Muao v. Grosvenor Properties Ltd.

• Decision Date: 28 June 2002
• Docket Number: No. A095772.,A095772.
• Citation: 99 Cal.App.4th 1085,122 Cal.Rptr.2d 131
• Court: California Court of Appeals Court of Appeals
• Parties: Roy MUAO, Plaintiff and Appellant, v. GROSVENOR PROPERTIES LTD., et. al., Defendants and Respondents.

122 Cal.Rptr.2d 131

99 Cal.App.4th 1085

Roy MUAO, Plaintiff and Appellant, v. GROSVENOR PROPERTIES LTD., et. al., Defendants and Respondents.

No. A095772.

Court of Appeal, First District, Division 3.

June 28, 2002.

Daniel G. O'Donnell, Sacramento, Clancey, Doyle & O'Donnell, for Appellant.

Susan H. Roos, San Francisco, Matthew A. Goodin, Cook and Roos, for Respondent.

PARRILLI, J.

Roy Muao appeals from an order granting defendants' petition to compel arbitration and dismissing his action for wrongful termination.¹ In his briefs, he challenges only that part of the order directing arbitration. Defendants move to dismiss the appeal because Muao's appellate claim is not reviewable at this time. We conclude that under California law, the appeal must be dismissed as premature. Additionally, we reject Muao's argument that review of the arbitration order is permissible at this time under section 16(a)(3) of the Federal Arbitration Act. (9 U.S.C. § 16(a)(3).) However, to correct the erroneous dismissal of the action, we remand the matter to the trial court to vacate the dismissal and to dispose of the defendants' motion for a stay of the action pending arbitration.

FACTUAL AND PROCEDURAL BACKGROUND

Muao sued his employer, Grosvenor Properties, Ltd., and certain current and former employees of the company (hereafter referred to collectively as Grosvenor), seeking money damages based on a claim of wrongful termination.

In lieu of an answer, Grosvenor petitioned to compel arbitration of Muao's claims under sections 1281.2 and 1281.7 of the Code of Civil Procedure² and moved to stay the action pursuant to section 1281.4. The request for arbitration was based on a written agreement signed by Muao, which provided for arbitration of all claims arising from Muao's employment with the company, excluding claims of workers' compensation, unemployment insurance, and any matter within the jurisdiction of the California Labor Commissioner.

Muao opposed the petition to compel arbitration, arguing that the arbitration agreement was procedurally and substantively unconscionable, and against public policy. Additionally, Muao argued he had been coerced into signing the agreement. In reply, Grosvenor argued Muao had not established that the agreement violated public policy or was unconscionable, or that the circumstances under which he signed the agreement were oppressive.

After argument, the trial court granted Grosvenor's petition to compel arbitration, but severed a provision requiring Muao to pay his own attorney's fees. At the conclusion of the hearing, the trial court asked Grosvenor's counsel, "[I]s there any reason I shouldn't dismiss this or stay it? "I mean, [the proposed order] provide[s] for dismissal here." Grosvenor's counsel replied, "There is nothing left." The court then filed an order dated May 23, 2001, which provided: "IT IS HEREBY ORDERED that [Muao's] claims are all subject to a valid, enforceable and irrevocable arbitration agreement. Accordingly, the Court grants [Grosvenor's] petition to compel arbitration, provided that the provision in the arbitration agreement stating that each side bear its own attorneys fees is stricken. Therefore, the above-referenced matter is dismissed." This appeal ensued.

DISCUSSION

1. Under California Law, The Order Compelling Arbitration Is Not Appealable At This Time

Section 1294 lists the orders and judgments that are appealable in judicial proceedings to enforce arbitration agreements.³ "An order directing arbitration, not being one of those orders listed in section 1294 ..., is not appealable." (Laufman v. Hall-Mack Co. (1963) 215 Cal.App.2d 87, 88, 29 Cal.Rptr. 829.) Such an order is reviewed on appeal from the judgment entered after the arbitration is completed or in exceptional circumstances, not present here, by writ of mandate. (Mid-Wilshire Associates v. O'Leary (1992) 7 Cal.App.4th 1450, 1454, 9 Cal.Rptr.2d 862.) Because no judgment has been entered on an arbitration award, the order compelling arbitration is not reviewable at this time.

