Lyons Magnus v. Fujitsu America CA5 ( 2013 )

Filed 10/25/13 Lyons Magnus v. Fujitsu America CA5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
LYONS MAGNUS, INC.,
F064876
Plaintiff and Respondent,
(Super. Ct. No. 11CECG03294)
v.
FUJITSU AMERICA, INC., OPINION
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Fresno County. Mark W.
Snauffer, Judge.
Davis Wright Tremaine, Martin L. Fineman and Joseph E. Addiego III for
Defendant and Appellant.
Baker Manock & Jensen, John G. Michael, Kenneth J. Price and Andrea M. Upton
for Plaintiff and Respondent.
-ooOoo-
Defendant Fujitsu America, Inc. (Fujitsu) appeals from the denial of its petition to
compel arbitration of a dispute that arose with plaintiff Lyons Magnus, Inc. (Lyons).
Lyons had retained Fujitsu to install and implement ―Enterprise Resource Planning‖ (or
ERP) business software produced and sold by SAP America, Inc. (SAP). The software
package included a special module known as ―Tradespend Management‖ (Tradespend)
developed by Vistex, Inc. (Vistex) for use in SAP‘s ERP software. During the software
implementation process, a controversy arose regarding the proper timing to implement
portions of Tradespend. Significant delays and other problems followed, and Lyons
eventually filed a complaint in the trial court against Fujitsu, SAP and Vistex alleging
various theories of tort and contract liability. Meanwhile, Fujitsu commenced an
arbitration proceeding against Lyons only. The contract between Fujitsu and Lyons
provided for arbitration of disputes, but SAP and Vistex were not subject to that
provision and they were unwilling to arbitrate.
Fujitsu filed a petition to compel Lyons to arbitrate under Code of Civil Procedure
section 1281.2.1 Lyons opposed the petition and also sought to enjoin or stay the
arbitration proceedings. Lyons argued that if the arbitration were allowed to proceed in
the absence of all of the parties, there was a substantial risk of conflicting rulings. The
trial court agreed with Lyons‘s assessment and denied the petition to compel arbitration
based on section 1281.2, subdivision (c). Under that subdivision, a petition may be
denied if ―[a] party to the arbitration agreement is also a party to a pending court action
… with a third party, arising out of the same transaction or series of related transactions
and there is a possibility of conflicting rulings on a common issue of law or fact.‖ Fujitsu
argues on appeal that the trial court abused its discretion because, allegedly, conflicting
rulings could not possibly have occurred. Fujitsu, however, falls short of demonstrating
1 Unless otherwise indicated, all further statutory references are to the Code of Civil
Procedure.
2.
that premise. Moreover, we conclude the trial court‘s decision was well within its
reasonable discretion under the circumstances. Accordingly, the order is affirmed.
FACTS AND PROCEDURAL HISTORY
Fujitsu was a provider of information technology products and services. Fujitsu
was designated by SAP as one of its global technology partners and had collaborated with
SAP in installing and customizing SAP software for over three decades. SAP‘s software
products included ERP software. The purpose of ERP software was to improve business
operations by streamlining existing processes and improving visibility into business
operations using a unified suite of software applications that are integrated into existing
business software systems.
In 2009, Lyons decided it would update its information technology by obtaining
ERP software. After reviewing the available versions of such software on the market,
Lyons decided to purchase ERP software from SAP. In Lyons‘s perspective, one feature
that set SAP‘s ERP software apart from others was its inclusion of Tradespend by Vistex.
Tradespend was a special software module that dealt with customer discounts and
rebates, which represented an important portion of Lyons‘s business.
Having decided to purchase SAP‘s ERP software, it was necessary for Lyons to
determine which company should be hired to implement the software. SAP
recommended Fujitsu as a company that had the qualified personnel and experience
necessary to implement all aspects of the ERP software. On August 25, 2009, Lyons and
Fujitsu entered into a master agreement for the supply of equipment, software and
services (the Master Agreement), pursuant to which Fujitsu was to provide professional
technology consulting services to install and implement the SAP ERP software for
Lyons.
