Opinion
B162637.
11-6-2003
JOHN H. HUGO, Plaintiff and Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Respondent.
E. Thomas Moroney for Plaintiff and Appellant. McNamara Spira & Smith, J. Patrick Jacobs and Mary O. ONeill for Defendant and Respondent.
The trial court dismissed an underinsured motorist arbitration proceeding between appellant John Hugo (Hugo) and his insurance carrier State Farm Mutual Automobile Insurance Company (State Farm), for failure to prosecute. Claiming the trial court lacked jurisdiction to dismiss the arbitration proceeding, Hugo appeals from the judgment of dismissal. Because we agree that the trial court had no jurisdiction to dismiss the arbitration proceeding, and have stated so in Blake v. Ecker (2001) 93 Cal.App.4th 728 (Blake), we reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
The arbitration proceeding arises from a car accident that occurred in 1994 in which Hugo was injured by the negligence of an underinsured motorist. Although the parties argued to arbitrate in 1997, by August 2002, the arbitration hearing had not commenced. The delay was based on the following events.
In March 1997, after settling with the underinsured motorist, Hugo filed a claim with State Farm based on the underinsured motorist provision in his automobile liability insurance policy. That policy required Hugo to arbitrate the claim. Both parties agreed to arbitration and exchanged lists attempting to select an arbitrator. More than one and one-half years later, the parties still had not agreed on an arbitrator.
On December 18, 1998, Hugo filed a petition to compel arbitration because the parties had reached an impasse in selecting an arbitrator. (Code Civ. Proc., § 1281.2.) The trial court granted the petition on January 25, 1999, specifically addressing the method the parties were to use in selecting an arbitrator. In addition, the trial court ordered that the arbitration proceeding begin by "Memorial Day 1999." The trial court then dismissed the petition without prejudice, but its order stated that it would "vacate this dismissal upon request, if any party files a motion to confirm, vacate, or modify the arbitration award, or to compel discovery, or for other good cause shown."
All further statutory references are to the Code of Civil Procedure.
While the order imposes the courts selection of an arbitrator on the parties, it also allows them to continue to work toward selecting a mutually agreeable arbitrator. The order states in relevant part:
"The petition is argued and granted. The Court makes the following orders: [¶] 1. The parties may, within five days, agree on any of the following five retired judges or justices: . . . [¶] 2. If the parties cannot agree within five days on which one of the five will be the arbitrator, the Court will appoint Judge Wallerstein, as the arbitrator, . . . [¶] 3. The parties will remain free to select any arbitrator (from the Courts list or otherwise) in writing signed by both of them."
The arbitration languished for three and one-half years for a variety of reasons, including the parties inability to select an arbitrator, difficulty scheduling an arbitration date, Hugos repeated substitution of counsel, discovery disputes, and numerous other scheduling conflicts.
Although it appeared that the parties had selected an arbitrator by November 1999, Hugo ultimately rejected that arbitrator. It was not until April 2001 that the parties had agreed on retired Los Angeles Superior Court judge George Dell (Dell) as the arbitrator and scheduled the arbitration for July 2001.
On May 7, 2001, Dell confirmed that the arbitration would proceed and requested that the parties deposit a retainer. Dell acknowledged receipt of State Farms retainer, but Hugo did not pay his portion of the arbitrators fees. Hugo apparently did not pay his portion of the fees until August 2002.
Although it is not included in the record, it appears that the trial court prepared two tentative rulings before the hearing on the motion. One of the tentative rulings raised the concern that Hugo had failed to pay the arbitrator. At the hearing, Hugos counsel told the court that Hugo had paid a portion of his fees. "As to the fee, Mr. Hugo did send a $1,000 deposit to Judge Dell this week. Judge Dell asked for [$]2,700 to cover a two-day arbitration hearing. My client will get that additional money. . . . He has sent $1,000 which will certainly cover this matter, I believe, in reading the papers and maybe a short telephonic conference call."
In the meantime, the arbitration did not go forward in July 2001. Hugo changed counsel, the parties became embroiled in a discovery dispute involving Hugos designation of 36 non-retained experts, and Hugos latest counsel canceled the arbitration. The parties attempted to reschedule, and Dell offered additional dates through the end of 2001. But the arbitration did not go forward in 2001.
In May 2002, Hugo, now representing himself, wrote to Dell and requested a scheduling conference to set a new arbitration date. On June 7, 2002, Dell conducted the conference with both parties in which they discussed the delay in setting the arbitration hearing.
