Wuzhong Down Products v. Keehn
Filed 6/10/13 Shaoxing City Maolong Wuzhong Down Products v. Keehn CA2/2
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IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
TWO
SHAOXING CITY MAOLONG WUZHONG
DOWN PRODUCTS et al,
Plaintiffs and Respondents,
v.
L. SCOTT KEEHN et al.,
Defendants and Respondents;
IAN S. LANDSBERG et al.,
Defendants and Appellants.
B238360
(Los Angeles
County
Super. Ct.
No. BC455229)
APPEAL from
an order of the Superior Court
of
County. James R.
Dunn, Judge. Affirmed.
Gordon & Rees, Peter Schwartz,
Gary Collis and A. Louis Dorny for Defendants and Appellants Ian S. Landsberg
and Landsberg & Associates.
Keehn Law Group and L. Scott Keehn
for Defendants and Respondents L. Scott Keehn and Keehn & Associates.
Timothy D.
McGonigle, Timothy D. McGonigle and Robert A. Brock for Plaintiffs and
Respondents Shaoxing City Maolong Wuzhong Down Products Co. and Shui Yan Cheng.
* * * * * *
Plaintiffs
and respondents Shaoxing City Maolong Wuzhong Down Products Ltd. and Shui Yan
Cheng (Cheng plaintiffs) filed a complaint alleging legal malpractice against
defendants Ian S. Landsberg and Landsberg Margulies LLP, and defendants and
respondents L. Scott Keehn and Keehn & Associates (Keehn defendants). Appellants Ian S. Landsberg and
Landsberg & Associates brought a petition
to compel arbitration, relying on an arbitration provision in their fee
agreement with the Cheng plaintiffs. The
trial court denied the petition. It ruled
that Code of Civil Procedure section 1281.2, subdivision (c) applied to
preclude arbitration, as a party
to the arbitration agreement was also a party to pending litigation with a
third party, which arose out of a series of related transactions, and there was
a possibility of conflicting rulings on common issues of law or fact.
We affirm. The trial
court properly ruled that the Keehn defendants were a “third party†within the
meaning of the statute, even though they had a separate arbitration agreement with
the Cheng plaintiffs. Moreover, the
trial court properly concluded the other statutory requirements were satisfied
and acted within its discretion in denying the petition to compel arbitration.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff
Shui Yan Cheng was a corporate director and shareholder of Aelous. The Cheng plaintiffs obtained a $5.35 million
arbitration award against Aelous and two of its other shareholders, which was
confirmed as a judgment in March 2009.
After the Cheng plaintiffs undertook efforts to execute on the judgment,
Aelous and the shareholders filed Chapter 11 bankruptcy petitions.
The Cheng
plaintiffs retained the Keehn defendants in July 2009 to represent their
interests in the bankruptcy proceedings. The engagement letter included an arbitration
agreement, which provided in part that “any controversy concerning the
attorneys’ fees incurred in this Engagement, or any other claim arising out of,
or related to, this, or any subsequent engagement of the Firm shall be settled
by binding arbitration.†The provision
also required the arbitration to be conducted in San Diego County, directed
that the JAMS Arbitration Rules and Procedures would apply and permitted review
of the arbitrator’s decision by the Fourth District Court of Appeal to the same
extent as any superior court judgment.
Approximately
five months later, on November 16, 2009, the Cheng plaintiffs entered into a fee agreement with
Landsberg & Associates (sometimes Landsberg agreement), also involving
representation in the bankruptcy action.
Ian S. Landsberg (Landsberg) signed the agreement as the firm’s
partner. It included an arbitration
provision, requiring that any claims arising out of the agreement be submitted
to final and binding arbitration. In
relevant part, the Landsberg agreement provided: “It is understood and agreed that any claim
arising out of the rendition or lack of rendition of services under this
Agreement (including claims of legal malpractice) will be determined by
submission to final and binding arbitration, and not by a lawsuit or resort to
court process except as provided by law for judicial review or enforcement of
arbitration proceedings. This includes
any claim that any legal services rendered under this contract were unnecessary
or unauthorized or were improperly, negligently or incompetently
rendered. At the sole option of the
Client this arbitration agreement may also include any dispute over legal fees
as provided in Sections 6200–6206 of the Business and Professions Code of the State of
California.†The Landsberg agreement
also provided that the parties were giving up their right to a jury trial,
California law governed and the proceedings would be administered by the
American Arbitration Association’s Los Angeles office.
