Banc of Cal., NA v. Superior Court

Filed 9/27/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
BANC OF CALIFORNIA, B310190
NATIONAL ASSOCIATION,
(Los Angeles County
Petitioner, Super. Ct. No. 19SMCV01580)
v.
THE SUPERIOR COURT OF
LOS ANGELES COUNTY,
Respondent;
N977CB HOLDINGS, LLC et al.,
Real Parties in Interest.
ORIGINAL PROCEEDINGS in mandate. H. Jay Ford III
Judge. Petition granted.
Grignon Law Firm LLP, Margaret M. Grignon, Anne M.
Grignon; Kibler Fowler & Cave LLP, Michael Kibler, Matthew J.
Cave, Adam C. Pullano for Petitioner.
No appearance for Respondent.
Skylar Kirsh, LLP, Justin M. Goldstein, Louise D. Nutt for
Real Parties in Interest.
__________________________
Banc of California, National Association (Banc) loaned
N977CB Holdings, LLC (Holdings) $3.5 million to facilitate
Holdings’s purchase of a commercial aircraft (aircraft). The
parties executed seven documents in connection with the loan
(loan documents) and an eighth agreement, executed seven weeks
later, concerning Banc’s charter of Holdings’s aircraft through a
charter company, Jet Edge (aircraft usage agreement). 1 After
Holdings allegedly defaulted on the loan, Banc filed this action
alleging Holdings breached the terms of the loan documents in
various respects. Banc also alleged it had a right to sell the
aircraft in the possession of Jet Edge as collateral for the loan
and to recover money owed by Jet Edge to Holdings based on a
subordination agreement. Banc asserted additional claims for
breach of the aircraft usage agreement and conversion, alleging
Holdings refused to return Banc’s remaining deposit under the
aircraft usage agreement.
Holdings and Jet Edge petitioned to compel arbitration and
stay the litigation based on an arbitration clause in the aircraft
usage agreement. Although Banc later dismissed its two causes
of action based on the aircraft usage agreement (leaving only the
claims based on breach of the loan documents), the trial granted
the petition as to the threshold question of arbitrability, finding
the American Arbitration Association (AAA) rules provided for
1 Banc named as a defendant Western Air Charter, Inc.,
doing business as Jet Edge.
2
delegation of the determination of whether the parties’ dispute
arose out of the arbitration clause, and therefore the arbitrator
should decide whether Banc’s claims were arbitrable.
Banc seeks a writ of mandate compelling the trial court to
vacate its order granting Holdings’s petition to compel
arbitration. Banc asserts the trial court erred in relying on the
Supreme Court’s decision in Henry Schein, Inc. v. Archer and
White Sales, Inc. (2019) ___ U.S. ___ [139 S.Ct. 524, 529] (Schein),
which held that where an arbitration clause contains a delegation
provision, the arbitrator should decide the threshold issue of
arbitrability even if the argued basis for arbitration is “wholly
groundless.” We agree with Banc. In Schein, the court
considered who should decide whether the parties’ dispute
arising from a specific contract with an arbitration clause was
arbitrable; here, the question on Holdings’s petition to compel
arbitration was whether the parties agreed to arbitrate their
dispute over the loan documents, which did not have arbitration
clauses, a question the court must decide in the first instance.
We grant the petition.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Agreements Between Banc and Holdings
On June 29, 2016 Banc loaned Holdings $3.5 million to
facilitate Holdings’s purchase of an aircraft. In connection with
the loan, the parties executed seven documents on June 29.
First, Holdings executed and delivered to Banc a promissory note
for $3.5 million, providing for 4.25 percent interest on the unpaid
principal balance. Holdings agreed to make monthly interest
payments and yearly payments of principal starting on July 5,
3
2017, with payment of all outstanding principal plus interest on
July 5, 2021. The promissory note included a clause providing
with respect to the promissory note and related documents that
“[i]f there is a lawsuit,” Holdings consented to jurisdiction in any
court in Idaho or Los Angeles County. Further, the parties
waived their right to a jury trial “in any action, proceeding, or
counterclaim brought by either [Banc] or [Holdings] against the
other.”
