Case Name: HENRY C. YUEN et al., Petitioners, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent. GEMSTAR-TV GUIDE INTERNATIONAL, INC. et al., Real Parties in Interest
Court: Court of Appeal of the State of California
Jurisdiction: California
Decision Date: 2004-08-25
Citations: 121 Cal. App. 4th 1133
Docket Number: No. B172662
Parties: HENRY C. YUEN et al., Petitioners, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent. GEMSTAR-TV GUIDE INTERNATIONAL, INC. et al., Real Parties in Interest.
Judges: 
Reporter: California Appellate Reports, Fourth Series
Volume: 121
Pages: 1133–1146

Head Matter:
[No. B172662.
Second Dist., Div. Five.
Aug. 25, 2004.]
HENRY C. YUEN et al., Petitioners, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent. GEMSTAR-TV GUIDE INTERNATIONAL, INC. et al., Real Parties in Interest.
Counsel
Arkin Kaplan, Stanley S. Arkin, Michelle A. Rice; Augustini & Wheeler, David Wheeler and Frederick A. Haist for Petitioners.
No appearance for Respondent.
Hogan & Hartson, Richard L. Stone, Anthony Basich, Neil R. O’Hanlon and Gary L. Urwin for Real Parties in Interest.

Opinion:
Opinion
ARMSTRONG, J.
In Green Tree Financial Corp. v. Bazzle (2003) 539 U.S. 444 [156 L.Ed.2d 414, 123 S.Ct. 2402], the Supreme Court has held that in arbitration proceedings governed by the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.), where an arbitration agreement is silent on the issue of whether class-wide relief is available, an arbitrator, not a court, should resolve the class arbitration issue. In this case, which is also governed by the FAA, we hold that the arbitrator should likewise decide whether the parties' arbitration agreement permits consolidation of two arbitration proceedings.
FACTS AND PROCEDURAL HISTORY
Petitioner Henry Yuen is the founder and former president of Gemstar. Petitioner Elsie Ma Leung is Gemstar's former chief financial officer. Yuen developed the "VCR+" system that allows a viewer to videotape television programs using a five-digit code. TV Guide International acquired Gemstar, now known as "Gemstar-TV Guide International." Upon the sale of Gemstar to TV Guide, Yuen and Leung became Gemstar employees. As part of the acquisition, Yuen and Leung each signed five written agreements, collectively referred to as the "Restructuring Agreements." Each agreement provided that the parties would submit any dispute involving the agreements to binding arbitration under the rules of the American Arbitration Association (AAA). The arbitration was to be held in the State of New York, but California law would apply.
Restructuring Agreements signed by Yuen and Leung provided that they could be terminated for cause. Gemstar terminatéd both Yuen and Leung's employment on April 18, 2003, based on, among other things, alleged financial irregularities revealed in an accounting report.
On May 30, 2003, Yuen and Leung initiated separate AAA arbitration proceedings in New York. Their arbitration demands are substantially identical. On June 9, 2003, the AAA provided petitioners' counsel lists of potential arbitrators. Each list contained different names. On July 8, 2003, petitioners' counsel submitted petitioners' arbitrator selection list. Again, the list was different for each petitioner. On that same date, Gemstar filed a consolidated answer and counterclaim.
On July 31, 2003, the AAA submitted to counsel a three-member panel of arbitrators for each proceeding. There was a short delay in the Yuen proceeding after Yuen objected to the appointment of one of the arbitrators. The Leung panel was appointed on August 13, 2003, and a replacement arbitrator was selected for the Yuen panel on September 19, 2003.
Gemstar raised the matter of consolidation during conferences with the arbitrators in September 2003. The panels advised counsel that absent the parties' agreement or a court order, the AAA did not have jurisdiction to consolidate the proceedings. The AAA case manager confirmed the AAA's position in a letter to counsel dated October 22, 2003.
In early October 2003, both sides commenced discovery in the Leung proceeding. Additional matters, including Leung's motions to dismiss Gemstar's counterclaims and to advance attorney's fees, were submitted to the arbitration panel.
Yuen and Leung would not agree to consolidate the arbitrations. On November 3, 2003, Gemstar filed before respondent court a motion to consolidate the arbitrations pursuant to Code of Civil Procedure section 1281.3. That section provides that a court may order consolidation of separate arbitration proceedings where: "(1) Separate arbitration agreements or proceedings exist between the same parties; or one party is a party to a separate arbitration agreement or proceeding with a third party; and [j[] (2) The disputes arise from the same transactions or series of related transactions; and BI] (3) There is common issue or issues or law or fact creating the possibility of conflicting rulings by more than one arbitrator or panel of arbitrators."
Respondent court granted the motion to consolidate in an order filed November 24, 2003. The court found it would be appropriate to consolidate the two arbitration proceedings because the facts alleged in the demands for arbitration were virtually identical, many of the same witnesses would testify in both proceedings, and counsel were the same in both proceedings. The court found that "[separate arbitrations would be costly, involve duplicative witnesses and might result in conflicting rulings by the respective AAA arbitration panels." The court found that the only remaining issue to be determined was whether Code of Civil Procedure section 1281.3 applied. Neither party had cited or discussed Green Tree, and respondent court did not refer to Green Tree in its order granting the motion to consolidate. Instead, the court based its analysis on California case law and earlier Supreme Court cases, particularly Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S 468 [103 L.Ed.2d 488, 109 S.Ct. 1248] (Volt), in which the court held that the FAA did not preclude a California court from applying California procedural statutes governing arbitration.
