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Cetera Advisor Networks LLC v. Protective Property & Casualty Insurance Co.

United States District Court, E.D. California

July 15, 2019

CETERA ADVISOR NETWORKS LLC, Plaintiff-in-Interpleader,
v.
PROTECTIVE PROPERTY & CASUALTY INSURANCE COMPANY, CAL CAPITAL LIMITED, and GERALD B. GLAZER, Defendants-in-Interpleader. AND RELATED COUNTERCLAIMS AND CROSSCLAIMS

          ORDER GRANTING CETERA'S MOTION TO COMPEL ARBITRATION

          JOHN A. MENDEZ, UNITED STATES DISTRICT JUDGE

         Cetera Advisor Networks LLC (“Cetera”), the custodian of a brokerage account with assets valued at over $450, 000 (the “Account”), filed this interpleader action to settle competing demands and claims of ownership over the Account by Protective Property & Casualty Insurance Company (“Protective”) and Cal Capital Limited (“Cal Capital”). Compl., ECF No. 1.

         Protective then filed counterclaims against Cetera for refusing Protective's recent requests for funds from the Account. Protective Answer to Cetera, ECF No. 5. Cetera moves to compel arbitration of these counterclaims. Cetera Mot., ECF No. 7.

         For the reasons set forth below, this Court GRANTS Cetera's motion.[1]

         I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

         Gerald B. Glazer (“Glazer”) was the owner of Sacramento Infiniti, an automobile dealership located in Sacramento, California. Protective Answer to Cetera, Counterclaim ¶ 3. Sacramento Infiniti offered customers the option of purchasing a vehicle service contract (“VSC”), which would cover the cost of certain vehicle repairs. Id. Glazer formed Cal Capital to manage the profits received from the sale of the VSCs. Id. ¶ 4.

         In 2008, Cal Capital entered into a Trust Agreement with Chesterfield International Reinsurance Limited (“Chesterfield”) whereby Chesterfield would process, administer, and adjudicate claims under VSCs. Counterclaim ¶ 5, n1. A trust account would be formed for which Chesterfield would serve as trustee, for the benefit of Cal Capital, and from which Chesterfield would be reimbursed for claims paid to the customers. Id. Chesterfield subsequently entered into an account agreement with Financial Network Investment Corporation (“Financial Network”), now known as Cetera, to open the trust account at issue. Id. ¶ 6.

         In 2010, an affiliate of Chesterfield, Lyndon Property Insurance Company (“Lyndon”), now known as Protective, replaced Chesterfield as trustee of the Account. Compl. ¶ 12. In 2013, Lyndon and Cetera executed an updated Account Agreement for the Account, still held for the benefit of Cal Capital. Id. ¶ 14. Currently, Cetera holds the Account, with assets valued in excess of $450, 000, in the name of Lyndon (now Protective) as trustee for the benefit of Cal Capital. Id. ¶¶ 1, 20.

         Under the terms of the 2013 Account Agreement, Cetera is obligated to pay amounts from the Account as requested by duly authorized entities and in the past Cetera has permitted Lyndon to withdraw from the Account. Compl. ¶ 21. However, in 2018, Lyndon and/or Protective made certain requests for withdrawals from the Account to which Glazer and/or Cal Capital objected and, given that conflict between the parties, Cetera did not make the withdrawals requested by Lyndon and/or Protective. Id. ¶ 15.

         On February 15, 2019, pursuant to 28 U.S.C. § 1335, Cetera filed the instant Complaint-in-Interpleader naming Protective, Cal Capital, and Glazer as Defendants-in-Interpleader; depositing the Account with this Court; and requesting a determination of Protective and Cal Capital's rights to the Account. See Compl.

         On March 13, 2019, Protective filed an Answer to Cetera's Complaint-in-Interpleader and also brought counterclaims against Cetera and crossclaims against Cal Capital and Glazer. See Protective Answer to Cetera.

         On April 19, 2019, Cal Capital filed an Answer to Cetera's complaint (ECF No. 16) and an Answer to Protective's crossclaims (ECF No. 17). In its Answer to Protective, Cal Capital also filed crossclaims against Protective and Portfolio, an alleged business partner and alter-ego of Protective. Protective then filed an Answer to Cal Capital's crossclaims. ECF No. 24. Portfolio (formally Portfolio General Management Group, Inc.) also filed an Answer to Cal Capital's crossclaims. ECF No. 28.

         On April 19, 2019, Glazer filed an Answer to Cetera's complaint in which he disclaimed any personal claim to the Account and denied any personal objection to specific withdrawal requests. ECF No. 14. Glazer also filed an Answer to Protective's crossclaims. ECF No. 25.

         Cetera moves to compel arbitration of Protective counterclaims against Cetera: (1) Breach of Contract, (2) Breach of the Covenant of Good Faith and Fair Dealing, (3) Breach of Fiduciary Duty, and (4) Violation of California Business & Professions Code § 17200. Cetera Mot. Protective opposes Cetera's motion in full. Protective Opp'n, ECF No. 31. Cal Capital opposes Cetera's motion to the extent it seeks to compel arbitration of Protective's breach of fiduciary duty claim against Cetera or any of Cal Capital's crossclaims against Protective. Cal Capital Opp'n, ECF No. 32. ...


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