Judgment Confirming Arbitration Award And Postjudgment Order Awarding Attorney Fees Are Reversed.
One of this blog’s sidebar categories is “Nonsignatories,” because many cases address whether nonsignatories to arbitration agreements can nevertheless be compelled to arbitrate either because they are third-party beneficiaries of the agreement, or because they have a special relationship with a party to the agreement – e.g., agency. The issue in Ahern et al. v. Asset Management Consultants Inc., B253974 and B257684 (2/7 August 11, 2015) (Perluss, Zelon, Segal) (unpublished) was whether the Ahern plaintiffs could be compelled to arbitrate by the defendants, despite the fact that the Ahern plaintiffs were not signatories to the arbitration agreement.
The arbitration agreement applied to the Seller (iStar CTL I, L.P.) and to the Purchasers of real property (Hopper parties). The Purchasers assigned and sold their interests in the property to the Ahern plaintiffs and others. The Ahern parties sued the Purchasers for fraudulent inducement and other causes of action, and the Purchasers successfully moved to compel arbitration, obtained favorable results in arbitration, and confirmed the arbitration award as a judgment.
The Court of Appeal explained that iStart CTL, the Seller, “would most likely have been entitled to require the Ahern parties to arbitrate disputes regarding their respective rights and obligations regarding the sale [to the Ahern parties].” The problem, however, was that the real dispute was not between the Purchasers and the Seller, but rather between the Purchaser and the Ahern parties who “were fully aligned with the purchaser side of the transaction only. . ..” Thus, the arbitration agreement between the Purchasers and the Seller did not apply to disputes between the Purchasers and the Purchaser’s buyers and assignees.
Because the judgment confirming the arbitration award was reversed, the attorney’s fee award was also reversed.
Greetings to my former colleague at Jackson, DeMarco, Tidus & Peckenpaugh, M. Alim Malik, lead counsel for defendants and respondents.