Petitioners challenged respondent court's order in a petition for writ of mandate filed January 26, 2004.
DISCUSSION
Congress enacted the FAA " 'to overrule the judiciary's long-standing refusal to enforce agreements to arbitrate .'" (Volt, supra, 489 U.S. at p. 478.) The FAA's passage " 'was motivated, first and foremost, by a congressional desire to enforce agreements into which parties had entered.' " (Ibid., citing Dean Witter Reynolds Inc. v. Byrd (1985) 470 U.S. 213, 220 [84 L.Ed.2d 158, 105 S.Ct. 1238, 1242].)
Beyond ensuring that courts would enforce arbitration agreements covered by the FAA, Congress made "no federal policy favoring arbitration under a certain set of procedural rules . . . ." (Volt, supra, 489 U.S. at p. 476.) Prior to the Supreme Court's decision in Green Tree, California courts applied California statutes governing arbitration procedures to arbitrations covered by the FAA. (Garcia v. DIRECTV, Inc. (2004) 115 Cal.App.4th 297, 298 [9 Cal.Rptr.3d 190]; Blue Cross of California v. Superior Court (1998) 67 Cal.App.4th 42, 60 [78 Cal.Rptr.2d 779].)
Green Tree, a commercial lender, was the defendant in two class actions (Bazzle and Lackey) filed by disgruntled customers. The plaintiffs' loan agreements included a clause providing for arbitration of all contract-related disputes, but was silent on the issue of whether a class-wide arbitration was permissible. Green Tree moved to compel arbitration in both cases. The arbitrator who arbitrated both cases certified class arbitrations and ultimately ruled in favor of the plaintiffs in both cases.
Among Green Tree's arguments on appeal was that the matters should not have proceeded as class arbitrations because the contract prohibited them. The South Carolina Supreme Court held that because the arbitration clauses were silent on the issue, state law applied. Interpreting South Carolina law, the court interpreted the agreements as permitting class arbitration. The Supreme Court granted certiorari to determine whether that ruling conflicted with the FAA.
The Supreme Court held that the issue of whether the parties' contract permitted class arbitration was a matter of state law contract interpretation that the arbitrator, not the court, should resolve. Although a court should decide "certain gateway matters, such as whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy," issues that do not involve either "the validity of the arbitration clause nor its applicability to the underlying dispute between the parties" (Green Tree, supra, 539 U.S. at p. 452) are for the arbitrator, not the court, to resolve.
". . . [T]he question is not whether the parties wanted a judge or arbitrator to decide whether they agreed to arbitrate a matter. [Citation.] Rather, the relevant question here is what kind of arbitration proceeding the parties agreed to. That question does not concern a state statute or judicial procedures. [Citation.]. It concerns contract interpretation and arbitration procedures. Arbitrators are well situated to answer that question. Given these considerations, along with the arbitration contracts' sweeping language concerning the scope of the questions submitted to arbitration, this matter of contract interpretation should be for the arbitrator, not the courts, to decide. [Citation.]" (Green Tree, supra, 539 U.S. at pp. 452-453.)
Thus, under the line drawn by the Supreme Court in Green Tree, the court decides whether the matter should be referred to arbitration, but "once a matter has been referred to arbitration, the court's involvement is strictly limited until the arbitration is completed." (Finley v. Saturn of Roseville (2004) 117 Cal.App.4th 1253, 1259 [12 Cal.Rptr.3d 561].)
The contracts in this case contain a California choice-of-law provision with an equally broad arbitration clause stating that "all disputes" relating to the contract shall be submitted to arbitration. Green Tree mandates that consolidation is such an issue.
Although it declined to resolve the consolidation issue at the time Gemstar informally requested consolidation, the AAA, in direct response to Green Tree, has recognized the impact of that case by adopting Supplementary Rules for Class Arbitration. Pursuant to these supplementary rules, effective October 8, 2003, the AAA has agreed to administer demands for class arbitration where "(1) the underlying agreement specifies that disputes arising out of the parties' agreement shall be resolved by arbitration in accordance with any of the Association's rules, and (2) the agreement is silent with respect to class claims, consolidation or joinder of claims." (AAA, Rules, Supplementary Rules for Class Arbitration, <http://www.adr.org> (as of Aug. 25, 2004).) Although these rules are specific to class arbitrations, and a request for consolidation may involve somewhat different considerations, the rules nonetheless provide an administrative mechanism by which the AAA may consider the consolidation issue raised here.
DISPOSITION
The petition for writ of mandate is granted. A peremptory writ shall issue directing respondent court to vacate its order of November 24, 2003, granting defendant's motion to consolidate separate arbitrations, and enter a new and different order denying the motion without prejudice to submitting the matter to the AAA. The parties are to bear their own costs.
Grignon, Acting P. J., concurred.
For ease of reference, we refer to real parties in interest collectively as "Gemstar."
The choice-of-law provision included in each agreement states: "This Agreement, the legal relations between the parties and any action, whether contractual or non-contractual, instituted by any party with respect to matters arising under or growing out of or in connection with or in respect of this Agreement, the relationship of the parties or the subject matter hereof shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and performed in such State and without regard to conflicts of law doctrines."
Petitioners also filed a notice of appeal of respondent court's order. We dismissed the appeal on May 5, 2004.