Opinion
B226831
08-17-2011
JOHN AMIS Plaintiff and Respondent, v. GREENBERG TRAURIG, LLP et al., Defendants and Appellants.
Gaims, Weil, West & Epstein, Alan Jay Weil, Steven S. Davis and Andrew M. Vogel for Defendants and Appellants. Roger L. Stanard for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC426815)
APPEAL from an order of the Superior Court of Los Angeles County, Zaven V. Sinanian, Judge. Affirmed.
Gaims, Weil, West & Epstein, Alan Jay Weil, Steven S. Davis and Andrew M. Vogel for Defendants and Appellants.
Roger L. Stanard for Plaintiff and Respondent.
INTRODUCTION
Defendants Greenberg Traurig, LLP (GT), Naoki Kawada and John Gatti appeal an order denying their motion to compel plaintiff John Amis, their former client, to arbitrate his claims against them. We affirm.
Defendants' arguments rest on their interpretation of two key documents, both of which are dated September 27, 2007. The first is a letter whereby GT agreed to represent Pacific Marketing Works, Inc. (PMW) in a lawsuit (the engagement agreement). The second is an agreement signed by various individuals and entities, including Amis, which purports to waive conflicts of interest GT had in connection with the lawsuit (the waiver agreement). The engagement agreement contained an arbitration clause; the waiver agreement did not.
Defendants contend that under the engagement agreement and waiver agreement they had the right to compel arbitration of this case. We disagree. Nothing in the engagement agreement or the waiver agreement requires Amis to arbitrate any of the causes of action he has asserted. Further, for reasons we shall explain, we reject defendants' argument that Amis is compelled to arbitrate this suit under the doctrine of equitable estoppel.
FACTUTAL AND PROCEDURAL BACKGROUND
GT is an international law firm and a New York limited liability partnership with principal offices in Miami, Florida. The firm represents clients throughout the United States and the world. When the events that gave rise to this action took place, Kawada and Gatti were attorneys working in GT's Santa Monica, California office, and were either partners or shareholders of the firm. Amis was an officer and 10 percent shareholder of PMW, a California corporation.
1. The Path Action
In May 2006 PMW and its subsidiary Habitual, LLC (Habitual) commenced an action (the Path Action) in Los Angeles County Superior Court against Path Productions, LLC, Michael Colovos, and Nicole Colovos (together Path) for breach of contract and various torts. A year later, in May 2007, Path filed a first amended cross-complaint against PMW, Habitual, and Amis, as well as Yoshi Kato, Toshi Fujita and Kats Fukushima, who were officers, directors and shareholders of PMW. The first amended cross-complaint set forth breach of contract and tort causes of action and alleged that Amis, Kato, Fujita and Fukushima were alter egos of PMW and Habitual.
2. The Engagement Agreement
The engagement agreement provides that GT will represent PMW in the Path Action. It defines PMW as the "Client." The document is in the form of a letter from Kawada of GT to Fukushima of PMW. On the first page it states: "It is our policy to represent only the person or entity identified in this engagement letter. Unless specifically stated otherwise, our representation of Client does not extend to any of Client's affiliates. For example, our representation does not include any of Client's parent companies, subsidiaries, sister corporations, employees, officers, directors, shareholders or partners, or any entities in which you own or share an interest." (Italics added.)
The engagement agreement further provides: "Arbitration of Malpractice Claims: If a dispute arises between GT and Client regarding whether any legal services rendered by GT were improperly, negligently, or incompetently rendered, such dispute shall be submitted for arbitration within one year after GT ceases to provide services to Client on the matter in question." (Italics added.) The engagement agreement does not state anything about the arbitration of a dispute between GT and Client's affiliates.
Although the engagement agreement includes provisions regarding GT's existing or potential conflicts of interest, it does not refer to the waiver agreement. The engagement agreement requires PMW to pay GT a $50,000 retainer.
The engagement agreement has a signature space for PMW to be signed by Fukushima as its president and CEO. There is no signature space for Amis, who did not sign the document.
