United States District Court, C.D. California, Southern Division
GRANTING PETITION TO CONFIRM ARBITRAL AWARD, ALTERNATIVELY, TO AMEND THE AWARD
AND COMPEL ARBITRATION  GRANTING PETITION TO CONFIRM SECOND ARBITRAL AWARD
 DENYING APPLICATION FOR ENTRY OF DEFAULT AGAINST RESPONDENT CHELSEY STEAD MARTIN 
DAVID O. CARTER, District Judge.
Before the Court are Petitioner Christopher Hellmich's Petition to Confirm Arbitral Award ("First Petition" or "First Pet.") (Dkt. 21), Petition to Confirm Second Arbitral Award ("Second Petition" or "Second Pet.") (Dkt. 28), and Application for Entry of Default Against Respondent Chelsey Stead Martin (Dkt. 40). After reviewing the papers and hearing oral arguments, the Court GRANTS the Petitions and DENIES the Application.
Petitioner Christopher Hellmich ("Petitioner") seeks confirmation of an arbitral award dated September 28, 2014 against Respondents Mastiff Contracting, LLC ("Mastiff"), George Holley, Jr. ("Holley"), and James W. Martin ("Martin"). In the alternative, Petitioner asks the Court to amend the award and compel Mastiff, Holley, Martin, and Respondent Chelsey Anne Stead Martin ("Stead Martin") to arbitrate. In addition, Petitioner seeks confirmation of an arbitral award dated October 23, 2014 against Mastiff, Holley, and Martin.
Mastiff is a citizen of New York. Martin is the majority shareholder of Mastiff and is a citizen of New York. First Pet. at 3-4. Holley is the second largest shareholder of Mastiff and is a citizen of Texas. Id. at 4. Stead Martin, also a citizen of New York, is James Martin's wife and was allegedly held out by Mastiff as its Chief Financial Officer. Id. Petitioner was a shareholder of Mastiff at all relevant times to his claims and is a California citizen. Id. at 3.
Martin and Holley formed Mastiff in 2009 after creating a new enclosed deep well power generator and cooling systems technology that could generate electricity in a renewable and eco-friendly manner. Arbitration Demand ¶ 2 ("Arb. Demand") (Dkt. 21-3). Mastiff, through Martin and Holley, represented to investors, including Petitioner, that Mastiff solely owned all of the intellectual property associated with its technology and that it had filed provisional patents for it. See, e.g., id. ¶¶ 32, 56.
Relying on Mastiff's representations, Petitioner made a $50, 000 loan to Mastiff on September 27, 2013. First Pet., Ex. 2 ("Loan Agreement") (Dkt. 21-2). The Loan Agreement contained an arbitration provision which stated:
Any and all disputes arising from or related to this Agreement or the relationship of the parties that cannot be resolved by negotiation shall be resolved by arbitration conducted in Orange County, California in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"), which rules are incorporated by reference into this clause. There shall be a single arbitrator chosen in accordance with the rules of the AAA. The arbitration shall be conducted in a single hearing, and the arbitrator shall render his or her decision within thirty (30) days of the conclusion of the hearing. The expenses of the arbitration (including reasonable attorney's fees) shall be borne as specified in the decision of the arbitrator who shall allocate those costs and fees based on the relative merit of the two positions, as determined by the arbitrator. The arbitrator shall not have power to award damages in connection with any dispute in excess of actual compensatory damages and shall not multiply actual damages or award consequential or punitive damages. Equitable remedies shall be available in any such arbitration. The decision of the arbitrator shall be final and non-appealable. Judgment upon any decision rendered by the arbitrator may be entered by any court having jurisdiction.
Loan Agreement at 2. The Loan Agreement is between "the undersigned, Mastiff Contracting, LLC" and "Christopher Hellmich." Loan Agreement at 1. At the bottom of the last page of the contract, Martin signed "For Mastiff." The signature block reads, "James W. Martin CEO Mastiff Contracting, LLC." Id. at 2. Holley's and Stead Martin's names does not appear on the document.
Subsequently, again in reliance on Mastiff's misrepresentations, Petitioner made three more loans to Mastiff. Arb. Demand ¶¶ 36-41, 52-53. Those loans are now past due. Id. ¶ 5.
In its early days, Mastiff allegedly fell under the influence of a purported banker David Maxwell, who "claimed access to secret sources of money that could grow a few million into billions within 12-18 months." Id. ¶ 3. Mastiff began pitching business ventures involving schools, security fores, printing presses, deep sea diving, saw-mills, and construction, none of which had to do with its electricity generation technology. Because Mastiff's focus was so scattered and because Mastiff promised fantastical returns, no one was interested in investing. Id. ¶¶ 3, 27. In 2012-2014, Raymond Salem, Dr. Rick Cardin, and Petitioner became involved with Mastiff and worked to put Mastiff on the right track by developing a more realistic business plan and lining up likely investors. Id. ¶¶ 26-31, 35, 41, 62-71. However, Mastiff refused to take any investments that limited Mastiff's ability to use the funds to invest with Maxwell. Id. ¶¶ 72-77.
B. Arbitration Proceedings
On July 9, 2014, Petitioner filed a demand for arbitration with AAA against Mastiff, Holley, and Martin. His demand alleges claims of (1) breach of contract; (2) declaratory relief; (3) violation of California's Unfair Competition Law (UCL); (4) fraud; and (5) accounting. All of the claims are solely against Mastiff except the fraud claim, which is alleged against all three. See generally Arb. Demand. The breach of contract claim is brought based in part on Mastiff's failure to repay its loans from Petitioner. Id. ¶¶ 82-85. The fraud claim is brought based on the allegations that Petitioner was induced to loan money to Mastiff by Mastiff's, Holley's, and Martin's misrepresentations that Mastiff solely owned all of the intellectual property and their material omission of the fact that they never intended to agree to any investment that was not tied to a Maxwell transaction. Id. ¶¶ 108-113.
On August 4, 2014, the Arbitrator held a telephonic hearing regarding Petitioner's AAA Rule 38 Motion for Emergency Measures of Protection. Id. Petitioner attended the hearing with his counsel. Respondents Martin and Holley attended and spoke at the hearing. See Arbitration TRO Hr'g Tr., Aug. 4, 2014 ("TRO Hr'g Tr.") (Dkt. 1-2). Respondent Mastiff could not participate in the hearing because Mastiff, a limited liability corporation, was not represented by counsel at the hearing. See id. at 8:7-11:3 (noting that, under AAA rules and California law, a limited liability corporation must be represented by counsel).
As a result of the hearing, the Arbitrator issued the first arbitral award at issue in this case, First Pet., Ex. 1 ("First Arbitral Award"), a temporary restraining order pursuant to AAA Rule 38. The order, dated September 28, 2014, states in relevant part:
4. The Arbitrator issued a temporary restraining order that shall remain in full force and effect until the arbitrator determines rules on Claimant's motion for preliminary injunction. The arbitrator ordered that:
a. RESPONDENT MASTIFF CONTRACTING, LLC, its owners, officers, directors, employees, agents, and their assigns, shall immediately cease, and/or is restrained from commencing or participating in, any or all commercial, monetary, banking, or securities transactions of every nature or kind that directly or indirectly involve David Maxwell, as he is identified in the moving papers;
b. RESPONDENT JAMES W. MARTIN, is restrained, enjoined, and barred from directly or indirectly exercising any managerial control of any type of Mastiff Contracting, LLC;
c. RESPONDENT GEORGE HOLLEY, JR., is restrained, enjoined, and barred from directly or indirectly exercising any managerial control of ...