Preview
E-FILED
6/21/2018 4:18 PM
1 Matthew W. Quall, #183759
FRESNO COUNTY SUPERIOR COURT
John M. Cardot, #155715
2 Matthew R. Dardenne, #281489 By: C. Cogburn, Deputy
3 Quall Cardot LLP
205 E. River Park Circle, Suite 110
4 Fresno, California 93 720
Telephone: (559) 418-0333
5 Facsimile: (559) 418-0330
6 Attorneys for Plaintiff, Pickett & Sons Construction, Inc.
7
8 SUPERIOR COURT OF CALIFORNIA
9 COUNTY OF FRESNO
PICKETT 10
11 & SONS CONSTRUCTION, No. 18CECG01305
INC., a California corporation,
12 PLAINTIFF'S REPLY IN SUPPORT OF
Plaintiff, MOTION TO STAY ARBITRATION
13
v.
14
RAMOS RUIZ BROTHERS, INC. dba
15 RAMOS FURNITURE, a California
corporation; JOSE RAMOS, an individual;
16 JOSE RAMOS AG LAND VENTURES, Date: June 28, 2018
an unknown entity; PETERS ROOFING, Time: 3:30 p.m.
17 INC., a California corporation; UCHE Dept.:501
SYDNEY AGBAKOBA dba SPECTRUM Judge: Mark Snauffer
18 BUILDING INSULATION SERVICES;
TCC CONSTRUCTION, INC., a
19 California corporation; and DOES 1
through 100, inclusive,
20
Defendants.
21
22 Plaintiff, PICKETT & SONS CONSTRUCTION, INC. ("Pickett"), hereby submits its
23 Reply in support of its Motion to Stay Arbitration ("Motion") against the Opposition filed
24 collectively thereto by Defendants RAMOS RUIZ BROTHERS, INC. dba RAMOS FURNITURE,
25 JOSE RAMOS, and JOSE RAMOS AG LAND VENTURES (hereafter collectively "Ramos"). 1
26 Ill
27 1
For sake of clarity the remaining defendants including Peters Roofing, Inc. ("Peters Roofing"), Uche Sydney
Agbakoba dba Spectrum Building Insulation Services ("Spectrum"), and TCC Construction, Inc. ("TCC") are hereafter
28 collectively referred to as the "Non-Opposing Defendants."
1
REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION
1 I. INTRODUCTION
2 In Opposition to the Motion, Ramos raises three main points: (1) there is no legal authority
3 permitting Pickett to seek a stay to the underlying arbitration; (2) Pickett cannot avoid arbitration
4 because it would impermissibly control Ramos' case; and (3) there is no possibility of inconsistent
5 judgments. Each argument fails in the face of Code of Civil Procedure ("CCP") § 1281.2, and long
6 standing principles of equity. Indeed, each argument not only turns on misrepresentations of law
7 and fact, but also depends on circular logic that allows Ramos to take unfair advantage of its own
8 failures to obtain written agreements to arbitrate, which failure necessitated the need for this
9 Motion.
10 Such a motion is not only expressly permitted under § 1281.2, but was advised by the
11 arbitrator in his order denying joinder of the Non-Opposing Defendants in arbitration. 2
12 Consequently, the Court should stay the underlying arbitration and join Ramos to the civil action
13 so that Pickett may be afforded a complete defense to Ramos' claims and avoid the possibility of
14 inconsistent judgments.
15 II. PROCEDURAL STATUS
16 In response to the Motion, only Ramos filed an Opposition. Peters Roofing filed a "Non-
17 Opposition" to the Motion.
18 Simultaneous to filing its Opposition, Ramos also filed a petition to compel arbitration
19 which is set to be heard on July 25, 2018. It raises the same issues there as raised in its Opposition
20 here. Regardless of the outcome, any order here moots the issues raised in the petition such that it
21 should be summarily rejected and taken off calendar. (See RJN filed in support hereof).
22 III. RESPONSE TO RAMOS' FACTUAL ASSERTIONS
23 In its Opposition, Ramos either misstates or fails to fully explain several critical facts or key
24 issues raised in the Motion. These miss-assertions require correction.
25 Ill
26
2
In footnote 3 of the Arbitrator's Order (Ex. 9 to the Declaration of Matt Quall in support of the Motion), the Arbitrator
27 explained that he was "not unmindful of Respondent's preference for a stay or dismissal if all requested joinders are
not ordered. And, of course, economy of effort suggests a single forum." However, due to his limited jurisdiction, he
28 left it "up to the parties to determine how this ruling affects the proper forum for this dispute."
2
REPLY IN SUPPORT OF MOTION TO ST AY ARBITRATION
1 First, Ramos seeks to frame the merits of the Motion based on inappropriate speculation
2 concerning Pickett's motive in bringing the Complaint. For instance, Ramos claims it "is being
3 sued for making a claim in arbitration" and also contends the claims "were created just to get Ramos
4 involved as a 'party."' (Oppo. p. 3:1-3.)
5 Of course, Ramos does not offer any proof of such an improper motive by way of
6 declaration, testimony, or evidence. Instead it offers only conclusory statements that are
7 contradicted by admissions in its Opposition and attorney declaration. Such admissions include:
8 (1) TCC and Spectrum '.,vere involved in a series of related transactions concerning the construction
9 and remodeling of an industrial commercial building located at 4550 N. Blackstone Avenue,
10 Fresno, California 93726 (hereinafter the "the Project") (Oppo. 2:4-5; see also Declaration of
11 William J. Murry); (2) TCC and Spectrum were hired by Ramos, not Pickett, such that Pickett had
12 no privity of contract with TCC or Ramos, (Oppo. 2:2-3); (3) Ramos failed to obtain written
13 agreements to arbitrate with these third parties such that they cannot be joined to the arbitration;
14 (Oppo 2:9-10) and (4) The inability to join these parties raises a possibility that Picket may be
15 subject to inconsistent judgments. (Oppo. 3 :4-8.)
