Judge: Edward B. Moreton, Jr., Case: 22SMCV00841, Date: 2022-10-13 Tentative Ruling

Case Number: 22SMCV00841    Hearing Date: October 13, 2022    Dept: 200

Superior Court of California

County of Los Angeles

Beverly Hills Courthouse | Department 200

Background

This case arises from Defendant Violet QOZB Owner LLC’s (“Defendant”) retention of Plaintiff Ninyo & Moore Geotechnical Environmental Sciences Consultants (“Plaintiff”) to perform testing and related services at a property located at 11777 San Vicente Blvd, Los Angeles, California.  Plaintiff contends Defendant has failed to remit payments due under the retention agreement.  In March 2022, Plaintiff recorded a mechanic’s lien against the property to collect the unpaid balance owed by Defendant.  On June 2, 2022, Plaintiff filed its Complaint in this action seeking to recover its unpaid fees through enforcement of the mechanic’s lien or on related theories of breach of contract and services rendered.

Defendant was served with the Complaint on June 13, 2022, through its registered agent for service of process.  Defendant has not answered the Complaint or otherwise made an appearance in this action.  Plaintiff moves the Court to compel the action to arbitration and stay proceedings pending conclusion of the arbitration.

Motion to Compel Arbitration Standard

      Under both the Title 9 section 2 of the United States Code (known as the Federal Arbitration Act) and the Title 9 of Part III of the California Code of Civil Procedure commencing at section 1281 (known as the California Arbitration Act, hereinafter “CAA”), arbitration agreements are valid, irrevocable, and enforceable, except on such grounds which exist at law or equity for voiding a contract.  (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)  

      California Code of Civil Procedure section 1281.2 permits a party to file a motion to request the Court order the parties to arbitrate a controversy.  (Code Civ. Proc., § 1281.2.)  Under Code of Civil Procedure section 1281.2, the Court must grant the motion “if the Court determines that an agreement to arbitrate the controversy exists”, unless one of four limited exceptions apply.  (Ibid.)  The statutory exceptions arise where: (a) the right to compel arbitration has been waived by the petitioner; (b) grounds exist for rescission of the agreement; (c) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues; or (d) the petitioner is a state or federally chartered depository institution seeking to compel arbitration pursuant to a contract whose agreement was induced by fraud or without respondent’s consent.  (Ibid.)  

      Under Code of Civil Procedure section 1281.2, the party moving to compel arbitration bears the burden of demonstration “that an agreement to arbitrate the controversy exists.”  (Code Civ. Proc., § 1281.2.)  “With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.”  (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160 [emphasis in original].)  “Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges.” (Ibid.; see also Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [“The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability”].)

Analysis

As Plaintiff brings this action to enforce a mechanic’s lien, Code of Civil Procedure section 1281.5 is triggered.  Section 1281.5 was enacted by the Legislature specifically to address a holding by the Court of Appeal which deemed parties to have waived contractual arbitration provisions by bringing actions to enforce a mechanic’s lien.  As the Court explained in R. Baker, Inc. v. Motel 6, Inc.:

[Prior] to the enactment of section 1281.5 in 1977, the filing of an action on a contract without seeking to preserve arbitration constituted a waiver of a contract provision for arbitration. (Titan Enterprises, Inc. v. Armo Construction, Inc. (1973) 32 Cal.App.3d 828, 832 . . . .)  In Titan, plaintiff, a subcontractor [,] filed an action against the contractor seeking to enforce a mechanic's lien.  The rule in Titan created a “damned if you do damned if you don’t” situation for a plaintiff wishing to file a mechanic’s lien, and to arbitrate his claim.  If the time limits for filing a mechanic’s lien were not followed, an action to enforce the lien could not be maintained.  But, if the action to enforce the mechanic's lien was properly brought, the materialman would waive any rights to arbitration.  Section 1281.5 came to the rescue. (Legis. Counsel's com.; Stats. 1977, ch. 135, Assem. Bill No. 322.) ( R. Baker, Inc. v. Motel 6, Inc. (1986) 180 Cal.App.3d 928, 930-931.)

Section 1281.5(a) requires a party seeking to preserve their arbitration rights to either state in the complaint that it “does not intend to waive any right of arbitration, and intends to move the court, within 30 days after service of the summons and complaint, for an order to stay further proceedings in the action” or bring an application to stay concurrently with the filing of the complaint.

