JPV I L.P. v. Koetting
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Tribal lending entities (TLEs) retained the LLCs to manage their online lending programs. In 2017, the relationships began to deteriorate. The LLCs and their managing members, the Koettings, allegedly persuaded customers to continue borrowing from new lenders controlled by the Koettings. The TLEs terminated the agreements and claimed breach of contractual and fiduciary duties, fraud, theft, failure to safeguard customer data, and failure to transfer revenue owed. The LLCs also accused the TLEs of breaching the agreements. An arbitrator ruled against the LLCs and the Koettings.
The court of appeal reversed in part because the TLEs failed to demonstrate that the Koettings clearly consented to the arbitrator’s determination of whether they as nonsignatories were bound by the arbitration agreement in the contracts between the TLEs and the LLCs. JPV (successor to the TLEs) unsuccessfully moved to amend the judgment to add the Koettings as judgment debtors on an alter ego theory.
JPV argued the trial court abused its discretion by disregarding the collateral estoppel effect of the arbitrator’s findings underlying the judgment against the LLCs and failing to consider all circumstances relevant to the alter ego inquiry, including the arbitral findings that the LLCs wrongfully diverted the TLEs’ customers and business opportunities to other entities controlled by the Koettings. The court of appeal vacated. The trial court made erroneous legal assumptions and misunderstood the proper scope of its discretion.
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