Friday, March 13, 2020
By a MetNews Staff Writer
A provision in an agreement conferring on either party the right to “demand” arbitration in the event of a dispute does not amount to creating a power to force the other side to engage in such alternate dispute resolution, Div. Three of the Fourth District Court of Appeal has held.
The case involves a partnership agreement which provides that in the event of a disagreement, mediation is required and, if that fails, either party “may make a demand for arbitration,” prescribing rules for any arbitration.
“The partnership agreement does not contain language that would compel anyone to arbitrate, and the language itself is not ambiguous or ‘doubtful,’ ” Acting Presiding Justice William Bedsworth wrote, in an unpublished opinion filed Wednesday. “Although the language giving the details of the arbitration—should it take place—is mandatory, no provision requires the parties to arbitrate their disputes.”
Bedsworth agreed with Orange Superior Court Judge Deborah C. Servino, who denied a motion to compel arbitration, that resort to that settlement approach was contemplated only if both parties agreed. He explained:
“The mediation provision contains an express mandatory agreement to mediate: ‘the parties are obligated to first attempt to resolve the dispute through non-binding mediation.’ The arbitration provision, however, includes no comparable language indicating an agreement to arbitrate, such as ‘the parties agree to arbitrate’ or ‘the parties are obligated to arbitrate.’ There is mandatory language regarding how the arbitration is to be conducted if the parties agree to do it: the place, the rules, the number of arbitrators. But nothing in the provision expresses any basic agreement to engage in arbitration.”
The jurist went on to say:
“The language used in the partnership agreement plainly and clearly does not include a provision requiring the parties to arbitrate. It allows a party to ‘make a demand’ for arbitration, but it does not require the other party to accept. It includes language about what must happen if the arbitration takes place, but that is as far as it goes. That’s not far enough.”
The case is Allen v. Talley, LLP, G057220.
Attorneys on appeal were Madison S. Spach Jr. and Thomas E. Walling of the Newport Beach firm of Spach, Capaldi & Waggaman, for the party opposing arbitration, and Raul B. Garcia and Jacoby R. Perez of the Redlands firm of Garcia Reed & Ramirez, for the party seeking it.
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