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Date: 03-12-2020

Case Style:

Victrola 89, LLC v. Jaman Properties 8, LLC

Case Number: B295439

Judge: Manella, P.J.

Court: California Court of Appeals Second Appellate District, Division Four on appeal from the Superior Court, County of Los Angeles

Plaintiff's Attorney: Andrew S. Pauly and Andrew J. Haley

Defendant's Attorney: Betty M. Shumener, Staci M. Tomita, Benjamin L. Hicks and Benjamin P. Sosnick

Description: After respondent Victrola 89, LLC (Victrola) purchased
a house (the Property) from appellant Jaman Properties 8,
LLC (JP8), Victrola filed suit against JP8, appellant Jaman
Properties, Inc. (JP), and their principal, appellant Michael
Manheim (collectively, the Jaman Parties), among others,
regarding allegedly undisclosed and unrepaired defects in
the Property. Based on the real estate purchase agreement
(the Agreement) between Victrola and JP8, the Jaman
Parties moved to compel arbitration under the Federal
Arbitration Act (FAA).
1
The court denied the motion to compel arbitration,
finding that the procedural provisions of the California
Arbitration Act (CAA), rather than those of the FAA, applied
to its ruling on the motion. Under section 1281.2,
1 The Agreement is a standard form created and distributed
by the California Association of Realtors (CAR). CAR has filed an
amicus curiae brief in support of the Jaman Parties.
3
subdivision (c), of the CAA (Section 1281.2(c)), a court may
refuse to compel arbitration if “[a] party to the arbitration
agreement is also a party to a pending court action or special
proceeding with a third party, arising out of the same
transaction or series of related transactions and there is a
possibility of conflicting rulings on a common issue of law or
fact.” (Code Civ. Proc., § 1281.2, subd. (c).) Because both the
Jaman Parties and Victrola were parties to a pending court
action (i.e., Victrola’s lawsuit) with third-party defendants
not required to arbitrate, the court found “a possibility of
conflicting rulings on a common issue of law or fact” and
exercised its discretion under Section 1281.2(c) to decline to
enforce the arbitration provision of the Agreement.
On appeal, the Jaman Parties contend the court erred
in finding the FAA did not apply to their motion to compel
arbitration. Victrola counters that: (1) the court correctly
found the CAA, not the FAA, applied; (2) most of the claims
Victrola brought are not covered by the Agreement’s
arbitration clause; (3) Code of Civil Procedure section 1298.7
(Section 1298.7) exempts Victrola from arbitrating its
construction defect claims; (4) JP and Manheim are not
entitled to enforce the arbitration provision of the
Agreement because they are not parties to the Agreement;
and (5) the Jaman Parties are estopped from asserting the
application of the FAA.
As discussed below, we find: (1) the parties
incorporated the procedural provisions of the FAA into the
Agreement; thus the court could not look to Section 1281.2(c)
4
to deny the Jaman Parties’ motion; (2) the Agreement’s
arbitration clause encompasses all of Victrola’s claims
against the Jaman Parties; (3) the FAA preempts Section
1298.7 in this instance; and (4) JP and Manheim have
standing to enforce the arbitration provision. Because the
trial court did not reach the claim of judicial estoppel, we
remand to permit that court to adjudicate the issue.
Accordingly, we vacate the trial court’s order denying the
Jaman Parties’ motion, and remand for the court to
determine whether the Jaman Parties are judicially
estopped from claiming the FAA’s procedural provisions
apply.
STATEMENT OF RELEVANT FACTS
On November 11, 2016, Matthew S. Barrett and Kathy
K. Barrett made an offer to buy the Property.2 The offer was
made using a CAR form, and contained the following
language under Paragraph 22.B:
“Arbitration of Disputes: The Parties agree
that any dispute or claim in Law or equity
2 Matthew S. Barrett and Kathy K. Barrett are the sole
members of respondent Victrola. In the Agreement, the parties
agreed that “[v]esting of title to the Property shall be determined
by Buyer during Escrow.” In the complaint, Victrola is defined as
“Owner.” Though not in the record before us, we assume the
parties determined that Victrola would hold title to the Property.
Nothing in the record or the parties’ briefs suggests any party
has contended Victrola is not bound by the Agreement, and we
proceed under the assumption that it is.
5
arising between them out of this Agreement
or any resulting transaction, which is not
settled through mediation, shall be decided
by neutral, binding arbitration. The Parties
also agree to arbitrate any disputes or
claims with Broker(s), who, in writing,
agree to such arbitration prior to, or within
a reasonable time after, the dispute or claim
is presented to the Broker. The arbitrator
shall be a retired judge or justice, or an
attorney with at least 5 years of residential
real estate Law experience, unless the
parties mutually agree to a different
arbitrator. The Parties shall have the right
to discovery in accordance with Code of
Civil Procedure §1283.05. In all other
respects, the arbitration shall be conducted
in accordance with Title 9 of Part 3 of the
Code of Civil Procedure. Judgment upon
the award of the arbitrator(s) may be
entered into any court having jurisdiction.
Enforcement of this agreement to
arbitrate shall be governed by the
Federal Arbitration Act. . . .” (Bolding
added.)
“‘NOTICE: BY INITIALING IN THE
SPACE BELOW YOU ARE AGREEING TO
HAVE ANY DISPUTE ARISING OUT OF
THE MATTERS INCLUDED IN THE
‘ARBITRATION OF DISPUTES’
PROVISION DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE
6
GIVING UP ANY RIGHTS YOU MIGHT
POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR JURY
TRIAL. BY INITIALING IN THE SPACE
BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND
APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE
‘ARBITRATION OF DISPUTES’
PROVISION. IF YOU REFUSE TO
SUBMIT TO ARBITRATION AFTER
AGREEING TO THIS PROVISION, YOU
MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE
CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO
THIS ARBITRATION PROVISION IS
VOLUNTARY.’”
