Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Los Angeles County No. BC395717 Superior Court. Mark Mooney, Judge.
Law Offices of Robert S. Besser, Robert S. Besser; Law Office of Anthony Kornarens and Anthony Kornarens for Defendants and Appellants.
Law Office of Mitchel J. Ezer and Mitchel J. Ezer for Plaintiff and Respondent.
CHANEY, J.
Defendant David Pullman appeals from the superior court’s denial of his motion to compel arbitration under a pre-dispute written arbitration agreement. We affirm the ruling as fully supported by the record.
FACTUAL AND PROCEDURAL BACKGROUND
The Previous Actions
On July 27, 2005, William J. Little filed suit in Los Angeles Superior Court against defendants David Pullman and Structured Assets Sales LLC (collectively Pullman) (LASC No. BC337234), alleging that a 2005 agreement between them (the Original Agreement) was illegal, and seeking its rescission on that ground. The Original Agreement provided for Little and Pullman to purchase and share Screen Actors Guild residual income rights owned by the Sherman A. Helmsley bankruptcy estate.
Sherman A. Helmsley is the television and film actor who portrayed George Jefferson in the television show “The Jeffersons.”
On February 28, 2006, Pullman moved in that action to compel arbitration under the Original Agreement’s arbitration provision. Due to developments in the bankruptcy court, however, the arbitration motion was taken off calendar before it was heard. On April 26, 2006, the trustee in the Sherman A. Helmsley estate’s Chapter 7 bankruptcy proceeding filed an adversary proceeding in the United States Bankruptcy Court against Little and Pullman, alleging fraudulent control of bidding and interference by Little and Pullman with the Helmsley estate’s sale of its residual rights.
The bankruptcy trustee’s allegations paint the following picture: When the trustee had placed the Helmsley residual rights on sale for $40,000 subject to overbid in April 2005, Little and Pullman had engaged in a bidding war, driving Little’s bid up to $214,000 and Pullman’s winning bid up to $215,000. However when they discovered that some residuals were not included in the rights on which they had bid, Pullman forfeited his $4,000 deposit rather than go through with the purchase. Little and Pullman then entered into the May 2005 Original Agreement, agreeing that Little would seek to purchase the Helmsley residual rights from the bankruptcy estate for a reasonable price, that Pullman then would have an option to buy the rights for half of what Little would pay, and that Pullman would then pay Little half of the residuals’ proceeds each year. Little then purchased the rights from the bankruptcy estate for $85,000, yielding the estate substantially less than Pullman’s earlier bid. Pullman then paid Little $42,500, half of what Little paid for the residuals.
Little then cross-complained against Pullman in the bankruptcy court adversary proceeding, and Pullman moved in that court for arbitration under the Original Agreement. On September 26, 2006, the bankruptcy judge found that if it had jurisdiction over the cross-action between Little and Pullman, it would order them to arbitration under either (or both) the Federal Arbitration Act and California law; but that the bankruptcy court lacked jurisdiction over the cross-action. The bankruptcy court left the cross-action, and the motion for arbitration, to be heard in the then-pending Los Angeles Superior Court action. Little then dismissed his bankruptcy court cross-action against Pullman and entered into a settlement of the bankruptcy trustee’s adversary proceeding against him. After trial in the trustee’s adversary proceeding against him, Pullman obtained judgment in his favor. That judgment was later affirmed by the Ninth Circuit Court of Appeals’ Bankruptcy Appellate Panel.
We grant Pullman’s request for judicial notice of the Bankruptcy Appellate Panel ruling, having received no opposition to the request. (Evid. Code, §§ 452, subd. (d), 453, 459.)
On September 27, 2006 (the day after the bankruptcy court denied Pullman’s arbitration motion) Little amended his Superior Court complaint to seek dissolution of a joint venture that he alleged had arisen from the Original Agreement (instead of seeking rescission of the agreement for illegality). A few weeks later Pullman learned (to his surprise) that on October 12, 2006, the Superior Court had denied his then-off-calendar motion for arbitration based on its finding—without hearing—that the Original Agreement was an illegal attempt to defraud the bankruptcy court. Pullman did not appeal from the order denying arbitration. (Code Civ. Proc., § 1294, subd. (a).)
On October 26, 2006, Pullman renewed his motion to compel arbitration in the still-pending superior court action (apparently after seeking to disqualify the trial judge for having initiated ex parte communications with the bankruptcy court judge and bankruptcy trustee). His renewed arbitration motion relied upon the Original Agreement and the changed circumstances resulting from the proceedings in the bankruptcy court, as well as factual errors in the trial court’s October 12, 2006 order, the fact that Little had amended his earlier allegations of the Original Agreement’s illegality, and the fact that in the bankruptcy court Little had denied the agreement’s illegality.