16 For sake of clarity, Ramos is not being sued for making a claim in arbitration. Rather,
17 Pickett seeks to join Ramos and its claims in arbitration to its civil action against the Non-Opposing
18 Parties whom Pickett has been barred from joining in arbitration. To join Ramos, Pickett did not
19 have to bring any new claims against Ramos at all; it could have simply sought to join Ramos
20 pursuant to CCP § 1281.2. However, in framing the merits of the Motion this way, Ramos seeks
21 to paint a distorted picture about the purpose of Pickett's Complaint and this Motion.
22 Notwithstanding, neither the Complaint nor the Motion are brought for an improper purpose but
23 for the express purpose allowed under § 1281.2.
24 Second, Ramos also attempts to paint an incomplete picture about the purpose of Pickett's
25 Motion, choosing to focus only on the request for a stay, while ignoring the request to join all
26 parties and causes of action in the arbitration to civil action. In one example, Ramos contends:
27 Pickett is asking the Court to stop Ramos from proceeding with
arbitration to which Pickett consented, and to stay it in favor of
28 moving ahead with a court case in which Ramos has not made any
3
REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION
1 allegations. If the Court were to grant this Motion, then Ramos
would have no forum in which the liability of Pickett to Ramos was
2 being adjudicated. The only way for Ramos to have its claims heard
would be to file a cross-complaint against Ramos.
3
4 (Oppo. p. 3:22-27.)
5 Each of these claims are patently false. By joining the two actions, Ramos' claims in
6 arbitration automatically become civil claims against Pickett. Thus, Ramos is neither left without
7 a forum to prosecute its claims, nor is forced to file a cross-complaint. If Pickett only sought to
8 stay the arbitration, without joining Ramos' claims, Ramos might have a point. But, by seeking to
9 join both actions, Ramos' concerns are misplaced.
1O Third, Ramos seeks to further blur its picture by raising the issue of whether the causes of
11 action raised in the Complaint are well pled, drawing heavily upon Osseous Technologies of
12 America Inc. v. Discovery Ortho Partners, LLC (2010) 191 Cal. App. 4th 357 ("Osseous"). That
13 case is simply not applicable to the issues raised here, which is whether joinder of an action in
14 arbitration is appropriate under CCP § 1281.2. Rather, it only decided whether the trial court
15 properly dismissed a cause of action for declaratory judgment, when a breach of contract had
16 already occurred. Id. at 374-76. In that matter, there was no underlying arbitration which either
17 party sought to stay or join. Rather, there one trial court granted demurrer against a claim for
18 declaratory judgment, while another tried an action for breach of contract over the same dispute.
19 In dicta, the Court discussed a court's discretion to hear two competing claims filed in separate
20 courts being litigated at the same time. Id at 374-76. Thus, Osseous is of no value to the issues
21 raised in the Motion.
22 In any event, this Motion is not the proper vehicle to challenge the validity of any single
23 cause of action. Moreover, if the two actions are joined, the declaratory judgment action will merge
24 with Ramos' breach of contract action, mooting the issue raised by Ramos.
25 Finally, Ramos misstates who comes before the Court with unclean hands. In its
26 Opposition, Ramos contends Pickett has "delayed Ramos for months by ostensibly participating in
27 arbitration." (Oppo. 6:15.) In raising this argument, Ramos pretends Pickett has not been trying to
28 join all indispensable parties from the beginning. However, that is not the case. Pickett has sought
4
REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION
1 to include all Non-Opposing Defendants from the outset of the dispute so that all indispensable
2 parties are joined.
3 Ramos only filed the arbitration on November 6, 2017. Pickett answered on November
4 29th after tendering its defense to the Non-Opposing Defendants. Once they failed to accept
5 Pickett's tender, Pickett sought to join all Non-Opposing Defendants to the arbitration. Peters
6 Roofing did not oppose joinder because it had a written agreement to arbitrate with Pickett.
7 Spectrum did not oppose. TCC opposed on the grounds of the lack of any written agreement to
8 arbitrate. On March 27, 2018, the arbitrator joined Peters Roofing. However, it held neither
9 Spectrum nor TCC could be compelled to arbitrate due to the lack of written agreements to arbitrate
10 between them and Ramos. As a result, Picket filed its state court action on April 16, 2018.
11 Pickett's actions are not delay tactics, but the natural consequence of Ramos' failure to
12 obtain written agreements to arbitrate with its own contractors who performed work on the project
13 giving rise to the alleged damages Ramos seeks against Pickett. Had it done so, all indispensable
14 parties could have been joined in arbitration. By failing to do so, and by failing to bring this action
15 in civil court in the first place, Ramos has caused a possibility of inconsistent results in two separate
16 forums over the same related series of transactions. Consequently, Ramos' actions - not Pickett's
17 - necessitated the civil action and this Motion.
18 IV. ANALYSIS
19 In its Opposition, Ramos raises three main arguments as to why the underlying arbitration
20 should not be stayed and joined to the civil action: (1) there is no legal authority permitting Pickett
21 to seek a stay to the underlying arbitration; (2) Pickett cannot avoid arbitration because it would
22 impermissibly control Ramos' case; and (3) there is no possibility of inconsistent judgments. The
23 first two arguments are simply false as a matter of law. The third argument contradicts the
24 undisputed facts raised in this Motion.
25 A. The Court Has Authority to Stay or Join the Actions Pursuant to CCP § 1281.2
26 Ramos contends there is no legal authority to stay the arbitration. (Oppo. 1:8 ["Pickett urges
27 a position without any support in the law"] Rather, it contends joinder is permitted in only two
28 cases, "(l) where there are multiple plaintiffs, and only some of them are bound by an arbitration
5
REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION
1 provision, and (2) where some of the defendants named in the complaint are not subject to
2 arbitration." (Oppo. p. 3 :9-11.) This argument is patently false. Ramos provides no authority for
3 its position which is contrary to the exceptions contained in CCP § 1281.2. It does not cite any
4 statute or a single case in support of its argument quoted above.