Three days
later, the Cheng plaintiffs filed a substitution of attorney, which substituted
Landsberg of Landsberg Margulies LLP in the place of the Keehn defendants. Landsberg represented the Cheng plaintiffs
for approximately four months.
In February
2011, the Cheng plaintiffs filed a complaint for legal malpractice against the
Keehn defendants, Landsberg Margulies LLP and Landsberg. Without distinguishing the conduct engaged in
by any specific defendant, they alleged that all defendants acted negligently
in a number of respects and that such negligence caused them to suffer
damages. Notwithstanding their agreement
to arbitrate, the Keehn defendants proceeded to litigate the matter, filing an
answer to the complaint, exchanging discovery, and meeting and conferring
regarding inadequate discovery responses.
In August
2011, appellants filed a petition to compel arbitration, relying on the
arbitration provision in the Landsberg agreement. In a declaration, Landsberg further averred
that the reference to Landsberg Margulies in the substitution of attorney was a
typographical error, as he had ended his association with that firm as of
November 1, 2009.
The Cheng
plaintiffs opposed the petition, arguing that permitting the arbitration to go
forward could lead to inconsistent results with the ongoing litigation and that
petitioner Landsberg & Associates was not a party to the action. The Keehn defendants also opposed the
petition. They relied on Code of Civil
Procedure section 1281.2, subdivision (c), which provides that an order to
arbitrate is not appropriate where: “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.â€
At an
initial hearing in October 2011, the trial court’s tentative decision was to
deny the petition, reasoning that compelling arbitration created “the potential
here of inconsistent verdicts, both in terms of liability and in terms of the
total amount of damages, as well as the potential allocation between
them.†Ultimately, it permitted the
parties to file supplemental briefs to address the application of
section 1281.2, subdivision (c) to the circumstances alleged and in
consideration of the additional fact—disclosed to appellants at the
hearing—that the Keehn defendants had entered into an arbitration agreement
they had elected not to enforce.
All parties
filed supplemental briefs. At a
subsequent hearing, the trial court affirmed its tentative ruling. It found the case unusual in that “what is
tantamount to one party’s waiver of their right to enforce an arbitration
agreement has put the case in the posture where, because of the unique facts in
this case, and the potential for inconsistent verdicts, it robs the Landsberg
defendants’ right to arbitrate under the agreement.†Nonetheless, it concluded that it did “not
have the power to force the Keehn defendants to arbitrate under the Landsberg
agreement, nor do they have the power to force them to arbitrate under their
own agreement.†Accordingly, it entered
an order denying appellants’ petition to compel arbitration. This appeal followed.
DISCUSSION
Appellants
maintain the trial court erred in denying their petition to compel arbitration,
arguing that the Keehn defendants were not a “third party†within the meaning
of section 1281.2, subdivision (c) and therefore the exception was inapplicable.
be a third party because they had a separate agreement to arbitrate. We find no merit to appellants’ contention.
I. Governing Legal Principles Concerning
Petitions to Compel Arbitration and the Standard of Review.
law reflects a strong public policy in favor of arbitration as a relatively
quick and inexpensive method for resolving disputes. [Citation.]
To further that policy, section 1281.2 requires a trial court to enforce
a written arbitration agreement unless one of three limited exceptions
applies. [Citation.] Those statutory exceptions arise
right to arbitration; (2) grounds exist for revoking the arbitration agreement;
and (3) pending litigation with a third party creates the possibility of
conflicting rulings on common factual or legal issues. (§ 1281.2, subds. (a)–(c).)†(Acquire
II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967 (
The Acquire II court
described the statutory elements necessary to satisfy the final exception: “
exception applies when (1) ‘[a] party to the arbitration agreement is also a
party to a pending court action or special proceeding with a third party
. . .’; (2) the third party action ‘aris[es] out of the same
transaction or series of related transactions’; and (3) ‘there is a
rulings on a common issue of law or fact.’
