Court Opinion

ID: 9745175
Source: CourtListenerOpinion
Date Created: 2023-08-26 22:40:04.547597+00
Date Added: 2024-06-11T07:24:57.271088
License: Public Domain

ASHMANN-GERST, J., Dissenting.
I respectfully dissent.
The majority frames the issue before us as “whether a plaintiff may dismiss a complaint in the trial court after the case has been ordered into arbitration, but before an arbitration has commenced.” (Maj. opn., ante, at p. 1543.) The majority has misstated the “primary issue” presented in this petition for writ of mandate. (Maj. opn., ante, at p. 1543.) The critical issue is not whether Cardiff Equities, Inc. (Cardiff), could dismiss case No. BC372414, but whether a plaintiff may circumvent an order compelling arbitration simply by dismissing its complaint and filing a new action based upon the same foundational facts.
Keeping this in mind, I agree with the majority that Cardiff had an absolute right to voluntarily dismiss case No. BC372414 without prejudice pursuant to Code of Civil Procedure section 581, subdivisions (b)(1) and (c)1 following the trial court’s order compelling arbitration. I also agree that Cardiff’s filing of case No. BC380048 was permissible, subject to the statute of limitations. However, for the reasons set forth below, I disagree with the majority’s conclusion that the trial court’s order staying the litigation in case No. BC380048 was improper. In light of the unchallenged finding that Cardiff’s claims in case No. BC372414 were “inextricably intertwined,” the obvious overlapping and similar claims in case No. BC380048, Cardiff s deliberate attempt to circumvent the order compelling arbitration, and well-established legal authority that precludes a litigant from vacating a court order, I conclude that the trial court providently granted Robert W. O’Neel Hi’s (O’Neel) request for a stay pursuant to section 1281.4.

Procedural Background

Cardiff files its first complaint, in case No. BC372414

On June 7, 2007, Cardiff initiated litigation against O’Neel and others (collectively referred to as the O’Neel defendants) by filing case *1554No. BC372414. Cardiff alleged that in 2005, it invested in Myrtle Beach Partners, LP (MBP), pursuant to the terms of a partnership agreement. Cardiff invested $1.4 million in MBP and in return received an ownership interest. It also was entitled to receive a preferred return on its investment. “As an inducement to Cardiff to make its investment in MBP, O’Neel personally guaranteed certain aspects of Cardiff’s investment and return thereon, and promised to pay certain fees to Cardiff” pursuant to the terms of a guaranty of payment and fee agreement (guaranty).
Cardiff later alleged that in 2006, the O’Neel defendants caused MBP to be merged into Myrtle Beach Consolidated Partners, L.P. (MBCP). In connection with that merger, the O’Neel defendants used accounting improprieties to reduce substantially the value of Cardiff’s interest in MBP. The O’Neel defendants also refused to provide an accounting of the amounts paid out by MBP.
Based on the foregoing allegations, Cardiff alleged that the O’Neel defendants “breached the Partnership Agreement and the Guaranty by failing to pay monies due to Cardiff, by refusing to provide Cardiff with access to MBP’s books and records, by refusing to account for profits of MBP, by misstating the results of MBP’s operations and the impact of its merger into MBCP, by failing to provide reports to Cardiff, and by employing certain accounting improprieties designed to understate amounts due to MBP’s limited partners, among other things.”

The O’Neel defendants move to compel arbitration

In response to the pleading, the O’Neel defendants filed a motion to compel arbitration. They pointed out that the partnership agreement contains an arbitration provision, and then argued that all of the claims alleged by Cardiff were subject to arbitration. “The allegations regarding the Partnership Agreement are incorporated into each of the Causes of Action in the Complaint; the allegations regarding the alleged breach are incorporated into 9 of the 13 causes of action. These are not independent actions, but depend on the existence of the Partnership Agreement.” Because each cause of action arose from the partnership agreement, that agreement was anything but “peripheral to this dispute.”

