Judge: H. Jay Ford, III, Case: 23SMCV04195, Date: 2025-02-11 Tentative Ruling

Case Number: 23SMCV04195    Hearing Date: February 11, 2025    Dept: O

Case Name:                           Lipson v. The Irvine Company, LLC, et al.

SUBJECT:                MOTION TO COMPEL ARBITRATION

MOVING PARTY:   Defendant Contract Services Group, Inc.

RESP. PARTY:         Plaintiff Susan Jennifer Lipson

TENTATIVE RULING

            Defendant Contract Services Group, Inc.’s Motion to Compel Arbitration is GRANTED. The Court proceedings shall be stayed pending arbitration.

            Pursuant to Code of Civil Procedure section 1281.2, “[o]n petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement.” (Code Civ. Proc., § 1281.2.) 

            “If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, 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.” (Code Civ. Proc., § 1281.4.) 

Prior Demand for Arbitration 

            A party seeking to compel arbitration under Code of Civil Procedure Section 1281.2 must “plead and prove a prior demand for arbitration under the parties’ arbitration agreement and a refusal to arbitrate under the agreement.” (Mansouri v. Super. Ct. (2010) 181 Cal.App.4th 633, 640; Civ. Proc. Code, § 1281.2.) 

            Here, Defendant Contract Services Group, Inc. (“CSG”) does not expressly state a demand for arbitration was made to Plaintiff Susan Jennifer Lipson (“Plaintiff”). However, CSG contends Plaintiff refuses to submit her claims against CSG to arbitration. (Mot. at 3:13-15.) Thus, one can reasonably infer that a prior demand for arbitration was made to Plaintiff and was refused.   

Existence of a Valid Agreement 

            The party moving to compel arbitration has the initial burden to (1) affirmatively admit and allege the existence of a written arbitration agreement, and (2) prove the existence of that agreement by a preponderance of the evidence.  (Rosenthal v. Great W. Fin. Sec. Corp, 14 Cal. 4th 394, 413.) Once this is met, the burden shifts to the responding party to prove that the agreement is unenforceable by a preponderance of the evidence.  (Ibid.) 

            In establishing the existence of an agreement to arbitrate, it is sufficient for defendant to provide a copy of the arbitration agreement or state the paragraph verbatim.  (Baker v. Italian Maple Holdings, LLC, 13 Cal.App.5th 1152, 1160 (2017); Cal. Rules of Court, Rule 3.1330.) 

            Here, Defendant CSG has produced the Lease Agreement and Master Services Agreement, which both contain arbitration clauses. (Bassi Decl., ¶, Ex. D; Toledo Decl., ¶, Ex. A.) The Lease Agreement (“Lease”) is between Plaintiff and Defendant Playa Villas Malibu, LLC, while the Master Services Agreement (“MSA”) is between CSG and the Irvine Management Company, respectively. (Id.)

The Lease includes the following arbitration clause:

“NOTICE: BY SIGNING IN THE SPACE BELOW YOUA RE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY THE FEDERAL ARBITRATION ACT AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR BY A JURY TRIAL. BY SIGNING BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE OTHERWISE SPECIFICALLY INCLUDED IN THIS ADDENDUM. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF APPLICABLE LAW. YOUR AGREEMENT TO THIS ARBITRAITON PROVISION IS VOLUNTARY. I HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES, AS DESCRIBED ABOVE, TO NEUTRAL ARBITRATION.”

The MSA includes the following arbitration clause:

“OWNER AND VENDOR AGREE THAT ANY DISPUTES ARISING BETWEEN THEM IN CONNECTION WITH THE MASTER SERVICES OR ANY DIVISION SERVICES CONTRACT OR THE SERVICES PROVIDED THEREUNDER (INCLUDING BUT NOT LIMITED TO A DETERMINATION OF ANY AND ALL OF THE ISSUES IN SUCH DISPUTE, WHETHER OF FACT OF LAW) SHALL BE DETERMINED BY BINDING ARBITRATION.”

