Judge: Lynette Gridiron Winston, Case: 22PSCV01925, Date: 2025-04-28 Tentative Ruling
Case Number: 22PSCV01925 Hearing Date: April 28, 2025 Dept: 6
CASE NAME: Michael Rosas, et al. v. OC Auto Exchange dba LA Auto Exchange, et al.
Defendants OC Auto Exchange dba LA Auto Exchange, Western Surety Company, and Capital One Auto Finance, Inc.’s Motion to Lift Stay and Dismiss the Action
TENTATIVE RULING
The Court DENIES Defendants OC Auto Exchange dba LA Auto Exchange, Western Surety Company, and Capital One Auto Finance Inc.’s motion to lift stay and dismiss the action.
Defendants are ordered to give notice of the Court’s ruling within five calendar days of this order.
BACKGROUND
This is a fraud action. On November 21, 2022, plaintiffs Michael Rosas and Odalys Rosas (collectively, Plaintiffs) filed this action against defendants OC Auto Exchange dba LA Auto Exchange, a California corporation, Western Surety Company, a South Dakota corporation, Capital One Auto Finance Inc., a Texas Corporation (collectively, Defendants), and Does 1 through 10. On February 21, 2023, Plaintiffs filed the operative First Amended Complaint against Defendants and Does 1 through 10, alleging causes of action for fraud & deceit, negligent misrepresentation, violation of Business and Professions Code section 17200, action for rescission of sales contract for sale of goods pursuant to California [sic] Code section 1698, violation of California Civil Code section 1632, violation of the Song-Beverly Consumer Warranty [sic], Civil Code section 1790, et seq., violation of the Consumers [sic] Legal Remedies Act – Equitable and Injunctive Relief, and violation of Vehicle Code section 11711.
On March 5, 2025, Defendants moved to lift the stay and dismiss this action. The motion is unopposed.
LEGAL STANDARD
“Once a trial court has compelled claims to contractual arbitration, the court has ‘very limited authority with respect to [the] pending arbitration.’ [Citation.]… ‘Once a court grants [a] petition to compel arbitration and stays the action at law, the action at law sits in the twilight zone of abatement with the trial court retaining merely a vestigial jurisdiction over matters submitted to arbitration’ to determine, upon conclusion of the arbitration proceedings, whether an award on the merits requires dismissal of the legal action. [Citation.]’ [Citations.]” (Lew-Williams v. Petrosian (2024) 101 Cal.App.5th 97, 105 (Lew-Williams).) “[W]hen a plaintiff ‘fail[s] to timely prosecute the arbitration,’ a defendant’s ‘only avenue for redress’ is in the arbitration proceeding. [Citations.]” (Id. at p. 106; see also Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1808 [remedy for dilatory tactics in arbitration proceedings is to “move in the arbitration proceedings to terminate them for failure to pursue the arbitration claim with reasonable diligence”].)
DISCUSSION
Defendants move the Court to lift the stay entered on April 26, 2023, in which the parties stipulated to staying this action and arbitrating this dispute with AAA. (Stipulation and Order (4/26/23).) Defendants indicate that Plaintiffs have yet to initiate arbitration proceedings for more than two years at this point. Defendants indicate that they are unable to have this matter dismissed by the arbitrator because Plaintiffs never filed the demand for arbitration, no arbitrator has been appointed, and Defendants cannot file claims against themselves in arbitration. (Sirey Decl., ¶¶ 2-8.) Defendants contend that Plaintiffs’ failure to file this action in arbitration undermines the policy purpose of arbitration, i.e., to provide a speedy and relatively inexpensive means to resolve this dispute. Defendants contend the Court has power to lift the stay because there is no appointed arbitrator with conflicting jurisdiction, and indefinite stays are discouraged. Defendants contend the lack of prosecution of this case in arbitration undermines judicial efficiency, has caused unnecessary delay, and has prejudiced Defendants’ ability to resolve the dispute.
Defendants then ask the Court to dismiss this action due to Plaintiffs’ failure to pursue arbitration for more than two years, per Code of Civil Procedure section 583.420, subdivision (a)(2)(B). Defendants contend Plaintiffs’ failure to initiate arbitration has resulted in an unjustifiable delay and indefinite dormancy, and that Plaintiffs have failed to prosecute this action. Defendants contend Plaintiffs have had enough time to pursue arbitration, and their failure to initiate arbitration is a clear case of unreasonable delay.
The Court lacks jurisdiction to grant this motion. (Lew-Williams, supra, 101 Cal.App.5th at p. 107 [trial court exceeded its jurisdiction in dismissing claims for failure to prosecute after it had previously ordered those claims to arbitration and stayed the action].) On April 26, 2023, the parties stipulated to staying this action and proceeding to arbitration, and the Court issued such orders. (Stipulation and Order (4/26/23).) The fact that Plaintiffs failed to initiate arbitration over the past two years does not permit the Court to now intervene and dismiss this action for failure to prosecute. (Lew-Williams, supra, 101 Cal.App.5th at p. 107.) At this point, the power to dismiss lies with the arbitrator. (Id.)
Once the Court ordered the claims to arbitration, “under its ‘vestigial’ jurisdiction, a court may: appoint arbitrators if the method selected by the parties fails (§ 1281.6); grant a provisional remedy ‘but only upon the ground that the award to which an applicant may be entitled may be rendered ineffectual without provisional relief’ (§ 1281.8, subd. (b)); and confirm, correct or vacate the arbitration award (§ 1285).” (Lew-Williams, supra, 101 Cal.App.5th at pp. 105-106.) “Absent an agreement to withdraw the controversy from arbitration, … no other judicial act is authorized.” (Id.)
Moreover, contrary to Defendants’ assertion, “the AAA Commercial Arbitration Rules and Mediation Procedures (AAA rules or rule) expressly recognize that a defendant may initiate arbitration. (See AAA rule R-4(a)(ii)(c) [“The party filing the [d]emand with the AAA is the claimant and the opposing party is the respondent regardless of which party initiated the court action.”].)” (Lew-Williams, supra, 101 Cal.App.5th at p. 109.) Defendants did not provide any evidence to support their contention that they cannot initiate the arbitration. Although Defendants would need to pay the filing fee, they ultimately will not be unfairly burdened with the expense because the arbitrator can apportion the fees in the final award. (Id.)
Further, once the arbitration has commenced, Defendants “may request the arbitrator issue orders to control and expedite the proceeding (AAA rule R-24), and the arbitrator may issue sanctions for violations.16 (See AAA rule R-60(a) [“The arbitrator may, upon a party's request, order appropriate sanctions where a party fails to comply with its obligations under these Rules or with an order of the arbitrator.”].)” (Lew-Williams, supra, 101 Cal.App.5th at pp. 109-110.) Further, if Plaintiffs refuse to participate in the arbitration, the arbitration may proceed in their absence. (Id. citing AAA rule R-32.) The arbitrator also has discretion to dismiss the arbitration due to a party's failure to proceed with reasonable diligence. (Id.)
Thus, the remedy for Defendants here is to initiate the arbitration and use whatever remedies afforded them for Plaintiffs’ dilatory tactics. (Id. at pp. 105, 109-110; Brock v. Kaiser Foundation Hospitals, supra, 10 Cal.App.4th at p. 1808.)
Based on the foregoing, the Court DENIES the motion.
CONCLUSION
The Court DENIES Defendants OC Auto Exchange dba LA Auto Exchange, Western Surety Company, and Capital One Auto Finance Inc.’s motion to lift stay and dismiss the action.
Defendants are ordered to give notice of the Court’s ruling within five calendar days of this order.