Opinion
A145221
01-25-2017
J.B.B. INVESTMENT PARTNERS LTD. et al., Plaintiffs and Respondents, v. R. THOMAS FAIR et al., Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Mateo County Super. Ct. No. CIV522693)
R. Thomas Fair (Fair), Bronco RE Corporation (Bronco), BRE Boulevard LLC (Boulevard), and BRE Cameron Creek LLC (Cameron; collectively defendants) appeal from the trial court's 2015 order denying their motion to stay the action and compel arbitration, brought against J.B.B. Investment Partners, Ltd. (JBB) and Silvester Rabic (Rabic; collectively, plaintiffs) in this action arising from plaintiffs' investment in defendants' properties. Defendants challenge the trial court's findings that (1) the motion to compel arbitration was an untimely and improper request for reconsideration of a prior order denying an identical motion, and (2) defendants, having actively litigated the case for two years, waived their right to compel arbitration. We shall affirm the court's 2015 order denying defendants' motion to compel arbitration.
BACKGROUND
The factual and procedural background in this opinion is taken in part from our prior opinion in J.B.B. Investment Partners, Ltd. v. Fair (2014) 232 Cal.App.4th 974 (J.B.B. Investment Partners).
Fair, an attorney and inactive member of the California State Bar, is the founder of Bronco, and Bronco is the managing member of Boulevard and Cameron. Boulevard and Cameron are Arizona limited liability companies formed in 2007, and they each own apartment units in Arizona. JBB is a limited partnership based in Atherton, California and Rabic is a nonattorney individual investor. In late 2007 and early 2008, JBB invested $150,000 and Rabic invested $100,000 in Boulevard and Cameron, and both became members of the limited liability companies.
Subsequently, plaintiffs asserted they had discovered that defendants had made various fraudulent representations and omissions, and the parties attempted to negotiate a settlement of those disputes. In the midst of settlement negotiations, on July 5, 2013, plaintiffs filed a lawsuit against defendants. On August 6, 2013, plaintiffs filed a motion pursuant to Code of Civil Procedure section 664.6 to enforce the parties' settlement, which they purportedly entered into through email exchanges between Fair and counsel for plaintiffs. On August 15, 2013, defendants filed a motion to stay the action and compel arbitration, pursuant to the arbitration agreement contained in each limited liability company's operating agreement.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
On October 18, 2013, following a hearing, the trial court granted plaintiffs' motion to enforce the settlement and denied defendants' motion to compel arbitration. On November 1, 2013, the court entered its judgment granting plaintiffs' motion to enforce the settlement. Also on November 1, the court entered a separate order denying defendants' motion to stay the action and compel arbitration. In its order, the court explained "Prior to hearing oral argument on the Motion [to compel arbitration], the court heard oral argument on, and ruled upon [Plaintiffs'] Motion to Enforce Settlement . . . . [¶] . . . [¶] As a result of granting Plaintiffs' Motion to Enforce Settlement, the court held that because it had found that Defendant R. Thomas Fair agreed to settle the case on July 5, 2013, the Defendants had waived their right to arbitration."
The court certified both its judgment enforcing the settlement and its order denying arbitration for interlocutory appeal under section 166.1.
On November 12, 2013, defendants filed a notice of appeal solely from the trial court's November 1, 2013 "Order on Motion to Enforce Settlement and Judgment Pursuant to [section 664.6]." On December 5, 2014, a panel of this Division found that "Fair's printed name on the document sought to be enforced as a settlement was not a signature." We therefore reversed the judgment enforcing the settlement. (J.B.B. Investment Partners, supra, 232 Cal.App.4th at p. 978.) The California Supreme Court subsequently denied plaintiffs' petition for review, and the remittitur issued on April 17, 2015.
In light of this holding, we "express[ed] no opinion as to whether plaintiffs can enforce the[ir] July 4 offer [to settle] by another method, such as a motion for summary judgment for breach of contract." (J.B.B. Investment Partners, supra, 232 Cal.App.4th at p. 991, fn. 4.) In the opinion, we also affirmed the consolidated cross-appeal by plaintiffs challenging the trial court's postjudgment order denying their motion for attorney fees. (Id. at pp. 977-978, 983.)
