memorandum of points and authorities in support of swinerton builders

Cal. Super. - 1st Dist.May 7, 2021

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO MOTION TO COMPEL ARBITRATION AND FOR STAY Bennett J. Lee (Bar No. 230482) Daniel Sakaguchi (Bar No. 222722) VARELA, LEE, METZ & GUARINO, LLP 333 Bush Street, Suite 1500 San Francisco, California 94104 Telephone: 415-623-7000 Facsimile: 415-623-7001 E-Mail: blee@vlmglaw.com dsakaguchi@vlmglaw.com Attorneys for Defendant SWINERTON BUILDERS SUPERIOR COURT OF CALIFORNIA FOR THE CITY AND COUNTY OF SAN FRANCISCO UNLIMITED JURISDICTION 875 CALIFORNIA II, LLC, a Delaware limited liability company, Plaintiff, v. SWINERTON BUILDERS, a California corporation, Defendant. Case No.: CGC-20-588615 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SWINERTON BUILDERS’ MOTION TO COMPEL ARBITRATION AND STAY THE PENDING LITIGATION Date: March 29, 2021 Time: 9:30 a.m. Dept.: 302, Law and Motion Defendant Swinerton Builders (“Swinerton” or “Defendant”) hereby submits this memorandum of points and authorities in support of its Motion to Compel Arbitration and Motion to Stay the Pending Litigation. I. INTRODUCTION The instant dispute arises out of work that Swinerton performed for Plaintiff 875 California II, LLC (“Plaintiff” or “Grosvenor”) on a project known as 875 California Street in San Francisco, California (the “Project”) pursuant to a modified AIA Document A102-2007 Agreement dated October 26, 2016 (the “Agreement”) that contains a mandatory arbitration provision. Accordingly, pursuant to Code of Civil Procedure §§ 1281.2 and 1281.4, Swinerton seeks an order compelling the parties to arbitrate their dispute in accordance with their agreement and staying this action until such arbitration is complete. ELECTRONICALLY F I L E D Superior Court of California, County of San Francisco 03/01/2021 Clerk of the Court BY: SANDRA SCHIRO Deputy Clerk 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 MEMORANDUM ISO MOTION TO COMPEL ARBITRATION AND FOR STAY II. FACTUAL AND PROCEDURAL BACKGROUND This litigation arises out of the construction of a residential apartment building located at 875 California Street in San Francisco, California (the “Project”) with Grosvenor as the project owner and Swinerton as general contractor. Swinerton and Grosvenor first entered into a Work Order and Contract for Preconstruction Services (the “Preconstruction Agreement”), dated November 1, 2015. (See Request for Judicial Notice (“RJN”), Ex. 1 (Complaint), ¶ 3.) Thereafter, Swinerton and Grosvenor entered into the Agreement for construction of the Project, which superseded the Preconstruction Agreement and merged it into the Agreement. (See RJN, Ex. 2 (Agreement).) Specifically, the Agreement stated, at Article 1: The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. (RJN, Ex. 2.) Because the Preconstruction Agreement is a prior written agreement between the parties, it is integrated and merged into the Agreement and subject to the Agreement’s dispute resolution procedures. Pursuant to the merger and integration clause above, Article 2 of the Agreement (“The Work of This Contract”) expressly includes Preconstruction Services: § 2.1 Preconstruction Services. The Preconstruction Phase is the period prior to commencement of the construction Work. As a part of the services to be rendered by the Contractor to the Owner hereunder, and in consideration of the Contractor’s Fee, the Contractor shall also perform the “Preconstruction Phase Services” requested by the Owner, including those services set forth below, at no additional cost to the Owner: (RJN, Ex. 2, § 2.1; see also §§ 2.1.1-2.1.9 (setting forth construction scheduling, constructability review and value engineering services to be provided by Swinerton during the Preconstruction Phase); see also General Conditions, § 1.1.3 (“The Work includes all labor, materials, equipment and other services and obligations”) (emphasis added).) A. The Parties Agreed in Writing to Arbitrate Article 15 of the General Conditions to the Agreement sets forth the dispute resolution procedures wherein Grosvenor agreed to arbitrate any disputes arising under the Agreement with Swinerton, in pertinent part, as follows: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 MEMORANDUM ISO MOTION TO COMPEL ARBITRATION AND FOR STAY ARTICLE 15 CLAIMS AND DISPUTES […] § 15.2.1 Claims, disputes, or other matters in controversy arising out of or related to the Contract except those waived as provided for in Sections 9.10.5, 14.4.3, 15. l.4.l, and 15.l.6 shall be subject to mediation as a condition precedent to binding dispute resolution. § 15.2.2 The parties shall endeavor to resolve their Claims by mediation which, unless the parties mutually agree otherwise, shall be administered by the American Arbitration Association in accordance with its Construction Industry Mediation Procedures in effect on the date of the Agreement. A request for mediation shall be made in writing, delivered to the other party to the Contract, and