Plaintiff claims it has complied with the first option under 1281.5(a) by including the required language in its Complaint.  Paragraph 2 of Plaintiff’s Complaint states “Plaintiff does not intend to waive any right to arbitration arising from the valid, enforceable and irrevocable written agreement to arbitrate controversies arising out of the written agreement that is the subject of this action.  Plaintiff intends to move the court for an order pursuant to C.C.P. §§ 1281.2, 1281.4 to stay further proceedings in this action.”  The Court notes Plaintiff’s Complaint makes no mention of the 30-day period as required by section 1281.5(a).  As originally enacted, section 1281.5 did not provide a specific time in which a party must apply for a stay before being deemed to have waived arbitration.  However, section 1281.5 was amended in 2003 to add the 30-day period to subdivision (a) and impose a new clear timing requirement now codified at section 1281.5(b).

            Under section 1281.5(b), a party is deemed to have waived arbitration if it does not file and serve its motion within 30 days after service of the summons and complaint: “Within 30 days after service of the summons and complaint, the claimant shall file and serve a motion and notice of motion pursuant to Section 1281.4 to stay the action pending the arbitration of any issue, question, or dispute that is claimed to be arbitrable under the agreement and that is relevant to the action to enforce the claim of lien. The failure of a claimant to comply with this subdivision is a waiver of the claimant’s right to compel arbitration.”

            Defendant was served with the summons and complaint on June 13, 2022. Plaintiff thus had 30 days, or until July 13, to file and serve its motion to compel arbitration and stay proceedings.  Plaintiff filed its notice and supporting documents on July 19, and its memorandum of points and authorities on July 20.  Plaintiff’s motion is thus untimely under section 1281.5(b). Further, Plaintiff’s motion does not include a proof of service showing the motion has been served on Defendant as required by section 1281.5(b).  Plaintiff has thus not complied with the timing requirements of section 1281.5(b) and by the plain language of the statute Plaintiff is deemed to have waived arbitration.

            This waiver applies not only to Plaintiff’s cause of action seeking foreclosure of the mechanic’s lien, but also applies to the causes of action for breach of contract and services rendered.  Von Becelaere Ventures, LLC v. Zenovic (2018) 24 Cal.App.5th 243 (“Zenovic”) is instructive here.  In Zenovic the plaintiff had contracted with defendant to construct a single-family residence.  A dispute arose between the parties and defendant filed a mechanics lien against the property.  The plaintiff then filed an action against defendant in state court for breach of contract, negligence, and other causes of action.  Defendant filed a separate state court action seeking to enforce its mechanic’s lien and moved to compel arbitration of plaintiff’s claims pursuant to an arbitration clause in the construction contract.  The trial court denied defendant’s motion to compel arbitration, finding defendant had waived the right to arbitrate plaintiff’s claims by filing the separate action to enforce the mechanic’s lien without complying with Code of Civil Procedure section 1281.5.

            The Court of Appeal affirmed, holding section 1281.5 “means what it says” and “In this case, [defendant] did not file the Orange County action to enforce the mechanics lien until after [plaintiff] filed the San Diego action. [Plaintiff’s] action alleged disputes regarding [defendant's] billing practices and specifically included allegations related to [defendant's] actions in recording and attempting to enforce his mechanics lien. In his motion to compel arbitration, [defendant] agreed that all of [plaintiff’s] causes of action qualified as arbitrable construction disputes. Yet, [defendant] neither included an allegation in the complaint filed in the Orange County action stating he did not intend to waive any right of arbitration and intended to seek a stay of the Orange County action (§ 1281.5(a)(1)), nor filed an application for stay at the time he filed the complaint in the Orange County action (§ 1281.5(a)(2)). His failure to do so waived the right to arbitrate construction disputes under the terms of the construction contract.”  (Zenovic, supra, 24 Cal.App.5th at 250-251.)

The same result follows here. The Court thus finds Plaintiff has waived the right to arbitrate all of his claims against Defendant by failing to comply with the express requirements of Code of Civil Procedure section 1281.5. Accordingly, Plaintiff’s motion to compel arbitration and stay proceedings is DENIED.

Conclusion

            Plaintiff’s motion to compel arbitration and stay proceedings is DENIED.

Dated: October 13, 2022

__________________________________________

Edward B. Moreton, Jr.

Judge of the Superior Court