On April 20, 2015, plaintiffs filed a first amended complaint, alleging causes of action for securities fraud in violation of the California Corporations Code, fraud, breach of fiduciary duty, constructive fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, declaratory relief, promissory estoppel, rescission for fraud in the inducement, and legal malpractice. They also filed a motion for summary judgment. Also on April 20, defendants filed a second motion to stay the action and compel arbitration, based on the same arbitration clauses in the applicable operating agreements they relied on in the first motion to compel arbitration.
On May 15, 2015, following a hearing, the trial court denied defendants' motion to stay the action and compel arbitration, explaining: "This motion is an untimely and improper request for reconsideration of the October 18, 2013 Order made by Judge Buchwald denying Defendants' prior motion to compel arbitration. [(Code Civ. Proc., § 1008.)] Judge Buchwald previously found that Defendants had waived the right to arbitration based on [the] factual finding that Defendants had agreed to settle the case[.] Defendants neither moved for reconsideration nor sought appellate review of that finding[.]
"In addition, a waiver of arbitration may be found where 'the party seeking to compel arbitration has previously taken steps inconsistent with an intent to arbitrate.' [Citation.] This case has been actively litigated for the past two years. Defendants have engaged in extensive litigation activities which indicate a waiver of their right to arbitrate claims arising out of the alleged Operating Agreements."
On May 20, 2015, defendants filed a notice of appeal from the court's May 15 order.
On June 25, 2015, we denied plaintiffs' motions to dismiss defendants' appeal and for sanctions. On December 10, 2015, we granted plaintiffs' request for judicial notice of the briefs filed in the prior appeal in this case.
DISCUSSION
Defendants challenge the trial court's findings that (1) the motion to compel arbitration was an untimely and improper request for reconsideration of the prior order denying an identical motion, and (2) having actively litigated the case for two years, defendants have waived their right to compel arbitration. Even indulging all of defendants' assumptions in favor of finding jurisdiction to consider the appeal, we conclude that, in light of defendant's failure to challenge the trial court's 2013 order denying their first motion to compel arbitration, the trial court in 2015 correctly found that they have waived the right to compel arbitration.
Under section 1281.2, upon the filing of a petition to compel arbitration, the trial court must order arbitration if it determines that an agreement to arbitrate the controversy exists, unless it determines, inter alia, that "[t]he right to compel arbitration has been waived by the petitioner . . . ." (§ 1281.2, subd. (a).)
Although no single test defines conduct that constitutes waiver of the right to arbitrate, our Supreme Court has confirmed that the following factors are relevant and properly considered when assessing waiver claims: " ' "(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether 'the litigation machinery has been substantially invoked' and the parties 'were well into preparation of a lawsuit' before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) 'whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place'; and (6) whether the delay 'affected, misled, or prejudiced' the opposing party." ' [Citations.]" (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196 (St. Agnes).) In addition, state law "reflects a strong policy favoring arbitration agreements and requires close judicial scrutiny of waiver claims. [Citation.] Although a court may deny a petition to compel arbitration on the ground of waiver (§ 1281.2, subd. (a)), waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof. [Citations.]" (St. Agnes, at p. 1195.)
"Generally, the determination of waiver [of the right to arbitrate] is a question of fact, and the trial court's finding, if supported by sufficient evidence, is binding on the appellate court. [Citations.] 'When, however, the facts are undisputed and only one inference may reasonably be drawn, the issue is one of law and the reviewing court is not bound by the trial court's ruling.' [Citation.]" (St. Agnes, supra, 31 Cal.4th at p. 1196; accord, Oregel v. PacPizza, LLC (2015) 237 Cal.App.4th 342, 354 (Oregel).) Here, defendants argue that the trial court's waiver finding is a question of law, subject to de novo review, while plaintiffs assert that the court's finding should be affirmed if supported by substantial evidence. We conclude the court's ruling was correct under either standard of review.