(§ 1281.2(c).) If all three of
these conditions are satisfied, then section 1281.2(c) grants a trial court
discretion to either deny or stay arbitration despite an agreement to arbitrate
the dispute. [Citation.] Specifically, section 1281.2 identifies four
options from which the court may choose:
(1) ‘refuse to enforce the arbitration agreement and
. . . order intervention or joinder of all parties in a single
action or special proceeding’; (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 pending court action or special proceeding pending
the outcome of the arbitration proceeding’; and (4) ‘stay arbitration
pending the outcome of the court action or special proceeding.’ (§ 1281.2.)†(Acquire
II, supra, 213 Cal.App.4th at pp. 967–968.)
Accordingly,
“[s]ection 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,†and it gives “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
. . . .†(
Services (2005) 35 Cal.4th 376, 393.)
The Legislature included
section 1281.2, subdivision (c) as part of the statutory scheme governing
arbitration “so that common issues of fact and law will be resolved
consistently, and only once.†(
California, Inc. (2002) 101 Cal.App.4th 711, 727.)
As
a threshold matter, we review the trial court’s interpretation of section
1281.2, subdivision (c) de novo. (
1276, 1283.) “Specifically, whether a
third party for purposes of [section 1281.2,
subd. (c)] is a
matter of law subject to de novo review.â€
(Laswell v. AG Seal Beach, LLC (2010)
189 Cal.App.4th 1399, 1406.) Once
section 1281.2 has been found to apply, “‘the trial court’s discretionary
decision as to whether to stay or deny arbitration is subject to review for
abuse.’ [Citations.]†(Acquire
II, supra, 213 Cal.App.4th at pp. 971–972; accord, Birl v. Heritage Care, LLC (2009) 172 Cal.App.4th 1313, 1318.)
“the trial court’s order will not be disturbed on appeal unless it exceeds the
bounds of reason.†(Henry v. Alcove
Investment, Inc. (1991) 233
Cal.App.3d 94, 101.)
II. The Trial Court
Properly Determined That the Keehn Defendants Were a Third Party Within the
Meaning of Section 1281.2, Subdivision (c).
The trial court concluded this was a
matter that fit within the parameters of section 1281.2, subdivision (c). It necessarily determined that the Keehn
defendants were a “third party†within the meaning of the statute. In Whaley
v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479 (
1281.2, subdivision (c) applied to employees who brought an
action against their former employer and its vice-president, because those
defendants were already in litigation with other former employees that involved
related transactions and raised common issues of law and fact. (Whaley,
supra, at p. 485.) The appellate
court rejected the employer’s argument that the exception was intended to apply
only for the benefit of one who is both a party to an arbitration agreement and
a party to the related litigation with a third party. (Id.
at pp. 484–485.)
Applying well-established rules of statutory interpretation,
the Whaley court reasoned
that the employer’s construction of the statute was contrary to its plain
language: Section 1281.2, subdivision
(c) “contains
it may be invoked only in favor of the party caught ‘in the middle’ between
arbitration and litigation. The statute
is unambiguous: it allows the trial
court to deny a motion to compel arbitration whenever ‘a party’ to the
arbitration agreement is also ‘a party’ to litigation with a third party that
(1) arises out of the same transaction or series of related transactions, and
(2) presents a possibility of conflicting rulings on a common issue of law or
fact. As the trial court concluded, [the
employer] is ‘a party’ to the arbitration agreements and is also ‘a party’ to
litigation with a third party [employee] that satisfies the other conditions
set forth in the statute. Thus, the
trial court had discretion to refuse to compel arbitration in order to avoid
the possibility of conflicting rulings.
[Citations.]†(
486.) The court further noted that the
Legislature easily could have included the qualifying language that the
employer sought to infer, and its failure to do so precluded the court from
construing the statute to include limitations that the Legislature did not. (Ibid.)
Relevant
here, the provision’s requirement that “[a] party to the arbitration
agreement is also a party to a pending court action or special proceeding with
a third party†is likewise unambiguous.
(§ 1281.2, subd. (c).) “As used in section 1281.2,
subdivision (c), the term ‘third party’ means a party to the action that is not
bound by or entitled to enforce the arbitration agreement. [Citations.]â€
(Thomas v. Westlake (2012) 204
Cal.App.4th 605, 612; RN Solution, Inc.
v. Catholic Healthcare West (2008) 165 Cal.App.4th 1511, 1519 [“
party’ for purposes of
section 1281.2, must be construed to mean a party that is not bound by the arbitration
agreementâ€].) Here, it was undisputed that the Keehn
defendants were not a party to the Landsberg agreement and therefore had no
ability to enforce it. The trial
court properly ruled they were a “third party†within the meaning of the
exception.