3. The Waiver Agreement
While the Path Action was pending GT was representing Sojitz Corporation (Sojitz) in connection with a proposed transaction to acquire certain PMW assets. GT was thus simultaneously negotiating against PMW in a business transaction while representing PMW in a lawsuit. The waiver agreement relates to GT's conflict of interest.
The document consists of a letter from GT to PMW and Sojitz. In the first paragraph of the letter it states that PMW "has asked" GT to represent PMW, Habitual, Fukushima, Kato, Fujita and Amis in the Path Action. The waiver agreement, however, does not refer to the engagement agreement, nor does it state that GT represents Amis pursuant to a written contract.
The waiver agreement defines Habitual, Fukushima, Kato, Fujita and Amis as PMW's "Affiliates." It further provides, inter alia, that "PMW and each of its Affiliates hereby: [¶] . . . [¶] 1. Waives any right it may have to assert that GT's representation of PMW and/or any of its Affiliates in the [Path Action] creates or constitutes a conflict of interest . . . ."
There is no arbitration clause in the waiver agreement. Amis signed the waiver agreement.
4. Conflicting Evidence Regarding the Relationship Between the Engagement Agreement and Waiver Agreement
Defendant Kawada stated in a declaration that he "caused" the engagement agreement and waiver agreement "to be prepared to govern the firm's services in the [Path Action.]" Kawada further stated that his secretary e-mailed the engagement agreement and waiver agreement at the same time to Amis and other PMW affiliates.
Amis stated in his declaration that the engagement agreement was "never presented" to him for signature. He further stated: "I have no recollection of seeing this engagement letter until preparing for the filing of this action. At no time did anyone from GT ever present me with an engagement letter or request that I sign the engagement letter referred to above."
In addition, Amis stated the following regarding the purpose of the waiver agreement: "I understood this letter to address the fact that GT represented [Sojitz] in its effort to purchase the assets of PMW. Because of that representation, I understood that there was a conflict of interest between GT's representation of Sojitz and its representation of PMW and that this conflict would need to be waived in order for GT to assume representation of PMW." Amis thus explained his consent to the waiver agreement without any reference to the engagement agreement.
5. The Settlement of the Path Action and Amis's Bankruptcy Petition
In a sworn declaration Amis described the circumstances leading to the settlement of the Path Action, and its affect on Amis, in the following way: "In November 2007, GT recommended that I agree to settle [the Path Action] by signing a settlement agreement and Stipulation For Entry of Judgment in which I was personally liable for the payment of $2,400,000 to the cross-defendants in that action, Path Productions, Inc., Michael Colovos and Nicole Colovos. At no time did I have the financial resources with which to pay this money. GT never advised me of my risks of being found liable for this money had the case proceeded to trial. As the result of following GT's advice, I signed the settlement documents. Within a few weeks of the settlement, GT's other client, Sojitz, refused to proceed with its purchase of PMW's assets. As a result, judgment was entered against PMW, the other three shareholders, and me. PMW, the other three shareholders and I were forced to file bankruptcy as a result."
On October 29, 2008, Amis filed a petition for bankruptcy in the United States Bankruptcy Court for the Central District of California. Since that date Amis has been a debtor-in-possession.
6. The Complaint
On November 24, 2009, Amis, individually and as debtor-in-possession, filed the complaint in this action against GT, Kawada and Gatti. The complaint sets forth causes of action for breach of fiduciary duty, attorney malpractice and breach of written warranty. It alleges that although the engagement agreement "expressly excluded" PMW's employees, officers and shareholders, defendants "provided legal representation for Amis and the other PMW shareholders" in the Path Action. The complaint does not allege that Amis was a party to the engagement agreement, or that defendants breached that agreement. It does, however, allege that GT breached the waiver agreement.
The complaint further alleges that the waiver agreement was "ineffectual" because defendants failed to obtain Amis's informed written consent. It also alleges that defendants breached their fiduciary duties by, inter alia, failing to advise Amis of "the risks involved for his personal liability under the proposed settlement agreement and stipulated judgment and the reasonable alternative to [Amis's] personal liability of making the settlement agreement contingent upon Sojitz's acquisition of PMW's assets."
