Judge: Jon R. Takasugi, Case: 23STCV15382, Date: 2024-01-25 Tentative Ruling

Case Number: 23STCV15382    Hearing Date: January 25, 2024    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendant’s motion to compel arbitration is GRANTED, and this action is ordered stayed pending the completion of arbitration.

On 6/30/2023, Plaintiffs Andrew Luft, Jennifer Patterson, KPM Holdings, LLC, Caryn Waechter, Rajinder Sekhon, Hyung Shin Na as trustee of the Hyung Shin Na Livign Trust U/A, dated 7/14/2017 (collectively, Plaintiffs) filed suit against Glenhurt Ventures, LLC (Defendant), alleging: (1) violations of building standards for original construction pursuant to California Civil Code section 896 and 897.

            Now, Defendant moves to compel Plaintiffs to arbitrate its Complaint, and stay this proceeding pending the completion of arbitration.

Legal Standard

Where the Court has determined that an agreement to arbitrate a controversy exists, the Court shall order the petitioner and the respondent to arbitrate the controversy …unless it determines that…  grounds exist for rescission of the agreement.” (Code Civ. Proc., § 1281.2.) Among the grounds which can support rescission are fraud, duress, and unconscionability. (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.) The Court may also decline to compel arbitration wherein there is possibility of conflicting rulings on a common issue of law or fact. (Code Civ. Proc., § 1281.2 (c).)

Discussion

The party moving to compel arbitration “bears the burden of proving [the] existence [of an arbitration agreement] by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) The moving party also bears the burden of demonstrating that the claims fall within the scope of the arbitration agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.)

            Here, Defendant submitted evidence that the CC&Rs require that construction disputes between Plaintiffs and Defendant be arbitrated.

            More specifically, Defendant submitted evidence that it recorded CC&Rs against the community on 12/8/2017, which notified Plaintiffs that any disputes associated with or relating to the design and/or construction of the community must be resolved through binding arbitration. Section 10.3 of the CC&R provides in relevant part:

10.3 DISPUTES WITH DECLARANT PARTIES. Any dispute between the Association or any Owners, on the one hand, and the Declarant, or any director, officer, partner, shareholder, member, employee, representative, contractor, subcontractor, design professional or agent of the Declarant (each, a “Declarant Party,” and collectively the “Declarant Parties”), on the other hand, is a “Dispute” that shall be resolved in accordance with the following alternative dispute resolution procedures…

10.3.4 BINDING ARBITRATION. IN THE EVENT THAT A DISPUTE WITH A DECLARANT PARTY IS NOT RESOLVED PURSUANT TO SECTIONS 10.3.1, 10.3.2 OR 10.3.3, SUCH DISPUTE SHALL BE SUBMITTED TO AND RESOLVED BY BINDING ARBITRATION. ARBITRATION SHALL BE MANDATORY AND BINDING, AND SHALL BE GOVERNED BY THE FEDERAL ARBITRATION ACT AND THE CALIFORNIA ARBITRATION ACT (TO THE EXTENT IT IS CONSISTENT WITH THE FEDERAL ARBITRATION ACT)…

…

(n) AGREEMENT. BY TAKING TITLE TO OR ANY LEGAL INTEREST IN ALL OR ANY PORTION OF THE COMMUNITY, THE ASSOCIATION AND EACH OWNER ARE DEEMED TO AGREE TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THIS SECTION 10.3 ENTITLED “DISPUTES WITH DECLARANT PARTIES” DECIDED BY NEUTRAL BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT AND THE CALIFORNIA ARBITRATION ACT, TO THE EXTENT THE CALIFORNIA ARBITRATION ACT IS CONSISTENT WITH THE FEDERAL ARBITRATION ACT, AND THE PARTIES ARE GIVING UP ANY RIGHTS THE PARTIES MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY TAKING TITLE TO OR ANY LEGAL INTEREST IN ANY PORTION OF THE COMMUNITY SUBJECT TO THIS SECTION 10.3, THE PARTIES ARE GIVING UP THEIR RESPECTIVE JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THIS SECTION 10.3 ENTITLED “DISPUTES WITH DECLARANT PARTIES.” IF A PARTY REFUSES TO SUBMIT TO ARBITRATION AFTER TAKING TITLE TO OR ANY LEGAL INTEREST IN ANY PORTION OF THE COMMUNITY AND AGREEING, IN CONNECTION THEREWITH, TO THE FOREGOING PROVISIONS, SUCH PARTY MAY BE COMPELLED TO ARBITRATE UNDER THE FEDERAL ARBITRATION ACT AND THE CALIFORNIA ARBITRATION ACT, TO THE EXTENT THE CALIFORNIA ARBITRATION ACT IS CONSISTENT WITH THE FEDERAL ARBITRATION ACT. BY EXECUTING ANY GRANT DEED OR OTHER INSTRUMENT CONVEYING, BY FEE OR EASEMENT, ANY PORTION OF THE COMMUNITY, THE GRANTEE THEREIN SHALL BE DEEMED TO ACKNOWLEDGE THAT ITS AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.