Appellants claim the fact that the
Keehn defendants entered into a separate arbitration agreement with the Cheng
plaintiffs renders them ineligible for third-party status. They rely on a series of cases holding that a
third party does not include a defendant who can compel arbitration of the
claims against it. But in each of those
cases, the “third party†had some relationship to the contract containing the
arbitration agreement requiring that it be bound by the agreement or permitted
to enforce the agreement. None of the
cases involved the circumstances here, where the third party was also a party
to a completely separate agreement also providing for arbitration. (See Thomas
v. Westlake, supra, 204 Cal.App.4th at pp. 614–615 [a defendant’s agent is
not a third party because “a
plaintiff’s allegations of an agency relationship among defendants is
sufficient to allow the alleged agents to invoke the benefit of an arbitration
agreement executed
though the agents are not parties to the agreementâ€]; Laswell v. AG Seal Beach, LLC, supra, 189 Cal.App.4th at pp.
1407–1408 [defendants who owned and managed a health care facility were not
third parties because there was a sufficient identity of parties to bind them
to the arbitration agreement]; Molecular
Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th
696, 714, 715 [a defendant is not a third party under the doctrine of equitable
estoppel where the “‘plaintiff relies on the terms of an agreement to assert
his or her claims against a nonsignatory defendant’†and such claims are
“‘dependent upon, or founded in and inextricably intertwined with, the
underlying contractual obligations of the agreement containing the arbitration
clause’â€];
Solution, Inc. v. Catholic Healthcare West, supra, 165 Cal.App.4th at p. 1520
[nonsignatory to arbitration agreement was not a third party because she could
be bound by the agreement both as an agent-employee of the signatory and as a
third party beneficiary of the contract containing the arbitration provision];
Exline, supra, 153 Cal.App.4th at
pp. 1284–1285 [nonsignatory to arbitration agreement sued as an alter ego of a
signatory entitled to enforce arbitration agreement and is therefore not a
third party under § 1281.2, subd. (c)].)
Notwithstanding
that case law uniformly holds the term “third party†unambiguously means a party to the action who
is neither bound by nor entitled to enforce the arbitration agreement,
appellants maintain that the term is ambiguous, therefore requiring us to
examine legislative history. We agree
with the Whaley court that “[e]ven if
we were to consider the legislative history of the statute, however, we would
still find no latent ambiguity suggesting another possible meaning of the
statutory language.†(
487.)
According to appellants, any reliance on
appellate court misquoted the pertinent legislative history. The Whaley
court cited the Senate Committee on the Judiciary’s analysis of the bill to
examine legislative intent, stating: “The
legislative history broadly defines the problem the Legislature intended to
address as follows: ‘In actions
involving multiple parties with related claims, where some claimants agree to
arbitrate their differences and others remain outside the agreement, arbitration
is unworkable. Where a party to an
arbitration agreement is also party to a pending court action or special
proceeding, with such a third party, there may be a possibility of
conflicting rulings on issues of law or fact.’ (Sen. Com. on Judiciary, Analysis of Sen.
Bill No. 1628 (1997–1998 Reg. Sess. [sic])
p. 2, italics added.) Thus, the statute
was intended primarily to prevent conflicting rulings resulting from
arbitration proceedings and other related litigation arising out of the same
transaction.†(Whaley, supra, 121
Cal.App.4th at p. 488, underline added.) The Senate Committee analysis actually used
the word “any†instead of the word “the,†and subsequent legislative analyses
accurately quoted the Senate Committee report including the word “any.â€
No. 1628 (1977–1978 Reg. Sess.) p. 2; Sen. Policy Comm. Materials,
Correspondence from Legislative Representative of the State Bar of Cal.
re Sen. Bill No. 1628, May 23, 1978, p. 1; Sen. Policy Comm. Materials,
Correspondence from Legislative Representative of the State Bar of Cal.
re Sen. Bill No. 1628, March 30, 1978, p. 1.)
Appellants
contend that the Senate Committee’s use of the word “any†is significant and
suggests that the statutory exception was intended to apply only when “others
remain outside any agreement,†meaning that the fact the Keehn defendants were
parties to a separate arbitration agreement rendered the exception
inapplicable. (See Sen.