Additionally, paragraph 29 of the Agreement stated:
“Except as otherwise specified, this Agreement shall be
interpreted and disputes shall be resolved in accordance
with the Laws of the State of California.”
After Victrola’s initial offer, JP8 and Victrola each
made two counteroffers, culminating in an agreement
executed on January 7, 2017, for the Barretts or their
designee to purchase the Property. Each of the counteroffers
incorporated the previous offer or counteroffer. Escrow
closed on February 17, 2017.
On August 8, 2018, Victrola filed a complaint against
JP8, JP, Manheim, T. Engineering Group, Inc.,
7
Harris-Anderson, and Harms Concrete Construction, Inc.
The gravamen of the complaint was that JP8 and its
affiliates, principals, and contractors, deceived Victrola
about both the initial condition of the Property and the
repairs of the Property’s defects.
On November 1, 2018, the Jaman Parties moved to
compel arbitration and stay the action. According to the
notice of motion, the motion was “brought under the Federal
Arbitration Act (‘FAA’), 9 U.S.C. §§ 3-4.” In the
memorandum of points and authorities accompanying the
motion, when arguing the court should stay the action as to
any claims or parties not subject to arbitration, the Jaman
Parties relied on section 1281.4 of the Code of Civil
Procedure (Section 1281.4) (i.e., a section of the CAA), as
well as Twentieth Century Fox Film Corp. v. Superior Court
(2000) 79 Cal.App.4th 188 (Twentieth Century Fox), a case
interpreting Section 1281.4. (Twentieth Century Fox, supra,
at 192.)
On January 18, 2019, the court denied the motion,
finding the CAA, not the FAA, applied. Specifically, the
court found that “the question is not whether the Federal
Arbitration Act (‘FAA’) ‘applies’ to this Agreement, but
rather, whether the parties expressly incorporated the FAA’s
procedural provisions into the Agreement. If the parties did
not, the Court is not precluded from exercising its discretion
under CCP § 1281.2(c), because § 1281.2 is not preempted by
the FAA.” The court relied principally on Valencia v. Smyth
(2010) 185 Cal.App.4th 153. There, the court held the
8
parties had agreed to be bound by the CAA, notwithstanding
language in the arbitration agreement that “Interpretation
of this agreement to arbitrate shall be governed by the
Federal Arbitration Act.” (Valencia v. Smyth, supra, 185
Cal.App.4th at 159, emphasis added.) Recognizing the
provision in the instant agreement stated “‘Enforcement of
this agreement [to arbitrate] shall be governed by the
Federal Arbitration Act’” (emphasis added), the court
characterized the change in wording as “a distinction
without a difference.” It concluded the CAA applied, and it
was thus free to determine under Section 1281.2(c) whether
to decline to compel arbitration. The court found that
because the other defendants named in Victrola’s complaint
had not agreed to arbitrate, there was “a possibility of
conflicting rulings on a common issue of law or fact
regarding the Jaman Defendants’ liability . . . .” The court
then exercised its discretion under Section 1281.2(c) to
decline to enforce the arbitration agreement between
Victrola and the Jaman Parties.
On January 24, 2019, the Jaman Parties appealed the
court’s denial of their motion. The Jaman Parties do not
argue the trial court abused its discretion in its application
of Section 1281.2(c), only that the court erred in applying the
section in the first place.
9
DISCUSSION
A. The FAA Governs Whether the Agreement’s
Arbitration Provision Should Be Enforced
“In accordance with choice-of-law principles, the
parties may limit the trial court’s authority to stay or deny
arbitration under the CAA by adopting the more restrictive
procedural provisions of the FAA.” (Valencia v. Smyth,
supra, 185 Cal.App.4th at 157.) “[T]he FAA’s procedural
provisions (9 U.S.C. §§ 3, 4, 10, 11) do not apply unless the
contract contains a choice-of-law clause expressly
incorporating them.” (Id. at 174.) “[T]he question is not
whether the parties adopted the CAA’s procedural
provisions: The state’s procedural statutes (§§ 1281.2,
1290.2) apply by default because Congress intended the
comparable FAA sections (9 U.S.C. §§ 3, 4, 10, 11) to apply in
federal court. The question, therefore, is whether the parties
expressly incorporated the FAA’s procedural provisions into
their agreements.” (Id. at 177; see also Cronus Investments,
Inc. v. Concierge Services (2005) 35 Cal.4th 376, 387, 394
[“Our opinion does not preclude parties to an arbitration
agreement to expressly designate that any arbitration
proceeding should move forward under the FAA’s procedural
provisions rather than under state procedural law” (italics
omitted)].)
“The question of whether the Agreement incorporated
the FAA’s procedural provisions, thereby eliminating the
trial court’s authority under section 1281.2(c), ‘is a question
10
of law involving interpretation of statutes and the contract
(with no extrinsic evidence). We therefore apply a de novo
standard of review.’” (Valencia v. Smyth, supra, 185
Cal.App.4th at 161-162.)
1. The FAA Was Incorporated into the
Agreement
While no party has cited a case analyzing the meaning
of the sentence “Enforcement of this agreement to
arbitrate shall be governed by the Federal Arbitration
Act,” and we have found none, we conclude the parties
intended to incorporate the FAA with respect to compelling
arbitration. As set forth below, previous cases have held
that when an arbitration agreement provides that its
“enforcement” shall be governed by California law, the CAA
governs a party’s motion to compel arbitration. It follows
that when an agreement provides that its “enforcement”
shall be governed by the FAA, the FAA governs a party’s
motion to compel arbitration.
