Defendants filed motions to compel arbitration of these claims on the basis of three separate agreements, at least one of which was executed by each plaintiff. The trial court found the arbitratiоn clauses in two of the agreements inapplicable, but it compelled the signatories of the third agreement to arbitrate with their brokers. Invoking the doctrine of equitable estoppel, the court also required the signatories of the third agreement to arbitrate their claims against the service providers, who were not parties to the arbitration agreements. Defendants have appealed the court's refusal to compel arbitration with the remaining plaintiffs, while the plaintiffs who were ordered to arbitration have cross-appealed that order.
We reverse the trial court's ruling on the two arbitration clauses it found inapplicable. Because each of the plaintiffs executed one or the other of these two agreements, we remand for entry of an order compelling arbitration by all plaintiffs. We dismiss the cross-appeal of the plaintiffs who were required to arbitrate under the arbitration clause contained in the third agreement because an order compelling arbitration is not appealable.
I. BACKGROUND
In 2015, two sets of plaintiffs filed two materially identical class action lawsuits against several real estate brokers (broker defendants) and a group of
Plaintiffs' claims are premised on the broker defendants' use of a software program known as "TransactionPoint," alleging TransactionPoint was used to facilitate improper payments from the service provider defendants to the broker defendants in the course of the sales. As one of the complaints explained the gravamen of the claims, the brokers used TransactionPoint to "prеpare transaction documents and order related real estate settlement services (such as title insurance, escrow, natural hazard disclosure reports, and home-warranty contracts) for Plaintiffs and other members of the Class. In doing so, [the brokers] entered into sublicensing agreements with providers of real estate settlement services, including [the service provider defendants].... Pursuant to these agreements, [the broker defendants] received undisclosed payments from the [service provider defendants] for the real estate settlement services ordered through TransactionPoint." Plaintiffs allege that payments under the sublicense agreements operated in the nature of kickbacks; when a broker ordered settlement services from a service provider through TransactionPoint, the service provider paid the broker a "sublicense fee," purportedly for the service provider's use of the software.
The complaints allege claims for breach of fiduciary duty, fraud, unfair competition, and unjust enrichment.
Defendants filed motions to compel arbitration of plaintiffs' claims, based on arbitration clauses contained in printed form agreements executed by plaintiffs in connection with the home sales. Because plaintiffs did not all execute the same agreements, three different arbitration clauses in three separate agreements were involved. In their motion, defendants contended that all three arbitration clauses require arbitration of the claims in plaintiffs' complaints.
Second, the 2007 version of a form "Residential Purchase Agreement" (hereafter the 2007 RPA) required arbitration of certain disputes between buyers or sellers and their brokers, even though the brokers were not parties to the agreement. Specifically,
The arbitration clauses in each of these agreements required the parties affirmatively to manifest their assent to arbitration by initialing the clause. For purposes of the motions to compel, the plaintiffs fall into four groups, based on the particular arbitration clause or clauses to which they agreed. The two plaintiffs in Laymon , Theodore and Amy Laymon (Laymons) are bound only by the 2007 RPA arbitration clause, while Christine Himpler, a Hernandez plaintiff, is bound only by the RLA arbitration clause.
The trial court heard the motions to compel arbitration in the two matters jointly. In a detailed written decision, the court concluded the arbitration clauses in the RLA and the 2007 RPA do not cover the claims in the complaints, but the clause in the 2010 RPA does cover them. It therefore denied arbitration with respect to the claims of the Laymons, Himpler, and the McCants group, but it granted the motion with respect to the Hernandez group. The court reasoned that the RLA's arbitration clause does not apply
II. DISCUSSION
Defendants have appealed the trial court's rulings with respect to the Laymons, the McCants group, and Himpler, while the Hernandez group has appealed the court's rulings with respect to their claims. They also challenge the trial court's ruling that the doctrine of equitable estoppel permits the service provider defendants to demand arbitration under the 2010 RPA. Defendants have moved to dismiss the Hernandez group's cross-appeal, arguing an order compelling arbitration is not appealable.
A. Applicable Law of Arbitration
The relevant law was recently summarized in
"A party who claims that there is an applicable written arbitration agreement may petition the superior court for an order compelling the parties to arbitrate. [Citation.] ... 'In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration....' [Citation.] ... Where, as here, 'there is no "factual dispute as to the language of [the] agreement" [citation] or "conflicting extrinsic evidence" regarding the terms of the contract [citation], our standard of review of a trial court order granting or denying a motion to compel arbitration under [Code of Civil Procedure] section 1281.2 is de novo.' [Citation.] 'We are not bound by the trial court's construction or interpretation.' [Citation.]