7. Defendants' Motion to Compel Arbitration
On April 30, 2010, defendants filed a motion to compel arbitration and to stay action pending arbitration. In a 22-page minute order dated August 2, 2010, the trial court denied the motion. The court found that the engagement agreement and the waiver agreement do not constitute a single contract. With respect to this issue, the court stated: "Amis did not consent to an arbitration provision in [the agreement] simply because he signed his own agreement, [the waiver agreement], with GT."
The court further stated: "[I]t is unclear whether Amis was aware of the arbitration agreement that was included in the Engagement Agreement. Amis did receive an e-mail that included the Engagement Agreement and the Waiver, however only the signed Waiver was returned to GT."
Additionally, the trial court distinguished this case from a case where the non-signatory of a contract "accepted the benefits emanating from the contract." The trial court stated: "Here, it is unclear whether the Engagement Agreement or the Waiver governed the attorney-client relationship between Amis and GT. More importantly, the Engagement Agreement between PMW and GT specifically excluded '[c]lient's affiliates.' "
Defendants timely appealed the trial court's order denying their motion to compel arbitration.
An order denying a motion to compel arbitration is appealable. (Code Civ. Proc., § 1294, subd. (a); Valentine Capital Asset Management, Inc. v. Agahi (2009) 174 Cal.App.4th 606, 612, fn. 5.)
CONTENTIONS
Defendants contend that the trial court was required to grant their motion to compel arbitration under both the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) and the California Arbitration Act (Code of Civ. Proc., § 1280 et seq.). In particular, defendants argue that Amis was bound by the arbitration provision in the engagement agreement even though he did not sign that agreement because (1) he was an agent of a signatory, namely PMW; (2) he accepted the benefits of the engagement agreement; (3) he is bound by the arbitration provision under the doctrine of equitable estoppel; and (4) under Civil Code section 1642 the waiver agreement and engagement agreement must be construed as one contract. In the alternative, defendants contend that the scope of the arbitration provision in the engagement agreement must itself be arbitrated.
Amis denies that the FAA governs this dispute. He further denies that he is bound by the arbitration provision in the engagement agreement or that he was a party to that contract, and specifically contends that each of the four main arguments raised by defendants is erroneous. Alternatively, Amis argues that if he is bound by the engagement agreement, the contract is voidable by him pursuant to Business and Professions Code section 6148, which he contends defendants violated. Defendants deny violating this statute and contend that the FAA preempts the application of it to invalidate an arbitration clause.
DISCUSSION
1. Standard of Review
To the extent a trial court's decision on a motion to compel arbitration is based on disputed facts, we review the decision for substantial evidence. (Metalclad Corp. v.Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1716 (Metalclad).)If the facts are not disputed, we conduct a de novo review. (Ibid.)
Here, the facts are generally undisputed with a few exceptions. Amis and defendants dispute whether Amis received the engagement agreement and waiver agreement at the same time. In their declarations they also make conflicting statements about the intentions of the parties regarding the two key documents in this case. Additionally, although the parties agree that GT represented Amis in the Path Action, they dispute whether GT's representation of Amis was pursuant to the engagement agreement and the waiver agreement.
2. The FAA Governs This Case
The FAA applies to a "written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . ." (9 U.S.C. § 2.) "Commerce" is defined by the FAA to include "commerce among the several States or with foreign nations." (9 U.S.C. § 1.) The United States Supreme Court has interpreted the words "involving commerce" as broadly as the term "affecting commerce." (Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265, 277 (Allied-Bruce).)Congress thus intended to exercise its "commerce power to the full" when it enacted the FAA. (Id. at p. 277.)
The arbitration clause at issue is in the engagement agreement. Under this agreement GT, a New York company and international law firm with principal offices in Florida, agreed to represent PMW, a California company, in a lawsuit in California against, among other parties, Path Productions, LLC, a Delaware limited liability company. We have no trouble holding that the engagement agreement is a contract evidencing a transaction involving commerce within the meaning of the FAA. (See Williams v. Katten, Muchin & Zavis (N.D. Ill. 1993) 837 F.Supp. 1430, 1437 [holding that a partnership agreement of a national law firm was a contract evidencing a transaction involving commerce]; Lucido v. Cravath, Swaine & Moore (S.D.N.Y. 1977) 425 F.Supp. 123, 126-127 [holding that an international law firm was engaged in an industry affecting commerce].)'