On July 1, 2002, State Farm filed its motion to dismiss in superior court for failure to prosecute the arbitration under Sections 583.410, 583.420(a)(2)(A), or in the alternative under sections 583.310 and 583.360, which together require dismissal for failure to bring the action to trial within five years.
Section 583.410 provides: "(a) The court may in its discretion dismiss an action for delay in prosecution pursuant to this article on its own motion or on motion of the defendant if to do so appears to the court appropriate under the circumstances of the case. [¶] (b) Dismissal shall be pursuant to the procedure and in accordance with the criteria prescribed by rules adopted by the Judicial Council."
Section 583.420(a)(2)(A) provides: "(a) The court may not dismiss an action pursuant to this article for delay in prosecution except after one of the following conditions has occurred: [¶] . . . [¶] (2) The action is not brought to trial within the following times: [¶] (A) Three years after the action is commenced unless otherwise prescribed by rule under subparagraph (B)."
Section 583.310 provides: "An action shall be brought to trial within five years after the action is commenced against the defendant."
Section 583:360 provides: "(a) An action shall be dismissed by the court on its own motion or on motion of the defendant, after notice to the parties, if the action is not brought to trial within the time prescribed in this article. [¶] (b) The requirements of this article are mandatory and are not subject to extension, excuse, or exception except as expressly provided by statute."
On August 6, 2002, Hugos new attorney and State Farm participated in a second conference call with Dell. Dell was aware of the pending motion to dismiss.
On appeal, State Farms brief states that the arbitrator, "declined to rule on the matter," or "did not want to hear," the motion. But these characterizations are belied by State Farms counsels representations at the hearing on the motion. State Farms counsel stated: "It was my impression, in our August 6th telephone conversation with Judge Dell, that he perceived there to be a split in authority, and that it was my impression, I dont think it was counsels impression, that it was his preference that the court rule on the merits, but that he would if the court isnt inclined to do so."
Hugos counsels impression was as follows: "Mr. Jacobs told Judge Dell what was going on with respect to the motion. He indicated what your first tentative was. Judge Dell said he thought there was a split in authority with respect to jurisdictional issues because your tentative had cited Blake saying that the court did not have jurisdiction. Judge Dell said he thought there was a split, that he would then get involved again, depending on what this court did. If the court took it and dismissed it, there was no reason for him to get involved. If the court sent it to him, he would then hear it."
On August 29, 2002, the trial court granted the motion to dismiss. In doing so, it vacated the dismissal entered on January 25, 1999, dismissed the petition to arbitrate with prejudice, and terminated the arbitration proceedings. The trial court dismissed the arbitration because Hugo had failed to pay the arbitrator and, contrary to its order, had not commenced the arbitration before Memorial Day 1999. Therefore, according to the trial court, Hugo had forfeited his right to arbitrate. Hugo timely appealed.
The court stated: "I have decided that the case law that leaves questions of non-prosecution of arbitration for decision by the arbitrator in the form of an award, leaves for judicial decision such questions under certain circumstances. And that the present case does present those circumstances. [¶] Accordingly, Im going to grant moving party relief in a form that I will prescribe in a moment. [¶] Predominant among the circumstances that convince me that this is a question that the judicial power can resolve are claimants disobedience to my order that the parties submit their — that the parties arbitrate their controversy; claimants disobedience of my order that the arbitration hearing must commence before Memorial Day 1999; claimants disobedience of whatever implication can be drawn from that preceding order that I required that the arbitration hearing proceed without undue delay; and claimants decision that he would not pay the arbitrator anything during the ensuing three and a half years even though the arbitrator called for a payment well over a year before today. And where the claimant paid only approximately 25 percent of the amount the arbitrator called for only a few days before todays hearing, . . . [¶] Under all of these circumstances I have decided that under applicable case law and under the courts order of January 25, 1999, claimant has in effect forfeited his right to have his claim arbitrated, and forfeited his right to have the arbitrator rather than the court decide whether the arbitration proceeding should be terminated for failure to proceed with diligence. [¶] Having decided that the decision is one that the court can make, I then proceed to make the decision whether or not to terminate the claimants right to have his claim arbitrated, and I have decided under all of these circumstances that the better exercise of my discretion in that regard is clearly and beyond doubt to terminate that right for claimant."
