Judge Ronald F. Frank, Case Number: 23TRCV02822, Date: 2024-03-29 Tentative Ruling

Judge: Ronald F. Frank, Case: 23TRCV02822, Date: 2024-03-29 Tentative Ruling

Case Number: 23TRCV02822 Hearing Date: March 29, 2024 Dept: 8

Tentative Ruling

HEARING DATE: March 29, 2024¿

CASE NUMBER: 23TRCV02822

CASE NAME: Saddleback Roofing Inc. v. Milender White Construction, Inc., et al.

MOVING PARTY: Defendant, MW Residential SoCal Corp..

RESPONDING PARTY: Plaintiff, Saddleback Roofing, Inc.

TRIAL DATE: Not Set.

MOTION:¿ (1) Motion to Compel Arbitration

Tentative Rulings: (1) GRANTED.

I. BACKGROUND¿

A. Factual¿

On August 28, 2023, Plaintiff, Saddleback Roofing, Inc. filed a Complaint against Defendants, Milender White Construction, Inc., MW Residential SoCal Corp., St Market D3, LLC, Inglewood Market Gateway, LLC, and DOES 1 through 10. The Complaint alleges causes of action for: (1) Breach of Written Contract; (20 Unjust Enrichment; (3) Quantum Meruit; and (4) Foreclosure of Mechanic’s Lien.

Defendant, MW Residential SoCal Corp. (“Milender White”) now moves to enforce an arbitration clause.

B. Procedural

On February 20, 2024, Defendants, Milender White filed a Motion to Compel Arbitration and Stay Proceedings. On March 18, 2024, Plaintiff filed an opposition brief. On March 22, 2024, Defendants, Milender White filed a reply brief.

II. ANALYSIS

A. Legal Standard

The Federal Arbitration Act (“FAA”) states that “[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.)

California law states that “[o]n 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.) “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.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

Pursuant to Code of Civil Procedure §1281.2, generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2)¿the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting¿rulings on common issues.

When seeking to compel arbitration, the initial burden lies with the moving party to demonstrate the existence of a valid arbitration agreement by preponderance of evidence. (Ruiz v. Moss Bros. Auto Group (2014) 232 Cal.App.4th 836, 841-42; Gamboa v. Northeast Community Clinic (2021), 72 Cal.App.5th 158, 164-65.) It is sufficient for the moving party to produce a copy of the arbitration agreement or set forth the agreement’s provisions. (Gamboa, 72 Cal.App.5th at 165.) The burden then shifts to the opposing party to prove by a preponderance of evidence any defense to enforcement of the contract or the arbitration clause. (Ruiz, 232 Cal.App.4th at 842; Gamboa, 72 Cal.App.5th at 165.) Subsequently, the moving party must establish with the preponderance of admissible evidence a valid arbitration agreement between the parties. (Ibid.) The trial court then weighs all the evidence submitted and uses its discretion to make a final determination. (Ibid.) “California law, ‘like [federal law], reflects a strong policy favoring arbitration agreements and requires close judicial scrutiny of waiver claims.’” (Wagner Const. Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 31.)

If the court orders arbitration, then the court shall stay the action until arbitration is completed. (See Code Civ. Proc., § 1281.4.)

B. Analysis

Here, the parties do not disagree that they entered into a subcontractor agreement with each other, for Plaintiff to provide goods and services for a construction project located in Inglewood, California. Plaintiff’s claim is based on the allegation that Plaintiff performed its contractual duties but did not receive payment for its services and has been forced to file this lawsuit. The relevant arbitration clause between Milender White and Plaintiff states:

SECTION 15 – CLAIMS RESOLUTION

A. Arbitration. Subcontractor/Vendor agreed to binding arbitration as the agreed form of dispute resolution for any claims arising under this Agreement. The arbitration shall be administered by the American Arbitration Association (“AAA”) pursuant to the AAA’s Construction Industry Arbitration Rules then in effect, unless the parties agree otherwise. Subcontractor/Vendor agrees that if the Contractor is compelled to Arbitrate (or engage in another specified non-judicial method of resolution) under the Prime Contract, the Subcontractor/Vendor may be joined by Contractor in any such action or proceeding involving the project that is subject of this Agreement.

