Opinion
NOT TO BE PUBLISHED
PROCEEDINGS in mandate after the superior court issued an order granting a motion to compel arbitration, San Diego County Super. Ct. No. GIN057373, Michael B. Orfield, Judge.
O'ROURKE, J.
Petitioners Roger and Karen Warburton (Warburtons) seek a writ of mandate directing the superior court to vacate its July 20, 2007 order (1) granting the motion of real parties in interest, Karl and Barbara Zinner (Zinners), and Charles Vuytowecz and Priority One Group, to compel arbitration; and, (2) granting the joinder of Charles Vuytowecz to the motion to compel arbitration. We conclude the trial court erred in granting the motion to compel arbitration without deciding whether the Zinners waived the contractual right to arbitration by participating in litigation, and erred in granting joinder without considering whether the motion was timely.
Warburtons are the buyers, Zinners are the sellers, Charles Vuytowecz is the real estate agent and Priority One Group is the broker of record in the transaction.
FACTUAL AND PROCEDURAL BACKGROUND
On November 29, 2006, the Warburtons filed a complaint alleging fraudulent nondisclosure and breach of contract and warranty arising from the purchase of a home from the Zinners, Charles Vuytowecz, and Priority One Group. The purchase agreement contains an arbitration clause stating that the arbitrator shall render an award in accordance with substantive California law; discovery rights are granted in accord with California law; and "In all other respects, the arbitration shall be conducted in accordance with Title 9 of part III of the California Code of Civil Procedure. Judgment upon the award of the arbitrator(s) may be entered into any court having jurisdiction. Interpretation of this agreement to arbitrate shall be governed by the Federal Arbitration Act. . . . [¶] . . . B[rokers]: Buyer and Seller agree to mediate and arbitrate disputes or claims involving either or both Brokers . . . provided either or both Brokers shall have agreed to such mediation or arbitration prior to, or within a reasonable time after, the dispute or claim is presented to Brokers. Any election by either or both Brokers to participate in mediation or arbitration shall not result in Brokers being deemed parties to the Agreement."
We have gleaned this information from the writ petition. The parties did not include a copy of the complaint in their filings, thus limiting our description of the precise allegations made in the complaint.
All further statutory references are to the Code of Civil Procedure.
The next paragraph notified the parties that by initialing it, they agreed to arbitrate disputes involving matters included in the "Arbitration of Disputes" decided by neutral arbitration "as provided by California law." It further advised, "If you refuse to submit to arbitration after agreeing to this provision, you may be compelled to arbitrate under the authority of the California Code of Civil Procedure." (All letters capitalized in original.) Buyers and sellers both initialed in the spaces provided. No line was provided for the brokers to initial or consent to the provision, and they did not do so. In June 2007, the Zinners filed a petition to compel arbitration and stay the action in lieu of an answer in the trial court. On June 19, 2007, Charles Vuytowecz and Priority One Group sought to join in the Zinners' petition.
Petitioners opposed both petitions, arguing the Zinners had unreasonably delayed seeking arbitration, because they were "aware of [petitioners'] claims since early 2006," and never raised the issue of arbitration until they filed the motion to compel. Specifically, petitioners relied on the following facts: "[Petitioners] sent [Real Parties in Interest] a demand letter in January, 2006 regarding the [Real Parties' In Interest] fraudulent nondisclosure and the substantial problems with the property. [The Zinners'] counsel responded and negotiations took place over a number of months. . . . The parties mediated the case prior to filing a lawsuit in or about November, 2006." The Zinners and Vuytowecz filed demurrers to the complaint. On or about April 19, 2007, the Zinners sent petitioners an offer to compromise under section 998. On or about May 15, 2007, the Zinners filed a stipulation indicating that they expected to file a cross-complaint, and requested additional time to respond to the complaint. The Petitioners "filed a Motion for Order Permitting Discovery of Financial Information on May 16, 2007," which the Zinners opposed.
The Zinners stated in their opposition papers that they did not invoke the litigation machinery, and "none of the parties . . . have been required to respond to even one single piece of discovery." They pointed out that petitioners did not notice any deposition, and did not designate experts.
On July 19, 2007, the superior court issued a tentative order stating, "The subject arbitration is to be interpreted by the Federal Arbitration Act [(FAA)]. . . Under federal law, the arbitrator designated by the parties must decide whether the delay in demanding arbitration was 'unreasonable' and 'prejudicial' to the other party. Where the delay is unrelated to the litigation process, it is improper for the judge to decide this issue." . . . [¶] Therefore, the court grants the petition and request for stay in order to allow the parties to raise the issue before their chosen arbitrator(s). This is not a determination on the merits of the 'waiver' issue or the Petition itself. If the arbitrator determines that [the Zinners] have waived their right to arbitrate, the court reserves the right to lift the stay and proceed on the merits of the case. [¶] The 'joinder' of Defendants Charles Vuytowecz and Priority One Group is likewise granted." The court ordered arbitration within 60 days of the ruling. Following a July 20, 2007 hearing on the court's tentative decision, the court's tentative was confirmed.