5 On the other hand, CCP § 1281.2 expressly provides the Court with authority to stay and
6 join the arbitration as requested by Pickett. This provision was not cited erroneously as claimed in
7 Ramos' Opposition. In fact, it was quoted verbatim.
8 Under its express language, § 1281.2 provides three exceptions by which a court may refuse
9 to enforce an arbitration agreement. § 1281.2(a)-(c); Laswell v. AG Seal Beach, LLC (2010) 189
10 Cal. App. 4th 1399, 1404-1405. The third party litigation exception contained in subdivision (c)
11 at issue here applies "where ' [a] party to the arbitration agreement is also a party to a pending court
12 action or special proceeding with a third party, arising out of the same transaction or series of
13 related transactions and there is a possibility of conflicting rulings on a common issue of law or
14 fact." Id. at 1405 citing§ 1281.2(c).
15 There are no other statutory limitations or requirements that must be met to invoke §
16 1281.2(c) as claimed by Ramos, i.e. multiple plaintiffs, or third parties named as defendants. Under
17 the express language of the statute there are only three requirements that must be met to invoke the
18 exception: (1) a party to the arbitration engaged in litigation with a third party; (2) the third party
19 action "aris[es] out of the same transaction or series of related transactions"; and (3) a possibility
20 of conflicting rulings on a common issue of law or fact." § 1281.2(c).
21 Here, each statutory requirement is met. First, Pickett is a party to the arbitration; Ramos'
22 status is irrelevant. The Non-Opposed Defendants are third parties. As stated in Laswell, the term
23 third party does not reference non-parties to the underlying litigation. Rather, the "'term 'third
24 party' for purposes of section 1281.2 must be construed to mean a party that is not bound by the
25 arbitration agreement."' Id. at 1407 citing RN Solution, Inc. v. Catholic Healthcare West (2012)
26 165 Cal. App. 4th 1511, 1519 (emphasis added). As ruled by the arbitrator and agreed to by Ramos,
27 Spectrum and TCC were not bound by any arbitration agreement and could not be forced to
28 arbitrate. Second, Picket is engaged in litigation with TCC and Spectrum in this action. Third, as
6
REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION
1 further discussed below, a possibility of conflicting rulings on a common issue of law or fact exists
2 as the Court is not bound by any decision made in arbitration regarding all parties' liability.
3 Consequently, each requirement is met and the exception may be applied at the Court's discretion.
4 Notwithstanding, Ramos contends §1281.2(c) is not appropriate because a petition to
5 compel arbitration was not filed prior to the Motion. The statute contains no such requirement.
6 While§ 1281.2(c) presumes a petition to compel arbitration will first be filed ("On a petition") it
7 does not mandate one to invoke the exception contained in § 1281.2(c) since § 1281.2( c)
8 "specifically gives the superior court the authority to order joinder of an arbitration proceeding and
9 a civil action to avoid the possibility of conflicting rulings." Prudential Property & Casualty Ins.
10 Co. v. Sup. Ct. (1995) 36 Cal. App. 4th 275, 278-79. Thus, the issue is not who sued whom first
11 or a question of procedure, but a matter of preferred legislative policy that "is part of California's
12 statutory scheme designed to enforce the parties' arbitration agreements[.]" Laswell, 189 Cal. App.
13 4th at 1405. Under the plain language of§ 1281.2(c), the legislature has provided the courts with
14 discretion as to how to enforce arbitration agreements when a party to an underlying arbitration is
15 also involved in litigation with parties not subject to arbitration arising out of the same or a series
16 of related factual matters.
17 This understanding of the statute is further confirmed by the remedies provided later which
18 are untethered to any requirement to file a petition to compel arbitration. Under§ 1281.2:
19 If the court determines that a party to the arbitration is also a party
to litigation in a pending court action or special proceeding with a
20 third party as set forth under subdivision (c) herein, the court (1)
may refuse to enforce the arbitration agreement and may order
21 intervention or joinder of all parties in a single action or special
proceeding; (2) may order intervention or joinder as to all or only
22 certain issues; (3) may order arbitration among the parties who have
agreed to arbitration and stay the pending court action or special
23 proceeding pending the outcome of the arbitration proceeding; or
(4) may stay arbitration pending the outcome of the court action or
24 special proceeding.
25 (Emphasis added.) This provision is not con~itioned on the mandatory filing of any petition; it is
26 independent of any other provision of the statute. As an independent provision, it provides the
27 Court authority to refuse enforcement of arbitration, stay arbitration, and order joinder of parties
28 into one unified civil action when there exist third parties, meaning those not bound by any
7
REPLY IN SUPPORT OF MOTION TO ST AY ARBITRATION
1 arbitration agreement. Those are the precise conditions here. Thus, under the plain language of
2 either portion of the statute, the Court has authority to stay and join the arbitration when there is a
3 possibility of inconsistent judgments. 3
4 In its Opposition, Ramos effectively admits this point, even though it later argues against
5 it. (See Oppo., p. 5: 16-18 ["there is in fact a provision covering a situation ... where there are
6 claims in arbitration which overlap with those in court"].) In the face of its admission, it contends
7 that most "right and logical thing to do" is stay the civil action while Ramos, Pickett, and Peters
8 Roofing arbitrate their clain1s. (Oppo., p. 6:3-8, 15.) However this course of action is the least
9 logical of all because it exposes Pickett and Peters Roofing to the possibility of inconsistent
10 judgments. More than that, it would require Pickett and Peters Roofing to effectively try the same
11 case twice, one against Ramos and each other, and then once again against TCC and Spectrum.
