CALYX Peak Inc et al vs HQM Group LLC et al

Case Number

25CV01380

Case Type

Hearing Date / Time

Fri, 11/07/2025 - 10:00

Nature of Proceedings

CMC; Petition to Compel Arbitration

Tentative Ruling

(1)       Plaintiffs’ petition to compel arbitration is granted in part and denied in part. The petition is granted in part as to claims by and against parties Calyx Peak, Inc., Bosim 1628 Management Company, LLC, Howard Keum, and HQM Group LLC, which arise out of or relate to the Membership Interest Purchase Agreement or the Senior Secured Promissory Note. The petition is denied in part as to claims by and against parties Bosim 1628 Management Company, LLC, Wael Nagui Abdo, and Heather Abdo, related to the Management Services Agreement.

(2)       The arbitration proceedings pertaining to the Membership Interest Purchase Agreement and the Senior Secured Promissory Note are consolidated into one arbitration proceeding pursuant to the arbitration clause in the Membership Interest Purchase Agreement.

(3)       This action is stayed, including the claims pertaining to the Management Services Agreement, pending resolution of the arbitration proceedings.

Background:

This case relates to the sale, financing, and operation of a cannabis cultivation, nursery and processing operation located at 1628 Cravens Lane, Carpinteria, California 93013 (Location). (Complaint, ¶¶ 17-18; Cross-complaint, ¶ 28.) Prior to September 2023, plaintiff Bosim 1628 Management Company, LLC (Bosim) was the lessee of at the Location and conducted operations there. (Complaint, ¶¶ 17-18; Cross-complaint, ¶ 28.) Plaintiff Calyx Peak, Inc. (Calyx) is, or was, the sole owner of plaintiff Bosim. (Complaint, ¶ 19; Cross-complaint, ¶ 14.)

On September 29, 2023, plaintiff Bosim, plaintiff Calyx, and defendant HQM, entered into a Membership Interest Purchase Agreement (MIPA). (Complaint, ¶ 19 & exhibit B [MIPA]; Cross-complaint, ¶ 3.) The MIPA provided, among other things, that plaintiff Calyx would sell its membership interest in plaintiff Bosim to defendant HQM in exchange for $4,938,000.00, plus interest, to be paid in a series of scheduled payments. (MIPA, §§ 2.1(a), 2.3.) As payments were made to Calyx under the MIPA, certain percentages of Calyx’s ownership interest would be transferred to HQM. (MIPA, § 2.4(b) & schedule A.)

HQM’s payment obligations under the MIPA were secured by a Senior Secured Promissory Note, by and between plaintiff Calyx and defendant HQM, dated September 29, 2023 (Note). (Complaint, ¶ 23 & exhibit D [Note].) The MIPA also granted defendants Wael Nagui Abdo and Heather Abdo (collectively, the Abdos) the rights to manage Bosim’s licensed cannabis cultivation operations at the Location pursuant to a Management Services Agreement (MSA), by and between Bosim and the Abdos. (MIPA, § 3.6; Complaint, ¶ 21 & exhibit C [MSA]; Cross-complaint, ¶ 3.) The MSA was executed on September 29. 2023, the same day as the MIPA and the Note.

On March 4, 2025, plaintiffs filed their complaint in this action asserting five causes of action: (1) declaratory relief; (2) breach of contract; (3) conversion; (4) trespass; and (5) trespass to chattel. (Complaint, ¶¶ 52-85.) Plaintiffs Calyx and Bosim allege that defendants HQM and the Abdos did not pay the amounts owed and were in default, causing immediate and irreparable harm to plaintiffs. (Complaint, ¶¶ 29-32, 33-51.) Based on this default, plaintiffs have asserted the termination of the MIPA and MSA. (Complaint, ¶¶ 33-34.) Plaintiffs attempted, but failed, to physically retake possession of the Location and the operations. (Complaint, ¶¶ 35-36.) Plaintiffs have also sought to assert their rights, as against defendants, to renew licenses and permits necessary for the operation of the business. (Complaint, ¶¶ 41-47.) Plaintiffs sought damages, injunctive relief, declaratory relief, and other prayers for relief. (Id. at p. 18.)