The Settlement
In March and April, 2007 (after Little had settled with the Helmsley bankruptcy trustee and Pullman had prevailed in the adversary proceeding), Pullman and Little entered into a Settlement Agreement and Mutual Release (the Settlement Agreement) resolving their disputes arising from the Original Agreement. The Settlement Agreement required Little to return the $42,500 that Pullman had paid Little under the Original Agreement; it transferred Pullman’s rights to future payments of the Helmsley residuals to Little; and it required Little to dismiss the then-pending Superior Court case No. BC337234 with prejudice. The Settlement Agreement was integrated, expressly superseding all earlier agreements. It contained no direct reference to the Original Agreement, and no provision for arbitration.
The agreement provides in paragraph 8: “This agreement expresses the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersedes all prior oral or written agreements, commitments and understandings pertaining to the subject matter hereof.”
The Present Lawsuit
On August 4, 2008, Little sued Pullman in the Los Angeles Superior Court, alleging Pullman’s interference and fraud with respect to the Settlement Agreement. Little’s suit alleged that the Settlement Agreement was intended to resolve their disputes arising from the Original Agreement; that Little had paid Pullman $42,500 consideration called for by the Settlement Agreement; that Pullman nevertheless had interfered with Little’s ability to receive the Helmsley residuals from the Screen Actors Guild; and that Pullman was guilty of fraud in connection with the Settlement Agreement.
Pullman demurred to the complaint on November 5, 2008. On November 13, 2009, Little filed a First Amended Complaint, to which Pullman demurred on February 18, 2009. On May 11, 2009, Little filed a Second Amended Complaint, the demurrer to which was overruled on August 19, 2009.
Pullman’s demurrer to the First Amended Complaint apparently was sustained, though the ruling is not before us in this appeal.
On September 18, 2009, Pullman moved in the superior court to compel arbitration. Pullman’s arbitration motion contended that the Settlement Agreement was entered into to resolve the parties’ disputes under the Original Agreement; that the Original Agreement had contained a written arbitration provision requiring that “any controversy or claim arising out of or relating to this agreement, its breach or any of the transactions or services contemplated herein shall be settled by arbitration before a panel of three non-attorney arbitrators in Los Angeles County, State of California, in accordance with the rules of the American Arbitration Association”; and that Little’s present action effectively involves the parties’ dispute under the Original Agreement.
Little opposed the motion, contending variously that the parties had never validly agreed to the Original Agreement’s terms; that in the earlier action the court had refused to compel arbitration based on its ruling that the Original Agreement was illegal; that the Settlement Agreement, which contained no arbitration provision, had superseded and terminated the Original Agreement, including its arbitration provision; and that Pullman had waived any right to arbitration by his delay in seeking it.
On November 20, 2009, the superior court denied Pullman’s motion to compel arbitration. The court identified as the ground for its decision that Pullman had waived his right to arbitration under the Original Agreement by delaying his request for arbitration and by interposing demurrers.
On January 6, 2010, Pullman filed this timely appeal from the November 20, 2009 order denying the motion to compel arbitration. (Code Civ. Proc. § 1294, subd. (a); (Cal. Rules of Court, rule 8.104.) We affirm.
DISCUSSION
In order to be entitled to arbitration, Pullman was required to present “prima facie evidence of a written agreement to arbitrate the controversy” that was raised by Little’s current suit. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) Under our law, ‘“[t]he right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract.’” (Marcus & Millichap Real Estate Inv. Brokerage Co. v. Hock Investment Co. (1998) 68 Cal.App.4th 83, 88.) The trial court, however, did not rule on that issue. It instead found (having apparently assumed that the parties had agreed to arbitrate their controversy) that Pullman had waived his right to arbitration due to his “lengthy delay and utilizing the judicial machinery” by demurring to Little’s pleadings.
In finding that Pullman had waived arbitration, the trial court did not directly address the factors that control a waiver determination: (1) whether Pullman’s actions were inconsistent with the right to arbitrate; (2) whether the parties were well into the litigation before Pullman sought arbitration; (3) whether arbitration was requested shortly before trial; (4) whether Pullman had filed a counterclaim without having sought arbitration; (5) whether Pullman had taken advantage of discovery or other important litigation procedures that were not available in arbitration; and (6) whether Little had been affected, misled, or prejudiced by the delay in seeking arbitration. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196; see also Groom v. Health Net (2000) 82 Cal.App.4th 1189, 1195-1196 [no waiver without evidence of prejudice resulting from delay and prosecution of demurrers].)