12 Meanwhile, Ramos, TCC, and Spectrum would only have to do so once. This does not put the
13 parties on the equal playing field presumed by the courts. It creates lopsided risk for one set of
14 parties to which the others are not exposed.
15 Ramos is simply wrong in its analysis of§ 1281.2. The statute provides the Court explicit
16 power to stay the arbitration and join the parties to arbitration and their claims to the existing civil
17 action. Because doing so best preserves judicial economy and the rights of all the parties, not just
18 Ramos, doing so "is both the right and logical thing to do." (Contra Oppo., p. 6: 15.)
19 B. Ramos is Not Entitled to Arbitration Given The Existence of Third Parties
20 Ramos last contends Pickett cannot exercise control over its case by seeking to join all
21 parties. Once more, Ramos misinterprets § 1281.2 and the purpose for the Motion.
22 Arbitration is a matter of private contract. As such the parties' right to arbitration is not
23 absolute but "may have to yield if there is an issue of law or fact common to the arbitration and a
24 pending action or proceeding with a third party and there is a possibility of conflicting rulings
25 thereon." Mercury Ins. Group v. Sup.Ct. (1998) 19 Cal. 4th 332, 348 citing§ 1281.2(c). As stated
26 in Laswell, § 1281.2(c) "addresses the peculiar situation that arises when a controversy also affects
27 3
To the extent a petition is a mandatory condition under subdivision (c) Ramos itself has satisfied the requirement by
filing a petition in this action.
Its petition triggers the exception contained in § 1281.2(c).Whether that exception is
28 raised here on in response to its own petition is irrelevant.
The result is the same.
8
REPLY IN SUPPORT OF MOTION TO STA Y ARBITRATION
1 claims by or against other parties not bound by the arbitration agreement." Laswell, 189 Cal. App.
2 4th at 1405 (emphasis added). Consequently, any party to arbitration is free to invoke§ 1281.2(c)
3 when third parties not bound to arbitration exist.
4 That is the precise situation here. Pickett is not seeking to "control a claimant's case."
5 (Oppo., p. 6:32.) It is simply invoking a statutory right so that it may address claims "against other
6 parties not bound by the arbitration agreement." However, if the actions are joined, Ramos still
7 maintains control over its case. It is not being deprived of any claims, causes of action, or defenses.
8 It may still challenge any claims or causes of action raised by any other party.
9 By framing its argument this way, it is actually Ramos who seeks to control Pickett's case
10 by refusing to allow it to litigate its claims against all allegedly responsible parties. Ramos' would
11 rather have Pickett "point the finger of blame at the empty chairs of TCC and Spectrum" in
12 arbitration. (Oppo., 4:14-15.) However, under§ 1281.2, Pickett is not required to stand alone for
13 the wrongdoing of others' empty chairs. It may seek to have them stand for their own wrongdoing.
14 Furthermore, Ramos' argument and attempt to control Pickett' s defense is not equitable in
15 light of the fact that it was Ramos' who failed to obtain the arbitration agreements with its
16 subcontractors. Had Ramos not failed to do so, Pickett would not be in the present position. The
17 law of equity prevents Ramos from relying on its own failures in this manner.
18 c. Ramos' Own Arguments Demonstrate a Possibility of Inconsistent Judgments
19 Finally, Ramos contends "there is no danger here of conflicting rulings which would be
20 harmful to Pickett." (Oppo., p. 9: 11.) However, in its next breadth, it demonstrates the precise
21 danger Pickett seeks to guard against, wherein it states: "If Pickett were to lose at arbitration, it
22 could proceed to litigate its indemnification claims against TCC and Spectrum in court." (Oppo.,
23 p. 9:15-17.)
24 Trial courts do not enforce the results of arbitration against non-parties. A private
25 arbitration award will not give rise to collateral estoppel in favor of a nonparty to an arbitration
26 absent an agreement giving the judgment that preclusive effect. See Vandenberg v. Superior Court
27 (1999) 21 Cal. 4th 815, 824-825, n. 2. Thus, in arbitrating the dispute, the arbitrator could find
28 TCC and Spectrum responsible for some or nearly all of Ramos' damages, if any. Meanwhile, the
9
REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION
1 Court may not agree, exposing Pickett to the possibility of inconsistent judgment amounts.
2 This was the precise issue in Best Interiors, Inc. v. Millie & Severson, Inc. (2008) 161 Cal.
3 App. 4th 1320, 1322, and Cha v. Granville Homes, Inc. (Cal. Ct. App., Mar. 17, 2011, No. F058806)
4 2011 WL 913458, at *4. 4 In Best, the investigators were not subject to arbitration so a possibility
5 of inconsistent judgment amounts existed. In Cha, a case dealing with the issue of indemnification
6 by non-party subcontractors, the potential for disparate liability also created the possibility of
7 inconsistent judgments. That is the same issue presented here.
8 Because there is a possibility of inconsistent judgments, the Court may issue a stay to the
9 arbitration and join all parties to the civil action.
10 v. CONCLUSION
11 For the foregoing reasons, Pickett respectfully requests the Court grant its Motion for Stay
12 of Arbitration and Joinder of Arbitral Proceedings.
13
14
15 Dated: June 21, 2018 QUALL CARDOT LLP
16
17
18 By:~~-~~~-+-----'~~~~~~
MattheW{v.Quall
John M. Cardot
19 Matthew R. Dardenne
Attorneys for Plaintiff, Pickett &
20 Sons Construction, Inc.
21
22
23
24
25
26 4
Ramos' contends Pickett inappropriately cited Cha under Rule of Court 8 .1115 arguing the very case which allows
citation to unpublished cases complied with the exceptions contained in that rule.However, there would have been no
27 need for the court in Gilbert v.Master Washer & Stamping Co. (2001) 87 Cal. App. 4th 212, 218, n. 14, to cite an
unpublished decision pursuant to the Evidence Code § 452 if an applicable exception applied under Rule 8 .1115, fully
28 As such, citation to Cha is appropriate.
demonstrating Rule 8.1115 is in conflict with a state statute.
