Judge: Anne Richardson, Case: 24STCV17385, Date: 2024-09-30 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 24STCV17385    Hearing Date: September 30, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

On November 23, 2005, Plaintiffs Whittwood, LLC and 14 West, LP and Defendant West Coast Dental Administrative Services, LLC’s predecessor in interest, Frontier Dental Management, entered into a lease agreement for Frontier to lease property located at 5160 Whittier Boulevard, Los Angeles, CA, 90022 (the Property).

On July 12, 2024, Plaintiffs filed a Complaint against West Coast Dental alleging causes of action for: (1) Breach of Contract; (2) Breach of the Implied Covenant of Good Faith and Fair Dealing; (3) Violations of Cal. Business and Professions Code § 17200, et. seq.; (4) Intentional Interference with Prospective Economic Advantage; and (5) Intentional Interference with Contract.

On August 15, 2024, West Coast Dental filed a Cross-Complaint alleging cause of action for (1) Declaratory Relief and (2) Breach of Contract.

            Both the Complaint and the Cross-Complaint arise from various allegations that the other party breached the terms of the lease agreement.

            On August 14, 2024, Plaintiffs filed the instant motion to compel arbitration and stay proceedings.

            On September 5, 2024, West Coast Dental opposed the motion. On September 11, 2024, Plaintiffs replied.

At the initial hearing, the Court noted that both sides seemed to agree that some claims were to be excluded from arbitration, and ordered the parties to  meet and confer to see if they could resolve by stipulation which claims are to be arbitrated, and which claims should not be arbitrated. The parties each submitted declarations on September 25, 2024, but failed to reach agreement. Accordingly, the Court will rule on the underlying motion. The Plaintiffs’ motion is now before the Court.

II. Motion

A. Legal Standard

Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ. Proc. § 1281.2.) This is usually done by presenting a copy of the signed, written agreement to the court. “A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim, or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, rule 3.1330.) The moving party must also establish the other party’s refusal to arbitrate the controversy. (Code of Civ. Proc. § 1281.2.)

On a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2) the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting¿rulings on common issues. (Code Civ. Proc., § 1281.2; see¿Condee¿v. Longwood Management Corp.¿(2001) 88 Cal.App.4th¿215,¿218-19.)

B. Analysis

Plaintiffs present a valid arbitration agreement and evidence that West Coast Dental refuses to arbitrate. (Gruenbaum Decl. Ex. 1 [Lease Agreement including the Arbitration Agreement]; Gold Decl. ¶6, Ex. 5 [evidencing West Coast Dental’s refusal to arbitrate].) West Coast Dental does not dispute the existence or validity of the Arbitration Agreement but argues that the Arbitration Agreement excludes certain matters from arbitration and that each of the Plaintiffs’ causes of action fall under one or more of those exclusions.

The relevant portions of the Arbitration Agreements are as follows:

A.    ARBITRATION OF DISPUTES: Except as provided in Paragraph B below, the Parties agree to resolve any and all claims, disputes or disagreements arising under this Lease, including but not limited to any matter relating to Lessor’s failure to approve an assignment, sublease or other transfer of Lessee’s interest in the Lease under paragraph 12 of the Lease, and other defaults by Lessor, or any defaults by Lessee by and through arbitration as provided below and irrevocably waive any and all rights to the contrary. The Parties agree to at all times conduct themselves in strict, full, complete and timely accordance with the terms hereof and any attempt to circumvent the terms of this Arbitration Agreement shall be absolutely null and void and of no force or effect whatsoever.