By its terms, the FAA “provides for the enforcement of
arbitration provisions in any contract evidencing a
transaction involving interstate commerce.” (Mount Diablo
Medical Center v. Health Net of Cal., Inc. (2002) 101
Cal.App.4th 711, 717 (Mount Diablo).) But agreements to
have such enforcement governed by state rules are
enforceable. (Volt Info. Scis. V. Bd. of Trs. (1989) 489 U.S.
468, 479 (Volt) [“Arbitration under the Act is a matter of
consent, not coercion, and parties are generally free to
11
structure their arbitration agreements as they see fit. Just
as they may limit by contract the issues which they will
arbitrate, [citation] so too may they specify by contract the
rules under which that arbitration will be conducted.
Where, as here, the parties have agreed to abide by state
rules of arbitration, enforcing those rules according to the
terms of the agreement is fully consistent with the goals of
the FAA, even if the result is that arbitration is stayed
where the Act would otherwise permit it to go forward”].) In
Volt, the United States Supreme Court held that the FAA
did “not prevent application of Cal. Civ. Proc. Code Ann.
§ 1281.2(c) to stay arbitration where, as here, the parties
have agreed to arbitrate in accordance with California law.”
(Volt, supra, at 477.)
In Mount Diablo, the arbitration agreement involved
interstate commerce, and thus the FAA presumptively
applied. (Mount Diablo, supra, 101 Cal.App.4th at 717 & fn.
5.) However, the arbitration agreement contained a
choice-of-law provision, stating the agreement’s “‘validity,
construction, interpretation and enforcement’” would be
governed by California law. (Id. at 716.) The court found
this provision compelled application of state procedural law.
Specifically, the court held that the “explicit reference to
enforcement reasonably includes such matters as whether
proceedings to enforce the agreement shall occur in court or
before an arbitrator.” (Id. at 722.) In so holding, the court
noted that “Chapter 2 (in which § 1281.2 appears) of title 9
of part [3] of the California Code of Civil Procedure is
12
captioned ‘Enforcement of Arbitration Agreements.’” (Ibid.)
From this, the court concluded that “[a]n interpretation of
the choice-of-law provision to exclude reference to this
chapter would be strained at best.” (Ibid.)
In Gravillis v. Coldwell Banker Residential Brokerage
Co. (2006) 143 Cal.App.4th 761 (Gravillis), the Court of
Appeal considered an arbitration provision in a preprinted
real estate purchase agreement prepared by CAR.
(Gravillis, supra, at 768.) The agreement contained a
provision stating: “‘By initialing in the space below you are
agreeing to have any dispute arising out of the matters
included in the “Arbitration of Disputes” provision decided
by neutral arbitration as provided by California law . . . . If
you refuse to submit to arbitration after agreeing to this
provision, you may be compelled to arbitrate under the
authority of the California Code of Civil Procedure.’ (Italics
added, all capitals omitted.)” (Id. at 784.) Defendants
moved to compel arbitration under the FAA. (Gravillis,
supra, at 769.) The Court of Appeal held that “[b]ecause the
Agreement provides that a motion to compel arbitration is to
be decided under California law, we need not decide if the
FAA applies,” and directed the trial court to determine
whether to stay or deny arbitration under Section 1281.2(c).
(Gravillis, at 784.) Notably, though the parties disagreed
whether the agreement in Gravillis involved interstate
commerce, it contained no language purporting to
incorporate the FAA.
13
In Valencia v. Smyth, the court considered another
arbitration provision contained in a CAR form. (Valencia v.
Smyth, supra, 185 Cal.App.4th at 156.) This provision was
identical to that in Gravillis, but with “the addition of a
single sentence: ‘Interpretation of this agreement shall be
governed by the [FAA].’ (Italics added.)” (Id. at 157.) The
Court of Appeal characterized the question as “whether this
additional language warrants a different conclusion than the
one we reached in Gravillis.” (Id. at 176.) The court
concluded it did not, “because the CAA and the FAA employ
the same rules of contract interpretation.” (Ibid.) The court
held that “interpreting an arbitration agreement in
accordance with the FAA does not accomplish the . . . goal of
displacing section 1281.2(c).” (Id. at 178.) The court
explained:
“In Mount Diablo, supra, 101
Cal.App.4th 711, the choice-of-law provision
stated, ‘“The validity, construction,
interpretation and enforcement of this
Agreement shall be governed by the laws of
the State of California”’ (id. at p. 716).
Mount Diablo relied in large part on the
provision’s ‘explicit reference’ to
‘enforcement’ in concluding the CAA’s
procedural provisions applied. (See Mount
Diablo, supra, 101 Cal.App.4th at 722, 724.)
We do not read Mount Diablo to suggest
14
that an explicit reference to ‘interpretation,’
by itself, would determine the applicable
procedural law.” (Valencia v. Smyth, supra,
at 179.)3
If, as the courts in Mount Diablo and Valencia v.
Smyth held, contracting parties’ explicit reference to
“enforcement” under California law required the trial court
to consider any motions to compel arbitration under the
CAA, it follows that the instant parties’ reference to
“enforcement” under the FAA required the court to consider
the Jaman Parties’ motion to compel arbitration under the
FAA.
2. Victrola’s Contrary Arguments Are
Unpersuasive
(a) Incorporating the FAA Is Not
Limited to Enforcing an
Arbitration Award
Victrola argues that “Enforcement of this agreement to
arbitrate shall be governed by the Federal Arbitration Act”
3 In their opening brief, the Jaman Parties note: “What
happened next [after the Valencia v. Smyth9 decision] came as a
surprise to no one: CAR revised its form language to substitute
the magic language (‘enforcement’) for the deficient language
(‘interpretation’).” CAR and Victrola agree with this sequence of
events, but Victrola disputes whether CAR’s substitution
sufficiently “displace[d] the CAA procedural provisions.”