Defendants filed a cross-complaint on March 14, 2025 and a first amended cross-complaint (FACC) on June 9, 2025, against plaintiffs and an individual allegedly affiliated with plaintiff Calyx named Howard Keum. The FACC asserted causes of action: (1) breach of contract; (2) fraudulent misrepresentation; (3) negligent misrepresentation; (4) intentional interference with contractual relations; (5) breach of the implied covenant of good faith and fair dealing; (6) unjust enrichment; (7) declaratory relief; and (8) injunctive relief. (FACC, ¶¶ 58-107.) Defendants allege they discovered multiple compliance deficiencies and financial liabilities that either had not been properly disclosed by plaintiffs or had been affirmatively misrepresented by plaintiffs. (FACC, ¶ 37.)  The alleged misrepresentations included the Location’s condition and its ability to legally operate under licenses issued by the California Department of Cannabis Control and the County of Santa Barbara. (FACC, ¶ 38.) Defendants also allege that a previously undisclosed internal email at Calyx revealed that necessary upgrades at the Location would cost “between $1 million and $1.2 million.” (FACC, ¶ 39.) According to defendants, plaintiffs knew about these needed costs, but failed to disclose them before the sale. (FACC, ¶ 40.)

Defendants further allege that plaintiffs either failed to disclose or affirmatively misrepresented other issues with the Location prior to the sale, including, (1) that plaintiffs “did not use METRC tags in one of the greenhouses” in violation of California law, (2) there were electrical issues which rendered portions of the Location non-compliant with applicable building codes, (3) the processing building at the Location lacked the necessary sprinkler system and fire exits, (4) a processing license was surrendered due to the non-compliant processing facility at the Location, and (5) there was a preexisting mechanics lien on the Location. (FACC, ¶¶ 42-53.) Defendants allege these misrepresentations and non-disclosures by plaintiffs constituted breaches of the agreements at issue and fraudulently induced them to enter into these agreements. (FACC, ¶¶ 58-107.) Defendants allegedly “invested nearly $1,100,000 in installing over 150 new exhaust fans and blackout curtains, upgrading infrastructure to meet Santa Barbara County’s fire and safety standards,” and incurred other unexpected costs. (FACC, ¶ 51.)  

After defendants allegedly discovered some of these issues and attempted to resolve them in good faith, defendants allege that plaintiffs attempted to forcefully take physical control of the Location. (FACC, ¶¶ 54-57.) According to defendants, plaintiffs engaged in “a coordinated and aggressive takeover attempt by a group of 10 to 15 individuals, including Bosim representatives, business competitors, and unidentified persons.” (FACC, ¶ 55.) “The group arrived in multiple trucks, brought a dog, and a locksmith equipped with a lock-cutting tool.” (FACC, ¶ 55.) Defendants allege, “[a]fter an hours-long standoff, the men were denied the attempted hostile takeover.” (FACC, ¶ 56.) The following day, defendants allege that “Mr. Keum … engaged in hostile behavior, shouting at farm employees,” and “threatening to use his car to block employees from leaving.” (FACC, ¶ 56.) According to defendants, although “[t]he hostile takeover attempt ultimately failed,” plaintiffs allegedly continued “to interfere with the Santa Barbara licensing process.” (FACC, ¶ 57.) Defendants sought damages, recission of the MIPA, disgorgement of benefits, declaratory relief, injunctive relief, and other prayers for relief. (FACC, p. 15.)

The parties previously litigated various issues pertaining to injunctive relief and attempted (unsuccessfully) to resolve this matter at mediation. At issue in this petition is whether the court should now compel the parties to arbitrate this dispute, in whole or in part, pursuant to the three agreements executed on September 29, 2023 (the MIPA, the Note and the MSA). Plaintiffs, the moving parties, seek to compel arbitration while defendants oppose arbitration. The court notes that it has considered the Request for Leave to File a Late Brief filed by defendants and determines, in its discretion, to consider the opposition to this petition. (Cal. Rules of Court, rule 3.1300(d).)

