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This case was last updated from Los Angeles County Superior Courts on 08/14/2019 at 09:14:33 (UTC).

MH PILLARS LTD VS PAYMENTWORLD LIMITED ET AL

Case Summary

On 01/15/2016 MH PILLARS LTD filed a Contract - Other Contract lawsuit against PAYMENTWORLD LIMITED. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judge overseeing this case is MICHAEL JOHNSON. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****7148

  • Filing Date:

    01/15/2016

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Other Contract

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judge

MICHAEL JOHNSON

 

Party Details

Plaintiff and Petitioner

MH PILLARS LTD.

Defendants and Respondents

PAYMENTWORLD LLC

BALANKO ROMAN

PAYMENTWORLD LIMITED

DOES 1 TO 100

Other

BELL KENNETH D.

Attorney/Law Firm Details

Plaintiff and Petitioner Attorneys

PIVTORAK LAW FIRM

FIRM PIVTORAK LAW

Defendant and Respondent Attorneys

ALPERT LAW GROUP APC

GLUCK BENJAMIN N.

GABRIEL JONATHAN G. ESQ.

 

Court Documents

PROOF OF SERVICE

2/28/2018: PROOF OF SERVICE

NOTICE RE: CONTINUANCE OF HEARING

6/21/2018: NOTICE RE: CONTINUANCE OF HEARING

Proof of Service

7/3/2018: Proof of Service

JOINT STATUS CONFERENCE REPORT IN ADVANCE OF AUCUST 1,2018 STATUS CONFERENCE

7/26/2018: JOINT STATUS CONFERENCE REPORT IN ADVANCE OF AUCUST 1,2018 STATUS CONFERENCE

ORDER RE: PETITION TO CONFIRM ARBITRATION AWARD; PETITION TO VACATE OR CORRECT ARBITRATION AWARD

8/1/2018: ORDER RE: PETITION TO CONFIRM ARBITRATION AWARD; PETITION TO VACATE OR CORRECT ARBITRATION AWARD

Minute Order

2/7/2019: Minute Order

EX PARTE APPLICATION FOR ORDER GRANTING LEAVE TO INTERVENE BY KENNETH D. BELL, COURT-APPOINTED RECEIVER OF REX VENTURE GROUP, LLC D/B/A ZEEKREWARDS.COM AND/OR FOR ORDER SHORTENING TIME AND/OR CONTINUI

6/23/2016: EX PARTE APPLICATION FOR ORDER GRANTING LEAVE TO INTERVENE BY KENNETH D. BELL, COURT-APPOINTED RECEIVER OF REX VENTURE GROUP, LLC D/B/A ZEEKREWARDS.COM AND/OR FOR ORDER SHORTENING TIME AND/OR CONTINUI

NOTICE OF RULING ON EX PARTE APPLICATION FOR ORDER GRANTING LEAVE TO INTERVENE BY KENNETH D. BELL, COURT-APPOINTED RECEIVER OF REX VENTURE GROUP, LLC D/B/A ZEEKREWARDS.COM AND/OR FOR ORDER SHORTENING

6/24/2016: NOTICE OF RULING ON EX PARTE APPLICATION FOR ORDER GRANTING LEAVE TO INTERVENE BY KENNETH D. BELL, COURT-APPOINTED RECEIVER OF REX VENTURE GROUP, LLC D/B/A ZEEKREWARDS.COM AND/OR FOR ORDER SHORTENING

DEFENDANT ROMAN BALANKO'S NOTICE OF RE-SCHEDULING RE: MOTION AND MOTION TO COMPEL ARBITRATION

7/5/2016: DEFENDANT ROMAN BALANKO'S NOTICE OF RE-SCHEDULING RE: MOTION AND MOTION TO COMPEL ARBITRATION

DEFENDANT PAYMENTWORLD, LLC'S, OPPOSITION TO KENNETH D. BELL'S COURT APPOINTED RECEIVER OF REX VENTURE GROUP, LLC'S MOTION FOR ORDER GRANTING LEAVE TO FILE COMPLAINT IN INTERVENTION

