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Cronus Investments, Inc. v. Concierge Services

Cronus Investments, Inc. v. Concierge Services

Supreme Court of California

March 10, 2005, Filed

S116288

Opinion

CHIN, J.—CA(1)(1) Code of Civil Procedure section 1281.2, subdivision (c) 1 permits a trial court, under specified circumstances, to stay arbitration pending the outcome of related litigation. In Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468 [103 L. Ed. 2d 488, 109 S. Ct. 1248] (Volt), the United States Supreme Court held [****2]  that the Federal Arbitration Act (FAA), 9 United States Code section 1 et seq., which applies to and favors the enforcement of arbitration agreements affecting interstate commerce, does not preempt the application of section 1281.2, subdivision (c) where the parties have agreed that their arbitration agreement would be governed by the law of California. In this case, the parties agreed that their arbitration agreement would be governed by California law, but they further agreed that the designation of California law “shall not be deemed an election to preclude application of the [FAA], if it would be applicable.” As explained below, we conclude that, in this situation, the FAA also does not preempt the application of section 1281.2, subdivision (c).

Facts and Procedural History

In July 2000, Howard Colman transferred a home-management business, Dew-All Services, Inc. (Dew-All), to a newly created [****3]   [**220]  company, Concierge Services, LLC (Concierge). Cronus Investments, Inc. (Cronus), which is wholly owned by Colman, has a 20 percent interest in Concierge, while Westrec Marina Management, Inc. (Westrec) owns the remaining interest. The transactions involved six agreements: (1) a limited liability company (LLC) agreement between Cronus and Westrec, which created Concierge; (2) a stock purchase agreement by which Concierge bought the stock in Colman's  [*381]  preexisting company, Dew-All; (3) an employment agreement by which Concierge employed Colman as its president; (4) a covenant not to compete and confidentiality agreement between Colman and Concierge; (5) a consulting agreement between Cronus and Concierge; and (6) a guaranty agreement executed by Westrec of a promissory note payable by Concierge to Colman.

Four of the six agreements provide for the arbitration of any disputes between the parties “arising out of, in connection with, or in relation to the interpretation, performance or breach of this Agreement … .” 2 The arbitration clause further specifies that “The designation of a situs or specifically a governing law for this agreement or the arbitration shall not be deemed an [****4]  election to preclude application of the [FAA], if it would be applicable.” 3  [***544]  The agreements also contained a choice-of-law clause providing that “[t]his agreement shall be construed and enforced in accordance with and governed by the laws of the State of California, without giving effect to the conflict of laws provisions thereof.”

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35 Cal. 4th 376 *; 107 P.3d 217 **; 25 Cal. Rptr. 3d 540 ***; 2005 Cal. LEXIS 2644 ****; 2005 Cal. Daily Op. Service 2130; 2005 Daily Journal DAR 2945

CRONUS INVESTMENTS, INC., Plaintiff, Cross-defendant and Appellant; HOWARD JON COLMAN, Cross-defendant and Appellant, v. CONCIERGE SERVICES, Defendant, Cross-complainant and Respondents; WESTREC MARINA MANAGEMENT, INC., et al., Defendants and Respondents.

Prior History:  [****1]  Superior Court of Los Angeles County, No. LC060095. Richard B. Wolfe, Judge. Court of Appeal of California, Second Appellate District, Division Four, No. B159591.

Cronus Investments, Inc. v. Concierge Services, LLC, 107 Cal. App. 4th 1308, 133 Cal. Rptr. 2d 384, 2003 Cal. App. LEXIS 589 (Cal. App. 2d Dist., 2003)

CORE TERMS

arbitration, arbitration agreement, parties, choice-of-law, contracts, arbitration clause, proceedings, preempt, federal court, state court, state law, courts, rules of procedure, federal policy, ambiguities, procedural provisions, favoring arbitration, rules of arbitration, district court, high court, provisions, lawsuit, stay of arbitration, designation, principles, arbitration proceedings, compel arbitration, court action, arbitration provision, conflicts

Business & Corporate Compliance, Arbitration, Federal Arbitration Act, Arbitration Agreements, Civil Procedure, Alternative Dispute Resolution, General Overview, Stay Pending Arbitration, Pretrial Matters, Judicial Review, Contracts Law, Contract Conditions & Provisions, Arbitration Clauses, International Trade Law, Dispute Resolution, International Commercial Arbitration, Arbitration, Admiralty & Maritime Law, Enforcement of Arbitration, Federal Arbitration Act, Maritime Contracts, Arbitrability, Responses, Defenses, Demurrers & Objections, Waiver & Preservation of Defenses, Governments, State & Territorial Governments, Relations With Governments, Contracts Law, Affirmative Defenses, Coercion & Duress, Defenses, Unconscionability, Criminal Law & Procedure, Coercion & Duress, Ambiguities & Mistakes, Mandatory ADR, Legislation, Interpretation