Arbitration Can Be Compelled in Absence of Justiciable Controversy

Tuesday, December 2, 2014

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Arbitration Can Be Compelled in Absence of Justiciable Controversy

By a MetNews Staff Writer

Disagreement over the meaning of a contract is sufficient to compel arbitration even if there is presently no justiciable controversy, where the agreement to arbitrate does not compel a contrary result, the Court of Appeal for this district has ruled.

The disagreement in issue is between Bunker Hill Park Limited, which owns the land at 201-281 South Figueroa Street in downtown Los Angeles—known as the Figueroa Courtyard—and its tenant, U.S. Bank National Association, which owns the five low-rise office buildings on the site. U.S. Bank is successor in interest to a 99-year ground lease that expires in 2077, unless it terminates it early, as it has the power to do, with 60 days notice.

Bunker Hill Park Limited asserts that U.S. Bank’s subleases would expire automatically upon termination of U.S. Bank’s lease, while U.S. Bank balks that this would render available space in the buildings unleaseable and that such circumstance was not intended.

Bunker Hill Park Limited petitioned to compel arbitration under a provision in an amendment to the ground lease. It required arbitration in connection with “[a]ny and all disputes, controversies, or claims arising under or relating to the Ground Lease, this Amendment,...or the enforcement of the provisions thereunder or the determination of the Parties’ rights and obligations thereunder, including but not limited to any unlawful detainer actions, the subject matter of the Complaint and/or the subject matter of the Cross-Complaint.”

Los Angeles Superior Court Judge Richard A. Stone found that the issue was “whether the respective parties’ ‘dispute’ over the effect of termination of the ground lease on the subleases presents an ‘actual controversy,’ i.e., is ripe (as Petitioner contends), or whether adjudication of the ‘dispute’ would be tantamount to rendering an advisory opinion (as Respondent contends).”

His conclusion was that no actual controversy was presently in existence, and that arbitration would be appropriate only “after termination of the subject ground lease, should such event ever take place.”

Reversal came Wednesday in an opinion by Justice Audrey Collins of this district’s Div. Four. She wrote:

“Here, the parties, both of whom are sophisticated business entities, agreed to a broadly worded arbitration provision that obligates them to arbitrate ‘[a]ny and all disputes, controversies or claims arising under or relating to the Ground Lease.’ The parties do not argue that the putative ripeness requirement derives from this language, and we agree with their implicit concession that it does not. Moreover, we decline to read an unwritten justiciability requirement into the arbitration provision the parties bargained for and negotiated. The expansive arbitration provision does not on its face limit the universe of arbitrable disagreements to those that are ‘ripe.’ Unlike some arbitration provisions that explicitly apply only to disputes that are ‘justiciable under applicable state or federal law’…, the arbitration provision in this case is devoid of any such limiting language.”

Collins went on to spell out that it is “irrelevant whether the petition to compel arbitration articulates an ‘actual controversy’ that could support an award for declaratory relief.”

The case is Bunker Hill Park Limited v. U.S. Bank National Association, 14 S.O.S. 5402.

James L. Goldman of Pircher, Nichols & Meeks, joined by Joel Zeldin and Charles R. Rice of Shartsis Friese, represented the landowner. Joshua Wayser and Brian J. Tanada of Katten Muchin Rosenman acted for the ground lease tenant.