3. The Engagement Agreement and Waiver Agreement Do Not Require Amis to Arbitrate His Claims
There is a strong federal and state policy in favor of arbitration. (Metalclad, supra, 109 Cal.App.4th at p. 1712; Victoria v. Superior Court (1985) 40 Cal.3d 734, 744 (Victoria). Nonetheless, " 'arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.' " (AT&T Technologies, Inc. v. Communications Workers of America (1986) 475 U.S. 643, 648 (AT&T Technologies); accord Victoria, at p. 744 [" ' "there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate" ' "].) Although federal law governs the interpretation and validity of an arbitration clause subject to the FAA, the federal courts apply ordinary state-law principles that govern the formation of contracts. (First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944 (First Options); Neal v. Hardee's Food Systems, Inc. (5th Cir. 1990) 918 F.2d 34, 37, fn. 5; Maggio v. Winward Capital Management Co. (2000) 80 Cal.App.4th 1210, 1214, fn. 1.) Accordingly, we will apply general principles of California contract law to determine whether Amis is bound by the arbitration provision in the engagement agreement.
Because the FAA applies we must construe any ambiguities in the applicable arbitration clause in favor of arbitration, notwithstanding the California rule that a contract is construed most strongly against the drafter. (Erickson v. Aetna Health Plans of California, Inc. (1999) 71 Cal.App.4th 646, 656.) As we shall explain, however, we hold that the arbitration clause in this case clearly does not compel Amis to arbitrate his claims against GT.
a. The Engagement Agreement and Waiver Agreement Are Not a Single Contract Under Civil Code Section 1642
Civil Code section 1642 provides: "Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together." As stated ante, defendants contend that under this statute the engagement agreement and waiver agreement must be interpreted together, as part of a single contract. We disagree.
"Whether a document is incorporated into the contract depends on the parties' intent as it existed at the time of contracting. The parties' intent must, in the first instance, be ascertained objectively from the contract language. [Citation.] However, '[t]he use of extrinsic evidence to show [whether] several written instruments were intended to constitute a single contract does not involve a violation of the parole evidence rule.' [Citation.] The applicability of Civil Code section 1642 is a question of fact for the trial court, and the appellate court will affirm the court's resolution if it is supported by substantial evidence." (Versaci v. Superior Court (2005) 127 Cal.App.4th 805, 814-815; accord Vons Cos., Inc. v. Lyle Parks Jr., Inc. (2009) 177 Cal.App.4th 823, 834, fn. 5 ["Whether Civil Code section 1642 applies in a particular case is a question of fact for the trial court"].)
Here, the trial court found that the engagement agreement and waiver agreement did not constitute a single contract under Civil Code section 1642. We hold that there was substantial evidence supporting this finding.
The engagement agreement and waiver agreement were not "between the same parties" within the meaning of Civil Code section 1642 because the engagement agreement specifically excluded PMW's affiliates, including Amis, while the waiver agreement specifically included Amis and the other PMW affiliates. The engagement agreement states: "Unless specifically stated otherwise, our representation of Client [i.e. PMW] does not include any of Client's affiliates." (Italics added.) There is nothing in the engagement agreement, however, that specifically states that GT represents any of PMW's affiliates or that Amis was the "Client."
Likewise, the waiver agreement only generally states in its recitals that PMW "has asked" GT to represent PMW's affiliates but does not specifically state that PMW's affiliates are the "Client" for purposes of the engagement agreement or that GT's representation of PMW's affiliates is governed by the engagement agreement or any other written contract. Indeed, the waiver agreement does not make any reference to the engagement agreement and the engagement agreement does not make any reference to the waiver agreement. The waiver agreement therefore did not "specifically state" that GT represents Amis pursuant to the engagement agreement.