B. Arbitration Under the RLA
As noted above, the RLA requires arbitration between a client and broker of disputes "regarding the obligation to pay compensation under this Agreement." The trial court concluded, and plaintiffs argue here, that these claims do not concern plaintiffs' obligation to pay compensation because "plaintiffs do not dispute this obligation. Instead, they contend that the brokers breached their fiduciary duty by failing to disclose that they were also receiving other compensation from third parties."
If not for plaintiffs' claim for an accounting and disgorgement, we would be inclined to agree with the trial court's ruling. Compensation under the RLA is computed as a percentage of a home's sale or listing price and is payable if (1) a potential buyer offers to pay the listing price, regardless of whether the property actually sells; (2) the seller enters into a contract of sale within
Putting aside the claim for disgorgement, this action seeks damages for the broker defendants' acceptance of kickbacks and the service provider defendants' payment of those kickbacks, in violation of the defendants' contractual and tоrt duties to disclose their dealings. On its surface, this would not appear to implicate the "obligation to pay compensation," since it is largely independent of the brokers' primary function under the RLA of finding a buyer.
Nonetheless, we cannot ignore the plain language of the arbitration clause (Rice v. Downs , supra , 248 Cal.App.4th at pp. 185-186,
Notwithstanding their claim to return of the commissions, plaintiffs contend the RLA arbitration clause does not apply because they do not disputе their obligation to pay them-in other words, they concede the broker defendants earned their commissions by selling the homes. As plaintiffs argue, "this is a dispute about the broker's right to keep compensation already received, not about Plaintiffs' 'obligation to pay compensation.' " The distinction is unavailing. In making the argument, plaintiffs are attempting to separate the broker defendants' performance of services under the RLA from the allegedly wrongful conduct justifying disgorgement. In effect, plaintiffs contend, the broker defendants became entitled to receive the
C. The 2007 RPA
Paragraph 17B(3) of the 2007 RPA states that "Buyer and Seller agree to mediate and arbitrate disputes or claims involving either or both Brokers, consistent with [paragraphs ] 17A and B ," provided the broker agrees to arbitrate the dispute. (Italics added.) In interpreting the clause, the trial court focused on the italicized language, concluding that because paragraphs 17A and 17B(1) require mediation and arbitration of disputes between seller and buyer, the requirement of consistency limits the duty to arbitrate disputes with brokers to those disputes that also involve a dispute between both parties to the sale. We find that interpretation untenable beсause it fails to take into account the full scope of paragraphs 17A and 17B.
Paragraph 17A of the 2007 RPA does not merely require mediation of disputes between a buyer and seller. It also (1) specifies that mediation is required regardless of whether the parties have initialed the arbitration clause, (2) requires the parties to split mediation costs, and (3) states that a party forfeits the right to attorney fees if the party fails to mediate. A reasonable reading of the requirement in paragraph 17B(3) of consistency with paragraph 17A is that the mediation conditions established in paragraph 17A apрly to party/broker arbitrations as well as to party/party arbitrations. Such a reading does not require, or even suggest, that party/broker arbitration must be restricted to disputes involving both parties.
Similarly, paragraph 17B of the 2007 RPA (1) requires buyers and sellers to arbitrate any dispute, (2) specifies the qualifications of the arbitrator, (3) establishes the applicable substantive and procedural law, (4) authorizes
In making their argument, plaintiffs mischaracterize the 2007 RPA arbitration clause as containing a "clear limitation ... that any arbitration between 'Buyer and Seller' and 'either or both Brokers' be 'consistent with 17A and B.' " This is not a fair reading of the language of the clause. Instead, it states both buyer and
Plaintiffs also contend the 2007 RPA arbitration clause should be interpreted against the broker defendants because it is adhesive. An arbitration clause is a contract of adhesion if "it lies within a standardized form drafted and imposed by a pаrty with superior bargaining strength, leaving plaintiffs with only the option of adhering to the contract or rejecting it." (Magno v. The College Network, Inc. (2016)
Because every plaintiff initialed an аrbitration clause either in the RLA or the 2007 RPA, our holdings have the effect of requiring every plaintiff to arbitrate. Plaintiffs' argument with respect to
D. The Hernandez Group's Cross-appeal
The Hernandez group has appealed the portion of the trial court's decision requiring them to arbitrate their claims against both the broker defendants and the service provider defendants under the 2010 RPA. We agree with defendants that the court's order is nonappealable аnd grant their motion to dismiss the Hernandez group's cross-appeal.