(Coppola Decl., Exh. B, pp. 47-52.) 

In opposition, Plaintiffs do not dispute being bound by the CC&Rs. However, they contend that the ADR provisions in the CC&Rs contain a multi-step process which Defendants have not abided by.

More specifically, Plaintiffs argue:

The ADR Provisions on which Defendant relies in its Motion to Compel Arbitration contain a multi-step process in which the parties are first required to attempt resolution, then mediate, and then potentially arbitrate a dispute in the event that the prior efforts did not reach resolution. Specifically, Section 10.3, entitled “Disputes With Declarant,” first requires Plaintiffs to send a Written Notice of Claim to Defendant regarding the construction defects. (Defendant’s Request for Judicial Notice (“DRJN”), Exhibit A, ¶10.3.1.)

Pursuant to Section 10.3.2 of the CC&Rs, upon receipt of the Notice of Claim, Defendant an its representatives “have the right to (a) meet with the party alleging the Dispute at a reasonable time and place to discuss the Dispute, (b) enter the Community to inspect any areas that are subject to the Dispute, and (c) conduct inspections and testing (including destructive or invasive testing) in a matter deemed appropriate” by Defendant. (DRJN, Exhibit A, ¶10.3.2.)

After inspections, Defendant is provided full access to the Community to take complete and corrective action, including construction repairs. (Id.) In the event the dispute is not resolved within ninety (90) days after receipt of the Notice, the Declarant has the option to submit the matter to mediation. (DRJN, Exhibit A, ¶10.3.3.) No deadline for submitting the matter to mediation is specified in the CC&Rs. (Id.) If the dispute has not been resolved after the parties have complied with Section 10.3.1, 10.3.2, and 10.3.3 of the CC&Rs, the CC&Rs next call for arbitration of the remaining claims. (DRJN, Exhibit A, ¶10.3.3.)

Plaintiffs further argue that SB800 requires that ADR procedures meet the minimum standards of the Civil Code, and that the ADR procedures here fail to meet that standard.

However, the Court agrees with Defendant that Plaintiffs are confusing prelitigation dispute resolution procedures with the right to arbitrate. These are two separate and distinct processes and both are separately enforceable. The arbitration provision set forth in the CC&Rs is authorized and protected by both Federal and California law. "California law, like federal law, favors enforcement of valid arbitration agreements." (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97.) "The Federal Arbitration Act (9 U.S.C. § 1 et seq.) incorporates a strong federal policy of enforcing arbitration agreements, including agreements to arbitrate statutory rights." (Id. at 96-97.) In this case, Plaintiffs filed suit against Defendant. Defendant is therefore entitled to rely on, and enforce, their arbitration agreement, and is not required first to utilize ADR methods for resolving pre-litigation construction disputes. Rather, Defendant must abide by the terms of the binding arbitration agreement, and in moving to compel arbitration has done so.

Here, Plaintiffs did not submit any evidence which could show that a binding arbitration agreement does not exist, nor have they advanced any argument by which to show that the agreement is unconscionable and therefore unenforceable.

Moreover, Defendant is not barred from enforcing the arbitration agreement because it was inactive at the time the complaint was filed. Glenhurt Ventures is currently active and in good standing with the Secretary of State. 

Based on the foregoing, Defendant’s motion to compel arbitration is granted, and this action is ordered stayed pending the completion of arbitration.

It is so ordered.

Dated:  January    , 2024

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.  For more information, please contact the court clerk at (213) 633-0517.