10
REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION
Preview
E-FILED 6/21/2018 4:18 PM 1 Matthew W. Quall, #183759 FRESNO COUNTY SUPERIOR COURT John M. Cardot, #155715 2 Matthew R. Dardenne, #281489 By: C. Cogburn, Deputy 3 Quall Cardot LLP 205 E. River Park Circle, Suite 110 4 Fresno, California 93 720 Telephone: (559) 418-0333 5 Facsimile: (559) 418-0330 6 Attorneys for Plaintiff, Pickett & Sons Construction, Inc. 7 8 SUPERIOR COURT OF CALIFORNIA 9 COUNTY OF FRESNO PICKETT 10 11 & SONS CONSTRUCTION, No. 18CECG01305 INC., a California corporation, 12 PLAINTIFF'S REPLY IN SUPPORT OF Plaintiff, MOTION TO STAY ARBITRATION 13 v. 14 RAMOS RUIZ BROTHERS, INC. dba 15 RAMOS FURNITURE, a California corporation; JOSE RAMOS, an individual; 16 JOSE RAMOS AG LAND VENTURES, Date: June 28, 2018 an unknown entity; PETERS ROOFING, Time: 3:30 p.m. 17 INC., a California corporation; UCHE Dept.:501 SYDNEY AGBAKOBA dba SPECTRUM Judge: Mark Snauffer 18 BUILDING INSULATION SERVICES; TCC CONSTRUCTION, INC., a 19 California corporation; and DOES 1 through 100, inclusive, 20 Defendants. 21 22 Plaintiff, PICKETT & SONS CONSTRUCTION, INC. ("Pickett"), hereby submits its 23 Reply in support of its Motion to Stay Arbitration ("Motion") against the Opposition filed 24 collectively thereto by Defendants RAMOS RUIZ BROTHERS, INC. dba RAMOS FURNITURE, 25 JOSE RAMOS, and JOSE RAMOS AG LAND VENTURES (hereafter collectively "Ramos"). 1 26 Ill 27 1 For sake of clarity the remaining defendants including Peters Roofing, Inc. ("Peters Roofing"), Uche Sydney Agbakoba dba Spectrum Building Insulation Services ("Spectrum"), and TCC Construction, Inc. ("TCC") are hereafter 28 collectively referred to as the "Non-Opposing Defendants." 1 REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION 1 I. INTRODUCTION 2 In Opposition to the Motion, Ramos raises three main points: (1) there is no legal authority 3 permitting Pickett to seek a stay to the underlying arbitration; (2) Pickett cannot avoid arbitration 4 because it would impermissibly control Ramos' case; and (3) there is no possibility of inconsistent 5 judgments. Each argument fails in the face of Code of Civil Procedure ("CCP") § 1281.2, and long 6 standing principles of equity. Indeed, each argument not only turns on misrepresentations of law 7 and fact, but also depends on circular logic that allows Ramos to take unfair advantage of its own 8 failures to obtain written agreements to arbitrate, which failure necessitated the need for this 9 Motion. 10 Such a motion is not only expressly permitted under § 1281.2, but was advised by the 11 arbitrator in his order denying joinder of the Non-Opposing Defendants in arbitration. 2 12 Consequently, the Court should stay the underlying arbitration and join Ramos to the civil action 13 so that Pickett may be afforded a complete defense to Ramos' claims and avoid the possibility of 14 inconsistent judgments. 15 II. PROCEDURAL STATUS 16 In response to the Motion, only Ramos filed an Opposition. Peters Roofing filed a "Non- 17 Opposition" to the Motion. 18 Simultaneous to filing its Opposition, Ramos also filed a petition to compel arbitration 19 which is set to be heard on July 25, 2018. It raises the same issues there as raised in its Opposition 20 here. Regardless of the outcome, any order here moots the issues raised in the petition such that it 21 should be summarily rejected and taken off calendar. (See RJN filed in support hereof). 22 III. RESPONSE TO RAMOS' FACTUAL ASSERTIONS 23 In its Opposition, Ramos either misstates or fails to fully explain several critical facts or key 24 issues raised in the Motion. These miss-assertions require correction. 25 Ill 26 2 In footnote 3 of the Arbitrator's Order (Ex. 9 to the Declaration of Matt Quall in support of the Motion), the Arbitrator 27 explained that he was "not unmindful of Respondent's preference for a stay or dismissal if all requested joinders are not ordered. And, of course, economy of effort suggests a single forum." However, due to his limited jurisdiction, he 28 left it "up to the parties to determine how this ruling affects the proper forum for this dispute." 2 REPLY IN SUPPORT OF MOTION TO ST AY ARBITRATION 1 First, Ramos seeks to frame the merits of the Motion based on inappropriate speculation 2 concerning Pickett's motive in bringing the Complaint. For instance, Ramos claims it "is being 3 sued for making a claim in arbitration" and also contends the claims "were created just to get Ramos 4 involved as a 'party."' (Oppo. p. 3:1-3.) 5 Of course, Ramos does not offer any proof of such an improper motive by way of 6 declaration, testimony, or evidence. Instead it offers only conclusory statements that are 7 contradicted by admissions in its Opposition and attorney declaration. Such admissions include: 8 (1) TCC and Spectrum '.,vere involved in a series of related transactions concerning the construction 9 and remodeling of an industrial commercial building located at 4550 N. Blackstone Avenue, 10 Fresno, California 93726 (hereinafter the "the Project") (Oppo. 2:4-5; see also Declaration of 11 William J. Murry); (2) TCC and Spectrum were hired by Ramos, not Pickett, such that Pickett had 12 no privity of contract with TCC or Ramos, (Oppo. 2:2-3); (3) Ramos failed to obtain written 13 agreements to arbitrate with these third parties such that they cannot be joined to the arbitration; 14 (Oppo 2:9-10) and (4) The inability to join these parties raises a possibility that Picket may be 15 subject to inconsistent judgments. (Oppo. 3 :4-8.) 16 For sake of clarity, Ramos is not being sued for making a claim in arbitration. Rather, 17 Pickett seeks to join Ramos and its claims in arbitration to its civil action against the Non-Opposing 18 Parties whom Pickett has been barred from joining in arbitration. To join Ramos, Pickett did not 19 have to bring any new claims against Ramos at all; it could have simply sought to join Ramos 20 pursuant to CCP § 1281.2. However, in framing the merits of the Motion this way, Ramos seeks 21 to paint a distorted picture about the purpose of Pickett's Complaint and this Motion. 