Since SAP ERP software must be individually tailored to specific business
operations and integrated into existing systems, the implementation of the software can
be extremely involved and complex. Fujitsu and Lyons agreed that the implementation
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process would occur in accordance with a three-phase schedule set forth in a statement of
work, which was an attachment to the Master Agreement. The phases were described as
phases 1A, 1B, and 1C. During each phase, only certain software modules or
applications were to be implemented at that time, as set forth in the statement of work.
Fujitsu began implementing phase 1A in October 2009, and that phase was
successfully completed ahead of schedule. However, difficulties began to arise during
the next phase—phase 1B—of the implementation process. There were disagreements
over how soon Fujitsu should implement portions of Vistex‘s Tradespend module.
Apparently, Vistex‘s employees strongly disagreed with Fujitsu‘s employees on that
issue. The disagreements reached a level of discord that Vistex employees allegedly
threatened Fujitsu staff while the latter attempted to implement Tradespend. The
controversy led to substantial delays and, according to Lyons, other problems or defects
were encountered as well.
Lawsuit in Superior Court
On September 21, 2011, Lyons filed its lawsuit in the trial court naming Fujitsu,
SAP and Vistex as defendants. The complaint stated general allegations common to all
causes of action, which we briefly summarize here. SAP and Fujitsu expressly
represented to Lyons that Fujitsu was qualified and able to provide Lyons with the
services needed to successfully implement the SAP ERP, including the Tradespend
module developed by Vistex. In reliance on said representations, Lyons entered into the
Master Agreement with Fujitsu to implement the SAP ERP software. Allegedly, as soon
as Fujitsu sent individuals to Lyons‘s facility to implement the software, it became
apparent that there were problems and Fujitsu was having difficulty completing the
implementation of Tradespend. In particular, a conflict allegedly developed in regard to
the implementation of Tradespend, resulting in Vistex staff threatening Fujitsu staff and
individuals leaving the Lyons‘s implementation. According to Lyons‘s complaint, after
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substantial delays and other problems persisted, it became apparent to Lyons that Fujitsu
was not going to complete the implementation of the software.
Based on these and other allegations, the complaint alleged breach of contract
claims against Fujitsu and SAP, including a first cause of action for rescission and a ninth
cause of action for breach of contract. The complaint also contained a number of causes
of action premised on alleged tortious conduct, including a second cause of action for
fraud–intentional misrepresentation against Fujitsu and SAP; a third cause of action for
fraud–intentional concealment against Fujitsu and SAP; a fourth cause of action for
violation of Business and Professions Code section 17200 against Fujitsu and SAP; a
fifth cause of action for negligent misrepresentation against Fujitsu and SAP; a sixth
cause of action for conspiracy to defraud against ―all‖ defendants (i.e., Fujitsu, SAP and
Vistex); a seventh cause of action for intentional interference with contract against
Vistex; and an eighth cause of action for negligent interference with prospective
economic relations against Vistex.
Arbitration Proceedings
In the Master Agreement between Fujitsu and Lyons, it provided that ―[a]ny
controversy arising out of or relating to this Agreement shall be settled before one
arbitrator by binding arbitration in Santa Clara County, California under the auspices of
the American Arbitration Association (‗AAA‘) .…‖ On November 29, 2011, Fujitsu
initiated arbitration proceedings by filing a demand for arbitration (the Demand) with the
AAA.2 The Demand stated Fujitsu‘s single cause of action against Lyons for breach of
contract. According to the Demand, Lyons failed to pay Fujitsu for a substantial portion
of the work it had performed under the Master Agreement. Furthermore, the Demand
alleged Lyons began insisting that certain software modules be installed in the second
2 Fujitsu was formally served with Lyons‘s complaint and summons about one week
later, on December 8, 2011.