7/6/2016: DEFENDANT PAYMENTWORLD, LLC'S, OPPOSITION TO KENNETH D. BELL'S COURT APPOINTED RECEIVER OF REX VENTURE GROUP, LLC'S MOTION FOR ORDER GRANTING LEAVE TO FILE COMPLAINT IN INTERVENTION

KENNETH D. BELL, COURT-APPOINTED RECEIVER OF REX VENTURE GROUP, LLC D/B/A ZEEKREWARDS.COM'S REPLY IN SUPPORT OF MOTION FOR ORDER GRANTING LEAVE TO FILE COMPLAINT IN INTERVENTION

7/12/2016: KENNETH D. BELL, COURT-APPOINTED RECEIVER OF REX VENTURE GROUP, LLC D/B/A ZEEKREWARDS.COM'S REPLY IN SUPPORT OF MOTION FOR ORDER GRANTING LEAVE TO FILE COMPLAINT IN INTERVENTION

Minute Order

7/19/2016: Minute Order

DECLARATION OF FIROZ PATEL IN SUPPORT OF PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION TO COMPEL ARBITRATIO1

8/10/2016: DECLARATION OF FIROZ PATEL IN SUPPORT OF PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION TO COMPEL ARBITRATIO1

DEFENDANT PAYMENTWORLD'S, LLC, NOTICE OF NON-OPPOSITION AND JOINDER TO MOTION TO COMPEL ARBITRATION

8/10/2016: DEFENDANT PAYMENTWORLD'S, LLC, NOTICE OF NON-OPPOSITION AND JOINDER TO MOTION TO COMPEL ARBITRATION

PROOF OF SERVICE OF SUMMONS

8/10/2016: PROOF OF SERVICE OF SUMMONS

Minute Order

8/23/2016: Minute Order

57 More Documents Available

 

Docket Entries

  • 10/02/2019
  • Hearingat 08:30 AM in Department 56 at 111 North Hill Street, Los Angeles, CA 90012; Status Conference

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  • 06/11/2019
  • Docketat 08:30 AM in Department 56; Status Conference (RECRIMINAL PROCEEDINGS) - Held - Continued

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  • 06/11/2019
  • DocketMinute Order ( (Status Conference RE: CRIMINAL PROCEEDINGS)); Filed by Clerk

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  • 06/05/2019
  • DocketStatus Report; Filed by MH Pillars Ltd. (Plaintiff)

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  • 06/05/2019
  • DocketRequest for Dismissal; Filed by Kenneth D. Bell (Legacy Party)

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  • 02/07/2019
  • Docketat 08:30 AM in Department 56; Status Conference (RECRIMINAL PROCEEDINGS) - Held - Continued

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  • 02/07/2019
  • DocketMinute Order ( (Status Conference RE: CRIMINAL PROCEEDINGS)); Filed by Clerk

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  • 01/31/2019
  • Docketat 08:30 AM in Department 56; Status Conference (RECRIMINAL PROCEEDINGS) - Not Held - Advanced and Continued - by Court

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  • 01/29/2019
  • DocketNotice (of Continuance of Status Conference); Filed by Paymentworld, LLC (Defendant); Roman Balanko (Defendant)

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  • 01/28/2019
  • DocketNotice (JOINT STATUS CONFERENCE REPORT IN ADVANCE OF JANUARY 31 2019 STATUS CONFERENCE); Filed by Kenneth D. Bell (Legacy Party)

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144 More Docket Entries
  • 03/15/2016
  • Docketat 00:00 AM in Department 56; Court Order - Held

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  • 03/15/2016
  • DocketEx-Parte Application; Filed by Plaintiff/Petitioner

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  • 03/15/2016
  • DocketMinute Order

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  • 03/15/2016
  • DocketEX PARTE APPLICATION FOR EXTENSION OF TIME TO SERVE PLEADING AND ORDER EXTENDING TIME TO SERVE AND ORDER CONTINUING CASE MANAGEMENT CONFERENCE

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  • 03/15/2016
  • DocketMinute order entered: 2016-03-15 00:00:00; Filed by Clerk

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  • 01/28/2016
  • DocketNOTICE OF CASE MANAGEMENT CONFERENCE

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  • 01/28/2016
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 01/15/2016
  • DocketSUMMONS

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  • 01/15/2016
  • DocketComplaint; Filed by MH Pillars Ltd. (Plaintiff)

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  • 01/15/2016
  • DocketCOMPLAINT FOR DAMAGES (1) BREACH OF CONTRACT; ETC

    Read MoreRead Less

Tentative Rulings

Case Number: BC607148    Hearing Date: November 24, 2020    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

MH PILLARS LTD., etc.,

Plaintiff,

vs.

