Tentative Ruling: Pursuant to CCP § 1281.2(c) and ¶ 4, the motion to compel arbitration is granted except as to the claims and defenses asserted by and against Bus Depot, Inc., which are stayed pending arbitration.
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Background and Procedural History –
On 2/28/12, Bus Depot, Inc. (“BDI”) filed this action against Ryan’s Holdings, Inc. arising out of the alleged diversion of funds deposited into BDI’s bank account (Complaint ¶ 10) and the failure to pay for bus repair and maintenance services (Complaint ¶ 18). BDI asserts causes of action for (1) conversion, (2) breach of contract, (3) quantum meruit, and (4) accounting.

On 5/15/12, Ryan’s Holdings Inc.; Ryan’s Express Transportation Services, Inc.; Ryan’s Express Motorcoach; Ryan’s Express Transportation; LSJ Transportation, Inc.; and Century Park Capital Partners II, LP (collectively “Cross-Complainants”) filed a cross-complaint against BDI, Michael Haggerty, Olga Haggerty, and CH Trading Company. Cross-Complainants assert various causes of action for fraud, breach of contract, conversion, and related claims.

On 7/23/12, the Haggertys and CH Trading Co. (collectively “Haggerty Parties”) filed a demurrer and motion to strike directed at the Cross-Complaint. On 9/4/12, Cross-Complainants filed a motion to compel arbitration and stay action based on an arbitration provision in a settlement agreement dated 6/24/11 (“2011 Settlement Agreement”) executed by the Haggerty Parties and Cross-Complainants. On 9/26/12, the Court granted the motion to compel arbitration for the limited purpose of determining whether BDI is bound as a party to the 2011 Settlement Agreement and/or whether BDI is bound by the arbitration clause contained in the 2011 Settlement Agreement. The Court stayed this action pending arbitration of those issues and took the Haggerty Parties’ demurrer and motion to strike off-calendar. See Order dated 10/5/12.

On 11/22/13, the Court set the motion to compel arbitration for further hearing on 3/5/14; lifted the stay as to the Complaint only; and staying the demurrer and motion to strike pending the Court’s ruling on the motion to compel arbitration.

The action was assigned to this Court on 3/11/13.

Motion to Compel Arbitration –
On 6/24/13, the arbitrator determined that BDI was not bound as a party to the 2011 Settlement Agreement and was not bound by the arbitration clause contained in the 2011 Settlement Agreement. Ellis Supp. Decl. ¶ 2, Ex. A. Cross-Complainants request that this action be compelled to arbitration, except as to the claims and defenses asserted by and against BDI, with a stay pending completion of the arbitration.

It is undisputed that the arbitration provision in the 2011 Settlement Agreement provides: “Any disputes under this Agreement shall be settled by binding arbitration before a single arbitrator selected by ARC pursuant to JAMS rules . . . .” Roellig Decl. ¶ 2, Ex. A § C(18). It is undisputed that the Haggerty Parties and Cross-Complainants executed the 2011 Settlement Agreement. Id. § A(1)-(4); id. p. 11.

Preliminarily, to the extent the Haggerty Parties argued that the arbitration provision’s use of “under” is narrow (see Cape Flattery Ltd. v. Titan Maritime, LLC (9th Cir. 2011) 647 F.3d 914, 922); this interpretation has been rejected by California state courts (see EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1328-29). The Court concludes that the arbitration provision is broad, covering the claims in the Cross-Complaint against the Haggerty Parties.

The issue before this Court is how to exercise the Court’s discretion pursuant to CCP § 1281.2(c). Reviewing the allegations of the Cross-Complaint, the Court concludes that BDI was involved in a series of transactions with the parties to the 2011 Settlement Agreement and that there is a possibility of conflicting rulings as concerning BDI (see, e.g., Cross-Complaint ¶¶ 33-40; see also Opp’n p. 9-10 (wherein the Haggerty Parties assert that there is a possibility of conflicting rulings as to BDI and the Haggerty Parties on several COAs jointly asserted against them in the Cross-Complaint)). Because the claims and defenses asserted by and against BDI cannot be compelled to arbitration and are subject to CCP § 1281.2(c), the Court has discretion to refuse to enforce arbitration entirely, order arbitration among the parties who have agreed to arbitrate and stay the pending court action, or stay arbitration pending the outcome of the court action. CCP § 1281.2 ¶ 4; Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 383; see also Cronus Investments, Inc., 35 Cal.4th at 393-94 (concluding that CCP § 1281.2(c) is not preempted by the FAA).

Notably, the Haggerty Parties present no reason why the claims against them should not be compelled to arbitration. BDI argues only that its claims are not subject to arbitration; however, this provides no support as to how the Court may exercise its discretion pursuant to CCP § 1281.2 ¶ 4. Therefore, the Court exercises its discretion to order arbitration among Cross-Complainants and the Haggerty Parties only, and stay this action as to all claims and defenses asserted by and against BDI, pending the resolution of the arbitration.

The Haggerty Parties’ demurrer and motion to strike are off-calendar in light of the Court’s ruling on the motion to compel arbitration.