We do not reach the waiver issue on which the trial court ruled. We instead affirm the denial of arbitration on the ground that Pullman failed to make a prima facie showing that the parties had agreed to arbitrate the controversies raised by Little’s lawsuit. (See Mike Davidov Co. v. Issod (2000) 78 Cal.App.4th 597, 610 [if decision is correct, trial court’s erroneous reasoning is not prejudicial error justifying reversal].)
1. The Applicable Law
Pullman relies on a mix of state and federal law, having argued in the trial court and contending in this court (without discussion) that “[t]he 2005 Agreement involves interstate commerce and therefore falls within the provisions of the Federal Arbitration Act” (FAA). (9 U.S.C., § 1 et seq.) Little’s brief does not address the issue.
Section 2 of the FAA sets forth “a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.” (Moses H. Cone Hospital v. Mercury Const. Corp., supra, 460 U.S. at p. 24; Buckeye Check Cashing, Inc. v. Cardegna (2006) 546 U.S. 440, 443-444.) That rule of enforceability of arbitration agreements preempts any contrary state law. (Southland Corp. v. Keating (1984) 465 U.S. 1, 10-16; Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 405.) Code of Civil Procedure section 1281 embodies the same presumption, providing that predispute arbitration agreements are “valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.”
Section 2 of the FAA provides: “A written provision in... a 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.” (9 U.S.C., § 2.)
While the parties have not briefed the question whether the controversy raised by Little’s present suit against Pullman comes within the FAA, we assume that the FAA might have at least potential application here. However, there is no need to dwell on the question. The FAA does not apply until the existence of an enforceable arbitration agreement is established under state law principles. (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 313; Cione v. Forresters Equity Services, Inc. (1997) 58 Cal.App.4th 625, 634.) In any event, neither party has suggested any way in which the application of federal or state law might lead to different outcomes with respect to any issues in this appeal. (See St. Agnes Medical Center v. PacifiCare of California, supra, 31 Cal.4th at p. 1194 [leaving undetermined whether FAA does or does not apply, with comment that “the federal and state rules applicable in this case are very similar”].)
Both the Settlement Agreement and the Original Agreement deal with the Helmsley residuals, which constitute rights arising from a nationally broadcast and syndicated television series that unquestionably affected interstate commerce.
2. The Question Whether Pullman Has Shown A Prima Facie Agreement To Arbitrate The Controversies Raised In This Case Is An Issue of Law.
When the parties have agreed to arbitrate their controversies, a trial court “has little discretion to deny an arbitration motion”; the FAA then “mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” (Dean Witter Reynolds, Inc. v. Byrd (1985) 470 U.S. 213, 218; Republic of Nicaragua v. Standard Fruit Co. (1991) 937 F.2d 469, 475.) Under California law, the rule is the same. “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a 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....” (Code Civ. Proc., § 1281.2.) Arbitration will generally be ordered “unless it can be said with assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” (Pacific Inv. Co. v. Townsend (1976) 58 Cal.App.3d 1, 9; Gravillis v. Coldwell Banker Residential Brokerage Co. (2006) 143 Cal.App.4th 761, 777.)
Both the FAA and the equivalent California law require that when the court considers an arbitration request, it must determine “(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (Cox v. Ocean View Hotel Corp. (2008) 533 F.3d 1114, 1119; Chiron Corp. v. Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130; Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 406 [court errs if it orders arbitration where parties did not agree to arbitrate controversy raised by pending action].) Without a prima facie showing of an agreement to arbitrate the pending controversies, the court has no basis on which to make the finding that the law requires: “that an agreement to arbitrate the controversy exists....” (Code Civ. Proc., § 1281.2; Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 413 [burden of party seeking arbitration is to provide “prima facie evidence of a written agreement to arbitrate the controversy”]; Chiron Corp. v. Ortho Diagnostic Sys., Inc., supra, 207 F.3d at p. 1130; Howard Electrical & Mechanical Co. v. Briscoe Co. (9th Cir. 1985) 754 F.2d 847, 850 [arbitration may be validly ordered only if the parties’ agreement to arbitrate is susceptible to an interpretation that would encompass the controversy].) A party “cannot be compelled to arbitrate if an arbitration clause does not bind it at all.” (John Wiley & Sons v. Livingston (1964) 376 U.S. 543, 547.)
