A recent court filing has highlighted a contentious dispute between a software development company and one of its former contractors over allegations of fraudulent billing practices. On July 29, 2024, LFG Payments, Inc. filed a complaint in the Superior Court of Los Angeles County against Christian Smith, accusing him of falsifying timesheets and accepting payment for work not performed.
The case revolves around Smith's employment as a technical writer for LFG Payments through Gun.io, a staffing agency that places professionals with clients needing to scale their engineering teams. According to the complaint, LFG Payments entered into an agreement with Gun.io on April 15, 2022, to pay $350 an hour for Smith's services. This agreement was later modified on May 11, 2022, to increase Smith's hours from 80 to 120 per month. Despite these arrangements, LFG alleges that by mid-June 2022, Smith had not performed any significant work but submitted false invoices claiming he had worked 187 hours.
LFG Payments' lawsuit against Smith includes claims of affirmative fraud, fraud by concealment, unjust enrichment, and violation of Business and Professions Code section 17200. The company asserts that it paid nearly $100,000 based on Smith's fraudulent invoices and is seeking restitution for the damages incurred. "LFG paid nearly $100,000 for a body of work it alleged could have been performed by anyone in less than an hour," the complaint states.
Smith responded by filing a motion to compel arbitration under the Subscription Agreement between Gun.io and LFG Payments. He argued that even though he was not a signatory to the agreement, he should be entitled to compel arbitration based on theories of third-party beneficiary and equitable estoppel. However, the trial court denied his motion, stating that LFG’s claims were not inextricably intertwined with the Subscription Agreement.
The appellate court reversed this decision upon review. The court concluded that although Smith did not sign the Subscription Agreement between Gun.io and LFG Payments, he could enforce its arbitration clause under the doctrine of equitable estoppel. The court found that LFG’s claims against Smith were fundamentally linked to the obligations outlined in the Subscription Agreement.
In its ruling, the appellate court noted: "The interconnectedness between the Subscription Agreement and the substance of LFG’s claims makes it inequitable for LFG to avoid arbitration." The judges emphasized that all disputes related to Smith's services should be resolved via arbitration as stipulated in the Subscription Agreement.
Representing Christian Smith is Gregg A. Rapoport from Smith Gambrell & Russell LLP while Ryan M. Lapine and Rodney S. Lasher from Venable LLP represent LFG Payments Inc. The case is presided over by Judge Jon R. Takasugi under Case ID B332067.