Opinion
F053046
6-24-2008
LINDA ADAMS et al., Plaintiffs and Respondents, v. MHC COLONY PARK LIMITED PARTNERSHIP et al., Defendants and Appellants.
Robie & Matthai, James R. Robie, Craig W. Brunet and Steven S. Fleischman for Defendants and Appellants. Endeman, Lincoln, Turek & Heater, Henry E. Heater and Linda B. Reich for Plaintiffs and Respondents.
Not to be Published
This case presents questions concerning the validity and enforcement of an arbitration provision in contracts for the rental of sites in a mobilehome park. The trial court denied a motion by defendants, park owners and operators, to compel arbitration of the residents claims against them, finding that the arbitration provision was void as contrary to public policy and that enforcement of the provision presented a possibility of conflicting judgments in related proceedings. Defendants appeal, contending there is no public policy against the arbitration agreements, no possibility of conflicting rulings on common issues of law or fact was shown, and the arbitration agreements are not unconscionable. We find the trial court properly declined to enforce the arbitration agreements pursuant to Code of Civil Procedure section 1281.2, subdivision (c), and affirm on that basis.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs are 87 owners and former owners of mobilehomes located at a mobilehome park owned and operated by defendants. The complaint contains 10 causes of action: nuisance, breach of contract, negligence, intentional interference with property rights, breach of the covenant of good faith and fair dealing, negligence per se, unfair business practices, breach of warranty of habitability, breach of the covenant of quiet enjoyment, and declaratory and injunctive relief. Generally, plaintiffs claims are based on defendants alleged failure to maintain the common facilities within the park; they seek injunctive relief, restitution, and damages.
Defendants moved to compel arbitration of the claims of 17 of the plaintiffs, whose leases or rental agreements for sites at the mobilehome park contained arbitration provisions. Plaintiffs opposed the motion, arguing that (1) the trial court should decline to compel arbitration pursuant to Code of Civil Procedure section 1281.2, subdivision (c), because arbitration of the claims of only some of the plaintiffs would present a potential for conflicting rulings on common issues of law and fact; (2) the arbitration provisions are void as contrary to the public policy expressed in Civil Code section 1953, subdivision (a), and Civil Code section 798.87; and (3) the arbitration provisions are unconscionable. After hearing, the court denied the motion, stating: "The pertinent clauses of the contract at issue in this particular case are void as contrary to public policy.... Further, arbitration of what amounts to a minority of the leases (17) in question could lead to conflicting and inconsistent judgments."
The motion as filed concerned 17 plaintiffs; the record on appeal has been augmented to include stipulations of the parties that an additional 18 plaintiffs have arbitration provisions in their rental agreements and will be bound by the determination of this court as to the enforceability of those provisions.
Defendants appeal, asserting plaintiffs failed to carry their burden of demonstrating there is a public policy against the arbitration provisions in question, plaintiffs failed to establish that the arbitration provisions were unconscionable, and the trial courts ruling concerning "inconsistent judgments" was not a determination that there is a potential for inconsistent rulings on common issues of law and fact, and therefore could not support a denial of arbitration under Code of Civil Procedure section 1281.2, subdivision (c).
DISCUSSION
"The party seeking to compel arbitration bears the burden of proving that an arbitration agreement exists. The opposing party then must prove any defense to enforcement of the arbitration agreement. [Citation.]" (Crippen v. Central Valley RV Outlet (2004) 124 Cal.App.4th 1159, 1164.) Along with their motion, defendants presented the relevant portions of the rental agreements in issue, including addendum No. 2, which contains the arbitration provision. Plaintiffs did not dispute that the arbitration provision was part of these rental agreements, or that the claims asserted in their complaint fell within the scope of the arbitration provision. Thus, defendants met their burden of proving the arbitration agreements exist. In opposition, however, plaintiffs raised defenses to enforcement of the arbitration provisions. Whether a valid defense was established by plaintiffs is the issue before this court.
I. Void As Contrary To Public Policy
Plaintiffs contend the arbitration provision in the rental agreements in issue is void as contrary to public policy. They assert the public policy against these arbitration provisions is expressed in Civil Code sections 798.77 and 1953.
A. Mobilehome Residency Law.
Civil Code section 798.77 is part of the Mobilehome Residency Law (MRL). (Civ. Code, §§ 798-799.10.) The MRL "extensively regulates the landlord-tenant relationship between mobilehome park owners and residents." (Greening v. Johnson (1997) 53 Cal.App.4th 1223, 1226.) It "most significantly regulates the contents of rental agreements and the termination of tenancies." (Griffith v. County of Santa Cruz (2000) 79 Cal.App.4th 1318, 1321.) "`A mobile home owner typically rents a plot of land, called a "pad," from the owner of a mobile home park. The park owner provides private roads within the park, common facilities such as washing machines or a swimming pool, and often utilities. ...When the mobile home owner wishes to move, the mobile home is usually sold in place, and the purchaser continues to rent the pad on which the mobile home is located." (Galland v. City of Clovis (2001) 24 Cal.4th 1003, 1009.) "The MRL recognizes that, unlike other renters, mobilehome owners cannot easily relocate if their tenancies are terminated" and "`mobile home tenancies are different from the ordinary tenancy." (Greening v. Johnson, supra, 53 Cal.App.4th at p. 1226.)
