Judge Michael E. Whitaker, Case Number: 22SMCV02461, Date: 2023-09-19 Tentative Ruling

Judge: Michael E. Whitaker, Case: 22SMCV02461, Date: 2023-09-19 Tentative Ruling

On November 28, 2022, Plaintiff Leonardo Parra (“Plaintiff”) filed a complaint against Defendants Paul C. Ferra (“Ferra”) and Melissa Oliver (“Oliver”) (collectively, “Defendants”) for (1) Breach of Written Contract; (2) Violation of Civil Code sections 1102, et seq.; (3) Fraud; and (4) Fraudulent Concealment stemming from Defendants’ alleged misrepresentation/failure to disclose conditions of the residential property Defendants sold to Plaintiff.

Defendants now move to compel Plaintiff to arbitrate his claims. Plaintiff opposes the motion and Defendants have replied.

“[T]he advantages of arbitration include a presumptively less costly, more expeditious manner of resolving disputes. It follows a party to a valid arbitration agreement has a contractual right to have its dispute with another party to the contract resolved quickly and inexpensively.” (Henry v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 99–100 [cleaned up].) Thus, “on petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that 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.” (Code Civ. Proc., § 1281.2; see also

EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1320 [the language in section 1281.2 compelling arbitration is mandatory].) The right to compel arbitration exists unless the court finds that the right has been waived by a party’s conduct, other grounds exist for revocation of the agreement, or where a pending court action arising out of the same transaction creates the possibility of conflicting rulings on a common issue of law or fact. (Code Civ. Proc., § 1281.2, subds. (a)-(c).)

“On a petition to compel arbitration, the trial court must first determine whether an agreement to arbitrate the controversy exists. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. The party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the respondent's signature.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543-544 [cleaned up].) The party seeking to compel arbitration must also “plead and prove a prior demand for arbitration and a refusal to arbitrate under the agreement.” (Mansouri v. Superior Court (2010) 181 Cal.App.4th 633, 640-641.)

And while the moving party on a motion to compel arbitration “bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, [a] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. The trial court sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842 [cleaned up]; see also Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [“The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability”].)

The parties do not dispute that the residential purchase agreement (“RPA”) contains a valid and binding alternative dispute resolution provision that provides, in relevant part, “The Parties agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action” and “The Parties agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration [….]” (See Exhibit A to Complaint, “RPA” at ¶ 22, subparagraphs A and B, respectively; Motion at pp. 3-4; Opposition at p. 3.) Moreover, Plaintiff does not dispute that the claims are encompassed within the scope of the RPA’s alternative dispute resolution provision.

Instead, on September 5, the day before Plaintiff’s opposition to the motion was due, Plaintiff filed a fictitious/incorrect name amendment to the complaint, naming Doe 1 as Coldwell Banker Residential Brokerage Company (“Coldwell Banker”). The RPA lists Defendant Ferra as the listing agent for seller, Defendant Oliver, and names Coldwell Banker as Defendant Ferra’s broker.

Plaintiff opposes the motion on the grounds that Defendants waived their right to arbitration by (1) ignoring the demand for mediation Plaintiff sent on October 10, 2022; and (2) waiting nearly a year before moving to compel arbitration. Plaintiff also argues that the motion should be denied because Coldwell Banker is not a party to the RPA, and as such, cannot be compelled to arbitration. As such, compelling Plaintiff and Defendants to arbitration would run the risk of inconsistent rulings on the same factual and legal issues.

“Waiver of the right to arbitrate does not require a voluntary relinquishment of a known right. For example, a party may waive the right by an untimely demand even without any intent to forgo the procedure. In this circumstance, waiver is similar to a forfeiture arising from the nonperformance of a required act.” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1203 (hereafter, Hoover) [cleaned up].) “Although participation in litigation of an arbitrable claim does not itself waive a party's right later to seek arbitration, at some point, litigation of the issues in dispute justifies a finding of waiver.” (Id. at p. 1204.) On the issue of what constitutes a “reasonable time” to demand arbitration, the Hoover court noted:

There is no fixed stage in a lawsuit beyond which further litigation waives the right to arbitrate. Rather, the court views the litigation as a whole in determining whether the parties' conduct is inconsistent with a desire to arbitrate. A defendant's removal of a case filed in state court to federal court does not by itself constitute an implicit waiver of the right to compel arbitration. But, a defendant's removal of a case to federal court, coupled with participation in several months of litigation, waives the right to arbitrate because electing to proceed in federal court on an arbitrable dispute is presumptive waiver of the right to arbitrate.

The presence or absence of prejudice from the litigation is a determinative issue. Because of the strong policy favoring arbitration, prejudice typically is found only where the petitioning party has unreasonably delayed seeking arbitration or substantially impaired an opponent's ability to use the benefits and efficiencies of arbitration. Prejudice sufficient for waiver will be found where instead of seeking to compel arbitration, a party proceeds with extensive discovery that is unavailable in arbitration proceedings.

(Id. at p. 1205 [cleaned up].) Similarly, in finding there was no waiver to arbitrate, the California Supreme Court noted, in part:

Although we have found no California or United States Supreme Court decisions on point, other courts that have addressed this issue hold that a petitioning party does not waive its arbitration rights merely by seeking to change judicial venue of an action prior to requesting arbitration. In so holding, those courts reason that a party is not required to litigate the issue of arbitration in an improper or inconvenient venue, and that a party's position on venue does not necessarily reflect a position on arbitrability. We agree with that reasoning, and find it consistent with California and federal case law holding that a waiver determination requires the consideration of all circumstances, including the absence or presence of prejudice.

