Department 58

Hearing Date: August 5, 2022

Case Name: Jason F. Brown v. David Williamson

Case No.: 22STCP00665

Motion: Petition to Compel Arbitration

Moving Party: Petitioner Jason F. Brown

Responding Party: Respondents David Williamson and Magdalena D. Williamson

Tentative Ruling: The Motion to Compel Arbitration is granted, and the case is stayed pending completion of the arbitration.

Background

This is a dispute arising from the sale of real property alleged to contain defects. The parties entered into a Residential Purchase Agreement in which Jason F. Brown (Petitioner or Brown) agreed to purchase real property (926 Robinson Street, Los Angeles, CA 90026) from David Williamson and Magdalena D. Williamson (Respondents or the Williamsons).

After the close of escrow, Petitioner experienced issues with the Property, including water leaks, cracks in the wall, and heating, ventilation, and air conditioning (HVAC) units malfunctioning because the repairs were not code compliant. Petitioner and Respondents attended mediation in December 2021 but were unable to settle the dispute. On February 8, 2022, Petitioner requested that the parties arbitrate the dispute, but Respondents did not reply.

Separate Lawsuits

On February 16, 2022, the Williamsons filed a separate lawsuit against the Property’s brokerage firm and listing agent for breach of contract, breach of fiduciary duty, and professional negligence in Case No. 22STCV05747. In that case, the Williamsons allege that the defendants failed to procure Brown’s signature on “Request for Repair No. 1” (RR1). Under Form RR1, the Williamsons purported to credit Brown $23,200.00 in exchange for Brown removing the physical inspection contingency and providing a release from any liability regarding the Property’s condition. (Sabel Decl., ¶ 2, Ex. 1.)

On April 4, 2022, David Williamson filed a second lawsuit against Janik Roskovani, the general contractor on the Property, for breach of contract, professional/gross negligence, breach of implied covenant to perform competent work, fraud, and tort of another, in Case No. 22STCV11308. This lawsuit centers on the renovation of the Property in June 2018, which included work on the HVAC unit. Williamson contends that Roskovani agreed to indemnify him “from all claims and liability arising from 6/7/18 contract.” (Sabel Decl., ¶ 2, Ex. 2.)

Petition to Compel Arbitration

On February 25, 2022, Brown filed a Petition to Compel Arbitration in this Court, seeking an order to compel the Williamsons to arbitration.

On April 20, 2022, the Williamsons filed a Motion to Stay Proceedings and Opposition to the Petition to Compel Arbitration. They request that the Court suspend the proceedings under Code of Civil Procedure section 1281.2, subdivision (c) because there are two other pending lawsuits related to this action.

On July 29, 2022, Brown replied to the Williamsons’ motion. He argues that the motion is untimely, the Federal Arbitration Act governs the agreement, and the exception under section 1281.2 does not apply.

The arbitration clause is in Paragraph 22(B) of the Residential Purchase Agreement and states:

22B. The Parties agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration. The Parties also agree to arbitrate any disputes or claims with Broker(s), who, in writing, agree to such arbitration prior to, or within a reasonable time after, the dispute or claim is presented to the Broker. The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of residential real estate Law experience, unless the parties mutually agree to a different arbitrator. The Parties shall have the right to discovery in accordance with Code of Civil Procedure §1283.05. In all other respects, the arbitration shall be conducted in accordance with Title 9 or Part 3 of the Code of Civil Procedure. Judgment upon the award of the arbitrator(s) may be entered into any court having jurisdiction. Enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act. Exclusions from this arbitration agreement are specified in paragraph 22C. (Prout Decl., ¶ 2, Ex. 1.)

The parties do not dispute that Brown and the Williamsons signed the agreement nor do they dispute the validity of the arbitration agreement. Instead, the contention is whether the Court should order the arbitration despite the underlying cases that the Williamsons have filed against their real estate brokerage and listing agent, and general contractor.

The Court finds that there is a valid arbitration agreement. The grounds for opposing arbitration lack merit. Petitioner Brown’s motion to compel arbitration is granted.