Second, Banc and Holdings executed an aircraft and
business loan agreement (loan agreement). The loan agreement
required Holdings to provide specified financial reports to Banc
each year. Further, the loan agreement provided that “any
dispute, claim or controversy . . . between [Banc] and [Holdings]
or related to the Loan, whether sounding in contract, tort or
otherwise, that becomes the subject of a judicial action shall be
heard by a referee pursuant to Section 638 of the California Code
of Civil Procedure,” 2 and that the referee “may (i) hear and
determine all of the issues, whether of fact or law, and (ii)
ascertain any fact necessary to enable the court to determine an
action or proceeding in any Controversy or matter related to a
Controversy.” The parties agreed the loan agreement would
serve as a “reference agreement” under section 638 and could be
filed with the court as the basis for a motion for the controversy
to be heard by a referee. A venue provision stated, “If there is a
lawsuit, [Holdings] agrees upon [Banc’s] request to submit to the
jurisdiction of the courts of Los Angeles County, State of
California.” Further, the parties waived their right to a jury
trial.
2 All further undesignated statutory references are to the
Code of Civil Procedure.
4
Third, Holdings executed an aircraft security agreement
(security agreement) granting Banc a security interest and lien
on the aircraft (a specific Gulfstream jet), two engines, and other
aircraft parts, as well as specified documents relating to the
aircraft, engines, and parts. Under the agreement, Holdings was
required to obtain insurance naming Holdings and Banc as
insureds. Banc perfected its security interest by recording it,
providing notice to the Federal Aviation Administration, and
filing a Uniform Commercial Code (UCC) financing statement
with the Delaware Secretary of State. The security agreement
included a venue provision stating, “If there is a lawsuit,
[Holdings] consents to the jurisdiction of all state and federal
courts located within California.” The parties also waived their
right to a jury trial.
Fourth, Holdings executed and delivered to Banc on the
same date a collateral assignment of rights (assignment
agreement), assigning to Banc a security interest in the fifth
agreement, an aircraft services and charter management
agreement between Holdings and Jet Edge (charter agreement).
The assignment agreement required Holdings to obtain Banc’s
consent before settling any dispute under the charter agreement.
Further, Banc was authorized on behalf of Holdings to enforce
any rights Holdings had to collect amounts due to Holdings under
the charter agreement. The assignment agreement incorporated
the terms of the jury waiver in the loan agreement. The charter
agreement provided that the parties to the agreement “submit to
the non-exclusive jurisdiction for litigation arising out of this
Agreement to the courts of Delaware.” Banc perfected its
security interest in the charter agreement by filing a UCC
financing statement with the Delaware Secretary of State.
5
Sixth, Holdings executed and delivered to Banc an
agreement to provide insurance (insurance agreement), under
which Holdings agreed to insure the collateral set forth in the
security agreement. The one-page agreement did not address
jurisdiction. And seventh, Banc, Holdings, and Jet Edge
executed a subordination and standstill agreement
(subordination agreement), providing that in consideration of the
$3.5 million loan, Jet Edge agreed to subordinate “any and all
claims or liens now or hereafter attaching to the [c]ollateral
arising from [Jet Edge’s] [i]nterest or otherwise . . . .” The
subordination agreement provided that “[i]f there is a lawsuit,”
Jet Edge consents to jurisdiction in all California state and
federal courts and venue in Los Angeles County, California.
None of the seven loan documents contained an arbitration
agreement.
