Opinion
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County, Super. Ct. No. 06CC12581 Gregory Munoz, Judge.
Petillon, Hiraide, Loomis & Katz, Mark T. Hiraide and Lisa M. Hiraide for Defendant and Appellant.
Law Office of M. Candice Bryner, M. Candice Bryner; Outwater & Pinckes and David E. Outwater for Plaintiff and Respondent.
OPINION
RYLAARSDAM, ACTING P. J.
Defendant Johan Hendrik Smit Duyzentkunst appeals from an order denying his motion to compel arbitration of a complaint filed by plaintiff Genutec Business Solutions, Inc. He contends the court erred in finding that the provisions in the agreement containing the arbitration paragraph required the parties to litigate disputes in the superior court. We agree and reverse.
FACTS
Plaintiff purchased a company owned by defendant. The purchase agreement contains a dispute resolution paragraph, entitled “Resolution of Disputes,” that reads in part: “In the event of any dispute with respect to or pursuant to this Agreement, . . . the Parties shall in good faith seek to settle or compromise such dispute or claim. In the event that any such dispute or claim cannot be settled . . . within thirty . . . days of the other Party’s receipt of written notice of the . . . claim, any Party may promptly thereafter submit the dispute to non-binding mediation before a mediator[] . . . mutually acceptable to the Parties . . . . If such dispute shall not be appropriately resolved to the satisfaction of all Parties as a result of the [m]ediation, then any Party may submit the dispute to final and binding arbitration . . . . In the event that it may reasonably be assumed that a dispute or claim shall not be settled . . . by [m]ediation . . . or in the event that it may not reasonably be expected that the claiming Party wait thirty . . . days before submitt[ing] the dispute to [a]rbitration, then a dispute or claim may be submitted . . . immediately.”
A separate provision, entitled “Governing Law,” states that California law shall apply and that “[e]ach Party hereto irrevocably submits to the jurisdiction of the Circuit Court [sic] of the State of California, Orange County, in any action or proceeding arising out of or relating to this Agreement . . . and each Party hereby irrevocably agrees that all claims in respect of any such action or proceeding must be brought and/or defended in such court . . . . . . . [E]ach Party irrevocably waives . . . the defense of an inconvenient forum . . . .” (Underscoring omitted.)
When a dispute arose between the parties, in late October 2006 plaintiff’s lawyer wrote to defendant’s lawyer and requested the matter be submitted to mediation in accordance with the terms of the agreement. Approximately three weeks later the parties discussed meeting to try to resolve the dispute. A week thereafter on November 28, plaintiff’s counsel sent a follow-up letter. On Friday, December 2, defendant’s lawyer responded by letter stating that he and defendant would “welcome the opportunity to meet . . . and . . . discuss a resolution . . .” and he agreed they would abide by the resolution of dispute provisions by mediating. He repeated the alternative to meet with parties and lawyers only, stating he wanted to do so as soon as possible, and suggested a discussion on the following Monday.
According to the declaration of plaintiff’s lawyer, when he attempted to reach defendant’s lawyer that Monday, he was not available or out of the office. On that same day plaintiff filed this action but did not serve it. For the next week and a half the lawyers exchanged e-mails discussing a possible meeting, but none was set up. On December 19, plaintiff’s lawyer faxed another letter to defendant’s counsel, which, among other things, reiterated a willingness to meet. Defendant’s lawyer responded the same day stating it was “disingenuous for [counsel] to suggest that [he had] not been responsive to . . . requests to meet . . . in view of our several discussions during the past two weeks.”
The next day plaintiff’s lawyer sent the complaint to defendant’s counsel with a notice and acknowledgment of receipt. Thereafter, defendant filed his motion to compel arbitration based on the dispute resolution paragraph in the agreement.
In its opposition, plaintiff asserted that the arbitration provision was not mandatory but permissive. Specifically, it argued that because the agreement states that a party “may submit the dispute to . . . arbitration,” arbitration was voluntary. (Italics added.) It also relied on the language in the governing law section of the agreement, which states that the parties submit to the jurisdiction of the court in Orange County and agreed that an action “must be brought . . . in such court[.]” (Italics added.) Secondarily, it claimed defendant had waived the right to arbitrate because it had not first mediated the dispute.
The court agreed with plaintiff’s interpretation of the agreement, refusing to compel arbitration, stating: “I think the agreement is poorly written to begin with because it provides for the parties having a right to ask for arbitration using the word ‘may’ ask for arbitration. [¶] Then we have the other provision referring to litigation in that any controversy must be decided by the Orange County Superior Court. . . . I think that’s overriding.”
