Exhibit 1 — JAMS Arbitration Transcript (Closing Argument Excerpt) — OTO Analytics v. Benworth (N.D. Cal. No. 3:24-cv-03975)

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U.S. District Court for the Northern District of California · No. 4:24-cv-03975-AMO · Doc. 56-2 · 2024-09-13 · Docket on CourtListener

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EXHIBIT 1 
Case 4:24-cv-03975-AMO     Document 56-2     Filed 09/13/24     Page 1 of 9

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                    JAMS ARBITRATION
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                          BEFORE
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         ALEXANDER L. BRAINERD, ESQ. (ARBITRATOR)
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OTO ANALYTICS, INC., d/b/a        )
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WOMPLY,                           ) Case No.:
                                  ) 1210038203
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                                  )
  Claimant/Counter-Respondent,    )
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                                  )
      v.                          )
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                                  )
BENWORTH CAPITAL PARTNERS LLC,    )
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                                  )
                                  )
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  Respondent/Counter-Claimant.    )
__________________________________)
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          REPORTER'S TRANSCRIPT OF PROCEEDINGS
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            (Volume VIII, Pages 1626 - 1764)
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                 THURSDAY, JUNE 29, 2023
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                        9:37 a.m.
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                       Full Session
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REPORTED BY:
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Vickie Blair
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CSR No. 8940, RPR-CRR
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JOB NO. 5991546
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Arbitration taken on Thursday, June 29, 2023, 9:37 a.m.,
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before VICKIE BLAIR, CSR No. 8940, RPR-CRR.
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APPEARANCES OF COUNSEL VIA ZOOM:
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THE ARBITRATOR:
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         JAMS
         BY ALEXANDER "LEX" BRAINERD, JAMS Mediator,
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         Arbitrator, and Referee/Special Master
         Two Embarcadero Center
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         Suite 1500
         San Francisco, California  94111
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         abrainerd@jamsadr.com
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FOR CLAIMANTS:
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         WILLKIE FARR & GALLAGHER LLP
         BY ALEXANDER L. CHENEY, Partner, Litigation
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         One Front Street
         San Francisco, California  94111
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         +1 415 858 7418
         acheney@willkie.com
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         WILLKIE FARR & GALLAGHER LLP
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         BY JOSHUA LEVY, Counsel, Litigation
         1875 K Street, N.W.
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         Washington, D.C.  20006-1238
         +1 202 303 1147
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         jlevy@willkie.com
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         WILLKIE FARR & GALLAGHER LLP
         BY TIFFANY M. LIN, Associate, Litigation
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         One Front Street
         San Francisco, California  94111
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         +1 415 858 7419
         tlin@willkie.com
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         WILLKIE FARR & GALLAGHER LLP
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         BY DANIEL L. MORRIS, Associate, Litigation
         787 Seventh Avenue
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         New York, New York  10019-6099
         +1 212 728 8186
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         dmorris@willkie.com
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APPEARANCES OF COUNSEL VIA ZOOM: (Continued)
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FOR RESPONDENTS:
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         KOZYAK TROPIN THROCKMORTON
         BY JORGE L. PIEDRA, Managing Partner, Partner
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         2525 Ponce de Leon Boulevard
         9th Floor
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         Coral Gables, Florida  33134
         (305) 728-2975
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         jpiedra@kttlaw.com
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         KOZYAK TROPIN THROCKMORTON
         BY DWAYNE A. ROBINSON, Partner
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         2525 Ponce de Leon Boulevard
         9th Floor
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         Coral Gables, Florida  33134
         (305) 377-0659
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         drobinson@kttlaw.com
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         KOZYAK TROPIN THROCKMORTON
         BY MICHAEL R. LORIGAS, Attorney
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         2525 Ponce de Leon Boulevard
         9th Floor
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         Coral Gables, Florida  33134
         (305) 728-2980
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         mlorigas@kttlaw.com
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         GIRARD SHARP
         BY SIMON GRILLE, Partner
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         601 California Street
         Suite 1400
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         San Francisco, California  94108-2819
         t: 415.544.6434
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         sgrille@girardsharp.com
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ALSO PRESENT:
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         FAROLA SAINT-REMY, Paralegal
         KOZYAK TROPIN THROCKMORTON
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form.
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              And then Benworth is correct that you can't
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rewrite the parties' agreement, that is the allocations
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that the parties agreed to, they determined that was the
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value, that was the price to pay for those services.
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              Benworth also argued that Womply is an LSP
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because it generated a lot of loans.  I take that to
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mean because it collected a lot of loan applications, or
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information for loan applications, and referred that to
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the lender, to Benworth.
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              Well, that was done under the referral
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agreement, so if that is what makes Womply, in
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Benworth's view, a lender service provider, then perhaps
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maybe it was the referral agreement that needed to
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approved by the SBA, but that's not what was being done
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under the separate order form.
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              But, in any event, our point is, under the
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law, because this transaction is complete, and the only
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obligation to be performed under the contract is
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payment, payment will still be enforced under California
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law, otherwise, you're rewarding Benworth for not
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complying with the SBA rules to submit LSP agreements to
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the SBA.
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              ARBITRATOR BRAINERD:  Let me stop you,
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Mr. Cheney.  Just tell me in -- I mean, I know it's in
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your brief, but just tell me today sort of, if you can,
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in summary fashion why you believe that Womply is not a
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lender service provider under the SBA regulations.
