Superior Court of California 

County of Los Angeles 

Department 78 

 

UNIVERSAL PIPELINE, INC.,

Plaintiff, 

vs.

ELITE EARTHWORKS & ENGINEERING, et al.,

Defendants. 

 

 

  Case No.: 22STCV39594

 

DEFENDANT ELITE EARTHWORKS & ENGINEERING’S MOTIONS TO COMPEL ARBITRATION AND STAY PROCEEDINGS.   

Defendant Elite Earthworks & Engineering’s motions to compel arbitration and stay proceedings are DENIED.

Moving party to provide notice.

FACTUAL BACKGROUND  

This is an action for breach of contract, accounts stated, reasonable value, and enforcement of mechanic’s lien release bond. Plaintiff Universal Pipeline, Inc. (“UPI”) alleges that on October 25, 2021, Elite Earthworks & Engineering (“Elite”) entered into written agreements (“subcontract”) with UPI to provide all labor, materials, equipment, and services to install underground utilities for $2,293,497. (Compl., ¶10.) Elite modified the subcontract from time to time, which modified the prices set forth in the subcontract. (Compl., ¶11.) UPI furnished all labor, materials, services, and equipment for the project. (Compl., ¶12.) Despite performing all of its obligations, Elite has not paid the amount owed, which totaled $2,311,188.83 after Elite made more changes to the subcontract. (Compl., ¶¶13-15.)

PROCEDURAL HISTORY

On December 19, 2022, Plaintiff filed its Complaint.

On August 15, 2023, Defendant Harco National Insurance Company answered.

On August 16, 2023, Elite filed a motion to compel arbitration and stay action pending arbitration.

DISCUSSION

Elite moves to compel arbitration pursuant to an arbitration agreement contained in Article 11 of the parties’ Standard Agreement Between Contractor and Subcontractor.

California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, California Code of Civil Procedure section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967 [citations omitted]; Code Civ. Proc. § 1281.2.) 

In deciding a petition to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The party seeking arbitration has the “burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.) The trial court “sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Id.) General principles of contract law govern whether parties have entered a binding agreement to arbitrate. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236; see also Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) 

Whether there is a written agreement to arbitrate is a matter of contract, and courts must enforce arbitration contracts according to their terms. (Banc of California, National Association v. Superior Court of Los Angeles County (2021) 69 Cal.App.5th 357, 366.) A party cannot be required to submit to arbitrate any dispute to which he has not agreed to arbitrate. (Id.)

Existence of a Valid Agreement and Applicability to the Instant Claims

Here, Elite alleges that an arbitration agreement exists in Article E of the parties’ Standard Agreement Between Contractor and Subcontractor. The article reads in relevant part:

11.3 CONTRACTOR-SUBCONTRACTOR DISPUTE MITIGATION AND RESOLUTION

11.3.1 DIRECT DISCUSSIONS If the Parties cannot reach resolution on a matter relating to or arising out of the Agreement, the Parties shall endeavor to reach resolution through good faith direct discussions between the Parties’ representative, who shall possess the necessary authority to resolve such matter and who shall record the date of first discussions. If the Parties’ representatives are not able to resolve such matter within five (5) Business Days, the Parties’ representatives shall immediately inform senior executives of the Parties in writing that a resolution could not be reached. Upon receipt of such notice, the senior executives of the Parties shall meet within five (5) Business Days to endeavor to reach resolution. If the matter remains unresolved after fifteen (15) Days from the date of first discussion, the Parties shall submit such matter to the dispute resolution procedures selected in this ARTICLE 11.

