Emelyanenko v. Strafach

Background

Stanislav Emelyanenko sued his former employer, Sudo Security Group, Inc., and William Joseph Strafach, whom the complaint identifies as Sudo’s chief executive officer, president, director, and chairman of its board. The complaint asserts claims including fraud, securities fraud, breach of contract, extortion, racketeering, unfair competition and business practices, harassment and stalking, and violation of California Government Code section 12900 and following sections.

Emelyanenko alleges that during his recruitment in 2018 and 2019, Strafach and Chirayu Patel made false statements about Sudo’s financial condition and offered employment. He alleges that he was told Sudo had raised approximately $1 million from Mark Cuban, when the actual amount raised was $100,000 to $200,000. He also alleges that Sudo could not fulfill the employment conditions offered to him because of its financial situation.

Arbitration materials and factual dispute

During Sudo’s onboarding process through Sequoia, Emelyanenko received a voluntary dispute-resolution policy and a California dispute-resolution agreement. The agreement stated that employment-related disputes between an employee and Sudo or Sequoia would be resolved through binding arbitration, rather than in court, and that the parties would give up their rights to a jury trial. The record included evidence that Emelyanenko viewed the documents and electronically checked a box stating that he had read and agreed to the agreement.

The court applied a standard similar to the summary-judgment standard to the motion to compel arbitration. It explained that a court must determine whether a valid arbitration agreement exists and whether that agreement covers the dispute. If material facts about whether the parties formed an arbitration agreement are genuinely disputed, the court must hold a trial on that issue and keep the motion to compel arbitration pending until those facts are resolved.

The court found a genuine dispute about whether Defendants waived their arbitration rights or breached the agreement by failing to respond to an arbitration demand. Emelyanenko declared that he delivered a written arbitration demand in June 2022 and that Patel received it, photographed its pages, and sent them to Strafach, who acknowledged receipt. Patel and Strafach disputed this account, stating that they did not recall receiving the demand and had no records showing that they received it before the lawsuit began. The court concluded that further proceedings were necessary and did not reach the remaining arguments concerning arbitration.

The court also noted that, under the agreement, an employee had to provide written notice of a claim to the opposing party. If Emelyanenko had in fact delivered written notice as he declared, the court stated that this would at least have triggered an obligation to participate in selecting a mutually agreeable arbitrator.

Motion to strike and evidence objections

Emelyanenko moved to strike an errata correcting a declaration by Dustin Schodt. The correction added the required statement that the declaration was made under penalty of perjury. The court held that the errata properly corrected an oversight and was not an unauthorized supplemental filing. The court also rejected arguments that the correction was untimely or prejudicial and DENIED the motion to strike.

The court OVERRULED Emelyanenko’s objections to Defendants’ reply evidence. Those objections challenged the declaration’s compliance with the penalty-of-perjury requirement, its admissibility and timing, Schodt’s knowledge and qualifications, the supporting records, and the use of an electronic signature. The court held that the errata cured the declaration’s technical defect, that the declaration’s contents could be presented in admissible form, and that Schodt had sufficient personal knowledge of Sequoia’s platform and record-keeping processes. The court also held that several of Emelyanenko’s remaining arguments disputed the facts rather than presenting proper evidentiary objections.

The court did not credit the portion of Patel’s declaration stating that a calendar invitation showed Emelyanenko participated in an open-enrollment meeting, because the document only showed that he accepted the invitation. The court also did not consider part of Schodt’s declaration because the document list provided did not contain the document-identification numbers Schodt referenced.

Disposition

Judge Araceli Martinez-Olguin DEFERS RULING on the motion to compel arbitration pending further proceedings, DENIES the motion to strike, and OVERRULES the objections to evidence. The parties were ordered to submit a joint case-management statement addressing whether a jury trial, bench trial, or another proceeding should resolve the arbitration motion. The court set a case-management conference for October 10, 2024.