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              MR. CHENEY:  Because if you look at the
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actual definition of a lender service provider, and I
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think I have the language here, all right, give me one
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minute, it is a lender who carries out lender functions
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in originating, disbursing, servicing, or liquidating a
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specific SBA business loan or loan portfolio.
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              So the difficult thing, admittedly, about
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SBA regulations, but the first part, originating, that
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term is not defined, but it can't simply be referring
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loan applications because referral agent is separately
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defined as a separate type of entity.
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              Disbursing, Womply was not involved in
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disbursing loans; that was Benworth.
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              Womply did not service the loans, as
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Benworth concedes; Benworth is servicing the loans.
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              And Womply has not liquidated any of the
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loans.
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              So, focusing on the definition of a lender
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service provider, Womply was not performing any of those
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services, and apparently Benworth agreed because that's
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what it told the SBA, and that's what it said in
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Womply's contracts.
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              ARBITRATOR BRAINERD:  Can you make a
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distinction for me between referring and originating?
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Is there some meaningful distinction, in your mind,
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between those two activities?
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              MR. CHENEY:  So there are other -- in the
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SOPs it refers to technology service providers that
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provide technology to lenders that don't involve
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underwriting are not agents.
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              If an agent is performing underwriting,
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then they are a lender service provider.
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              So I would interpret, using that guidance,
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that the term "originating" really means underwriting.
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              ARBITRATOR BRAINERD:  Let me ask you next,
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the following question there, it's your position that
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Womply was not engaging in underwriting services;
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correct?
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              MR. CHENEY:  That's correct.
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              ARBITRATOR BRAINERD:  So let's take the
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verification activities that you think are supported by
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the technology fees.
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              I mean, you know, isn't verification part
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of the underwriting process?
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              MR. CHENEY:  So that is something that a
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lender can use in order to conduct its underwriting
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activities.
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              We like to think of it this way:  That if
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Womply had not compiled all of these verification
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services into the platform, Benworth may have had to go
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out and contract with each one of these service
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providers individually.
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              For example, Mr. Navarro testified that, in
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2020, Benworth was using LexisNexis to verify
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information; that doesn't make LexisNexis a lender
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service provider.
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              All Womply was doing was compiling these
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services together in one place, and then, in the
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contracts with Benworth, they said they were not, you
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know, saying that these contracts or these applications
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should be submitted to the SBA or comply with the regs.
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              They applied the technology, they provided
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the results to the lender, and then it was the lender's
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decision on whether or not to ask for more information
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or to submit that information to the SBA.
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              So, ultimately, it was the lender who was
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doing the underwriting based on the results of
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technology that was applied by Womply.
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              Simply applying technology and giving the
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results to the lender does not make that technology
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service provider a lender service provider --
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              ARBITRATOR BRAINERD:  Well, I remember --
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              MR. CHENEY:  -- or an underwriter.
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              ARBITRATOR BRAINERD:  I remember that in
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the -- and, again, I may have this not quite right, but
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I remember in the hearing that all of the Benworth folks
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agreed that Benworth had the obligation to do a, quote,
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unquote, "good faith review," and I gather you would
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contend that's where the actual underwriting took place;
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right?
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              MR. CHENEY:  Yes, that's correct, and they
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had to actually indicate which loans would be submitted
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to the SBA for approval; Womply was not involved in that
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process.
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              ARBITRATOR BRAINERD:  Okay.  I'm sorry, go
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ahead, is there anything further you want to make -- any
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other points you want to make?
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              MR. CHENEY:  No, that was all.
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              Thank you, Mr. Brainerd.
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              ARBITRATOR BRAINERD:  Mr. Robinson,
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briefly, anything else?
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              MR. ROBINSON:  I do.
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              So the definition of LSP, if you would
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review it, Mr. Brainerd, it says, "an entity that
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carries out the functions of originating."
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              Not just originating, but the functions.
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              And can any of us really conclude, after
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