11.3.2 MEDIATION If direct discussions pursuant to the subsection immediately above do not result in resolution of the matter, the Parties shall endeavor to resolve the matter by mediation. The mediation shall be convened within thirty (30) working Days of the matter first being discussed and shall conclude within forty-five (45) working Days of the matter being first discussed. Either Party may terminate the mediation at any time after the first session by written notice to the non-terminating Party and to the mediator. The costs of the mediation shall be shared equally by the Parties…

11.3.3 BINDING DISPUTE RESOLUTION If the matter is unresolved after submission of the matter to a mitigation procedure or to mediation, except as provided in §11.4, the Parties shall submit the matter to the binding dispute resolution procedure selected below:

11.3.3.1 ARBITRATION

X The Parties choose binding arbitration for any claim or dispute arising out of or relating to this Agreement. EACH PARTY WAIVES THEIR RIGHT TO BE HEARD IN A COURT OF LAW, with or without a jury.

…

11.3.3.4 LITIGATION

X Litigation in either the state or federal court having jurisdiction of the matter in the location of the Project.

If not indicated in §11.3.3, then litigation is the default and not arbitration.

The agreement states that the parties agreed to resolve disputes concerning the agreement through direct discussion. If that failed, the parties agreed to participate in mediation before proceeding to other dispute resolution. The parties do not dispute that they have participated in direct discussion and mediation and failed to resolve the dispute. (Petition to Compel Arbitration, ¶9; UPI’s Response, ¶9.) The agreement then states that should mediation fail, the parties shall submit the matter to the binding dispute resolution procedures listed under section 11.3.3. The section then lists Arbitration and Litigation, as well as a clause which states “If not indicated in §11.3.3, then litigation is the default and not arbitration.” Both arbitration and litigation are included as dispute resolution procedures under section 11.3.3. Additionally, section 11.3.3 does not specify whether the parties agreed to arbitration or litigation. To the contrary, section 11.3.3.4 states litigation shall be the default if a default option is not included in section 11.3.3. Because the agreement states on its face that litigation is the default, it appears the parties agreed to litigate this matter. 

Elite cites Civ. Code, section 1641 and argues that UPI waived its right to be heard in a court of law and that the Court may not cherry-pick parts of the agreement. Civ. Code, section 1641 provides that the 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. Here, if sections 11.3.3, 11.3.3.1, and 11.3.3.4 are read together, there is no default option listed in section 11.3.3 (since both options are checked) and section 11.3.3.4 states that in that case litigation is the default option. 

On the form contract there was a box to check to select arbitration as the default option and a box to check to select litigation as the default option. Here, both boxes were checked. (Article 11 of the Contract, Wilson Declaration, Exhibit A) Both boxes were checked when Elite provided the contract to UPI for signature. (Wilson Declaration, Paragraphs 4 and 5.) 

The contract then states that if not indicated one way or the other, litigation is the default method of dispute resolution.

Ambiguity exists when a contractual provision is susceptible to two or more reasonable constructions. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 847.)    

Here, the Court does not find the language of the contract ambiguous.

The parties signed a contract with the box checked for arbitration and the box checked for litigation, indicating that either method of dispute resolution was acceptable, thereby not choosing arbitration over litigation.

The additional contract language stating: “[I]f not indicated in §11.3.3, then litigation is the default” dictates that in such a situation as exists here (where there is not a choice of one or the other), then litigation is the default. Thus, according to the terms of the contract, checking both boxes is the same as checking none at all. 

The unambiguous language of the contract indicates that the parties did not agree to arbitrate disputes.

Elite’s Objection #2 to the Declaration of Mark Wilson in support of the opposition to the motion to compel arbitration is overruled. The Court declines to rule upon the rest of the objections as the information objected to was not relied upon in reaching the decision here.

The Court declines to rule upon Elite’s objections to the Declaration of Pedram Minoofar in support of the opposition to the motion to compel arbitration as the information in the declaration was not relied upon in reaching the decision here.

Because the parties did not agree to arbitrate this matter, the motion to compel arbitration is denied. Likewise, Elite’s motion to stay proceedings pending arbitration is denied.

DATED: September 29, 2023

                                                                    _______________________________ 

Hon. Jill Feeney 

Judge of the Superior Court