The trial court found that defendants took steps inconsistent with the right to arbitrate. (See St. Agnes, supra, 31 Cal.4th at p. 1196.) After the court denied their first motion to compel arbitration, defendants failed to appeal from that order, and instead appealed solely from the judgment enforcing the purported settlement pursuant to section 664.6. Over the 17 months the appeal and subsequent petition for review were pending, defendants never indicated that they had any intent to challenge the trial court's arbitration denial. It was not until shortly after issuance of the remittitur, on the same date that plaintiffs filed a first amended complaint and a motion for summary judgment, that defendants filed another motion to compel arbitration. These facts support the trial court's 2015 finding that defendants, in failing to appeal, acquiesced in the court's 2013 determination that they had waived any right to arbitrate. (Cf. United Pacific Ins. Co. v. Hanover Ins. Co. (1990) 217 Cal.App.3d 925, 942 ["By failing to appeal from the interim order, [defendant] acquiesced in [trial court's] determination of the parties' obligations under the settlement agreement"].)
Although not discussed by the parties, the register of actions from the San Mateo County Superior Court reflects that defendants filed a motion to compel arbitration on December 5, 2014, but that motion was taken off calendar, presumably because our decision reversing the trial court's judgment was not yet final. Assuming this apparently premature motion can be deemed to have given notice to plaintiffs of an intent to again attempt to arbitrate the matter, that notice still came some 14 months after the trial court's denial of the first motion to compel arbitration. --------
Defendants describe the 2013 order enforcing the settlement as having mooted the first motion to arbitrate, which they assert made it futile to appeal the arbitration denial "because the motion was never substantively addressed. . . . [¶] . . . [¶] Simply stated, there was nothing for [defendants] to appeal." (See Oregel, supra, 237 Cal.App.4th at p. 356 ["a court may find a party has not acted inconsistently with its right to arbitrate if the party delayed seeking to enforce an arbitration agreement during a time when that agreement would have been considered unenforceable under existing law"].) Defendants are incorrect. The arbitration motion was never dismissed as moot. Rather, the court denied the motion after finding that defendants had waived the right to arbitrate by settling the matter with plaintiffs. That order, like any order denying a motion to compel arbitration, was immediately appealable. (See § 1294, subd. (a); see also, e.g., St. Agnes, supra, 31 Cal.4th 1187 [affirming appellate court's finding that appellant did not waive right to arbitration, and trial court therefore should have granted petition to compel arbitration]; Oregel, at p. 361 [affirming trial court's order denying petition to arbitrate on ground of waiver].) Hence, defendants cannot use the futility rule to excuse their failure to demonstrate an intent to preserve the right to arbitrate by appealing the denial of their motion to compel arbitration.
Again, defendants chose to appeal only the judgment enforcing the settlement, and not to challenge the separate appealable order denying the motion to compel arbitration, which precluded this court from addressing that issue in the first appeal. Instead they waited over a year, until the first appeal was finally resolved to again raise the same arbitration request before a different judge, further delaying the action and leading to yet another appeal on an issue that could have been addressed much earlier. (See St. Agnes, supra, 31 Cal.4th at p. 1196.) In the first appeal, we gave defendants the relief they requested when we reversed the judgment enforcing the settlement. They had an obligation to anticipate the possibility of that reversal and to ensure that the order denying arbitration was also addressed on appeal, but they failed to do so.
In sum, because defendants could have appealed from the order denying their 2013 motion to compel arbitration but, for whatever reason, chose not to, they may not now claim either that they intended to challenge that order or that they were precluded from doing so. Their conduct, which was inconsistent with the assertion of the right to arbitrate, misled plaintiffs and put them through the time and expense of defending against a second motion to compel arbitration and a second appeal. (See St. Agnes, supra, 31 Cal.4th at p. 1196; see also Oregel, supra, 237 Cal.App.4th at p. 361 [court may consider "expenditure of time and money in determining prejudice where the delay was unreasonable or unjustified"].) The trial court in 2015 properly found that defendants acquiesced in the court's 2013 finding that defendants had waived the right to arbitrate. (See ibid.; § 1281.2, subd. (a); cf. United Pacific Ins. Co v Hanover Ins. Co., supra, 217 Cal.App.3d at p. 942.)
DISPOSITION
The order appealed from is affirmed. Costs on appeal are awarded to plaintiffs.
/s/_________
Kline, P.J. We concur: /s/_________
Richman, J. /s/_________
Stewart, J.