The MIPA’s arbitration clause provides as follows:

10.5 Binding Arbitration. Any dispute, controversy, or claim arising out of or relating to this Agreement, including any determination of the scope or applicability of this Section 10.5, shall be finally settled by arbitration and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The Parties shall share the costs of the arbitration equally; provided, however, that the arbitrator shall have the power to grant the prevailing party’s costs associated with the arbitration (including, without limitation, the arbitrator’s costs and expenses). The arbitration will be conducted in the English language, in Santa Barbara County, California by a single arbitrator jointly selected by the parties. If the Parties are unable to agree upon an arbitrator within thirty (30) days of delivery of the notice of arbitration, the Parties agree to use the American Arbitration Association as an appointing authority. The arbitrator shall have the power to grant legal and equitable remedies, including awarding the prevailing party its attorneys’ fees and other costs of the arbitration (including, without limitation, the arbitrator’s costs and expenses), but they shall not grant punitive damages. To the extent federal and state law conflict as regards to this contract, state law shall apply. Except as may be required by Applicable Law, neither a Party nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all of the parties. The arbitrator shall issue an award in this dispute within one year of their appointment. The award shall be final and binding upon all Parties as from the date rendered and shall be the sole and exclusive remedy between the Parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal. THE PARTIES ACKNOWLEDGE THAT THE PARTIES ARE IRREVOCABLY WAIVING THE RIGHT TO A TRIAL IN COURT, INCLUDING A TRIAL BY JURY AND THAT ALL RIGHTS AND REMEDIES WILL BE DETERMINED BY AN ARBITRATOR AND NOT BY A JUDGE OR JURY. Notwithstanding the foregoing, nothing herein shall preclude either Party from seeking injunctive relief from a state court of appropriate jurisdiction. (MIPA, § 10.5 [underscore removed].)

The Note’s arbitration clause provides as follows:

11.5 Binding Arbitration. Any dispute, controversy, or claim arising out of or relating to this Note, including any determination of the scope or applicability of this Section 11.6 [sic], shall be finally settled by arbitration and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The Parties shall share the costs of the arbitration equally; provided, however, that the arbitrator shall have the power to grant the prevailing party’s costs associated with the arbitration (including, without limitation, the arbitrator’s costs and expenses). The arbitration will be conducted in the English language, in the city of Costa Mesa, California by a single arbitrator jointly selected by the Parties. If the Parties are unable to agree upon an arbitrator within thirty (30) days of delivery of the notice of arbitration, the Parties agree to use the American Arbitration Association as an appointing authority. The arbitrator shall have the power to grant legal and equitable remedies, including awarding the prevailing party its attorneys’ fees and other costs of the arbitration (including, without limitation, the arbitrator’s costs and expenses), but they shall not grant punitive damages. To the extent federal and state law conflict as regards to this contract, state law shall apply. Except as may be required by Applicable Law, neither a Party nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all of the parties. The arbitrator shall issue an award in this dispute within one year of their appointment. The award shall be final and binding upon all Parties as from the date rendered and shall be the sole and exclusive remedy between the Parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal. THE PARTIES ACKNOWLEDGE THAT THE PARTIES ARE IRREVOCABLY WAIVING THE RIGHT TO A TRIAL IN COURT, INCLUDING A TRIAL BY JURY AND THAT ALL RIGHTS AND REMEDIES WILL BE DETERMINED BY AN ARBITRATOR AND NOT BY A JUDGE OR JURY. Notwithstanding the foregoing, nothing herein shall preclude either Party from seeking injunctive relief from a state court of appropriate jurisdiction. (Note, § 11.5 [underscore removed].)