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phase of implementation, even though such work was (allegedly) not scheduled to be
done until the last phase in the statement of work. Lyons refused to cooperate with
Fujitsu in developing a revised statement of work to provide for such changes or
modifications using a formal change-order process. Instead, Lyons simply demanded
such changes and then, later, ceased paying Fujitsu. Fujitsu continued to complete
phase 1B for approximately two months and offered proposals to accommodate Lyons‘s
changes. When it became apparent that Lyons would not cooperate or pay amounts
owed, the contract was terminated. The total amount that Lyons allegedly owed Fujitsu
was approximately $1.2 million for services performed on phase 1B of the software
implementation.
Trial Court Proceedings
On December 21, 2011, Lyons filed a motion for preliminary injunction to enjoin
or stay the arbitration proceedings initiated by Fujitsu. The motion was made on the
ground that Lyons‘s claims against Fujitsu were intertwined with related claims against
third parties SAP and Vistex, and it was therefore necessary for all of the claims to be
adjudicated together with all of the parties in a single action in the superior court in order
to avoid inconsistent findings of fact or law. For this reason, Lyons asked the trial court
to enjoin or stay the arbitration proceedings.
On January 9, 2012, Fujitsu filed its petition to compel Lyons to arbitrate before
the AAA and to stay the pending litigation under section 1281.2. The petition argued that
Lyons should be ordered to arbitrate all disputes between it and Fujitsu in accordance
with the agreement to arbitrate set forth in the Master Agreement. Fujitsu further argued
that Lyons‘s claims against third parties SAP and Vistex could be adjudicated afterwards,
separately and efficiently, without any risk of conflicting rulings. Both SAP and Vistex
filed joinders in Fujitsu‘s petition to compel arbitration and stay the litigation because
they preferred that Fujitsu and Lyons arbitrate in advance of the trial court litigation,
since it might help to resolve or simplify the issues in the litigation.
6.
On February 8, 2012, Lyons filed its opposition to the petition to compel
arbitration. The opposition reiterated Lyons‘s position that because its pending lawsuit
involved third parties (SAP and Vistex) against whom Lyons asserted causes of action
that were related to and intertwined with its dispute against Fujitsu, the only way to avoid
the risk of conflicting rulings was to have the entire controversy, including the claims
against SAP and Vistex, heard in a single forum in the trial court. Accordingly, under
section 1281.2, subdivision (c), Lyons urged the trial court to deny Fujitsu‘s petition.
Fujitsu‘s petition to compel arbitration and Lyons‘s motion to enjoin or stay
arbitration were both heard together on February 23, 2012. Following oral argument, the
trial court took the petition and motion under submission.
On March 8, 2012, the trial court heard and decided a demurrer filed by SAP to
Lyons‘s complaint. SAP‘s demurrer to the first cause of action (for rescission) was
sustained on the ground that the cause of action was duplicative of the cause of action for
breach of contract pled in the complaint. Similarly, SAP‘s demurrer to the sixth cause of
action (for civil conspiracy) was sustained on the ground that civil conspiracy was not an
independent cause of action separate from the tort causes of action alleged in the
complaint. The trial court did not hold that no basis for conspiracy liability existed, but
only that it was not a stand-alone or independent cause of action.
On March 28, 2012, the trial court issued its written order deciding Fujitsu‘s
petition to compel arbitration and Lyons‘s motion to enjoin or stay the arbitration. The
trial court agreed with Lyons‘s position that there was a risk of inconsistent rulings if the
arbitration proceeded and so it denied Fujitsu‘s petition to compel arbitration and granted
Lyons‘s motion to enjoin arbitration. The trial court relied on the discretion conferred on
it by section 1281.2, subdivision (c), to the effect that a court ―may refuse to compel
arbitration where a controversy affects claims by other parties not bound by the
arbitration agreement and arbitration risks conflicting rulings on common issues of law or
fact.‖
7.
