Case Name: Old Trace Partners, L.P. et al v Sorensen et al
Case Number: 114CV26684

Defendants’ Motion to Award Liquidated Damages and Attorney’s Fees against Plaintiffs

Brief Factual and Procedural Background
In 2007, Defendants promoted an investment to purchase and develop an office building in Los Altos, California. Plaintiffs allege material false statements were made in the investment prospectus.
The dispute is governed by an Operating Agreement that was amended on October 31, 2012, and requires arbitration.
Plaintiffs filed their complaint on June 19, 2014. On September 30, 2014, Defendants filed a Petition to Compel Arbitration. On November 17, 2014, the Court ordered the matter to arbitration. Judge Overton’s order specifically states: “All claims not subject to arbitration shall be stayed pending conclusion of the arbitration or further order of the Court.”
The parties are now back in court, and currently dispute whether or not it is appropriate to award liquidated damages under Section 14.10 of the Operating Agreement, which awards liquidated damages for failing to arbitrate a dispute. Defendants further demand attorney’s fees pursuant to Section 14.20 of the Operating Agreement.
The Court notes that defendants’ reply is 4 days late. And, although the Court reviewed the reply, the Court does not find it persuasive.

Legal Analysis
The Court cannot act on the present requests because Judge Overton’s order specifically provided that all claims not subject to arbitration shall be stayed pending conclusion of the arbitration or further order of this Court. The stay has not been lifted. And, case law is clear that if a lawsuit is stayed pending a decision through binding arbitration, “the action at law sits in the twilight zone of abatement with the trial court retaining merely vestigial jurisdiction over matters submitted to arbitration.” (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796.
This “vestigial jurisdiction” consists of the court being empowered to “appoint arbitrators if the method selected by the parties fails (§ 1281.6); grant a provisional remedy ‘but only upon the ground that the award to which an applicant may be entitled may be rendered ineffectual without provisional relief’ (§ 1281.8, subd. (b)); and confirm, correct or vacate the arbitration award (§ 1285). Absent an agreement to withdraw the controversy from arbitration, however, no other judicial act is authorized. [Citation.] [¶] In the interim, the arbitrator takes over. It is the job of the arbitrator, not the court, to resolve all questions needed to determine the controversy. [Citations.] The arbitrator, and not the court, decides questions of procedure and discovery. [Citations.] It is also up to the arbitrator, and not the court, to grant relief for delay in bringing an arbitration to a resolution.” (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487–488.)
Appellate courts have therefore routinely rejected parties’ efforts to have courts overstep their limited jurisdiction in cases that are stayed pending binding contractual arbitration. (See, e.g., MKJA, Inc. v. 123 Fit Franchising, LLC (2011) 191 Cal.App.4th 643, 661 [court cannot issue order lifting stay based upon party’s claim that it cannot afford contractual arbitration]; Finley v. Saturn of Roseville (2004) 117 Cal.App.4th 1253, 1259–1260, (Finley ) [order compelling review of decision by second arbitrator which was provided for in arbitration agreement was unauthorized]; Blake v. Ecker (2001) 93 Cal.App.4th 728, 737 [remedy for failure to timely prosecute arbitration was in the arbitration proceeding, not through court order], disapproved on other grounds in Le Francois v. Goel (2005) 35 Cal.4th 1094, 1107, fn. 5, 29 Cal.Rptr.3d 249, 112 P.3d 636; Titan/Value Equities, supra, 29 Cal.App.4th 482, 35 Cal.Rptr.2d 4 [order compelling arbitration to proceed under stated conditions involving potential reinstatement to trial calendar was in excess of court’s jurisdiction].)” Optimal Markets, Inc. v. Salant, 221 Cal. App. 4th 912, 923-24.
This Court has no jurisdiction to consider defendants’ requests. Accordingly, their Motion is DENIED.