(St. Agnes Medical Center v. PacifiCare of Cal. (2003) 31 Cal.4th 1187, 1205 (hereafter, St. Agnes) [cleaned up].)

In Hoover, the appellate court held that the defendant waived its right to arbitration by “actively litigating this action for more than a year and causing prejudice to Hoover.” (Hoover, supra, 206 Cal.App.4th at p. 1203.) In particular, the Hoover court determined that the defendant waived its right because it “[d]id not introduce the question of arbitration for almost a full year and [the defendant] conducted litigation in a style inconsistent with the right to arbitrate. The two failed efforts to remove the case to federal court and [the defendant’s] recalcitrant responses to discovery suggest its policy has been one of delay rather than seeking a more prompt and expeditious resolution through arbitration. During that time, [the defendant] availed itself of discovery mechanisms like depositions not available in arbitration. [The defendant] also solicited putative class members, in an effort to reduce the size of the class. Hoover was certainly strongly affected and prejudiced by [the defendant’s] delay, causing significant legal expenses.”

(Id. at p. 1205 [cleaned up]; but see St. Agnes, supra, 31 Cal.4th at p. 1201 [“a waiver generally does not occur where the arbitrable issues have not been litigated to judgment].)

Plaintiff’s first argument, that Defendants waived their right to arbitration by ignoring Plaintiff’s demand for mediation, is without merit. The RPA does not provide that a refusal to mediate constitutes a waiver of the right to arbitrate, and the language of the agreement suggests otherwise.

First, the RPA makes clear that the mediation provision and the arbitration provision are separate: “THIS MEDIATION PROVISION APPLIES WHETHER OR NOT THE ARBITRATION PROVISION IS INITIALED.” (RPA, ¶ 22. A.)

Second, the RPA specifically contemplates and provides a remedy in situations where the opposing party “refuses to mediate after a request has been made[.] (RPA, ¶ 22. A.) Specifically, any such party who refuses to mediate after a request is made “shall not be entitled to recover attorney fees, even if they would otherwise be available to that Party in any such action.” (Ibid.)

Third, the arbitration provision of the RPA provides for arbitration of “any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation[….]” (RPA, ¶ 22. B.) By the plain language of the RPA, any claim or dispute not resolved through mediation, whether because a party has refused to mediate it or because mediation efforts were ultimately unsuccessful, would be subject to arbitration under the agreement.

Plaintiff’s second argument, that Defendants unreasonably delayed in compelling arbitration, is equally unavailing.

Although Plaintiff filed the complaint in this matter on November 28, 2022, Plaintiff did not successfully serve Defendants until July 26, 2023. (See Proofs of Service filed August 7, 2023.) Thereafter, Defendants moved to compel arbitration on August 18, and filed a Reply brief in support of their motion to compel on September 12. But otherwise, they have not participated in the lawsuit.

Thus, Defendants have not unreasonably delayed or otherwise substantially engaged in the litigation for the Court to find a waiver of their right to seek to compel Plaintiff to arbitration.

Plaintiff argues that because Plaintiff has now named Coldwell Banker as a defendant, who is not a party to the RPA, the Court should not compel Plaintiff to arbitrate claims against Defendants, because the dual arbitration and litigation proceedings would run the risk of inconsistent rulings on the same factual and legal issues. The Court disagrees.

The RPA provides: “The Parties also agree to arbitrate any disputes or claims with Broker(s), who, in writing, agree to such arbitration prior to, or within a reasonable time after, the dispute or claim is presented to the Broker.” (RPA ¶ 22. B.) Because Plaintiff recently named Coldwell Banker as a defendant, it is too soon to know whether Coldwell Banker will agree to arbitration. Defendants have represented in the Reply that “Coldwell Banker is expected to agree to participate in the arbitration.” (Reply at p. 2, n. 1 and p. 7.)

But even if Coldwell Banker does not voluntarily agree to arbitrate, Plaintiff can move to compel Coldwell Banker to arbitrate once Coldwell Banker has been properly served with the summons and complaint and served with a notice of motion and motion to compel it to arbitration, provided Plaintiff has a legal and factual basis to do so.[1]

If Coldwell Banker will not agree, and cannot be compelled to arbitration, then the Court can also stay this proceeding against Coldwell Banker, in full or in part, pending the arbitration proceeding, to avoid the risk of inconsistent rulings.

Thus, Plaintiff’s addition of Coldwell Banker as a Defendant does not preclude compelling Plaintiff’s claims against Defendants to arbitration.

In conclusion, Defendants have met their burden to compel arbitration, and the Court specifically finds that the arbitration provision set forth in the RPA between Plaintiff and Defendants is enforceable. Therefore, the Court grants Defendants motion to compel arbitration.

Defendants shall provide notice of the Court’s ruling and file a proof of service regarding the same.

[1] The Court declines to compel Coldwell Banker to arbitration at this point. Plaintiff has not yet provided proof that Coldwell Banker was served with the summons and complaint, and as such, the Court does not yet have jurisdiction to compel Coldwell Banker to arbitration, nor has Coldwell Banker been given notice or an opportunity to be heard in connection with this motion.

DEPARTMENT	207
HEARING DATE	September 19, 2023
CASE NUMBER	22SMCV02461
MOTION	Motion to Compel Arbitration
MOVING PARTIES	Defendants Paul C. Ferra and Melissa M. Oliver
OPPOSING PARTY	Plaintiff Leonardo Parra