            The parties do not dispute the Lease contains an agreement between Plaintiff and Defendant Playa Villas Malibu, LLC to arbitrate certain claims arising out of Plaintiff’s tenancy. Likewise, the parties do not dispute the MSA contains an agreement between CSG and the Irvine Management Company to arbitrate certain claims arising out of the contractual obligations. However, Plaintiff asserts she cannot be compelled to arbitrate her claims against CSG because she is a nonsignatory to the MSA and her claims against CSG are not intimately founded in and intertwined with the Lease. As such, the threshold issue is whether Plaintiff, a nonsignatory to the MSA can be compelled to arbitrate her claims against CSG. Alternatively, the court must decide whether Plaintiff’s claims against CSG are intimately founded in and intertwined with her claims against Playa Villas Malibu, LLC such that it would be equitable to compel her to arbitrate her claims against CSG.

            “Generally speaking, one must be a party to an arbitration agreement to be bound by it or invoke it.” (Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 763.) Nevertheless, “[t]here are exceptions to the general rule that a nonsignatory to an agreement cannot be compelled to arbitrate and cannot invoke an agreement to arbitrate, without being a party to the arbitration agreement.” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236–1237.) These exceptions are: “ ‘(a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or alter ego; (e) estoppel; and (f) third-party beneficiary’ [citations].” (Benaroya v. Willis (2018) 23 Cal.App.5th 462, 469.) Here, CSG argues estoppel, agency, and alter ego theories to support compelling Plaintiff to arbitrate her claims.

1.     Equitable Estoppel

            Under the doctrine of equitable estoppel, “a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are ‘intimately founded in and intertwined’ with the underlying contract obligations. [Citations].” (JSM Tuscany, LLC, supra,  93 Cal.App.4th 1237 (emphasis added).) “By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement. [Citations].” (Id.) “The rule applies to prevent parties from trifling with their contractual obligations. [Citations].” (Id.)

            Here, Plaintiff has sued Defendants The Irvine Company, LLC (“Irvine Co.”), Playa Villas Malibu, LLC (“PVM”), and CSG under four negligence theories: negligence, premises liability, vicarious liability, and negligent hiring, supervision, or retention. The Complaint alleges that Plaintiff slipped on a liquid substance on the floor and sustained injuries as a result, at Malibu Apartment Homes, Villas Playa Vista (the “Premises”), where she is a tenant. (Compl., ¶¶10-11.) The Complaint further alleges that Defendants owned, maintained, leased, managed, or controlled the Premises in a negligent manner. (Id. at ¶¶13, 16.) As such, Plaintiff’s claims arise out of her tenancy with PVM, an agent of the Irvine Co., and rely on the rights and responsibilities of PVM and Plaintiff created by the Lease. Although Plaintiff contends her claims against CSG do not arise out of her tenancy with PVM, CSG provides janitorial services to Irvine Co. via the MSA and the Complaint allegations that the Defendants failed to identify, replace, repair, or warn about the liquid substance on the floor (Compl., ¶16), essentially intertwines the janitorial services provided by CSG with Irvine Co. and PVM’s contractual obligations under the Lease.

            Therefore, equitable estoppel applies to allow CSG to enforce the arbitration clauses in the Lease and MSA against Plaintiff.

2.     Agency Principles

            Next, Defendant CSG asserts Plaintiff must be compelled to arbitrate her claims under agency principles because contends the Complaint alleges that both the signatory Defendants and nonsignatory Defendants were acting as agents of each other.

            “A nonsignatory to an agreement to arbitrate may be required to arbitrate, and may invoke arbitration against a party, if a preexisting confidential relationship, such as an agency relationship between the nonsignatory and one of the parties to the arbitration agreement, makes it equitable to impose the duty to arbitrate upon the nonsignatory.” (Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 765; see also Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1285.) “Courts look to traditional principles of contract and agency law to determine whether a nonsignatory is bound by an arbitration agreement signed by its principal or agent.” (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 860.) “Ostensible authority exists to the extent that ‘a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess’ such authority.” (Id.)

