Judge: Margaret L. Oldendorf, Case: 22AHCV01259, Date: 2023-04-17 Tentative Ruling

Case Number: 22AHCV01259    Hearing Date: April 17, 2023    Dept: P

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

NORTHEAST DISTRICT

I.         INTRODUCTION

            This action stems from a contract to construct an ADU (back house) on property owned by Plaintiff Alan Chan. Chan contracted with Defendant Chisel & Tool to perform the work. Chan alleges that problem arose early on, he refused to accept the work, and Chisel & Tool abandoned the project.

            The construction agreement contains an arbitration provision requiring that disputes be settled by arbitration with the American Arbitration Association. In February 2023, Chisel & Tool filed a demand for arbitration with the AAA. In March 2023, Chan filed his answer. Problems arose and Chan filed the present lawsuit. Chisel & Tool now moves for an order compelling Chan to arbitrate pursuant to the written agreement.

II.        LEGAL STANDARD

Code Civ. Proc. §1281.2 provides that upon petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate and a party’s refusal to submit to arbitration, the court shall order the parties to arbitrate the controversy if it determines that an agreement exists, unless it determines that the right to arbitrate has been waived, that grounds exist for revocation, or that a party to the agreement is also party to a pending litigation arising out of the same facts and there exists a possibility of conflicting rulings on a common issue of fact or law.  In such a situation, the court may (1) refuse to enforce the arbitration agreement and order intervention or joinder of all parties in a single action, (2) order intervention or joinder as to all or only certain issues, (3) order arbitration among the parties who have agreed to arbitration and stay the action pending outcome of arbitration, or (4) stay arbitration pending outcome of the litigation.

III.      ANALYSIS

            A moving party’s burden under Code Civ. Proc. §1281.2 is to show the existence of a written agreement to arbitrate and a party’s refusal to submit to arbitration. This is the unusual case where there is no dispute regarding the existence of a written agreement to arbitrate. Chisel & Stone has met its burden of establishing the existence of a written agreement to arbitrate the controversy. Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413. A copy of the contract is attached to both the Complaint and the motion. Paragraph 11.1 of the contract contains an arbitration provision. While Chisel & Stone presents no evidence that Chan has refused to arbitrate, the filing of this lawsuit itself is arguably evidence of such refusal. In opposition to this motion, Chan makes no argument that Chisel & Stone waived its right to demand arbitration or that grounds exist for revocation of the agreement. Consequently, to the extent it is not redundant based on the already-commenced arbitration, the motion to compel arbitration is granted.

            The true controversy here is not whether the parties have agreed to arbitrate, but what the rules of arbitration should be. The construction contract provides at ¶14.1 that in an arbitration or litigation the prevailing party shall be entitled to reasonable fees and costs. However, AAA has informed the parties it has determined this is a consumer dispute and therefore falls under Code Civ. Proc. §1284.3, which precludes arbitrators from requiring consumers to pay the fees and costs of an opposing party if the consumer does not prevail, including fee and costs of the arbitrator. Because ¶14.1 conflicts with this section, AAA has told the parties it will not arbitrate unless and until either (a) the parties both waive ¶14.1’s fee shifting provision or (b) there is a court order addressing this provision.

            Chan refuses to sign a waiver because AAA has made clear that doing so will give the arbitrator discretion to award fees and costs. In other words, AAA is asking Chan to waive his statutory rights under Section 1284.3.

            Chisel & Stone has apparently refused to sign a waiver because it would prefer to have the fee-shifting provision enforced. It disagrees with AAA’s conclusion that this is a consumer agreement, arguing that it is instead a construction agreement and therefore does not fall under Section 1284.3.

            Neither party cites any legal authority pursuant to which this Court may rule on an issue that is before the arbitrator, and the Court is aware of none. In fact, once a controversy has been submitted to arbitration a trial court retains only “vestigial jurisdiction” to make certain other orders pertaining to arbitration. Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487. “It is the job of the arbitrator, not the court, to resolve all questions needed to determine the controversy. [Citations.] The arbitrator, and not the court, decides questions of procedure and discovery.” Id. at 487-488.

            This is especially true where, as here, the arbitration language delegates arbitrability to the arbitrator, as ¶11.1 does.

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

            To reiterate, the true controversy here is not whether to arbitrate but what the rules of arbitration should be. Having agreed in writing to have arbitration administered by the American Arbitration Association, the parties must now comply with the rules set forth by that agency.

IV.      CONCLUSION AND ORDER

            Motion to compel arbitration pursuant to the terms of the written agreement is granted. This action is stayed pending completion of arbitration.

            Defendant is ordered to give notice.

Dated: ____________                                 ___________________________________

                                                                                  MARGARET L. OLDENDORF

                                                                            JUDGE OF THE SUPERIOR COURT