Parties that enter into a contract with an arbitration provision may anticipate that any controversary that arises regarding the contract will be submitted to arbitration. Quite often, however, one party will file his dispute in a civil court of law instead of initiating a proceeding in arbitration.
It is up to the party to the contract that wishes to arbitrate to seek to compel arbitration. [CCP § 1281.2; 9 USC § 4] Where litigation is already pending, a petition to compel arbitration is usually filed in conjunction with a motion to stay the litigation until the arbitration is completed. [CCP § 1281.4; see Twentieth Century Fox Film Corp. v. Sup.Ct. (Lottermoser) (2000) 79 CA4th 188, 192, 93 CR2d 896, 898.
The party petitioning to compel arbitration should be aware that participating in the lawsuit for some time before seeking to compel arbitration may cause the motion to compel arbitration to be denied. For example, the motion to compel could be denied when the moving party prejudices the opposing party by delaying its motion until after taking advantage of discovery that would not have been available in arbitration. [Zamora v. Lehman (2010) 186 CA4th 1, 17, 111 CR3d 335, 346; see Burton v. Cruise (2010) 190 CA4th 939, 947-949, 118 CR3d 613, 619-621.] Accordingly, a moving party should not delay in seeking to compel arbitration of a dispute.
A stay must be granted where a court of competent jurisdiction has already ordered arbitration of the dispute involved in litigation pending in any court in California; or where an application for such an order has been made but not yet ruled upon. The California litigation may be stayed until the arbitration is complete or such earlier time as the court specifies. [CCP § 1281.4; see Twentieth Century Fox Film Corp. v. Sup.Ct. (Lottermoser) (2000) 79 CA4th 188, 192, 93 CR2d 896, 898; Heritage Provider Network, Inc. v. Sup.Ct. (Eastland Med. Group, Inc.) (2008) 158 CA4th 1146, 1152-1153, 70 CR3d 645, 649-650—when arbitration has been ordered, stay of litigation is mandatory under § 1281.4; RN Solution, Inc. v. Catholic Healthcare West (2008) 165 CA4th 1511, 1521-1522, 81 CR3d 892, 901]
It is often the case, however, that the action sought to be stayed involves other issues not subject to arbitration. If those issues are severable from the arbitrable controversy (e.g., tort claims severable from contract claims), the court may stay only the arbitrable issues and allow the action to proceed to trial on the other issues; or, it may stay all claims pending the outcome of the arbitration. [See CCP § 1281.4]
A plaintiff in the matter that has been compelled to arbitration has the right to dismiss his court action without prejudice under CCP § 581, if the arbitration has not commenced and no dispositive motion has been ruled upon. [Cardiff Equities, Inc. v. Sup.Ct. (O'Neel) (2008) 166 CA4th 1541, 1549-1552, 83 CR3d 699, 706-708—“voluntary dismissal deprives the court of subject matter jurisdiction and personal jurisdiction in that case”; compare Mesa Shopping Center-East, LLC v. Hill (2014) 232 CA4th 890, 906, 181 CR3d 791, 804-805— plaintiff not entitled to voluntarily dismiss action without prejudice once arbitration on the merits has commenced]
Subject to the statute of limitations, plaintiff may file a new action that includes nonarbitrable claims but eliminates arbitrable claims that were included in the prior action. [Cardiff Equities, Inc. v. Sup.Ct. (O'Neel), supra, 166 CA4th at 1550, 83 CR3d at 707—plaintiff was no longer bound by portion of trial court's order compelling arbitration of arbitrable claims.]
Even broader choices are available where one of the parties is involved in litigation with a third party arising out of the same transaction. To avoid the possibility that the arbitrator's rulings might conflict with the court's ruling on common issues of law or fact, the court may either:
- refuse arbitration and order intervention or joinder of all parties in the pending litigation; or
- “order intervention or joinder”—i.e., consolidate the arbitration and litigation—as to certain issues; or
- stay the pending court action and order arbitration to proceed among the parties who have agreed to arbitration; or
- stay the arbitration pending the outcome of the pending court action. [CCP § 1281.2(c), (d)(1)-(4); see Cronus Investments, Inc. v. Concierge Services (2005) 35 C4th 376, 382-383, 394, 25 CR3d 540, 544-545, 554; Abaya v. Spanish Ranch I, L.P. (2010) 189 CA4th 1490, 1493, 118 CR3d 345, 346-347—court order denying motion to compel arbitration was proper exercise of discretion to avoid possibility of conflicting rulings on common issues; Best Interiors, Inc. v. Millie & Severson, Inc. (2008) 161 CA4th 1320, 1322, 75 CR3d 1, 2—trial court did not abuse discretion under CCP § 1281.2 in denying petition to compel arbitration where there was possibility of conflicting rulings on common issue of law or fact (holding that FAA does not preempt this aspect of § 1281.2]
Where the order compelling arbitration is not explicit as to “stay” vs. “dismissal,” it is presumed that the matter is stayed; hence, the order is not appealable. [MediVas, LLC v. Marubeni Corp. (9th Cir. 2014) 741 F3d 4, 5, 10]
Under California law, an appeal from the denial of a motion to compel arbitration automatically stays all further trial court proceedings on the merits. [See Varian Med. Systems, Inc. v. Delfino (2005) 35 C4th 180, 190, 25 CR3d 298, 306-307; and detailed discussion in Eisenberg, Cal. Prac. Guide: Civil Appeals & Writs (TRG), Ch. 7] The automatic stay allows the party seeking to compel arbitration the opportunity to obtain appellate review of the order without having to expend further resources and energy litigating the merits of the case in the trial court. Unfortunately, the automatic stay may encourage unscrupulous appellants to file borderline frivolous appeals for the main purpose of obtaining a prolonged delay in litigating the case.
Neither the granting nor refusal of a stay is an appealable order. [See CCP § 1294]