Legal Standard

Code of Civil Procedure section 1281.2 authorizes the court to order arbitration of a case if it finds the parties agreed to arbitrate the dispute “and that a party to the agreement refuses to arbitrate that controversy.” Arbitration agreements should be liberally interpreted and ordered unless the agreement clearly does not apply to the dispute in question. (Weeks v. Crow (1980) 113 Cal.App.3d 350, 353; Segal v. Silberstein (2007) 156 Cal.App.4th 627, 633.)

The party moving to compel arbitration has the initial burden to (1) affirmatively admit and allege the existence of a written arbitration agreement, and (2) prove the existence of that agreement by a preponderance of the evidence. (Rosenthal v. Great W. Fin. Sec. Corp, 14 Cal. 4th 394, 413.) Once this is met, the burden shifts to the responding party to prove that the agreement is unenforceable by a preponderance of the evidence. (Ibid.)

“ ‘Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.’ ” (California Correctional Peace Officers Assn. v. State¿(2006) 142 Cal.App.4th 198, 205.)

Discussion

While the Opposition was untimely, it did not prejudice the Petitioner.

Petitioner Brown argues that the Williamsons failed to oppose his Petition to Compel Arbitration within 10 days after service pursuant to Code of Civil Procedure section 1290.6.

While the Opposition was untimely under section 1290.6, there was no prejudice to Petitioner. Brown filed his reply five court days before the hearing on August 5, 2022. Since the California Arbitration Act does not contemplate the service of reply papers, Brown “implicitly relied on section 1005, subdivision (b) as authority . . . and the reply papers avoided any prejudice to [Brown] due to [the Williamsons’] late-filed and served response papers.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 847-848.) Accordingly, the Court exercises its discretion to consider the Williamsons’ opposition.

Respondents’ request for stay is denied because there are no pending cases in other counties.

Respondents request that the Court exercise its discretion to suspend the proceedings, citing to California Rules of Court, rule 3.515(h). The rule is listed under Chapter 7, which is for the “Coordination of Complex Actions.” Respondents do not contend that this case is complex, nor do they assert that the cases are pending coordination.

A petition for coordination may be submitted to Judicial Council when civil actions “pending in different courts” share common questions of fact or law. (Code Civ. Proc., § 404.) Different courts mean courts in different counties. Respondents do not indicate that another case has been filed in another county for coordination to be applicable. Therefore, the Court denies the request for a stay.

Petitioner has sufficiently demonstrated a valid agreement to arbitrate

In establishing the existence of an agreement to arbitrate, it is generally sufficient for defendant to simply provide a copy of the arbitration agreement. (Baker v. Italian Maple Holdings, LLC, 13 Cal. App. 5th 1152, 1160 (2017); Cal. Rules of Court, rule 3.1330.)

Here, the arbitration clause covers “any dispute or claim in Law or equity arising between [buyer and seller] out of this Agreement or any resulting transaction.” (Prout Decl., ¶ 2, Ex. 1.) The “resulting transaction” was Petitioner Brown’s purchase of the Property. Brown’s claims against the Williamsons center on alleged defects and misrepresentations by the Williamsons about the Property. As such, the dispute arises out of the Agreement and the resulting transaction.

The Federal Arbitration Act applies, and the Court does not have authority to stay the arbitration under section Code of Civil Procedure section 1281.2, subdivision (c).

Respondents do not discuss whether the California Arbitration Act or Federal Arbitration Act governs the arbitration provision in the Residential Purchase Agreement.

If the procedures under the Federal Arbitration Act applies, then the Court is not permitted to stay arbitration pending completion of judicial litigation. (Mastick v. TD Ameritrade, Inc. (2012) 209 Cal.App.4th 1258, 1263 [the Federal Arbitration Act “does not authorize courts to stay arbitration pending resolution of litigation, or to refuse to enforce a valid arbitration provision to avoid duplicative proceedings or conflicting rulings”]; Valencia v. Smyth (2010) 185 Cal.App.4th 153, 157 [holding that the Federal Arbitration Act “does not permit a trial court to stay or deny arbitration”].)

The arbitration clause in this case provides that “Enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act.” (Prout Decl., ¶ 2, Ex. 1.)