Where the language of the parties’ agreements is not disputed, and the record contains no extrinsic evidence of their intended meaning, the arbitrability of the dispute is subject to de novo review. (Gravillis v. Coldwell Banker Residential Brokerage Co., supra, 143 Cal.App.4th at p. 771.) Whether the written agreements themselves constitute a prima facie showing of an agreement to arbitrate, sufficient to require that controversies arising under them must be submitted to arbitration for ultimate determination, is a question of law for the court. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865; Chan v. Drexel Burnham Lambert, Inc. (1986) 178 Cal.App.3d 632, 642 [interpretation of written agreement is solely judicial function unless interpretation turns on credibility of extrinsic evidence]; see also Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83 [question whether arbitration agreement applies to particular controversy is question for court, not arbitrator].)
Pullman cites his testimony that the parties did not intend to extinguish the Original Agreement or to supersede its arbitration provision by entering into the Settlement Agreement. But the cited testimony is irrelevant to establish the parties’ mutual intentions in entering into the Settlement Agreement, for it states only his own uncommunicated intentions. (Morrow v. Los Angeles Unified School Dist. (2007) 149 Cal.App.4th 1424, 1444 [inadmissible to testify as to another person’s state of mind without personal knowledge thereof].) In the absence of competent evidence of the parties’ mutual intention, it must be ascertained from the Settlement Agreement. (Civ. Code, § 1639.)
3. Pullman Has Failed To Make A Prima Facie Showing Of An Agreement To Arbitrate The Controversy Raised In This Action.
However broad the agreement’s language may be, “it extends only to those things concerning which it appears that the parties intended to contract.” (Civ. Code, § 1648.) Therefore unless their agreement is susceptible to a determination that they intended their arbitration agreement to encompass the controversy raised by Little’s current action, no arbitration can be ordered. (Retail Clerks Union, Local 775 v. Purity Stores, Inc. (1974) 41 Cal.App.3d 225, 231 [arbitration should be ordered unless arbitration agreement is not susceptible to interpretation that covers asserted dispute]; Marsch v. Williams (1994) 23 Cal.App.4th 250, 256 [arbitration provision in later contract will not be applied to earlier related contract without arbitration provision, where later contract does not expressly incorporate earlier contract’s terms].)
Pullman argues that the Settlement Agreement, and the controversies in this case, involve the parties’ rights to the Helmsley residuals—which are also the subject of the Original Agreement. Thus, he argues, the controversy arising from the present lawsuit comes within the terms of the Original Agreement’s arbitration provision.
Little contends that the Original Agreement’s arbitration provision should not be enforced, for example because certain interlineations were not initialed by both parties, because the agreement had been found to be illegal, and because the trial court properly determined that Pullman had waived any right to arbitration under it. However those questions do not arise until there has been a prima facie showing that the parties agreed to arbitrate the controversies raised by the action. (Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 413.)
If the only issue were whether both the Original Agreement and the Settlement Agreement both involved disputes about the parties’ rights to the Helmsley residuals, Pullman unquestionably would be correct. The specific language of the Original Agreement requires arbitration of “any controversy or claim arising out of or relating to this agreement, its breach or any of the transactions or services contemplated herein....” The first question therefore is whether the present controversies arise out of or relate to the Original Agreement, to its breach, or to any of the transactions or services contemplated in the Original Agreement.
The scope of the parties’ current controversy is set forth in Little’s Second Amended Complaint. It alleges that Pullman breached the implied covenant of good faith and fair dealing that arose from the parties’ Settlement Agreement, by suggesting to the Screen Actors Guild that Little had no settlement; that by entering into the Settlement Agreement without an intention to perform his obligations to Little, Pullman was guilty of fraud; and that Little is entitled to an accounting of funds due Little under the Settlement Agreement from the Screen Actors Guild, but that were instead received by Pullman.
The claims raised by Little’s pleading are that Pullman interfered with, and fraudulently induced others to breach, his rights to Helmsley residuals. Those rights, however, arise from the Settlement Agreement, not from the Original Agreement. While both the agreements relate to the parties’ rights to the Helmsley residuals, the Original Agreement provides only historical background to the disputes about those rights. Those rights were resolved and released by the Settlement Agreement; Little’s pleading in the current case does not invoke or involve any rights under the Original Agreement.
Nor could it. The subject of the Settlement Agreement was the “outstanding disputes” between them, including disputes about claims arising from the Original Agreement, disputes about claims involved in the then-pending lawsuit, and disputes about “any and all claims, demands, debts, liabilities, obligations, accounts, and causes of action of every kind and nature whatsoever, whether now known or unknown, that any of the parties, now has or ever has had against the other party.” Little and Pullman expressly agreed that their Settlement Agreement released one another from all such claims, that it “expresses the entire agreement and understanding of the parties” with respect to these claims, and that it “supersedes all prior oral or written agreements, commitments and understandings pertaining to” these claims.
