Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 200 

 

 

 

MOVING PARTY: PLAINTIFFS DHC BUILDERS, INC.; BOB WARD      ELECTRIC INC.; HCI SYSTEMS, INC.; RICK HAMM CONSTRUCTION INC.  

RESPONDING PARTY: DEFENDANT 8600 WILSHIRE BOULEVARD LLC 

 

The Court considered the moving, opposition and reply papers filed in connection with Defendant 8600 Wilshire Boulevard LLC’s motion for an order setting the amount of cash deposit in lieu of surety bonds.     

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BACKGROUND 

This dispute arises from the construction of an 18-unit luxury condominium located in Beverly Hills, California (the “Project”).  Defendant 8600 Wilshire Boulevard LLC is the owner and developer of the Project.   

Defendant and Plaintiff DHC Builders, Inc. (“DHC”) entered into a contract for construction of the Project.  (Simpson Decl. ¶2; Orenstein Decl. ¶2, Ex. A).  DHC provided project management and supervisory services and hired multiple subcontractors to perform the work including Plaintiffs Bob Ward Electric Inc. (“BWE”), HCI Systems Inc. (“HCI”) and Rick Hamm Construction Inc. (“RHCI”).  (Simpson Decl. ¶2, Orenstein Decl. ¶2).  DHC alleges Plaintiff made numerous changes to the scope of work and was unable to make timely decisions, which caused the construction of the Project to be much more time consuming and expensive.  As a result, the contract price ballooned from $29.9M to $44M.  Opp. at 1.    

DHC filed a complaint against Defendant for breach of contract, indemnity and declaratory relief and also recorded a mechanic’s lien against the Property in the amount of $9,516,768.77.  The lien amount consists of remaining unpaid contract balance and direct costs incurred by DHC because of Defendant’s delay and failure to pay valid change orders.  DHC’s lien also includes amounts asserted separately by various subcontractors.  Ex. 6 to Turner Decl. 

In response, Defendant argues the delays and additional costs were DHC’s fault.  Defendant claims it granted nearly 1,000 requests for change orders made by DHC, in excess of $14 million.  Defendant also granted 512 days of extensions and added another 45 days to the grace period before the commencement of contractual liquidated damages.  Motion at 4.  Defendant has filed a cross-complaint for breach of contract, recovery under performance bond, indemnity and declaratory relief.  Exs. 1-2 to Turner Decl. 

The Court previously ordered this matter to be decided in arbitration and stayed the action pending completion of the arbitration.  See August 3, 2021 Order.  The arbitration proceedings are still ongoing.  Defendant recently moved to disqualify one of the arbitrators on conflict grounds, and a replacement arbitrator has not yet been selected.  Motion at 3,7.    

This hearing is on Defendant’s motion for an order setting the amount of cash deposit in lieu of surety bonds.  Defendant asks the Court to lift the stay and enter an order that, upon Defendant’s deposit of $9,233,606.34 with the Clerk of the Court, the mechanic’s liens and a bonded stop payment notice by DHC (“BSPN”) (itemized on page 1 of the motion), are “released and of no further effect against title to the Property and all notices of pendency of actions related to said liens are ordered withdrawn.”  Motion at 20-21.  Defendant seeks the relief because it wants to refinance the loan on the Property with a new lender who requires a clean title.  Motion at 8.  Defendant claims it is in “serious jeopardy” of having the loan commitment entirely withdrawn, absent the relief sought in its motion.  Motion at 8.  Defendant previously sought the relief it seeks now on an ex parte basis but the Court ordered a full briefing.   

Plaintiffs DHC and BWE have opposed the motion.  Plaintiffs HCI and RHCI have joined in DHC’s opposition.    

REQUEST FOR JUDICIAL NOTICE 

Under Cal. Evid. Code §452(d), the Court shall take judicial notice of the records of any court of any state of the United States.  DHC seeks judicial notice of (1) Defendant’s Ex Parte Application for Order re Cash Deposit, Lifting Stay to Release Mechanics Lien and Bonded Stop Payment Notice; Vacating Arbitrator’s Decision filed on September 15, 2022, (2) DHC’s opposition to the ex parte application, and (3) the Court’s order on the ex parte application.  As these are court records, the Court grants the request for judicial notice (“RJN”).   

EVIDENTIARY OBJECTIONS  

 DHC has lodged various evidentiary objections to declarations submitted by Defendant in support of its motion.  For reasons set forth below, the Court concludes it does not have jurisdiction to decide Defendant’s motion, and the Court does not reach the merits of the motion (i.e., the Court does not decide whether Defendant is entitled to a cash deposit in lieu of a surety bond).  As the evidentiary objections relate to the merits of that motion rather than to the Court’s jurisdiction, the Court overrules them as moot.   