15
refers “only to post-arbitration procedures – i.e., enforcement
of any judgment resulting from arbitration.” The words used
to incorporate the FAA in the Agreement are not susceptible
to Victrola’s interpretation. We need look no further than
our own Code of Civil Procedure for confirmation: Chapter 2
of Title 9 of Part 3 is entitled “Enforcement of Arbitration
Agreements” (underline added) and contains provisions
(§§1281-1281.99) relating to how arbitration agreements are
enforced. (See, e.g., Code Civ. Proc., § 1281.2 [“On petition of
a party to an arbitration agreement alleging the existence of
a written agreement to arbitrate a controversy and that a
party to the agreement refuses to arbitrate that controversy,
the court shall order the petitioner and the respondent to
arbitrate the controversy if it determines that an agreement
to arbitrate the controversy exists”].) A separate chapter --
Chapter 4 of Title 9 of Part 3 -- is entitled “Enforcement of
the Award” (underline added) and contains provisions (Code
Civ. Proc., §§ 1285-1288.8) pertaining to the enforcement of
an arbitration award. (See, e.g., Code Civ. Proc., § 1285
[“Any party to an arbitration in which an award has been
made may petition the court to confirm, correct or vacate the
award”].) “Enforcement of this agreement to arbitrate” does
not and cannot mean “Enforcement of the arbitration award
that may result from an arbitration undertaken pursuant to
this agreement to arbitrate.”
16
(b) References to California Law Do
Not Override the Agreement’s
Directive That Its Enforcement Be
Governed by the FAA
Pointing to the Agreement’s numerous references to
California law, Victrola argues “the arbitration provision in
the Purchase Agreement reiterates that California law
applies to substantive and procedural issues . . . .”
Specifically, Victrola points out that paragraph 22.B
provides that: (1) the parties “shall have the right to
discovery in accordance with Code of Civil Procedures
§1283.05” but “[i]n all other respects, the arbitration shall be
conducted in accordance with Title 9 of Part 3 of the Code of
Civil Procedure”; and (2) by initialing, the parties agree to
arbitration “as provided by California law” and that if a
party refuses to arbitrate it “may be compelled to arbitrate
under the authority of the California Code of Civil
Procedure.” As explained below, these references to
California law do not override the Agreement’s provision
that “Enforcement of this agreement to arbitrate shall be
governed by the Federal Arbitration Act.”
4
4 Victrola also attaches significance to paragraph 29 of the
agreement, which contained the language that “[e]xcept as
otherwise specified, this Agreement shall be interpreted and
disputes shall be resolved in accordance with the Laws of the
State of California.” This language does not help Victrola
because the agreement in fact “otherwise specified.”
17
The parties were free to agree that discovery would be
conducted in accordance with Code of Civil Procedure section
1283.05. Their choice does little to inform us about what law
the parties intended to apply when deciding whether the
arbitration agreement should be enforced. Similarly, a
directive that arbitration shall be “conducted” in accordance
with the CAA in all other respects has no bearing on the law
that should be used to determine whether arbitration is
required. (Warren-Guthrie v. Health Net (2000) 84
Cal.App.4th 804, 816, overruled on another point in Cronus
Investments, Inc. v. Concierge Services, supra, 35 Cal.4th at
393, fn. 8 [“Agreement to apply California contractual
arbitration law is expressly limited to that law which bears
on how the arbitration shall be conducted, as distinguished
from agreeing that the plan shall be governed by California
law for all purposes, including the determination . . .
whether or not arbitration is required”]; accord, Gravillis,
supra, 143 Cal.App.4th at 784, fn. 4 [“The language in the
Agreement that the ‘arbitration shall be conducted in
accordance with [the CAA]’ (italics added) does not indicate,
by itself, that the arbitration provision should be governed
by California law”].)
Victrola is correct that arbitration agreements
providing for disputes to be “‘decided by neutral arbitration
as provided by California law,’” and informing a party that it
“‘may be compelled to arbitrate under the authority of the
California Code of Civil Procedure,’” have previously been
held to mean that enforcement of the agreement shall be
18
decided under California law (see, e.g., Gravillis, supra, 143
Cal.App.4th at 784), but only in the absence of an express
proviso that “Enforcement of this agreement to arbitrate
shall be governed by the [FAA].” “Under well-established
principles of contract interpretation, when a general and a
particular provision are inconsistent, the particular and
specific provision is paramount to the general provision.”
(Kashmiri v. Regents of University of California (2007) 156
Cal.App.4th 809, 834.) Thus, the Agreement’s specific
directive that its enforcement will be governed by the FAA is
paramount to any general statement that disputes will be
decided as provided by California law.
Further, that a party “may” be compelled to arbitrate
under the CAA is permissive, whereas the sentence that
enforcement of the agreement “shall” be governed by the
FAA is mandatory. “The whole of a contract is to be taken
together, so as to give effect to every part, if reasonably
practicable, each clause helping to interpret the other.” (Civ.
Code, § 1641.) Taken as a whole, the Agreement’s references
to California law fail to override its explicit provision that
enforcement of the Agreement is to be governed by the FAA.5
5 We note additionally that Code of Civil Procedure section
1298, subdivision (c) (Section 1298(c)), mandates the quoted
language that a party agree to have disputes “decided by neutral
arbitration as provided by California law” and that a party “may
be compelled to arbitrate under the authority of the California
Code of Civil Procedure.” The Jaman Parties argue the FAA
preempts Section 1298(c) because “[i]f the mere act of inserting a
(Fn. is continued on the next page.)
