30-13-638671

Petition to Compel Arbitration
2. Demurrer to Complaint

Petition to Compel Arbitration

There are three reasons for why the petition to compel contractual arbitration must fail.

First, on a motion to compel arbitration under CCP §1281 et seq, the moving party has the burden of demonstrating (1) an arbitration agreement covering the controversy, (2) a demand for arbitration consistent therewith, and (3) a refusal by the other party to arbitrate. Mansouri v. Superior Court (2010) 181 Cal.App.4th 633, 640; Brodke v. Alphatec Spine Inc. (2008) 160 Cal.App.4th 1569, 1575. The burden rests with the party seeking to compel arbitration to establish these three prerequisites by a preponderance of the evidence. Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972; Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1220-1221.

Here, Vega identifies two attorney-client retainer agreements as the source for the putative arbitration agreement. The agreements do contain an arbitration clause, but the agreements themselves are between the plaintiffs and “the Consumer Protection Assistance Coalition referred attorney” (in the case of Hertzler) and “Consumer Protection Assistance Coalition” (in the case of Serrato). Vega is not a named party to the agreement, nor a signatory to the agreement, nor an identified (or even implied) third party beneficiary to the agreement. Vega provides no declaration in support of the petition, which leaves this Court to guess as to why he thinks an attorney-client retainer agreement with an arbitration clause should provide any assistance to him.

Second, Vega first appeared in the action on 10/22/13 by way of a motion to set aside his default. He made no mention of any arbitration rights concurrent therewith, or at any time prior to the filing of this petition on 03/18/14. While arbitration is a favored means of resolving disputes, a trial court may deny a petition to compel arbitration if it finds the moving party has waived that right. St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195. Waiver may be found where the party seeking arbitration has unreasonably delayed in seeking arbitration. Zamora v. Lehman (2010) 186 Cal.App.4th 1, 17; in accord, Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 557 [3-month delay]; Kaneko Ford Design v. Citipark, Inc. (1988) 202 Cal.App.3d 1220, 1228 [five month delay]. Under the circumstances, the delay here is unreasonable and prejudicial since plaintiffs have already made significant litigation decisions (namely dismissing the corporate entities and focusing on alter ego) without the threat of compelled arbitration. The prejudice to plaintiffs also stems from the obvious risk of inconsistent rulings (discussed below).

Third, CCP §1281.2(c) permits a court to deny a motion to compel arbitration if “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.” This is a purely discretionary decision by the Court, based on the realities of what enforcement might do to the rest of the case.

Valencia v. Smyth (2010) 185 Cal.App.4th 153, is instructive. In that case, the plaintiffs sued their agent, broker, seller and title company for fraud relating to a recent home purchase. The seller moved to compel arbitration, relying on a provision in the standard form sales contract. The plaintiffs resisted, arguing that relegating part of the lawsuit to arbitration ran the risk of conflicting results since all allegations related to the same set of facts/circumstances and only some defendants were required to arbitrate. The trial court agreed, and declined to compel arbitration. The Court of Appeal affirmed (at 180.)

A similar result was reached by the Court in Birl v. Heritage Care LLC (2009) 172 Cal.App.4th 1313 [suit against hospital, doctor and nursing facility arising out of related treatment; arbitration of claim against nursing facility not proper given risk of conflicting decisions] and Best Interiors, Inc. v. Millie and Severson, Inc. (2008) 161 Cal.App.4th 1320 [suit against contractor, project owner and inspector, arbitration of claim against contractor improper given risk of conflicting results].

Here, all of the claims relate to Vega’s association with the corporate entities responsible for taking the retainer fees and funneling them to various attorneys. Although the individual claims do not necessarily overlap in any way, there is a very real risk of inconsistent findings regarding alter ego and vicarious liability. It simply makes more sense to keep all the claims together.

Petition to compel arbitration is DENIED.

Demurrer to FAC

Vega’s demurrer fails to include the required particularity for each claim and all grounds. CRC 3.1320(a). On this basis alone the demurrer ought to be overruled.

In addition, a demurrer presents an issue of law regarding the sufficiency of the allegations set forth in the complaint. Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1126. In general, a pleading is adequate if it contains a reasonably precise statement of the ultimate facts, in ordinary and concise language, and with sufficient detail to acquaint a defendant with the nature, source and extent of the claim. Leek v. Cooper (2011) 194 Cal.App.4th 399, 413. Here, defendant’s issue with the Hertzler and Serrato agreements has already been dispensed with in the petition to compel arbitration – and no other shortcoming is offered. Defendant also contends that Brice has an obligation to plead around a perceived waiver defense in one of her agreements, but this is new matter for the defendant to prove on summary judgment, not something the plaintiff must negate in the pleading.

Lastly, a demurrer can be used only to challenge defects that appear within the four corners of the pleading under attack; or from matters outside the pleading that are judicially noticeable under Evidence Code §§ 451 or 452. The “four corners” include matters shown in exhibits attached to the complaint and incorporated by reference; or in a superseded complaint in the same action. Extrinsic information is not to be considered. Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505; Ion Equip. Corp. v. Nelson (1980) 110 CA3d 868, 881. Here, defendant challenges Villalons’ standing because they once filed a bankruptcy petition. From there defendant speculates that a petition was perfected, that the trustee took over any claims they may have had, and that Villalons have no right to bring the present action. This a long list of assumptions made by defendant on facts not contained in the operative pleading. If indeed this claim was a bankruptcy asset belonging to a trustee, defendant may have a point but on the pleadings it is impossible to state.

Demurrer overruled. Defendant to answer within 5 days.