Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. BC397910, William F. Highberger, Judge.
Paul, Hastings, Janofsky & Walker, Howard M. Privette and Nicholas J. Begakis; Weil, Gotshal & Manges, Jonathan D. Polkes, Ashley R. Altschuler and Ashish D. Gandhi; Quinn Emanuel Urquhart Oliver & Hedges, Bruce E. Van Dalsem and Rory S. Miller for Defendants and Appellants.
Kinsella Weitzman Iser Kump & Aldisert, Dale F. Kinsella and Jonathan P. Steinsapir; Williams & Connolly, Philip A. Sechler and John E. Joiner for Plaintiffs and Respondents.
BIGELOW, P. J.
Appellants seek reversal of the superior court’s order denying their motion to compel arbitration and stay court proceedings pending completion of that arbitration as well as completion of an arbitration the court previously ordered in a related lawsuit (Ruby action). Appellants contend a mandatory arbitration clause in certain tax-related agreements between respondents and some of the appellants, together with California law and policy, require such a result. We disagree and therefore affirm the order.
Howard F. Ruby, et al. v. Tishman Speyer Properties, L.P., et al., Los Angeles Superior Court case No. BC 393671.
For purposes of discussion and to place the subject motion in context, the facts are taken from the allegations of the complaint and first amended complaint.
1. Contribution of Properties
Respondents owned interests in apartment properties managed under the “Oakwood Worldwide” brand. In 2005, respondents signed a master agreement with appellants Archstone-Smith Trust (Archstone) and Archstone-Smith Operating Trust (trust), under which respondents contributed their interests in the Oakwood properties to the trust in a tax-free transaction. In return, respondents received class A-1 common units in the trust. The A-1 units gave respondents equity in the trust and the right to share fully in the trust’s economic success, to receive distributions from the trust, and to redeem their units on specified terms. Archstone, then a publicly traded real estate investment trust (REIT), was the sole trustee of the trust and owned almost 90 percent of the trust’s beneficial interests through class A-2 common units.
The arrangement, commonly known as an “UPREIT” transaction, allowed respondents to defer immediate recognition of tax liabilities they would otherwise have incurred in a taxable sale of their properties.
2. Related Agreements
The transaction involved numerous agreements. A declaration of trust, the trust’s governing instrument, provided that the A-1 units held by respondents and others and the A-2 units held by Archstone were to be treated equally and “have the same designations, preferences, rights, powers and duties.” The declaration of trust gave respondents consent and approval rights over any amendment that would adversely affect their interests. The consent of a majority of A-1 unit holders was also required before Archstone could sell, exchange, transfer or dispose of assets held in the trust other than in a termination transaction. Under registration rights agreements, respondents had other rights including the right to redeem their units after a one-year hold period, either for cash or a publicly traded share of Archstone.
Although appellants’ transfer of properties to the trust was tax neutral, their liability for taxes could potentially be triggered by post-transfer transactions undertaken by Archstone or the trust. In such case, respondents could incur unplanned, substantial tax liabilities related to the gain appellants deferred by contributing their properties to the trust. To protect against that risk, the parties entered into tax-related agreements regarding respondents’ contribution of properties. The tax-related agreements contained tax covenants limiting, for a lockout period of at least 10 years, Archstone’s and the trust’s ability to engage in or to allow transactions that might cause respondents to incur deferred tax liability. To protect against such an eventuality, the tax covenants required Archstone and the trust to make a compensatory payment to respondents under a complex formula should Archstone or the trust cause or permit certain specified transfers of the contributed property.
Because respondents had owned the contributed properties for many years, the properties had an exceptionally low tax basis relative to fair market value.