The trial court grants the O’Neel defendants’ motion

On October 1, 2007, the trial court granted the O’Neel defendants’ motion to compel arbitration. It found “that the gravamen of this action concerns the [partnership agreement] which contains an arbitration clause to which [Cardiff] is a signatory. The non-signatory defendants may invoke the arbitration clause in the partnership agreement to compel [Cardiff] to arbitrate its *1555claims because the causes of action against the non-signatory defendants are intimately founded in and intertwined with the underlying partnership agreement.” Cardiff was ordered to submit this dispute to arbitration; the action was stayed pending completion of the arbitration.

Cardiff dismisses case No. BC372414 and files a new action

Cardiff did not challenge the trial court’s October 1, 2007, order. Instead, it voluntarily dismissed case No. BC372414 without prejudice and filed a new action, case No. BC380048. Although the complaint in this new action named O’Neel as the only defendant and overtly alleged only breach of the guaranty (not the partnership agreement), the pleadings are strikingly similar. Like the complaint in case No. BC372414, the complaint in case No. BC380048 alleges facts showing the formation of MBP, Cardiff’s financial investment, and Cardiff’s receipt of an ownership interest. It also sets forth execution of the partnership agreement, as well as the allegation that Cardiff was entitled to receive a preferred return.
Cardiff further alleges that in July 2006, O’Neel caused MBP to be merged into MBCP, and that in connection with the merger, O’Neel and his affiliates unilaterally determined the value of Cardiff’s MBP interest, significantly undervaluing its interest. According to the complaint, Cardiff could not determine the “exact amount of such underpayment . . . without access to information which O’Neel has refused to provide.”
Based on the foregoing allegations, Cardiff asserts that “O’Neel breached the Guaranty by failing to pay monies due to Cardiff, by refusing to provide Cardiff with access to MBP’s books and records, by refusing to account for profits of MBP and to explain deductions and payments to third parties, by causing MBP to breach its obligations to Cardiff, by misstating the results of MBP’s operations and the impact of its merger into MBCP, by failing to provide reports to Cardiff, and by employing certain accounting improprieties designed to understate amounts due to Cardiff, among other things.”

Case No. BC372414 and case No. BC380048 are deemed related

Simultaneously with the filing of the complaint, Cardiff filed a notice of related case, indicating that case No. BC380048 was related to case No. BC372414. On November 26, 2007, the superior court found the two cases to be related.

O’Neel moves to stay case No. BC380048

O’Neel then moved to stay case No. BC380048 on the ground that the claims alleged in Cardiff’s complaint had been ordered to arbitration. O’Neel *1556argued that this action arose “from the exact same set of facts as those” presented in case No. BC372414. Because the trial court previously ordered this dispute to arbitration, O’Neel argued that case No. BC380048 should be stayed pursuant to section 1281.4 pending completion of the arbitration.

The trial court grants O’Neel’s motion to stay

Over Cardiff’s opposition, the trial court granted O’Neel’s motion. The trial court explained: “[T]he complaint filed in [case No. BC380048] is nothing other than an attempt to plead around the Court’s prior ruling compelling arbitration in the Related Case [case No. BC372414]. The Court previously issued an arbitration order in the Related Case in October 2007 after making a finding that the claims asserted in the Related Case were subject to arbitration under the relevant partnership agreement since all of the claims were intimately founded in and intertwined with the underlying partnership agreement. The Court finds that the claims as presently alleged in the instant case are also intimately founded in and intertwined with the underlying partnership agreement and, therefore, [the case] is hereby stayed pending the arbitration in the Related Case pursuant to . . . Section 1281.4.”

Cardiff files a petition for writ of mandate

Dissatisfied with the trial court’s order, Cardiff filed a petition for a writ of mandate, asking us to set aside the order staying the litigation in case No. BC380048. I see no basis to do so.