CONTENTIONS
Hugo contends that based on our decision in Blake, supra, 93 Cal.App.4th 728, once the trial court had compelled arbitration, it had no jurisdiction to terminate the arbitration for failure to prosecute.
Hugo further contends that even if the trial court had jurisdiction to consider the motion to dismiss, its decision to terminate the arbitration was an abuse of discretion.
DISCUSSION
1. Standard of Review
The jurisdictional issue before us is a legal question that we have previously decided in Hugos favor in Blake, supra, 93 Cal.App.4th 728.
2. The Trial Court Lacked Jurisdiction to Terminate the Arbitration
a. Section 1292.6 Did Not Confer Jurisdiction
"[A]n arbitration has a life of its own outside the judicial system." (Byerly v. Sale (1988) 204 Cal.App.3d 1312, 1316.) A trial court has jurisdiction to grant a petition to compel arbitration under section 1281.2. The filing of the petition under that section vests the trial court with limited jurisdiction under section 1292.6 over any subsequent petition relating to the arbitration proceedings. The retained jurisdiction does not include the authority to dismiss the arbitration that already has been compelled. (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796, 1805 (Brock), declined to extend on another issue by Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 982, fn. 14.) There is no provision in title 9 "which is the font of the trial courts jurisdiction over the arbitration proceeding," for a petition or motion to dismiss the arbitration. (Ibid.)
Section 1281.2 provides in pertinent part: "On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, . . ."
Section 1292.6 provides: "After a petition has been filed under this title [Title 9, Part 3 of the Code of Civil Procedure, which includes a petition to compel under section 1281.2], 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."
In Blake, supra, 93 Cal.App.4th at pp. 737-738, we addressed this jurisdictional issue, embracing the rationale and result in Brock to conclude that once the trial court compelled arbitration (and stayed the action), the only avenue for redress for failure to timely prosecute the arbitration was in the arbitration proceeding. We reached this conclusion with a full understanding that the cases relied on by State Farm, Lockhart-Mummery v. Kaiser Foundation Hospitals (1980) 103 Cal.App.3d 891, 898, and Preston v. Kaiser Foundation Hospitals (1981) 126 Cal.App.3d 402, 406-407, concluded that the trial court retains jurisdiction to dismiss arbitration proceedings. We agree with the reasoning in Brock, supra, that neither opinion is supportable. (10 Cal.App.4th at pp. 1803-1805; see also Titan/Value Equities Group v. Superior Court (1994) 29 Cal.App.4th 482, 487-488, fn. 8 [citing the Brock courts criticism of Preston].)
We summarily reject State Farms argument that Blake, supra, 93 Cal.App.4th 728, is inapposite because there, unlike here, a civil action had been filed and the action at law had been stayed pending the outcome of arbitration. (Id. at pp. 737-738.) We recognize that here no civil action was pending but that is irrelevant when determining the trial courts jurisdiction under title 9 to dismiss the arbitration proceeding.
This does not mean to say that State Farm had no remedy against what it perceived to be Hugos dilatory tactics. Two such options are available, one by resorting to the court, and the other to the arbitrator. State Farm could have filed a petition under section 1281.6 to have the trial court make the appointment of an arbitrator to speed up the process. (Engalla v. Permanente Medical Group, Inc., supra, 15 Cal.4th at pp. 980-981.) It did not do so and also missed the trial courts Memorial Day 1999 deadline. But when the arbitrator was selected, State Farm concedes that it could have sought relief for delay by bringing the motion before him. (Young v. Ross-Loos Medical Group, Inc. (1982) 135 Cal.App.3d 669, 672-674 [arbitrator had authority to dismiss action under section 583 (now section 583.310) for failure to prosecute].) The arbitrator, not the trial court, had the authority to decide State Farms motion to dismiss.
Section 1281.6 provides in relevant part: "If the arbitration agreement provides a method of appointing an arbitrator, that method shall be followed. If the arbitration agreement does not provide a method for appointing an arbitrator, the parties to the agreement who seek arbitration and against whom arbitration is sought may agree on a method of appointing an arbitrator and that method shall be followed. In the absence of an agreed method, or if the agreed method fails or for any reason cannot be followed, or when an arbitrator appointed fails to act and his or her successor has not been appointed, the court, on petition of a party to the agreement, shall appoint the arbitrator."