There is no reason to conclude that GT represented Amis pursuant to the waiver agreement because that document does not state anything regarding the terms and conditions of GT's representation of Amis in the Path Action. GT and the other defendants might have represented Amis and PMW's other affiliates without a written contract. Amis contends defendants' failure to obtain a written contract was a violation of Business and Professions Code section 6148. We do not reach this issue because we rule in Amis's favor on other grounds.
Defendants' argument can thus be summarized as follows: The engagement agreement and waiver agreement must be construed as part of one contract that is binding on Amis even though (1) Amis did not sign the engagement agreement but did sign the waiver agreement, (2) the engagement agreement specifically excludes him and the other PMW affiliates, (3) the engagement agreement and waiver agreement do not refer to each other, and (4) the waiver agreement specifically includes Amis and the other PMW affiliates. Defendants have not cited, and we have not found, any cases which support their position that the engagement agreement and waiver agreement must, as a matter of law, be construed as a single contract under these circumstances.
In support of their position defendants cite Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667 (Brookwood). In Brookwood the plaintiff was employed by defendant Bank of America (Bank) and its affiliate defendant BA Investment Services, Inc. (BAIS). In connection with her employment the plaintiff signed a registered representative agreement with BAIS, a U-4 form, and an employment agreement with Bank. The registered representative agreement with BAIS and the U-4 form contained arbitration clauses but the employment agreement with Bank did not. (Id. at pp. 1671, 1672, 1675.) The registered representative agreement specifically stated that the plaintiff was " 'dually employed by [Bank] pursuant to an additional employment agreement[.]' " (Id. at p. 1671.) The Court of Appeal held that there was substantial evidence supporting the trial court's implied finding that the three documents signed by the plaintiff were part of the same contract. (Id. at p. 1675.)
Brookwood lends no support to defendants' argument. Unlike the trial court in Brookwood, the trial court in this case rejected defendants' Civil Code section 1642 argument. Thus the standard of review is different here. The facts are also distinguishable. The engagement agreement and waiver agreement do not refer to each other. Amis did not sign the engagement agreement, he claims he was never presented with the agreement, and the agreement specifically excludes him. The circumstances in this case are thus materially different than those in Brookwood.
Defendants' reliance on Pacific Employers Ins. Co. v. City of Berkeley (1984) 158 Cal.App.3d 145 (Pacific Employers)is also misplaced. There a city entered into a construction contract with a general contractor. When the general contractor failed to complete the project, the plaintiff did so pursuant to a surety contract (a performance bond). (Id. at p. 148.) The surety contract expressly referred to the construction contract and incorporated that contract by reference. (Id. at p. 152.) The court held that the city could withhold from the plaintiff liquidated damages pursuant to a provision in the construction contract because (1) the surety contract and construction contract should be interpreted as one contract and (2) "the public policy favoring liquidated damages provisions in public works contracts[.]" (Id. at pp. 150, 152.) No similar facts exist here. The engagement agreement did not incorporate by reference the terms of the waiver agreement and is not inextricably intertwined with the wavier agreement, as the surety contract was with the construction contract.
In Pacific Employers the court held that Civil Code section 1642 was not " 'limited to contracts signed by the same parties[.]' " (Pacific Employers, supra, 158 Cal.App.3d at p. 150.) We agree with this statement. The absence of Amis's signature on the engagement agreement is not by itself dispositive of the issue of whether Civil Code section 1642 applies. Our decision is based on the totality of the circumstances.
Defendants cite Cadigan v. American Trust Co. (1955) 131 Cal.App.2d 780 (Cadigan)for the proposition that two writings need not refer to each other to be construed as one contract under Civil Code section 1642. In Cadigan the plaintiffs purchased real property from the defendant's decedent. In exchange for a grant deed the plaintiffs executed a promissory note and a deed of trust in decedent's favor. The plaintiffs and decedent also orally agreed that if the plaintiffs timely made all the payments due under the note while the decedent was alive, the decedent would release the plaintiffs from the balance due under the note at the time of her death. The decedent confirmed this agreement in a letter to the plaintiffs, which referred to the deed of trust and note. (Id. at p. 781.)