In accordance with the MRL, we will refer to the rented land as a "site." (Civ. Code, §§ 798.4, 798.12.)
Article 2 (Civil Code sections 798.15 through 798.22) of the MRL sets out the requirements for rental agreements for mobilehome park sites. The rental agreement must be in writing, include a copy of the MRL (Civ. Code, § 798.15, subd. (c)), and include a "provision specifying that ... it is the responsibility of the management to provide and maintain physical improvements in the common facilities in good working order and condition" (id., subd. (d)). Section 798.16, subdivision (a) provides that "[t]he rental agreement may include other provisions permitted by law." None of the sections in the article governing rental agreements expressly authorizes or prohibits arbitration provisions in the rental agreement.
In article 7, governing transfers of mobilehomes or mobilehome parks, Civil Code section 798.77 provides: "No rental or sale agreement shall contain a provision by which the purchaser or homeowner waives his or her rights under this chapter [the MRL]. Any such waiver shall be deemed contrary to public policy and shall be void and unenforceable." Plaintiffs contend section 798.77, in combination with section 798.87, expresses a public policy against inclusion of an arbitration provision in a rental agreement for a mobilehome site. Section 798.87 provides:
"(a) The substantial failure of the management to provide and maintain physical improvements in the common facilities in good working order and condition shall be deemed a public nuisance. Notwithstanding Section 3491, this nuisance may only be remedied by a civil action or abatement. [¶]...[¶]
"(c) A civil action pursuant to this section may be brought by a park resident ...." (Civ. Code, § 798.87, subds. (a), (c).)
Plaintiffs argue that Civil Code section 798.87 makes "a civil action" and abatement the only remedies for a nuisance under that section, and section 798.77 prohibits waiver of the right to bring "a civil action" to remedy a nuisance. Therefore, they conclude, residents of a mobilehome park cannot waive their right to bring "a civil action" to remedy a nuisance by agreeing to arbitrate nuisance claims. Because their complaint includes a nuisance cause of action, among others, based on the alleged failure to maintain the common facilities and improvements, plaintiffs conclude they must be afforded their right to bring "a civil action," and an arbitration provision precluding them from doing so is contrary to the public policy expressed in these sections of the MRL.
Defendants counter that Civil Code section 798.87 merely affords residents a private right of action to remedy a public nuisance, and it was not intended to guarantee a "civil action" and prohibit arbitration. They also assert that, because section 798.25.5 expressly prohibits mobilehome park rules and regulations that "mandate binding arbitration of any dispute between the management and homeowners," the Legislature knew how to prohibit arbitration provisions when it wanted to, and the absence of any express prohibition in the MRL of arbitration provisions in rental agreements indicates such provisions are permissible and there is no public policy against them.
Civil Code section 798.25.5 does not prohibit all park rules and regulations mandating arbitration. It provides:
"Any rule or regulation of a mobilehome park that (a) is unilaterally adopted by the management, (b) is implemented without the consent of the homeowners, and (c) by its terms purports to deny homeowners their right to a trial by jury or which would mandate binding arbitration of any dispute between the management and homeowners shall be void and unenforceable." (Civ. Code, § 798.25.5.)
This section prohibits rules and regulations mandating arbitration of disputes only if they are imposed on the homeowners without their consent; it does not prohibit arbitration rules to which the homeowners voluntarily agree. Consequently, the one section of the MRL that expressly mentions arbitration indicates there is no public policy against arbitration of disputes between homeowners and management of a mobilehome park, provided the homeowners voluntarily agree to arbitration.
Civil Code sections 798.77 and 798.87 also do not support the existence of a public policy against arbitration of disputes between homeowners and park management about park maintenance. Section 798.87 provides that, "[n]otwithstanding Section 3491," a public nuisance in the form of a failure of management of a mobilehome park to maintain the common facilities "may only be remedied by a civil action or abatement." Civil Code section 3491 specifies that "[t]he remedies against a public nuisance are: 1. Indictment or information; 2. A civil action; or, 3. Abatement." (Civ. Code, § 3491, italics added.) The remedies against a private nuisance are a civil action and abatement. (Civ. Code, § 3501.) The apparent purpose of the second sentence of Civil Code section 798.87, subdivision (a), which specifies the available remedies, is to exclude indictment or information from the remedies available for a failure to maintain a mobilehome park, even though such a failure to maintain is designated as a "public nuisance."
The specification in Civil Code section 798.87 of "a civil action" as a remedy for a nuisance does not preclude an agreement to arbitrate a dispute concerning maintenance of a mobilehome park. In County of Solano v. Lionsgate Corp. (2005) 126 Cal.App.4th 741, Lionsgate appealed from a judgment based on an arbitrators decision that included an award to the County for violations of the False Claims Act. Lionsgate contended the Countys claims against it under the False Claims Act were not arbitrable. The court rejected that argument.