(Milender White Mtn., Exhibit A.)

The parties at issue in this motion do not even dispute that there is a valid arbitration agreement between them. Plaintiff’s opposition, however, contends that Defendant Milender White’s Motion to Compel Arbitration is dubious because it is attempting to force non-contracting parties into arbitration. For example, Plaintiff contends that Fidelity is a critical party here, as issuer of the release bond, but notes that Fidelity did not enter into an arbitration agreement, nor did Defendants, ST Market D3 or Inglewood Market Gateway, LLC. Plaintiff argues that because these key parties cannot be compelled to arbitration, that absent parties will not be bound by a judgment in arbitration, could force the arbitrating parties to re-litigate the common issues, and will cause unnecessary delays, involve unnecessary expenses and create the potential for conflicting rulings on identical issues of law and fact. Namely, Plaintiff’s main argument is that the case involves non-contracting parties who are not subject to the arbitration clause, and may potentially deprive plaintiff of its rights to recover under the release bond.

The Court disagrees. Pursuant to Code of Civil Procedure § 1281.2(c), “[a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition.” (Cal. Code Civ. Proc. § 1281.2(c).) Plaintiff is arguing that if this Court orders Plaintiff to join in a mass arbitration involving all other parties in the consolidated actions, there is a substantial likelihood of conflicting rulings on common issues of law and fact because the absent parties will not be bound by the arbitration judgment. As such, Plaintiff contends that even if It obtained a money judgment against Defendant Milender White in arbitration, it is unclear if other parties would be bound by that judgment in the subsequent judicial proceeding to enforce the release bond. Plaintiff notes that it was “forced” to record a mechanic’s lien and file a suit to foreclose on the non-contracting owner’s property. More specifically, Plaintiff contends that it is not in privity with Fidelity, and that Plaintiff now cannot foreclose on its mechanic’s lien and thus a judgment against Fidelity is critical.

As noted in Milender White’s reply brief, Defendants, Fidelity, ST, and Inglewood are only defendants as to Plaintiff’s fourth cause of action, and that for there to be liability under the Mechanic’s Lien Release Bond, Plaintiff would first be required to prove that it is entitled to be paid additional amounts for the “construction services” and materials that it claims to have supplied to the Project. As such, Defendant Milender White contends that the initial determination of liability, which is the subject for the first three causes of action against Milender White, is what must be decided by an arbitrator before any liability of the surety on the bond is considered. Milender White notes that it is only after that determination has been made, and after Milender White refuses to pay the liability directly itself, that Plaintiff would look to the bond issued by Fidelity. Accordingly, Defendant maintains that there is no risk of inconsistent judgments because once liability on the first three causes of action are determined, the only thing that could possibly be decided by this Court is whether payment under the Mechanic’s Lien Release Bond is required. The Court agrees with this argument from Defendant as well as their distinction of Best Interiors, Inc. v. Millie & Severson, Inc. (2008) 161 Cal.App.4th 1320.

This is the only argument made by Plaintiff as grounds to argue against enforcing arbitration. Despite Plaintiff’s assertion that Defendant is attempting to force non-signatory parties into arbitration, the Court does not see any such arguments made in Milender White’s moving or reply papers. Nor does the Court intend to order non-signatories into eh arbitration. Instead, the Court intends to enforce the parties’ contractual agreement to send the payment dispute into their agreed ADR program and stay the balance of this case pending the completion of the arbitration.

For the foregoing reasons, this Court’s tentative ruling is to GRANT the Motion to Compel Arbitration and to stay the balance of the litigation until the arbitration of the payment dispute is completed.

Milender White is ordered to give notice.