In its written order, the trial court summarized a scenario in which conflicting
rulings might occur: ―Were the case to proceed to arbitration first, Fujitsu could claim
that it is not at fault for any of the problems that occurred, and that the fault, if any, lies
with SAP and/or Vistex (or others). [Thus], the arbitrator could reasonably conclude that
Fujitsu is not responsible, but non-parties SAP and/or Vistex are. [Lyons] receives no
award, as SAP and Vistex are non-parties to the arbitration (and have contended
explicitly that they are not bound by the arbitrator‘s findings). [¶] Lyons then proceeds
to trial against SAP and/or Vistex, who then ‗point the finger‘ at Fujitsu, which has
already been absolved of liability by the arbitrator. The jury agrees that Fujitsu is the
liable party, and absolves SAP and Vistex of liability. Lyons winds up with no recovery,
due to these inconsistent findings, after two complex proceedings and their associated
costs. Undoubtedly, other inconsistent scenarios can be imagined depending upon one‘s
assumptions as to the likely outcomes.[3]‖
Following entry of the above order, Fujitsu timely filed its notice of appeal.
DISCUSSION
I. Standard of Review
An order denying a petition to compel arbitration under section 1281.2,
subdivision (c), is reviewed for abuse of discretion. (Lindemann v. Hume (2012) 204
Cal.App.4th 556, 565 (Lindemann).) Under this standard, the trial court‘s discretionary
ruling will not be disturbed unless it ―exceed[ed] the bounds of reason.‖ (Henry v.
3 The trial court added, in a footnote: ―One could also posit that Fujitsu defeats
Lyons‘[s] claims against it and largely prevails on its affirmative claims for amounts
owed by Lyons in the arbitration; however, the arbitrator apportions some fault to absent
parties SAP and/or Vistex. Lyons would then be compelled to pursue its claims against
SAP and/or Vistex in a subsequent court trial in order to seek indemnification unavailable
in the arbitration forum. The possible inconsistencies inherent in adjudication of two
separate proceedings are only limited by one‘s legal imagination.‖
8.
Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 101; Fitzhugh v. Granada Healthcare
& Rehabilitation Center, LLC (2007) 150 Cal.App.4th 469, 475 (Fitzhugh).)
II. Overview of Section 1281.2, Subdivision (c)
Section 1281.2, subdivision (c), provides that a petition to compel arbitration may
be denied if ―‗[a] party to the arbitration agreement is also a party to a pending court
action or special proceeding with a third party, arising out of the same transaction or
series of related transactions and there is a possibility of conflicting rulings on a common
issue of law or fact.‘‖ In such cases, the trial court may in its discretion refuse to enforce
the arbitration agreement ―so that all issues between all parties are resolved in the judicial
proceeding.‖ (Metis Development LLC v. Bohacek (2011) 200 Cal.App.4th 679, 691
(Metis) [paraphrasing § 1281.2, subd. (c)].)4 ―‗Section 1281.2[, subdivision ](c)
addresses the peculiar situation that arises when a controversy also affects claims by or
against other parties not bound by the arbitration agreement. The … provision giv[es] the
court discretion not to enforce the arbitration agreement under such circumstances—in
order to avoid potential inconsistency in outcome as well as duplication of effort .…‘‖
(Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 393 [holding the
provision comports with policies favoring arbitration under federal law].)
―While there is a strong public policy in favor of arbitration, there is an ‗equally
compelling argument that the Legislature has also authorized trial courts to refuse
enforcement of an arbitration agreement [or stay the arbitration] when, as here, there is a
4 Several alternatives are available under the statute where the possibility of
conflicting rulings is found. The court ―(1) may refuse to enforce the arbitration
agreement and may order intervention or joinder of all parties in a single action or special
proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may
order arbitration among the parties who have agreed to arbitration and stay the pending
court action or special proceeding pending the outcome of the arbitration proceeding; or
(4) may stay arbitration pending the outcome of the court action or special proceeding.‖
(§ 1281.2, subd. (c).)