Com. on Judiciary, Analysis of Sen. Bill No. 1628 (1977–1978 Reg. Sess.) p.
2.) We discern no such meaning from the
committee’s isolated use of the word “any.â€
Courts have cautioned “to
rely on legislative history only when that history itself is unambiguous.†(J.A.
Jones Construction Co. v. Superior Court (1994) 27 Cal.App.4th 1568, 1578;
accord, Kachlon v. Markowitz (2008)
168 Cal.App.4th 316, 337; Medical Bd. v.
Superior Court (2003) 111 Cal.App.4th 163, 179.) In other portions of the analysis, the Senate
Committee stated that the bill applied “[w]here a party to an arbitration agreement is also a party to a pending court actionâ€
and allowed a court to “refuse to enforce the
arbitration agreement†or “stay the
arbitration agreement pending resolution of the court action
. . . .†(Sen. Com. on Judiciary, Analysis of
Sen. Bill No. 1628 (1977–1978 Reg. Sess.) pp. 1–3, italics added.) Though we recognize that the Legislature is
sensitive “to
language and the definitional nuances which may be associated with its use of
different words†(People v. Quillar (1989)
214 Cal.App.3d 1458, 1461), nothing in the legislative history indicates that
the Legislature intended to convey different meanings through its alternating
use of the modifiers “any,†“the†and “an.â€
We conclude “the differences are linguistic only†(ibid.)
and the Senate Committee’s isolated use of the word “any†does not reflect
legislative intent to prohibit the use of the exception where a third party has
a separate arbitration agreement but is not bound by or able to enforce the
arbitration agreement which is the basis for the petition to compel
arbitration.
Nor are we persuaded that the Legislature’s simultaneous
enactment of section 1281.3 as part of Senate Bill No. 1628 demonstrated
an intent to exclude from the reach of section 1281.2, subdivision (c) third
parties who have a separate arbitration agreement. As explained in Parker v. McCaw (2005) 125 Cal.App.4th 1494, 1505: “Section 1281.3 permits consolidation of
separate arbitration proceedings under certain circumstances: ‘A party to an arbitration agreement may
petition the court to consolidate separate arbitration proceedings, and the
court may order consolidation of separate arbitration proceedings when: . . . (2) The disputes arise
from the same transactions or series of related transactions; and [¶]
(3) There is common issue or issue of law or fact creating the
possibility of conflicting rulings by more than one arbitrator or panel of
arbitrators.’ In the event that the
arbitration agreements ‘contain inconsistent provisions, the court shall
resolve such conflicts and determine the rights and duties of the various
parties to achieve substantial justice under the circumstances.’ [Citation.]â€
Appellants argue that sections 1281.2 and 1281.3 should be
harmonized so that the former statute applies to a third party who does not have
a separate arbitration agreement while the latter applies to a third party who
is a party to another arbitration agreement.
Appellants’ interpretation is unsupported by either the
statutory language or legislative history.
Nothing in the language of either section 1281.2 or section 1281.3
indicates that the Legislature intended to limit the definition of a “third
party†to one without an independent arbitration agreement. In any event, section 1281.3 assumes the existence
of “arbitration proceedings,†and thus does not encompass the situation here
where parties to an arbitration agreement proceed to litigate. In addition, the legislative history
demonstrates that the two provisions were designed to address distinctly
different circumstances. Section 1281.2
was intended to give the trial court four options to deal with actions
involving multiple parties where a party to an arbitration agreement is also a
party to a pending court action with a third party. (Sen.
Com. on Judiciary, Analysis of Sen. Bill No. 1628 (1977–1978 Reg. Sess.) p. 2.) On the other hand, the intent of
section 1281.3 was to provide a mechanism to consolidate separate
arbitration proceedings: “The purpose of
this change is to prevent inconsistent rulings where multiple parties involved
in the same dispute have all agreed to arbitrate, but in separate
proceedings.†(Sen. Com. on Judiciary, Analysis of
Sen. Bill No. 1628 (1977–1978 Reg. Sess.) p. 3.) The legislative history focused on providing
a means for trial courts to deal with two unrelated scenarios—one in which a
party to an arbitration agreement is also in litigation with a third party
involving a related matter and the other where there are separate but related
arbitration proceedings. (
to improve procedural aspects of arbitration in civil disputesâ€].) Nothing in the Senate Committee analysis
supports the interpretation advocated by appellants that section 1281.3,
and not section 1281.2, subdivision (c), must apply because the Cheng plaintiffs
and the Keehn defendants were parties to an arbitration agreement they elected
not to enforce.
name="_ftnref4" title="">[4]
III. The Trial Court Properly Determined the Remaining Requirements
of Section 1281.2, Subdivision (c) Were Met and Acted Within Its Discretion in
Denying the Petition to Compel Arbitration.
