Bodine v. United Aircraft Corp.

Citation125 Cal.Rptr. 344,52 Cal.App.3d 940
CourtCalifornia Court of Appeals
Decision Date10 November 1975
PartiesAlbert G. BODINE, Jr., Individually and doing business as Bodine Soundrive Company, and Soundrill Corporation, a corporation, Plaintiffs and Respondents, v. UNITED AIRCRAFT CORPORATION, a corporation, Defendant and Appellant. Civ. 45391.

Ward & Heyler, Guy E. Ward, Moore & Moore, Henry T. Moore, Jr., Robert H. Moore, Los Angeles, for plaintiffs and respondents.

O'Melveny & Myers, Sidney H. Wall and Mark Wood, Los Angeles, for defendant and appellant.

KAUS, Presiding Justice.

Defendant United Aircraft Corporation ('United') appeals from trial court orders denying its petition to order arbitration and granting injunction restraining United from proceeding with arbitration.


The genesis of the basic dispute between the parties is a contract, dated January 1, 1960, under which plaintiff agreed to disclose to United certain studies, engineering data, trade secrets and inventions, for an option period of six months. During that option period--later extended to nine months--United had the power to acquire certain licenses to exploit the data furnished to it, for which licenses it was to pay a royalty of $100,000 in cash, plus minimum royalties of $10,000 per month against specified percentages of sales. Concurrently with this 'royalty license' agreement plaintiff executed a letter dated December 31, 1959, which extended to United a further option in the event it exercised the royalty option under January 1, 1960 agreement: United could discharge its duty to pay royalties and acquire a 'paid-up license' by paying $15,000,000 in addition to all royalties theretofore paid or accrued, or $20,000,000, to be computed by crediting royalties already paid against said sum.

The January 1, 1960 contract contained an arbitration clause, copied below, 1 and also provided that it should 'be governed by the laws of the State of Connecticut.'

The option letter of December 31, 1959, made no reference to arbitration. 2

Disagreements between the parties developed in due course. Plaintiff claimed and United denied that it had in fact exercised its option by exploiting and using the data which plaintiff had furnished. On February 8, 1963, plaintiff filed his first amended complaint in this case. It contained five counts: Count 1 was based on the theory that United had exercised the option for a paid-up license and asked for damages in the sum of $15,000,000; Count 2 was based on the contract for a royalty license and claimed damages in a like amount; Count 3 relied on an implied agreement to pay $15,000,000 for the use of the data furnished by plaintiff; 3 Count 4 was a common count, based apparently on the paid-up license theory; Count 5 alleged promissory fraud by United in connection with the royalty license agreement pleaded in Count 2.

United answered the amended complaint on March 29, 1963. It also counterclaimed for $76,000, claiming plaintiff had breached the royalty license agreement. Copies of both writings, including of course, the arbitration provision contrained in the royalty license agreement, were attached to defendant's answer. No attempt to seek arbitration was, however, made until September 21, 1973.

Much had happened in the intervening decade. After extensive discovery, the parties finally proceeded to jury trial in January 1968. During the trial, plaintiff was nonsuited on Counts 1 and 4. On March 8, 1968, the jury returned a verdict against plaintiff on Count 3, but awarded him compensatory and punitive damages for a total amount of $13,500,000 on Counts 2 and 5. The trial court, however, granted defendant a new trial on those counts. Both parties appealed. In December 1972, Division Two of this court, in an Thus, the dispute remaining to be tried was limited to the royalty license agreement, set forth in Count 2, and the alleged fraudulent inducement in connection therewith--Count 5.

unpublished opinion, affirmed the trial court in all respects. After denial of a petition for hearing by the California Supreme Court, the matter became final.

In September 1973 defendant sent plaintiff a letter demanding arbitration of the disputes set forth in Counts 2 and 5. In October 1973 plaintiff noticed a motion for an injunction to enjoin arbitration proceedings and three days later defendant filed a petition to order arbitration.

The trial court found that defendant had weaived and therefore lost its right to arbitration. We agree.


United appreciates the difficulty of its position: Without ever asserting its right to arbitrate, it participated in extensive litigation through the pleading, discovery, trial, new trail and appeal stages. It recognizes that normally its attempt to avoid submission of the issues framed by Counts 2 and 5 to another California jury would be quixotic, but contends that, notwithstanding the ten-year delay, under the 'unique' circumstances of this case, it is entitled to arbitration as a matter of law.

United's theory is that its 1973 demand to arbitrate Counts 2 and 5 was timely because it had 'no viable right to arbitration' until the previous appeal eliminated the non-arbitrable Counts 1, 3, and 4: therefore, any attempt to demand arbitration before that decision became final would have been 'futile' and 'doomed to failure.' The present posture of the case is therefore, in United's view, precisely the same as it would have been, had United asserted its right to arbitrate when it had its first chance to do so.

We disagree, even if we accept certain debatable premises of United's position. 4

United is, of course, aware that the pendency of non-arbitrable as well as arbitrable issues between litigants is no obstacle to a petition for arbitration. Section 1281.2 of the Code of Civil Procedure expressly provides in relevant part:

'If the court determines that there are other issues between the petitioner and the respondent which are not subject to arbitration and which are the subject of a pending action or special proceeding between the petitioner and the respondent and that a determination of such issues may make the arbitration unnecessary, the court may delay its order to arbitrate until the determination of such other issues or until such earlier time as the court specifies.'

United asserts, however, that had it sought arbitration in 1963, the court would inevitably have stayed arbitration on Count 2 and ordered the parties to try the other counts first.

While we do not agree with United's assumption that this would necessarily have been the only correct ruling in 1963, the issue is irrelevant. 5 By not even submitting the question whether the parties should arbitrate first and litigate later--or vice versa--and by litigating all counts, United clearly waived the arbitration clause of the royalty license contract.

Arbitration is not a matter of absolute right. Section 1281.2 of the Code of Civil Procedure provides that the court shall order arbitration unless it determines that the right to compel arbitration has been waived. The law is well established that 'the arbitration provision of a contract may be waived by either or both of the parties by litigating the dispute which would be arbitrable under the provision and not raising the question of the arbitration provision (citations) . . .' (Local 659, I.A.T.S.E. v. Color Corp. Amer., 47 Cal.2d 189, 194--195, 302 P.2d 294, 297.) Litigate is, of course, exactly what defendant did.

This rule is not a relic of the era of judicial hostility toward litigation. In Gunderson v. Superior Court, 46 Cal.App.3d 138, 143, 120 Cal.Rptr. 35, 38, the court stated: 'Arbitration is a recognized and favored means by which parties expeditiously and...

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    ...exists in favor of a party may be lost through a failure properly and timely to assert the right." Bodine v. United Aircraft Corp., 52 Cal.App.3d 940, 945, 125 Cal.Rptr. 344 (1975), quoting Gunderson v. Superior Court, 46 Cal.App.3d 138, 143, 120 Cal.Rptr. 35 (1975). "[A] party must 'procee......
  • Sobremonte v. Superior Court (Bank of America Nat. Trust and Sav. Ass'n)
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    ...Waived Its Right To Compel Arbitration Standard of Review "Arbitration is not a matter of absolute right." (Bodine v. United Aircraft Corp. (1975) 52 Cal.App.3d 940, 945, 125 344.) Code of Civil Procedure section 1281.2 provides that "[o]n petition of a party to an arbitration agreement all......
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