9.
possibility of conflicting rulings. ([Code Civ. Proc.,] § 1281.2, subd. (c).)‘ [Citation.]‖
(Fitzhugh, supra, 150 Cal.App.4th at p. 475.) That was precisely what the Legislature
intended in enacting subdivision (c) of section 1281.2. (Whaley v. Sony Computer
Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 488 (Whaley).) Thus, a
contractual right to arbitrate ―may have to yield if there is an issue of law or fact common
to the arbitration and a pending action or proceeding with a third party and there is a
possibility of conflicting rulings thereon.‖ (Mercury Ins. Group v. Superior Court (1998)
19 Cal.4th 332, 348.)
―The issue to be addressed under section 1281.2, subdivision (c), … is not whether
inconsistent rulings are inevitable but whether they are possible if arbitration is ordered.‖
(Lindemann, supra, 204 Cal.App.4th at p. 567, italics added.) An evidentiary showing is
not necessary to establish this defense to enforcement of arbitration; the trial court may
rely on the allegations in the relevant pleadings to decide whether a possibility of
inconsistent rulings would exist. (Abaya v. Spanish Ranch I, L.P. (2010) 189
Cal.App.4th 1490, 1498-1499.)
III. No Abuse of Discretion
A. Trial Court Properly Found a Risk of Conflicting Rulings
In the matter before us, Lyons‘s pending civil action in the trial court was not
limited to the two parties to the arbitration agreement (Lyons and Fujitsu), but included
claims against third parties (SAP and Vistex) relating to the same transaction or series of
related transactions (the purchase and implementation of SAP ERP software). Therefore,
the application of section 1281.2, subdivision (c), turned on the question of whether there
was ―a possibility of conflicting rulings on a common issue of law or fact‖ if the
arbitration proceeded. (§ 1281, subd. (c); see Metis, supra, 200 Cal.App.4th at p. 691.)
One common issue was whether Fujitsu failed to adequately perform the software
implementation services as required under the Master Agreement. Certainly, it would be
relevant to each of the claims, regardless of the forum, whether Fujitsu adequately
10.
performed such services and satisfied its material obligations under that contract. Among
other things, the matter of Lyons‘s damages, or at least the extent of Lyons‘s damages, if
any, would appear to depend in large measure on this issue. Nevertheless, we think a
better way of articulating the gist of the common issues would be in terms of causation:
That is, what was the cause, legally and factually, of the problems and delays in the
implementation of the software that led to Lyons‘s alleged damages? Deciding what
persons and conduct caused the alleged events would be a relevant issue in both forums.
And the issue could be resolved in a number of ways, as highlighted by the following
series of questions: Were the problems and delays (or some portion thereof) caused by
inadequate performance by Fujitsu of the software implementation process constituting a
breach of contract? Were the problems and delays (or some portion thereof) due to
Vistex‘s alleged interference with Fujitsu‘s performance? Did the problems and delays
occur because SAP and Fujitsu fraudulently represented to Lyons that Fujitsu could
adequately perform the required implementation services? Was there a combination of
some or all of the above causes? And, as indicated presently below, these overlapping
and intertwined issues clearly allow for the possibility of conflicting rulings.
The trial court appears to have analyzed the nature of the common issues in a
similar fashion. As noted, in holding there was a possibility for conflicting rulings, the
trial court described the following potential scenario: ―Were the case to proceed to
arbitration first, Fujitsu could claim that it is not at fault for any of the problems that
occurred, and that the fault, if any, lies with SAP and/or Vistex (or others). ]Thus], the
arbitrator could reasonably conclude that Fujitsu is not responsible, but non-parties SAP
and/or Vistex are. [Lyons] receives no award, as SAP and Vistex are non-parties to the
arbitration (and have contended explicitly that they are not bound by the arbitrator‘s
findings). [¶] Lyons then proceeds to trial against SAP and/or Vistex, who then ‗point
the finger‘ at Fujitsu, which has already been absolved of liability by the arbitrator. The
jury agrees that Fujitsu is the liable party, and absolves SAP and Vistex of liability.