22 Notwithstanding, neither the Complaint nor the Motion are brought for an improper purpose but 23 for the express purpose allowed under § 1281.2. 24 Second, Ramos also attempts to paint an incomplete picture about the purpose of Pickett's 25 Motion, choosing to focus only on the request for a stay, while ignoring the request to join all 26 parties and causes of action in the arbitration to civil action. In one example, Ramos contends: 27 Pickett is asking the Court to stop Ramos from proceeding with arbitration to which Pickett consented, and to stay it in favor of 28 moving ahead with a court case in which Ramos has not made any 3 REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION 1 allegations. If the Court were to grant this Motion, then Ramos would have no forum in which the liability of Pickett to Ramos was 2 being adjudicated. The only way for Ramos to have its claims heard would be to file a cross-complaint against Ramos. 3 4 (Oppo. p. 3:22-27.) 5 Each of these claims are patently false. By joining the two actions, Ramos' claims in 6 arbitration automatically become civil claims against Pickett. Thus, Ramos is neither left without 7 a forum to prosecute its claims, nor is forced to file a cross-complaint. If Pickett only sought to 8 stay the arbitration, without joining Ramos' claims, Ramos might have a point. But, by seeking to 9 join both actions, Ramos' concerns are misplaced. 1O Third, Ramos seeks to further blur its picture by raising the issue of whether the causes of 11 action raised in the Complaint are well pled, drawing heavily upon Osseous Technologies of 12 America Inc. v. Discovery Ortho Partners, LLC (2010) 191 Cal. App. 4th 357 ("Osseous"). That 13 case is simply not applicable to the issues raised here, which is whether joinder of an action in 14 arbitration is appropriate under CCP § 1281.2. Rather, it only decided whether the trial court 15 properly dismissed a cause of action for declaratory judgment, when a breach of contract had 16 already occurred. Id. at 374-76. In that matter, there was no underlying arbitration which either 17 party sought to stay or join. Rather, there one trial court granted demurrer against a claim for 18 declaratory judgment, while another tried an action for breach of contract over the same dispute. 19 In dicta, the Court discussed a court's discretion to hear two competing claims filed in separate 20 courts being litigated at the same time. Id at 374-76. Thus, Osseous is of no value to the issues 21 raised in the Motion. 22 In any event, this Motion is not the proper vehicle to challenge the validity of any single 23 cause of action. Moreover, if the two actions are joined, the declaratory judgment action will merge 24 with Ramos' breach of contract action, mooting the issue raised by Ramos. 25 Finally, Ramos misstates who comes before the Court with unclean hands. In its 26 Opposition, Ramos contends Pickett has "delayed Ramos for months by ostensibly participating in 27 arbitration." (Oppo. 6:15.) In raising this argument, Ramos pretends Pickett has not been trying to 28 join all indispensable parties from the beginning. However, that is not the case. Pickett has sought 4 REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION 1 to include all Non-Opposing Defendants from the outset of the dispute so that all indispensable 2 parties are joined. 3 Ramos only filed the arbitration on November 6, 2017. Pickett answered on November 4 29th after tendering its defense to the Non-Opposing Defendants. Once they failed to accept 5 Pickett's tender, Pickett sought to join all Non-Opposing Defendants to the arbitration. Peters 6 Roofing did not oppose joinder because it had a written agreement to arbitrate with Pickett. 7 Spectrum did not oppose. TCC opposed on the grounds of the lack of any written agreement to 8 arbitrate. On March 27, 2018, the arbitrator joined Peters Roofing. However, it held neither 9 Spectrum nor TCC could be compelled to arbitrate due to the lack of written agreements to arbitrate 10 between them and Ramos. As a result, Picket filed its state court action on April 16, 2018. 11 Pickett's actions are not delay tactics, but the natural consequence of Ramos' failure to 12 obtain written agreements to arbitrate with its own contractors who performed work on the project 13 giving rise to the alleged damages Ramos seeks against Pickett. Had it done so, all indispensable 14 parties could have been joined in arbitration. By failing to do so, and by failing to bring this action 15 in civil court in the first place, Ramos has caused a possibility of inconsistent results in two separate 16 forums over the same related series of transactions. Consequently, Ramos' actions - not Pickett's 17 - necessitated the civil action and this Motion. 18 IV. ANALYSIS 19 In its Opposition, Ramos raises three main arguments as to why the underlying arbitration 20 should not be stayed and joined to the civil action: (1) there is no legal authority permitting Pickett 21 to seek a stay to the underlying arbitration; (2) Pickett cannot avoid arbitration because it would 22 impermissibly control Ramos' case; and (3) there is no possibility of inconsistent judgments. The 23 first two arguments are simply false as a matter of law. The third argument contradicts the 24 undisputed facts raised in this Motion. 25 A. The Court Has Authority to Stay or Join the Actions Pursuant to CCP § 1281.2 26 Ramos contends there is no legal authority to stay the arbitration. (Oppo. 1:8 ["Pickett urges 27 a position without any support in the law"] Rather, it contends joinder is permitted in only two 28 cases, "(l) where there are multiple plaintiffs, and only some of them are bound by an arbitration 5 REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION 1 provision, and (2) where some of the defendants named in the complaint are not subject to 2 arbitration." (Oppo. p. 3 :9-11.) This argument is patently false. Ramos provides no authority for 3 its position which is contrary to the exceptions contained in CCP § 1281.2. It does not cite any 4 statute or a single case in support of its argument quoted above. 