LEGAL STANDARD 

CCP §1281.4 requires that a court impose a stay of litigation whenever that court, or another court, has ordered arbitration of a controversy that is an issue in the litigation. The court in which the litigation is pending is required to “stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” Id.  

The purpose of the statutory stay is to protect the jurisdiction of the arbitrator by preserving the status quo until arbitration is resolved.  (MKIA Inc. v. 123 Fit Financing, LLC, 191 Cal.App.4th 643, 658.)  In the absence of a stay, the continuation of the proceedings in the trial court disrupts the arbitration proceedings and can render them ineffective. (Id.; see also Federal Ins. Co. v. Superior Court (1998) 60 Cal.App.4th 1370, 1374-1375.) 

In SWAB Financial, LLC v. E*Trade Securities, LLC (2007) 150 Cal.App.4th 1181, 1200, the Court of Appeal emphasized that, after granting a petition to compel arbitration and staying a lawsuit, the scope of jurisdiction that a trial court retains is extremely narrow: “Once a petition is granted and the lawsuit is stayed, the action at law sits in the twilight zone of abatement with the trial court retaining merely vestigial jurisdiction over matters submitted to arbitration.”  Id.   

There are, however, narrow circumstances where a trial court has jurisdiction to lift a stay.  Under its ‘vestigial’ jurisdiction, a court may: (1) appoint arbitrators if the method selected by the parties fails (CCP §1281.6); (2) grant a provisional remedy “but only upon the ground that the award to which an applicant may be entitled may be rendered ineffectual without provisional relief” (CCP §1281.8(b)); and (3) confirm, correct or vacate the arbitration award (CCP §1285).  Absent an agreement to withdraw the controversy from arbitration, however, no other judicial act is authorized. (Byerly v. Sale (1988) 204 Cal.App.3d 1312, 1315.)  In the interim, the arbitrator takes over.  It is the job of the arbitrator, not the court, to resolve all questions needed to determine the controversy. (Van Tassel v. Superior Court (1974) 12 Cal.3d 624, 627.)   

DISCUSSION 

Defendant argues the Court has jurisdiction to decide its motion (1) under CCP §1281.8, (2) under CCP §1292.6, (3) because the parties so stipulated, and (4) because the arbitration contract adopted JAMS rules which provides for the Court’s jurisdiction to decide “interim measures.”  The Court disagrees and concludes it does not have jurisdiction to decide Defendant’s motion for reasons set forth below.   

First, Defendant relies on CCP §1281.8(b) to argue the Court has authority to lift the stay to grant a “provisional remedy.” But §1281.8(a) defines a “provisional remedy” to include only the following: “(1) Attachments and temporary protective orders issued pursuant to Title 6.5; (2) Writs of possession issued pursuant to Article 2; (3) Preliminary injunctions and temporary restraining orders issued pursuant to Section 527; (4) Receivers appointed pursuant to Section 564.”  The provisional remedies envisioned by¿§1281.8 are of the kind “designed to enable the plaintiff in a civil action to protect against dissipation of property by the defendant during the pendency of the action, with consequent loss of the benefits of a judgment.”  Manhattan Loft LLC v. Mercury Liquor Inc. (2009) 173 Cal.App.4th 1040, 1054.  Defendant’s motion for an order to set the amount of cash deposit in lieu of surety bonds is not among the allowed types of provisional remedies.  (See Manhattan Loft LLC, 173 Cal.App.4th at 1054 (holding that although lis pendens was a provisional remedy, because it is not mentioned in the limited language of §1281.8(a), the court could not grant such relief).)  Nor is Defendant’s motion intended to protect against dissipation of assets by Plaintiffs which would render an arbitration award meaningless.  Defendant has not alleged any attempts by Plaintiffs to dissipate assets, nor has it explained how its motion to set aside would prevent dissipation by Plaintiffs.  As Defendant admits, its motion is intended simply to aid in a refinancing.   

In addition, CCP §1281.8(b) states the Court may grant a provisional remedy “only upon the ground that the award to which an applicant may be entitled may be rendered ineffectual without provisional relief.” The logical reason for the requirement that an applicant be required to show that an arbitration award may be rendered ineffectual is to “ensure that the court does not invade the province of the arbitrator — i.e., the court should be empowered to grant provisional relief in an arbitrable controversy only where the arbitrator's award may not be adequate to make the aggrieved party whole.”  (Woolley v. Embassy Suites (1991) 227 Cal.App.3d 1520, 1528.) 