11.
Lyons winds up with no recovery, due to these inconsistent findings, after two complex
proceedings and their associated costs.‖ Although the word ―fault‖ is perhaps technically
inapt, at least to the extent a breach of contract was allegedly concerned, the thrust of the
trial court‘s explanation is correct.
Fujitsu insists that if arbitration were allowed to proceed, the issues would remain
distinct from the issues in the court action and that no conflicting rulings would result.
We disagree. As discussed above, common issues appear to be so intertwined and
interrelated that conflicting rulings are a real possibility, as ably explained in the trial
court‘s order. While there may be scenarios in which this would not occur, the standard
is not that conflicting rulings are inevitable, but only that they are possible. (Lindemann,
supra, 204 Cal.App.4th at p. 567.) Moreover, the question before us—as the reviewing
court—is whether the trial court‘s order denying arbitration amounted to a clear abuse of
discretion by going beyond the bounds of reason under the circumstances. Fujitsu has
failed to demonstrate that such was the case here. In Lindemann, where a similar
argument was raised, the Court of Appeal stated: ―Although the … defendants attempt to
portray the issues in this case as discrete and segregable, we cannot say the trial court‘s
contrary conclusion exceeded the bounds of reason.‖ (Id. at p. 568.) We, likewise,
cannot say on this record that the trial court‘s decision exceeded the bounds of reason.
Finally, Fujitsu makes the novel argument that because certain appellate cases
engaged in (or noted that the trial court engaged in) a thorough or careful factual analysis
of the issue of whether or not arbitration should be denied under section 1281.2,
subdivision (c) (see, e.g., Best Interiors, Inc. v. Millie & Severson, Inc. (2008) 161
Cal.App.4th 1320, 1329-1330; Whaley, supra, 121 Cal.App.4th at pp. 481-484, 488;
Lindemann, supra, 204 Cal.App.4th at p. 568; Birl v. Heritage Care, LLC (2009) 172
Cal.App.4th 1313, 1319), a similarly detailed level of analysis is required on all such
motions. Allegedly, the trial court‘s analysis here did not meet that heightened level of
scrutiny or thoroughness. We reject this line of argument for several reasons. First, the
12.
trial court‘s order indicates the court did undertake a careful and reasoned analysis, and
Fujitsu has failed to demonstrate otherwise. Second, to the extent Fujitsu is trying to
impose an evidentiary requirement, the argument is misplaced because ―courts have
routinely relied on the allegations contained in the operative pleading to determine
whether there is the possibility of conflicting rulings within the meaning of
section 1281.2, subdivision (c).‖ (Abaya v. Spanish Ranch I, L.P., supra, 189
Cal.App.4th at p. 1499.) Third, none of the cases cited by Fujitsu specifically addressed
the issue of whether a particular level of detailed analysis was a requirement in such
cases. Appellate opinions are not authority for issues that were not considered therein.
(Ginns v. Savage (1964) 61 Cal.2d 520, 524, fn. 2; See’s Candy Shops, Inc. v. Superior
Court (2012) 210 Cal.App.4th 889, 907.) Fujitsu mistakes or has lost sight of the real
issue on appeal, which is whether the trial court abused its discretion on the record before
us. As discussed herein, Fujitsu has failed to show that such an abuse of discretion
occurred.
B. Trial Court’s Order Did Not Contravene Policy Favoring Arbitration
Fujitsu contends the trial court‘s ruling contravened the strong public policy
favoring arbitration. (See Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) Again, we
disagree. Although the law indeed favors arbitration, the Legislature has expressed
another public policy in section 1281.2, subdivision (c), that arbitration may be denied in
those situations where the conditions delineated in that subdivision are found to exist.