B.    DISPUTES EXCLUDED FROM ARBITRATION: The following claims, disputes or disagreements under this Lease are expressly excluded from the arbitration procedures set forth herein: 1. Disputes for which a different resolution determination is specifically set forth in this Lease, 2. All claims by either party which (a) seek anything other than enforcement or determination of rights under the Lease, or (b) are primarily founded upon matters of fraud, willful misconduct, bad faith or any other allegations of tortious action, and seek the award of punitive or exemplary damages, 3. Claims relating to (a) Lessor’s exercise of any unlawful detainer rights pursuant to applicable law or (b) rights or remedies used by Lessor to gain possession of the Premises or terminate Lessee’s right of possession to the Premises, all of which disputes shall be resolved by suit filed in the applicable court of jurisdiction, the decision of which court shall be subject to appeal pursuant to applicable law and 4. All claims arising under Paragraph 39 of this Lease, which disputes shall be resolved by the specific dispute resolution procedure provided in Paragraph 39 to the extent that such disputes concern solely the determination of rent.

(Gruenberg Decl. ISO Mot., Exh. 1, ¶ 61.)

            Plaintiffs have repeatedly stated that they are only seeking to compel into arbitration those claims that do not fall into the exclusions. (Mot., p. 5:26-27, Reply, pp. 3:22 – 4:11.)

Here, the first and second of Plaintiffs’ causes of action in the Complaint facially arise from disputes or disagreements arising under the lease agreement. However, the third, fourth and fifth claims facially appear to fall within the exclusion. Similarly, the second cause of action for breach of contract in the cross-complaint appears to be based on the lease containing the arbitration agreement. “The function of the court is very limited when the parties have agreed to submit all questions of contract interpretation to the arbitrator. It is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract.” (City of Los Angeles v. Superior Court (2013) 56 Cal.4th 1086, 1093.)

West Coast Dental does not allege that no arbitration agreement exists, that either party has waived the right to compel arbitration, that grounds exist for revocation of the agreement, or that litigation is pending that may render the arbitration unnecessary. Thus, West Coast Dental has not shown that a valid defense against arbitration exists. Rather, West Coast Dental argues that Plaintiffs are exclusively seeking types of relief that fall under the "Disputes Excluded from Arbitration" section, or that in the alternative, this Court should make the decision as to which claims are arbitrable and which are not.

The parties cite different cases to support their claims that either this Court, or the arbitrator, should decide which claims are arbitrable.

First, the arbitration agreement provides that the arbitration will be conducted by Alternative Dispute Resolution Services (ADRS.) (Gruenberg Decl. ISO Mot., Exh. 1, ¶ 61 subd. (c).)

Under the ADRS rules, unless the issue of arbitrability has been previously determined by the court, the arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the scope of the arbitration agreement. (Gold Decl. ISO Mot., Exh.7, ¶ 8.)

State and federal courts have held that parties may clearly and unmistakably agree to delegate arbitrability decisions to the arbitrator by incorporating the arbitration rules of a dispute resolution provider into an agreement. (Mondragon v. Sunrun, Inc. (2024) 101 Cal.App.5th 592, 604 [citing cases].) That case went on to note, however, the existence of other cases in which that rule does not apply, such as cases involving unsophisticated parties like hourly employees and consumers. (Id. at 604-605.)

This case does not involve an unsophisticated party. Rather, this is a dispute regarding a 10-year commercial lease, in which the commercial tenant opposing arbitration has filed a Cross-Complaint naming both the plaintiff and a third party as cross-defendants. Thus, the cases cited in Mondragon generally upholding the parties’ right to delegate the authority to determine arbitratrability applies.

This Court thus concludes that since the complaint’s two contractual claims, as well as the cross-complaint’s claim for breach of contract, facially arise out of the contract containing the arbitration agreement, it is appropriate to compel such claims into arbitration. The remaining causes of action will be stayed pending arbitration. However, the arbitrator retains jurisdiction to make further orders regarding the scope of the arbitration, as per the arbitration agreement and the ADRS rules.

Accordingly, the Plaintiffs’ motion to compel arbitration is GRANTED.

III. Conclusion

Plaintiffs’ Motion to Compel Arbitration and Stay Proceedings is GRANTED. The Court STAYS the instant proceedings “until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies,” (Code Civ. Proc., § 1281.4), and will set an OSC re: completion of arbitration in approximately 12 months.