            Here, the Complaint does allege a preexisting agency relationship between CSG and the nonsignatory defendants to the Lease and MSA. In paragraph 5 of the Complaint,, Plaintiff alleges all the Defendants including the Doe defendants are “the agent, partner, co-joint venturer, associate, and/or employee of one or more of the other Defendants, and was acting in the course and scope of such agency, partnership, joint venture, association, and/or employment when the acts giving rise to the causes of action occurred.” (Compl., ¶5.) Defendant CSG was previously named as Doe 1 before Plaintiff amended the Complaint after discovering its true name. Nonetheless, it would not be equitable to impose a duty to arbitrate on Plaintiff under the agency theory because the MSA explicitly states the following:

“No Agency. Vendor is an independent contractor. Nothing in this Master Agreement or any Division Services Contract shall create an employment, agency, joint venture or partnership relationship between the parties. Vendor has no right to bind Owner in any manner except to the extent that Owner specifically authorizes Vendor to do so in regard to any application or other matter required as a part of the Services.”

(Toledo Decl., ¶3, Ex. A –  Master Services Agreement, ¶ 23(a).)

            The MSA further identifies the Owner as the Irvine Co. and Vendor as CSG. Thus, Defendant CSG and Irvine Co. by the express terms of the MSA are not agents, employees, joint venturers, or partners of each other.

            Therefore, agency principles are inapplicable to allow Defendant CSG to enforce the arbitration clause in the Lease and MSA against Plaintiff.

3.     Alter Ego Theory

            Finally, Defendant CSG briefly argues Plaintiff is required to arbitrate her claims against CSG because she alleges in her Complaint that CSG and the other defendants are alter egos of each other. (Compl., ¶5.)

            “Indeed, while an agent is one who acts on behalf of a corporation, an alter ego is one who, effectively, is the corporation.” (Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1285.) In Rowe, the plaintiff sued defendants for breach of a contract on the grounds of alter ego and the contract itself contained an agreement to arbitrate. (Id.) Furthermore, the complaint in Rowe contained allegations that the defendants entered into the contract and were entitled to the benefit of the arbitration provisions. (Id.) This instant case is distinguishable from Rowe because Plaintiff has not sued the Defendants for breach of contract but rather for negligence, premises liability, vicarious liability, and negligent hiring, supervision, or retention. Therefore, the alter ego theory is inapplicable here to compel Plaintiff to arbitrate her claims against Defendant CSG.

            4.         Remaining findings:

            Plaintiff does not raise any issues regarding enforceability of the Lease and MSA on the grounds of unconscionability. Moreover, Plaintiff’s argument pursuant to Code of Civil Procedure Section 1281.2, subdivision (c) is unpersuasive. Defendant CSG was not a named defendant at the time Defendants Irvine Co. and PVM filed their motion to compel arbitration, therefore no court action was pending between Plaintiff and third party pursuant Section 1281.2, subdivision (c) existed.

            Finally, Plaintiff contends that Defendant CSG waived its right to arbitrate. In reply, Defendant CSG argues it has not waived it right to arbitrate. Both Plaintiff and Defendant CSG cite to case law that has been recently overruled by the Supreme Court of California in Quach v. California Commerce Club, Inc. (2024) 16 Cal. 5th 562.

            Prior to Quach, in determining whether waiver had occurred, the courts would apply the multifactor test set forth in St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal. 4th 1187. (See Spracher v. Paul M. Zagaris, Inc. (2019) 39 Cal.App.5th 1135, 1138 citing to St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal. 4th 1187.) However, “[c]ourts should not apply the St. Agnes factors as a single multifactor test for determining whether the right to compel arbitration has been lost through litigation. [Citations].” (Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, 584.) “Instead, a court should be careful to consider only those factors that are relevant to the specific state-law defense the party resisting arbitration has raised.” (Id.) “To establish waiver under generally applicable contract law, the party opposing enforcement of a contractual agreement must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it.” (Id.) “Its intentional relinquishment or abandonment of the right may be proved by evidence of words expressing an intent to relinquish the right or of conduct that is so inconsistent with an intent to enforce the contractual right as to lead a reasonable factfinder to conclude that the party had abandoned it.” (Id.)

  Here, the court is not persuaded that Plaintiff has met its burden to show Defendant waived its right to arbitration. The court finds Defendant CSG’s statements and conduct of filing an Answer to the Complaint, scheduling mediation, and serving objections to propounded discovery to preserve its affirmative defenses, persuasively shows an intent to relinquish or abandon CSG’s right to the arbitration of the Plaintiff’s claims. 

            Accordingly, Defendant Contract Services Group, Inc.’s Motion to Compel Arbitration is GRANTED. The Court proceedings shall be stayed pending arbitration.