Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

MOVING PARTY: Defendants Sandra Hanover Ebner, individually and as trustee of Ebner and Hanover Trust, Stephen Ebner, individually and as trustee of Ebner and Hanover Trust  

 

RESPONDING PARTY: Plaintiff Mark Lange 

 

BACKGROUND 

This case arises from a dispute over the sale of a home.  Plaintiff Mark Lange entered into a written purchase agreement (the “Agreement’) with Defendant Ebner and Hanover Trust (the “Trust”) to purchase a home located at 5868 Deerhead Road, Malibu, California (the “Property”).  (Compl. ¶ 7.)  Defendants Sandra Hanover Ebner and Stephen Ebner are trustees of the Trust.   

  The Property had two septic tank systems.  At the time of the purchase, Plaintiff asked about the operating condition of the tanks.  Defendants’ real estate agent advised Plaintiff’s real estate agent that Defendants had contacted Mosser Plumbing to perform an inspection but the inspection did not go forward because Defendants had decided to sell.  (Id. ¶ 9.)   

In reality, Plaintiff claims Defendants did retain Mosser Plumbing to conduct an inspection of the septic systems on the property, and Mosser Plumbing provided Defendants with a written report which states in pertinent part “The conventional septic system is not compliant by the City Standard because of the slow drainage of the seepage pit that was water tested.”  (Id. ¶ 9.)  Mosser Plumbing recommended that Defendants “Hire a Civil Engineer to design a new system which will require treatment tank and disinfection components.”  (Id. ¶ 9.)   

Plaintiff was never given a copy of the Mosser Report by Defendants.  (Id. ¶10.)  Had Plaintiff known that the septic tank was not compliant and needed to be redesigned, Plaintiff claims he would never have bought the Property.  (Id. ¶11.)   

The operative complaint alleges four causes of action for (1) intentional misrepresentation, (2) negligent misrepresentation, (3) intentional non-disclosure, and (4) negligent non-disclosure.   

This hearing is on Defendants’ motion to compel arbitration.  Defendants argue that a valid arbitration agreement exists which requires arbitration of Plaintiff’s claims and the litigation should be dismissed or alternatively, stayed pending completion of the arbitration.   

LEGAL STANDARD 

The Federal Arbitration Act (“FAA”) applies to contracts that involve interstate commerce (9 U.S.C. §§ 1, 2), but since arbitration is a matter of contract, the FAA also applies if it is so stated in the agreement.  (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355 [260 Cal. Rptr. 3d 1] (“[T]he presence of interstate commerce is not the only manner under which the FAA may apply. … [T]he parties may also voluntarily elect to have the FAA govern enforcement of the Agreement”].)   

Here, the arbitration agreement states: “Enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act.”  (Ex. A to Ebner Decl.)  The language of this provision is unambiguous: the parties specified that the FAA governs the arbitration agreement. (Cf. Victrola 89, LLC, 46 Cal.App.5th at pp. 343, 348 (contracting parties’ explicit “reference to ‘enforcement’ under the FAA required the court to consider the [defendants’] motion to compel arbitration under the FAA.”).) 

Under the FAA, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration …”.  Moses H. Cone Memorial Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 24–25.  This federal policy favoring arbitration preempts any state law impediments to the policy’s fulfillment.  If a state law interferes with the FAA’s purpose of enforcing arbitration agreements according to their terms, the FAA preempts the state law provision, no matter how laudable the state law’s objectives. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 352.)  Under the supremacy clause of the United States Constitution (art. VI, cl. 2), the FAA requires any conflicting state law to give way. (Nitro-Lift Technologies, L. L. C. v. Howard (2012) 133 S.Ct. 500, 504). 

However, while the arbitration agreement here is governed by the FAA, the agreement may be enforced via the summary procedures provided by California arbitration law.  (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal. 4th 394, 409-410.)  It is a “general and unassailable proposition . . . that States may establish the rules of procedure governing litigation in their own courts,” even though the controversy is governed by substantive federal law.  (Felder v. Casey (1988) 487 U.S. 131, 138.)  By the same token, however, a state procedural rule must give way “if it impedes the uniform application of the federal statute essential to effectuate its purpose, even though the procedure would apply to similar actions arising under state law.” (McCarroll v. L.A. County etc. Carpenters (1957) 49 Cal. 2d 45, 61, 62.)   

“We think it plain the California procedures for a summary determination of the petition to compel arbitration serve to further, rather than defeat, the enforceability policy of the [FAA.]”  (Rosenthal, 14 Cal. 4th at 409.)  Code Civ. Proc. § 1281.2 and 1290.2 are neutral as between state and federal law claims for enforcement of arbitration agreements.  (Id.)  “They display no hostility to arbitration as an alternative to litigation; to the contrary, the summary procedure provided, in which the existence and validity of the arbitration agreement is decided by the court in the manner of a motion, is designed to further the use of private arbitration as a means of resolving disputes more quickly and less expensively than through litigation.”  (Id.) 

As with federal law, under California law, public policy favors arbitration as an efficient and less expensive means of resolving private disputes.  (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 8-9; AT&T Mobility LLC v. Concepcion, 563 U.S. at 339.)  To further that policy, Code Civ. Proc. §1281.2 requires a trial court to enforce a written arbitration agreement unless it finds (1) no written agreement to arbitrate exists, (2) the right to compel arbitration has been waived, (3) grounds exist for rescission of the agreement or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues.    