"Lionsgates primary argument centers on the False Claims Acts references to `a civil action to recover penalties and damages, and to assessments and findings by `the court. [Citations.] However, it is settled that statutory claims are not inarbitrable merely because the statute in question includes such provisions. Business and Professions Code section 17204 declares that `[a]ctions for any relief pursuant to this chapter shall be prosecuted exclusively in a court of competent jurisdiction .... Nevertheless, our Supreme Court has held that claims for restitution and disgorgement under Business and Professions Code section 17200 et seq. are arbitrable. [Citations.] Similarly, although Civil Code section 1780, subdivision (c) formerly specified that actions under the Consumers Legal Remedies Act (CLRA) must be filed in `any court ... having jurisdiction of the subject matter, the high court ruled that actions for damages under that version of the CLRA could be arbitrated. [Citation.] It has also been established that antitrust claims under the Cartwright Act [citation] are subject to arbitration, despite language in Business and Professions Code section 16750, subdivision (a) contemplating civil actions `in any court having jurisdiction .... [Citation.]" ( County of Solano v. Lionsgate Corp., supra, 126 Cal.App.4th at p. 747.)
Thus, the reference in Civil Code section 798.87 to a "civil action" does not preclude arbitration of the nuisance claims of the plaintiffs with arbitration provisions in their rental agreements, provided those plaintiffs voluntarily agreed to arbitrate such claims.
Plaintiffs argue that an arbitration agreement cannot deprive a party of statutory remedies. "[A]rbitration may resolve statutory claims as well as those purely contractual if the parties so intend, and ... in doing so, the parties do not forego substantive rights, but merely agree to resolve them in a different forum. [Citations.]" (Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1075 (Broughton).) However, "`not ... all controversies implicating statutory rights are suitable for arbitration. [Citation.]" (Ibid.) Whether they are suitable "turns on congressional intent, which can be discovered in the text of the statute in question, its legislative history or in an `"inherent conflict" between arbitration and the [statutes] underlying purposes. [Citation.]" (Ibid.) "[W]hen the primary purpose and effect of a statutory remedy is not to compensate for an individual wrong but to prohibit and enjoin conduct injurious to the general public, i.e., when the plaintiff is acting authentically as a private attorney general, such a remedy may be inherently incompatible with arbitration." (Id. at p. 1077.)
The Broughton court considered whether claims for injunctive relief and damages under the Consumers Legal Remedies Act (CLRA) (Civ. Code § 1750 et seq.) were subject to arbitration. The court contrasted cases in which the plaintiff acted as a private attorney general for the public benefit, with cases in which any public benefit derived from the statutory remedy was merely incidental to private compensation. (Broughton, supra, 21 Cal.4th at p. 1080.) The court also noted there were "evident institutional shortcomings of private arbitration in the field of such public injunctions." (Id. at p. 1081.) The court concluded:
"In short, there are two factors taken in combination that make for an `inherent conflict between arbitration and the underlying purpose of the CLRAs injunctive relief remedy. First, that relief is for the benefit of the general public rather than the party bringing the action. [Citations.] Second, the judicial forum has significant institutional advantages over arbitration in administering a public injunctive remedy, which as a consequence will likely lead to the diminution or frustration of the public benefit if the remedy is entrusted to arbitrators." ( Broughton, supra, 21 Cal.4th at p. 1082.)
The court determined the plaintiffs claims for injunctive relief under the CLRA were not arbitrable, despite the written arbitration agreement between the parties. The plaintiffs were a mother and son, who were covered by a health care plan with the defendant that included an arbitration provision. They alleged two causes of action: (1) medical malpractice, based on severe injuries the son allegedly suffered at birth, and (2) deceptive and misleading advertisement of the quality of medical services available under the defendants health care plan, in violation of the CLRA. (Broughton, supra, 21 Cal.4th at p. 1072.) Because the plaintiffs had already learned of and been injured by the alleged deceptive advertising, any injunctive relief afforded as a result of their CLRA action would inure to the benefit of others, not to their own benefit. (Broughton, supra, at p. 1080, fn. 5.) The court noted that, "even if a CLRA plaintiff stands to benefit from an injunction against a deceptive business practice, it appears likely that the benefit would be incidental to the general public benefit of enjoining such a practice." (Ibid.) Accordingly, the court concluded that, in their claims for injunctive relief under the CLRA, the plaintiffs were acting purely as private attorney generals for the benefit of the public; the primary purpose and effect of the statutory remedy sought was to enjoin conduct injurious to the general public, not to remedy the plaintiffs individual injuries. (Broughton, supra, at p. 1080.)
