Crown Homes, Inc. v. Landes

• Decision Date: 23 February 1994
• Docket Number: No. B078210,B078210
• Citation: 27 Cal.Rptr.2d 827,22 Cal.App.4th 1273
• Court: California Court of Appeals Court of Appeals
• Parties: , 1994-1 Trade Cases P 70,523 CROWN HOMES, INC. et al., Plaintiffs and Appellants, v. Neil LANDES et al., Defendants and Respondents.

Page 827

27 Cal.Rptr.2d 827

22 Cal.App.4th 1273, 1994-1 Trade Cases P 70,523

CROWN HOMES, INC. et al., Plaintiffs and Appellants, v. Neil LANDES et al., Defendants and Respondents.

No. B078210.

Court of Appeal, Second District, Division 5, California.

Feb. 23, 1994.

Certified for Partial Publication ^*

Rehearing Denied March 11, 1994.

Review Denied May 19, 1994.

Endeman, Lincoln, Turek & Heater and Linda B. Reich and Henry E. Heater, San Diego, for plaintiffs and appellants.

Sheppard, Mullin, Richter & Hampton, Don T. Hibner, Jr., Dani Jo Merryman, Samantha M. Phillips, Los Angeles, for defendants and respondents.

TURNER, Presiding Justice.

I. BACKGROUND

This is an appeal from a judgment granting a motion to confirm an arbitration award pursuant to Code of Civil Procedure section 1286. ¹ Plaintiffs are seven residents of the Stallion Meadows Mobile Home Park: Lydia McGregor; Barbara Robinson; Michael Robinson; David Seim; Pamela Seim; Jerald Vincent; and Marilyn Jewell-Vincent as well as two corporate mobile home dealerships, Apple Homes, Inc. and Crown Homes, Inc. The complaint named as defendants: Neil Landes; Cynthia Landes; and Ernest Goldenfeld; the general partners of Goldland Associates (Goldland), which in turn is alleged to be the developer and owner of Stallion Meadows Mobile Home Park (Stallion). The complaint also named as defendants: L.C. Homes Inc., a mobile home dealer; L.C. Manufactured Housing, Inc.; and Manufactured Housing Construction, Inc. ² Plaintiffs alleged that defendants violated state antitrust laws under the Cartwright Act (Bus. & Prof. Code, § 16700 et seq.) by illegally tying the lease of space in the park to the purchase of mobile homes and "dig-in" packages from L.C. Homes, Inc. As a result, plaintiffs alleged they were forced to pay higher than market prices for their mobile homes and dig-in packages. Apple Homes and Crown Homes alleged they were precluded from selling mobile homes to be placed in the park. The resident plaintiffs also asserted that Mr. Landes, Mr. Goldenfeld, and Mr. Goldland violated Civil Code sections 798.37 and 798.31, which are part of California's Mobilehome Residency Law. (Civ.Code, § 798 et seq.)

In February 1992, defendants filed a motion to compel arbitration as to the resident plaintiffs. Commissioner Robert W. Zakon granted the motion and the arbitration began on October 19, 1992 before retired Judge Leon Savitch. On April 6, 1993, the arbitrator issued an award in favor of defendants in a "Report of Arbitration Proceedings and Statement of Decision by Arbitrator" which was subsequently modified by letter dated May 26, 1993. Defendants moved to confirm the award. Plaintiffs moved to vacate it on the grounds the arbitrator exceeded his powers under California law and the arbitration agreement. The trial court denied plaintiffs' motion to vacate the award; granted defendants' motion to confirm the award; and entered judgment on August 9, 1993, in defendants' favor. Plaintiffs filed a timely appeal from the judgment. In the published portion of his opinion, we hold that antitrust claims arising under the Cartwright Act (Bus. & Prof.Code, § 16700 et seq.) are arbitrable. In so concluding, we disagree with the holding of Bos Material Handling, Inc. v. Crown Controls Corp. (1982) 137 Cal.App.3d 99, 109-112, 186 Cal.Rptr. 740, not because it was wrongly decided in 1982, but the authority it relied upon is no longer viable and persuasive by reason of subsequent United States Supreme Court decisions.

II. DISCUSSION

A.-D. ^**

E. Arbitration of An Antitrust Cause of Action

Plaintiffs argue the arbitration agreement in the leases violated California law insofar as it allowed the parties to agree to arbitrate an antitrust cause of action contrary to the decision of Bos Material Handling, Inc. v. Crown Controls Corp., supra, 137 Cal.App.3d at pages 109-112, 186 Cal.Rptr. 740. Bos held that it would "follow the mainstream of judicial thought ... [and conclude] parties ... cannot agree privately to exclude antitrust issues under the Cartwright Act from judicial scrutiny and determination." (Id. at p. 111, 186 Cal.Rptr. 740 (fn. omitted).) The prevailing judicial thought to which Bos referred to was American Safety Equipment Corp. v. J.P. Maguire & Co. (2d Cir.1968) 391 F.2d 821, 825-828 and Wilko v. Swan (1953) 346 U.S. 427, 437-438, 74 S.Ct. 182, 188-189, 98 L.Ed. 168. ¹¹ American Safety held "the pervasive public interest in enforcement of the [Sherman Anti-Trust Act], and the nature of the claims that arise in such cases, combine to make ... antitrust claims ... inappropriate for arbitration." (American Safety Equipment Corp. v. J.P. Maguire & Co., supra, 391 F.2d at pp. 827-828.) Wilko held a securities dispute was not arbitrable. (Wilko v. Swan, supra, 346 U.S. at p. 438, 74 S.Ct. at p. 189.)