As evidenced by the text above, the MIPA and the Note contain similar arbitration clauses. Both contracts also contain choice-of-law provisions choosing California law. (MIPA, § 10.3; Note, § 11.3.) The main difference between the arbitration clause in the MIPA and the Note is that the MIPA states that the arbitration shall be conducted in Santa Barbara, California, while the Note states that the arbitration shall be conducted in Costa Mesa. (MIPA, § 10.5; Note, § 11.5.) Defendant Heather Abdo signed the MIPA and the Note in her capacity as “manager” on behalf of defendant HQM. (MIPA, pp. 27-28; Note, p. 13.) Plaintiff Bosim’s Chief Executive Officer executed the MIPA on behalf of Bosim. (MIPA, pp. 27-28.) Plaintiff Calyx’s Chief Executive Officer signed the MIPA and the Note on behalf of Calyx. (MIPA, pp. 27-28; Note, p. 13.)

The MSA does not contain an arbitration clause. The MSA’s forum selection clause provides as follows:

10.1. This Agreement shall be governed by and construed in accordance with the laws of the state of California applicable to contracts to be performed entirely within such state. The state courts of California shall have exclusive jurisdiction, including in personam jurisdiction, and shall be the exclusive venue for any and all controversies and claims arising out of or relating to this Agreement. (MSA, § 10.1.)

Unlike the MIPA and the Note, the MSA provides that California state courts have exclusive jurisdiction to adjudicate disputes arising out of the MSA. The Abdos defendants signed the MSA in their individual capacity as “contractors.” (MSA, p. 10.) Plaintiff Bosim’s Chief Executive Officer executed the MSA on behalf of Bosim. (Ibid.)

Analysis:

(1)       The Parties’ Contentions.

There are three agreements at issue in this petition which were executed on the same day, September 29. 2023 (the MIPA, the Note and the MSA). These agreements relate to the same or similar transactions but were not executed by the same parties. The MIPA (by and between Calyx, Bosim and HQM) relates to the sale and purchase of the operating entity at the Location. The Note (by and between Calyx and HQM) relates to the financing and security of the obligations under the MIPA. The MSA (by and between Bosim and the Abdos) relates to the operations at the Location that were contemplated to take place after the MIPA was executed. Two of the agreements (the MIPA and the Note) contain an arbitration clause. One of the agreements (the MSA) does not contain and arbitration clause and chooses California state courts as the exclusive forum to adjudicate disputes.

Plaintiffs argue that the arbitration clauses in the MIPA and the Note are very broad and reach any disputes arising out of or relating to these agreements. Plaintiffs rely on established law favoring arbitration if the parties have contracted to resolve their disputes via arbitration. Plaintiffs argue that although the MSA does not contain an arbitration clause, the MSA is “inextricably intertwined” with the claims related to the MIPA and the Note. Plaintiffs contend that any claims under the MSA would necessarily arise out of or relate to the MIPA and the Note. Plaintiffs also argue that the three agreements should be construed “together as one contract” because they relate to the same subject matter and were executed together as part of one transaction. Plaintiff cites Holguin v. Dish Network LLC (2014) 229 Cal.App.4th 1310, 1320, for the proposition that this rule applies even if the contracts are not executed on the same date or by the same parties, do not expressly refer to each other, or have slightly different (though overlapping) areas of concern. Plaintiff urges the court to grant the petition to compel arbitration.

Defendants argue in opposition that the three agreements at issue relate to different subject matters and are between different parties. According to Defendants, the MIPA and Note govern ownership transfer and financing, while the MSA governs interim facility management. Defendants argue that because the agreements are between different sets of parties the agrements cannot be construed as a single agreement under Civil Code section 1642. Defendants argue that each agreement was executed by a distinct combination of signatories, reflecting separate transactions and distinct legal obligations. Defendants contend that agreements may not be integrated into a single contract when doing so would erase or nullify the parties’ deliberate choice of different dispute resolution mechanisms. Defendants argue that arbitration may not be compelled under Code of Civil Procedure section 1281.2 when distinct agreements govern different phases of a transaction and only one contains an arbitration clause. Defendants urge the court to deny the petition to compel arbitration because there are conflicting contractual obligations pertaining to arbitration between different sets of parties to three separate agreements and the court has discretion to do so under Code of Civil Procedure section 1281.2, subdivision (c).

The parties do not raise the defenses of waiver, fraud in the execution, or revocation. The parties do not argue that the agreements at issue are not authentic. There is no apparent conflict between the parties as to the written terms of the agreements. The primary disagreements between the parties are the legal effect of their agreements as it pertains to arbitration.

