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Volt Info. Scis. v. Bd. of Trs.

Supreme Court of the United States

November 30, 1988, Argued ; March 6, 1989, Decided

No. 87-1318


 [*470]  [***494]  [**1251]    CHIEF JUSTICE REHNQUIST delivered the opinion of the Court.

  [****6]  ] Unlike its federal counterpart, the California Arbitration Act, Cal. Civ. Proc. Code Ann. § 1280 et seq. (West 1982), contains a provision allowing a court to stay arbitration pending resolution of related litigation. We hold that ] application of the California statute is not pre-empted by the Federal Arbitration Act (FAA or Act), 9 U. S. C. § 1 et seq., in a case where the parties have agreed that their arbitration agreement will be governed by the law of California.

Appellant Volt Information Sciences, Inc. (Volt), and appellee Board of Trustees of Leland Stanford Junior University (Stanford) entered into a construction contract under which Volt was to install a system of electrical conduits on the Stanford campus. The contract contained an agreement to arbitrate all disputes between the parties "arising out of or relating to this contract or the breach thereof." 1 [****8]  The contract also contained a choice-of-law clause providing that "[t]he Contract shall be governed by the law of the place where the Project is located." App. 37. During the course of the project,  [****7]   [***495]  a dispute developed regarding compensation for extra work, and Volt made a formal demand for arbitration. Stanford responded by filing an action against Volt  [*471]  in California Superior Court, alleging fraud and breach of contract; in the same action, Stanford also sought indemnity from two other companies involved in the construction project, with whom it did not have arbitration agreements. Volt petitioned the Superior Court to compel arbitration of the dispute. 2 Stanford in turn moved to stay arbitration pursuant to Cal. Civ. Proc. Code Ann. § 1281.2(c) (West 1982), which permits a court to stay arbitration pending resolution of related litigation between a party to the arbitration agreement and third parties not bound by it, where "there is a possibility of conflicting rulings on a common issue of law or fact." 3 The Superior Court denied  [**1252]  Volt's motion to compel arbitration and stayed the arbitration proceedings pending the outcome of the litigation on the authority of § 1281.2(c). App. 59-60.

 [****9]  The California Court of Appeal affirmed. The court acknowledged that the parties' contract involved interstate  [*472]  commerce, that the FAA governs contracts in interstate commerce, and that the FAA contains no provision permitting a court to stay arbitration pending resolution of related litigation involving third parties not bound by the arbitration agreement. App. 64-65. However, the court held that by specifying that their contract would be governed by "'the law of the place where the project is located,'" the parties had incorporated the California rules of arbitration, including § 1281.2(c), into their arbitration agreement. Id., at 65. Finally, the court rejected Volt's contention that, even if the parties had agreed to arbitrate under the California rules, application of § 1281.2(c) here was nonetheless pre-empted by the FAA because the contract involved interstate commerce. Id., at 68-80.

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489 U.S. 468 *; 109 S. Ct. 1248 **; 103 L. Ed. 2d 488 ***; 1989 U.S. LEXIS 1273 ****; 57 U.S.L.W. 4295



Disposition: Affirmed.


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