Opinion ID: 1259923
Heading Depth: 2
Heading Rank: 3

Heading: Evaluation

Text: Contrary to plaintiff's contention, the majority rule, as reflected in cases like Prima Paint, Devonshire, and Weinrott, is compatible with California's arbitration statute. The difference between Code of Civil Procedure section 1281.2, which calls for arbitration unless grounds exist for revocation of the agreement, and the federal statute, which mandates arbitration save upon such grounds as exist at law or in equity for the revocation of any contract is inconsequential, and does not require or point to a different rule. Likewise, the New York statute, calling for arbitration when there is no substantial question whether a valid agreement was made or complied with (N.Y. Civ. Prac. Law, § 7503, subd. (a) (1980 McKinney)), is harmonious. As in the case of these statutes, the term agreement may properly be construed to refer to the agreement to arbitrate, as distinguished from the overall contract in which that agreement is contained. ( Weinrott v. Carp, supra, 298 N.E.2d at p. 47.) In addition, the majority rule is in accord with this state's strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution. (See, e.g., Christensen v. Dewor Developments (1983) 33 Cal.3d 778 [191 Cal. Rptr. 8, 661 P.2d 1088]; Keating v. Superior Court (1982) 31 Cal.3d 584, 595 [183 Cal. Rptr. 360, 645 P.2d 1192], U.S. Supreme Ct. jur. postponed until hg. on the merits, sub nom. South land Corp. v. Keating (1983) 459 U.S. 1101 [74 L.Ed.2d 948, 103 S.Ct. 721]; Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699 [131 Cal. Rptr. 882, 552 P.2d 1178].) (2) (See fn. 7.) This is particularly true in cases such as this, where parties of presumptively equal bargaining power have entered into an agreement containing a commitment to arbitrate by a procedure of unchallenged fairness, [7] and one of the parties seeks to avoid arbitration by asserting that the other party fraudulently induced the agreement because he never intended to perform. (See fn. 1, ante. ) The difference between a breach of contract and such fraudulent inducement turns upon determination of a party's state of mind at the time the contract was entered into, and we ought not close our eyes to the practical consequences of a rule which would allow a party to avoid an arbitration commitment by relying upon that distinction. California courts have observed in other contexts the dangers inherent in committing preliminary issues to the courts. If participants in the arbitral process begin to assert all possible legal or procedural defenses in court proceedings before the arbitration itself can go forward, `the arbitral wheels would very soon grind to a halt.' ( East San Bernardino County Water Dist. v. City of San Bernardino (1973) 33 Cal. App.3d 942, 951 [109 Cal. Rptr. 510].) Referring preliminary issues to the courts can cause `serious delay and confusion, thus robbing the arbitration procedure of much of its value to the parties.' ( Ibid., fn. 3, citing Cal. Law Revision Com. Recommendation and Study on Arbitration (1960).) And, we have recently warned against procedural gamesmanship aimed at undermining the advantages of arbitration. ( Christensen v. Dewor Developments, supra, 33 Cal.3d 778, 784.) A statutory interpretation which would yield such results is not to be preferred. We conclude that this court should adopt the majority rule. (3) The scope of arbitration is, of course, a matter of agreement between the parties, and if they choose to limit that scope so as to exclude questions of fraud in the inducement of the contract that choice must be respected. In this state, as under federal law ( Moses H. Cone Memorial Hosp. v. Mercury Const., supra, 460 U.S. 1 [74 L.Ed.2d 765, 785, 103 S.Ct. 927, 941]), doubts concerning the scope of arbitrable issues are to be resolved in favor of arbitration. ( Morris v. Zuckerman (1968) 69 Cal.2d 686, 690 [72 Cal. Rptr. 880, 446 P.2d 1000]; O'Malley v. Wilshire Oil Co. (1963) 59 Cal.2d 482, 490-491 [30 Cal. Rptr. 452, 381 P.2d 188]; Lesser Towers, Inc. v. Roscoe-Ajax Constr. Co. (1969) 271 Cal. App.2d 675, 695-696 [77 Cal. Rptr. 100].) Therefore, in the absence of indication of contrary intent, and where the arbitration clause is reasonably susceptible of such an interpretation, claims of fraud in the inducement of the contract (as distinguished from claims of fraud directed to the arbitration clause itself) will be deemed subject to arbitration. [8] (4) We proceed to apply these principles to the instant case, where the parties agreed to arbitrate any dispute between the parties hereto with respect to the provisions of this Lease exclusive of those provisions relating to payment of rent. Although this language is not as broad as that considered in Prima Paint other cases have found allegations of fraud covered by quite similar arbitration clauses. (See, e.g., J.P. Stevens & Co., Inc. v. Harrell International, Inc. (Fla.App. 1974) 299 So.2d 69, cert. dism. (Fla. 1975) 313 So.2d 707.) Moreover, as in Devonshire, the issue of fraud which is asserted here seems inextricably enmeshed in the other factual issues of the case. (271 F.2d at p. 410; see also Comprehensive Merch. Cat., Inc. v. Madison Sales Corp. (7th Cir.1975) 521 F.2d 1210, 1214.) Indeed, the claim of substantive breach  that the air conditioning did not perform properly  is totally embraced within the claim of fraud  that the lessor knew, at the time of the lease, that the air conditioning would not perform. Thus, if the trial court were to proceed to determine the fraud claim it would almost certainly have to decide the claim of substantive breach as well, and the original expectations of the parties  that such questions would be determined through arbitration  would be totally defeated. However the fraud claim were determined, there would be virtually nothing left for the arbitrator to decide. We conclude that the arbitration clause is broad enough to include this claim of fraud in the inducement. Accordingly, the judgment is reversed and the superior court is directed to vacate its order denying 100 Oak Street's petition to compel arbitration and to enter an order granting the petition.