Filed 3/15/16 Performance Contracting v. Abener Teyma Mojave General Partnership CA4/2

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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                                     or ordered published for purposes of rule 8.1115.


           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   FOURTH APPELLATE DISTRICT

                                                 DIVISION TWO



PERFORMANCE CONTRACTING, INC.,

         Plaintiff and Respondent,                                       E062939

v.                                                                       (Super.Ct.No. CIVDS1413926)

ABENER TEYMA MOJAVE GENERAL                                              OPINION
PARTNERSHIP et al.,

         Defendants and Appellants.



         APPEAL from the Superior Court of San Bernardino County. Gilbert G. Ochoa,

Judge. Reversed with directions.

         Gibbs Giden Locher Turner Senet & Wittbrodt LLP, Nathan D. O’Malley, and

Luke N. Eaton for Defendants and Appellants.

         Bremer Whyte Brown & O’Meara LLP, Jeremy S. Johnson, and Holly A.

Bartuska for Plaintiff and Respondent.




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       Defendants Abener Teyma Mojave General Partnership, Abeinsa Holdings, Inc.,

Abener North America Construction, L.P., and Mojave Solar, LLC (Mojave)

(collectively, defendants) appeal from the trial court’s order denying their petition to

compel arbitration of plaintiff Performance Contracting, Inc.’s action against them for

breach of contract and related claims. The trial court denied the petition on the ground

that some of the defendants were “third parties” under Code of Civil Procedure section

1281.2, subdivision (c).1 We conclude that, as a matter of law, none of the defendants

constitute third parties as that term is used in section 1281.2, subdivision (c), and we

therefore reverse the trial court’s ruling with directions to grant defendants’ petition to

compel arbitration.

                                               I

                    FACTUAL AND PROCEDURAL BACKGROUND

       A.      The Complaint and the Petition to Compel Arbitration

       In October 2014, plaintiff entered into a contract with defendant Abener Teyma

Mojave General Partnership whereby plaintiff agreed to supply and install insulation

materials on the power plant commonly known as the Mojave Solar Power Plant Project

(the Project). The contract contains an arbitration clause requiring arbitration of “any

dispute” arising out of the contract.



       1   All statutory references are to the Code of Civil Procedure.



                                              2
       In September 2014, plaintiff filed a complaint asserting causes of action for

foreclosure of mechanics lien, breach of contract, fraudulent and negligent

misrepresentation, unjust enrichment, and violation of California’s prompt payment

statutes. (Civ. Code, §§ 3287 et seq., 8800, 8812, 8814, 8816, 8818; Bus. & Prof. Code

§§ 7108.5, 7108.6.) The gravamen of these claims is the allegation that all defendants are

parties to the contract and owe plaintiff over $3 million for work plaintiff performed

under the contract. The complaint alleges that: plaintiff entered into the contract with all

defendants; all defendants “have a unity of interest and are commonly owned and

represented”; all defendants “commonly owned” the Project; each defendant “was the

agent, employee or joint venturer of each of the other . . . Defendants”; and each

defendant “benefit[ed] from Plaintiff’s work on the Project and avail[ed] itself to the

obligations imposed by way of the Agreement and by ownership of the Project.”

       Defendants Abener Teyma Mojave General Partnership, Abeinsa Holdings, Inc.,

and Abener North America Construction, L.P. moved to compel arbitration, arguing the

existence of the valid arbitration clause in the contract triggers arbitration under section

1281.2.

       Plaintiff opposed the petition, arguing that arbitration was inappropriate under

section 1281.2, subdivision (c) due to the presence of third party defendants not subject to

arbitration and the possibility of conflicting rulings on common issues of law and fact.

Plaintiff asserted there was “an obvious risk of inconsistent determinations or rulings” if



                                              3
arbitration were to proceed because Abeinsa Holdings, Inc., Abener North America

Construction, L.P., and Mojave were nonsignatories to the contract and therefore could

not be compelled to arbitration. Plaintiff also argued defendants had conceded that

nonsignatory Mojave was a third party for purposes of section 1281.2, subdivision (c)

because Mojave had not joined defendants’ petition to compel arbitration.

