Opinion ID: 589768
Heading Depth: 3
Heading Rank: 1

Heading: The California Law on Orders Compelling Arbitration

Text: 9 Under California law, an order compelling arbitration is the final order in a special proceeding. Once the order is made, the special proceeding is complete and the arbitration must proceed. The order cannot be appealed or reviewed until after the arbitration is completed, and the trial court will not revisit the issue. See Atlas Plastering, Inc. v. Superior Court, Alameda County, 72 Cal.App.3d 63, 67, 140 Cal.Rptr. 59 (1977); Maddy v. Castle, 58 Cal.App.3d 716, 719, 130 Cal.Rptr. 160 (1976); Jardine, Matheson & Co. v. Pacific Orient Co., 100 Cal.App. 572, 280 P. 697, 698 (1929). Thus, an order compelling arbitration is sufficiently firm to be accorded conclusive effect and is entitled to full faith and credit. Sandoval v. Superior Court, 140 Cal.App.3d 932, 936, 190 Cal.Rptr. 29 (1983); see Lounge-A-Round v. GCM Mills, Inc., 109 Cal.App.3d 190, 198, 166 Cal.Rptr. 920 (1980) (holding that the dismissal of a petition to compel arbitration is sufficiently final for purposes of res judicata because the dismissal was final as to a particular issue). 10 Because a California court order compelling arbitration is given preclusive effect in federal court, the key to this case is whether the state court order is an order compelling arbitration. If the state court judgment was indeed an order compelling arbitration under California law, the federal district court erred by effectively overruling the state court and staying the arbitration. 11 Dravo argues that its state court action to enjoin the arbitration proceedings was simply a preliminary injunction action. Under this theory, Dravo asserts that the state court decision is entitled to no more preclusive effect than any ordinary denial of a preliminary injunction. Indeed, the cases cited by Dravo for the proposition that the state court order is not entitled to preclusive effect involve preliminary or pre-trial motions. However, Dravo is unable to provide any authority for the proposition that a refusal to enjoin arbitration is treated as an ordinary denial of a preliminary motion instead of an order compelling arbitration. We believe the better view is that a denial of an injunction against arbitration is an order compelling arbitration. 12 Under California law, the state court decision against Dravo is treated as an order compelling arbitration. The California courts have consistently held that an action for an injunction against arbitration is simply a defense to a petition to compel arbitration. California State Council of Carpenters v. Superior Court, 11 Cal.App.3d 144, 155-56, 89 Cal.Rptr. 625 (1970). It makes no difference who took the first step into court; the action is always treated as if the court were ruling on a petition to compel arbitration. Id.; Melchor Inv. Co. v. Rolm Sys., 3 Cal.App.4th 587, 591-92, 4 Cal.Rptr.2d 343 (1992) (order denying a preliminary injunction against arbitration is tantamount to an order compelling arbitration); International Film Investors v. Arbitration Tribunal of the Directors Guild of Am., 152 Cal.App.3d 699, 704, 199 Cal.Rptr. 690 (1984) (a judgment denying an injunction against arbitration is the practical equivalent of an order to compel arbitration). Thus, the denial of an injunction against the arbitration process is an order to compel arbitration. 13 Our analysis is supported by the decision of the Third Circuit in Towers, Perrin, Forster & Crosby, Inc. v. Brown, 732 F.2d 345 (3d Cir.1984). In Towers, the Third Circuit determined that a California state court decision allowing or denying arbitration is a final order for purposes of res judicata: What little case law there is on point indicates that the decision that a dispute is or is not arbitrable is conclusive of that issue. Id. at 348. The court went on to note that, [i]n California, the preclusive effect of an order depends on what the order determines, not on whether it is deemed interlocutory. Id. at 349. 14 Moreover, the best example of California law on this issue is provided by the holdings of the California courts in this very case. Dravo brought an action for injunctive relief and argued that the state court should stay arbitration under Cal.Civ.Proc.Code § 1281.2(c). After the state trial court considered and rejected Dravo's arguments that section 1281.2(c) applied, denied Dravo injunctive relief, and compelled arbitration in this case, Dravo appealed the trial court's decision to the California Court of Appeal. The Court of Appeal ruled as a procedural matter that the state trial court's denial of an injunction was an order compelling arbitration that cannot be appealed until the arbitration has been completed. The California Court of Appeal therefore dismissed Dravo's appeal. Even the district court noted that the California Court of Appeal treated the state trial court's decision as an order compelling arbitration. Thus, we find that the state trial court order was an order compelling arbitration under California law and that such an order is given preclusive effect under California law. 15