Seven weeks later—on August 18, 2016—Banc and
Holdings entered into the aircraft usage agreement, which
allowed Banc and its authorized purchasers to charter air
transportation on Holdings’s aircraft at a discounted price based
on Banc’s planned usage of at least 150 hours of flight time in
each 12-month period following execution of the agreement. The
agreement provided that Banc would give Holdings a $480,000
deposit upon execution of the agreement and annually thereafter.
The aircraft usage agreement included an arbitration
provision in section 6.5 that stated, “In the event of any dispute
or controversy between the Parties relating to this Agreement
(other than a dispute or controversy seeking injunctive or
equitable relief), the matter shall be submitted to arbitration for
resolution, which arbitration shall be conducted in Los Angeles,
CA, before one arbitrator, in accordance with the rules of the
6
American Arbitration Association (Commercial) then in effect.”
The “Agreement” was defined as the “Aircraft Usage Agreement.”
The aircraft usage agreement also contained a clause titled
“Governing Law and Court Jurisdiction” under which Banc and
Holdings consented to jurisdiction in California federal courts if
the courts had jurisdiction, and if not, to California state courts.
The aircraft usage agreement provided for a one-year term,
to be automatically renewed unless either party gave notice of
termination within 30 days of the agreement’s anniversary date.
However, the agreement provided that several provisions,
including the arbitration clause in section 6.5 would “survive
beyond the end of the Term of this Agreement.” Banc terminated
the agreement by its July 17, 2017 “Notice of Non-Renewal.” In
the notice of non-renewal, Banc requested Holdings return the
remaining deposit held by Holdings, in the amount of
$189,761.71.
B. The Lawsuit and Petition To Compel Arbitration
On September 10, 2019 Banc filed this action against
Holdings, Jet Edge, and 20 Doe defendants. The first amended
complaint alleged in the first cause of action that Holdings
breached the promissory note, the loan agreement, the security
agreement, the assignment agreement, the insurance agreement,
the UCC financing statements, the notices filed with the Federal
Aviation Administration, “and all other documents executed in
connection with the Bank’s Loan to [Holdings].” Banc sought
$3 million owed on the loan; the right to sell or otherwise dispose
of the aircraft to enforce Banc’s security interest under the
security agreement; and the right to enforce any rights Banc held
7
under the charter agreement, including to recover of any
amounts owed to Holdings under that agreement.
The second cause of action alleged Jet Edge’s breach of the
charter agreement and subordination agreement, including the
failure of Jet Edge to pay to Banc amounts Jet Edge owed to
Holdings under the charter agreement.
The third cause of action against Holdings alleged breach of
the aircraft usage agreement arising from Holdings’s refusal to
return $189,761.71 that Holdings held in deposit for Banc after
Banc gave notice it was not renewing the agreement. The fourth
cause of action alleged a claim for conversion against Holdings
based on Holdings’ refusal to return the remaining deposit under
the aircraft usage agreement.
On April 3, 2020 Holdings filed a petition to compel
arbitration under section 1281.2 to arbitrate Banc’s claims based
on the arbitration clause in the aircraft usage agreement.
Holdings asserted that “[w]ithout question” the third and fourth
causes of action were subject to arbitration, and even if the first
and second causes of action were not subject to arbitration, they
should be stayed pending completion of the two arbitrable claims.
Jet Edge, which was not a party to the aircraft usage agreement,
joined the petition and motion to stay. On August 5, 2020,
instead of filing an opposition to the petition, Banc voluntarily
dismissed without prejudice its third cause of action for breach of
the aircraft usage agreement and fourth cause of action for
conversion. In its reply brief, Holdings asserted the arbitration
clause in the aircraft usage agreement applied to the parties’
disputes regarding the loan documents because the loan
documents related to the aircraft usage agreement and the
documents were signed “around the same time.” Holdings argued
8
the language in the arbitration clause requiring arbitration of
“any dispute or controversy between the Parties relating to this
Agreement” should be construed broadly to include the dispute
over the loan documents. 3 (Underlining and boldface omitted.)