Paragraphs 1.6 and 1.7 of the tax-related agreements set forth a protocol for resolving any disputes regarding whether Archstone or the trust would owe respondents compensatory payments under the tax covenants and, if so, in what amount. Paragraph 1.6(d) described the obligations of Archstone and the trust to make compensatory payments, as well as the manner of computation, and also required such payments to be delivered within a certain time frame “after receipt by the [trust] of a written claim from the [unit holder], unless [Archstone] disagrees with the computation of the amount required to be paid in respect of such breach or violation, in which event the procedures in Paragraph 1.7(b)... shall apply....” Paragraph 1.6(d) stated in part that “[t]he written claim made by the [unit holder] shall set forth a detailed calculation of the Tax Liability and the Taxes of the [unit holder]... and shall provide [Archstone] with such evidence or verification as [Archstone] may reasonably require as to the items necessary to confirm the calculation of the Tax Liability of the [unit holder]....”
Paragraph 1.6(a), entitled “Tax Liability Payment Obligation, ” read in part: “In the event that the [trust] or [Archstone] violates or breaches its obligations as set forth in [the tax-related covenants], the sole right of the [unit holder] shall be to receive from the [trust] and [Archstone] and [the trust] and/or [Archstone] shall pay to the [unit holder] as damages an amount equal to the Tax Liability of the [unit holder]. The term ‘Tax Liability’ means, ... with respect to a breach by the [trust] and/or [Archstone] of any of their obligations..., the amount of Taxes resulting from income and/or gain allocated to (or recognized by) the [unit holder]....”
Paragraph 1.7(b) of the tax-related agreements in turn directed the process for resolving such a disagreement. The provision required that a unit holder notify Archstone and the trust by “a claim (each, a ‘Tax Claim Notice’)” that they have “breached or violated one or more of the Tax-Related Covenants.” Upon such a notice, Archstone and the unit holder “shall negotiate in good faith to resolve any disagreements regarding any such breach or violation, including any disagreement regarding the calculation of the Tax Liability” of the unit holder “as described in Paragraph 1.6 above.” A proceeding before an accountant or a panel of accountants is required if those informal efforts fail.
Paragraph 1.7 is entitled, “Rights and Remedies of the [Unit Holder].”
Once empanelled, under Paragraph 1.7(b) the three accounting firms are directed to “resolve as expeditiously as possible all points of any such disagreement (including, without limitation, whether a breach of the Tax-Related Covenants has occurred and, if so, the amount of the damages to which the [unit holder is] entitled as a result thereof, determined as set forth in Paragraph 1.6.).”
3. 2007 Leveraged Buyout
In 2007, two years after respondents contributed their properties to the trust in exchange for A-1 units, appellants Tishman Speyer Properties, L.P., Tishman Speyer Development Corporation and Tishman Speyer Real Estate Venture VII, L.P. (collectively Tishman) and nonparty Lehman Brothers Holdings, Inc. (Lehman) announced they had agreed to a $22 billion deal to acquire Archstone and take it private in a leveraged buyout (LBO). Under this transaction, Archstone merged into appellant Tishman Speyer Archstone-Smith Multifamily Series I Trust (Tishman Speyer Trust), a privately held entity owned by Tishman and Lehman.
Appellant River Holding, L.P., a limited partnership jointly controlled by Tishman and Lehman and their affiliates, was formed to facilitate the LBO.
Archstone, at the purported insistence of Tishman and Lehman and aided by appellant Morgan Stanley & Co., Inc. (Morgan Stanley), allegedly structured the LBO to force respondents out of their A-1 common units. Appellants created a new interest in the trust (series O) into which all A-1 common units automatically converted unless their holders accepted cash for their interests. The series O interests lacked virtually all of the rights and characteristics of the A-1 common units. Series O holders had no right to share equally with other common unit holders in the appreciation of assets held in the trust, had inferior distribution rights making it unlikely that the unit holder would ever receive any distributions from the trust, and had limited rights of redemption that required a five-year waiting period and other unfavorable restrictions. Appellants asserted that an A-1 unit holder who chose to receive cash was making a “voluntary” election and thus would not be entitled to compensatory payment under the tax-related agreements.
Plaintiffs in the Ruby matter elected to receive cash payments for their A-1 units and therefore faced potential tax liability as a result of the LBO.