       In their reply, defendants argued the nonsignatory defendants did not constitute

third parties under section 1281.2, subdivision (c) because they were all related and

commonly owned. Defendants also argued there was no possibility of conflicting rulings

because “all” of the nonsignatory defendants were willing to participate in arbitration.

Defendants explained in a footnote that Mojave was also represented by the undersigned

counsel and had not yet appeared “because it [was] awaiting the outcome of [the petition]

before incurring the costs and expenses of filing a response to the complaint.”

       Two days before the hearing on defendants’ petition, defendants, including

Mojave, filed a surreply. The surreply explained that defendants had recently retained

new counsel to represent them in the action and that new counsel had discovered “there

had been a miscommunication regarding the Defendants’ willingness to participate in

arbitration.” The surreply was “intended to remove all doubt that all Defendants,

including MOJAVE, are willing to submit to arbitration in this matter.”




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       B.     The Trial Court’s Denial of the Petition

       At the hearing on the petition, defense counsel announced his appearance on

behalf of all defendants and reiterated the argument that there was no possibility of

conflicting rulings because all defendants were willing to arbitrate the dispute. The court

asked defense counsel why Mojave had not joined the petition, stating: “All I see is

they’re not here. If they were here, then I would have a different issue that I would have

to decide.” The court admonished defense counsel for filing a surreply, informed the

parties that it had not read the surreply, and stated that Mojave had not yet appeared in

the case.

       Defense counsel replied that it was his understanding former counsel and Mojave

had an agreement whereby Mojave could avoid the cost of appearing by not joining the

petition. Counsel emphasized that despite Mojave’s failure to join in the moving papers,

“what we’ve represented both in the reply and in our documents is that Mojave wants to

go to arbitration.” The trial court observed that former defense counsel’s strategy to help

Mojave “save $395.00 at the risk of their client’s rights” was ill-advised and denied the

petition.




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                                               II

                                        DISCUSSION

       A.     California Public Policy Favors Arbitration and California Law Requires
              Enforcement of Valid Arbitration Agreements

       In California, “[a] strong public policy favors the arbitration of disputes, and

doubts should be resolved in favor of deferring to arbitration proceedings.” (Laswell v.

AG Seal Beach, LLC (2010) 189 Cal.App.4th 1399, 1404-1405 (Laswell), quoting Rowe

v. Exline (2007) 153 Cal.App.4th 1276, 1282 (Rowe).) “A trial court is required to order

a dispute to arbitration when the party seeking to compel arbitration proves the existence

of a valid arbitration agreement covering the dispute. [Citation.] Under Code of Civil

Procedure section 1281.2, ‘[o]n 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’ the case falls into one of three limited

exceptions.” (Laswell, supra, at pp. 1404-1405.)

       One of the limited exceptions to the enforcement of contractual arbitration

provisions is where “[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.” (§ 1281.2, subd. (c).) “This exception ‘ “addresses the


                                               6
peculiar situation that arises when a controversy also affects claims by or against other

parties not bound by the arbitration agreement.” ’ ” (Laswell, supra, 189 Cal.App.4th at

p. 1405, quoting Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376,

393 (Cronus).) “The exception thus does not apply when all defendants, including a

nonsignatory to the arbitration agreement, have the right to enforce the arbitration

provision against a signatory plaintiff.” (Laswell, supra, at p. 1405; accord, Molecular

Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 709; RN

Solution, Inc. v. Catholic Healthcare West (2008) 165 Cal.App.4th 1511, 1519; Rowe,

supra, 153 Cal.App.4th at p. 1290.) The exception “ ‘is not a provision designed to limit

the rights of parties who choose to arbitrate or otherwise to discourage the use of

arbitration. Rather, it is part of California’s statutory scheme designed to enforce the

parties’ arbitration agreements.’ ” (Cronus, supra, at p. 393.)

