Opinion ID: 2600052
Heading Depth: 4
Heading Rank: 1

Heading: The Arbitrator Committed a Clear Error of Law

Text: In order to determine whether the arbitrator committed an error of law, we begin with the pertinent statute. Code of Civil Procedure section 1281.12 states in full: If an arbitration agreement requires that arbitration of a controversy be demanded or initiated by a party to the arbitration agreement within a period of time, the commencement of a civil action by that party based upon that controversy, within that period of time, shall toll the applicable time limitations contained in the arbitration agreement with respect to that controversy, from the date the civil action is commenced until 30 days after a final determination by the court that the party is required to arbitrate the controversy, or 30 days after the final termination of the civil action that was commenced and initiated the tolling, whichever date occurs first. Neither of the parties disputes that Code of Civil Procedure section 1281.12 applies in the present proceeding. Here, the arbitration agreement required that a dispute must be submitted to binding arbitration within one year from the date the dispute arose or the claim shall be void and considered waived to the fullest extent allowed by law. Plaintiff, the party required to initiate the action, instead commenced a civil action within the one-year period. The commencement of this civil action therefore tolled the applicable time limitation until the final order compelling arbitration. (1) According to its legislative history, the statute prevents parties from being either forced to abide by arbitration agreements of dubious validity instead of seeking court evaluation, initiating costly and duplicative proceedings, or being unfairly deprived of any forum for resolution of the dispute. Supporters observe that there are many legitimate reasons why a party might file a lawsuit in court, rather than demanding or pursuing arbitration. Among these are the following: (1) the plaintiff may believe the claims are not subject to arbitration because the arbitration agreement is unenforceable on grounds of unconscionability or similar concepts; (2) there may be a dispute about whether the particular claims at issue do or do not fall within the scope of an arbitration agreement; (3) the plaintiff may contend that one or more of the statutory grounds for denying a petition to compel arbitration set forth in Code of Civil Procedure section 1281.2 exist, assuming the defendant does file a petition to compel arbitration in response to the plaintiff's filing of the lawsuit; (4) the plaintiff may prefer a court trial or jury trial and simply be hopeful that the defendant will not assert any right to arbitrate the claims, for whatever reason [indeed, the defendant may decide that it prefers a court proceeding as well]; and (5) the plaintiff might not even be aware that there is an arbitration agreement governing the controversy. (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 1553 (2005-2006 Reg. Sess.) for hearing Apr. 5, 2005, p. 3, underscoring & extra capitalization omitted.) Thus, the statute unquestionably applies in the present case, when a plaintiff files a timely action in superior court, and a defendant, either deliberately or through inadvertence, allows the lawsuit to proceed, asserting its right to arbitration only after the limitations period provided in the arbitration agreement has expired. The parties disagree, however, on how the tolling provision of Code of Civil Procedure section 1281.12 operates in the present case. As recounted above, plaintiff was terminated on January 31, 2006, and filed a civil action on October 2, 2006, well within the one-year period. The parties disagree on when the order to arbitrate became final, with defendant arguing the date was either April 12, 2007, when the trial court orally informed the parties of its ruling in favor of defendant's petition to compel arbitration, or May 2, 2007, when the trial court issued a written order. Plaintiff affixes the date on May 31, 2007, when the Court of Appeal summarily denied plaintiff's writ petition challenging the trial court's grant of defendant's petition to compel arbitration. We do not know the arbitrator's reasons for concluding Code of Civil Procedure section 1281.12 did not save plaintiff's claim, but we do have defendant's arguments in defense of the arbitral decision, which may have been adopted by the arbitrator. Defendant states in its brief before this court: If the tolling provisions of Code of Civil Procedure section 1281.12 were applicable, then the one-year limitation period expired 30 days after either April 12, 2007, when the trial court issued from the bench its final order, or May 2, 2007 when the trial court granted [defendant's] Petition to Arbitrate by Order. Therefore, plaintiff's first attempt to seek arbitration, which according to defendant was on June 13, 2007, when he agreed to an arbitrator, was untimely by defendant's reasoning. (2) To understand the error of defendant's position, we begin with the meaning of tolling. To toll has been defined most pertinently as to stop the running of; to abate . (Black's Law Dict. (8th ed. 2004) p. 1525.) When it comes to the tolling of a statute of limitations, we have stated: Tolling may be analogized to a clock that is stopped and then restarted. Whatever period of time that remained when the clock is stopped is available when the clock is restarted, that is, when the tolling period has ended. ( Woods v. Young (1991) 53 Cal.3d 315, 326, fn. 3 [279 Cal.Rptr. 613, 807 P.2d 455].) (3) The only way to make sense of defendant's position is to understand it as asserting that what is being tolled is not the running of the one-year contractual limitations period, but the contractual one-year deadline itself. In other words, according to defendant's position, the contractual limitations period continues to run after a lawsuit is filed, but the actual one-year period deadline, if and when it is reached, is tolled, i.e., temporarily abated; the deadline then is reinstated 30 days after a plaintiff is compelled by judicial determination to arbitrate, leading to termination of the right to arbitrate if a plaintiff fails to initiate arbitration within that 30-day period. What makes this interpretation untenable is not only that it is at variance with the common understanding of the term tolling, but also that it contradicts the express language of Code of Civil Procedure section 1281.12 that tolling starts from the date the civil action is commenced. This language establishes that what is being tolled is the running of the contractual limitations period itself, as plaintiff argues. Under a proper interpretation of Code of Civil Procedure section 1281.12, therefore, plaintiff's claim was not time-barred. Leaving aside any tolling of the statute that may have resulted from the filing of a complaint with the DFEH, approximately eight months had passed between the time of the termination on January 31, 2006, and October 2, 2006, when plaintiff filed a complaint in superior court. Choosing arguendo the earliest date defendant offers for when the trial court's order to arbitrate became final, April 12, 2007, then, by the terms of Code of Civil Procedure section 1281.12, the tolling ended 30 days after that, on May 12, 2007. But the end of the tolling period simply means that the contractual limitations clock began to run again, not that the limitations period ended. Because there were approximately four months left on the one-year limitation period when the civil action was filed, even if there was no FEHA tolling, then plaintiff had four months from the May 12, 2007, date to initiate the arbitration. Plaintiff's initiation, which even by defendant's calculation was no later than June 13, 2007, was well within this period. Therefore, the trial court and the Court of Appeal were both correct in concluding that the arbitrator misapplied the tolling provision and on that basis erroneously granted summary judgment for defendant.