Unlike the Ruby plaintiffs, respondents decided not to accept a cash consideration for their interests in light of the potential tax liability, but they were left with inferior, and riskier, series O interests. After eliminating the A-1 units, appellants allegedly caused billions of dollars in cash and assets held by the trust to be improperly distributed to Archstone, which Archstone then used for most of the merger consideration. The LBO resulted in an increase in the debt-to-asset ratio of the trust from less than 50 percent to more than 85 percent. Archstone also ceased being an REIT subject to strict requirements, including a requirement that the REIT make periodic distributions to its unit holders.
Because respondents did not receive cash for their A-1 units, respondents did not incur tax liability in the LBO. As a result, unlike the Ruby plaintiffs, they were not entitled to demand, and never demanded, compensatory payments under Paragraphs 1.6 and 1.7 of the tax-related agreements. Respondents presently hold their series O units.
PROCEDURAL HISTORY
In September 2008, respondents filed the instant action. The operative first amended complaint alleged that through a series of bad faith actions taken by appellants, respondents’ A-1 units were “forcibly converted” into the substantially inferior series O units. Respondents alleged that the parties to the LBO structured the merger so that A-1 units would automatically convert into series O unless the holder accepted cash; however, the series O units lacked virtually all the rights and characteristics of the A-1 units that respondents had bargained for when they had transferred their property interests to the trust. Respondents alleged appellants further schemed to deprive respondents of the benefits the tax-related agreements, the provisions of which precluded Archstone and the trust from causing or permitting transactions that would trigger respondents’ tax liability and required Archstone and the trust to indemnify respondents should that occur.
Respondents alleged that had they accepted a cash payment rather than the series O units, they would have incurred tax liabilities greater than the cash payment they would have received for their A-1 units. Archstone allegedly asserted that the indemnity provision in the tax-related agreements would not go into effect if an A-1 unit holder accepted the cash payment because such payment would be the result of the unit holder’s “choice.” Respondents alleged that Archstone, aided and abetted by the other appellants, violated its fiduciary duties to respondents by consummating the LBO and by forcing respondents out of their A-1 units over their objections and without their actual consent.
The first amended complaint asserted claims against Archstone for breach of fiduciary duties as trustee of the trust and as majority owner of common units of the trust, breach of the declaration of trust, breach of the consent provisions in the tax-related agreements, breach of the registration rights agreements and violation of Business and Professions Code section 17200 et seq. Respondents also asserted a cause of action against the trust for breach of the property contribution agreements and against the remaining appellants for aiding and abetting in the breach of fiduciary duties and tortious interference with the tax-related agreements, declaration of trust, registration rights agreements and property contribution agreements.
Appellants filed a motion to compel arbitration and to stay proceedings. They asked the trial court to stay all proceedings in this action pending completion of arbitration that the trial court had ordered in the Ruby matter, to compel respondents to submit to arbitration the issue whether the LBO triggered tax indemnity obligations under the tax-related agreements “for those... contributors who elected to receive cash for their A-1 units, ” and to stay all proceedings in this action pending the completion of arbitration of that issue. (Italics added.)
Respondents opposed the motion, contending that no arbitrable issue or controversy existed as to them (as opposed to the Ruby plaintiffs) and there was no basis to stay the present proceedings. Respondents asserted that Paragraph 1.7 of the tax-related agreements was a limited provision providing that an accountant or panel of accountants shall determine whether Archstone or the trust breached the tax covenants in the tax-related agreements and, if so, the amount of compensatory payments owed on any tax claim. Respondents argued it was undisputed that, unlike the Ruby plaintiffs, they did not receive cash as a result of the LBO, did not report any taxable gain, and thus had prepared no tax claim notice demanding compensatory payments from the trust under Paragraph 1.7. Respondents noted there was no factual predicate for any arbitration in the present action.