PAYMENTWORLD LIMITED, et al.,

Defendants.

CASE NO.: BC607148

[TENTATIVE] ORDER RE: RENEWED MOTION TO VACATE ARBITRATION AWARD

Date: November 24, 2020

Time: 8:30 a.m.

Dept. 56

MOVING PARTIES: Defendants Payment World, LLC and Roman Balanko

RESPONDING PARTY: Plaintiff MH Pillars Ltd.

The Court has considered the moving, opposition, and reply papers. Although Defendants’ memorandum of law in support of the moving papers exceeds, without leave of Court, the 15-page limit in California Rules of Court, Rule 3.1113(d), the Court will exercise its discretion and will consider the entirety of Defendants’ moving papers. Plaintiff raises no argument as to the length of the moving papers.

BACKGROUND

Plaintiff filed a complaint arising from a breach of a Merchant Agreement (the “Agreement”) to provide credit card processing services, alleging causes of action for: (1) breach of contract—including covenant of good faith and fair dealing; (2) conversion; (3) rescission and restitution; (4) fraud and deceit; (5) unfair competition law; and (6) accounting. The complaint alleges that Defendants breached the Agreement by failing to pay Plaintiff approximately $20,733,298.73 of funds belonging to Plaintiff and its customers.

Defendants filed a motion to compel arbitration under the Agreement, which the Court granted. All claims asserted against Defendants were compelled to arbitration.

The Current Motion

Defendants filed a renewed motion (the “Motion”) to vacate the resulting arbitration award (the “Arbitration Award”). The Motion is made on the grounds that: (1) the arbitrator exceeded his authority by issuing an order pursuant to an illegal contract; and (2) the Arbitration Award was procured by fraud or undue means. The Arbitration Award is attached as Exhibit 9 to the declaration of Shoshana E. Bannett (“Bannett”) in support of the Motion.

The Arbitration Award states that: (1) Defendants, jointly and severally, were ordered to pay Plaintiff the sum of $20,733,285.00 for breach of contract, and interest thereon at the legal rate, running from the entry of judgment on the Arbitration Award; (2) Defendants, jointly and severally, were ordered to pay to Plaintiff the sum of $100,000.00 for unlawful conversion, and interest thereon at the legal rate, running from the entry of judgment on the Arbitration Award; and (3) Plaintiff was awarded $69,607.10 in fees and expenses. The Arbitration Award was issued on May 2, 2018.

In opposing the Motion, Plaintiff advances the following arguments: (1) public policy favors confirmation of arbitration awards; (2) Defendants have not produced any admissible evidence to vacate the Arbitration Award; (3) there is no evidence that the Agreement was entered into for unlawful reasons; and (4) Defendants cannot establish that fraud or undue means led to the Arbitration Award.

DISCUSSION

CCP § 1286.4 allows a court to vacate an arbitration award. CCP § 1286.2 sets forth specific grounds for the vacating of an arbitration award. An arbitration award must be vacated if the court determines that: (1) the award was procured by corruption, fraud, or other undue means; (2) there was corruption in any of the arbitrators; (3) the rights of the party were substantially prejudiced by misconduct of a neutral arbitrator; (4) the arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted; and (5) the rights of the party were substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefor or by the refusal of the arbitrators to hear evidence material to the controversy or by other conduct of the arbitrators contrary to the provisions of this title.

The merits of the controversy between the parties are not subject to judicial review. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11.) Courts will not review the validity of the arbitrator’s reasoning. (Id.) Arbitration awards are generally immune from judicial review. (Id.) Parties who stipulate in an agreement that controversies that may arise out of it shall be settled by arbitration, may expect not only to reap the advantages that flow from the use of that nontechnical, summary procedure, but also to find themselves bound by an award reached by paths neither marked nor traceable and not subject to judicial review. (Id.) A court may not review the sufficiency of the evidence supporting an arbitrator’s award. (Id.) Courts must give every intendment to validity of an arbitration award. (United Brotherhood of Carpenters etc., Local 642 v. Demello (1972) 22 Cal.App.3d 838, 840.)