5 On the other hand, CCP § 1281.2 expressly provides the Court with authority to stay and 6 join the arbitration as requested by Pickett. This provision was not cited erroneously as claimed in 7 Ramos' Opposition. In fact, it was quoted verbatim. 8 Under its express language, § 1281.2 provides three exceptions by which a court may refuse 9 to enforce an arbitration agreement. § 1281.2(a)-(c); Laswell v. AG Seal Beach, LLC (2010) 189 10 Cal. App. 4th 1399, 1404-1405. The third party litigation exception contained in subdivision (c) 11 at issue here applies "where ' [a] party to the arbitration agreement is also a party to a pending court 12 action or special proceeding with a third party, arising out of the same transaction or series of 13 related transactions and there is a possibility of conflicting rulings on a common issue of law or 14 fact." Id. at 1405 citing§ 1281.2(c). 15 There are no other statutory limitations or requirements that must be met to invoke § 16 1281.2(c) as claimed by Ramos, i.e. multiple plaintiffs, or third parties named as defendants. Under 17 the express language of the statute there are only three requirements that must be met to invoke the 18 exception: (1) a party to the arbitration engaged in litigation with a third party; (2) the third party 19 action "aris[es] out of the same transaction or series of related transactions"; and (3) a possibility 20 of conflicting rulings on a common issue of law or fact." § 1281.2(c). 21 Here, each statutory requirement is met. First, Pickett is a party to the arbitration; Ramos' 22 status is irrelevant. The Non-Opposed Defendants are third parties. As stated in Laswell, the term 23 third party does not reference non-parties to the underlying litigation. Rather, the "'term 'third 24 party' for purposes of section 1281.2 must be construed to mean a party that is not bound by the 25 arbitration agreement."' Id. at 1407 citing RN Solution, Inc. v. Catholic Healthcare West (2012) 26 165 Cal. App. 4th 1511, 1519 (emphasis added). As ruled by the arbitrator and agreed to by Ramos, 27 Spectrum and TCC were not bound by any arbitration agreement and could not be forced to 28 arbitrate. Second, Picket is engaged in litigation with TCC and Spectrum in this action. Third, as 6 REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION 1 further discussed below, a possibility of conflicting rulings on a common issue of law or fact exists 2 as the Court is not bound by any decision made in arbitration regarding all parties' liability. 3 Consequently, each requirement is met and the exception may be applied at the Court's discretion. 4 Notwithstanding, Ramos contends §1281.2(c) is not appropriate because a petition to 5 compel arbitration was not filed prior to the Motion. The statute contains no such requirement. 6 While§ 1281.2(c) presumes a petition to compel arbitration will first be filed ("On a petition") it 7 does not mandate one to invoke the exception contained in § 1281.2(c) since § 1281.2( c) 8 "specifically gives the superior court the authority to order joinder of an arbitration proceeding and 9 a civil action to avoid the possibility of conflicting rulings." Prudential Property & Casualty Ins. 10 Co. v. Sup. Ct. (1995) 36 Cal. App. 4th 275, 278-79. Thus, the issue is not who sued whom first 11 or a question of procedure, but a matter of preferred legislative policy that "is part of California's 12 statutory scheme designed to enforce the parties' arbitration agreements[.]" Laswell, 189 Cal. App. 13 4th at 1405. Under the plain language of§ 1281.2(c), the legislature has provided the courts with 14 discretion as to how to enforce arbitration agreements when a party to an underlying arbitration is 15 also involved in litigation with parties not subject to arbitration arising out of the same or a series 16 of related factual matters. 17 This understanding of the statute is further confirmed by the remedies provided later which 18 are untethered to any requirement to file a petition to compel arbitration. Under§ 1281.2: 19 If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a 20 third party as set forth under subdivision (c) herein, the court (1) may refuse to enforce the arbitration agreement and may order 21 intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only 22 certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special 23 proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or 24 special proceeding. 25 (Emphasis added.) This provision is not con~itioned on the mandatory filing of any petition; it is 26 independent of any other provision of the statute. As an independent provision, it provides the 27 Court authority to refuse enforcement of arbitration, stay arbitration, and order joinder of parties 28 into one unified civil action when there exist third parties, meaning those not bound by any 7 REPLY IN SUPPORT OF MOTION TO ST AY ARBITRATION 1 arbitration agreement. Those are the precise conditions here. Thus, under the plain language of 2 either portion of the statute, the Court has authority to stay and join the arbitration when there is a 3 possibility of inconsistent judgments. 3 4 In its Opposition, Ramos effectively admits this point, even though it later argues against 5 it. (See Oppo., p. 5: 16-18 ["there is in fact a provision covering a situation ... where there are 6 claims in arbitration which overlap with those in court"].) In the face of its admission, it contends 7 that most "right and logical thing to do" is stay the civil action while Ramos, Pickett, and Peters 8 Roofing arbitrate their clain1s. (Oppo., p. 6:3-8, 15.) However this course of action is the least 9 logical of all because it exposes Pickett and Peters Roofing to the possibility of inconsistent 10 judgments. More than that, it would require Pickett and Peters Roofing to effectively try the same 11 case twice, one against Ramos and each other, and then once again against TCC and Spectrum. 