The trial court denied appellants’ motion to stay proceedings and to compel arbitration. The court found that respondents had received series O units instead of cash in connection with the LBO and appellants did not currently dispute the amount of appellants’ payment obligations, if any, under Paragraph 1.6 of the tax related agreements. The court found no arbitrable controversy currently pending between the parties. The court further found that because no arbitrable controversy existed between the parties in this action, it was not mandated to stay the litigation pending completion of arbitration in the Ruby matter. The court declined to exercise its discretion to stay the litigation at hand pending completion of arbitration in Ruby. It found that although the Ruby arbitration and the present claims relate to the same underlying transaction, the Ruby arbitration was not sufficiently relevant to the pendency of the present litigation to warrant a stay.
Appellants appealed the order (1) denying their motion for an order compelling arbitration, (2) denying a stay of proceedings pending completion of arbitration in the Ruby matter, and (3) declining to issue a discretionary stay of proceedings.
Appellants’ appeal, however, automatically stayed further proceedings in the superior court. (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 190; see also Prudential-Bache Securities, Inc. v. Superior Court (1988) 201 Cal.App.3d 924, 925.)
STANDARD OF REVIEW
On appeal from the denial of a motion to compel arbitration when no material facts are in dispute, this court reviews the arbitration agreement de novo to determine whether it is legally enforceable, applying general principles of California contract law. (Thompson v. Toll Dublin, LLC (2008) 165 Cal.App.4th 1360, 1369.) An order denying a petition to compel arbitration, as with any other judgment or order of a lower court, is presumed correct, and all intendments and presumptions are indulged to support the order on matters as to which the record is silent. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564; Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 88.)
DISCUSSION
1. Arbitration
Appellants contend that respondents should be compelled to arbitrate the threshold issue of whether the acquisition triggered the tax indemnification rights set forth in the tax-related agreements. They assert the claims alleged by respondents “encompass” the predicate issue of whether the acquisition breached the tax-related agreements. They further argue that the trial court’s order rests upon an improperly narrow interpretation of the parties’ agreement to arbitrate. We disagree.
Private arbitration involves a matter of agreement between the parties and is governed by contract law. (In re Tobacco Cases I (2004) 124 Cal.App.4th 1095, 1104 (Tobacco Cases).) Code of Civil Procedure section 1281.2 provides that when a party alleges a written agreement to arbitrate a controversy exists and another party to the agreement refuses to arbitrate such 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....” (Italics added.) Although a strong policy exists in favor of enforcing agreements to arbitrate, no policy exists to compel persons to accept arbitration of controversies that they have not agreed to arbitrate and which no statute has made arbitrable. (Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 481; see also Bouton v. USAA Casualty Ins. Co. (2008) 43 Cal.4th 1190, 1199.) A trial court has no power to order parties to arbitrate a dispute which they did not agree to arbitrate. (Code Civ. Proc., § 1281.2; Bouton, at p. 1202.) Thus, in a case such as the present, whether an arbitrable controversy is present depends on the terms of the parties’ agreement.
The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties (Civ. Code, § 1636), and if the contractual language is clear and explicit, it governs (Civ. Code, § 1638). (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) In interpreting a contract, the court must attempt to give effect to the parties’ intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was entered into. (Bono v. David (2007) 147 Cal.App.4th 1055, 1063 (Bono).) Indeed, “ ‘[h]owever broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.’ (Civ. Code, § 1648.)” (Ibid.)
Viewing the terms of the tax-related agreements, the trial court concluded that respondents have not asserted any claim for breach of the tax covenants triggering the dispute resolution provisions set forth in Paragraphs 1.6 and 1.7 of the tax-related agreements. In addition to sharply limiting the issues subject to arbitration, the tax-related agreements set forth specific events and actions that must occur before a right to arbitration exists. As specified in Paragraph 1.6(d), to initiate the process that may culminate in arbitration, the claimant must first submit a tax claim notice or, at the very least, have incurred tax liability. Such a tax claim must set forth a “calculation of the Tax Liability and the Taxes” incurred as a result of breach or violation of a tax-related covenant. If Archstone rejects the tax claim notice, only then is the controversy eligible for arbitration and only as to the limited issues provided for in Paragraphs 1.6 and 1.7.