Further, Holdings asserted the AAA rules (applicable under the
arbitration clause) delegated to the arbitrator the power to decide
the scope and validity of the arbitration clause and the
arbitrability of any claim.
Banc filed a sur-reply brief, arguing Holdings improperly
raised new arguments in its reply brief as to why the first and
second causes of action had not become moot by dismissal of the
third and fourth causes of action. Banc asserted the arbitration
clause in the aircraft usage agreement limited its application to
disputes relating to “this Agreement.” Further, the loan
documents were not related to the aircraft usage agreement, and
most of the loan documents provided for the courts to resolve any
disputes. Moreover, the court, not the arbitrator, should decide
the threshold question of the arbitrability of Banc’s claims.
On August 18, 2020 the trial court issued a tentative ruling
denying Holdings’s petition to compel arbitration. However, the
court allowed the parties to file supplemental briefs. Holdings
argued in its supplemental brief that where there is a delegation
clause, the arbitrator must decide the threshold issue of
3 Holdings also relied on the declaration of Robert Estrin
filed with its petition in which Estrin stated that Banc’s counsel
on a telephone call “told [him] that [Banc] agreed to provide the
loan to [Holdings] in part because of the Aircraft Usage
Agreement.” The trial court in its initial tentative ruling rejected
Holdings’s argument, finding the declaration was “insufficient” to
conclude the arbitration provision applied to breach of the loan
documents.
9
arbitrability, even if the argument for arbitration is “wholly
groundless,” citing to Schein, supra, 139 S.Ct. at page 529. In
response, Banc argued that four of the seven loan documents
contained choice-of-venue provisions requiring Holdings to
submit to the jurisdiction of the California courts. Banc
distinguished Schein on the ground it involved a single
agreement with an arbitration clause, whereas Holdings sought
to compel arbitration of claims arising from unrelated
agreements that did not contain arbitration clauses.
After a hearing on September 17, 2020, the court adopted
its revised tentative ruling granting the petition to compel
arbitration as to the threshold issue whether Banc’s remaining
causes of action were subject to arbitration under the aircraft
usage agreement. The court explained that by incorporating the
AAA rules requiring the arbitrator to decide questions of
arbitrability under the aircraft usage agreement, the “parties
clearly and unmistakably delegated the question of the
arbitrability of the 1st and 2nd causes of action under [§] 6.5 [of
the aircraft usage agreement] to the arbitrator.” Further, the
parties’ consent to jurisdiction in the California courts under the
loan documents was “not inconsistent with the parties’ intention
to submit the question of arbitrability under [§] 6.5 of the Aircraft
Usage Agreement to the arbitrator, as reflected by the
incorporation of the AAA Commercial rules. Indeed, it is not
uncommon for a lawsuit to be filed first and a petition to compel
arbitration is filed in response, such that consent to jurisdiction
would not necessarily be irreconcilable with a mandatory
arbitration clause.”
Banc filed a motion for reconsideration based on the recent
decision in Moritz v. Universal City Studios LLC (2020)
10
54 Cal.App.5th 238, 241 (Moritz) that upheld the denial of a
motion to compel arbitration of a contract that did not contain an
arbitration clause even though earlier contracts between the
parties contained arbitration clauses. After a hearing on
December 4, 2020, the trial court denied the motion for
reconsideration. The court entered an order on January 19, 2021
granting the petition to compel arbitration and motion to stay the
action.
C. The Petition for Writ of Mandate
On February 3, 2021 Banc filed a petition for writ of
mandate challenging the trial court’s January 19, 2021 order
compelling the parties to arbitration and staying the action. On
February 24, 2021 we issued an order to show cause why relief
should not be granted. Holdings and Jet Edge filed a return, and
Banc filed a reply.