filed with the person or entity administering the mediation. The request may be made concurrently with the filing of binding dispute resolution proceedings but, in such event, mediation shall proceed in advance of binding dispute resolution proceedings, which shall be stayed pending mediation for a period of sixty (60) days from the date of filing, unless stayed for a longer period by agreement of the parties or court order. If an arbitration is stayed pursuant to this Section 15.3.2, the parties may nonetheless proceed to the selection of the arbitrator(s) and agree upon a schedule for later proceedings. […] § 15.3.1 Any Claim subject to, but not resolved by, mediation shall be subject to arbitration which, unless the parties mutually agree otherwise, shall be administered by the American Arbitration Association in accordance with its Construction Industry Arbitration Rules in effect on the date of the Agreement. A demand for arbitration shall be made in writing, delivered to the other party to the Contract, and filed with the person or entity administering the arbitration. The party filing a notice of demand for arbitration must assert in the demand all Claims then known to that party on which arbitration is permitted to be demanded. (RJN, Ex. 2, General Conditions, Article 15) (emphasis added.) B. Grosvenor Files Suit in State Court On December 23, 2020, Superior filed its Complaint alleging breach of contract and declaratory relief. (RJN, Ex. 1.) Both causes of action concern Work performed by Swinerton pursuant to the Agreement on the Project, and specifically, the Preconstruction Services required by Article 2 of the Agreement, as further defined by § 1.1.3 of the General Conditions to the Agreement. (See id. and RJN, Ex. 2, Article 2 and General Conditions, § 1.1.3.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 MEMORANDUM ISO MOTION TO COMPEL ARBITRATION AND FOR STAY At no time before the filing of this action did Grosvenor initiate the dispute resolution proceedings outlined in the Agreement with respect to the Preconstruction Services at issue in the Complaint. (Declaration of Daniel Sakaguchi (“Sakaguchi Decl.”), ¶ 3.) During meet and confer efforts, in an effort to avoid motion practice, counsel for Swinerton discussed its position that the claims in this lawsuit were required to be arbitrated, and Grosvenor took the position that the instant litigation was not subject to arbitration. (Id., ¶¶ 4-5.) Accordingly, Swinerton filed the instant motion. III. LEGAL DISCUSSION A. California Law Has a Strong Presumption in Favor of Enforcing Arbitration Clauses “California has a strong public policy in favor of arbitration as expeditious and cost- effective way of resolving disputes.” (Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1153; Boys Club of San Fernando Valley, Inc. v. Fidelity & Deposit Co. (1992) 6 Cal.App.4th 1266, 1272 [same].) Given this strong policy in favor of enforcing arbitration agreements, doubts as to whether an arbitration clause applies to a dispute are to be resolved in favor of sending the parties to arbitration. (See Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak St. (1983) 35 Cal.3d 312, 323 [citing cases].) Arbitration clauses are therefore liberally construed in favor of the arbitration. (Hayes Children Leasing Co. v. NCR Corp. (1995) 37 Cal. App. 4th 775, 788 [“Any ambiguity in the scope of the arbitration, however, will be resolved in favor of arbitration.”] [citations omitted].) B. The Court Should Compel Grosvenor and Swinerton to Arbitrate this Dispute The Agreement between Swinerton and Grosvenor requires that all Claims (defined to include “a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract terms, extension of time, a disputed payment of money, or other disputed relief with respect to the terms of the Contract” and “other disputes and matters in question between the Owner and the Contractor arising out of or relating to the Contract”) be resolved per the dispute resolution procedure set out in Article 15 of the General Conditions to the Agreement. (RJN, Ex. 2, General Conditions, § 15.1.1.) Grosvenor’s Complaint alleges two causes of action all arising 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 MEMORANDUM ISO MOTION TO COMPEL ARBITRATION AND FOR STAY from Work performed by Swinerton pursuant to the Agreement. (Id., Ex. 1 at ¶¶ 7-15.) Accordingly, the Court must order the parties to arbitrate and stay this action. 