Judge Mark E. Windham, Case Number: 24STLC03073, Date: 2024-07-29 Tentative Ruling

Judge: Mark E. Windham, Case: 24STLC03073, Date: 2024-07-29 Tentative Ruling

Case Number: 24STLC03073 Hearing Date: July 29, 2024 Dept: 26

European Paving Designs, Inc. v. AMG & Associates, Inc., et al.

PETITION TO COMPEL ARBITRATION AND STAY PROCEEDINGS

(CCP §§ 1281.2, et seq., 638)

TENTATIVE RULING:

Defendant AMG & Associates, Inc.’s Motion to Compel Arbitration is GRANTED. THE ACTION IS STAYED PENDING MEDIATION AND/OR ARBITRATION.

AN ORDER TO SHOW CAUSE REGARDING STATUS OF MEDIATION AND/OR ARBITRATION IS SET FOR JANUARY 27 2025 AT 9:30 AM IN DEPARTMENT 26 IN THE SPRING STREET COURTHOUSE.

ANALYSIS:

On April 26, 2024, Plaintiff European Paving Designs, Inc. (“Plaintiff”) filed the instant

action for breach of contract against Defendants AMG & Associates, Inc. (“Defendant AMG”) and Travels Casualty and Surety Company (“Defendant Travelers”). The Complaint alleges causes of action for (1) Breach of Contract; (2) Work, Labor and Services/Agreed Price; (3) Open-Book Account; (4) Account Stated; (5) Claim for Recovery on Contractors License Bond; and (6) Violation of Prompt Payment Statute.

Defendant AMG filed the instant Motion to Compel Arbitration and Stay Action Pending Arbitration on May 30, 2024. Plaintiff filed an opposition on July 16, 2024.

Discussion

The Motion is brought pursuant to Code of Civil Procedure section 1281, et seq., which provides in relevant part:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(a) The right to compel arbitration has been waived by the petitioner; or

(b) Grounds exist for the revocation of the agreement.

(Code Civ. Proc., § 1281.2, subds. (a)-(b).) Defendant AMG demonstrates the existence of an arbitration agreement between the parties in their construction agreement. (Citing Compl., Exh. 1, Art. 14.) The arbitration provision states:

A. “All claims, disputes and matters in question arising out of or relating to this Agreement, or the breach thereof, except for claims described in paragraph B shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect unless the Parties mutually agree otherwise, provided, however, that only one arbitrator or shall hear the dispute regardless of the amount in controversy. The Parties agree to participate, in good faith, in mediation as an express condition precedent to the initiation of any arbitration proceeding. The costs of the foregoing mediation shall be split evenly by the parties.

B. The agreement to arbitrate shall not apply to any claim:

1. Primarily for contribution or indemnity asserted by one Party to this Agreement against the other Party and arising out of an action brought in a state or federal court; or

2. Required to be resolved in a different manner by the Prime Contract.

(Ibid.) The Complaint alleges causes of action for breach of contract and common counts against Defendant AMG, as well as violation of the statute for prompt payment. The Court finds that all of these causes of action are related to the subcontractor agreement and subject to the terms of the arbitration agreement.

It has long been the rule in California that a broadly worded arbitration clause, such as we have here, may extend to tort claims that may arise under or from the contractual relationship. “There is no requirement that the cause of action arising out of a contractual dispute must be itself contractual. At most, the requirement is that the dispute must arise out of contract.” (Crofoot v. Blair Holdings Corp. (1953) 119 Cal.App.2d 156, 182,

(Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) Here, the common count and statutory causes of action may not be contractual in nature but arise from a dispute that has its basis in the parties’ written agreement. The Court finds, therefore, that all the causes of action alleged against Defendant AMG in the Complaint are subject to arbitration.

Plaintiff also argues that Defendant AMG has waived the right to arbitration by failing to respond to its initial communications. Plaintiff served a formal settlement demand upon Defendant AMG in which it explained the nature and basis of its claims, referenced the mediation and arbitration provisions within the agreement, and requested a response by a date certain. (Opp., Cabal Decl. ¶2, Ex. 1.) Defendant AMG did not respond. (Id.) Regarding waiver,

State law, like the FAA, reflects a strong policy favoring arbitration agreements and requires close judicial scrutiny of waiver claims. (Christensen v. Dewor Developments (1983) 33 Cal.3d 778, 782, 191 Cal.Rptr. 8, 661 P.2d 1088.) Although a court may deny a petition to compel arbitration on the ground of waiver (§ 1281.2, subd. (a)), waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof. [Citations omitted.]

In Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 72 Cal.Rptr.2d 43, the Court of Appeal referred to the following factors: “In determining waiver, a court can consider ‘(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether “the litigation machinery has been substantially invoked” and the parties “were well into preparation of a lawsuit” before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) “whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place”; and (6) whether the delay “affected, misled, or prejudiced” the opposing party.’ ”

(St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195-1196.) Although Plaintiff cites the factors relevant to waiver, it does not analyze them in the opposition. Only the first factor leans in Plaintiff’s favor because Defendant’s failure to respond to the mediation and arbitration reference is somewhat inconsistent with the right to arbitrate. However, there has been no substantial invocation of the litigation machinery, no request to arbitrate close to the trial date, no lengthy delay in seeking arbitration, no counterclaim by Defendant AMG, and no apparent prejudice to Plaintiff. Therefore, Plaintiff has not met this “heavy burden of proof” to demonstrate that Defendant AMG has waived the right to arbitration.

The Court finds there are no grounds to deny the instant Motion. In light of the Motion to Compel Arbitration being granted, a stay of the action is appropriate under Code of Civil Procedure section 1281.4.

Conclusion

Defendant AMG & Associates, Inc.’s Motion to Compel Arbitration is GRANTED. THE ACTION IS STAYED PENDING MEDIATION AND/OR ARBITRATION.

AN ORDER TO SHOW CAUSE REGARDING STATUS OF MEDIATION AND/OR ARBITRATION IS SET FOR JANUARY 27 2025 AT 9:30 AM IN DEPARTMENT 26 IN THE SPRING STREET COURTHOUSE.

Moving party to give notice.