Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_08-cv-00472/USCOURTS-cand-4_08-cv-00472-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1391 Personal Injury

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

IRWIN UNION BANK & TRUST COMPANY,

et al.,

Plaintiffs, No. C 08-0472 PJH

v. ORDER GRANTING MOTION

TO COMPEL ARBITRATION AND

FREEDOM MORTGAGE COMPANY, DENYING DISMISSAL

Defendant.

_______________________________/

Defendant’s motions to compel arbitration and dismiss the complaint came on for

hearing before this court on April 30, 2008. Plaintiffs Irwin Union Bank & Trust Company

and Irwin Home Equity Corporation appeared through their counsel, David J. Berger and

Jenny L. Dixon. Defendant Freedom Mortgage Company appeared through its counsel,

John K. Crossman and Jason J. Curliano. Having read the parties’ papers and carefully

considered their arguments and the relevant legal authority, and good cause appearing, the

court hereby GRANTS defendant’s motion to compel arbitration and DENIES defendant’s

motion to dismiss, as stated at the hearing, and summarized as follows:

Pursuant to section 4 of the Federal Arbitration Act, a district court must issue an

order compelling arbitration if the following two-pronged test is satisfied: (1) a valid

agreement to arbitrate exists; and (2) that agreement encompasses the dispute at issue. 

See United Computer Sys., Inc. v. AT&T Corp., 298 F.3d 756, 766 (9th Cir. 2002). Here,

the parties do not dispute that they are bound by the Loan Purchase Agreement, and that

this agreement contains an arbitration clause that would encompass the claims at issue

(which arise from a purported breach of the Loan Purchase Agreement). See, e.g.,

Declaration of David Altman, Ex. A at Article VIII, Section 8.09. Rather, they disagree only

Case 4:08-cv-00472-PJH Document 31 Filed 04/30/08 Page 1 of 2
United States District Court

For the Northern District of California

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on the question whether the arbitration provision, which includes permissive language, is

equivalent to a mandatory arbitration provision. 

As the court noted at the hearing, however, the Ninth Circuit has previously decided

this issue and held that, under similar circumstances as those here, permissive language in

an arbitration provision should be construed as mandatory. See, e.g., Collins v. Burlington

Northern Railroad Co., 867 F.2d 542 (9th Cir. 1989); see also Am. Italian Pasta Co. v.

Austin Co., 914 F.2d 1103, 1104 (8th Cir.1990)(holding the phrase “if both parties agree” to

be a mandatory arbitration provision); Ceres Marine Terminals, Inc. v. Int'l Longshoremen's

Ass'n, 683 F.2d 242, 246-47 (7th Cir.1982)(“may refer the grievance to arbitration” is

mandatory); Local 771, I.A.T.S.E. v. RKO Gen., Inc., 546 F.2d 1107, 1116 (2d

Cir.1977)(“may submit to arbitration” is mandatory). 

Adopting this reasoning here, the court accordingly finds that the foregoing twoprong inquiry is satisfied, and arbitration is mandatory under the terms of the arbitration

provision contained in the Loan Purchase Agreement. The court therefore GRANTS

defendant’s motion to compel arbitration. 

The court DENIES, however, defendant’s corresponding motion to dismiss. Instead,

the court orders the instant action STAYED pending completion of arbitration proceedings. 

IT IS SO ORDERED.

Dated: April 30, 2008 ______________________________

PHYLLIS J. HAMILTON

United States District Judge

Case 4:08-cv-00472-PJH Document 31 Filed 04/30/08 Page 2 of 2