Issue No.1: The Illegality of the Agreement

Defendants contend that the Arbitration Award must be vacated because it is founded on an illegal contract, in this case the Agreement. Specifically, Defendants assert that Plaintiff and its principals—Firoz and Ferhan Patel (the “Patels”)—have pleaded guilty to conspiracy to launder monetary instruments and operating an illegal money transmitting business.

An arbitrator exceeds his or her authority by issuing an award pursuant to an illegal contract. (Moncharsh, supra, 3 Cal.4th 1, 31.) A court will vacate an arbitration award where such award is based on an illegal contract. (Loving & Evans v. Blick (1949) 33 Cal.2d 603, 611.) A contract is illegal if it: (1) is contrary to an express provision of law; (2) contrary to the policy of express law, though not expressly prohibited; or (3) otherwise contrary to good morals. (Civ. Code § 1667.) All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law. (Civ. Code § 1668.) Where the object of the contract is illegal, courts generally will not enforce it or lend assistance to a party to a party who seeks to benefit from an illegal act. (Yuba Cypress Housing Partners, Ltd. v. Area Developers (2002) 98 Cal.App.4th 1077, 1082.)

A court will deem a contract illegal where a company’s primary activity is illegal despite the fact a company engages in some legitimate business activity. (Bovard v. American Horse Enterprises, Inc. (1988) 201 Cal.App.3d 832, 839-841.) A bargain may be illegal by reason of the wrongful purpose of one or both of the parties making it. (Redke v. Silvertrust (1971) 6 Cal.3d 94, 104.) A party who makes a bargain in furtherance of a wrongful purpose cannot enforce it. (Id.) A party cannot avail itself of the general principle that if a contract can be performed in a legal manner it is not void if such party seeking to enforce a contract participates in the illegal performance. (Kashani v. Tsann Kuen China Enterprise Co. (2004) 118 Cal.App.4th 531, 552.)

Guilty and nolo pleas are admissible in a subsequent civil action as an admission of the crime. (Interinsurance Exchange v. Flores (1996) 45 Cal.App.661, 672.) An issue necessarily decided in a prior criminal proceeding is conclusively determined as to the parties if it is involved in a subsequent civil action. (Teitelbaum Furs, Inc. v. Dominion Ins. Co. (1962) 58 Cal.2d 601, 607.)

Defendants’ Evidence

An indictment was issued against Plaintiff and the Patels in the United States District Court for the District of Columbia in United Sates of America v. MH Pillars, Ltd., Firoz Patel, and Ferhan Patel (the “Federal Case”) on November 3, 2016 alleging the following counts: (1) conspiracy in violation of 18 U.S.C. § 371; (2) operating an unlicensed money transmission business in violation of 18 U.S.C. § 1960(a); (3) conspiracy to launder monetary instruments in violation of 18 U.S.C. § 1956(h); and (4) money transmitting without a license in violation of D.C. Stat. § 26-1001. (Bannett Decl. at Exhibit 8.) The Criminal Information in the Federal Case states that Plaintiff conspired with the Patels by operating an unlicensed money transmitting business, which transmitted funds that Plaintiff and the Patels knew were derived from specified unlawful activity in order to promote that unlawful activity. (Bannett Decl. at Exhibit 4.)

The Statement of the Offense in the Federal Case as to Plaintiff[1] states that: (1) money transmitting businesses were required to be licensed in each state where the failure to do so is punishable as a misdemeanor or a felony under state law; (2) in 2004, the Patels founded AlertPay in Montreal, Canada, which acted as an online money transmitting business, and was claimed to have been used by millions of members worldwide, including in the United States; (3) Firoz Patel knew that AlertPay was transmitting illegal proceeds based in part on statements made by co-conspirators, as well as his review of customer data; (4) AlertPay lacked a license to operate in any state in the United States or the District of Columbia and, despite such licensure, it offered its services in virtually every state in the United States and the District of Columbia; (5) in early 2012, Firoz Patel purchased Plaintiff and in early 2012, Plaintiff—doing business as Payza—claimed to have purchased AlertPay; (6) AlertPay accounts were transitioned to Payza; (7) Firoz Patel purposely attempted to deceive financial institutions into thinking that Payza and AlertPay were different; (8) nearly all of the business of Payza was done in violation of U.S. law; and (9) Payza caused over $250,000,000.00 to be illegally transmitted and did so with the specific intent to violate the law. The Statement of Offense also alleges other wrongful actions of Plaintiff. Plaintiff signed an acknowledgement on July 8, 2020, that the Statement of Offense: (1) was made for the purpose of providing the court with a factual basis for a guilty plea to the charge against Plaintiff; and (2) Plaintiff admitted to being guilty of the crime charged.