Muao argues, however, that we may review the order compelling arbitration at this juncture because the order includes a provision dismissing his action at law. It is true, as Muao notes, that the dismissal of the action is deemed a final judgment (§ 581d) and therefore appealable under section 904.1. However, section 906 provides, in relevant part, that "[u]pon an appeal pursuant to 904.1 ..., the reviewing court may review" only an "intermediate ... order ... which involves the merits or necessarily affects the judgment ... appealed from or which substantially affects the rights of a party...." Here, the trial court's order resolved two separate proceedings before it: Muao's action at law and Grosvenor's petition under section 1281.2, "which is in essence a suit in equity to compel specific performance of the arbitration agreement." (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal. App.4th 1790, 1795, 13 Cal.Rptr.2d 678, fn. and citation omitted, declined to extend on another issue by Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 982, fn. 14, 64 Cal.Rptr.2d 843, 938 P.2d 903 (Brock).) "The fate of the action at law has no direct effect on the contractual arbitration proceedings." (Id. at p. 1793, 13 Cal.Rptr.2d 678.) That Grosvenor filed the petition to compel arbitration in lieu of an answer "does not mean ... that the arbitration is a subsidiary proceeding which necessarily falls within the paramount legal action.... [W]hen no legal action has been filed, a petition to compel arbitration may nevertheless be filed. (§ 1281.2.)" (Id. at p. 1799, fn. 7, 13 Cal. Rptr.2d 678.) The trial court "retains a separate, limited jurisdiction over the contractual arbitration which was the subject of the section 1281.2 petition: `After a petition has been filed under this title [i.e., "title 9" (§§ 1280-1294.2)], the court in which such petition was filed retains jurisdiction to determine any subsequent petition involving the same agreement to arbitrate and the same controversy, and any such subsequent petition shall be filed in the same proceeding.' (§ 1292.6 [italics added].)" (Id. at p. 1796, 13 Cal.Rptr.2d 678.) Thus, the order compelling arbitration cannot be said to involve the merits nor does it necessarily affect the order of dismissal of the action at law. (§ 906.) Additionally, requiring the parties to proceed to arbitration at this time does not "substantially affect[ ]" Muao's rights. (§ 906; Laufman v. Hall-Mack Co., supra, 215 Cal.App.2d 87, 89, 29 Cal.Rptr. 829.) Muao may prevail at the arbitration proceeding. If he loses, he can challenge the order compelling arbitration on appeal from any judgment entered on the arbitration award. (§§ 1294; 1294.2; Laufman v. Hall-Mack Co, supra, at pp. 89-90, 29 Cal.Rptr. 829.)

2. Section 16 of the Federal Arbitration Act Does Not Govern The Appealability of The Order Compelling Arbitration in This State Court Proceeding

As an alternative basis for invoking our appellate jurisdiction at this time, Muao argues that because the Federal Arbitration Act (FAA) governs the arbitration proceeding, an immediate appeal of the order compelling arbitration is permitted under section 16(a)(3) of the Act. We disagree.

It is not disputed that this arbitration proceeding is governed by the FAA; and that had the trial court's order been issued by a federal court, the order compelling arbitration would be immediately appealable as "a final decision with respect to an arbitration" under section 16(a)(3) of the FAA. (Green Tree Financial Corp.Ala. v. Randolph (2000) 531 U.S. 79, 84-89, 121 S.Ct. 513, 148 L.Ed.2d 373 (Green Tree).)⁴ Green Tree, however, does not address the applicability of its holding to state court proceedings governed by the FAA. Therefore, we are not bound to follow Green Tree's "federal construction" of what constitutes a "`final decision'" under section 16 of the FAA for purposes of determining the applicability of that section to this state court proceeding. (Johnson v. Fankell (1997) 520 U.S. 911, 916, 117 S.Ct. 1800, 138 L.Ed.2d 108.)

While our courts have not explicitly addressed the applicability of section 16 of the FAA to state court proceedings in California, we do not write on an entirely clean slate. Our Supreme Court and the Court of Appeal, Second District, Division Five have addressed the applicability of other sections of the FAA to state court proceedings. (See Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 405-410, 58 Cal.Rptr.2d 875, 926 P.2d 1061 (Rosenthal) [section 4 of the FAA]; Siegel v. Prudential Ins. Co. (1998) 67 Cal.App.4th 1270, 1272-1291, 79 Cal. Rptr.2d 726 [sections 10 and 12 of the FAA].) In those cases, the courts determined that our state procedural rules regarding the use of summary procedures to determine petitions to compel arbitration (§§ 1281.2, 1290.2) and judicial review of an arbitration award (§ 1286.2) are not preempted by the procedural rules in FAA's sections 4 (jury trial to determine petition to compel arbitration), 10 (grounds for vacating an award) and 12 (procedure for motion to vacate award). (Rosenthal, supra, at pp. 405-410, 58 Cal.Rptr.2d 875, 926 P.2d 1061; Siegel v. Prudential Ins. Co., supra, at pp. 1272-1291, 79 Cal. Rptr.2d 726.) Additionally, before Green Tree, other states with appellate rules similar to ours have held that their state rule, which postponed an appeal of an order compelling arbitration until completion of arbitration, governed in their state court proceedings subject to the FAA even though the order under review would have been immediately appealable under section 16 of the Act had the proceeding been in federal court. (See Weston Sec. Corp. v. Aykanian (1998) 46 Mass.App.Ct.72, 74-78, 703 N.E.2d 1185 (Mass.App.Ct.1998), rev. denied, (1999) 429 Mass. 1107, 710 N.E.2d 604; Marr v. Smith Barney, Harris Upham & Co. (1992) 116 Or.App.517, 520-524, 842 P.2d...