In One Case, Arbitration Presented Possibility Of Inconsistent Rulings, And In The Other Case, Arbitration Of Indemnification Claim Was Beyond The Scope Of The Agreement To Arbitrate
The following scenario reminds me of cases I have litigated – and arbitrated. Buyer discovers water intrusion in home she buys, and sues Developer and later Seller for allegedly concealing the facts. Seller and Developer cross-complain against one another for indemnity. After trial court denies Seller’s motion to compel arbitration against Buyer, Buyer adds business manager associated with Seller, general contractor, and real estate agent as targets. Seller now moves to compel arbitration of its indemnification claims against business manager and general contractor. Trial court denies that motion to compel too. The orders denying the two motions to compel are both appealed. Lindemann v. Hume, et al., B22616 & B233273 (2nd Dist. Div. 7 filed 2/21/12;pub. order 3/20/12) (Perluss, P.J.).
Result: the orders are affirmed. Why?
According to the trial court, the motion to compel the Buyer to arbitrate raised “a possibility of conflicting rulings on common issues of law and fact if the nondisclosure causes of action against [the Seller] were ordered to arbitration and the litigation against [the Developer] proceeded in superior court. (Code Civ. Proc., section 1281.2, subd. (c).)” The order denying a petition to compel arbitration under section 1281.2 is generally reviewed for abuse of discretion, and abuse was lacking here.
Interestingly, the Court of Appeal agreed with the Seller that the Buyer’s claims did not “arise from the same cause of action.” However, ‘[t]heir further contention that the causes of action do not arise out of a series of related transactions . . . requires an unduly cramped view of section 1281, subdivision (c), that we reject.” The Court of Appeal did see connections. The Seller had not earlier simply purchased the home from the Developer with no involvement in the construction process or knowledge of defects, but had bought the home while it was under construction, its agents having additional knowledge. Such at least were the allegations.
As to the other motion to compel, there were unresolved legal issues as to just how far the trial court could go to compel a non-signatory to arbitrate. But the Court of Appeal did not have to address that dispute, because even if the nonparties were bound by the arbitration agreement, indemnification claims “are outside the scope of the arbitration provision, which covers only disputes between the seller and the buyer, not internecine disputes among members of the seller’s team of advisors.”
Blawg Trivia: We have filed this case under our sidebar category “Celebrities” because the Seller was a trust, whose beneficiary was Nicholas Cage.
Comments