Under California law, the right of appeal is statutory. (Gastelum v. Remax Internat., Inc. (2016)
The Hernandez group contends the trial court's order compelling them to arbitrate is nonetheless appealable under Code of Civil Procedure section 1294.2, which states that in any aрpeal under the title of the Code of Civil Procedure governing arbitration, "the court may review the decision and any intermediate ruling, proceeding, order or decision which involves the merits or necessarily affects the order or judgment appealed from, or which substantially affects the rights of a party." This section, which "simply ensures that the appellate court can effectuate its ruling on an arbitration order, by permitting review of any other trial court decision affecting that specific order," does not, however, make an order granting arbitration appealable merely becаuse it was rendered at the same time as an appealable order denying arbitration. (Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005)
III. DISPOSITION
The portion of the trial court's order denying arbitration pursuant to the RLA and the 2007 RPA is vacated, and those rulings are reversed. The matter is remanded to the trial court with instructions to enter an order compelling all plaintiffs
We concur:
Humes, P.J.
Dondero, J.
Notes
In Laymon v. J. Rockcliff, Inc., case No. A147464 (Laymon ), the broker defendants are J. Rockcliff, Inc. and Jeffrey W. Sposito, while the service provider defendants are Ticor Title Company of California, Fidelity National Home Warranty Company, Chicago Title Company, and Fidelity National Title Company. In Hernandez v. Mason-McDuffie Real Estate, Inc., case No. A147469 (Hernandez ), the broker defendants are Mason-McDuffie Real Estate, Inc., Mason-McDuffie of Marin County, L.P., Avelino David Cobo, Melody B. Royal, Darren C. Hall, and Edmond L. Krafchow, while the service provider defendants are the same as those in Laymon.
For the most part, these claims are alleged against all defendants, but some of the claims exclude defendant Fidelity National Home Warranty Company.
As relevant here, the full text of paragraph 17 of the 2007 RPA reads:
"17. DISPUTE RESOLUTION:
"A. MEDIATION: Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action. Paragraphs 17B(2) and (3) below apply to mediation whether or not the Arbitration provision is initialed. Mediation fees, if any, shall be divided equally among the parties involved. If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the mattеr through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action. THIS MEDIATION PROVISION APPLIES WHETHER OR NOT THE ARBITRATION PROVISION IS INITIALED.
"B. ARBITRATION OF DISPUTES: (1) Buyer and Seller agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration, including and subject to paragraphs 17B(2) and (3) below. The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of residential real estate Law experience, unless the parties mutually agree to a different arbitrator, who shall render an award in accordance with substantive California Law. The parties shall have the right to discovery in accordance with California Code of Civil Procedure § 1283.06. In all other respects, the arbitration shall be conducted in accordance with Title 9 of Part III of the California Code of Civil Procedure. Judgment upon the award of the arbitrator(s) may be entered into any court having jurisdiction. Interpretation of this agreement to arbitrate shall be governed by the Federal Arbitration Act.
"(2) EXCLUSIONS FROM MEDIATION AND ARBITRATION: ... [This subparagraph lists a variety of "matters" that arе excluded from arbitration, such as foreclosure and unlawful detainer proceedings. We do not quote the text because none of the exclusions are relevant here.]
"(3) BROKERS: Buyer and Seller agree to mediate and arbitrate disputes or claims involving either or both Brokers, consistent with 17A and B, provided either or both Brokers shall have agreed to such mediation or arbitration prior to, or within a reasonable time after, the dispute or claim is presented to Brokers. Any election by either or both Brokers to participate in mediation or arbitration shall not result in Brokers being deemed parties to the Agreement."
As required by Code of Civil Procedure section 1298, subdivision (c), the foregoing is followed by a "notice" informing the parties that agreeing to the arbitration provision is voluntary and will result in forfeiture of the right to judicial action.
Himpler signed the 2010 RPA but did not initial the arbitration provision. We assume Himpler is not bound by that provision, and defendants do not contend otherwise. Defendants state in their brief the Laymons signed an RLA but did not initial the arbitration provision, but we have not located a copy of that document in the record. Regardless, defendants do not contend the Laymons are bound by the RLA arbitration provision.
In reаching this conclusion, we do not intend to suggest any view with respect to the availability of disgorgement of commissions as a remedy under these circumstances. The significant issue under the RLA is the existence of a dispute, not the proper resolution of the dispute.
In making their argument, plaintiffs include a lengthy discussion of Shaw v. People ex rel. Chiang (2009)
Plaintiffs also сontend the parties would reasonably have expected the party/broker obligation to apply only to disputes involving both parties. We fail to understand why the parties' expectations would differ from the most sensible reading of the language.
Hock Investment, which considered the issue of mutuality, is readily distinguishable. In Hock Investment, one of the parties initialed the arbitration provision, while the other did not. The initialing party argued it could not be compelled to arbitrate because, in the absence of the other party's initials, the provision lacked mutuality. The court concluded it was unnecessary to address the argument because, it sensibly held, no agreement to arbitrate was formed when one party declined to initial the provision. (Hock Investment, supra, 68 Cal.App.4th at pp. 91-92,