―While there is a strong public policy in favor of arbitration, there is an ‗equally
compelling argument that the Legislature has also authorized trial courts to refuse
enforcement of an arbitration agreement [or stay the arbitration] when, as here, there is a
possibility of conflicting rulings. ([Code Civ. Proc.,] § 1281.2, subd. (c).)‘ [Citation.]‖
(Fitzhugh, supra, 150 Cal.App.4th at p. 475.) That was the case here. Moreover, the
Supreme Court has made it clear that a trial court‘s authority to deny arbitration under
section 1281.2, subdivision (c), is consistent with a broad public policy to encourage
13.
arbitration because it avoids the pitfall of potential inconsistent rulings and duplication of
effort that might otherwise be thrust upon a party to an arbitration agreement in the
peculiar situation described in subdivision (c). (Cronus Investments, Inc. v. Concierge
Services, supra, 35 Cal.4th at p. 393 [holding that § 1281.2, subd. (c), does not conflict
with strong policy of federal law to promote contractual arbitration].) For all of these
reasons, we reject Fujitsu‘s contention that the trial court‘s order violated the public
policy favoring arbitration.
C. Demurrer Ruling Did Not Mandate a Different Result
Fujitsu suggests that because the trial court sustained SAP‘s demurrer to the sixth
cause of action for civil conspiracy, it eliminated any grounds for concluding there were
common issues of law or fact. Fujitsu has failed to provide adequate legal discussion and
authority to support the argument that conspiracy claims were necessary to finding a
common issue; therefore, we treat that perfunctory claim as abandoned. (People v.
Stanley (1995) 10 Cal.4th 764, 793; People v. Gionis (1995) 9 Cal.4th 1196, 1214, fn. 11;
Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 699-700; Golden
Day Schools, Inc. v. Department of Education (1999) 69 Cal.App.4th 681, 695, fn. 9.) In
any event, Fujitsu has misinterpreted the effect of the demurrer ruling. On March 8,
2012, three weeks prior to its ruling on the petition to compel arbitration, the trial court
heard and decided a demurrer filed by SAP to Lyons‘s complaint. SAP‘s demurrer to the
sixth cause of action (for civil conspiracy) was sustained without leave on the sole ground
that civil conspiracy is not an independent cause of action. That is, conspiracy could not
be alleged as though it were a new or additional cause of action distinct from the
underlying tort causes of action alleged in the complaint. Contrary to Fujitsu‘s claim, the
trial court did not hold that no basis for conspiracy liability existed under the allegations,
but only that it was not an additional or independent cause of action.
14.
D. Trial Court’s Order and Analysis Were Sufficient
Fujitsu argues the trial court‘s statement of decision was insufficient because it did
not address each of the alternatives available under section 1281.2, subdivision (c). (See
fn. 4, ante [stating the options available to the trial court under § 1281.2, subd. (c)].) To
support this argument, Fujitsu relies on Metis. In Metis, the trial court denied a petition
to compel arbitration and then refused a timely request to prepare a statement of decision.
The trial court‘s brief written order in that case merely stated the bare conclusion that the
petitioner waived its right to arbitrate under section 1281.2, subdivision (a), and that there
was a risk of inconsistent rulings under section 1281.2, subdivision (c). No explanation
was provided. (Metis, supra, 200 Cal.App.4th at pp. 685-686, 691-693.) The petitioner
appealed and the Court of Appeal held: (1) a statement of decision was required and
(2) the trial court‘s order was inadequate. (Id. at pp. 689-693.) As to the order itself, the
Court of Appeal lamented, ―we are given no idea by the court‘s order‖ what the common
issues were. (Id. at pp. 691-692.) In addition, the Court of Appeal stated that the trial
court‘s order should have indicated why the existence of the potential for conflicting
rulings ―should lead to the denial of arbitration, rather than one of the other alternatives
set forth in the statute.‖ (Id. at p. 690.) We believe the latter comment is best understood
in light of the complete absence of any contextual information or explanation in the order
under consideration there.
