Judge: H. Jay Ford, III, Case: 23SMCV04922, Date: 2024-03-28 Tentative Ruling

Case Number: 23SMCV04922    Hearing Date: March 28, 2024    Dept: O

Case Name:  Stout, et al. v. Lesny, et al.

SUBJECT:                 (1)MOTION TO COMPEL ARBITRATION

                                    (2)MOTION TO CONSOLIDATE

MOVING PARTY:   (1) Defendant Rene R. Rivas and Dora G. Rivas

                                    (2) Plaintiffs Thomas M. Stout Jr., individually and as Trustee of the 2011 Stout Family Trust

RESP. PARTY:         (1) Plaintiffs Thomas M. Stout Jr., individually and as Trustee of the 2011 Stout Family Trust

                                    (2) Defendant Rene R. Rivas and Dora G. Rivas

TENTATIVE RULING

            Defendant Rene R. Rivas and Dora G. Rivas’ Motion to Compel Arbitration is GRANTED.  The Court orders this action stayed pending resolution of arbitration.  Defendants met their burden to establish the existence of a valid arbitration agreement. Plaintiffs did not meet their burden to challenge the existence and enforcement of the valid enforcement agreement. Enforcement of the arbitration agreement is under the FAA as per arbitration agreement. Given the Court’s order granting Defendant’s motion to compel arbitration, Plaintiffs Motion to Consolidate is DENIED as moot.

“The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination.” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.)   “The party opposing arbitration has the burden of demonstrating that an arbitration clause cannot be interpreted to require arbitration of the dispute.” (Rice v. Downs (2016) 247 Cal.App.4th 1213, 1223, citing Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686-87.)   “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that 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…”  (Code Civ. Proc., § 1281.2.)  “A party opposing the petition bears the burden of proving by a preponderance of evidence any fact necessary to its defense.” (Olvera v. El Pollo Loco, Inc. (2009) 173 Cal.App.4th 447, 453.)

If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c), the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.

(Code Civ. Proc., § 1281.2.)

            Defendants Rene Rivas and Dora Rivas (“The Rivas Defendants”) move to compel arbitration based on the Arbitration Agreement within the California Residential Purchase Agreement (“Purchase Agreement”) entered into between the parties on 6-7-21. (Rivas Decl., Ex. 1, ¶ 22b.) The Purchase Agreement included an agreement to arbitrate any dispute or claim arising out of the Purchase Agreement.  The existence of this arbitration agreement is undisputed. The agreement states:

B. ARBITRATION OF DISPUTES: The Parties agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration. The Parties also agree to arbitrate any disputes or claims with Broker(s), who, in writing, agree to such arbitration prior to, or within a reasonable time after, the dispute or claim is presented to the Broker. The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of residential real estate Law experience, unless the parties mutually agree to a different arbitrator. The Parties shall have the right to discovery in accordance with Code of Civil Procedure §1283.05. In all other respects, the arbitration shall be conducted in accordance with Title 9 of Part 3 of the Code of Civil Procedure. Judgment upon the award of the arbitrator(s) may be entered into any court having jurisdiction. Enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act. Exclusions from this arbitration agreement are specified in paragraph 22C.

"NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY."

"WE HAVE READ ANO UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES' PROVISION TO NEUTRAL ARBITRATION."

(Rivas Decl., ¶ 1, Ex. 1 at ¶22B, emphasis added.)

            It is undisputed the Plaintiffs’ claims in this action against the Rivas Defendants arise out of the Purchase Agreement “or any resulting transaction.”

            Plaintiffs argue the California Arbitration Act (“CAA” - Code of Civil Procedure, §§ 1280–1294.2), and not the Federal Arbitration Act (“FAA”), should govern the enforcement of the arbitration agreement. Plaintiffs argue CCP § 1281.2(c) applies because the Purchase Agreement adopts California Law. (Oppo., pp. 6–7; Motion to Consolidate, pp. 7–8.)  Further, Plaintiffs argue there are third parties involved in the real estate transaction that are not signatories to the arbitration agreement.  Therefore, Plaintiff’s argue the Court can and should deny the motion to compel arbitration under CCP 1281.2(c) because there is a “possibility of conflicting rulings on common issues of law or fact should the matter proceed to arbitration.” (Oppo, p. 6)  In their opposition, Plaintiffs do not raise any challenge to the enforcement of the arbitration agreement.    

            However, in their Reply Memorandum filed in support of Plaintiff’s motion to consolidate this action with another pending arbitration proceeding, Plaintiffs argue, without any evidence, that the Rivas Defendants “waived” their rights to arbitration.  The Court sustains the Rivas Defendants’ objection to this new matter raised for the first time in their Reply Memorandum.    

            The Rivas Defendants argue that the Federal Arbitration Act (“FAA”) applies to the enforcement of the arbitration agreement because it expressly states  “[E]nforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act.” The Rivas Defendants show the resolution of this issue is governed by  the holding of Victrola 89, LLC v. Jaman Props. 8 LLC (2020) 46 Cal.App.5th 337, 346. There, the Court held that under the exact same circumstances and with identical arbitration agreement language as at issue in this case, “when an agreement provides that its “enforcement” shall be governed by the FAA, the FAA governs a party's motion to compel arbitration.”  Thus, the Rivas Defendants argue the FAA preempts the application of CCP § 1281(c) and the Motion to Compel Arbitration must therefore be granted.    

For the same reasons as in Victoria, supra, the Court finds the FAA preempts the application of  CCP § 1281(c).  The Court finds that the FAA governs the enforcement of the Arbitration Agreement. “The FAA embodies a clear federal policy in favor of arbitration.” (Simula, Inc. v. Autoliv, Inc. (9th Cir. 1999) 175 F.3d 716, 719.) “The standard for demonstrating arbitrability is not high . . . . [the] FAA leaves no place for the exercise of discretion by a district court, but instead mandates that district courts direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” (Ibid.)

            The Court finds that since there is a valid arbitration agreement entered into by the parties, and the Plaintiffs did not meet their burden to challenge the agreement, the Motion to Compel Arbitration is GRANTED and orders this action is stayed. pending resolution of arbitration.