Once
the trial court makes the threshold determination that there is a third party
involved in litigation with one of the parties to the arbitration agreement,
its exercise of discretion comes into play.
(Rowe v. Exline, supra, 153
Cal.App.4th at p. 1288, fn. 6.) “If the
prerequisites of the exception exist in a particular case, i.e., there are
third parties not subject to arbitration on claims arising out of the same
transaction or related transactions, and a possibility of conflicting rulings
on common issues of law or fact, then the trial court has discretion to deny or
stay arbitration. [Citation.]†(Laswell
v. AG Seal Beach, LLC, supra, 189 Cal.App.4th at p. 1405.)
Though appellants address only
whether the first prerequisite was satisfied, we briefly turn to the remaining
two—whether the litigation “aris[es] out of the same transaction or
series of related transactions†and that “there is a possibility of conflicting rulings on a common
issue of law or fact†in connection with the controversy sought to be
arbitrated. (§ 1281.2, subd. (c).) In
evaluating whether the legal malpractice claims the Cheng plaintiffs filed
against appellants and the Keehn defendants arose out of the same transaction
or a series of transactions related to those appellants sought to arbitrate, we
may consider the factual allegations of the complaint. (See Lindemann
v. Hume (2012) 204 Cal.App.4th 556, 566-568; Abaya v. Spanish Ranch I, L.P. (2010) 189 Cal.App.4th 1490, 1499;
Cal.App.4th at pp. 1319–1320.)
According
to the Cheng plaintiffs’ complaint, both appellants and the Keehn defendants
“negligently failed to exercise proper care, skill, and diligence in
undertaking to perform legal services for Plaintiffs
. . . .†In describing
the specific acts of negligence, the Cheng plaintiffs did not distinguish among
appellants and the Keehn defendants, alleging that all defendants’ negligence
included the failure to timely conduct discovery, obtain relevant discovery,
competently challenge a lien and pursue its fraudulent nature and competently
challenge a number of fraudulent transfers.
As the trial court acknowledged, the Cheng plaintiffs’ allegations
involved a series of related transactions:
“[W]hat we’re talking about here is about a nine-month bankruptcy in
which the claim is that there w[ere] some alleged acts of malpractice which
were to the plaintiff’s detriment. And
nobody really has defined them, except in the complaint and in the complaint
they name a page and a half of alleged defalcations, none of which are
specifically identified with a particular defendant. So, based on the complaint, I have a lawsuit
against two defendants claiming a bunch of acts, and nowhere does it define as
to who did what to whom.†As alleged in
the complaint, the transactions involving appellants on the one hand and the
Keehn defendants on the other were inextricably intertwined, and hence related.
Even
if we were to go beyond the complaint, the only distinction among all
defendants was temporal. The Cheng
plaintiffs retained the Keehn defendants for approximately five months
beginning in July 2009, and thereafter engaged appellants for approximately
four months beginning in November 2009.
As explained by the court in Birl
v. Heritage Care, LLC, supra, 172 Cal.App.4th at page 1320, “[a] temporal
separation does not necessarily negate the existence of the requisite ‘series
of related transactions’†involving a third party. Rather, sequential conduct among multiple
defendants is sufficient to satisfy the statutory requirement. (See
Cal.App.4th at pp. 566–567 [series of related transactions shown by allegations
that the defendants acquired a home from its developer with knowledge of
possible water intrusion problems, disclosed the problems as part of an
unsuccessful sale of the property and ultimately resold the home without making
such disclosures]; Birl v. Heritage Care, LLC, supra, at pp. 1319–1320 [series of related transactions shown by
allegations that physicians and successive nursing homes failed to provide the
plaintiff with necessary care and treatment].)
Thus, the trial court properly concluded that the representation
provided by appellants and the Keehn defendants involved a series of related
transactions.
Likewise,
the complaint’s allegations showed the possibility of conflicting rulings on
common issues of law or fact if appellants did not participate in the pending
action and instead proceeded to arbitration.