To begin with, American Safety is no longer viable authority. As discussed below, plaintiffs assertion that Bos controls the disposition of this case is unpersuasive. This is because the "mainstream of judicial thought" relied on in Bos has since changed course with the advent of the United States Supreme Court decision of Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 473 U.S. 614, 628-629, 105 S.Ct. 3346, 3354-55, 87 L.Ed.2d 444 which although not directly overruling American Safety, discussed and rejected its analysis. Mitsubishi concluded that nothing in the federal antitrust laws prohibited parties from agreeing to arbitrate antitrust claims which arose out of international commercial transactions. (Ibid.) Although the court found it unnecessary to resolve the legitimacy of the American Safety doctrine as it applied to agreements to arbitrate disputes arising out of domestic transactions, the court "confess[ed] to some skepticism of certain aspects of the American Safety doctrine." (Id. 473 U.S. at p. 632, 105 S.Ct. at p. 3356.) At another point, the Mitsubishi court noted the "absence of any explicit support for such an exception [to the general rule providing for arbitrations] in either the Sherman Act or the Federal Arbitration Act." (Id. 473 U.S. at pp. 628-629, 105 S.Ct. at pp. 3354-3355.)

Mitsubishi declared that the American Safety doctrine was premised upon the following four considerations: first, "private parties play a pivotal role in aiding governmental enforcement of the antitrust laws by means of the private action for treble damages"; second, " 'the strong possibility that contracts which generate antitrust disputes may be contracts of adhesion militates against automatic forum determination by contract' "; third, antitrust issues which are prone to complexity, require sophisticated legal and economic analysis, and are therefore " 'ill-adapted to strengths of the arbitral process, i.e., expedition, minimal requirements of written rationale, simplicity, resort to basic concepts of common sense and simple equity' "; and fourth, just as " 'issues of war and peace are too important to be vested in the generals, ... decisions as to antitrust regulation of business are too important to be lodged in the arbitrators chosen from the business community....' " (Mitsubishi Motors v. Soler Chrysler-Plymouth, supra, 473 U.S. at p. 632, 105 S.Ct. at p. 3356; original italics.)

The Mitsubishi court then proceeded to address each of these ingredients and found them unpersuasive in terms of prohibiting arbitration of antitrust disputes arising from international business transactions. (Mitsubishi Motors v. Soler Chrysler-Plymouth, supra, 473 U.S. at pp. 632-640, 105 S.Ct. at pp. 3356-3361.) First, in terms of the role of the treble damage provisions of the Sherman Act, being part of the national policy designed to enforce antitrust laws, the Mitsubishi court held: "The importance of the private [treble-]damages remedy, however, does not compel the conclusion that it may not be sought outside an American court. Notwithstanding its important incidental policing function, the treble-damages cause of action conferred on private parties by § 4 of the Clayton Act, 15 U.S.C. § 15, and pursued by [the defendant] by way of its third counterclaim, seeks primarily to enable an injured competitor to gain compensation for that injury. [p] 'Section 4 ... is in essence a remedial provision.' " (Id. at p. 635, 105 S.Ct. at p. 3358.) The Mitsubishi court stated the second concern cited in American Safety relating to adhesion contracts was unjustified because the mere appearance of an antitrust dispute did not warrant invalidation of arbitration as a selected forum when there was no showing or basis for assuming the arbitral process was inadequate or unfair. (Id. at pp. 632-633, 105 S.Ct. at pp. 3356-3357.) The court also rejected the notion that the potential complexity of the issues was sufficient "to ward off arbitration." (Id. at p. 633, 105 S.Ct. at p. 3356.) Mitsubishi further concluded that an arbitration panel did not "pose too great a danger of innate hostility to the constraints on business conduct that antitrust law imposes." (Id. at p. 634, 105 S.Ct. at p. 3357.) In so doing, the court "decline[d] to indulge the presumption that the parties and arbitral body conducting a proceeding will be unable or unwilling to retain competent, conscientious, and impartial arbitrators." (Ibid.) Finally, the court concluded that the core of American Safety doctrine--the importance of private damages remedies in enforcing the antitrust laws--did not warrant the conclusion that the remedy may not be sought outside the American courts. (Id. at pp. 634-635, 105 S.Ct. at pp. 3357-3358.) Accordingly, the Mitsubishi court held American courts should "enforce an agreement to resolve antitrust claims by arbitration when that agreement arises from an international transaction." (Id. at pp. 624, 639-640, 105 S.Ct. at pp. 3352, 3360-3361). ¹²

The United States Supreme Court subsequently applied the principles of Mitsubishi in the context of domestic securities transactions to...