(2)       Standard of Review.

The standards governing a petition to compel arbitration are well established. “[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because 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. If the party opposing the petition raises a defense to enforcement—either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation (see § 1281.2, subds. (a), (b))—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) “In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)

(3)       The MIPA and the Note.

The court has reviewed the petition, opposition and reply, as well as the complaint, cross-complaint and FACC, and the contracts attached thereto. The court finds that plaintiffs Bosim and Calyx, and defendant HQM, agreed to arbitrate controversies and claims arising out of or relating to the MIPA. (MIPA, § 10.5.) Moreover, the court finds that plaintiff Calyx and defendant HQM agreed to arbitrate controversies and claims arising out of or related to the Note. (Note, § 11.5.) The arbitration clause in the MIPA covers “[a]ny dispute, controversy, or claim arising out of or relating to this Agreement, including any determination of the scope or applicability of this Section 10.5… .” (MIPA, § 10.5.) The arbitration clause in the Note covers “[a]ny dispute, controversy, or claim arising out of or relating to this Note, including any determination of the scope or applicability of this Section 11.6 [sic]… .” (Note, § 11.5.) The terms of the arbitration clauses in these two agreements are clear and unambiguous as agreed by the contracting parties.

Accordingly, the court determines that claims asserted in the complaint, the cross-complaint and the FACC arising out of or relating to the MIPA and the Note are subject to arbitration as agreed by the contracting parties. The plaintiffs, the moving parties in this petition, carried their burden to demonstrate that an arbitration agreement exists pertaining to controversies and claims arising out of or relating to the MIPA and the Note. (Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 652 [“Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.”].)

(4)       The MSA.

Unlike the MIPA and the Note, the MSA provides that California courts have exclusive jurisdiction over disputes: “[t]he state courts of California … shall be the exclusive venue for any and all controversies and claims arising out of or relating to this Agreement.” (MSA, § 10.1.) “California favors contractual forum selection clauses so long as they are entered into freely and voluntarily, and their enforcement would not be unreasonable.” (Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 146.) The MSA does not contain an arbitration clause.

The Abdos defendants signed the MSA in their individual capacity as “contractors.” (MSA, p. 10.) The claims asserted by and against the Abdos for breach of the MSA must be asserted in court. To conclude otherwise would defeat the clear contractual intent of the parties to the MSA. The court declines to construe the MIPA, the Note and the MSA’s dispute resolution provisions together pursuant to Civil Code section 1642, as argued by plaintiffs, because the three contracts are not “between the same parties” and contain conflicting dispute resolution provisions which could not be harmonized to effectuate the parties’ contractual intent. Moreover, even if the court construed the MIPA, Note, and MSA’s dispute resolution provisions together pursuant to Civil Code section 1642, as argued by plaintiffs, the court nonetheless must effectuate the parties’ mutual intent. “A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” (Civ. Code, § 1636.) Moreover, “[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.” (Civ. Code, § 1641.) Regardless of whether the dispute resolution provisions in the MIPA, Note and MSA are read together or separately, the court cannot effectively rewrite or nullify the dispute resolution provisions in the MSA, which provide for disputes related to the MSA to be resolved before the California state courts.

“The strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement, and a party cannot be compelled to arbitrate a dispute that he has not agreed to resolve by arbitration.” (Benasra v. Marciano (2001) 92 Cal.App.4th 987, 990 [party who signed arbitration agreement in his capacity as corporate officer did not agree to arbitrate matters in his individual capacity].) “There are significant consequences and distinctions that flow from the particular legal capacity in which a party sues.” (Birl v. Heritage Care, LLC (2009) 172 Cal.App.4th 1313, 1322 [plaintiffs who did not agree to arbitration cannot be compelled to arbitrate claims asserted in their individual capacity even if some of the claims asserted in another capacity may be subject to arbitration].) The MSA was signed by the Abdos only in their individual capacities. (MSA, p. 10.) The Abdos did not sign either the MIPA or the Note in their individual capacities and are not bound by those arbitration provisions in their individual capacities. (MIPA, pp. 27-28; Note, p. 13.)