The Order Compelling Arbitration Remains Intact

Cardiff’s claims in case No. BC380048 are subject to the trial court’s prior order compelling arbitration. In case No. BC372414, the trial court determined that the Partnership claims and the Guaranty claims2 were inextricably intertwined and subject to arbitration. Although dissatisfied with this finding and order, Cardiff did not attack the order, and thus the basis for it, by filing, for example, a motion for reconsideration (§ 1008; Clark v. First Union Securities, Inc. (2007) 153 Cal.App.4th 1595, 1608-1609 [64 Cal.Rptr.3d 313]) or a petition for writ of mandate. Thus, that order became final.
The majority attempts to avoid this inevitable result by concluding that Cardiff’s procedural maneuvering effected a successful vacating of the trial court’s order compelling arbitration. What the majority ignores, however, is the well-established principle that only trial courts, not litigants, may vacate *1557prior court orders. (See Blake v. Ecker (2001) 93 Cal.App.4th 728, 739, fn. 10, 746-747 [113 Cal.Rptr.2d 422], overruled on other grounds in Le Francois v. Goel (2005) 35 Cal.4th 1094, 1107 & fn. 5 [29 Cal.Rptr.3d 249, 112 P.3d 636]; Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1799 [13 Cal.Rptr.2d 678] [a plaintiff’s voluntary dismissal of an action at law in the wake of an unfavorable arbitration order does not act to vacate the order compelling arbitration].) Unless an order compelling arbitration is set aside by the trial court, the parties are bound to resolve their dispute in the arbitral forum. (See Blake v. Ecker, supra, 93 Cal.App.4th at pp. 738-740.) Were the rule otherwise, every finding that arbitrable and nonarbitrable claims are inextricably intertwined—and every order compelling arbitration based on such a finding—could be evaded by the tactic of a plaintiff’s voluntary dismissal of the judicial action at law and subsequent filing of a new, related action. To allow a plaintiff to avoid a trial court’s order compelling arbitration in such a fashion would undermine the arbitration statutes and violate California’s public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 [10 Cal.Rptr.2d 183, 832 P.2d 899].)
The majority offers several reasons for its decision to grant Cardiff's petition for writ of mandate, each of which is unconvincing. For example, the majority concludes that the complaint filed by Cardiff in case No. BC380048 “sets forth primarily a cause of action for breach of the Guaranty” (maj. opn., ante, at pp. 1551-1552) and that Cardiff thus “effectively severed” (maj. opn., ante, at p. 1551) its Partnership claims from its Guaranty claims. I cannot agree for at least two reasons. First, despite the majority’s holding that a party’s “actions [can] sever[]” claims alleged in a pleading (maj. opn., ante, at p. 1548), no legal authority supports such a novel proposition. Rather, the weight of authority—authority that I believe is correct—confirms that only a court may engage in the act of severance. (See, e.g., Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 121-124 [99 Cal.Rptr.2d 745, 6 P.3d 669] [discussing a trial court’s capacity to sever an unconscionable provision of a contract]; People v. Ochoa (2001) 26 Cal.4th 398, 423-424 [110 Cal.Rptr.2d 324, 28 P.3d 78] [summarizing the criteria to guide trial court decisions on severance motions]; §§ 592, 597, 598 [statutes that regulate the order of proof at trial]; § 597.5 [in a malpractice action, the trial court must order a separate trial on a statute of limitations defense]; § 1048, subd. (b)3 [court may order separate trials]; Civ. Code, § 3295, subd. (d) [“The court shall, on application of any defendant, preclude the admission of evidence of that defendant’s profits or financial condition until *1558after the trier of fact returns a verdict for plaintiff awarding actual damages and finds that a defendant is guilty of malice, oppression, or fraud . . .”].)
Second, although Cardiff was careful not to specifically plead a cause of action for breach of the partnership agreement in case No. BC380048, it is clear from the allegations summarized above that that is exactly what Cardiff is claiming. After all, both pleadings allege the formation of MBP, the execution of the partnership agreement, and Cardiff’s rights under the partnership agreement. Significantly, both pleadings also allege that O’Neel executed the guaranty to induce Cardiff to invest in MBP. As for Cardiff’s breach of contract cause of action in case No. BC380048, other than referring only to O’Neel (as opposed to the O’Neel defendants) and deleting the breach of the partnership agreement label, the allegedly wrongful conduct that amounts to a breach is identical to that alleged in the complaint in case No. BC372414.