DISCUSSION
A. Principles of Arbitration
Section 1281.2 requires the trial court to order arbitration
of a controversy “[o]n petition of a party to an arbitration
agreement alleging the existence of a written agreement to
arbitrate a controversy and that a party to the agreement refuses
to arbitrate such controversy . . . if it determines that an
agreement to arbitrate the controversy exists.” Whether there is
a written agreement to arbitrate “is a matter of contract, and
courts must enforce arbitration contracts according to their
terms.” (Schein, supra, 139 S.Ct. at p. 529; accord, Rent-A-
Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 67 [The Federal
11
Arbitration Act (FAA) “reflects the fundamental principle that
arbitration is a matter of contract”]; Pinnacle Museum Tower
Assn. v. Pinnacle Market Development (US), LLC (2012)
55 Cal.4th 223, 236 (Pinnacle) [“‘“[A] party cannot be required to
submit to arbitration any dispute which he has not agreed so to
submit.”’”].) 4
“[P]arties may agree to have an arbitrator decide not only
the merits of a particular dispute but also ‘“gateway” questions of
“arbitrability,” such as whether the parties have agreed to
arbitrate or whether their agreement covers a particular
controversy.’” (Schein, supra, 139 S.Ct. at p. 529; accord, Rent-A-
Center, West, Inc. v. Jackson, supra, 561 U.S. at pp. 68-69.)
“Unless the parties clearly and unmistakably provide otherwise,
4 The arbitration clause does not specify whether the FAA or
California Arbitration Act (CAA) applies. The substantive
provisions of the FAA apply if the applicable arbitration clause is
in “a contract evidencing a transaction involving commerce . . . .”
(9 U.S.C. § 2; see Volt Information Sciences, Inc. v. Board of
Trustees of Leland Stanford Junior University (1989) 489 U.S.
468, 476 [“It is undisputed that this contract falls within the
coverage of the FAA, since it involves interstate commerce.”]).
Although it is undisputed that Banc is a national banking
association, neither party addressed in the trial court or in this
writ proceeding whether the FAA applies (or whether Schein,
supra, 139 S.Ct. 524 controls if the CAA applies). We do not
reach these issues because even if we assume Schein applies, as
do the parties, under either the FAA or the CAA, it was for the
trial court in the first instance to decide whether the parties
agreed to arbitrate their dispute.
12
the question of whether the parties agreed to arbitrate is to
be decided by the court, not the arbitrator.” (AT&T Technologies,
Inc. v. Communications Workers of America (1986) 475 U.S. 643,
649; accord, Granite Rock Co. v. Int’l Broth. of Teamsters (2010)
561 U.S. 287, 296 [“It is . . . well settled that where the dispute at
issue concerns contract formation, the dispute is generally for
courts to decide.”]; First Options of Chicago, Inc. v. Kaplan (1995)
514 U.S. 938, 939.)
The party seeking to compel arbitration bears the burden of
proving by a preponderance of the evidence an agreement to
arbitrate a dispute exists. (Pinnacle, supra, 55 Cal.4th at p. 236;
Rosenthal v. Great Western Fin. Securities Corp. (1996)
14 Cal.4th 394, 413.) Where the evidence is not in conflict, we
review de novo the trial court’s ruling on a petition to compel
arbitration. (Pinnacle, at p. 236; accord, Wilson-Davis v. SSP
America, Inc. (2021) 62 Cal.App.5th 1080, 1087 [“Because the
basic facts underlying [defendant’s] motion to compel arbitration
are undisputed, this appeal presents a purely legal issue, which
we review de novo.”]; Moritz, supra, 54 Cal.App.5th at p. 245
[same].)
B. Schein and Its Progeny
The United States Supreme Court in Schein, supra,139 S.Ct. at pages 527 to 528, held the arbitrator should resolve
the threshold question whether an arbitration agreement applies
to a particular dispute where the arbitration agreement delegates
to the arbitrator the question of arbitrability, regardless of
whether the argument for arbitration is “‘wholly groundless.’”