That language leaves no room for an inference that the parties intended any provision of the Original Agreement, including the arbitration provision, to subsist. Plainly they did not intend that the arbitration provision of their Original Agreement would survive their entry into the Settlement Agreement, for they expressly agreed—in language that could not have been broader or more encompassing—that the Settlement Agreement “supersedes” any earlier agreements, commitments and or understandings respecting the controversies arising from the Original Agreement. Under that language, no earlier agreement could subsist.
To “supersede” is “1. To replace in power, authority, effectiveness, acceptance, use, etc., as by another person or thing. 2. to set aside or cause to be set aside as void, useless, or obsolete, usu. in favor of something mentioned; make obsolete. 3. to succeed to the position, function, office, etc., of; supplant.” (Random House College Dict. (1995) p. 1342.)
Because the parties expressly agreed that the Settlement Agreement “supersedes” the entire subject matter of the Original Agreement, the Settlement Agreement cannot be interpreted to adopt, or even to leave intact, their earlier agreement to arbitrate all of their disputes respecting the Helmsley residuals. By entering into the Settlement Agreement, they eliminated all of their current controversies with respect to the Original Agreement and their rights and obligations under it—including their rights to the Helmsley residuals. They were then free to agree, if they chose to do so, that any future disputes they might have would be subject to arbitration. But the Settlement Agreement contains no such provision. And the language of the Settlement Agreement is not susceptible to the interpretation that the parties intended their controversies arising from the Original Agreement to survive their entry into the Settlement Agreement, or that they intended the arbitration provision of the Original Agreement to encompass disputes that might arise in the future.
Pullman urges us to interpret the agreements in this case as the court did in Riley Manufacturing Co., Inc v. Anchor Glass Container Corp. (10th Cir. 1998) 157 F.3d 775, 780-781, where the parties’ settlement agreement, which lacked an arbitration provision, was held not to wholly extinguish the arbitration provision in their earlier agreement. But in Riley, the court found that the settlement released the parties’ liabilities only with respect to specific subjects; thus the previous agreement’s arbitration provision subsisted as to any other subjects. (Id. at p. 782.) Here, however, the Settlement Agreement was entered into “to resolve all outstanding disputes” between the parties, including specifically their rights and obligations with respect to the Helmsley residuals and payment for them, and with respect to the claims that were or could have been asserted in their earlier superior court action arising under the Original Agreement. And it expressly released and discharged each of them, without limitation, from any and all claims “of every kind and nature whatsoever, whether now known or unknown, that any of the parties, now has or ever has had against the other party.” These provisions distinguish this case from those in Riley Manufacturing Co., Inc v. Anchor Glass Container Corp., supra.
Once the Settlement Agreement ended the effectiveness of the Original Agreement’s arbitration provision, the parties had no agreement to arbitrate any disputes at all. Their earlier disputes (known and unknown) about the Helmsley residuals had ended in settlement; their rights and obligations under the Original Agreement were merged into their rights and obligations under the Settlement Agreement. The controversies that arose after their entry into the Settlement Agreement resulted from that agreement, not from the by-then-extinguished Original Agreement. By declining to include arbitration as a provision of their Settlement Agreement—the agreement that superseded the Original Agreement, rendering it aside as void and obsolete—they opted not to agree that they would resolve future controversies with arbitration.
Where contract providing for arbitration has expired under its own terms, arbitration ordinarily will be ordered only if: (1) the facts giving rise to the dispute occurred before the contract’s expiration; (2) post-expiration conduct infringed on rights that accrued or vested under the contract; or (3) the disputed contractual right survives the contract’s expiration. (Litton Financial Printing Division, a Div. of Litton Business Systems, Inc. v. NLRB (1991) 501 U.S. 190, 205-206.) Here, no provision of the Original Agreement survived the parties’ entry into the Settlement Agreement; and the disputes for which arbitration is sought all arose after the Settlement Agreement had extinguished the Original Agreement, as well as all the rights that accrued from it and all the controversies that arose from it.
Because there is no showing of an agreement that could be construed to require arbitration of the pending controversies, the trial court would have had no basis on which to make the preliminary finding that the law requires: “that an agreement to arbitrate the controversy exists....” (Code Civ. Proc., § 1281.2; Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 413.)
DISPOSITION
The order is affirmed.
We concur: MALLANO, P. J.JOHNSON, J.