19
(c) It Is Irrelevant Whether the
Initialed Portion of the Agreement
Mentioned the FAA
Victrola observes that “[t]he portion of the arbitration
provision that Respondent initialed and agreed to is the
portion in all capital letters – i.e., ‘BY INITIALING IN THE
SPACE BELOW, YOU ARE AGREEING TO . . . NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW . . .’
– not the portion referencing the FAA.” Victrola argues that
“[t]he purpose of requiring a purchaser to initial an
arbitration provision is to ensure that he/she/it understands
what types of claims will and will not be subject to
arbitration and what rules will apply to that determination,
in large part due to the importance of a right to a jury trial.”
We are unpersuaded that the lack of initials directly under
the sentence referencing the FAA renders it meaningless.
First, Victrola has provided no authority holding that a
party’s lack of initials directly under a sentence
incorporating the FAA renders such incorporation
ineffective. In fact, requiring such initials would arguably
statutorily required consumer notice into an arbitration contract
is interpreted as an election of California procedural law, that
directive inherently conflicts with the FAA and flouts a
contracting party’s freedom to choose the FAA’s procedural
rules.” We do not so construe Section 1298(c). Indeed, Victrola
admits that “CCP § 1298 does not prohibit the application of the
FAA’s procedural provisions where such provisions are expressly
incorporated.”
20
violate California law, which provides that certain language
must appear “[i]mmediately before the line or space provided
for the parties to indicate their assent or nonassent to the
arbitration provision described in subdivision (a) or (b), and
immediately following that arbitration provision . . . .” (Code
Civ. Proc., § 1298, subd. (c).) Had the Agreement required
the parties to initial immediately after the sentence in
question, it would arguably have violated the requirements
of Section 1298(c), because the requisite language would not
have appeared “[i]mmediately before the line or space
provided for the parties to” initial or “immediately following
th[e] arbitration provision.”
Second, the paragraph immediately preceding the
parties’ initials expressly stated the party was agreeing to
arbitrate matters “included in the ‘Arbitration of Disputes’
provision.” The “Arbitration of Disputes” provision appeared
directly above this paragraph and both described what
claims would be arbitrated and specified that “[e]nforcement
of this agreement to arbitrate shall be governed by the
Federal Arbitration Act.” Victrola’s concern that parties will
be unaware of what law governs the enforcement of such
agreements is unfounded.
(d) Arbitration Is Favored
Finally, Victrola argues that “[a]ny ambiguity in the
terms of [the] arbitration agreement (e.g., whether the FAA
or CAA applies) must be interpreted against Appellants”
because “ambiguities are interpreted against the party that
21
caused the ambiguity.” Victrola further contends, “[h]ere,
the contract was selected by Appellants who occupied
superior bargaining position.” But Victrola’s complaint
expressly alleges that Victrola “originally offered to purchase
the Property on November 11, 2016” and notes the
agreement to purchase the Property is made up of the
“California Residential Purchase Agreement and Joint
Escrow Instructions, dated November 11, 2016” and several
counteroffers. There is no allegation or evidence in the
record that JP8 compelled Victrola to use the CAR form to
make its offer, nor does any evidence support Victrola’s
argument that JP8 was in a “superior bargaining position.”
Indeed, that each side made two counteroffers suggests that
each exercised leverage in the negotiations.
Moreover, “the Legislature has expressed a ‘strong
public policy in favor of arbitration as a speedy and
relatively inexpensive means of dispute resolution.’
[Citations.] Consequently, courts will ‘“indulge every
intendment to give effect to such proceedings.”’” (Moncharsh
v. Heily & Blase (1992) 3 Cal.4th 1, 9.) As our Supreme
Court has concluded: “Any doubts or ambiguities as to the
scope of the arbitration clause itself should be resolved in
favor of arbitration.” (Cronus Investments, Inc. v. Concierge
Services, supra, 35 Cal.4th at 386.)
22
B. Unless the Jaman Parties Are Estopped,
Victrola Must Be Compelled to Arbitrate Its
Claims Against Them
Aside from its contention that the court correctly
applied Section 1281.2(c), Victrola proffers several other
arguments regarding why it should not be required to
arbitrate its disputes with the Jaman Parties. Though the
trial court did not rule on these grounds, we nevertheless
address them as alternative bases for affirming the trial
court’s denial of the motion to compel arbitration. (See, e.g.,
Muller v. Fresno Community Hospital & Medical Center
(2009) 172 Cal.App.4th 887, 906-907 [“It is the ruling, and
not the reason for the ruling, that is reviewed on appeal”].)
We note additionally that, with the exception of judicial
estoppel addressed below in subsection 4, the standard of
review on each issue is de novo.
1. JP and Manheim Have Standing to
Enforce the Arbitration Provision of the
Agreement
“The determination of standing to arbitrate as a party
to the contractual arbitration agreement is a question of law
. . . .” (Valley Casework, Inc. v. Comfort Construction, Inc.
(1999) 76 Cal.App.4th 1013, 1017, citing Unimart v. Superior
Court (1969) 1 Cal.App.3d 1039, 1045-1047.) “As a general
matter, only signatories to an arbitration agreement may
enforce it.” (Rowe v. Exline (2007) 153 Cal.App.4th 1276,
1284.) “However, in many cases, nonparties to arbitration
23
agreements are allowed to enforce those agreements where
there is sufficient identity of parties.” (Valley Casework, Inc.
v. Comfort Construction, Inc., supra, at 1021.)
