Judge Armen Tamzarian, Case Number: 24STCV04924, Date: 2024-06-12 Tentative Ruling

Judge: Armen Tamzarian, Case: 24STCV04924, Date: 2024-06-12 Tentative Ruling

Case Number: 24STCV04924 Hearing Date: June 12, 2024 Dept: 52

Plaintiff Seong Ho Cho’s Motion to Stay Arbitration Proceeding; Defendants Hilton & Hyland Real Estate, Inc. and Richad Maslan’s Motion to Stay Action

Background

This action is a dispute over a real estate transaction. Plaintiff Seong Ho Cho aka Eric Cho bought a house at 9267 Thrush Way, Los Angeles, California 90069 from defendant Keith Ferrazzi. Plaintiff alleges the house has various defects. On February 22, 2024, plaintiff initiated an arbitration proceeding (ADRS Case No. 24-1083-AJG) against Ferrazzi. (Crawford Decl., ¶ 7, Ex. 3.) On February 27, plaintiff filed this action against numerous defendants: Ferrazzi, two groups of real estate brokers who represented each party to the sale, a construction company that worked on the house, and the person who inspected the roof on plaintiff’s behalf.

On March 19, plaintiff moved to stay the arbitration proceeding. On April 23, defendants Hilton & Hyland Real Estate, Inc. and Richard Maslan moved to stay this action.

Plaintiff’s Motion to Stay Arbitration Proceeding

Plaintiff Seong Ho Cho aka Eric Cho moves to stay the pending arbitration proceeding, ADRS Case No. 24-1083-AJG, between himself and defendant Keith Ferrazzi. Plaintiff provides no authority giving the court power to do so.

Plaintiff relies on Code of Civil Procedure section 1281.2, which provides: “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶¶] (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.”

Section 1281.2 further provides, “If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c), the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.” Plaintiff moves the court to apply option (4).

The court has no power to do so under section 1281.2. This section only applies, “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy” seeking an order to compel arbitration when “another party to the agreement refuses to arbitrate that controversy.” No party has sought a court order compelling arbitration. Plaintiff initiated the arbitration proceeding against Ferrazzi before filing this action.

Nothing in the California Arbitration Act (CAA) permits a court to stay a preexisting arbitration proceeding when no party has moved to compel arbitration. The CAA exhibits a preference to stay an action pending arbitration instead of the other way around. Code of Civil Procedure section 1281.4 provides that, upon motion by a party, the court “shall” stay an action when any court “has ordered arbitration of a controversy which is an issue involved in” the action and “shall” stay an action when a party has moved to compel arbitration. The only provision in the CAA authorizing a court to stay an arbitration proceeding is the one in section 1281.2, which does not apply as discussed above. The court therefore must deny plaintiff’s motion to stay the arbitration proceeding.

Of the several cases plaintiff cites, only in Henry v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94 did a party move to stay an arbitration without any motion to compel arbitration. (Id. at p. 98 [a defendant “did not petition the trial court for an order to compel arbitration but it made clear to Mr. Henry it intended to pursue the arbitration. Therefore Mr. Henry brought a motion to stay arbitration”].) There, the Court of Appeal considered whether the trial court properly exercised its discretion under section 1281.2(c). It did not consider whether that subdivision applied in the first place. “It is axiomatic that cases are not authority for propositions not considered.” (People v. Ault (2004) 33 Cal.4th 1250, 1268, fn. 10.) Henry is also distinguishable because there, the plaintiff filed the civil action before the defendant initiated the arbitration proceeding against the plaintiff. (Henry, supra, 233 Cal.App.3d at p. 98.) Here, plaintiff initiated the arbitration proceeding before filing the civil action.

Assuming the court has the power to stay the arbitration proceeding under Code of Civil Procedure section 1281.2, subdivision (4), it would instead exercise its discretion to “stay the pending court action … pending the outcome of the arbitration proceeding” under subdivision (3). Courts have “broad discretion” in choosing which of the four options to take under section 1281.2(c). (Birl v. Heritage Care, LLC (2009) 172 Cal.App.4th 1313, 1322.) The California Arbitration Act “reflect[s] a ‘ “strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.” ’ ” (Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 25.) Staying the arbitration pending the resolution of this civil action undermines that policy.

Defendants’ Motion to Stay This Action

Defendants Hilton & Hyland Real Estate, Inc. and Richard Maslan move to stay this action pending resolution of the arbitration proceeding between plaintiff and Ferrazzi. Assuming Code of Civil Procedure section 1281.2(c) applies, the court exercises its discretion to stay this action under section 1281.2, subdivision (3).

In the alternative, the court exercises its inherent power to stay the action. “ ‘[A] court ordinarily has inherent power, in its discretion, to stay proceedings when such a stay will accommodate the ends of justice.’ ” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 141.) Staying this action pending resolution of the arbitration proceeding will accommodate the ends of justice, serve the interest in judicial efficiency, and give Ferrazzi the benefit of his bargain in agreeing to arbitrate disputes with plaintiff.

Disposition

Plaintiff Seong Ho Cho’s motion to stay arbitration proceeding is denied.

Defendants Hilton & Hyland Real Estate, Inc. and Richard Maslan’s motion to stay this action is granted. The court hereby stays this entire action pending resolution of the arbitration proceeding between plaintiff and defendant Keith Ferrazzi, ADRS Case No. 24-1083-AJG.