In any event, our case is plainly distinguishable from Metis. Here, the trial court‘s
order (entitled decision and order after hearing) adequately set forth the legal and factual
basis for its ruling (§ 632), including a discussion of the significant potential for
conflicting rulings. The order expressly recited the alternatives available under
section 1281.2, subdivision (c). It elaborated on why adjudicating the issues in two
separate or consecutive proceedings would not be best—i.e., that approach would create a
potential for conflicting rulings. Moreover, just before the order stated the conclusion
that arbitration was being denied, it quoted with approval the language of a recent case
15.
that had affirmed the denial of arbitration pursuant to section 1281.2, subdivision (c).
The quoted language, taken from Lindemann, stated in essence that the denial of
arbitration in that case was being affirmed because (1) there was a possibility of
conflicting rulings if arbitration was ordered and (2) it was reasonable for the trial court
to conclude that ―the entire case should be resolved in a single litigation.‖ (Lindemann,
supra, 204 Cal.App.4th at p. 568.) The quoted language, set forth where it was in the
order‘s discussion, clearly reflected that the trial court was following that same rationale
here. In context and read as a whole, we believe the order adequately reflected that
arbitration was being denied (that is, that outcome was being selected over the other
alternatives) because there was a possibility of conflicting rulings if arbitration was
ordered and, further, the joinder of all the parties in a single litigation was a reasonable
and appropriate means of avoiding the conflicting rulings and efficiently resolving the
entire controversy. Accordingly, Fujitsu‘s argument that the trial court‘s order was
insufficient is unavailing.5
E. Enjoining the Arbitration
We have held the trial court did not abuse its discretion in denying Fujitsu‘s
petition to compel arbitration. The trial court‘s order not only denied Fujitsu‘s petition, it
also granted Lyons‘s concurrent motion for a preliminary injunction to stop Fujitsu‘s
already initiated arbitration proceedings from going forward. Fujitsu argues the trial
court did not engage in the traditional balancing of all the equities prior to issuing the
preliminary injunction. The argument is misplaced because the proper analysis to be
5 Additionally, Fujitsu has not shown by citation to the record that it objected to the
sufficiency of the statement of decision in the trial court, and there is nothing in the court
register to show that any such objection or request for clarification was ever made.
Where there is a failure to properly object in the trial court, the matter is waived. (In re
Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1132, 1138.) We conclude waiver
constitutes an alternative basis for rejecting Fujitsu‘s challenge on this issue.
16.
undertaken by the trial court was under section 1281.2, subdivision (c), which the trial
court adequately performed. The several options in that statute included the denial of a
petition to compel arbitration, which in this case functioned as the practical equivalent of
stopping the arbitration from going forward. (See, e.g., Melchor Investment Co. v. Rolm
Systems (1992) 3 Cal.App.4th 587, 591-592 [order denying a preliminary injunction
against arbitration is tantamount to an order compelling arbitration]; International Film
Investors v. Arbitration Tribunal of Directors Guild (1984) 152 Cal.App.3d 699, 704 [―a
judgment denying such petition is the practical equivalent of an order to compel
arbitration‖].) Whether or not a separate order enjoining the arbitration was necessary or
merely superfluous, Lyons plainly requested that order as a defense to allowing the
arbitration commenced by Fujitsu with the AAA from proceeding in light of the problem
of conflicting rulings. (See Southeast Resource Recovery v. Montenay Intern. (9th Cir.
1992) 973 F.2d 711, 713 [applying California law, noting that an action for injunction
against arbitration is essentially a defense to a petition to compel arbitration].) The
proper analysis, therefore, was pursuant to section 1281.2, subdivision (c). Fujitsu has
failed to show any abuse of discretion or any prejudice in regard to the preliminary
injunction.
DISPOSITION
The order of the trial court is affirmed. Costs on appeal are awarded to Lyons.
_____________________
Kane, J.
WE CONCUR:
_____________________
Wiseman, Acting P.J.
_____________________
Detjen, J.
17.