       When the elements of the exception are present (i.e., there are third parties not

subject to arbitration on claims arising out of the same transaction or related transactions,

and a possibility of conflicting rulings on common issues of law or fact), section 1281.2,

subdivision (c) gives the trial court discretion to deny or stay arbitration. “ ‘The court’s

discretion under [the exception, however,] does not come into play until it is ascertained

that the subdivision applies, which requires the threshold determination of whether there

are nonarbitrable claims against at least one of the parties to the litigation (e.g., a

nonsignatory).’ ” (Laswell, supra, 189 Cal.App.4th at p. 1405.)



                                               7
       B.     Section 1281.2, Subdivision (c) Does Not Apply and the Trial Court Did
              Not Have Discretion to Deny the Petition

       Whether a defendant is in fact a third party for purposes of section 1281.2,

subdivision (c), is a matter of law subject to de novo review. (Laswell, supra, 189

Cal.App.4th at p. 1406.) If the third party exception applies, the trial court’s

discretionary decision as to whether to stay or deny arbitration is subject to abuse of

discretion review. (Ibid.)

       The trial court did not state its reasoning for denying the petition, but all of the

argument at the hearing related to Mojave’s failure to join the petition and the possibility

of conflicting rulings. The contract between plaintiff and defendant Abener Teyma

Mojave General Partnership provided for arbitration of “any dispute” arising under the

contract. The contract defines a dispute as a claim “of any kind arising between the

Parties in connection with . . . this Contract, including but not limited to, any question

regarding . . . the performance (or failure to perform) the Work.” The contract defines

the parties as plaintiff and defendant Abener Teyma Mojave General Partnership. The

trial court seemingly adopted plaintiff’s argument that the contract covered only Abener

Teyma Mojave General Partnership and that the presence of Abeinsa Holdings, Inc.,

Abener North America Construction, L.P., and Mojave as defendants in the action

demonstrated there were third parties not subject to the arbitration agreement. The trial

court thus at least implicitly concluded that the threshold requirement for application of

section 1281.2, subdivision (c)—that there were third parties not subject to the arbitration



                                               8
agreement—was satisfied and, as a result, it had discretion to deny arbitration. We

conclude, however, the threshold requirement for the third party exception was not

satisfied in this case as a matter of law and, therefore, the trial court had no discretion to

deny arbitration.

       As the Laswell court noted, “ ‘[t]he term “third party” for purposes of [the

exception to arbitration in section 1281.2, subdivision (c)] must be construed to mean a

party that is not bound by the arbitration agreement.’ [Citation.] ‘[I]n many cases,

nonparties to arbitration agreements are allowed to enforce those agreements where there

is sufficient identity of parties.’ [Citation.] In addition, ‘ “ ‘[t]he equitable estoppel

doctrine applies when a party has signed an agreement to arbitrate but attempts to avoid

arbitration by suing nonsignatory defendants for claims that are “ ‘based on the same

facts and are inherently inseparable’ ” from arbitrable claims against signatory

defendants.’ ” ’ ” (Laswell, supra, 189 Cal.App.4th at p. 1407, italics added.) “Claims

that rely upon, make reference to, or are intertwined with claims under the subject

contract are arbitrable.” (Rowe, supra, 153 Cal.App.4th at p. 1287.)

       Here, although plaintiff and Abener Teyma Mojave General Partnership are the

only signatories to the contract and the contract defines “dispute” as one between plaintiff

and Abener Teyma Mojave General Partnership, the three nonsignatory defendants are

equally bound by the contract and thus entitled to enforce it against plaintiff. According

to plaintiff’s own allegations, all defendants are related entities, all defendants are parties



                                               9
to the contract, and all defendants are responsible for misrepresenting the contract’s

payment terms and failing to timely pay for a portion of the work plaintiff performed. In

other words, plaintiff’s own allegations “demonstrate [its] claims against all defendants

are based on the same facts and theory and are inherently inseparable.” (Laswell, supra,

189 Cal.App.4th at p. 1407.) Additionally, the contract states that Mojave is the “Owner”

of the Project and the contract is printed on Abeinsa letterhead. And, defense counsel

represented more than once in connection with the petition to compel arbitration that all

defendants were represented by the same counsel and would participate in the arbitration

proceedings.

