DMS Services, LLC v. Superior Court
205 Cal. App. 4th 1346
| Cal. Ct. App. | 2012Background
- DMS petitioned for a writ of mandate to vacate a trial court order compelling arbitration of breach of contract and related claims against ZSC.
- ZSC, as DMS’s workers’ compensation claims administrator, was not a signatory to the deductible agreements containing an arbitration clause.
- DMS separately contracted with Zurich Insurance for workers’ compensation coverage and to administer claims; the deductible agreements with Zurich contained arbitration provisions.
- Zurich Insurance initiated AAA arbitration against DMS under the deductible agreements, seeking over $3.5 million.
- DMS filed suit against ZSC for breach of the claims administration agreement and sought declaratory relief against Zurich Insurance regarding the validity of the deductible agreement.
- The trial court granted arbitration against ZSC under equitable estoppel, concluding the nonsignatory could compel arbitration due to intertwinement with the deductible agreements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May ZSC compel arbitration under equitable estoppel? | DMS: claims against ZSC are not founded in or intertwined with the deductible agreement. | ZSC/Zurich: DMS’s claims are intertwined with the deductible agreement containing the arbitration clause. | No; equitable estoppel did not apply to compel arbitration of DMS against ZSC. |
| Is the declaratory relief claim against Zurich Insurance arbitrable or properly stayed? | DMS sought relief to determine validity of the deductible agreement; arbitration could resolve related issues. | Arbitration should proceed because the deductible agreement governs the dispute. | The order to arbitrate Zurich Insurance’s declaratory relief claim is discharged as improvidently granted. |
| Should the arbitration clause’s validity under Insurance Code § 11658 be resolved by the arbitrator or court in this proceeding? | Validity is a threshold issue; should be determined here. | Arbitrator should decide the validity, if at all. | Not necessary to decide in this writ; the court’s arbitration order as to ZSC was improper, and the clause’s validity remains unresolved here. |
Key Cases Cited
- Jones v. Jacobson, 195 Cal.App.4th 1 (Cal.App.4th 2001) (arbitration requires party to be bound by agreement; threshold question of enforceability)
- Molecular Analytical Systems v. Ciphergen Biosystems, Inc., 186 Cal.App.4th 696 (Cal.App.4th 2010) (whether nonsignatories can enforce arbitration under equitable estoppel; de novo review standard)
- Boucher v. Alliance Title Co., Inc., 127 Cal.App.4th 262 (Cal.App.4th 2005) (six theories by which a nonsignatory may compel arbitration)
- Goldman v. KPMG, LLP, 173 Cal.App.4th 209 (Cal.App.4th 2009) (equitable estoppel requires intertwined contract obligations for nonsignatory to enforce arbitration)
- JSM Tuscany, LLC v. Superior Court, 193 Cal.App.4th 1222 (Cal.App.4th 2011) (discusses standards and scope of arbitration agreements and nonsignatory enforcement)
- County of Contra Costa v. Kaiser Foundation Health Plan, Inc., 47 Cal.App.4th 237 (Cal.App.4th 1996) (limits of equitable estoppel when claims are not grounded in the contract containing arbitration)