Judge: H. Jay Ford, III, Case: 22SMCV00924, Date: 2022-09-20 Tentative Ruling

Case Number: 22SMCV00924    Hearing Date: September 20, 2022    Dept: O

   Case Name:  Nulane Entertainment, LLC v. Notre Dame Properties Ltd. Liability Company, et al.

SUBJECT:                MOTION TO COMPEL ARBITRATION

MOVING PARTY:   Defendant Notre Dame Properties Ltd.

RESP. PARTY:         Plaintiff Nulane Entertainment, LLC

TENTATIVE RULING

            Defendant Notre Dame Properties Ltd.’s Motion to Compel Arbitration is GRANTED.  The action is stayed pending completion of arbitration pursuant to 9 USC §3 and CCP §1281.4. 

            Plaintiff and Defendant agree that an arbitration agreement applicable to the controversy exists.  Plaintiff seeks specific performance of the parties’ Purchase Agreement.  The Purchase Agreement contains a clearly applicable arbitration clause:  “The parties agree that any dispute or claim in law or equity arising between them out of this agreement or any resulting transaction…shall be decided by neutral binding arbitration…Enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act.”  See Complaint, Ex. A, Residential Purchase Agreement, Section XIXII(b). 

            Plaintiff also concedes that, under Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5^th 337, the language regarding enforcement of the arbitration agreement under the FAA renders CCP §1281.2(c) inapplicable.  See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5^th 337, 344-345 (arbitration provision providing that “enforcement [of the arbitration agreement] shall be governed by the [FAA]” incorporated procedural provisions of the FAA and trial court erred when it denied the motion to compel per CCP §1281.2(c)).  CCP §1281.2(c) vests the Court with discretion to deny a motion to compel arbitration if the litigation involves third parties who are not parties to the arbitration agreement and there is a possibility of conflicting rulings on common issues of law and fact.  Id.

However, Plaintiff argues the Addendum modified the arbitration provision, so that California law applied to enforcement of arbitration agreement, not the FAA.  Under the Addendum, the parties added the following clause:  “The laws of the State of California will exclusively apply with regard to any case or controversy arising hereunder.  The State and Federal Courts of California will have exclusive jurisdiction of any such case or controversy.”  See Opposition, Ex. 3, ¶4(c). 

As acknowledged by Plaintiff, whether the Addendum removed the incorporation of the FAA for enforcement of the arbitration agreement is an issue of contractual interpretation.  Interpretation of contract is a question of law for the court, and the goal should be to give effect to the mutual intent of the parties.  See Pacific Gas & E. Co. v. G.W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 37; MacKinnon v. Truck Ins. Exch. (2003) 31 Cal.4th 635, 647-648. (citing Cal. Civ.Code § 1636). Such intent is to be inferred, if possible, from the written provisions of the contract based on their “ordinary and popular sense,” unless a “technical sense or special meaning is given to them by their usage.”  Id. at 648 (citing Cal. Civ.Code §§ 1639, 1644, 1638).  If the contractual language is clear and explicit, it governs. Id.     

“If no extrinsic evidence was presented or if the extrinsic evidence was not in conflict, the resolution of the ambiguity is a question of law, which is subject to independent review on appeal.  Even where uncontroverted evidence allows for conflicting inferences to be drawn, our Supreme Court treats the interpretation of the written contract as solely a judicial function.”  Scheenstra v. California Dairies, Inc. (2013) 213 Cal.App.4th 370, 390.   

No extrinsic evidence was presented to resolve the question of whether the ¶4(c) deleted or amended Section XIXII(b) of the Residential Purchase Agreement.  As such, the Court relies on the language of the Residential Purchase Agreement and the Addendum to determine whether ¶4(c) deleted or amended Section XIXII(b). 

There is nothing in the language of the addendum indicating any intent to amend or delete Section XIXII(b).  In fact, the amendments to the Residential Purchase Agreement are identified in ¶2 of the Addendum under the headings “Amendments.”  The Amendments change existing terms in the Residential Purchase Agreement.  Parties could easily have included among the Amendments a deletion of the “enforcement” under the FAA language from the arbitration provision.  Parties did not. 

The only reasonable interpretation is that the items listed in ¶4 of the Addendum is that they should be read together with the Residential Purchase Agreement, so that ¶4(C)’s choice of law clause is included along with Section XIXII(b).  In that case, the two sections must be interpreted in a way that gives effect and validity to both clauses.  Civ. Code §1641 (“[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other”).  As such, the Court interprets Section XIXII(b)’s language regarding enforcement under the FAA to be limited to the specific issue of enforcement of the arbitration agreement, while ¶4(C) imposes a general choice of law clause in all other respects. 

Enforcement of the arbitration agreement is governed by the procedural provisions of the FAA.  CCP §1281.2(c) is therefore inapplicable.  Plaintiff offers no other defense to enforcement of the arbitration agreement.  Defendant’s Motion to Compel Arbitration is GRANTED.

Even if the Court had found that the enforcement language under Section XIXII(b) no longer applied and Plaintiff could invoke CCP §1281.2(c), Plaintiff fails to present any evidence or facts that would support exercising the Court’s discretion in favor of litigation and against arbitration.  CCP §1281.2(c) does not require the Court to deny arbitration if its requirements are satisfied.  CCP §1281.2(c) merely grants the Court several options if third parties are involved and there is a possibility of conflicting rulings on common issues of law and fact.  Among these options is to stay the litigation and compel arbitration. 

Under the facts presented, even if CCP §1281.2(c) applied, stay of this litigation while Plaintiff and Defendant Notre Dame arbitrate the claims is the most reasonable outcome.  The third parties are only collaterally involved, and they are not parties to the contract.  Ultimately, Plaintiff’s claims are for specific performance and/or damages for breach of contract .