1. Grosvenor’s Claims Are Subject to the Parties’ Agreement to Arbitrate Under California law, arbitration agreements are “valid, enforceable and irrevocable . . . .” (Code Civ. Proc. § 1281 [emphasis added].) A party to an arbitration agreement is entitled to move the court to compel the contracting parties to arbitrate upon showing that (1) a written agreement to arbitrate a controversy exists and (2) a party to the agreement refuses to arbitrate. (Code Civ. Proc. § 1281.2; see also Hyundai Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 574 [holding that filing of a complaint by a party constitutes “an effective refusal of arbitration.”].) Upon such a showing, “the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists. . . .” (Code Civ. Proc. § 1281.2 [emphasis added].) The party seeking to enforce the arbitration provision “bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence.” (Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th 951, 972 [citing Rosenthal v. Great Western Financial Securities Corporation (1996) 14.Cal.4th 394, 413].) The party opposing arbitration “bears the burden of proving by preponderance of the evidence any fact necessary to its defense.” (Ibid.) The Court must consider and weigh all evidence presented including “all the affidavits, declarations, and other documentary evidence” and resolve any factual disputes to reach a final determination. (Ibid.) The Court determines whether an agreement exists, and if such an agreement exits, whether the agreement encompasses the parties’ dispute. (See Code Civ. Proc. § 1281.2 [stating on petition of a party to an arbitration agreement, “the court shall order . . .”; see also Fittante v. Palm Springs Motors, Inc. (2003) 105 Cal.App.4th 708, 713 [“trial court is therefore called upon to determine whether there is a duty to arbitrate the matter”].) Arbitration is especially favored when the arbitration clause contains broad language. (See Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1052 [citing cases] [“[A]arbitration clauses . . . that use the phrase ‘arising under or related to’ have been construed more broadly.”] [emphasis in original]; see also Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 MEMORANDUM ISO MOTION TO COMPEL ARBITRATION AND FOR STAY 677, 684 [compelling arbitration when parties agreed to arbitrate ‘any problem or dispute’ that arose under or concerned their agreement as “[t]hat contractual language is both clear and plain . . . [and] [i]t is also very broad.”].) Here, Swinerton has demonstrated the requirements under the statute. It is indisputable that Grosvenor and Swinerton had a valid agreement requiring arbitration of disputes “arising out of or relating to” the Agreement, and that Grosvenor, by initiating the current action, has refused abide by the Agreement. (See RJN, Ex. 1; RJN, Ex.2, General Conditions, § 15.1.1; see also Hyundai Amco America, Inc. v. S3H, Inc., supra, 232 Cal.App.4th 572, 574). Additionally, Grosvenor’s claims clearly fall within the broad scope of the Agreement dispute resolution provisions as all of them “aris[e] out of” Work performed by Swinerton on the Project under the Agreement. (See RJN, Ex. 1 at ¶¶ 7-15 and Ex. 2, General Conditions, § 15.1.1.) The Court should therefore compel arbitration in regard to Superior’s claims against Swinerton. 2. The Court Should Stay Grosvenor’s Lawsuit Pursuant to Code of Civil Procedure Section 1281.2, Subdivision (c). Defendants further respectfully request that the Court stay any non-arbitrable claims while Swinerton and Grosvenor proceed to arbitration. This is what Grosvenor agreed to pursuant to the Agreement. Where a petition or motion to compel arbitration is pending, a court has discretion and “shall, upon motion of a party to such action or proceeding, stay the action or proceeding until the application for an order to arbitrate is determined and, if arbitration of such controversy is ordered, until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Cal. Code. Civ. Proc. § 1281.4.) As argued above, Superior’s causes of action against Swinerton, including its claim regarding recovery on the mechanic’s lien release bond, are all arbitrable given the broad “arising from” language of the Subcontract. Thus, again, the cause of action against Fidelity is entirely duplicative of the cause of action brought against Swinerton, which would be resolved in arbitration. In this litigation, Fidelity is at risk of only being found secondarily liable to Swinerton, if at all. Staying the cause of action against Fidelity would therefore avoid duplication of efforts because the arbitration would resolve the merits of Superior’s lawsuit. The only issues, if any, that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 MEMORANDUM ISO MOTION TO COMPEL ARBITRATION AND FOR STAY would be left to be resolved in litigation would be defenses specific to Fidelity after the arbitration has concluded. Accordingly, staying this litigation is appropriate and efficient. (See, e.g., Mission Viejo Emergency Med. Assocs. v. Beta Healthcare Grp., supra, 197 Cal. App. 4th 1146, 1153 [“California has a strong public policy in favor of arbitration as an expeditious and cost-effective way of resolving disputes.”].) IV. CONCLUSION Based on the foregoing, Swinerton respectfully requests that the Court grant its motion to compel arbitration based on the Agreement and grant such other and further relief as it deems necessary and appropriate. Dated: March 1, 2021 VARELA, LEE, METZ & GUARINO, LLP By: /s/ Daniel Sakaguchi Bennett J. Lee Daniel Sakaguchi Attorneys for Defendant SWINERTON BUILDERS