The court concluded the plaintiffs claims for damages under the CLRA were fully arbitrable, however, because an action for such damages is "primarily for the benefit of a party to the arbitration, even if the action incidentally vindicates important public interests." (Broughton, supra, 21 Cal.4th at p. 1084.) Further, "the United States Supreme Court has consistently rejected plaintiffs arguments that abbreviated discovery, arbitrations inability to establish binding precedent, and a plaintiffs right to a jury trial render the arbitral forum inadequate, or that submission of resolution of the claims to arbitration is in any sense a waiver of the substantive rights afforded by statute." (Ibid.)
A subsequent case reached a similar result concerning claims for injunctive relief against unfair competition (Bus. & Prof. Code, § 17200 et seq.) and misleading advertising (Bus. & Prof. Code, § 17500 et seq.). (Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 316.) The Cruz court found those claims were not subject to arbitration, because plaintiffs action was "undertaken for the public benefit" and "designed to prevent further harm to the public at large rather than to redress or prevent injury to a plaintiff." (Ibid.) Therefore, as in Broughton, there was "an `"inherent conflict" between arbitration and the underlying purpose of [those statutes] injunctive relief remedy. [Citation.]" (Ibid.) The court also held, however, that the plaintiffs "statutory and common law claims for equitable monetary relief — for restitution, disgorgement, and unjust enrichment" were arbitrable. (Id. at pp. 307, 320.)
The bulk of plaintiffs claims in this case are common law claims for damages or restitution, which Broughton and Cruz indicate are fully arbitrable. The statutory remedy that plaintiffs assert is not amenable to arbitration is an injunction based on the nuisance cause of action. Plaintiffs seek to enjoin the owners and operators of the mobilehome park from failing to maintain the facilities in the common areas of the park. The injunction would directly benefit plaintiffs, residents of the mobilehome park, by preventing further harm to them. Any benefit to the general public would be merely incidental to the benefit to the plaintiffs individually. Consequently, the exception to arbitrability established in Broughton and Cruz for statutory remedies that primarily benefit the general public does not apply in this case and is not a bar to arbitration of the claims of the plaintiffs with arbitration provisions in their rental agreements.
We conclude the arbitration provisions in the rental agreements in issue are not void as contrary to public policy as expressed in Civil Code sections 798.77 and 798.87.
Plaintiffs argue the arbitration agreement is void as contrary to the public policy expressed in Civil Code section 1953. Civil Code section 1953 provides, in pertinent part: "(a) Any provision of a lease or rental agreement of a dwelling by which the lessee agrees to modify or waive any of the following rights shall be void as contrary to public policy: [¶]...[¶] (4) His procedural rights in litigation in any action involving his rights and obligations as a tenant." In Jaramillo v. JH Real Estate Partners, Inc. (2003) 111 Cal.App.4th 394, the court held that section 1953 precluded an arbitration provision in a residential lease, because such a provision would constitute a waiver of jury trial, one of the lessees "`procedural rights in litigation." (Jaramillo, supra, at p. 404.) The court concluded, however, that "nothing in section 1953 precludes a tenant of residential premises and the tenants landlord from entering into a separate agreement to arbitrate that is entirely independent of any lease agreement. Certainly, section 1942.1 expressly authorizes a written agreement to arbitrate controversies `relating to a condition of the premises claimed to make them untenantable. We think that the most reasonable interpretation of section 1953, subdivision (a)(4), is that it establishes the general rule that a tenant of residential premises cannot validly agree, in a residential lease agreement, to binding arbitration to resolve disputes regarding his or her rights and obligations as a tenant." (Id. at p. 404, fn. omitted.) Plaintiffs contend Civil Code section 1953 should be applied to leases of mobilehome park sites, as it was to the leases of residential units involved in Jaramillo.
Civil Code section 1940 provides that "this chapter shall apply to all persons who hire dwelling units" and defines a "dwelling unit" as "a structure or the part of a structure that is used as a home, residence, or sleeping place by one person who maintains a household or by two or more persons who maintain a common household." (Civ. Code, § 1940, subds. (a), (c).) That section also provides, however: "Nothing in this section shall be construed to limit the application of any provision of this chapter to tenancy in a dwelling unit unless the provision is so limited by its specific terms." (Civ. Code, § 1940, subd. (d).) In Rich v. Schwab (1998) 63 Cal.App.4th 803, the court construed these provisions as expressly including dwelling units within the coverage of chapter 2, not as excluding any other type of leased property. "Thus, read together and taken in their ordinary sense, subdivisions (a), (b) and (d) of section 1940 provide that all the provisions of chapter 2 apply to leases of dwelling units and, unless specifically limited to such leases, apply to all other types of leases as well." (Id. at p. 813.) On that basis, the Rich court concluded that Civil Code section 1942.5, which it described as referring to a "lessee," applied to tenants of a mobilehome park, "who own their own dwellings and merely rent space from their landlord." (Rich v. Schwab, supra, 63 Cal.App.4th at p. 812.)
"[T]his chapter" refers to chapter 2 of title 5 of part 4 of division 3 of the Civil Code, of which both section 1940 and section 1953 are a part.