State Farms counsel stated during oral argument on the motion: "I thought I exercised the appropriate option by seeking court assistance rather than the arbitrators assistance in this matter. [¶] And now having done a lot more research and being enlightened that there is a split in case authority, I could have asked Judge Dell, I believe, rather than your Honor, but we decided to go and ask the courts assistance with the new understanding the court might decline to hear the motion and, as it were, kick it back to the arbitrator."
We reject State Farms argument that the arbitrator declined to hear the motion, and did so, in part because Hugo had not paid his portion of the arbitrators fees. State Farms counsel acknowledged that the arbitrator would hear the motion if the trial court was not inclined to do so. While it is true that Hugo did not pay his portion of the arbitrators fees, the arbitrator never raised that issue as a reason not to rule on the motion. Moreover, the parties agreed that the fees already paid might be sufficient to cover the arbitrators fees in ruling on the motion. If they were not, the arbitrator would have been free to assess fees to the parties in order to hear and rule on the motion.
State Farm acknowledged that it had paid its portion of the arbitrators fees. In response to the trial courts questions related to whether the fees issue had been raised as a reason for the arbitrator not to hear the motion, the following colloquy occurred: "The court: But [the arbitrator] may have already been paid enough to cover the cost of the work that would be involved in hearing and deciding a motion for a defense award on grounds of nonprosecution of the arbitration. [¶] [State Farm]: Thats what Im saying. He may well have been. . . ."
b. The Trial Courts January 25, 1999 Order Granting the Petition to Compel Arbitration Did Not Confer Jurisdiction
State Farm argues that the trial courts order granting the petition to compel arbitration conferred upon the trial court jurisdiction should either party demonstrate "good cause" for the trial court to vacate its prior ruling to compel arbitration. State Farm points out that it has demonstrated good cause for the dismissal of the arbitration proceeding. But, in support of this argument, State Farm again relies on Preston v. Kaiser Foundation Hospitals, supra, 126 Cal.App.3d 402, in which the court concluded that it had jurisdiction "to entertain a motion by defendants to dismiss the arbitration where plaintiffs have failed to exercise reasonable diligence in moving the dispute to a conclusion." (Id. at p. 407.) As discussed, we implicitly rejected the jurisdictional holding of Preston in Blake, supra, 93 Cal.App.4th at pp. 737-738.
Nor do we believe that the trial courts order conferred upon it the authority to make rulings related to the arbitration once it had ordered the parties to arbitration. Once the trial court granted the petition to compel arbitration, the trial courts jurisdiction is limited and the arbitration "ha[d] a life of its own outside the judicial system." (Byerly v. Sale, supra, 204 Cal.App.3d at p. 1316.) Only the arbitrator could make decisions related to the arbitration proceedings.
Finally, while State Farm asserts that there is "ample authority" to support the trial courts decision to dismiss the arbitration proceedings, it cites cases and a treatise that confirm that the dismissal statutes cited above apply to contractual arbitration proceedings. (Young v. Ross-Loos Medical Group, supra, 135 Cal.App.3d at pp. 673-674 [mandatory dismissal statutes applied to contractual arbitration in medical malpractice case]; Santangelo v. Allstate Ins. Co. (1998) 65 Cal.App.4th 804, 812-814 [dismissal statutes applied to uninsured motorist arbitration and failure to complete arbitration within five years was a ground for denying petition to compel arbitration].) These cases do not address the jurisdictional issue before us. Here, the issue is not whether the dismissal statutes apply to contractual arbitration, but whether the trial court or the arbitrator has the jurisdiction to apply them. We conclude that the arbitrator, not the trial court, had the authority to dismiss the arbitration. Thus, the trial court lacked jurisdiction when it dismissed the arbitration proceeding.
Because we have concluded that the trial court lacked jurisdiction, we need not reach or consider Hugos contention that the trial court abused its discretion in dismissing the arbitration.
DISPOSITION
For the reasons stated, the August 29, 2002 order of dismissal in which the trial court (1) vacated its original order granting Hugos petition to compel arbitration, (2) dismissed the petition to compel arbitration with prejudice, and (3) terminated the arbitration proceeding, is reversed. The matter is remanded with directions to vacate the August 29, 2002 order, and refer this motion to the arbitrator for consideration and ruling on the merits, and if necessary, for apportionment of the arbitration fees and costs associated with ruling on the motion. Hugo is awarded costs on appeal.
We Concur: KITCHING, J. and ALDRICH, J.