The plaintiffs, the moving parties in this petition, failed to carry their burden to demonstrate that an arbitration agreement exists pertaining to controversies and claims arising out of or relating to the MSA. (Engalla v. Permanente Medical Group, Inc., supra., 15 Cal.4th at p. 972 [“The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence…”].)

(5)       The Court’s Discretion.

“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] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact… [¶].” (Code Civ. Proc., § 1281.2, subd. (c).)

“If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c), the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.” (Code Civ. Proc., § 1281.2, subd. (d).)

Here, plaintiff Bosim is a party to the claims which are subject to arbitration pursuant to the MIPA and the arbitration clause therein. (Complaint, ¶¶ 1-85; FACC, ¶¶ 1-107; MIPA, § 10.5.) Bosim is also a party to the claims by and against the Abdos defendants based on the MSA, which are subject to exclusive resolution before the court. (Complaint, ¶¶ 1-85; FACC, ¶¶ 1-107; MSA, § 10.1.) Thus, Bosim, a party to the anticipated arbitration regarding the MIPA, is also a party to a court proceeding with third parties (the Abdos in their individual capacity) pertaining to the MSA. (Complaint, ¶¶ 1-85; FACC, ¶¶ 1-107; MIPA, § 10.5; MSA, § 10.1.) Each of these three agreements was executed on the same day as part of related transactions. The court finds under these circumstances Code of Civil Procedure section 1281.2, subdivision (c), applies and that the disputes under the MIPA, the Note, and the MSA arise “out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” (Code Civ. Proc., § 1281.2, subd. (c).)

Having considered the parties’ respective positions on this issue, the court exercises its discretion to “order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding.” (Code Civ. Proc., § 1281.2, subd. (d)(3).) The parties’ disputes pertaining to the MIPA and the Note appear to be the gravamen of the dispute before the court and the contracting parties agreed to arbitrate these claims. The majority of the causes of action set forth in the Complaint and FACC assert breaches of the obligations in these two agreements, in whole or in part. The MIPA and the Note are referenced repeatedly in the complaint and FACC, and form the gravamen of many of the causes of action. (Complaint, ¶¶ 19-42, 50-104, Ex. B); FACC ¶¶ 3-105.) Most of the issues in the Complaint and FACC relate to or arise out of the obligations under the MIPA and the Note, the alleged breaches of these agreements, the potential defenses to these obligations and the available remedies to the prevailing parties. These disputed issues arise out of or relate to the MIPA and the Note.

Staying the claims pertaining to the MSA, pending the arbitration proceedings pertaining to the MIPA and the Note, will promote the most efficient resolution of this matter while avoiding potential conflicting rulings. For example, if the arbitration resolves whether and under what circumstances payments are due under the MIPA and the Note, whether breaches of these two agreements occurred, whether the parties asserted valid defenses, and what remedies are available to the prevailing parties, this will likely resolve many of the issues pertaining to the MSA. Moreover, there would be one forum which is governing the parties’ discovery into these issues and making interim rulings on motions pertaining to the parties’ disputes. This would also reduce the potential for conflicting rulings on common issues of law and fact.

(6)       Conclusion.

Because the parties agreed to arbitrate the issues related to and arising out of the MIPA and the Note, the petition is granted in part as to the claims between the contracting parties which arise out of or relate to the MIPA or the Note. Because the parties to the MSA clearly did not agree to arbitration, and instead agreed for the California state courts to resolve disputes, the petition is denied in part as to claims between the contracting parties related to the MSA. Pursuant to the request of the moving parties on page 6 of their petition and the court’s discretion, the arbitration proceedings pertaining to the MIPA and the Note are consolidated into one arbitration proceeding under the arbitration clause in the MIPA. (Code Civ. Proc., § 1281.3.)  The court stays this entire action, including the claims pertaining to the MSA, pending the arbitration proceedings. (Code Civ. Proc., §§ 1281.2, subd. (c)-(d), 1281.4.)