Motion to Compel Arbitration in California

George Simons

May 07, 2021

Use arbitration to settle your dispute instead of spending time in court.

Summary: Are you being sued for a California debt? Don't really want the courts involved? You can file a motion to compel arbitration in California and fight your case outside the courtroom.

Arbitration clauses are widespread in construction contracts. The clauses require all disputed contract agreements to be submitted to arbitration instead of filing them in courts. The process is relatively cheaper compared to litigation and the numerous court procedures.

Arbitration also provides flexible options to the involved parties, leading to a faster dispute solution while allowing confidentiality between the parties involved. However, some parties may prefer traditional litigation whereby they can appeal the rulings and disputes presented in an open courtroom.

This way, the judges are aware that their decisions are being recorded for public reference. Therefore, some parties may decline to arbitrate their disputes before filing a case with the court of law directly, even with the availability of arbitration written agreements.

The party compelling the arbitration must establish a valid arbitration agreement while the arbitration opposing party provides evidence to defend itself. The trial court's role is to sit as a fact trier to weigh any affidavits, declarations, and other available evidence to determine the arbitrability issue. Arbitration agreements are valid, irreversible, and the law courts impose them on the law and equity grounds.

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How the Motion to Compel Arbitration Structured

The party compelling the arbitration establishes its demand for arbitration from the other party. The other party refuses to arbitrate as demanded by the California Code of Civil Procedure Section 1281.2.

When the petitioner alleges the arbitration agreement's existence, the respondent must prove if the purported contract is false. If the respondent challenges the arbitration agreement's existence, the petitioner will prove that the deal exists using any valid evidence.

The other party might have filed a court complaint already to allege the claims covered by the arbitration agreement. In that case, the party pursuing arbitration does not need to prove its demand for arbitration and the plaintiff's refusal.

It is because the filed complaint effectively constitutes an arbitration refusal. Thirty days after being summoned, the claimant must file and serve a motion and notice to keep the action pending the arbitration of any doubt that is arbitrable under the agreement.

The doubt should be relevant to enforce the claim of lien. If the claimant fails to comply, there might be a waiver of the claimer's right to compel arbitration.

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How California Law Courts Respond to the Complaint

Legally, the respondent carries the burden of proving that the agreement is void. California underwriters constrain the court to interpret the arbitration agreement terms liberally. It ensures that the ruling given favors the arbitration.

The law courts do not give out waivers so easily. The party seeking a waiver must provide enough reasons why a waiver must be granted to it. There are no specific determinants for waivers as the court decides whether to give or not to give a waiver.

Like other federal laws, California law strongly favors the terms of the arbitration agreement. The law also conducts a thorough judicial investigation to parties claiming waivers.

When a party may fail to adhere to the arbitration terms, the California law will determine the existence of this disputed arbitration agreement. If the court finds out that the agreement is actual and legal, it will order both parties to adhere to the arbitration agreement.

When giving the verdict, the court first determines whether the petitioner and the respondent agreed to the dispute arbitration. The determination derives from the California contract law general principles. Since arbitration is like a contract, one party cannot pull the other to a dispute arbitration it did not agree to submit.

Failure to read the agreement and amendments terms carefully is not a reason to evade the arbitration.

Can the Court Nullify the Arbitration?

The California court orders the parties not to arbitrate if:

  • It determines that the petitioner has waived the right to compel arbitration
  • There is an existence of grounds for the agreement revocation
  • The petitioner (a state or a federal money lending institution) created the purported contractual relationship using fraud without the respondent's consent and used the respondent's identification details unlawfully
  • A party in the arbitration agreement is also involved in another ongoing court action with a third party related to the conflict. However, this does not apply to dispute arbitration agreements for the professional negligence of health care providers

Litigation participation does not guarantee a waiver of the arbitration right. It would be illogical for a party participating in a lawsuit for contract breaching to request the court later to keep the litigation pending the arbitration.

The party seeking a waiver must prove that some detriment delayed the other party to seek arbitration. The court will allow arbitration provided the petitioner's disagreements are not distinct from the disputed arbitration agreement. If the court orders for arbitration, it will ensure that the parties perform the agreement effectively.

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Example of Arbitration in California

Hyundai Amco subcontracted with S3H to design and construct mechanical systems for installation in the Hyundai Motor America Incorporation headquarters in the United States. This contract had an arbitration and California choice-of-law provisions included.

However, during construction, after Hyundai Amco had paid some arrears for the contract, S3H dissolved its business and abandoned the agreement's ligations. Hyundai Amco demanded S3H to settle the dispute through a written document as S3H had breached the contract.

Without further communications after that, Hyundai Amco filed a case against S3H in the Orange County Superior Court in California. Hyundai Amco took S3H to court for contract breach, conversion, concealment, intentional fraud, fraud with a false impression, equitable commutation, fraudulent transfer, and constructive trust.

The court denied S3H's motion to compel the arbitration because S3H failed to assert Hyundai Amco refused its arbitration demand. However, the Court of Appeal overruled the verdict, reasoning that Hyundai Amco would have commenced arbitration proceedings as per the agreement instead of filing a lawsuit. This action affirmed Hyundai Amco's refusal to arbitrate the dispute. This ruling has increased the number of successful motions to compel arbitration in various cases.

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