The Court of Appeal affirmed the trial court's ruling that the grant deed, deed of trust, note and letter should be interpreted as one contract under Civil Code section 1642. The defendant argued that because the note did not refer to the letter, the two documents could not be construed as parts of the same contract. (Cadigan, supra, 131 Cal.App.2d at p. 786.) In rejecting that argument, the court stated: "The statute [Civil Code section 1642] makes no such requirement. Cases in which the question has been presented hold it unnecessary for either instrument to refer to the other." (Cadigan, at pp. 786-787.)
The present case is factually distinguishable from Cadigan. There the letter referred to the other documents, including the note. Here, by contrast, both the engagement agreement and the waiver agreement do not refer to each other. In any case, we agree with the cited statement in Cadigan. The mere fact that two writings do not refer to each other does not by itself, as a matter of law, preclude the interpretation of the writings as part of a single contract. But our decision is not based solely on the fact that the engagement agreement and waiver agreement do not refer to each other. As we explained ante, there are many other factors which were not present in Cadigan that lead us to the conclusion that the writings are not part of a single contract.
b. The Engagement Agreement Does Not Require Amis to Arbitrate His Claims Against Defendants
Amis is not a party to the engagement agreement. The arbitration clause in the engagement agreement therefore is not binding on Amis.
c. The Waiver Agreement Does Not Require Amis to Arbitrate His Claims Against Defendants
Although Amis is a party to the waiver agreement, that agreement does not include an arbitration clause. The waiver agreement therefore does not require Amis to arbitrate his claims against defendants.
d. Assuming the Engagement Agreement and Waiver Agreement Are a Single Contract, the Contract Does Not Require Amis to Arbitrate His Claims Against Defendants
Assuming for the sake of argument that the engagement agreement and waiver agreement must be interpreted as a single contract, the contract still does not require Amis to arbitrate his claims against defendants.
"A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful." (Civ. Code, § 1636.) "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." (Civ. Code, § 1638.) "The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed." (Civ. Code, § 1644, italics added.)
Here, both the engagement agreement and the waiver agreement expressly distinguish between PMW on the one hand, and Amis, Fukushima, Kato, Fujita and Habitual, on the other. In the engagement agreement PMW is defined as the "Client," while the individuals and Habitual fall within the definition of "Client's affiliates." Likewise, the waiver agreement defines Amis, Fukushima, Kato, Fujita and Habitual as PMW's "Affiliates." The parties to both agreements therefore intended to give the term "Client" a special meaning, that is, the term is expressly limited to PMW and does not include PMW's affiliates, including Amis.
The arbitration clause in the engagement agreement by its terms is limited to a dispute "between GT and Client." It says nothing about a dispute between GT and "Client's Affiliates" or "Affiliates." Had the parties intended to include PMW's affiliates, including Amis, in the arbitration clause, they could have easily done so. Indeed, the waiver agreement—which defendants claim is part of the same contract— includes provisions applicable to PMW (i.e. Client) "and its Affiliates," as well as PMW "or any of its Affiliates." The absence of any similar reference to Client's affiliates in the arbitration clause indicates that the parties did not intend to bind PMW's affiliates, including Amis, to the arbitration clause.
There is nothing in the record indicating that this omission was a mistake or an oversight or the result of sloppy writing. To the contrary, the record indicates that GT, a sophisticated international law firm, drafted the engagement agreement and waiver agreement at about the same time. We have no reason to doubt that GT said what it meant and meant what it said.
This case is not a dispute between GT and PMW. It is a dispute between GT, Kawada and Gatti on the one hand, and Amis on the other. PMW is not involved. Therefore the arbitration clause in engagement agreement is not applicable to this action.