12 Meanwhile, Ramos, TCC, and Spectrum would only have to do so once. This does not put the 13 parties on the equal playing field presumed by the courts. It creates lopsided risk for one set of 14 parties to which the others are not exposed. 15 Ramos is simply wrong in its analysis of§ 1281.2. The statute provides the Court explicit 16 power to stay the arbitration and join the parties to arbitration and their claims to the existing civil 17 action. Because doing so best preserves judicial economy and the rights of all the parties, not just 18 Ramos, doing so "is both the right and logical thing to do." (Contra Oppo., p. 6: 15.) 19 B. Ramos is Not Entitled to Arbitration Given The Existence of Third Parties 20 Ramos last contends Pickett cannot exercise control over its case by seeking to join all 21 parties. Once more, Ramos misinterprets § 1281.2 and the purpose for the Motion. 22 Arbitration is a matter of private contract. As such the parties' right to arbitration is not 23 absolute but "may have to yield if there is an issue of law or fact common to the arbitration and a 24 pending action or proceeding with a third party and there is a possibility of conflicting rulings 25 thereon." Mercury Ins. Group v. Sup.Ct. (1998) 19 Cal. 4th 332, 348 citing§ 1281.2(c). As stated 26 in Laswell, § 1281.2(c) "addresses the peculiar situation that arises when a controversy also affects 27 3 To the extent a petition is a mandatory condition under subdivision (c) Ramos itself has satisfied the requirement by filing a petition in this action. Its petition triggers the exception contained in § 1281.2(c).Whether that exception is 28 raised here on in response to its own petition is irrelevant. The result is the same. 8 REPLY IN SUPPORT OF MOTION TO STA Y ARBITRATION 1 claims by or against other parties not bound by the arbitration agreement." Laswell, 189 Cal. App. 2 4th at 1405 (emphasis added). Consequently, any party to arbitration is free to invoke§ 1281.2(c) 3 when third parties not bound to arbitration exist. 4 That is the precise situation here. Pickett is not seeking to "control a claimant's case." 5 (Oppo., p. 6:32.) It is simply invoking a statutory right so that it may address claims "against other 6 parties not bound by the arbitration agreement." However, if the actions are joined, Ramos still 7 maintains control over its case. It is not being deprived of any claims, causes of action, or defenses. 8 It may still challenge any claims or causes of action raised by any other party. 9 By framing its argument this way, it is actually Ramos who seeks to control Pickett's case 10 by refusing to allow it to litigate its claims against all allegedly responsible parties. Ramos' would 11 rather have Pickett "point the finger of blame at the empty chairs of TCC and Spectrum" in 12 arbitration. (Oppo., 4:14-15.) However, under§ 1281.2, Pickett is not required to stand alone for 13 the wrongdoing of others' empty chairs. It may seek to have them stand for their own wrongdoing. 14 Furthermore, Ramos' argument and attempt to control Pickett' s defense is not equitable in 15 light of the fact that it was Ramos' who failed to obtain the arbitration agreements with its 16 subcontractors. Had Ramos not failed to do so, Pickett would not be in the present position. The 17 law of equity prevents Ramos from relying on its own failures in this manner. 18 c. Ramos' Own Arguments Demonstrate a Possibility of Inconsistent Judgments 19 Finally, Ramos contends "there is no danger here of conflicting rulings which would be 20 harmful to Pickett." (Oppo., p. 9: 11.) However, in its next breadth, it demonstrates the precise 21 danger Pickett seeks to guard against, wherein it states: "If Pickett were to lose at arbitration, it 22 could proceed to litigate its indemnification claims against TCC and Spectrum in court." (Oppo., 23 p. 9:15-17.) 24 Trial courts do not enforce the results of arbitration against non-parties. A private 25 arbitration award will not give rise to collateral estoppel in favor of a nonparty to an arbitration 26 absent an agreement giving the judgment that preclusive effect. See Vandenberg v. Superior Court 27 (1999) 21 Cal. 4th 815, 824-825, n. 2. Thus, in arbitrating the dispute, the arbitrator could find 28 TCC and Spectrum responsible for some or nearly all of Ramos' damages, if any. Meanwhile, the 9 REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION 1 Court may not agree, exposing Pickett to the possibility of inconsistent judgment amounts. 2 This was the precise issue in Best Interiors, Inc. v. Millie & Severson, Inc. (2008) 161 Cal. 3 App. 4th 1320, 1322, and Cha v. Granville Homes, Inc. (Cal. Ct. App., Mar. 17, 2011, No. F058806) 4 2011 WL 913458, at *4. 4 In Best, the investigators were not subject to arbitration so a possibility 5 of inconsistent judgment amounts existed. In Cha, a case dealing with the issue of indemnification 6 by non-party subcontractors, the potential for disparate liability also created the possibility of 7 inconsistent judgments. That is the same issue presented here. 8 Because there is a possibility of inconsistent judgments, the Court may issue a stay to the 9 arbitration and join all parties to the civil action. 10 v. CONCLUSION 11 For the foregoing reasons, Pickett respectfully requests the Court grant its Motion for Stay 12 of Arbitration and Joinder of Arbitral Proceedings. 13 14 15 Dated: June 21, 2018 QUALL CARDOT LLP 16 17 18 By:~~-~~~-+-----'~~~~~~ MattheW{v.Quall John M. Cardot 19 Matthew R. Dardenne Attorneys for Plaintiff, Pickett & 20 Sons Construction, Inc. 21 22 23 24 25 26 4 Ramos' contends Pickett inappropriately cited Cha under Rule of Court 8 .1115 arguing the very case which allows citation to unpublished cases complied with the exceptions contained in that rule.However, there would have been no 27 need for the court in Gilbert v.Master Washer & Stamping Co. (2001) 87 Cal. App. 4th 212, 218, n. 14, to cite an unpublished decision pursuant to the Evidence Code § 452 if an applicable exception applied under Rule 8 .1115, fully 28 As such, citation to Cha is appropriate. demonstrating Rule 8.1115 is in conflict with a state statute. 10 REPLY IN SUPPORT OF MOTION TO STAY ARBITRATION