In fact, Cardiff could not allege otherwise. A plain reading of the guaranty reveals that a breach of the partnership agreement is a predicate to a claim for breach of the guaranty. The guaranty provides, for example, “O’Neel hereby absolutely and unconditionally guarantees to Cardiff the payment by [MBP] of [Cardiff’s $1.4 million investment] plus . . . the [preferred return] not previously distributed to Cardiff in accordance with the terms of the Partnership Agreement.” In other words, absent a proven breach of the partnership agreement, Cardiff has no basis upon which to pursue a claim for breach of the guaranty.
That being said, according to the terms of the partnership agreement, any alleged breach of that agreement is required to be determined in arbitration. Yet, what the majority has done is allow Cardiff to avoid the terms of the parties’ express arbitration agreement by characterizing its breach of the guaranty cause of action as wholly independent from the partnership agreement. Now Cardiff is able to litigate the question of whether O’Neel (and/or his affiliates) has breached the partnership agreement in a court of law, in the face of an unambiguous agreement that mandates otherwise.
The majority also supports its decision by relying upon the general proposition that “[a] court cannot force a litigant to pursue claims it chooses to abandon.” (Maj. opn., ante, at p. 1552.) While that may be true, Cardiff has not abandoned its Partnership claims. “Abandonment” means “[t]he relinquishing of a right or interest with the intention of never again claiming it.” (Black’s Law Dict. (8th ed. 2004) p. 2, col. 1; see County of Los Angeles v. Hale (1958) 165 Cal.App.2d 22, 28-29 [331 P.2d 166] [voluntary dismissal, followed by filing of new complaint, is not abandonment justifying fees award under statutes concerning eminent domain].) Instead of abandoning its *1559Partnership claims, Cardiff readily admits that that portion of the order compelling arbitration of the Partnership claims remains viable and insists that it has every right to pursue those claims in arbitration. The majority’s conclusion notwithstanding, Cardiff has not relinquished its right or interest in the Partnership claims with the intention of never again claiming it. Thus, it has not abandoned its Partnership claims.
Oddly, and inconsistently, the majority implicitly agrees. The majority writes; “if Cardiff later decides to file another action to pursue any claim under the Partnership Agreement it will necessarily have to do so in arbitration consistent with the trial court’s order.” (Maj. opn., ante, at p. 1552, fn. 7.) In other words, Cardiff is entitled to litigate its Partnership claims prior to or after the action at law involving the Guaranty claims has been resolved, or even simultaneously with the action at law involving the Guaranty claims. This holding is incongruous with the majority’s statement that Cardiff has abandoned its Partnership claims.
In a similar vein, the majority’s conclusion also conflicts with the general rule regarding dismissals and their consequences. Ordinarily, “ ‘[a] plaintiff’s voluntary dismissal of his action has the effect of an absolute withdrawal of his claim and leaves the defendant as though he had never been a party. [Citations.]’ ” (Paniagua v. Orange County Fire Authority (2007) 149 Cal.App.4th 83, 89 [56 Cal.Rptr.3d 746].) But, following the majority’s lead, not so in this case. According to the majority, Cardiff’s voluntary dismissal of its Partnership claims did not have the effect of an absolute withdrawal of those claims, but rather those claims have been preserved and Cardiff will be allowed to litigate them.
Perhaps most troublesome is the majority’s endorsement of Cardiff’s tactical maneuverings and its failure to exhaust other remedies available to it. Undeniably, Cardiff dismissed case No. BC372414 and filed case No. BC380048 solely to circumvent the trial court’s (1) finding that the Partnership claims and the Guaranty claims were inextricably intertwined, and (2) order compelling arbitration. I cannot endorse such improper litigation game playing.