Victrola argues that “even if Respondent [Victrola] is
compelled to arbitrate with Seller [JP8], Respondent should
not be required to arbitrate with Designer [JP] or Manheim,
as Respondent did not agree to arbitrate with either of
them.” Victrola further argues that “[d]espite Appellants’
contention that the Trial Court ruled Respondent must
arbitrate with Designer and Manheim under an equitable
estoppel theory, the Trial Court made no such ruling.”
Rather, as Victrola notes, the trial court stated that it
“‘assumes that Jaman Properties, Inc. and Michael Manheim
may enforce the arbitration agreement as non-signatories
based upon an equitable estoppel argument,’” citing DMS
Services, Inc. v. Superior Court (2012) 205 Cal.App.4th 1346,
1354.
JP and Manheim counter that because Victrola alleged
them to be alter egos of JP8, “they are entitled to enforce the
agreement to arbitrate given that Respondent has elected to
sue them for claims arising out of that agreement.” As
explained below, we conclude that JP and Manheim have
standing to enforce the Agreement’s arbitration provision
under an equitable estoppel theory.
“Under [the] doctrine [of equitable estoppel], as applied
in ‘both federal and California decisional authority, a
nonsignatory defendant may invoke an arbitration clause to
compel a signatory plaintiff to arbitrate its claims when the
24
causes of action against the nonsignatory are “intimately
founded in and intertwined” with the underlying contract
obligations.’” (Molecular Analytical Systems v. Ciphergen
Biosystems, Inc. (2010) 186 Cal.App.4th 696, 706, quoting
Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th
262, 271.) “‘By relying on contract terms in a claim against a
nonsignatory defendant, even if not exclusively, a plaintiff
may be equitably estopped from repudiating the arbitration
clause contained in that agreement.’” (Molecular Analytical
Systems v. Ciphergen Biosystems, Inc., supra, at 706, quoting
Boucher v. Alliance Title Co, supra, at 272.) “Where the
equitable estoppel doctrine applies, the nonsignatory has a
right to enforce the arbitration agreement.” (Molecular
Analytical Systems v. Ciphergen Biosystems, Inc., at p. 706.)
6
Victrola names JP and Manheim in seven of its nine
causes of action (all but the first and third). All such causes
of action are “intimately founded in and intertwined” with
the Agreement. Specifically:
- In the second cause of action (“Violations of Title
VII of the California Civil Code”), Victrola alleges:
6 “Even if the FAA applies, the question whether a contract
containing an arbitration provision can be enforced by or against
nonparties to the contract is governed by state law principles.
[Citation.] In any event, for purposes of equitable estoppel,
California and federal law are identical. [Citations.]” (DMS
Services, LLC v. Superior Court, supra, 205 Cal.App.4th at 1353,
fn. 3.)
25
“As a direct and proximate result of Defendants’
material breaches of the Purchase Agreement,
the Warranty, the implied covenant of good faith
and fair dealing, and Title 7 of the California
Civil Code, Owner has sustained damages, the
precise amount of which will be established
according to proof at trial.” (Underline added.)
- In the fourth cause of action (“Breach of
Warranty”), Victrola alleges: “Pursuant to the
express terms of the Purchase Agreement, the
Warranty and Title 7 of the California Civil Code,
Jaman [defined in the complaint as JP8, JP, and
Manheim] expressly warranted that Seller would
sell the Property as if it were a new construction .
. . .” (Underline added.) “Defendants breached
their express and implied warranties to Owner
because the work performed was not free from
defect as alleged above.”
- In the fifth cause of action (“Fraudulent
Concealment”), Victrola alleges JP and Manheim
(among others) intentionally concealed the
defects “to deceive Owners into purchasing the
Property . . . .” A similar allegation is made in
the sixth cause of action (“Fraudulent
Misrepresentation”).
- The seventh cause of action (“Negligent
Misrepresentation”) also alleges JP and Manheim
(among others) told Victrola that certain portions
of the Property were without defects when they
had no reason to believe this to be true.
26
- The eighth cause of action (“Fraudulent
Inducement”) alleges JP and Manheim (among
others) lied to Victrola to induce Victrola to waive
a $3,000 per day fee accruing due to the failure to
timely repair the Property’s defects.
- The ninth cause of action (“Negligence”) alleges
the “[n]on-[s]eller [d]efendants” (i.e., all
defendants but JP8) breached their duty of care
to Victrola by failing to construct/repair the
Property ipn a good and workmanlike manner.
These causes of action are all intertwined with the
Agreement and the obligations found therein. Accordingly,
JP and Manheim have standing to enforce the Agreement.
2. The FAA Preempts Section 1298.7
Victrola argues “[p]ursuant to CCP § 1298.7,
Respondent is not required to arbitrate its construction
defect claims.” As discussed above, however, because
enforcement of the arbitration agreement is governed by the
FAA, Section 1298.7 is preempted.
“[F]ederal preemption presents a pure question of law.”
(Farm Raised Salmon Cases (2008) 42 Cal. 4th 1077, 1089,
fn. 10.) “The FAA’s displacement of conflicting state law is
‘now well-established,’ Allied-Bruce Terminix Cos. v. Dobson,
513 U.S. 265, 272, 115 S. Ct. 834, 130 L. Ed. 2d 753 (1995),
and has been repeatedly reaffirmed, see, e.g., Buckeye [Check
Cashing, Inc. v. Cardegna], 546 U.S. [440], at 445-446
27
[(2006)], 126 S. Ct. 1204, 163 L. Ed. 2d 1038; Doctor’s
Associates, Inc. v. Casarotto, 517 U.S. 681, 684-685, 116 S.
Ct. 1652, 134 L. Ed. 2d 902 (1996); Perry v. Thomas, 482
U.S. 483, 489, 107 S. Ct. 2520, 96 L. Ed. 2d 426 (1987).”