The Warburtons filed a petition for writ of mandate and requested a stay of the superior court's order. On September 18, 2007, this court issued a stay, and on November 15, 2007, issued an order to show cause why the relief requested should not be granted.
DISCUSSION
I.
Petitioners contend the court erred in determining the arbitration agreement was to be interpreted by the FAA, and in ordering the case to arbitration without itself deciding the issue of waiver. We agree.
A court's order denying arbitration under section 1281.2, subd. (c) ordinarily is reviewed for abuse of discretion. But the issue here, involving whether federal law governs the arbitration agreement, is a question of law requiring interpretation of statutes and the contract with no extrinsic evidence; our review is de novo. (Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1116-1117.)
In Volt Info Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468 , there was a conflict between a choice of law clause and a clause regarding rules of arbitration. The contract "contained a choice-of-law clause providing that '[t]he Contract shall be governed by the law of the place where the Project is located' " (id. at p. 470.) that is, California, and an arbitration clause stating claims were to "be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association." (Id. at p. 470, fn. 1.) In litigation involving the parties to the contract and third parties, a California trial court denied a motion to compel arbitration and stayed the arbitration proceedings pursuant to section 1281.2, subd. (c). (Volt, at p. 471.) The California Court of Appeal affirmed, holding "that by specifying that their contract would be governed by [California law], the parties had incorporated the California rules of arbitration, including § 1281.2, subd. (c), into their arbitration agreement." (Id. at p. 472.) The United States Supreme Court affirmed the California Court of Appeal, and held "application of the California statute is not pre-empted by the [FAA] in a case where the parties have agreed that their arbitration agreement will be governed by the law of California." (Id. at p. 470.) The Supreme Court reasoned: "Just as [parties] may limit by contract the issues which they will arbitrate [citation], so too may they specify by contract the rules under which that arbitration will be conducted. Where, as here, the parties have agreed to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA, even if the result is that arbitration is stayed where the [FAA] would otherwise permit it to go forward." (Id. at p. 479.)
Following Volt, we conclude California law governs because the arbitration agreement specifically states the arbitration shall be conducted according to Title 9, section III, including section 1282.1, subdivision (a), 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."
"Whether waiver claims are determined by the court or the arbitrator depends on whether the arbitration agreement is governed by federal or state law. . . . under California law the court determines waiver, while under federal law the arbitrator must decide whether the delay in demanding arbitration was unreasonable and prejudicial and, where the delay is unrelated to the litigation process, 'it is improper for the judge to decide this issue.' " (Omar v. Ralphs Grocer Co. (2004) 118 Cal.App.4th 955, 963.)
The determination of waiver is a question of fact, which should be supported by substantial evidence. The trial court should give the parties an opportunity to brief the waiver issue, and hold a hearing on the matter. Factors to determine if waiver applies include: " ' "(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." ' " (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196.)
II.
The petitioners contend the trial court erred in permitting the joinder of Vuytowecz and Priority One Group, because (1) they did not file a proper petition to join; (2) they did not timely request arbitration; and (3) the arbitration clause is unconscionable and unenforceable as to them.
Generally, one must be a party to an arbitration agreement to be bound by it. Even the strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement or who have not authorized anyone to act for them in executing such an agreement. The right to arbitration depends on a contract. (Nguyen v. Tran (2007) 157 Cal.App.4th 1032, 1036.) However, "There are exceptions to the general rule that a nonsignatory to an agreement cannot be compelled to arbitrate and cannot invoke an agreement to arbitrate, without being a party to the arbitration agreement. [Citation.] A nonsignatory to an agreement to arbitrate may be required to arbitrate, and may invoke arbitration against a party, if a preexisting confidential relationship, such as an agency relationship between the nonsignatory and one of the parties to the arbitration, makes it equitable to impose the duty to arbitrate upon the nonsignatory." (Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 765.) Here, Vuytowecz contends the complaint filed by the Warburtons includes allegations that he was an agent; therefore, by the terms of the complaint, agency principles are established for the broker to invoke the arbitration clause.
On the question of whether the joinder request was timely, the trial court's tentative ruling did not set forth facts supporting the decision to permit joinder. Whether this joinder was proper hinges, in part, on whether the Zinners waived their right to compel arbitration. Should the trial court determine the Zinners did not waive their right to compel arbitration, it should decide whether the joinder motion was timely.
DISPOSITION
Let a writ of mandate issue vacating the trial court's order compelling arbitration and granting joinder, and directing the trial court to determine whether the Zinners waived the right to compel arbitration by participation in litigation. Should the trial court determine the Zinners did not waive their right to compel arbitration, it should decide whether the joinder motion was timely. The stay issued on September 18, 2007, is vacated. Costs are awarded to the petitioners. (Cal. Rules of Court, rule 8.490 (m)(2).)
WE CONCUR: HUFFMAN, Acting P. J., HALLER, J.