United States District Court, E.D. California
ORDER GRANTING CETERA'S MOTION TO COMPEL
A. MENDEZ, UNITED STATES DISTRICT JUDGE
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.
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
reasons set forth below, this Court GRANTS Cetera's
FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
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.
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.
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.
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.
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.
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.
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.
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.
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. ...