(Preston v. Ferrer (2008) 552 U.S. 346, 353.) “[A] state
procedural statute or rule that frustrated the effectuation of
section 2 [of the FAA]’s central policy would, where the
federal law applied, be preempted by the [FAA].” (Rosenthal
v. Great Western Fin Securities Corp. (1996) 14 Cal.4th 394,
408.)
“‘[T]he FAA pre-empts state laws which “require a
judicial forum for the resolution of claims which the
contracting parties agreed to resolve by arbitration.”’”
(Pinnacle Museum Tower Assn. v. Pinnacle Market
Development (US), LLC (2012) 55 Cal.4th 223, 235, quoting
Volt, supra, 489 U.S. at 478.) “One of the consequences of
the FAA’s applicability is its effect on Code of Civil
Procedure section 1298.7, which allows a purchaser to
pursue a construction and design defect action against a
developer in court, even when the parties have signed a real
property purchase and sale agreement containing an
arbitration clause. . . . [T]he FAA would preempt its
application here because it discriminates against
arbitration.” (Pinnacle Museum Tower Assn. v. Pinnacle
Mkt. Dev. (US), LLC at 235, fn. omitted; see also Basura v.
U.S. Home Corp. (2002) 98 Cal.App.4th 1205, 1212
[“[S]ection 1298.7 directly conflicts with section 2 of the FAA
because the California statute is a state law applicable only
28
to arbitration agreements, allowing a purchaser to pursue a
construction and design defect action against a developer in
court, despite having signed an agreement to convey real
property containing an arbitration clause”].)
Victrola does not deny that the FAA may preempt
Section 1298.7, but contends the FAA is inapplicable because
the Jaman Parties failed to submit evidence that the parties’
dealings involved interstate commerce.7 But the presence of
interstate commerce is not the only manner under which the
FAA may apply. As discussed above, the parties may also
voluntarily elect to have the FAA govern enforcement of the
Agreement, as they did here. This incorporation of the FAA
prevents Victrola from using Section 1298.7 as an escape
hatch from the parties’ agreement to arbitrate.
3. The Scope of the Arbitration Provision
Covers Victrola’s Claims Against the
Jaman Parties
“We review the scope of an arbitration provision de
novo when, as here, that interpretation does not depend on
conflicting extrinsic evidence.” (Lindemann v. Hume (2012)
204 Cal.App.4th 556, 570, fn. 11.) “In light of California’s
strong public policy favoring arbitration as a method of
7 The Jaman Parties argue that “the construction and sale of
a $22 million home is so massive that it ‘involves interstate
commerce’ so as to trigger Section 2 of the FAA.” While the
inference may be correct, the Jaman Parties presented no
evidence to support it.
29
dispute resolution, ‘[c]ourts should indulge every intendment
to give effect to such proceedings (Lewsadder v. Mitchum,
Jones & Templeton, Inc. [(1973)] 36 Cal.App.3d 255, 259 [111
Cal. Rptr. 405]) and order arbitration unless it can be said
with assurance that the arbitration clause is not susceptible
of an interpretation that covers the asserted dispute. (Retail
Clerks Union, Local 775 v. Purity Stores, Inc. [(1974)] 41
Cal.App.3d 225, 231 [116 Cal. Rptr. 40].)’ (Pacific Inv. Co. v.
Townsend (1976) 58 Cal.App.3d 1, 9–10 [129 Cal. Rptr.
489].) Hence, any reasonable doubt as to whether a claim
falls within the arbitration clause is to be resolved in favor of
arbitration. (Coast Plaza Doctors Hospital v. Blue Cross of
California (2000) 83 Cal.App.4th 677, 687 [99 Cal. Rptr. 2d
809].)” (Villacreses v. Molinari (2005) 132 Cal.App.4th 1223,
1229.) “The party opposing arbitration has the burden of
demonstrating that an arbitration clause cannot be
interpreted to require arbitration of the dispute.” (Rice v.
Downs (2016) 248 Cal.App.4th 175, 185.)
Here, the clause in question covers “any dispute or
claim in Law or equity arising between [buyer and seller] out
of this Agreement or any resulting transaction . . . .” The
“resulting transaction” was Victrola’s purchase of the
Property. Victrola’s claims against the Jaman Parties
concern the defects in the construction of the Property, along
with the defendants’ alleged deceit regarding those defects in
order to induce Victrola to purchase the Property. As such,
they arise out of the Agreement and the resulting
transaction.
30
Victrola argues that because “the arbitration provision
here is narrow, it applies only to contract issues, like breach
of the Purchase Agreement, and it excludes Respondent’s
fraud and negligence claims.” In support, Victrola cites
Tracer Research Corp. v. Nat’l Envtl. Servs. Co. (9th Cir.
1994) 42 F.3d 1292 (Tracer) for the proposition that “an
arbitration clause that covered disputes ‘arising under’ an
agreement, but omitted reference to claims ‘relating to’ an
agreement, covered only those disputes ‘relating to the
interpretation and performance of the contract itself.’” (Id.
at 1295.) But when an agreement provides that the parties
are to arbitrate “‘“any controversy . . . arising out of”’” an
agreement, “[t]he issue is not resolved simply by
determining whether the arbitration clause is narrow or
broad, whether the arbitration clause could encompass tort
claims, or even whether the claims in issue sound in tort, not
contract. The issue is whether the particular claims in issue
are controversies ‘arising out of’” the agreement. (Rice v.
Downs, supra, 248 Cal.App.4th at 186, 187.)
Here, the question is whether Victrola’s claims arise
“‘out of this Agreement or any resulting transaction.’”