(Id. at p. 528.) In Schein, the plaintiff filed suit for violation of
federal and state antitrust laws. (Ibid.) The relevant contract
13
contained an arbitration clause that provided that “[a]ny dispute
arising under or related to this Agreement (except for actions
seeking injunctive relief [and other specified exceptions]) shall be
resolved by binding arbitration in accordance with the arbitration
rules of the American Arbitration Association.” (Ibid.) The
defendant requested the court refer the case to arbitration, but
the plaintiff objected on the ground the complaint sought
injunctive relief, which was excluded from the terms of the
arbitration agreement. (Ibid.) The court observed the AAA rules
delegate to the arbitrator the power to resolve arbitrability
questions. (Ibid.) In rejecting the plaintiff’s contention the court
should decide the threshold issue of arbitrability notwithstanding
the delegation provision, the court explained, “When the parties’
contract delegates the arbitrability question to an arbitrator, a
court may not override the contract. In those circumstances, a
court possesses no power to decide the arbitrability issue. That is
true even if the court thinks that the argument that the
arbitration agreement applies to a particular dispute is wholly
groundless.” (Id. at p. 529.)
Banc relies on the decision of our colleagues in Division
One of this district in Moritz, supra, 54 Cal.App.5th at page 248
to support its argument Schein does not control. In Moritz, the
producer of The Fast and the Furious film and its sequels entered
into eight written producer contracts with a studio setting forth
the terms of the producer’s work on the films. (Id. at p. 241.) The
first seven contracts contained valid arbitration clauses. (Id. at
p. 242.) The contract governing the eighth through tenth films
provided that the terms of the seventh contract (with its
arbitration clause) would “apply to any movie constituting a
‘sequel’ or ‘remake’ of earlier films in the franchise.” (Id. at
14
p. 241.) A dispute arose concerning a later “spinoff film” that
would be based on characters from the prior films but was
neither a sequel nor a remake. (Id. at pp. 242-243.) The
producer sued the studio, alleging the parties had an oral
agreement the studio breached. (Id. at p. 243.) The studio moved
to compel arbitration under the arbitration clause in the seventh
contract. (Id. at p. 244.) The Court of Appeal affirmed the trial
court’s denial of the motion, explaining Schein “presupposes a
dispute arising out of the contract or transaction, i.e., some
minimal connection between the contract and the dispute. That
is so because under the FAA, contractual arbitration clauses are
‘valid, irrevocable, and enforceable’ if they purport to require
arbitration of any ‘controversy thereafter arising out of such
contract.’ (9 U.S.C. § 2.) Schein expressly understood that the
Act requires enforcement of arbitration clauses with respect to
disputes ‘“thereafter arising out of such contract.”’ [Citation.]
The FAA requires no enforcement of an arbitration provision
with respect to disputes unrelated to the contract in which the
provision appears. Appellants’ argument that an arbitration
provision creates a perpetual obligation to arbitrate any
conceivable claim that Moritz might ever have against them is
plainly inconsistent with the FAA’s explicit relatedness
requirement.” (Moritz, at p. 248.)
Division One revisited Schein in Bautista v. Fantasy
Activewear, Inc. (2020) 52 Cal.App.5th 650, 656, again concluding
Schein’s holding that the arbitrator must decide the threshold
question of arbitrability did not apply to the parties’ dispute. In
Bautista, the plaintiffs asserted representative claims on behalf
of the state under the Private Attorneys General Act (PAGA; Lab.
15
Code, § 2698 et seq.). 5 The plaintiffs were putative class
members in an earlier wage and hour class action against the
employer that resulted in a settlement agreement containing an
arbitration clause. (Bautista, at p. 654.) The arbitration clause
provided the arbitrator with the authority to determine
“‘arbitrability issues as a preliminary matter.’” (Ibid.) The
defendant employer petitioned to compel arbitration of the
plaintiffs’ PAGA claims pursuant to the settlement agreement.