Plaintiffs argue that Civil Code section 1953 is not limited to "dwelling units," so it should be construed to apply to all leases, including a lease of a mobilehome park site. Section 1953, however, expressly applies to "a lease or rental agreement of a dwelling." (Civ. Code, § 1953, subd. (a), italics added.) The term "dwelling," unlike the term "dwelling unit," is not defined in chapter 2. Plaintiffs argue that "dwelling" must mean something different from "dwelling unit"; they assert, without citation of authority, that a "dwelling" includes two components, a physical structure and the land under it.
Nothing in chapter 2 indicates that the Legislature intended the term "dwelling" to have a different meaning from the term "dwelling unit." The terms appear to be used interchangeably throughout the chapter. (See, e.g., Civ. Code, §§ 1940.5-1940.9, 1941.2, 1946.5, and 1954 referring to "dwelling unit" and Civ. Code, §§ 1940.2, 1941.1, 1942.1-1942.5, and 1953 referring to "dwelling.") Where a broader scope is given to a particular provision, terms such as "real property" (Civ. Code, § 1945) and "residential real property" (Civ. Code, § 1942.6) are used. "Dwelling unit" is statutorily defined to mean "a structure or the part of a structure that is used as a home ...." (Civ. Code, § 1940, subd. (c).) The plain meaning of "dwelling" is "a building or construction used for residence" (Websters 3d New Internat. Dict. (1981) p. 706). We find no basis for concluding that "a lease or rental agreement of a dwelling," as that term is used in Civil Code section 1953, subdivision (a) was intended to encompass a lease of a site in a mobilehome park. Consequently, Civil Code section 1953 does not support the trial courts finding that the arbitration provision in plaintiffs leases of mobilehome park sites was void as contrary to public policy. We conclude the arbitration provisions in the rental agreements in issue are not void as contrary to public policy as expressed in Civil Code section 1953.
II. Code of Civil Procedure Section 1281.2
Code of Civil Procedure section 1281.2 provides, in pertinent part:
"On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto 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, unless it determines that: [¶] ... [¶]
"(c) 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.... [¶]... [¶]
"If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c) herein, the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding."
A. Possibility of conflicting rulings on a common issue of law or fact.
Defendants assert the trial courts ruling that "arbitration of what amounts to a minority of the leases (17) in question could lead to conflicting and inconsistent judgments" is not a ruling pursuant to Code of Civil Procedure section 1281.2, subdivision (c), because the court did not find there was a "possibility of conflicting rulings on a common issue of law or fact." Although the courts ruling was not phrased in the statutory language, we agree with plaintiffs that "the only fair reading of the courts reference to `conflicting and inconsistent judgments" is that it was a finding that denial of arbitration was warranted under Code of Civil Procedure section 1281.2, subdivision (c). Plaintiffs opposition to defendants motion to compel arbitration contained three grounds on which they contended the court should decline to enforce the arbitration agreements: (1) enforcement presents a risk of conflicting rulings on common issues of fact and law, so enforcement should be denied pursuant to Code of Civil Procedure section 1281.2, subdivision (c); (2) the arbitration agreements are void as contrary to public policy; and (3) the arbitration agreements are unconscionable. The court ruled the arbitration agreements are "void as contrary to public policy" and arbitration "could lead to conflicting and inconsistent judgments." The finding that the arbitration agreements were void addressed plaintiffs second issue. Because a potential for conflicting and inconsistent judgments is not a factor in unconscionability analysis, the only reasonable interpretation of the "conflicting and inconsistent judgments" language is that it was a finding favorable to plaintiffs on their first argument, under Code of Civil Procedure section 1281.2, subdivision (c).
The courts tentative ruling similarly concluded that "the relief requested might result in inconsistent judgments." At oral argument of the motion, plaintiffs counsel interpreted this to be an exercise of the courts discretion under Code of Civil Procedure section 1281.2, subdivision (c). Defendants counsel did not challenge that interpretation, ask the court for clarification of its tentative ruling, or point out that the tentative ruling did not specifically find "a possibility of conflicting rulings on a common issue of law or fact." We construe the courts language regarding "inconsistent and conflicting judgments" as an exercise of the courts discretion to deny arbitration under Code of Civil Procedure section 1281.2, subdivision (c).
Plaintiff counsel stated: "In this case, we have a small fraction of the plaintiffs who do have arbitration clauses. Even if they are valid, the question is should the Court exercise its discretion, which it has under 1281.2(c) to avoid the risk of conflicting rulings. [¶]...[¶] It simply doesnt make sense to bifurcate the litigation and run that risk and create problems, enforcement problems on appeal, and thats why 1281.2(c) exists, and thats why, I think, the Court, at least in its tentative, elected to exercise its discretion in that area."
"The standard of review for an order staying or denying arbitration under section 1281.2, subdivision (c) is the well-known test for abuse of discretion. [Citation.] Thus, the trial courts order will not be disturbed on appeal unless it exceeds the bounds of reason. [Citations.]" (Henry v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 101.)
