Acquire II, Ltd. v. Colton Real Estate Group
213 Cal. App. 4th 959
| Cal. Ct. App. | 2013Background
- Six funds (Integrity Fund II, Provider Fund, Advantage Fund, Discovery Fund, Freedom Fund, Victory Fund) were created to purchase and manage commercial real estate, each with two investor types: share investors in the fund and tenants in common investors in specific properties.
- Plaintiffs include ~250 investors across funds, some as share investors, some as tenants in common, and some in multiple funds; contracts and ownership varied by investor and fund.
- Defendants moved to compel arbitration for six groups of plaintiffs, but arbitration provisions were not present in all governing documents, so some plaintiffs could not be compelled.
- Trial court denied all six motions under Cal. Code Civ. Proc. § 1281.2(c), invoking the risk of conflicting rulings if some plaintiffs arbitrate and others litigate.
- Defendants appealed, contending § 1281.2(c) should apply; plaintiffs argued the conditions were not satisfied and urged keeping all claims in court.
- Court reverses, holding the record lacks substantial evidence that § 1281.2(c)’s three conditions were satisfied for any motion and remands for per-group consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1281.2(c) applies to any motion to compel arbitration | Record supports group-level application | FAA preemption or varying choice-of-law terms may defeat applicability | Record insufficient; remand for per-group § 1281.2(c) analysis |
| Whether the trial court’s denial can be reviewed without a statement of decision | Implied findings support denial under § 1281.2(c) | Without a statement of decision, review is limited | Appellate review proceeds with implied findings and per-group analysis on remand |
| Whether any group satisfied all three conditions of § 1281.2(c) to justify denial or stay of arbitration | Some groups and related claims share common issues | Conditions are present for at least some groups under the record | Record does not show all three conditions for any motion; remand necessary |
| Whether FAA preemption prevents applying § 1281.2(c) to the Victory Fund tenant-in-common investors | California arbitration rules incorporated; state law governs | FAA might preempt state arbitration procedures | Not preempted; California procedure and explicit incorporation of CA rules apply |
Key Cases Cited
- Laswell v. AG Seal Beach, LLC, 189 Cal.App.4th 1399 (Cal. Ct. App. 2010) (third-party litigation exception to § 1281.2(c) requires three conditions)
- Molecular Analytical Systems v. Ciphergen Biosystems, Inc., 186 Cal.App.4th 696 (Cal. Ct. App. 2010) (discretion under § 1281.2(c) does not apply until conditions are determined)
- Metis Development LLC v. Bohacek, 200 Cal.App.4th 679 (Cal. Ct. App. 2011) (supports remand where record fails to identify common issues and transactions)
- Rowe v. Exline, 153 Cal.App.4th 1276 (Cal. Ct. App. 2007) (discusses standard of review for § 1281.2 decisions)
- Abaya v. Spanish Ranch I, L.P., 189 Cal.App.4th 1490 (Cal. Ct. App. 2010) (illustrates implications of dividing arbitrable and nonarbitrable claims)
- RN Solution, Inc. v. Catholic Healthcare West, 165 Cal.App.4th 1511 (Cal. Ct. App. 2008) (explains third-party concept and limits on delaying arbitration when disputes involve arbitrable and nonarbitrable claims)
- Mount Diablo Medical Center v. Health Net of California, Inc., 101 Cal.App.4th 711 (Cal. Ct. App. 2002) (incorporation of procedural rules via choice-of-law and arbitration provisions)