The Section 1281.4 Stay Was Mandatory

In light of the foregoing, I readily conclude that the trial court’s order staying the litigation in case No. BC380048 was mandatory and thus proper.
Section 1281.4 provides: “If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the *1560court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.”
Under section 1281.4, a party to a judicial proceeding “is entitled to a stay of those proceedings whenever (1) the arbitration of a controversy has been ordered, and (2) that controversy is also an issue involved in the pending judicial action.” (Marcus v. Superior Court (1977) 75 Cal.App.3d 204, 209 [141 Cal.Rptr. 890].)
As the majority admits, arbitration of a controversy was ordered. (Maj. opn., ante, at p. 1550.) Specifically, on October 1, 2007, the trial court ordered arbitration of all claims pled in case No. BC372414, including claims for breach of the partnership agreement and breach of the guaranty.
That controversy is an issue involved in case No. BC380048, the pending judicial action. “Section 1280, subdivision (c), defines ‘controversy’ as ‘any question arising between parties to an agreement whether such question is one of law or of fact or both.’ ” (Heritage Provider Network, Inc. v. Superior Court (2008) 158 Cal.App.4th 1146, 1152 [70 Cal.Rptr.3d 645].) “A controversy can be a single question of law or fact, and a stay shall be issued upon proper motion if the court has ordered arbitration of a controversy that is also an issue involved in an action or proceeding pending before it. [Citation.] Thus, a single overlapping issue is sufficient to require imposition of a stay.” (Id. at pp. 1152-1153.)
The controversy ordered to arbitration in case No. BC372414 is described in the complaint filed therein, which includes causes of action for breach of both the partnership and the guaranty. As set forth above, the complaint in case No. BC380048 also sets forth causes of action based upon the alleged breach of both agreements. These overlapping issues are sufficient to support the trial court’s order staying case No. BC380048 pending the arbitration ordered in case No. BC372414. (Heritage Provider Network, Inc. v. Superior Court, supra, 158 Cal.App.4th at pp. 1152-1153.)
Because the trial court ordered arbitration of a controversy which is an issue involved in case No. BC380048, the order staying case No. BC380048 was mandatory. Moreover, it was necessary to preserve the status quo until the arbitration ordered in case No. BC372414 is resolved. (Federal Ins. Co. v. Superior Court (1998) 60 Cal.App.4th 1370, 1374 [71 Cal.Rptr.2d 164] [purpose of the statutory stay is to protect the jurisdiction of the arbitrator by preserving the status quo until arbitration is resolved].) To allow Cardiff to litigate case No. BC380048 in the trial court would disrupt the arbitration *1561proceedings and render them ineffective. (60 Cal.App.4th at p. 1375 [“In the absence of a stay, the continuation of the proceedings in the trial court disrupts the arbitration proceedings and can render them ineffective.”].)
For these reasons, I would deny the petition and hold that Cardiff’s procedural tactics did not vitiate the order compelling arbitration and that the trial court’s stay of case No. BC380048 was mandatory and therefore appropriate.

 All further statutory references are to the Code of Civil Procedure unless otherwise indicated.

 For the ease of the reader, I use the phrase “Partnership claims” to refer to those claims alleged by Cardiff to have arisen solely out of the partnership agreement; the phrase “Guaranty claims” includes those alleged claims that have arisen solely out of the guaranty.

 “Although judges and lawyers commonly use the term ‘sever’ to describe orders for separate trials within a single action, this label is inaccurate. The term ‘sever’ was removed from the statute in 1971.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2001) f 12:408.5, pp. 12(I)-83 to 12(I)-84 (rev. # 1, 2001).)