When seeking to compel arbitration, the initial burden lies with the moving party to demonstrate the existence of a valid arbitration agreement by a preponderance of evidence.  (Ruiz v. Moss Bros. Auto Group (2014) 232 Cal.App.4th 836, 841-42; Gamboa v. Northeast Community Clinic (2021), 72 Cal.App.5th 158, 164-65.)  It is sufficient for the moving party to produce a copy of the arbitration agreement or set forth the agreement’s provisions.  (Gamboa, 72 Cal.App.5th at 165.)  The burden then shifts to the opposing party to prove by a preponderance of evidence any defense to enforcement of the contract or the arbitration clause.  (Ruiz, 232 Cal.App.4th at 842; Gamboa, 72 Cal.App.5th at 165.)  The trial court then weighs all the evidence submitted and uses its discretion to make a final determination.  (Id.)   

If the court orders arbitration, then the court shall stay the action until arbitration is completed.  (See Code Civ. Proc., § 1281.4.) 

DISCUSSION 

In ruling on a motion to compel arbitration, the Court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law  help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541; Victoria v. Superior Court (1985) 40 Cal. 3d 734, 835.)  Even when the FAA applies, “interpretation of the arbitration agreement is governed by state law principles.”  (Hotels Nevada, LLC v. Bridge Banc, LLC (2005) 130 Cal.App.4th 1431, 1435.) 

Although “[t]he law favors contracts for arbitration of disputes between parties” (Player v. Geo. M. Brewster & Son, Inc. (1971) 18 Cal.App.3d 526, 534), “there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate[.]” (Weeks v. Crow (1980) 113 Cal. App. 3d 350, 353..)¿ “[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” (AT&T Technologies v. Communications Workers (1986) 475 U.S. 643, 648 (citations and internal quotations omitted); see also Sparks v. Vista Del Mar Child & Family Services (2012) 207 Cal.App.4th 1511, 1518¿ (“Because arbitration is a contractual matter, a party that has not agreed to arbitrate a controversy cannot be compelled to do so.”).)¿¿¿¿¿¿¿  

Here, Defendants argue Plaintiff signed an arbitration agreement, agreeing to submit to final and binding arbitration “any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction.”  (Ex. A to Ebner Decl. ¶ 28.B.)  Defendants’ motion is based on the argument that this provision encompasses tort claims.  The Court disagrees, even though plaintiff opposes the motion on different grounds. 

An arbitration provision that includes the “arising from” or “arising out of” language and a phrase such as “in connection with” or “relating to” extends the scope of an¿arbitration provision to also encompass tort claims having “‘their roots in the relationship between the parties which was created by the contract”.  (Rice v. Downs (2016) 248 Cal. App.4th 175, 189.)  In contrast, arbitration provisions using only phrases such as “arising out of” or “‘arising from’” are narrower in application and extend only to disputes relating to the interpretation and performance of the agreement.  (Id., citing Cobler v. Stanley,¿Barber, Southard, Brown & Associates¿(1990) 217 Cal.App.3d 518, 530; ¿Mediterranean Enterprises v. Sangyong Corp.¿(9th Cir. 1983) 708 F.2d 1458, 1461, 1464;¿Tracer Research Corp. v. National Environmental Services Co.¿(9th Cir. 1994) 42 F.3d 1292, 1295.)   

Rice v. Downs is instructive.  There, the parties agreed to arbitrate “any controversy between the parties arising out” of the agreements.  The trial court compelled arbitration of tort claims for legal malpractice, breach of fiduciary duty and rescission claims.  The appellate court reversed.  It held that a narrowly worded arbitration¿provision that applied only to controversies¿“arising out of” the agreements did not encompass¿tort claims based upon violation of an independent duty or right originating outside of the agreements.  (248 Cal.App.4th at 198.)   

As in Rice, here, the arbitration provision applies only to disputes “arising out of” the Agreement.  The provision is narrow and does not require arbitration of disputes “in connection with” or “relating to” the Agreement.  Tort claims are not encompassed within this arbitration provision.  Plaintiff has alleged only tort claims.  Accordingly, the claims are not subject to binding arbitration.     

EFund Capital Partners v. Pless¿(2007) 150 Cal.App.4th 1311 is distinguishable.  EFund¿involved an unusually worded arbitration provision applying to “‘[a]ny dispute or other disagreement arising from or out of’” the agreement.  (Id. at 1317.)  The appellate court not only concluded that each cause of action stemmed from the relationship created by the agreement and thus arose “‘from or out of’” it, it also distinguished the language of the parties’ arbitration clause from the standard narrow “arising out of” type of clause at issue here: “The crucial language in the … arbitration clause differs from¿that discussed in the two Ninth Circuit opinions relied upon by the trial court.  The critical language in the two Ninth Circuit opinions were ‘arising hereunder’ in¿Mediterranean Enterprises, Inc.¿and¿‘arising out of’ in¿Tracer Research.¿[Citations.]  By contrast the language in the arbitration clause in this case is materially broader—‘arising from or out of’—than that in¿Mediterranean Enterprises, Inc.¿or¿Tracer Research.” (150 Cal.App.4th at 1328.)   

Unlike in EFund, the arbitration clause at issue here says only “arising out of.”  It does not say “arising from or out of”. Therefore, it does not encompass tort claims with a basis independent of the contract. 

CONCLUSION 

Based on the foregoing, the Court DENIES Defendants’ motion to compel arbitration.   

 

IT IS SO ORDERED. 

 

DATED: October 24, 2023 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court