Judge: Serena R. Murillo, Case: 23STCV07819, Date: 2023-08-17 Tentative Ruling
Case Number: 23STCV07819 Hearing Date: August 17, 2023 Dept: 31
TENTATIVE
Defendants Carbon
Law Group, P.C., and Littler Mendelson P.C.’s motions to compel arbitration are
DENIED.
Discussion
Defendants Littler and Carbon both move to compel
arbitration.
I.
Existence
of Arbitration Agreement
Defendant Littler presents evidence of an
Arbitration Agreement entered
into by Plaintiff. (Winfield Decl., Exh. 1) The
parties’ agreement contained an arbitration agreement. It states:
If a dispute between us cannot be resolved by
dialogue and/or mediation, both you and we agree that any dispute will be
resolved by binding arbitration. This arbitration provision is intended to be
interpreted and applied as broadly as legally permissible. It applies to all
claims or controversies that would otherwise be resolved in any court,
including claims arising out of or related to this Engagement Agreement and
services we render for you on your behalf (but excluding any issues or disputes
regarding fees, or billing).
(Id.)
Carbon also presents evidence of an Arbitration Agreement entered into by Plaintiff. (Raval Decl., Exh. A.)
The parties’ Engagement Agreement contained an arbitration provision.
Specifically, paragraph 12 provides in relevant part:
DISPUTES.
Firm strives to provide Client with the best service possible. In the unlikely
event that a dispute arises between the parties, Client and Firm agree to first
attempt to resolve any dispute by informal mediation using a mediator of the
parties' mutual choosing, and if the dispute cannot be handled by meditation,
the parties agree to submit the dispute to binding arbitration under the rules
of the California Arbitration Act.
(Id.)
II.
Code of Civil Procedure Section
1281.2(c).
In opposition,
Plaintiff does not deny that an Arbitration Agreement exists between Plaintiff
and Defendants. Instead, Plaintiff argues that the Court may exercise its
discretion to not enforce the Arbitration Agreement under Code of Civil
Procedure Section 1281.2(c).
Section 1281.2(c)
of the Code of Civil Procedure provides that 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 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.
“Pursuant to¿Code
of Civil Procedure section 1281.2, subdivision (c), “the court, may, in its
discretion, refuse to compel arbitration or may stay arbitration where ‘there
is a possibility of conflicting rulings on a common issue of law or fact.’
”
[Citation.] While there is a strong public policy in favor of arbitration,
there is an “equally compelling argument that the Legislature has also
authorized trial courts to refuse enforcement of an arbitration agreement [or
stay the arbitration] when, as here, there is a possibility of conflicting
rulings. [Citations.]” (Fitzhugh v. Granada Healthcare & Rehabilitation
Center, LLC¿(2007) 150 Cal.App.4th 469, 475.)
“Section
1281.2(c) addresses the peculiar situation that arises when a controversy also
affects claims by or against other parties not bound by the arbitration
agreement.¿The California provision giv[es] the court discretion not to enforce
the arbitration agreement under such circumstances—in order to avoid potential inconsistency
in outcome as well as duplication of effort.
. . .”
(Cronus Investments, Inc. v. Concierge Services¿(2005) 35 Cal.4th 376,
393.)
A court can rely
on the allegations of a complaint to determine if there is a possibility that
conflicting rulings could result if a motion to compel arbitration is
granted. (Abaya v. Spanish Ranch I, L.P. (2010) 189 Cal.App.4th
1490, 1499.) Contractual arbitration may have to yield if there is an
issue of law or fact common to the arbitration and a pending action or
proceeding with a third party and there is a possibility of conflicting rulings
thereon. (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010)
186 Cal.App.4th 696, 704-705.) Application of California Code of Civil
Procedure, Section 1281.2(c) is within the trial court’s discretion.
(Id.)
Here, Plaintiff argues Defendant People
Partners did not agree to arbitration under their agreement with Infiniti, and
because Defendants cannot invoke anyone’s arbitration agreement but their own, there
exists a third party in this litigation that is neither bound by nor has any
contractual entitlement to enforce the arbitration agreement.
i.
Same Transaction or Series of
Transactions
Plaintiff argues that each Defendant was
employed by Infiniti in a legal and/or consultative capacity, and Plaintiff’s
claim against each Defendant arises out of the very same transaction—namely,
the LAUSD Contract and the issues it created concerning the WARN Act.
Littler argues it was not involved in the
“same transaction or series of transactions” as the other defendants, because
it was not retained to provide counselling in relation to the LAUSD contract.