Defendants argue that Amis is bound by the arbitration clause because he was PMW's agent. In support of this argument defendants cite RN Solution, Inc. v. Catholic Healthcare West (2008) 165 Cal.App.4th 1511 (RN Solution) and Berman v. Dean Witter & Co., Inc. (1975) 44 Cal.App.3d 999 (Berman). In RN Solution the court held that the plaintiff, an "agent-employee" of RNS, was bound by an arbitration agreement she executed on behalf of RNS. (RNS Solution, at p. 1520.) In Berman the court held that an agent of a brokerage firm was "entitled to the benefit of arbitration" even though he did not sign the contract containing the arbitration clause and the arbitration clause did not refer to him. (Berman, at pp. 1002, 1004.) In both RN Solution and Berman, however, the contract at issue did not specifically distinguish the rights and obligations of the principal company from those of its agents-employees, as the engagement agreement and waiver agreement do here. RNS Solution and Berman therefore are factually distinguishable from the present case.
Defendants also rely on Harris v. Superior Court (1986) 188 Cal.App.3d 475 (Harris). There the plaintiffs sued Dr. Mirsaidi and his health care company for medical malpractice. The relevant contract provided that any claim asserted by the plaintiffs against the company and its "employees" is subject to binding arbitration. (Id. at p. 477.) The court held that although Dr. Mirsaidi did not sign the contract, he was bound by the arbitration clause. (Id. at p. 478.) The present case is distinguishable from Harris because the arbitration clause here does not specifically refer to PMW's "employees."
4. Amis Is Not Bound By the Arbitration Clause Under the Doctrine of Equitable Estoppel
Defendants argue that Amis is bound by the arbitration clause under the doctrine of equitable estoppel. They also contend that Amis is bound by the arbitration clause because he "accepted the benefits" of the engagement agreement. These arguments are essentially the same and thus will be addressed together.
" 'Equitable estoppel precludes a party from asserting rights "he otherwise would have had against another" when his own conduct renders assertion of those rights contrary to equity.' [Citation.] In the arbitration context, a party who has not signed a contract containing an arbitration clause may nonetheless be compelled to arbitrate when he seeks enforcement of other provisions of the same contract that benefit him. [Citations.]" (Metalclad, supra, 109 Cal.App.4th at p. 1713, citing Inter. Paper v. Schwabedissen Maschinen & Anlagen (4th Cir. 2000) 206 F.3d 411, 417-418 (International Paper)and NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 81 (NORCAL).)"The doctrine thus prevents a party from playing fast and loose with its commitment to arbitrate, honoring it when advantageous and circumventing it to gain undue advantage." (Metalclad, supra, 109 Cal.App.4th at 1714.)
In addition, the "equitable estoppel doctrine applies when a party has signed an agreement to arbitrate but attempts to avoid arbitration by suing nonsignatory defendants for claims that are ' "based on the same facts and are inherently inseparable" ' from arbitrable claims against signatory defendants." (Metalclad, supra, 109 Cal.App.4th at p. 1713.) This rule does not apply here. Amis, who did not sign the engagement agreement, is not trying to avoid the arbitration clause on the grounds that Gatti and Kawada are non-signatories to that contract.
The doctrine of equitable estoppel has been codified in California. Civil Code section 1589 provides: "A voluntary acceptance of the benefit of a transaction is equivalent to the consent to all of the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting." Similarly, Civil Code section 3521, a maxim of jurisprudence, states: "He who takes the benefit must bear the burden."
In the present case, Amis is not seeking to enforce the engagement agreement or any of its provisions. Further, there is nothing in the record indicating that Amis "benefitted" from the engagement agreement because there is no evidence that he was represented by GT pursuant to the engagement agreement or any other written contract. To the contrary, the engagement agreement specifically states that Amis is not the "Client" under the engagement agreement. Amis therefore is not bound by the engagement agreement under the doctrine of equitable estoppel.
Defendants cite numerous cases to support their position, all of which are distinguishable. We shall discuss two of them. In International Paper the plaintiff's predecessor-in-interest purchased an industrial saw from Wood Systems (Wood), the American distributor of Schwabedissen, the German manufacturer of the saw. (International Paper, supra, 206 F.3d at p. 414.) In its lawsuit against Schwabedissen the plaintiff alleged that it was a "third party beneficiary" to the contract between Schwabedissen and Wood (the S-W contract), which included an arbitration clause. (Id. at pp. 414-415). In opposition to Schwabedissen's motion to compel arbitration the plaintiff argued that it was not bound by the arbitration clause in the S-W contract because it did not sign that contract. The court, however, held that the plaintiff was equitably estopped from evading the arbitration clause. (Id. at pp. 417-418.) In so holding, the court noted that plaintiff's "entire case hinges on its asserted rights under the [S-W contract.]" (Id. at p. 418.)
