Opinion
NOT TO BE PUBLISHED
County Super. Ct. No. CGC-07-461147
Marchiano, P.J.
Defendant attorney William M. Gwire in propria persona appeals from an order denying his petition to compel arbitration of legal malpractice and other causes of action brought herein by his former client, plaintiff Steven M. Krantz. The court denied the petition because of the potential for inconsistent rulings in the arbitration and this court case. We conclude that the stated ground for the order is untenable, and therefore reverse.
I. BACKGROUND
This action arises out of two prior cases in which defendant acted as plaintiff’s counsel: Krantz v. BT Visual Images et al. (Super. Ct. S.F. City and County, 1998, No. 989085; the BT case); and Tandberg, Inc. v. Seltzer et al. (Super. Ct. S.F. City and County, 2002, No. CGC-02-416192; the interpleader case). Margaret Seltzer initially represented plaintiff in the BT case; defendant substituted in as plaintiff’s counsel in that case in September 2001. The BT case settled; prior to the settlement, Seltzer filed a lien for attorney’s fees she claimed were owed in the case. BT also known as Tandberg filed the interpleader case against Seltzer and Krantz in December 2002, and deposited settlement funds to cover the Seltzer lien. Those funds, according to plaintiff’s brief, were awarded to Seltzer in the interpleader case.
Plaintiff entered into a retainer agreement with defendant for the BT case in May 2001, and for the interpleader case in April 2003. The agreement for the BT case had no arbitration provision, but the agreement for the interpleader case had a clause stating: “We agree that in the event any dispute arises out of our relationship, or under this agreement, that dispute will be submitted for binding arbitration . . . .”
The 10-count complaint herein asserted causes of action for malpractice, breach of fiduciary duty, fraud, and intentional infliction of emotional distress. Three causes of action were based on defendant’s alleged failure to sue Seltzer for malpractice within the statute of limitations; three causes of action were based on the BT case; and two causes of action were based on the interpleader case.
Defendant petitioned to compel arbitration under the retainer agreement in the interpleader case. Plaintiff opposed the petition and filed a declaration stating: “At the time of the [interpleader retainer agreement], the Interpleader action had been ongoing for approximately five months. Gwire was my attorney of record from the inception of the Interpleader action and in fact had instigated the Interpleader action in order to settle the BT case. Gwire knew I wanted the interpleader monies released to me but told me he would not make any motion to release the interpleader funds to me until and unless I signed a new agreement. This letter agreement [the interpleader retainer agreement] was presented to me when I had no choice but to accept due to my inability to retain another attorney at that stage of litigation, and my desire to have Gwire do the work which he promised to do in the Interpleader case.” Plaintiff’s opposition memorandum argued that the arbitration provision applied only to the interpleader case, and that the agreement was unenforceable because it was unconscionable.
At the outset of the hearing on the petition, defendant conceded that he was only seeking to arbitrate claims relating to the interpleader case. The court stated: “[T]he issue that I have then is that if there are arbitrable claims and non-arbitrable claims, they all arise out of this ongoing relationship. It seems to me that it’s going to be very difficult to disentwine, if that’s a word, the arbitrable from the non-arbitrable claims without the risk of duplicative proceedings and the potential for inconsistent rulings, and so my inclination would be to say that, therefore, under the statute, I should exercise my jurisdiction to determine that because this is [a] case where some claims are arbitrable and some are not with the issues that I’ve just mentioned, that I should order that none of the claims go to arbitration and they should all be tried in this action.” After hearing the parties’ arguments on whether inconsistent rulings were likely to occur, the court denied the petition “based on the record . . . for the reasons that I’ve indicated.” The court’s order denied the petition without elaboration.
II. DISCUSSION
Our analysis is governed by Code of Civil Procedure section 1281.2 (hereafter § 1281.2), which provides: “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:
“(a) The right to compel arbitration has been waived by the petitioner; or
“(b) Grounds exist for the revocation of the agreement.
“(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. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. . . .
“If the court determines that a written agreement to arbitrate a controversy exists, an order to arbitrate such controversy may not be refused on the ground that the petitioner’s contentions lack substantive merit.
“If the court determines that there are other issues between the petitioner and the respondent which are not subject to arbitration and which are the subject of a pending action or special proceeding between the petitioner and the respondent and that a determination of such issues may make the arbitration unnecessary, the court may delay its order to arbitrate until the determination of such other issues or until such earlier time as the court specifies.
“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.”
The record reflects, and the parties agree, that the court purported to deny the petition under the authority of section 1281.2, subdivision (c). However, that subdivision by its terms permits denial of a petition to compel arbitration because of the possibility of conflicting rulings only when the court action or proceeding creating the potential conflict involves a third party. In that situation, “ ‘where some claimants agree to arbitrate their differences and others remain outside the agreement,’ ” the Legislature determined that “ ‘arbitration is unworkable.’ ” (Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 488, italics added and deleted.) In cases involving third parties, the court has the options listed in the fourth paragraph of section 1281.2, subdivision (c), which include refusal to enforce the arbitration agreement. But where, as here, the pending court action is between parties to the arbitration agreement, the court can only delay, not deny, arbitration pursuant to the third paragraph of section 1281.2, subdivision (c), if the conditions specified therein are met. (See generally Knight et al., Cal. Practice Guide: Alternative Dispute Resolution (The Rutter Group 2007) ¶¶ 5:323.5, 5:325, 5:327, pp. 5-208 to 5-209 (rev. #1, 2007) [court cannot deny arbitration on grounds other than those enumerated in section 1281.2; court has more options in third party cases].)
Plaintiff has lodged a copy of his first amended complaint, which adds new causes of action against Seltzer. However, under the second sentence of the first paragraph of section 1281.2, subdivision (c), this development would not turn the case into a “pending court action . . . with a third party” within the meaning of the subdivision because the action against Seltzer was not initiated until after the hearing on the arbitration petition. (See Bos Material Handling, Inc. v. Crown Controls Corp. (1982) 137 Cal.App.3d 99, 112 [pending third party actions are those that exist at the time of the hearing on the petition].)
While we therefore agree with defendant that the order denying the petition must be reversed, we decline his request to direct the court to order arbitration. Because the court found the potential for conflicting rulings dispositive, it had no occasion to rule on plaintiff’s claim of unconscionability, or to consider postponing arbitration pursuant to the third paragraph of section 1281.2, subdivision (c). We express no opinion on those issues, which the trial court should have an opportunity to address in the first instance.
III. DISPOSITION
The order denying the petition to compel arbitration is reversed, and the matter is remanded to the trial court for further proceedings consistent with this opinion.
We concur: Stein, J., Margulies, J.