Appellants state that the arbitration clause at issue in this case is identical to the clause in Ruby that the trial court decided raised an arbitrable controversy. They argue the arbitration clause further empowers the arbitrator to resolve as expeditiously as possible “all points of any such disagreement (including, without limitation, whether a breach of the Tax-Related Covenants has occurred....).” Appellants argue that by means of these provisions the parties to the tax-related agreements “unequivocally” agreed that any allegations of breach of the tax-related covenants would be decided in arbitration. Appellants claim both the complaint in this case and the complaint in Ruby are predicated upon allegations that appellants breached or violated the tax-related covenants in the tax-related agreements and both complaints assert that appellants engaged in a scheme to repudiate payment obligations under the tax-related agreements in connection with the LBO.
Appellants further assert that such claims are “inextricably intertwined” with issues to be determined in arbitration, including the question of whether there has been a breach of the tax-related agreements, which the parties agreed to arbitrate. Appellants indicate that the trial court below, notwithstanding it had just a month earlier granted appellants’ motion to compel arbitration in the Ruby case, erroneously decided there was no arbitrable controversy currently pending between the present parties because respondents chose not to tender a “dollar-and-cent” calculation of the damages they claim to be owed on account of the alleged breach of the tax-related covenants. Appellants complain that the trial court thereby allowed claims “brought by the same counsel, based on the same contracts, against virtually the same defendants, and raising the same allegations related to the same [a]cquisition, to be simultaneously litigated in different fora -- the Ruby claims before an arbitrator and the [present] claims in court.” These arguments ignore the contractual provisions and the allegations made by respondents.
It is undisputed that, unlike the plaintiffs in Ruby, respondents did not receive cash in the LBO, nor did they report any taxable gain or prepare any tax notices that might trigger the arbitration provision. Respondents have no claim for tax indemnity to make, and thus there are no compensatory payments for an accountant or panel of accountants to determine or calculate. In Bono, supra, 147 Cal.App.4th at page 1067, the court explained that “the decision as to whether a contractual arbitration clause covers a particular dispute rests substantially on whether the clause in question is ‘broad’ or ‘narrow.’” The contractual provision in the present case, as in Bono, is closer to the latter rather than the former. The arbitration provision contained in Paragraph 1.7(b) follows initial language reciting that “[i]f the Electing Contributor notifies the [trust] or [Archstone] of a claim (each, a ‘Tax Claim Notice’) that the [trust] and/or [Archstone] has breached or violated one or more of the Tax-Related Covenants....” (Italics added.) The narrow terminology the parties employed indicated their intent to closely limit the scope of their agreement to arbitrate. The placement of the arbitration clause under Paragraph 1.7(b), which is entitled, “Failure to Agree, ” rather than under Paragraph 1.7(a), entitled “Exclusive Rights and Remedies, ” indicates that the parties did not intend arbitration to be the sole and exclusive remedy for a breach of contract provisions. Indeed, Paragraph 1.7(a) provided only that the “sole and exclusive rights and remedies” electing contributors, such as respondents, may have are “damages, ” and they shall not be entitled to “specific performance.” The placement of the arbitration provision in a wholly separate paragraph signals the parties’ intent that the arbitration provision be narrowly applied to a particularized and technical controversy. That the tax-related agreements require designation of an accountant to resolve disputes over compensatory payments for violations of the tax covenants provides further support of the narrowness of the provision, one that requires submission only of claims both within the scope of the provision and an accountant’s traditional expertise. Such calculations and determinations are not of the type of “complex mixed legal and factual” determinations commonly decided by courts of law. (See Tobacco Cases, supra, 124 Cal.App.4th at pp. 1108-1109 & fn. 6.)