Here, Defendant has failed to show that any potential award in arbitration to which Defendant may be entitled would be “rendered ineffectual” unless the relief it seeks were granted.  It has not shown that in the event it prevails in the arbitration and receives a net positive award for money damages, Plaintiffs would not have the money to pay that relief unless a cash deposit was posted in lieu of a surety bond.  Rather, the sole purpose for Defendant’s request of a provisional remedy is to allow it to complete a refinancing.  That is not a legitimate purpose for a provisional remedy under CCP §1281.8(b).  (See Woolley, 227 Cal.App.3d at 1529 (reversing court’s grant of preliminary injunction; “the possibility that an arbitration award might be rendered ineffectual is a threshold minimum requirement for obtaining a preliminary injunction under section 1281.8”). 

Defendant relies on Lambert v. Superior Court (1991) 228 Cal.App.3d 383, to argue that the Court has jurisdiction under §1281.8(b).  In Lambert, the court of appeals directed the trial court to vacate its order denying a property owner’s motion to remove a mechanic’s lien imposed on the property by a general contractor.  The Lambert court ruled that the trial court may consider the motion on its merits despite a pending arbitration.  Id. at 387-388.  The Lambert court, however, never considered the issue of whether a motion to remove a mechanic’s lien was one of the provisional remedies allowed under §1281.8(b).  Id. at 388.  Moreover, the appellate court noted the trial court would not infringe on the arbitrator’s jurisdiction because the issue before it was “limited to the probable validity of the lien” that “would not require examination of the minute details of the contractor’s accounting.” Id. at 387.  Here, Defendant is not challenging the validity of the lien but asking the Court to look into the “minute details of the contractor’s accounting” including whether the lien is duplicative or excessive.  

Second, Defendant cites to CCP §1292.6 to argue that the “Legislature explicitly empowered the Superior Court to consider any additional petition regarding the agreement to arbitrate.”  Motion at 10.  But under §1292.6, the Court’s jurisdiction is restricted only to motions and petitions explicitly provided for in Title 9 of the CCP, none of which include Defendant’s present motion.  Title 9 only provides for the following petitions: (1) to compel arbitration (§1281.2), (2) to consolidate separate but related arbitrations (§1281.3), (3) to stay arbitration (§1281.4), and (4) to confirm, correct or vacate an award and enter judgment upon it (§§1285, 1287.4).  (Valsan Partners Limited Partnership v. Calcor Space Facility Inc. (1994) 25 Cal.App.4th 809, 820.)   Nowhere does the code provide the Court jurisdiction to hear and determine a motion for an order setting the amount of cash deposit in lieu of a surety bond. 

Third, Defendant claims the requirements in the foregoing code sections were somehow superseded by the parties’ stipulation that the Court retain jurisdiction “for all other purposes.”  Ex. 29 to Dunn Decl.  Defendant’s reading of the stipulation produces an absurd result.  The parties could not have intended that the case go to arbitration, yet the Court retain jurisdiction “for all [] purposes.”  Rather, a more proper reading of the phrase “for all other purposes” is that it is limited to the preceding clause which gives the Court jurisdiction to “enforce any order or enter judgment on any arbitration order or award that may be issued.”  Ex. 29 to Dunn Decl. 

Fourth, Defendant also argues the parties contemplated recourse to the Court for “interim” or provisional relief because the contract adopts the JAMS Arbitration Rules which state that the court’s decision on “interim measures” is “not incompatible with the agreement to arbitrate.”  Defendant has cited no authority – and the Court has found none – that the arbitration rules can trump the codes which clearly delimit the Court’s jurisdiction to decide matters during a pending arbitration.   

Lastly, Defendant’s motion presents the classic case of why the Court should have limited jurisdiction to lift a stay and provide relief.  Defendant is essentially seeking review of the arbitration panel’s decision denying its “Motion for Order Expunging or Reducing Duplicative and Excessive Liens”.  Defendant argued before the arbitration panel, as it does here, that the liens are duplicative and excessive and should be reduced.  Motion at 17-18; Ex. 6 to Turner Decl.  The arbitration panel concluded that “[a]t this early stage of the proceeding and without the benefit of an evidentiary hearing, the Panel finds that it is inappropriate to determine the merits of or to reduce and expunge any lien.”  Ex. 6 to Turner Decl.  Accordingly, Defendant asks the Court to rule on an issue that was submitted to and decided by the panel, which would clearly frustrate the purpose of an arbitration.  Indeed, in its ex parte papers, Defendant acknowledged the relief it seeks here was already decided by the panel, because it asked the Court to vacate the panel’s decision as part of its request to set the amount of cash deposit.  Ex. 1 to RJN.  While Defendant has now withdrawn its request to vacate the panel’s decision and its motion has excised all references to the panel’s prior ruling, its request would still subvert the ruling of the panel.        

CONCLUSION 

Based on the foregoing, the Court DENIES Defendant 8600 Wilshire Boulevard’s motion for an order setting the amount of cash deposit in lieu of surety bonds.   

 

IT IS SO ORDERED. 

 

DATED: October 25, 2022 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court