Judge: Gary I. Micon, Case: 22CHCV00392, Date: 2024-06-13 Tentative Ruling

Case Number: 22CHCV00392    Hearing Date: June 13, 2024    Dept: F43

Dept. F43

Date: 6-13-24

Case #22CHCV00392, Aqua Blue Construction, Inc., et al. vs. John Goshorn

Trial Date: N/A

MOTION AND REQUEST TO STAY PROCEEDINGS

MOVING PARTY: Plaintiffs/Cross-Defendants Aqua Blue Construction, Inc., and Britton Julien

RESPONDING PARTY: Defendant/Cross-Complainant John Goshorn

RELIEF REQUESTED

Plaintiffs are requesting that the Court stay all proceedings pending their appeal.

RULING: Motion to stay is granted.

SUMMARY OF ACTION

Plaintiffs Aqua Blue Construction, Inc., and Britton Rodne Juliet (Plaintiffs) filed this action on May 31, 2022, after Defendant John Goshorn (Defendant) allegedly failed to pay for change orders to a pool and spa construction contract.

This Court ordered the parties to arbitration on December 29, 2022, based on arbitration agreement in the parties’ pool and spa construction contract, dated April 29, 2021.

On June 13, 2023, the arbitrator, Justice Richard D. Aldritch, held a preliminary management conference for the arbitration. At the conference, Plaintiffs’ objections to the arbitration being treated as a consumer case was discussed.

On June 15, 2023, the arbitrator issued a scheduling order and confirmed JAMS’ preliminary determination that this is a consumer case.

Plaintiffs failed to make timely payment of an invoice issues by JAMS on July 13, 2023, or within 30 days thereafter. On September 25, 2023, JAMS administratively stayed the arbitration and vacated the hearing dates. Plaintiffs then refused to pay JAMS’ additional invoice issued on August 4, 2023. Defendant claimed that because the case was stuck in procedural limbo with no hearing dates due to Plaintiffs’ failure to pay the fees, Defendant filed with the Court his notice of Plaintiffs’ material breach of the arbitration agreement and election to proceed in court pursuant to CCP § 1291.98 on November 7, 2023.

On April 12, 2024, this Court issued an order granting Goshorn’s motion for sanctions and awarding sanctions in the amount of $36,974.79. The Court denied Aqua Blue’s motion seeking an order to show cause for contempt against Goshorn for violating the Court’s order to arbitrate this matter. The Court also denied Aqua Blue’s motion seeking monetary sanctions against Goshorn for his decision to terminate the arbitration proceedings. The case was returned to Court and the arbitration stay was lifted. A corrected order was issued on April 15, 2024.

On May 2, 2024, Aqua Blue and Britton Julien filed an appeal of the Court’s April 12 order. The Court issued a nunc pro tunc order on May 17, 2024, striking the April 12, 2024. On May 24, 2024, the Court issued a second nunc pro tunc order correcting the April 15 order to show that it supersedes the April 12 order. On June 6, 2024, Aqua Blue and Britton Julien filed two appeals for the Court’s April 15 and May 24 orders.

On June 3, 2024, Aqua Blue and Britton Julien filed their motion and request to stay proceedings pending their appeals. Their appeal is based on the constitutionality of CCP sections relied upon by this Court in its ruling. They argue that granting the motion to stay proceedings is proper and would result in significant savings of judicial resources pending a decision on the appeal. They also argue that the motion is based entirely on the discretionary power of the Court to either grant or deny the stay of the proceedings. They also note that there was no automatic stay of proceedings attached to the filing of the currently pending appeals.

Goshorn filed his opposition on June 10, 2024. He argues that there is no good cause to stay the case because CCP § 1294(a) signifies the Legislature’s intent for cases such as this to proceed pending appeal, and he argues that Plaintiffs’ appeal is unlikely to succeed. Next, he argues that there is no basis to stay the case under CCP § 904.1(a)(12). Finally, Goshorn argues that justice delayed is justice denied.

ANALYSIS

Because this request for a stay is not based on any automatic stay, the only authority that Aqua Blue and Julien cite in support of their motion for a stay of proceedings is Cal. Rules of Court Rule 3.515(f). That rule reads as follows:

“In ruling on a motion for a stay order, the assigned judge must determine whether the stay will promote the ends of justice, considering the imminence of any trial or other proceeding that might materially affect the status of the action to be stayed, and whether a final judgment in that action would have a res judicata or collateral estoppel effect with regard to any common issue of the included actions.” (Rule 3.515(f).)

Aqua Blue and Julien argue that while there are no imminent trial dates, allowing this case to proceed would be a waste of time and judicial resources because they are predicting that the Court of Appeal will overturn this Court’s prior orders. They do not, however, cite any authority for why they are likely to succeed. They also argue that neither party will be prejudiced if the action is stayed for several months to allow the writs of mandate to be considered and ruled upon. Finally, they argue that a stay will ensure that neither party is forced to waste resources once the writs are ruled upon.

In his opposition, Goshorn argues that Aqua Blue applies the wrong standard. Rule 3.515 applies only to motions under CCP § 404.5. (See Cal. Rules of Court Rule. 3.515(a).) CCP § 404.5 applies to stays that are put in place pending a determination of whether coordination of complex cases is appropriate. Rule 3.515 would not be applicable to this case.

Goshorn’s counsel represents in his opposition that he is not aware of any standard expressed by the Legislature or the Rules of Court setting out factors to be considered in a request to stay for a breach of contract/fraud case, so Goshorn argues that the general good cause standard for granting any discretionary relief should apply.

Goshorn argues that that there is no good cause to stay the case. First, he points out that a recent amendment to CCP § 1294(a) by the Legislature eliminates the automatic stay for appeals of order denying petitions to compel arbitration, which is effectively what Aqua Blue and Julien are appealing. Next, he argues that Aqua Blue’s constitutional arguments are unlikely to succeed on appeal because the Court of Appeal has already repeatedly held that CCP § 1281.98 is not preempted by the Federal Arbitration Act. (See Hohenshelt v. Superior Court (2024) 99 Cal.App.5th 1319, 1325-1326; Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 645; and Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 783.) Goshorn also argues that because Aqua Blue previously opposed arbitrating the matter, did not request the case be compelled to arbitration in opposition to Goshorn’s motion under CCP § 1281.98, and served discovery and filed multiple motions with the Court after the arbitration was terminated, then an appellate court would be unlikely to now grant a request by Aqua Blue to compel arbitration once more.

While Goshorn also cites Hernandez v. Sohnen Enterprises 2024 WL 2313710, he does not acknowledge that it creates a split of authority among the Courts of Appeal as to whether CCP §§ 1281.97 and 1281.98 remain valid because they may now be preempted by the FAA.  Because the law is no longer clear, it makes sense to stay this case until the conflict is cleared up or this case is reviewed by the Court of Appeal.

Goshorn also argues that there is no basis to stay under CCP § 904.1(a)(12) because there is no authority that would indicate that an appeal of the sanctions award would justify a stay of the entire case.  However, Aqua Blue has challenged both the sanctions award and the arbitration withdrawal provisions upon which those sanctions were based.

Given the new uncertainty over the state of the law, the court believes it prudent to stay this matter for now.

Based on the foregoing, Aqua Blue and Julien’s motion and request for stay of proceedings is granted. The case is stayed pending the outcome of the appeal or some change of circumstances that might warrant lifting the stay.

Moving party to give notice to all parties.