       Under these circumstances, Abeinsa Holdings, Inc., Abener North America

Construction, L.P., and Mojave can enforce the contract’s arbitration clause against

plaintiff and thus are not third parties within the meaning of section 1281.2, subdivision

(c). (See, e.g., Laswell, supra, 189 Cal.App.4th at pp. 1407-1408 [nonsignatory

defendants could enforce arbitration agreement against the plaintiff because she alleged

they were related to the signatory defendant and were responsible for the improper care

she received at the signatory defendant’s hospice care center]; Rowe, supra, 153

Cal.App.4th at pp. 1284-1290 [nonsignatory defendants could enforce arbitration

agreement against the plaintiff because he alleged in the breach of contract cause of

action that the corporation signatory was an alter ego of the nonsignatory defendants and

equitable estoppel principles applied to the other statutory causes of action].) Because



                                            10
section 1281.2, subdivision (c) does not apply to this case as a matter of law, “we need

not determine whether the trial court’s selection among the alternative dispositions

offered by the subdivision was an abuse of discretion.” (Rowe, supra, 153 Cal.App.4th at

p. 1290.)

       Plaintiff’s various arguments as to why we should affirm the trial court’s ruling

are unpersuasive. There is no support in the record for plaintiff’s assertion that

defendants waived their argument that they are not third parties under section 1281.2,

subdivision (c) by failing to raise it below and by conceding they are third parties. In

their reply brief, defendants explicitly argued that section 1281.2, subdivision (c)’s third

party exception did not apply because all of the nonsignatory defendants could enforce

the contract’s arbitration provision and were willing to submit to arbitration. Similarly,

there is no support for plaintiff’s contention that Mojave’s unwillingness to submit to

arbitration constitutes a possibility of conflicting rulings. On at least two occasions,

defense counsel, who represented all defendants including Mojave, stated that Mojave

would submit to arbitration. While Mojave did not join the initial petition to compel

arbitration, it joined the surreply and was present at the hearing on the petition.

       Lastly, plaintiff’s contention that Mojave is not a proper party to this appeal does

not change our conclusion that section 1281.2, subdivision (c) does not apply here as a

matter of law. Regardless of whether Mojave can be said to have formally joined the

petition to compel arbitration, plaintiff is estopped by the allegations in its complaint



                                              11
from arguing that any of the nonsignatory defendants cannot enforce the contract’s

arbitration clause.2 (See, e.g., Rowe, supra, 153 Cal.App.4th at p. 1287 [“a signatory to

an arbitration clause may be compelled to arbitrate against a nonsignatory when the

relevant causes of action rely on and presume the existence of the contract containing the

arbitration provision”].)

                                             III

                                      DISPOSITION

       The order denying the petition to compel arbitration is reversed and the matter is

remanded with directions for the trial court to enter a new order granting the petition to

compel arbitration. Defendants shall recover their costs on appeal.

       NOT TO BE PUBLISHED IN OFFICIAL REPORTS




       2  We decline plaintiff’s invitation to dismiss Mojave from this appeal. Any
“aggrieved” party may file a notice of appeal (§ 902) and we liberally construe the issue
of standing to resolve doubts in favor of the right to appeal (Apple, Inc. v. Franchise Tax
Bd. (2011) 199 Cal.App.4th 1, 13). Mojave took steps to become a part of the petition by
joining the surreply, appearing at the hearing, and representing through its counsel that it
wanted to submit to arbitration. Along with the other defendants, Mojave was aggrieved
by the trial court’s denial of the petition.



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                              CODRINGTON
                                           J.
We concur:

HOLLENHORST
          Acting P. J.

MILLER
                    J.




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