Judge: Jon R. Takasugi, Case: 24STCV14573, Date: 2024-09-03 Tentative Ruling

Case Number: 24STCV14573    Hearing Date: September 3, 2024    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

            Defendant’s motion to compel arbitration is GRANTED.

            On 6/11/2024, Plaintiff FEC Future Contractors & Engineers, Inc. (Plaintiff) filed suit against State of California Department of Transportation (Defendant), alleging: (1) breach of contract; (2) breach of implied warranty of correctness of plans and specification; and (3) declaratory relief.

            Now, Defendant moves to compel Plaintiff to arbitrate its Complaint, and to stay proceedings of this action.

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.)

A.    Existing Agreement

Plaintiff’s Complaint arises out of a contract (Contract) between it and Defendant.  Defendant submitted evidence that the 2018 Standard Specifics are incorporated into the Contract as part of the agreement. (See Complaint ¶ 9).

Defendant submitted evidence that 2018 Standard Specifications provide that the Contract is a public contract, governed by the Public Contract Code, and for which the sole remedy for resolution of any claims is by arbitration. (See RJN, Bowman Decl., Exh A.)

According to Section 9-1.22 of the 2018 Standard Specifications that were incorporated into the Contract:

Pub Cont Code § 10240 through 10240.13 provides for the resolution of contract claims by arbitration.

Start arbitration by filing a complaint with the Office of Administrative Hearings in Sacramento (1 CA Code Regs § 1350). File the arbitration complaint no later than 90 days after receiving the Department's final written decision on a claim. (Pub Cont Code § 10240.1).

 Section 10240 of the Public Contract Code states: “[t]he remedy for the resolution of claims arising under contracts made under the provisions of this chapter shall be arbitration pursuant to this chapter.” In addition, arbitration may only be waived by mutual, written agreement by the parties to the contract. (Pub. Cont. Code § 10240.10). “[A] "claim" means a demand for monetary compensation or damages, arising under or relating to the performance of a contract awarded under this chapter.” (Pub. Cont. Code § 10240.6).

Defendant submitted evidence that it has not agreed to waive arbitration. (Bowman Decl., ¶ X.)

Given that Defendant has established by a preponderance of the evidence that an arbitration agreement exists, and that Plaintiff’s claims are covered by that agreement, the burden shifts to the Plaintiff to establish that the arbitration clause should not be enforced. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236. (Pinnacle).)

II.               Plaintiff’s Burden 

The party opposing arbitration bears the burden of proving, by a preponderance of the evidence any defense, such as unconscionability or duress. (Pinnacle, supra, 55 Cal.4th at p. 236.)

In opposition, Plaintiff does not technically dispute that the Contract requires arbitration. However, Plaintiff argues that it must be allowed to litigate this action because to require arbitration would deprive it of any reasonable opportunity for relief.

As Plaintiff explains:

The Specifications established by Caltrans provide no deadlines for acceptance of a contract as complete or for Caltrans' performance of the claims procedure. The only deadlines established by the Specifications relate to the contractor's time to respond. For example, Section 9- 1.17C states that Caltrans' Engineer will provide a proposed final estimate but there is no timeline or deadline for the Engineer to do so after contract acceptance. But the same section gives the contractor only 30 days from receipt of the proposed final estimate to either accept the estimate or make a claim. (Katbi Decl., Exh. A.)

The next step in the claims procedure is for Caltrans to respond to any claim by issuing a Final Determination of Claims in accordance with Section -1.17D(3) of the Specifications. Caltrans has no limitation on when it can issue the Final Determination of Claims. However, once the contractor receives the Final Determination of Claims, it has a maximum of 90 days to file for arbitration. The Specifications Section 9-1.17D(3) clearly states that a contractor cannot seek arbitration until after the Final Determination is received: "Your failure to comply with the claims procedure is a bar to arbitration under Public Contract Code §10240.2."

In this case, Caltrans failed and refused to accept the contract as complete from September 2013 to May 30, 2024, depriving FEC of funds owed to it and the opportunity to bid and obtain other jobs. Even now, the claims process is not complete and Caltrans has not issued the final determination of claims. FEC cannot at this point seek arbitration.

            (Opp., 5: 5-22.)

            In other words, as the Contract is written, arbitration is not ripe until Caltrans has issued a Final Determination of Claims, yet there is no limitation on when Caltrans must issue the Final Determination of Claims. As such, Plaintiff contends it has been left in limbo as it awaits a final determination.

            While the Court sympathizes with Plaintiff’s position, Plaintiff does not cite any legal authority which could show that the Court has authority to depart from the Contract language to allow litigation to go forward here. As such, without any basis to not enforce the arbitration language, the Court cannot grant Plaintiff relief.

Moreover, Plaintiff has not offered any legal authority which could suggest that Defendant’s conduct amounts to waiver. (“This failure to cite pertinent legal authority is enough reason to reject the argument”); Akins v. State of California (1998) 61 Cal.App.4th 1, 50, 71 (contention waived by failure to cite legal authority).

Caltrans sent FEC its Proposed Final Estimate (PFE) on July 25, 2024, and FEC, within the time frames allowed by section 9-1.17C, submitted its claim report exceptions to the PFE on August 9, 2024. As such, the finds an insufficient basis to conclude that Caltrans has engaged in such delay or obstruction as to constitute waiver (assuming that such conduct could even show waiver, which Plaintiff has not established.)

            Based on the foregoing, Defendant’s motion to compel arbitration is granted.

It is so ordered.

Dated:  September    , 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.