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Once Trial Court Shunts Case to Arbitration, It Lacks Power to Dismiss, C.A. Declares
Contrary 1981 Decision Is Rejected
By a MetNews Staff Writer
Once a judge sends a case to arbitration, the court has no power to dismiss the action based on the plaintiffs’ failure to bring about arbitration proceedings, Div. Seven of the Court of Appeal for this district has held, rejecting older cases that hold to the contrary.
The opinion comes in a case in which the widow of a physician is carrying on litigation instituted by her husband, Dr. Wilbur Williams Jr., alleging that his former business partner, Sevana Petrosian, and three of her associates embezzled about $11.5 million belonging to him and his medical corporation. He also sued Wells Fargo Bank, N.A. and others for allegedly facilitating the theft.
Justice Gail Ruderman Feuer authored the opinion, filed Tuesday, reversing an order by then-Los Angeles Superior Court Judge Terry A. Green, now a mediator/arbitrator. Once a judge granted a motion by Petrosian and those connected with her to compel arbitration, Feuer said, the trial court “retained only vestigial jurisdiction over the case as provided in the California Arbitration Act,” and was bereft of the power to order a dismissal.
She explained:
“If a party fails to diligently prosecute an arbitration, the appropriate remedy is for the opposing party to seek relief in the arbitration proceeding (and, if necessary, the opposing party may need to initiate the arbitration for this purpose).”
2020 Lawsuit
The suit was filed by Williams, then 84, and by his corporation on April 27, 2020; precisely one year later, Petrosian and her associates filed a motion to compel arbitration; and on July 8, 2021, Los Angeles Superior Court Judge Barbara Scheper granted that motion and stayed proceedings in the Superior Court.
The plaintiffs did institute an arbitration proceeding but the alternate dispute resolution outfit in April 2022 terminated the matter because the plaintiffs failed to put up the required fee.
On Oct. 14, 2022, Scheper accepted a peremptory challenge filed by the plaintiffs (after the Court of Appeal reversed her dismissal with prejudice of the action against Wells Fargo and remanded the matter).
Williams died on Oct. 28, 2022. On March 21, 2023, Green ordered dismissal of the action as to “the Petrosian Defendants,” saying:
“This court has no reason to believe the case against the Petrosian Defendants will ever go to arbitration.
“Therefore, the Petrosian Defendants are dismissed from this case, for lack of prosecution.”
He invoked the two-year discretionary-dismissal statute.
On March 27, 2023, Green appointed Williams’s widow, Gail Dee Lew-Williams, to substitute-in as the plaintiff, and she appealed the dismissal order.
In her opening brief on appeal, she said Green dismissed the Petrosian Defendants “with prejudice”; Green’s order says it was “without prejudice.”
Letter Briefs Requested
Last Feb. 8, Div. Five sent a letter to counsel saying:
“The parties are requested to submit letter briefs addressing whether the trial court lacked jurisdiction to dismiss the claims against the Petrosian defendants for failure to prosecute after the court granted the motion to compel arbitration and stayed the action.”
Robert C. Little of Buchalter, APC responded on behalf of the Petrosian defendants:
“[T]here is a split of authority not yet settled by the California Supreme Court on whether the trial court deprives itself of jurisdiction to enforce its own orders once it orders arbitration. If the result of that split here is permitting the Williams plaintiffs to ping-pong in and out of court in multiple cases and then manufacture appellate jurisdiction by persistently disobeying the trial court’s multiple orders in different cases, then the state high court should resolve this split.”
Little cited the 1981 Court of Appeal decision by Justice Lynn Compton of Div. Two (now deceased) in Preston v. Kaiser Foundation Hospitals. Compton declared that the Superior Court, after ordering a case into arbitration, retains “the power on the one hand to entertain a petition by the plaintiff for judicial assistance in moving the arbitration forward where the matter is foundering for reasons beyond plaintiffs’ control, or on the other hand, to entertain a motion by defendants to dismiss the arbitration where plaintiffs have failed to exercise reasonable diligence in moving the dispute to a conclusion.”
The lawyer acknowledged that there was a contrary decision by the Third District Court of Appeal in the 1992 case of Brock v. Kaiser Foundation Hospitals. There, Justice Keith Sparks (now retired) said that while none of three cited cases “expressly holds that a trial court lacks jurisdiction to dismiss contractual arbitration proceedings for failure to prosecute, it is the inevitable conclusion to be drawn from their specific holdings (or dicta).”
Preston Rejected
Feuer wrote:
“In the three decades since Brock was decided no published cases have followed the principle enunciated in Preston and repudiated in Brock that a trial court may dismiss an action for failure to prosecute the arbitration regardless of the stay, and can terminate the arbitration.”
She noted that the California Supreme Court, in its 2016 decision in Gaines v. Fidelity National Title Ins. Co., “cited Brock approvingly in clarifying that once a trial court grants a petition to compel arbitration and stays the action, the trial court retains only vestigial jurisdiction over the matter to determine once the arbitration is concluded whether the action should be dismissed.”
The case is Lew-Williams v. Petrosian, B330387.
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