Victrola cites cases analyzing whether claims arose out of,
arose under, or arose from various agreements. None is
relevant to our analysis, because none analyzed whether the
claims arose out of the transaction resulting from the
31
agreement. 8 Given that Victrola’s claims all center around
the defects in the Property -- purchased as a result of the
Agreement -- and the alleged misrepre-sentations and
concealments surrounding the purchase transaction, we
conclude the claims arise out of the “Agreement or any
resulting transaction,” and are thus within the scope of the
arbitration provision.
8 Cobler v. Stanley, Barber, Southard, Brown & Associates
(1990) 217 Cal.App.3d 518 is inapposite. The case did not
address whether a non-contract claim was within the scope of an
arbitration clause providing for arbitration “‘arising from this
Agreement,’” but whether any cause of action supporting an
award of damages for emotional distress was ever submitted to
the arbitrator. (Id. at 531-532; see id. at 531 [“Therefore, the
only basis for the emotional distress damages award must have
been in any tort issues properly submitted to the arbitrator”].)
The court did not hold no such tort issues could have been
submitted, only that none were. (Id. at 532.)
The federal cases cited by Victrola are also unhelpful.
First, “[t]he decisions of the Ninth Circuit Court of Appeals . . .
are not binding on us.” (Roskind v. Morgan Stanley Dean Witter
& Co. (2000) 80 Cal.App.4th 345, 355.) Second, the cited cases
address whether disputes arose out of or from certain
agreements, not whether those disputes arose out of or from the
transactions resulting from those agreements. (Tracer, supra, 42
F.3d 1292, 1294-1295; Cape Flattery Ltd. v. Titan Mar., LLC (9th
Cir. 2011) 647 F.3d 914, 916-917, 924.)
32
4. We Remand to the Trial Court for a
Determination Whether the Jaman
Parties Are Judicially Estopped from
Asserting Application of the FAA
Finally, Victrola argues that “Appellants should be
estopped from asserting the FAA applies because Appellants
have successfully contended that C.C.P. § 1281.4, a
procedural provision of the CAA, applies.” Judicial estoppel
“prohibits a party from asserting a position in a legal
proceeding that is contrary to a position he or she
successfully asserted in the same or some earlier
proceeding.” (Owens v. County of Los Angeles (2013) 220
Cal.App.4th 107, 121.) “The elements of judicial estoppel are
‘(1) the same party has taken two positions; (2) the positions
were taken in judicial or quasi-judicial administrative
proceedings; (3) the party was successful in asserting the
first position (i.e., the tribunal adopted the position or
accepted it as true); (4) the two positions are totally
inconsistent; and (5) the first position was not taken as a
result of ignorance, fraud, or mistake.’” (Ibid., quoting
Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171,
183.)
“The determination of whether judicial estoppel can
apply to the facts is a question of law reviewed de novo, i.e.,
independently.” (Blix Street Records, Inc. v. Cassidy (2010)
191 Cal.App.4th 39, 46.) However, “[e]ven if the necessary
elements of judicial estoppel are satisfied, the trial court still
33
has discretion to not apply the doctrine.” (Owens v. County
of Los Angeles, supra, 220 Cal.App.4th at 121.)
When the Jaman Parties filed the motion to compel
arbitration, they argued the court “should compel arbitration
of the claims involving the Jaman Defendants pursuant to
the FAA,” but also argued the court “should stay the
litigation until the arbitration is completed,” citing Section
1281.4 and Twentieth Century Fox, supra, 79 Cal.App.4th
188, a case interpreting Section 1281.4. When they filed a
second motion to stay the case until the court could hear
their motion to compel arbitration, they again invoked
Section 1281.4, but made no mention of the FAA. The court
granted the motion to stay.
Victrola argues that all five elements of judicial
estoppel are therefore met: (1) “Appellants initially claimed
the CAA’s procedural provisions applied to the arbitration
provision, but now they claim that the FAA applies”; (2)
“these positions were taken in the same action”; (3)
“Appellants were successful in asserting they were entitled
to a stay pursuant to the CAA”; (4) “the two positions are
inherently inconsistent as the CAA and FAA’s procedural
provisions cannot both apply”; and (5) “the first position was
not taken out of ignorance, fraud, or mistake.”
In response, the Jaman Parties contend: (1) their
motion (to compel arbitration “expressly states that the
Motion is ‘brought under the Federal Arbitration Act (‘FAA’)
9 U.S.C. §§ 3-4”; (2) “having the Court stay discovery
pending the hearing on the Motion to Compel Arbitration” is
34
different than “enforcing . . . arbitration” and therefore the
positions are “not ‘totally inconsistent’”; and (3) there was no
“‘unfair strategy’” to justify the application of the judicial
estoppel doctrine.
Though we would review de novo any determination
whether the elements of judicial estoppel are met, we are
mindful that “[e]ven if the necessary elements of judicial
estoppel are satisfied, the trial court still has discretion to
not apply the doctrine.” (Owens v. County of Los Angeles,
supra, 220 Cal.App.4th at 121.) Additionally, while the
Jaman Parties have essentially argued the court should
decline to apply judicial estoppel because their successful
assertion of the CAA in their second motion to stay did not
prejudice Victrola, Victrola has not yet been afforded an
opportunity to argue that prejudice exists. We therefore
remand for the trial court to determine whether the
elements of judicial estoppel are satisfied and if so, whether
to exercise its discretion to apply the doctrine.

Outcome: The court’s order denying the Jaman Parties’ motion to compel arbitration is vacated. On remand, the court is to determine whether the Jaman Parties should be estopped from asserting that the FAA’s procedural provisions should govern their motion to compel arbitration and, if so, whether to exercise its discretion to apply the doctrine. The parties are to bear their own costs.

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