"... The legislative history broadly defines the problem the Legislature intended to address [in Code of Civil Procedure section 1281.2, subdivision (c)] as follows: `In actions involving multiple parties with related claims, where some claimants agree to arbitrate their differences and others remain outside the agreement, arbitration is unworkable. Where a party to an arbitration agreement is also party to a pending court action or special proceeding, with such a third party, there may be a possibility of conflicting rulings on issues of law or fact. [Citation.] Thus, the statute was intended primarily to prevent conflicting rulings resulting from arbitration proceedings and other related litigation arising out of the same transaction." (Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 488.)
Defendants do not dispute that "[a] party to the arbitration agreement [defendants] is also a party to a pending court action ... with a third party [plaintiffs without arbitration provisions in their rental agreements] arising out of the same transaction or series of related transactions [the alleged failure to maintain the common facilities of the mobilehome park]...." (Code Civ. Proc., § 1281.2, subd. (c).) Defendants contend, however, that plaintiffs failed to show "a possibility of conflicting rulings on a common issue of law or fact." (Ibid.) The question, then, is whether the claims of plaintiffs with an arbitration provision in their rental agreements and the claims of the plaintiffs without such a provision present "a common issue of law or fact" on which there is "a possibility of conflicting rulings" if the claims are not heard together in the same forum. (Ibid.)
The complaint asserts a number of causes of action for damages and injunctive relief on behalf of all the plaintiffs. With the possible exception of the fourth cause of action, each cause of action is based primarily on allegations that defendants had a duty to maintain the mobilehome parks "common areas, facilities, and physical improvements in good working order and condition," but failed to do so. The complaint alleges the sewer system causes sewer back ups or spills and stench; the electrical system is inadequate to meet demand, causing power outages and a risk of physical shock and fire; the water system produces inadequate water pressure and water that is not potable; the drainage is inadequate; and a lack of security and adequate lighting endangers the safety of residents. Defendants concede plaintiffs causes of action "have a common nucleus of allegations, namely the maintenance of the park."
The fourth cause of action (for intentional interference with property rights) alleges defendants interfered with the sale of plaintiffs mobilehomes and entered their mobilehomes without notice.
Plaintiffs claims present common liability issues. All plaintiffs allege that various common facilities at the same mobilehome park are inadequately maintained, in violation of statutory and administrative provisions and the common law. Whether the common facilities are adequately maintained, whether any shortcomings in their maintenance violate any of the alleged statutory, administrative or common law rights of plaintiffs, and which defendants, if any, are liable to plaintiffs for any such failure to maintain the common facilities present common questions of law and fact. Additionally, plaintiffs request for injunctive relief presents common questions. If the claims of the two groups of plaintiffs are heard in different forums, there is a possibility of inconsistent rulings on those issues.
Defendants assert that, if the arbitration proceeds and the arbitrator determines that defendants must repair some items, and defendants repair those items, then the claims of the plaintiffs without an arbitration agreement will be rendered moot. To the extent the plaintiffs without an arbitration agreement seek restitution or claim damages for personal injuries or property damage caused by the condition of those items prior to any arbitration induced repair, however, their claims will not be rendered moot by the arbitrators decision. Those plaintiffs will have to establish defendants liability for the condition of the property and litigate their own rights to restitution or damages for their losses. Further, if the arbitrator determines that defendants did not fail to maintain the common facilities, there is a possibility the judicial action by the plaintiffs without an arbitration agreement might result in a contrary finding. If so, the plaintiffs in the judicial action might recover for their injuries based on the same conditions of the mobilehome park for which the arbitrating plaintiffs were denied relief. The plaintiffs in the court action might also obtain injunctive relief, which the arbitrating plaintiffs would not be able to enforce, even though they are adversely affected by the same conditions.
Defendants assert the plaintiffs subject to an arbitration provision joined the other plaintiffs in their complaint in order to avoid their contractual obligation to arbitrate. Code of Civil Procedure section 1281.2, subdivision (c), makes denial or stay of arbitration discretionary when it is based on the involvement of third parties in the dispute, in order to avoid such gamesmanship. (Henry v. Alcove Investment, Inc., supra, 233 Cal.App.3d at p. 101.) Thus, the court can take into account any evidence that the party resisting arbitration joined other parties in the action in an attempt to avoid arbitration. Both groups of plaintiffs appear to have an interest in, and to be affected by, the condition of the mobilehome park. Nothing in the record suggests that plaintiffs with and plaintiffs without arbitration provisions in their rental agreements were joined in this action for the primary purpose of attempting to avoid arbitration with defendants.
We conclude the trial court did not abuse its discretion by denying arbitration pursuant to Code of Civil Procedure section 1281.2, subdivision (c).
Preston v. Ferrer (2008) 552 U.S. ___ [128 S.Ct. 978, 169 L.Ed.2d 917].