The facts in this case are completely different. Amis does not contend that he is a third party beneficiary of the engagement agreement and he does not assert any rights under that agreement. International Paper is thus clearly distinguishable.
In NORCAL the defendant and her late husband asked the plaintiff, a medical malpractice insurance company, to defend and indemnify them against a lawsuit brought by her late husband's patients. The defendant was accused of unauthorized medical treatment. The plaintiff insurance company paid for the defendant's defense under a reservation of rights. (NORCAL, supra, 84 Cal.App.4th at pp. 67-68.) After the insurance company settled the case against the defendant and her late husband, it sought to compel the defendant to arbitrate its declaratory relief claim that the insurance policy did not cover the claims asserted in the underlying lawsuit against the defendant and her late husband. (Id. at p. 69.) The court held that because the defendant had sought the benefits of the insurance policy by tendering the defense of the underlying lawsuit pursuant to the policy and because the plaintiff accepted those benefits by allowing the insurance company to assume the cost of her defense, she was bound by the arbitration clause in the insurance contact. (Id. at p. 78.)
The present case is very different from NORCAL. Amis never affirmatively sought the benefits of the engagement agreement, nor did he accept the benefits of that contract. As we have explained, there is absolutely nothing in the record indicating that Amis was represented by defendants pursuant to the engagement agreement or any written contract. NORCAL thus lends no support to defendants' equitable estoppel argument.
5. Defendants Forfeited Their Argument That the Scope of the Arbitration Clause Must Itself Be Arbitrated
Defendants argue that any dispute concerning the scope of the engagement agreement's arbitration clause must itself be submitted to arbitration. The question of arbitrability is decided by the courts unless the parties clearly and unmistakably agreed otherwise. (First Options, supra, 514 U.S. at p 943-944; AT&T Technologies, supra, 475 U.S. at p. 649.) Defendants contend that the parties in this case did so. The arbitration clause in the engagement agreement provides that "[t]he arbitration shall be before the American Arbitration Association [AAA] to be administered pursuant to the Association's Commercial Dispute Resolution Procedures then in effect." According to defendants, the AAA rules authorize the arbitrator to rule on his or her own jurisdiction. Defendants thus argue that the AAA arbitrator, not the courts, should decide whether Amis must submit his claims to arbitration. (See Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th 547, 557.)
Defendants did not make this argument in their motion to compel arbitration in the trial court. To the contrary, they asked the trial court to adjudicate the issue of arbitrability.
In general, if a party fails to raise an issue below, he or she will forfeit the issue on appeal. (Barnes v. Department of Corrections (1999) 74 Cal.App.4th 126, 130.) "However, this rule does not apply when the new theory on appeal is a pure question of law with no factual disputes." (Ibid.)In such circumstances we have the discretion to consider the issue. (People v. Johnson (2004) 119 Cal.App.4th 976, 984.) But we exercise our discretion to excuse forfeiture "rarely and only in cases presenting an important legal issue." (Inre S.B. (2004) 32 Cal.4th 1287, 1293.)
By failing to argue below that the AAA arbitrator should decide whether this matter is subject to arbitration, defendants forfeited the argument on appeal. Defendants not only deprived the trial court of an opportunity to consider the issue, they actually waived the issue by asking the trial court, in the first instance, to decide whether this dispute is subject to arbitration. We thus decline to excuse defendants' forfeiture. (See Express Scripts v. Aegon Direct Marketing Services (8th Cir. 2008) 516 F.3d 695, 701 [party argued for the first time on appeal that arbitration clause referring to AAA rules required arbitrator to decide arbitrability].)
DISPOSITION
The trial court's order dated August 2, 2010, denying defendants' motion to compel arbitration is affirmed. Plaintiff Amis is awarded costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
KITCHING, J. We concur:
KLEIN, P. J.
CROSKEY, J.