In its plea agreement (the “Plea Agreement”) in the Federal Case (Bannett Decl. at Exhibit 3), which was entered into on July 8, 2020, Plaintiff: (1) pled guilty to conspiring to commit offenses against the United States in violation of 18 U.S.C. § 371; (2) agreed that the Statement of Offense fairly and accurately described Plaintiff’s actions and involvement to the offenses to which Plaintiff was pleading guilty; (3) Plaintiff admitted guilt and the accuracy of the facts set forth in the Statement of Offense; and (4) admitted that a substantial part of its activity was fraudulent actions which were committed from outside the United States.

Defendants also present evidence that: (1) the primary purpose of Plaintiff’s existence was to operate for a criminal purpose (Bannett Reply Decl., Exhibit C at 79:14-15); and (2) Plaintiff did not dispute the fact that it operated primarily for a criminal purpose. (Id. at 77:3-20.)

Analysis

The Court finds that Plaintiff’s citation to Dougherty v. Cross (1944) 65 Cal.App.2d 687 is inapposite. Also, while Plaintiff asserts that the Plea Agreement only involves the United States and does not implicate any purely overseas transactions which the Agreement was intended to cover, a review of the Agreement does not state such fact. Also, Plaintiff presents no evidence that it only processed overseas transactions under the Agreement. In any event, such argument is unsupported because the evidence shows that Plaintiff existed and operated primarily for criminal purposes, and Plaintiff acknowledges in the Plea Agreement that it participated in overseas criminal activity.

The Court finds that based on Defendants’ evidence, the purpose of the Agreement was illegal. The Agreement gave rise to the Arbitration Award in this action and served as the basis for compelling arbitration. While the declaration of Firoz Patel in opposition to the Motion states that many of Payza’s customers were located outside of the United States, such statement is irrelevant to this analysis. The evidence presented by Defendants shows that: (1) Plaintiff was created and operated for a criminal purpose; (2) Plaintiff participated and was active in illegal activity such as money laundering; and (3) Plaintiff illegally transmitted over $250,000,000.00. The purpose of the Agreement was for Defendants to provide credit card processing and related services. The Agreement required Plaintiff to warrant that it was complying with all applicable state and federal laws. (Bannett Decl., Exhibit 10 at ¶ 3.) All the transactions of Plaintiff that arose from the Agreement are illegal because Plaintiff admitted that it was an unlicensed entity and its primary purpose was to engage in criminal activity.

Given that Plaintiff admitted: (1) its primary purpose was to engage in criminal conduct; and (2) its existence was for the purpose of operating in criminal activity, the Court finds that under Bovard and Redke, the Agreement is illegal. Because the Agreement was the basis for the Arbitration Award, the Court finds it appropriate to vacate the Arbitration Award.

The Court need not address Defendants’ fraud and undue influence arguments because of the Court’s finding as to illegality.

Therefore, the Court GRANTS the Motion.

Moving parties are ordered to give notice of this ruling.

In consideration of the current COVID-19 pandemic situation, the Court strongly encourages that appearances on all proceedings, including this one, be made by LACourtConnect if the parties do not submit on the tentative.  If you instead intend to make an appearance in person at Court on this matter, you must send an email by 2 p.m. on the last Court day before the scheduled date of the hearing to SMC_DEPT56@lacourt.org

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the

hearing, the motion will be placed off calendar.

Dated this 24th day of November 2020

Hon. Holly J. Fujie

Judge of the Superior Court


[1] The Statement of the Offense is attached as Exhibit 7 to the declaration of Bannett.