In a supplemental brief, defendants contend a recent case decided by the United States Supreme Court, Preston v. Ferrer, supra, 552 U.S. ___ [128 S.Ct. 978, 169 L.Ed.2d 917] (Preston ), precludes application of Code of Civil Procedure section 1281.2, subdivision (c), in this case. They contend this case is governed by the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.), which does not permit the court to stay or deny arbitration because of related pending litigation involving third parties not subject to the arbitration agreement.
In Preston, Preston, an attorney, contracted to perform "`personal management" services for Ferrer, a television personality. (Preston, supra, 128 S.Ct. at pp. 981-982, 983.) The contract included an agreement to arbitrate "`any dispute ... relating to the terms of [the contract] or the breach, validity, or legality thereof ... in accordance with the rules [of the American Arbitration Association]." (Id. at p. 982.) When a dispute arose, Preston demanded arbitration; Ferrer initiated an administrative proceeding before the California Labor Commissioner, attempting to have the contract invalidated on the ground Preston was performing under the contract as a talent agent without a license, in violation of the Talent Agencies Act (TAA) (Lab. Code, § 1700 et seq.). (Preston, supra, 128 S.Ct. at pp. 982, 983.) Ferrer subsequently filed suit in superior court, seeking a declaration that the dispute between the parties, including the issue of the validity of the contract, was not subject to arbitration. (Id. at p. 982.) Preston responded with a motion to compel arbitration; the superior court denied Prestons motion and enjoined Preston from proceeding with arbitration "`until the Labor Commissioner determine[d] that ... she [was] without jurisdiction over the disputes." (Ibid.) The Court of Appeal affirmed, holding the TAA vested "`exclusive original jurisdiction" over the dispute in the Labor Commissioner; the dissent "reasoned that the FAA called for immediate recognition and enforcement of the parties agreement to arbitrate." (Preston, supra, 128 S.Ct. at p. 982.)
The issue before the United State Supreme Court was not "whether the FAA preempts the TAA wholesale," but "simply who decides whether Preston acted as personal manager or as talent agent." (Preston, supra, 128 S.Ct. at p. 983.) Under the FAA, "`[a] written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." (Preston, supra, 128 S.Ct. at p. 983, quoting 9 U.S.C. § 2.) Previous cases had held that questions of the validity of the entire contract, as distinct from questions of the validity of the arbitration provision, are determined by the arbitrator. (Preston, supra, 128 S.Ct. at pp. 983-984.) The court concluded this rule applied, whether the question would otherwise be determined in a judicial forum or in an administrative forum. (Id. at p. 987.) Consequently, the arbitration should not have been enjoined while the Labor Commissioner determined the validity of the contract.
The court then discussed Ferrers argument that arbitration should be stayed pursuant to Code of Civil Procedure section 1281.2, subdivision (c). It distinguished Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ. (1989) 489 U.S. 468 (Volt). In Volt, a dispute arose between parties to a construction contract which contained an arbitration provision. (Preston, supra, 128 S.Ct. at p. 987.) Volt demanded arbitration; Stanford sued Volt and two other companies who were not parties to the arbitration agreement. (Ibid.) The superior court stayed the arbitration and the Court of Appeal affirmed, concluding that, by providing the contract was governed by California law, the parties incorporated into the contract the provisions of Code of Civil Procedure section 1281.2, subdivision (c). (Preston, supra, 128 S.Ct. at pp. 987-988.) Relying on the Court of Appeals interpretation of the contract, the United States Supreme Court held "that the FAA did not bar a stay of arbitration pending the resolution of Stanfords Superior Court suit against Volt and the two companies not bound by the arbitration agreement." (Id. at p. 988.)
The Preston-Ferrer contract also provided it was governed by California law. Volt, however, was distinguishable on two grounds. "First, arbitration was stayed in Volt to accommodate litigation involving third parties who were strangers to the arbitration agreement. Nothing in the arbitration agreement addressed the order of proceedings when pending litigation with third parties presented the prospect of inconsistent rulings. We thought it proper, in those circumstances, to recognize state law as the gap filler. [¶] Here, in contrast, the arbitration clause speaks to the matter in controversy; it states that `any dispute ... relating to ... the breach, validity, or legality of the contract should be arbitrated in accordance with the American Arbitration Association (AAA) rules." (Preston, supra, 128 S.Ct. at p. 988.) The validity or legality of the contract was in issue, and the contract provided that issue would be arbitrated. Because there were no third parties involved, there was "no risk that related litigation [would] yield conflicting rulings on common issues," and there was "no other procedural void for the choice-of-law clause to fill." (Ibid.)
Second, although the Volt contract provided for arbitration in accordance with AAA rules, Volt did not argue that incorporation of those rules trumped the choice-of-law clause, so the court did not address the effect of incorporation of privately promulgated arbitration rules on the choice-of-law provision. (Preston, supra, 128 S.Ct. at p. 988.) In Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, the court addressed that issue. The contract there contained a New York choice-of-law provision and a provision for arbitration in accordance with the rules of the National Association of Securities Dealers. "The `best way to harmonize the two clauses, we held, was to read the choice-of-law clause `to encompass substantive principles that New York courts would apply, but not to include [New Yorks] special rules limiting the authority of arbitrators. [Citation.]" (Preston, supra, 128 S.Ct. at pp. 988-989.) Preston followed Mastrobuono, and concluded "the `best way to harmonize the parties adoption of the AAA rules and their selection of California law is to read the latter to encompass prescriptions governing the substantive rights and obligations of the parties, but not the States `special rules limiting the authority of arbitrators. [Citation.]" (Id. at p. 989.)