The trial court reasoned: “[I]t
seems to me that if we’ve got an arbitrator trying to decide who is responsible
for what, he’s going to have to take a look at all the claimed actions that
constitute malpractice. And in a trial,
the judge is going to have to look at all the claimed allegations of
malpractice to determine (A) whether there was any malpractice by the
particular lawyer who is charged; and (B) whether there was any damage;
and (C) if there was, whether it was the alleged malpractice attributed to that
lawyer which resulted in the damage.â€
The trial court concluded that the same determinations would necessarily
be made in separate forums, thereby creating the possibility of conflicting
rulings.
“‘The
existence of [a] possibility of conflicting rulings on a common issue of fact
is sufficient grounds . . .’ to deny a motion to compel pursuant to
section 1281.2, subdivision (c).
[Citation.]†(
189 Cal.App.4th at p. 1499; accord, Lindemann
v. Hume, supra, 204 Cal.App.4th at p. 567 [the relevant issue under §
1281.2, subd. (c) “is not whether inconsistent rulings are inevitable but
whether they are possible if arbitration is orderedâ€].) As the trial court recognized, the possibility
of conflicting rulings was apparent here.
In their answer, the Keehn defendants asserted multiple affirmative
defenses including no proximate cause, failure to mitigate, acts or omission of
others, contributory negligence and superseding acts, each of which could
involve a determination by the trier of fact regarding the existence and extent
of appellants’ liability, including the amount of damage attributable to their
conduct. By the same token, an
arbitrator to any controversy between appellants and the Cheng plaintiffs would
also necessarily decide the existence and extent of appellants’ liability and
determine the resulting damage attributable to their conduct. This was the classic situation where “[d]ifferent triers
of fact in different proceedings could come to different and conflicting
conclusions as to which party or parties were liable, and also could arrive at
different conclusions in apportioning the amount of damages.†(Birl
v. Heritage Care, LLC, supra, 172 Cal.App.4th at p. 1321; see also
Corp. (1987) 190 Cal.App.3d 1637, 1642 [possibility of conflicting rulings
supported denial of petition to compel arbitration brought by one insurance
carrier in a pending action involving the allocation of a
settlement amount among numerous insurance carriers].)
“‘[S]ection 1281.2(c) is not a provision
designed to limit the rights of parties who choose to arbitrate or otherwise to
discourage the use of arbitration.
Rather, it is part of California’s statutory scheme designed to enforce
the parties’ arbitration agreements . . . .†(Cronus
Investments, Inc. v. Concierge Services, supra, 35 Cal.4th at p. 393.) The trial court properly determined that the
statutory exception applied here.
Although appellants do not challenge the trial court’s exercise of discretion
in electing to deny the petition to compel arbitration rather than choosing one
of the other available options under section 1281.2, the trial court was well
within its discretion to refuse to enforce the arbitration provision in the
Landsberg agreement. (See
Cal.App.4th at p. 1322 [finding trial court “did
not misapply the law or abuse its broad discretion in denying the motion to
compel arbitration†where conflicting rulings were possible];
Rehabilitation Center, LLC (2007) 150 Cal.App.4th 469, 475–476 [affirming
trial court’s exercise of discretion to deny petition to compel rather than
stay arbitration].)
The
order denying the petition to compel arbitration is affirmed. Parties to bear their own costs on appeal.
NOT TO
BE PUBLISHED IN THE OFFICIAL REPORTS.
_____________________, J.
FERNS
We concur:
____________________________,
P. J.
BOREN
____________________________,
J.
CHAVEZ
references are to the Code of Civil Procedure.
parties to bring the petition to compel arbitration notwithstanding that
Landsberg & Associates was not named in the complaint. Below, the trial court appeared to be
satisfied by appellants’ representation that the firm of Landsberg Margulies
was dissolved and, in any event, should not have appeared on the substitution
of counsel given that appellants were the parties to the Landsberg
agreement. Because the trial court did
not premise its order denying the petition on whether appellants were the
proper moving parties and the Cheng plaintiffs have not raised the issue, we,
too, are satisfied that appellants are the proper parties to have filed the
petition to compel arbitration. (See § 1281.2 [“party
to an arbitration agreement alleging the existence of a written agreement to
arbitrate a controversy†may petition to compel arbitration].)