(Ibid.) The Court of Appeal affirmed the trial court’s denial of the
employer’s petitions (filed as to each of the plaintiffs) because the
plaintiffs were not acting as agents of the state when they settled
their prior claims and entered into the settlement agreement.
(Id. at 657; id. at 655 [“[A]rbitration agreements entered into
before a plaintiff has been deputized for purposes of a PAGA
representative action [are] not enforceable for purposes of the
PAGA representative action.”].) Thus, on the threshold question
of “‘whether there is an agreement to arbitrate’” between the
employer and the real party in interest, the Court of Appeal
concluded there was not. (Bautista, at p. 658; cf.
Communications Workers of America v. AT&T Inc. (D.C. Cir.
2021) 6 F.4th 1344, 1346 [concluding in reviewing action to
compel arbitration of dispute under specific contract, under
Schein “[t]he question whether the parties’ dispute falls within
the contract’s arbitration clause, then, is for an arbitrator, not a
court, to decide”].)
5 The initial complaint also alleged class claims, but the
plaintiffs dismissed their claims after the employer filed its
petition to compel arbitration.
16
C. The Trial Court Erred in Compelling Arbitration of the
Threshold Question of Arbitrability
As discussed, Schein instructs that “[w]hen the parties’
contract delegates the arbitrability question to an arbitrator,” it
is for the arbitrator, not the court, to decide the threshold
arbitrability issue. (Schein, supra, 139 S.Ct. at p. 529.) But
unlike in Schein, where the court considered who should decide
whether the parties’ dispute fell within the scope of a specific
contract, here the trial court was tasked with deciding in the first
instance whether there was an agreement to arbitrate at all.
(See Granite Rock Co. v. Int’l Broth. of Teamsters, supra, 561 U.S.
at p. 296; AT&T Technologies, Inc. v. Communications Workers of
America, supra, 475 U.S. at p. 649.) We agree with the reasoning
in Moritz and Bautista that where a party seeks to arbitrate a
dispute that arises from a contract without an arbitration clause,
the court is not required under Schein to defer to the arbitrator
on the threshold determination of arbitrability. (See Bautista,
supra, 52 Cal.App.5th at p. 656; Moritz, supra, 54 Cal.App.5th at
p. 248.) Rather, where the party moving to compel arbitration
asserts a different contract with an arbitration provision shows
the parties’ intent to arbitrate, the question of the parties’ intent
is for the court to resolve. As the Bautista court explained in
finding the holding in Schein did not apply, “The question here is
not whether claims are arbitrable under an agreement among the
parties, but rather whether there exists an agreement among the
parties to arbitrate.” (Bautista, at p. 656.)
Here, the only agreement that contained an arbitration
clause was the aircraft usage agreement entered into almost two
months after execution of the loan documents. The aircraft usage
agreement incorporated the AAA rules, which delegated the
17
question of arbitrability to the arbitrator. 6 But once Banc
dismissed its third and fourth causes of action, the remaining
causes of action related only to the seven loan documents, none of
which contained an arbitration clause. As discussed, the first
cause of action alleged a breach of the seven loan documents,
including a failure to pay over $3 million owed on the loan, the
right to sell the aircraft, and the right to enforce Banc’s rights
under the charter agreement. The second cause of action alleged
Jet Edge’s breach of the charter agreement and subordination
agreement. Further, the arbitration clause in the aircraft usage
agreement provided that all disputes “between the [p]arties
relating to this Agreement” shall be submitted to arbitration, but
the “Agreement” was narrowly defined to mean the “Aircraft
Usage Agreement.” By contrast, five of the seven loan
documents, including the pivotal loan agreement and promissory
note, specified which courts would have jurisdiction “[i]f there is a
lawsuit.” The promissory note, loan agreement, security
agreement, and assignment agreement also provided for a jury
waiver, and the loan agreement provided that any disputes would
be heard by a referee. Given the parties’ clear expression of
which courts (or referee) would hear any lawsuit arising from the
loan documents, the parties’ failure to specify in the loan
6 The AAA rules provide, “The arbitrator shall have the
power to rule on his or her own jurisdiction, including any
objections with respect to the existence, scope, or validity of the
arbitration agreement or to the arbitrability of any claim or
counterclaim.”