In their supplemental brief, defendants assert the rental agreements that contained arbitration provisions also contained a California choice-of-law provision and "a JAMS arbitration provision." They argue that, in accordance with Preston, we should harmonize these two provisions by applying California substantive law and FAA procedural law. Because there is no provision in the FAA for a stay or denial of arbitration to avoid inconsistent rulings on common issues, defendants assert the denial of the motion to compel arbitration should be reversed. We disagree.
The provisions of the rental agreements containing arbitration clauses differ significantly from the relevant provisions of the contract in issue in Preston. Like the contract in Preston, the rental agreements with arbitration clauses contain a California choice-of-law provision. Unlike the Preston contract, however, defendants rental agreements do not contain a provision for arbitration in accordance with the rules of a private arbitration service. Instead, they contain two relevant provisions: Any arbitrable dispute "SHALL BE ... DECIDED BY ARBITRATION BY THE JUDICIAL ARBITRATION AND MEDIATION SERVICE, INC. (`JAMS)" and "ARBITRATION SHALL BE CONDUCTED PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1280 ET SEQ." Defendants contracts do not incorporate the JAMS rules. Instead, they expressly incorporate the provisions of "Code of Civil Procedure section 1280 et seq.," Californias laws governing arbitration.
Thus, unlike Preston, in this case there is nothing to harmonize. The parties agreed any arbitration is to be conducted in accordance with the substantive law of California and the procedural law set forth in Californias arbitration statutes. They effectively incorporated into their agreement the California arbitration statutes, including Code of Civil Procedure section 1281.2, subdivision (c). Accordingly, they agreed that, when there is pending litigation involving third parties and the same transaction that gave rise to the dispute to be arbitrated, and the two proceedings present the possibility of conflicting rulings on common issues of law or fact, the court may stay or deny arbitration. The trial court exercised the discretion conferred upon it, and denied arbitration in this case, in accordance with the parties agreement.
The reasoning set out in Volt is instructive:
In Volt, the Court was concerned with whether the FAA prevented application of the stay provision of Code of Civil Procedure section 1281.2, subdivision (c). The parties there conceded their contract fell within the scope of the FAA. We express no opinion regarding whether the FAA applies in this case, but find Code of Civil Procedure section 1281.2, subdivision (c), applies to arbitration of the parties dispute in any event. The issue of the application of the FAA was not raised in the trial court, and we need not reach it in order to resolve the issues raised in this appeal.
"But § 4 of the FAA does not confer a right to compel arbitration of any dispute at any time; it confers only the right to obtain an order directing that `arbitration proceed in the manner provided for in [the parties] agreement. [Citation.] Here the Court of Appeal found that, by incorporating the California rules of arbitration into their agreement, the parties had agreed that arbitration would not proceed in situations which fell within the scope of Calif. Code Civ. Proc. Ann. § 1281.2(c) .... This was not a finding that appellant had `waived an FAA-guaranteed right to compel arbitration of this dispute, but a finding that it had no such right in the first place, because the parties agreement did not require arbitration to proceed in this situation." (Volt, supra, 489 U.S. at pp. 474-475.)
The Volt court also observed:
"Arbitration under the [FAA] is a matter of consent, not coercion, and parties are generally free to 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 [FAA] would otherwise permit it to go forward." (Volt, supra, 489 U.S. at p. 479.)
The parties expressly agreed to arbitration "pursuant to California Code of Civil Procedure section 1280 et seq." The trial court acted pursuant to Code of Civil Procedure section 1281.2, subdivision (c) when it denied the motion to compel arbitration in order to avoid conflicting rulings on common issues of law or fact. Under Preston and Volt, even if the FAA applies, it would require arbitration only in accordance with the agreements of the parties. That agreement provides for a stay or denial of arbitration pursuant to Code of Civil Procedure section 1281.2, subdivision (c). Nothing in Preston invalidates the trial courts decision. We find no error.
III. Other Issues
In light of the determination that the trial court properly denied the motion to compel arbitration pursuant to Code of Civil Procedure section 1281.2, subdivision (c), we need not reach the other issues raised by defendants, on which the trial court did not rule, including the issue of unconscionability and whether the arbitration provision was unenforceable under Armendariz v. Foundation Health Psychcare Services (2000) 24 Cal.4th 83.
DISPOSITION
The order denying defendants motion to compel arbitration is affirmed. Plaintiffs are awarded their costs on appeal.
WE CONCUR:
VARTABEDIAN, Acting P.J.
WISEMAN, J.