Under similar facts, the Court of Appeal has held that the “reference to ‘enforcement’ under the FAA required the court to consider the [] motion to compel arbitration under the FAA.” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 348 (Victrola).) In Victrola, the appellate court addressed an arbitration clause embedded in a form similar to the one here: a “standard form created and distributed by the California Association of Realtors (CAR).” (Id. at p. 342, fn. 1.)

The Court of Appeal in Victrola reviewed prior case law involving the “enforcement” language, finding that “when an arbitration agreement provides that its ‘enforcement’ shall be governed by California law, the CAA governs a party’s motion to compel arbitration.” Therefore, “[i]t follows that when an agreement provides that its ‘enforcement’ shall be governed by the FAA, the FAA governs a party’s motion to compel arbitration.” (Id. at p. 346.)

Victrola also refuted the argument that the California Arbitration Act applies merely because the agreement references California law. Any provisions in the agreement referring to California law “ha[ve] no bearing on the law that should be used to determine whether arbitration is required,” and do not supersede the specific, mandatory clause that the Federal Arbitration Act governs enforcement. (Victrola, supra, 46 Cal.App.5th at pp. 349-350.) In addition, “the presence of interstate commerce is not the only manner under which the FAA may apply” and the parties may also “voluntarily elect to have the FAA govern enforcement of the Agreement.” (Id. at p. 355.)

Here, because the parties “incorporated the procedural provisions” of the Federal Arbitration Act into the arbitration agreement, this eliminates the Court’s authority under section 1281.2, subdivision (c) to deny arbitration. (Victrola, supra, 46 Cal.App.5th at p. 346; Valencia v. Smyth, supra, 185 Cal.App.4th at p. 157.)

Nevertheless, even considering the merits of the section 1281.2, subdivision (c) argument that arbitration may be inappropriate when there is a separate court action, the Court finds this exception inapplicable.

The exception under section 1281.2, subdivision (c) does not apply because there is no possibility of conflicting rulings.

Even if the Court considered the merits of Respondents’ argument that section 1281.2 somehow applied to this case notwithstanding the applicability of the Federal Arbitration Act, the Court does not agree there is a possibility of conflicting rulings.

California Code of Civil Procedure section 1281.2, subdivision (c) “allows the trial court to deny a motion to compel arbitration whenever ‘a party’ to the arbitration agreement is also ‘a party’ to litigation with a third party that (1) arises out of the same transaction or series of related transactions, and (2) presents a possibility of conflicting rulings on a common issue of law or fact.” (Whaley v. Sony Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 486.)

Respondent David Williamson contends that he is a party to two other pending proceedings. He is the plaintiff in the lawsuit against the brokerage/listing agent, and the plaintiff in the lawsuit against the general contractor that performed work on the Property.

The Court agrees that the lawsuits “arise[] out of the same transaction or series of related transactions.” All the cases involve the Subject Property and the underlying transaction between Petitioner and Respondents. Respondents’ lawsuit against the listing agent involves the failure to obtain a signature from Petitioner during the sale, while the lawsuit against the general contractor relates directly to the HVAC work in which Petitioner claims was defective.

However, Respondents do not demonstrate that there is a possibility of conflicting rulings on a common issue of law or fact. The instant case assets the liability of the Respondents Williamsons to the Petitioner due to the defects in the Property. That is a dispute alleging misrepresentations, failure to conduct reasonable inspections, constructive fraud, and failure to use reasonable care.

The Williamson lawsuit against the listing agent seeks $100,000.00 in damages because of the agent’s failure to obtain necessary signatures. The issue there is whether the agent breached her fiduciary duties to Respondents. This is independent of any liability that Respondents may have to the Petitioner here.

The other lawsuit is between Respondent David Williamson and the general contractor. That case involves claims of breach of contract, negligence, fraud, and tort of another. At issue in that case is the validity of the contract and indemnification agreement between Respondent and the general contractor. Any rulings in the arbitration case between Petitioner and Respondents would not be inconsistent with rulings on whether the general contractor must indemnify Respondents for their losses.

Accordingly, the Court grants the motion to compel arbitration and stays the proceedings pending completion of the arbitration between Respondent and Petitioner.