent express agreement of the parties, i.e., by the Transition Agreement. The court therefore determines that CIT has failed to meet its burden and instead finds that there is no valid arbitration agreement of the parties upon which arbitration may be compelled.

            (B)       Waiver

In opposition, Pueblo alternatively argues that CIT has waived its right to compel arbitration.

“Waiver … ‘is the intentional relinquishment or abandonment of a known right.’ [Citation.] To decide whether a waiver has occurred, the court focuses on the actions of the person who held the right; the court seldom considers the effects of those actions on the opposing party. That analysis applies to the waiver of a contractual right, as of any other.” (Morgan v. Sundance, Inc. (2022) 596 U.S. 411, 417 [142 S.Ct. 1708, 212 L.Ed.2d 753].) “The policy is to make ‘arbitration agreements as enforceable as other contracts, but not more so.’ [Citation.] Accordingly, a court must hold a party to its arbitration contract just as the court would to any other kind. But a court may not devise novel rules to favor arbitration over litigation. [Citation.] If an ordinary procedural rule—whether of waiver or forfeiture or what-have-you—would counsel against enforcement of an arbitration contract, then so be it.” (Id. at p. 418.)

“Accordingly, under California law, as under federal law, a court should apply the same principles that apply to other contracts to determine whether the party seeking to enforce an arbitration agreement has waived its right to do so.” (Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, 569.) “To establish waiver under generally applicable contract law, the party opposing enforcement of a contractual agreement must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it. [Citations.] Under the clear and convincing evidence standard, the proponent of a fact must show that it is ‘highly probable’ the fact is true. [Citation.] The waiving party’s knowledge of the right may be ‘actual or constructive.’ [Citation.] Its intentional relinquishment or abandonment of the right may be proved by evidence of words expressing an intent to relinquish the right or of conduct that is so inconsistent with an intent to enforce the contractual right as to lead a reasonable factfinder to conclude that the party had abandoned it.” (Id. at p. 584.)

As the procedural history identifies, Pueblo originally filed its own motion to compel arbitration of CIT’s claims in its complaint. The parties then entered into a stipulation, finalized as the Amended Stipulation, which include the recital: “Plaintiff and Defendants now agree to litigate the matter in this forum, to withdraw the Motion to Compel Arbitration, to withdraw the Motion to Seal, to set a deadline for Defendants’ responsive pleading, and to lift the stay on discovery.” (Amended Stipulation, filed Feb. 21, 2025, recital 5, p. 2.) The order on the stipulation withdrew Pueblo’s motion to compel arbitration, set a responsive pleading deadline, and permitted CIT “to file any responsive pleading of any form to any potential cross-complaint by Defendants on or before April 25, 2025.” (Amended Stipulation, order 4, pp. 2, 4.)

By the Amended Stipulation, the parties agreed to litigate “the matter in this forum.” The apparent meaning of “the matter” is this action, rather than some subset of claims that otherwise would be tried in this action; “this forum” would similarly refer to the Superior Court rather than arbitration. This construction is consistent with the inclusion in the order for plaintiff to file a responsive pleading to a potential cross-complaint. The Amended Stipulation thus contemplated Pueblo filing a cross-complaint, CIT filing a responsive pleading to that cross-complaint, i.e., a demurrer or answer but not including a motion to compel arbitration (Code Civ. Proc., § 422.10), and the prosecution of Pueblo’s cross-complaint in court with CIT’s claims rather than by separate arbitration.

Moreover, on April 25, 2025, consistent with the Amended Stipulation, CIT filed its demurrer and motion to strike as to Pueblo’s cross-complaint. CIT’s motion to compel arbitration was not filed until June 11. Even CIT’s motion points out that CIT expects the court to rule on its demurrer and motion to strike, and perhaps dispose of the cross-complaint as a matter of law, before ruling on the motion to compel arbitration: CIT moves to compel arbitration of Pueblo’s cross-complaint “on the basis that the Cross-Complaint, to the extent that it survives the Demurrer and Motion to Strike, alleges claims that arise out of and relate to the Billing Services Subcontractor Agreement, which contains a binding arbitration provision.” (Notice of Motion, at p. 2.)

In reply, CIT argues that it did not waive its right to arbitration of its cross-complaint because, at the time of the Amended Stipulation, the cross-complaint had not yet been filed. CIT thus argues that there was no “known right” because CIT did not know what claims would be brought in the cross-complaint. This argument is not credible as a matter of fact. What was waived was the right to arbitrate whatever cross-complaint may be brought that may have been otherwise arguably subject to arbitration. CIT knew that the filing of a cross-complaint was contemplated and that a broad cross-complaint could be filed. (See Code Civ. Proc., § 428.30.)

The Amended Stipulation, together with, among other things, the timing of the filing of the motion to compel arbitration relative to the filing of the demurrer and motion to strike, strongly imply that CIT had knowingly and intentionally waived its right to compel arbitration.

Waiver, and CIT’s litigation conduct, are also consistent with the determination, discussed above, that the Transition Agreement superseded the Billing Services Agreement. By entering into the Transition Agreement that did not include an arbitration provision, CIT had effectively waived its right to compel any arbitration. The Amended Stipulation confirms that waiver by agreeing to litigate this matter, regardless of the scope of the cross-complaint, in court.

The court finds, alternatively and under the applicable standards, that CIT waived any right to arbitration of the disputes in Pueblo’s cross-complaint that it may have had.

            (C)       Disposition

For the alternative reasons discussed above, the motion to compel arbitration will be denied.

(2)       Remaining Motions

The court will continue all remaining motions to September 22, 2025, to be heard with the other motions now pending in this matter. It is unclear to what extent the disposition of the motion to compel arbitration affects the parties’ positions on the other pending motions. The parties will be ordered to meet and confer and to provide their respective positions on the status of these motions.