Opinion
G057220
03-11-2020
KELLY ALLEN, Plaintiff and Respondent, v. TALLEY, LLP et al., Defendants and Appellants.
Spach, Capaldi & Waggaman, Madison S. Spach, Jr., and Thomas E. Walling for Defendants and Appellants. Garcia Reed & Ramirez, Raul B. Garcia and Jacoby R. Perez for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2018-01021773) OPINION Appeal from an order of the Superior Court of Orange County, Deborah C. Servino, Judge. Affirmed. Spach, Capaldi & Waggaman, Madison S. Spach, Jr., and Thomas E. Walling for Defendants and Appellants. Garcia Reed & Ramirez, Raul B. Garcia and Jacoby R. Perez for Plaintiff and Respondent.
INTRODUCTION
Talley, LLP; Talley & Company, Inc.; Andrew Talley; Anthony Abercrombie; Todd Tillman; and The Talley Law Group (Appellants) appeal from an order denying their petition to compel Kelly Allen to arbitrate a partnership dispute. The trial court denied the petition because the arbitration provision in the partnership agreement was permissive rather than mandatory.
We affirm. The partnership agreement does not contain language that would compel anyone to arbitrate, and the language itself is not ambiguous or "doubtful." Although the language giving the details of the arbitration - should it take place - is mandatory, no provision requires the parties to arbitrate their disputes.
FACTS
Allen, a certified public accountant, filed suit against Appellants for fraud, breach of contract, and interference, among other causes of action, in September 2018. Allen alleged he was duped into entering into an accountancy partnership, Talley, LLP, by misrepresentations regarding profits and staff support that would be available to the partnership. Relying on these misrepresentations, Allen closed his own accountancy company and took his book of business to the partnership.
Appellants petitioned the court to compel arbitration, citing these provisions in the Talley, LLP, partnership agreement:
"Mediation. If a dispute should arise under this Agreement, the parties are obligated to first attempt to resolve the dispute through non-binding mediation. Should a party fail to participate in mediation after receipt of [a] demand to mediate from the other party, then the party that fails to participate in such mediation waives its rights to any prevailing party attorneys' fees and costs that may be awarded to that party should that party prevail in an arbitration of the dispute pursuant to Section 11.9.2 herein below.
"Arbitration. If the parties are unable to resolve the dispute through mediation, any arbitration arising out of or related to this Agreement shall be conducted in accordance with the expedited procedures set forth in the JAMS Comprehensive Arbitration Rules and Procedures ('Rules') as those Rules exist on the effective date of this Agreement, including Rules 16.1 and 16.2 of the Rules. Either party may make a demand for arbitration by delivering a demand in writing to the other party in the manner prescribed by the Notices provision of this Agreement. The parties agree to the appointment of one (1) arbitrator, but in the event that they cannot agree to the appointment of the arbitrator, within fifteen (15) business days after the demand for arbitration is made, the arbitrator shall be chosen by JAMS in accordance with the Rules. [¶] Arbitration shall take place in the County of Orange, State of California, and the hearing before the arbitrator of the matter to be arbitrated shall be at the time and place within said County as is selected by the arbitrator. The arbitrator shall be experienced in handling limited liability or civil contract disputes. Judgment on the award may be entered in any court of competent jurisdiction; provided however, that either party may seek injunctive or equitable relief in a court of law without proceeding first through arbitration."
Appellants asserted that they had engaged in mediation with Allen, but evidently it had been unsuccessful in resolving the dispute, given that he filed his complaint shortly thereafter. Mediation having failed, Appellants demanded that Allen arbitrate.
The court denied the petition on the grounds that the relevant portion of the partnership agreement did not mandate arbitration. "[W]hile arbitration is favored, there must be a mandatory arbitration agreement. Here, there is only a permissive agreement to arbitrate if both parties choose to do so."
DISCUSSION
"[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence." (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal).)
We review the interpretation of an arbitration agreement de novo when there are no conflicting facts. (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 60.) We apply California contract law to determine whether a valid agreement to arbitrate exists. (Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787.) The sine qua non of a petition to compel arbitration is an existing written agreement. Under Rosenthal, supra, Appellants had the burden of proving the existence of an agreement by a preponderance of the evidence.
Like the trial court, we cannot find an express written agreement to arbitrate. The mediation provision contains an express mandatory agreement to mediate: "the parties are obligated to first attempt to resolve the dispute through non-binding mediation." The arbitration provision, however, includes no comparable language indicating an agreement to arbitrate, such as "the parties agree to arbitrate" or "the parties are obligated to arbitrate." There is mandatory language regarding how the arbitration is to be conducted if the parties agree to do it: the place, the rules, the number of arbitrators. But nothing in the provision expresses any basic agreement to engage in arbitration.
In addition, one of the Appellants, The Talley Law Group, is neither a party to nor a signatory of the partnership agreement. Allen could not be compelled to arbitrate with this defendant in any event. --------
Appellants argue that the mandatory language governing the details of arbitration - place, rules, etc. - should be extended to compel the arbitration itself. They argue that the provision's language expresses the parties' intention to require arbitration.
California law mandates an objective standard for contract interpretation. (Global Packaging, Inc. v. Superior Court (2011) 196 Cal.App.4th 1623, 1634.) The objective standard relies in the first instance on the contract language (Civ. Code, § 1639) and that is how we ascertain the parties' intent. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1267.)
In this case, language indicating a mutual agreement to arbitrate is missing from the arbitration provision. This omission takes on added significance in the presence of mandatory language in the preceding provision, the mediation provision. It seems likely that if the parties had intended both mediation and arbitration to be mandatory, they would have employed the same language in both provisions.
The cases Appellants have cited to support their arguments do not do so. Although it is true that "doubts regarding the arbitrability of a dispute are resolved in favor of arbitration" (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686 (Coast Plaza)), these "doubts" usually arise as a result of ambiguous language. (See Hartnell Community College Dist. v. Superior Court (2004) 124 Cal.App.4th 1443, 1450.) When the "contractual language is both clear and plain[,] . . . we are bound to give effect to the plain and ordinary meaning of the language used by the parties." (Coast Plaza, supra, 83 Cal.App.4th at p. 684.)
The language used in the partnership agreement plainly and clearly does not include a provision requiring the parties to arbitrate. It allows a party to "make a demand" for arbitration, but it does not require the other party to accept. It includes language about what must happen if the arbitration takes place, but that is as far as it goes. That's not far enough.
DISPOSITION
The order denying the petition to compel arbitration is affirmed. Respondent is to recover his costs on appeal.
BEDSWORTH, ACTING P. J. WE CONCUR: MOORE, J. ARONSON, J.