Appellants argue that present-day “nationally recognized independent public accounting firm[s]” called for under Paragraph 1.7(b) have “deep and varied” resources to bring to bear on the issues presented in an arbitration, including an array of professionals trained in law and business. We have no doubt that such accounting firms have such resources. However, even if available, there is no guarantee such professionals would be appointed to arbitrate the controversy, nor is it obvious the limited calculations to be performed in arbitration could remedy the type of misconduct alleged here.
In the present case, none of the damages respondents request requires a showing that appellants breached or violated the tax covenants. Respondents seek damages for economic loss arising from the forced conversion of the A-1 units to the inferior series O units and for economic loss arising from the abrogation of their rights as A-1 unit holders. They seek money damages caused by breach of fiduciary duties owed them, the aiding and abetting in such breach and tortious interference with their contracts. Even as to their claim under Business and Professions Code section 17200, respondents do not seek compensatory payments for breach or violation of the tax covenants. Rather, they seek restitution of the A-1 units taken from them or, if that is not feasible, the economic value of such units measured by the cash price of such units, plus payments owed them under the terms of the tax-related agreements. That a calculation similar to those provided for in Paragraphs 1.6(a) and 1.7(b) potentially might be arguable relevant in some future trial to a component of damages is not enough to raise an arbitrable controversy, given the fundamentally different nature of a bargained-for “tax claim” and tort damages that seek to make the plaintiff whole for injuries suffered.
We conclude, therefore, that the trial court did not err in denying the motion to compel arbitration.
2. Stay
Appellants contend that the action must be stayed pending arbitration of whether the tax-related covenants were violated. They also argue that all court proceedings must be stayed if arbitration is to be compelled in this case. They further assert that, all proceedings in this case should be stayed while arbitration proceeds in the Ruby matter. We disagree.
An automatic stay is required by Code of Civil Procedure section 1281.4 upon motion by a party should an issue in controversy in this case be ordered to arbitration. (Code Civ. Proc., § 1281.4 [“If a court of competent jurisdiction... has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion..., stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies. [¶]... [¶] If the issue which is the controversy subject to arbitration is severable, the stay may be with respect to that issue only”]; Heritage Provider Network, Inc. v. Superior Court (2008) 158 Cal.App.4th 1146, 1152-1153 (Heritage); see 6 Witkin, Cal. Procedure (5th ed. 2008) Proceedings Without Trial, § 528, pp. 1002-1004.)
Code of Civil Procedure section 1280, subdivision (c) defines a “controversy” as “any question arising between parties to an agreement whether such question is one of law or of fact or both.” (Heritage, supra, 158 Cal.App.4th at p. 1152.) “A controversy can be a single question of law or fact, and a stay shall be issued upon proper motion if the court has ordered arbitration of a controversy that is also an issue involved in an action or proceeding pending before it. [Citation.] Thus, a single overlapping issue is sufficient to require imposition of a stay.” (Id. at pp. 1152-1153.) In Heritage, a panel of Division Seven of this District held that when there is at least one overlapping issue in a controversy in which some claims are subject to arbitration and others are not, it was error for the trial court to deny a motion for stay of the court action. (Ibid.) The trial court in the present case, as we have discussed, properly found there is no arbitrable controversy between appellants and respondents as framed by the complaint. Although the Ruby plaintiffs proceeded under substantively nearly identical contractual provisions, the Ruby plaintiffs’ acceptance of cash in the LBO triggered the application of arbitration provisions contained in Paragraph 1.7(b) and their complaint thus could be deemed a “tax claim notice” under that provision. In contrast, respondents did not accept the cash payment but rather series O units, the receipt of which did not trigger the arbitration provision.
