Arbitration: Nonsignatories; Section 1281.2: Brokers Were Third Parties Not Compelled To Arbitrate And Prospect Of Conflicting Rulings Further Justified Denial Of Petition To Compel Arbitration In Seller-Purchaser Dispute

Different Tracks For Different Parties, Creating Chaos, Was Good Back-Up Reasoning For Denial.

            In Kim v. Kim, Case No. B283786 (2d Dist., Div. 8 June 13, 2018) (unpublished) (Rogan, J., Orange County Superior Court Judge sitting by assignment, concurred in by Rubin, Acting P.J. and Grimes, J.), defendants (all residential property seller affiliates) appealed a trial court’s denial of their petition to compel buyers to arbitrate all of their claims against both buyer affiliates and brokers/sales agents acting in a dual agency capacity. The problem was that the broker parties never agreed to arbitration under the CAR form agreement, and both buyers and brokers opposed the motion to compel arbitration.

            The trial judge denied the petition, finding that the brokers were “third parties” not bound by the arbitration agreement and that any other result would lead to the possibility of inconsistent rulings under Code of Civil Procedure section 1281.2(c). The 2/8 DCA agreed.

            First of all, the brokers were indeed “third parties” under section 1281.2(c) given the fact that the CAR form agreement mandated that the brokers had to consent to arbitration—and they did not. (Cronus Investments, Inc. v. Concierge Services, 35 Cal.4^th 376, 393 (2005).)

            Next, the decision to deny arbitration and allow the litigation to proceed was warranted. The problem here is that permitting the arbitration and litigation to proceed simultaneously could have resulted in these representative conflicting adjudications: (1) a jury could find that brokers negligently repeated seller’s misrepresentations about the property while an arbitrator could find that sellers did not make such misrepresentations; and (2) a jury could have found that brokers worked with sellers to fraudulently misrepresent the value of the property but an arbitrator could find that sellers had no such involvement. Given the possibility of conflicting rulings based on these “different tracks,” no error was committed in denying the petition to compel arbitration, coupled with the fact that discovery had been conducted in the litigation such that it was not efficient to proceed to arbitration on this additional basis.

            BLAWG OBSERVATION—Orange County Superior Court Judge James E. Rogan, sitting by assignment, has quite a pedigree. He was a former California and federal legislator and was a U.S. House of Representative manager in the impeachment trial of then President Bill Clinton, all before being appointed to the bench.