18
documents that the disputes would be decided by an arbitrator
shows the parties’ contrary intent. 7
Holdings argues we should interpret the language in the
aircraft usage agreement requiring arbitration of any dispute
“relating to this Agreement” broadly, relying on Ramos v.
Superior Court (2018) 28 Cal.App.5th 1042, 1052. The court in
Ramos observed that arbitration clauses using the phrase
“‘arising under or related to’ . . . have been construed more
broadly” than arbitration clauses providing for arbitration of
disputes “‘arising from’” or “‘arising out of’” an agreement. (Ibid.)
Further, Holdings asserts, because the seven loan documents and
the aircraft usage agreement are “interrelated,” this supports
arbitration. But even if the loan documents had some
relationship to the aircraft usage agreement, the question for the
trial court was whether the parties’ dispute related to the aircraft
usage agreement. It did not. Nothing in the record (as alleged in
the first amended complaint or submitted with the petition to
compel arbitration) shows the breach of the loan documents was
in any way related to the aircraft usage agreement, which simply
provided the terms for Banc to obtain a discounted price for flight
time on Holdings’s aircraft. While it may well be that the
incentive for Banc to make the loan to Holdings was a future
discounted rate on a charter of Holdings’s aircraft, this does not
show that the parties’ dispute—over Holdings’ alleged breach of
7 As the trial court noted, it is common for a lawsuit to be
filed before a motion to compel arbitration is made, which
scenario was envisioned in the aircraft usage agreement, but the
parties’ inclusion in the loan documents of jurisdiction provisions
but not arbitration clauses shows the parties’ intent a court (or
referee) resolve any disputes.
19
the loan documents—was in any way related to the aircraft usage
agreement. 8
Holdings’s reliance on the stray allegations in the
complaint containing facts that previously supported the since-
dismissed third and fourth causes of action is similarly
misplaced. It is true that paragraph 6 of the first amended
complaint alleges that Holdings wrongfully transferred
possession of the remaining deposit under the aircraft usage
agreement to Does 11 through 20 without Banc’s approval. But
this allegation is contained in the section of the amended
complaint identifying the parties, and Does 11 through 20 are
only named in the third and fourth causes of action. Likewise,
although paragraphs 61 through 81 address the aircraft usage
agreement, these allegations were contained in the third and
fourth causes of action that have since been dismissed.
Thus, Holdings did not meet its burden to show the parties
had “clearly and unmistakably” agreed to arbitrate their dispute
over the loan documents based on the arbitration clause in the
aircraft usage agreement. (AT&T Technologies, Inc. v.
Communications Workers of America, supra, 475 U.S. at p. 649.)
Absent an agreement to arbitrate, the trial court erred in
granting Holdings’s petition to compel arbitration on the issue of
arbitrability.
8 As discussed, in the trial court Holdings pointed to Estrin’s
declaration in which he stated that Banc’s counsel on a telephone
call told him that Banc agreed to provide the loan in part because
of the aircraft usage agreement. Holdings does not argue in its
return that this statement attributed to Banc shows the parties’
dispute over the loan documents was related to the aircraft usage
agreement.
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DISPOSITION
The petition is granted. A peremptory writ of mandate
shall issue directing respondent superior court to vacate its
January 19, 2021 order granting Holdings’s petition to compel
arbitration and motion to stay the action and to enter a new
order denying the petition and motion. Banc is to recover its
costs in this writ proceeding.
FEUER, J.
We concur:
PERLUSS, P. J.
SEGAL, J.
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