Similarly, Carbon argues its
representation of Infiniti was relatively brief, lasting from December 2020 to
August 2021. The only other defendant providing services to Infiniti during
that same period of time was Hackler & Flynn, whose scope of representation
was limited to employment matters. (FAC, ¶ 24.) In fact, the LAUSD contract was
renegotiated by successor counsel, Aric Williams, months after Carbon Law's
representation terminated. (FAC, ¶ 30.) The renegotiated LAUSD contract then
terminated in June 2022 while Allen Matkins served as general counsel and
Littler as employment counsel. (FAC, ¶ 33, 35.) Thus, Carbon Law's professional
legal services are wholly unrelated to those provided by its co-defendants in
this matter.
The Court finds that this matter arises
out of the same or related transactions as the case against Defendant People
Partners, namely Infinity’s alleged damages in excess of $5 million for having
to pay its employees for failing to provide 60 days’ notice before laying them
off, due to Infinity’s allegation that none of the defendants informed it of
its obligations under the WARN Act. Littler’s and Carbon’s arguments are based
on a narrow reading of whether the claims against each of them arise out of the
same or related set of transactions.
ii.
Possibility of Conflicting Rulings
Plaintiff argues each of the
claims against all Defendants will require the determination of a number of
common, important factual and legal questions. On the question of causation,
one trier of fact could determine that, had a defendant advised Infiniti about
its WARN Act obligations, then it would have given the proper WARN Act notice,
thereby saving millions of dollars. But another trier of fact could determine
that Infiniti, even after properly advised, would have “gambled” that the LAUSD
would renew its Contract, and that Infiniti would not have given the WARN Act
notice, for fear that it would cause massive attrition, thereby rendering
Infiniti incapable of servicing a renewed Contract. Likewise, as to damages,
the total amount lost by Infiniti because the advice was untimely is a
calculatable number; however, a jury and an arbitrator may ultimately reach
separate numbers or else ensure that Infiniti is only partially compensated for
damages caused by Defendants and, in what is currently a separate action, Aric
Williams. This is especially the case to the extent a jury or an arbiter
applies the principle of comparative negligence.
Littler argues that based on the
circumstances involving the hiring of and work performed by each of the
defendants, there is no possibility of conflicting rulings on issues of law or
fact. Each defendant was hired at a different time to perform different work
and report to different groups of Infiniti representatives. Littler argues what
damages, if any, arose as a result of a particular defendant’s alleged failure to
provide advice in light of the variables.
Carbon additionally argues that Plaintiff
fails to substantiate his contention that there is a possibility of conflicting
rulings as it relates to Carbon Law. As alleged in the First Amended Complaint,
Carbon Law's representation of Infiniti Health terminated in August 2021—months
before the LAUSD contract expired, and was subsequently renegotiated by
attorney Aric Williams. Thus, the issue of causation as it relates to Carbon
Law is unique to it in that (1) successor counsel, Aric Williams, renegotiated
the LAUSD contract after Carbon Law's representation terminated; and (2) the
contract in effect at the time LAUSD chose not to renew the contract was
substantially different than the contract in effect during Carbon Law's
representation.
The Court further finds that there is a possibility of conflicting rulings on a common
issue of law or fact as to causation and damages. While Defendant
Littler argues there are unique circumstances involving the hiring of each
party and the work they were to perform, which could in turn affect the amount
of damages owed to each party, neither Littler or Carbon has responded to
Plaintiff’s contention that there is a possibility of inconsistent rulings on
the issue of causation. The arbitrator may find that had a defendant advised
Infiniti about its WARN Act obligations, then Infiniti would have given the
proper WARN Act notice and would not have had to pay its employees when they
were already laid off during the notice period. On the other hand, a trier of
fact may find that Plaintiff would not have followed counsel’s advice regarding
giving notice due to hopes that LAUSD would renew its contract. And thus, there
would be no causation. “The issue to be addressed under section 1281.2,
subdivision (c)…is not whether inconsistent rulings are inevitable but whether
they are possible if arbitration is ordered.” (Lindemann, supra, 204
Cal.App.4th at 567.) Moreover, Carbon’s argument in reply that its
representation of Infiniti terminated in August of 2021 ignores Plaintiff’s
contention in opposition that that when Carbon was still providing services
to Infiniti in August 2021, the company was only a couple months away from
potentially having to provide WARN Act notice in the event the LAUSD Contract
was not renewed.
Therefore, as Defendant People Partners
is not a party to the arbitration agreement, this matter arises out of the same
or related transactions, and there is a possibility
of conflicting rulings, Section 1281.2 is applicable here. The Court sees no reason to require a duplication of
efforts in both a judicial and arbitral forum when the judicial forum can
adjudicate all issues together. As such, the Court
will exercise its discretion and deny both Defendant’s motion to compel
arbitration.
Conclusion
Based on the
foregoing, Defendants’ motions to compel arbitration are DENIED.
Moving parties are ordered to give notice.