Unlike in Ruby, respondents did not raise a “disagreement regarding the calculation of the Tax Liability” under the tax-related agreements, and thus their complaint did not constitute a “tax claim notice” to Archstone or the trust under Paragraph 1.7(b). The trial court properly found the arbitrable controversy in Ruby was not “inextricably intertwined” with the issues in the present case. As respondents note, the Ruby arbitration will neither eliminate any issue from this litigation nor will it limit or reduce respondents’ claimed damages. A stay of these proceedings would not foster arbitration’s stated purpose of “ ‘protect[ing] the jurisdiction of the arbitrator by preserving the status quo until arbitration is resolved.’ [Citation.]” (Heritage, supra, 158 Cal.App.4that p. 1152.) The arbitrable controversy in Ruby is whether the plaintiff claimants are owed compensatory payments for a breach or violation of the tax covenants. No similar controversy exists here. An automatic stay was therefore not required by Code of Civil procedure section 1281.4.
Appellants point to the trial judge’s comments made orally and in a minute order, in which he expressed a hope that the respondents in this case would voluntarily “go Tango in the [Ruby] arbitration, ” “as that would promote efficiency and consistent outcomes.” However, at the time of its ruling, the court also noted that “in the absence of a duty to arbitrate then the question is do I somehow force or cajole [respondents] into somebody else’s arbitration anyway in the spirit of practicality? And I don’t see a basis for that.” (Italics added.) Its comments notwithstanding, the trial court did not change its tentative order denying arbitration and a stay.
Appellants do not contend the allegedly arbitrable controversy is severable from the remaining issues in this case.
We further hold that the trial court did not err in declining to impose a discretionary stay of this action pending completion of arbitration in Ruby. (Code Civ. Proc., § 1281.2, subd. (c) [“If the court determines that a party to the arbitration is also a party to litigation in a pending court action... with a third party as set forth under subdivision (c) herein, the court... may order arbitration among the parties who have agreed to arbitration and stay the pending court action... pending the outcome of the arbitration proceeding”].) The standard of review for an order staying or denying arbitration under section 1281.2, subdivision (c) is abuse of discretion. (Henry v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 101.) Such an order will not be disturbed on appeal unless it exceeds the bounds of reason. (Ibid.; Shamblin v. Brattain (1988) 44 Cal.3d 474, 478-479.) We do not find the court exceeded the bounds of reason here.
The court therefore was not mandated to stay the present proceedings pending completion of arbitration, and it did not abuse its discretion in refusing to stay the present action under its discretionary power.
DISPOSITION
The order is affirmed. Respondents are to recover costs on appeal.
We concur: RUBIN, J., LICHTMAN, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Under the heading, “Exclusive Rights and Remedies, ” Paragraph 1.7(a) provided: “Notwithstanding any provision of this Agreement, the [unit holder] agrees that the sole and exclusive rights and remedies to which [unit holder] may be entitled at law or in equity for a breach or violation of any of the Tax-Related Covenants by the [trust] and/or [Archstone] shall be a claim for damages, against the [trust] and [Archstone], ... and neither the [unit holder] nor any [successor] shall be entitled to pursue a claim for specific performance of the Tax-Related Covenants.”
Under the heading, “Failure to Agree, ” Paragraph 1.7(b) provided: “If the [unit holder] notifies the [trust] or [Archstone] of a claim (each, a ‘Tax Claim Notice’) that the [trust] and/or [Archstone] has breached or violated one or more of the Tax-Related Covenants, [Archstone] and the [unit holder] shall negotiate in good faith to resolve any disagreements regarding any such breach or violation, including any disagreement regarding the calculation of the Tax Liability of the [unit holder] prepared by the [unit holder] as described in Paragraph 1.6 above. If any such disagreement cannot be resolved by [Archstone] and the [unit holder] within sixty (60) days after receipt by [Archstone] of the calculation of the Tax Liability referred to in Paragraph 1.6, the [trust] and/or [Archstone] and the [unit holder]... shall jointly retain a nationally recognized independent public accounting firm (an ‘Accounting Firm’)... to act as an arbitrator to resolve as expeditiously as possible all points of any such disagreement (including, without limitation, whether a breach of the Tax-Related Covenants has occurred and, if so, the amount of the damages to which the [unit holder is] entitled as a result thereof, determined as set forth in Paragraph 1.6).”