DISCUSSION
1. Interpretation of Agreement
The question here is whether the agreement’s language that “any Party may submit the dispute to final and binding arbitration” requires plaintiff to arbitrate upon defendant’s election. Plaintiff argues, and the court agreed, that use of the word “may” makes the provision permissive and therefore defendant cannot mandate arbitration.
Although there is a common understanding that “may” is permissive, in the context of this agreement we cannot construe “may” to be permissive in that sense. Here, use of the word “may” means only that the agreement does not require the parties to arbitrate in all cases. Rather, arbitration is triggered only when a party opts for it. But once that choice is made by one party, the other is required to arbitrate.
Pacific Gas & Electric Co. v. Superior Court (1993) 15 Cal.App.4th 576 (Pacific), overruled on another ground in Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 367, is instructive. There an agreement provided that a dispute “may be submitted by either party to arbitration . . . .” (Pacific Gas & Electric Co. v. Superior Court, supra, 15 Cal.App.4th at p. 595.) The real party in interest made the same argument as plaintiff here, that use of “may” was permissive and allowed arbitration only when both parties agreed. The court disagreed, stating that the arbitration provision was mandatory: “In this context the ‘may’ signifies the right of the party to invoke arbitration.” (Ibid.)
Likewise, in Service Employees Internat. Union, Local 18 v. American Building Maintenance Co. (1972) 29 Cal.App.3d 356, the agreement provided that ‘“the issue in dispute may be submitted to an impartial arbitrator . . . .’” (Italics omitted.) (Id. at p. 358.) The court considered “whether, in the agreement’s context, the language [quoted above] must be construed as implying (1) with the consent of both parties, or (2) at the option of either.” (Ibid.)
It decided the latter construction was correct because if the consent of both parties were required, “the arbitration provision would be of little purpose. It would lack validity and enforceability, and would amount to no more than a barren recital that the parties might in the future agree to arbitrate a dispute.” (Service Employees Internat. Union, Local 18 v. American Building Maintenance Co., supra, 29 Cal.App.3d. at p. 358.) This would violate the basic rule of contract interpretation that a court must choose the construction that renders the agreement valid. (Id. at p. 359.) It explained the use of the word may, noting that “‘may’ is sometimes used in granting to either of opposing parties a right, or privilege, with regard to the dispute” (ibid.), and concluded such was the meaning of the arbitration provision. (Ibid.) Such is the meaning in our case as well.
We are not persuaded that the Governing Law provision has any impact on this construction. That paragraph is plainly a fairly standard forum selection clause. It states that where there is an action arising from the agreement, it must be brought in Orange County. It does not state that any dispute must be litigated in the superior court. The language that “any such action or proceeding must be brought and/or defended in such court . . .” only means that such an action cannot be brought in the court of another county.
Further, there is no basis to compare use of “may” in the arbitration provision with the “must” used here, as plaintiff maintains. Those two paragraphs have entirely different purposes and there is nothing in the language of the agreement to suggest the parties intended them to be read together.
If we adopted the interpretation of the trial court and plaintiff, it would render the arbitration provision meaningless, in violation of basic rules of contract construction. Contrary to plaintiff’s claim, this construction does not nullify the forum selection clause. That provision would apply when an action is not to be arbitrated.
2. Arbitration Prerequisites
As a corollary to the interpretation argument, plaintiff suggests that arbitration is not available because there were two conditions precedent to it, i.e. “exhaustion of informal settlement negotiations and the mediation process[,]” “which did not happen here.” (Underscore omitted.) We disagree.
First, plaintiff only briefly mentions this claim and does not support it with authority or reasoned legal argument. Thus, this issue is waived. (People v. Stanley (1995) 10 Cal.4th 764, 793.)
Even if considered on the merits, however, the language of the arbitration provision itself defeats this claim. The paragraph states that if it is reasonable to assume a dispute will not be resolved by mediation, a party may skip that process and proceed straight to arbitration. And, although the agreement does provide the parties shall try to settle the dispute informally, it does not require this as a condition precedent to arbitration. Moreover, the evidence suggests the parties did attempt to resolve their dispute informally. Thus, had informal negotiations been a condition precedent, the condition was satisfied.
DISPOSITION
The order is reversed and remanded to the superior court to enter an order staying the action and ordering the matter to arbitration. Appellant is entitled to costs on appeal.
WE CONCUR: ARONSON, J., IKOLA, J.