Opinion Not For Publication Rejects Dictum In Published Opinion
Nonsignatories to arbitration agreements may find themselves bound to arbitrate if they are agents of a signatory party to the transaction. But that didn’t happen to the real estate brokers here. 3118, LLC v. CBD Investment, Inc., B234706 (2nd Dist. Div. 5 April 10, 2012) (not for publication).
Plaintiff, 3118, LLC, the purchaser of a building, successfully obtained an arbitration order against defendant brokers in a separate action. The Plaintiff appealed from an order denying its motion to compel arbitration and to stay litigation of claims against defendants, including defendant brokers, in the instant action. The real estate purchase agreement included a common mediation/arbitration provision, and a NOTICE provision, requiring initialing. The defendant brokers did not initial the NOTICE provision.
The published case of Nguyen v. Tran, 157 Cal.App.4th 1032 (2007) (4th District, Div. 3) needed to be addressed. In Nguyen v. Tran the purchasers signed the purchase agreement. The Court of Appeal stated in that case: “As such, [purchasers’] brokers could have been compelled to arbitrate the claims against them although they did not sign the agreement and were not parties to it.” Id., at p. 1037. That statement would seem to be dispositive and require the brokers to arbitrate in 3118, LLC. However, the statement is dictum in Nguyen v. Tran that the 2nd District, Division 5 refused to follow.
The express language of the real estate form in 3118, LLC provides: “Buyer and Seller agree to . . . arbitrate disputes or claims involving either or both Brokers, . . . . provided either or both Brokers shall have agreed to such . . . arbitration prior to, or within a reasonable time after, the dispute or claim is presented to Brokers.” The capitalized NOTICE provision states in part, “BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE ‘ARBITRATION OF DISPUTES’”. The brokers did not initial that NOTICE provision.
The Court of Appeal simply gave effect to the provision, concluding that the brokers, who did not sign the arbitration agreement, could not be compelled to arbitrate claims by plaintiff, the buyer, in light of the explicit language of the agreement. Refusing to apply equitable principles to override the contract, the Court of Appeal also noted that this was not a case where a nonsignatory wanted to be bound by an arbitration agreement.
However, the court reversed the order refusing to stay the judicial action against the brokers pending arbitration, because of the existence of overlapping issues and the risk of inconsistent results.
The opinion is unpublished and therefore cannot be cited as precedent. Nevertheless, if you are a real estate broker or litigator, this is a case you might want to keep in mind.
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