Victrola 89, LLC v. Jaman Properties 8, LLC

After respondent Victrola 89, LLC (Victrola) purchased

a house (the Property) from appellant Jaman Properties 8,

LLC (JP8), Victrola filed suit against JP8, appellant Jaman

Properties, Inc. (JP), and their principal, appellant Michael

Manheim (collectively, the Jaman Parties), among others,

regarding allegedly undisclosed and unrepaired defects in

the Property. Based on the real estate purchase agreement

(the Agreement) between Victrola and JP8, the Jaman

Parties moved to compel arbitration under the Federal

Arbitration Act (FAA).

1

The court denied the motion to compel arbitration,

finding that the procedural provisions of the California

Arbitration Act (CAA), rather than those of the FAA, applied

to its ruling on the motion. Under section 1281.2,

1 The Agreement is a standard form created and distributed

by the California Association of Realtors (CAR). CAR has filed an

amicus curiae brief in support of the Jaman Parties.

3

subdivision (c), of the CAA (Section 1281.2(c)), a court may

refuse to compel arbitration 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.” (Code Civ. Proc., § 1281.2, subd. (c).) Because both the

Jaman Parties and Victrola were parties to a pending court

action (i.e., Victrola’s lawsuit) with third-party defendants

not required to arbitrate, the court found “a possibility of

conflicting rulings on a common issue of law or fact” and

exercised its discretion under Section 1281.2(c) to decline to

enforce the arbitration provision of the Agreement.

On appeal, the Jaman Parties contend the court erred

in finding the FAA did not apply to their motion to compel

arbitration. Victrola counters that: (1) the court correctly

found the CAA, not the FAA, applied; (2) most of the claims

Victrola brought are not covered by the Agreement’s

arbitration clause; (3) Code of Civil Procedure section 1298.7

(Section 1298.7) exempts Victrola from arbitrating its

construction defect claims; (4) JP and Manheim are not

entitled to enforce the arbitration provision of the

Agreement because they are not parties to the Agreement;

and (5) the Jaman Parties are estopped from asserting the

application of the FAA.

As discussed below, we find: (1) the parties

incorporated the procedural provisions of the FAA into the

Agreement; thus the court could not look to Section 1281.2(c)

4

to deny the Jaman Parties’ motion; (2) the Agreement’s

arbitration clause encompasses all of Victrola’s claims

against the Jaman Parties; (3) the FAA preempts Section

1298.7 in this instance; and (4) JP and Manheim have

standing to enforce the arbitration provision. Because the

trial court did not reach the claim of judicial estoppel, we

remand to permit that court to adjudicate the issue.

Accordingly, we vacate the trial court’s order denying the

Jaman Parties’ motion, and remand for the court to

determine whether the Jaman Parties are judicially

estopped from claiming the FAA’s procedural provisions

apply.

STATEMENT OF RELEVANT FACTS

On November 11, 2016, Matthew S. Barrett and Kathy

K. Barrett made an offer to buy the Property.2 The offer was

made using a CAR form, and contained the following

language under Paragraph 22.B:

“Arbitration of Disputes: The Parties agree

that any dispute or claim in Law or equity

2 Matthew S. Barrett and Kathy K. Barrett are the sole

members of respondent Victrola. In the Agreement, the parties

agreed that “[v]esting of title to the Property shall be determined

by Buyer during Escrow.” In the complaint, Victrola is defined as

“Owner.” Though not in the record before us, we assume the

parties determined that Victrola would hold title to the Property.

Nothing in the record or the parties’ briefs suggests any party

has contended Victrola is not bound by the Agreement, and we

proceed under the assumption that it is.

5

arising between them out of this Agreement

or any resulting transaction, which is not

settled through mediation, shall be decided

by neutral, binding arbitration. The Parties

also agree to arbitrate any disputes or

claims with Broker(s), who, in writing,

agree to such arbitration prior to, or within

a reasonable time after, the dispute or claim

is presented to the Broker. The arbitrator

shall be a retired judge or justice, or an

attorney with at least 5 years of residential

real estate Law experience, unless the

parties mutually agree to a different

arbitrator. The Parties shall have the right

to discovery in accordance with Code of

Civil Procedure §1283.05. In all other

respects, the arbitration shall be conducted

in accordance with Title 9 of Part 3 of the

Code of Civil Procedure. Judgment upon

the award of the arbitrator(s) may be

entered into any court having jurisdiction.

Enforcement of this agreement to

arbitrate shall be governed by the

Federal Arbitration Act. . . .” (Bolding

added.)

“‘NOTICE: BY INITIALING IN THE

SPACE BELOW YOU ARE AGREEING TO

HAVE ANY DISPUTE ARISING OUT OF

THE MATTERS INCLUDED IN THE

‘ARBITRATION OF DISPUTES’

PROVISION DECIDED BY NEUTRAL

ARBITRATION AS PROVIDED BY

CALIFORNIA LAW AND YOU ARE

6

GIVING UP ANY RIGHTS YOU MIGHT

POSSESS TO HAVE THE DISPUTE

LITIGATED IN A COURT OR JURY

TRIAL. BY INITIALING IN THE SPACE

BELOW YOU ARE GIVING UP YOUR

JUDICIAL RIGHTS TO DISCOVERY AND

APPEAL, UNLESS THOSE RIGHTS ARE

SPECIFICALLY INCLUDED IN THE

‘ARBITRATION OF DISPUTES’

PROVISION. IF YOU REFUSE TO

SUBMIT TO ARBITRATION AFTER

AGREEING TO THIS PROVISION, YOU

MAY BE COMPELLED TO ARBITRATE

UNDER THE AUTHORITY OF THE

CALIFORNIA CODE OF CIVIL

PROCEDURE. YOUR AGREEMENT TO

THIS ARBITRATION PROVISION IS

VOLUNTARY.’”

Additionally, paragraph 29 of the Agreement stated:

“Except as otherwise specified, this Agreement shall be

interpreted and disputes shall be resolved in accordance

with the Laws of the State of California.”

After Victrola’s initial offer, JP8 and Victrola each

made two counteroffers, culminating in an agreement

executed on January 7, 2017, for the Barretts or their

designee to purchase the Property. Each of the counteroffers

incorporated the previous offer or counteroffer. Escrow

closed on February 17, 2017.

On August 8, 2018, Victrola filed a complaint against

JP8, JP, Manheim, T. Engineering Group, Inc.,

7

Harris-Anderson, and Harms Concrete Construction, Inc.

The gravamen of the complaint was that JP8 and its

affiliates, principals, and contractors, deceived Victrola

about both the initial condition of the Property and the

repairs of the Property’s defects.

On November 1, 2018, the Jaman Parties moved to

compel arbitration and stay the action. According to the

notice of motion, the motion was “brought under the Federal

Arbitration Act (‘FAA’), 9 U.S.C. §§ 3-4.” In the

memorandum of points and authorities accompanying the

motion, when arguing the court should stay the action as to

any claims or parties not subject to arbitration, the Jaman

Parties relied on section 1281.4 of the Code of Civil

Procedure (Section 1281.4) (i.e., a section of the CAA), as

well as Twentieth Century Fox Film Corp. v. Superior Court

(2000) 79 Cal.App.4th 188 (Twentieth Century Fox), a case

interpreting Section 1281.4. (Twentieth Century Fox, supra,

at 192.)

On January 18, 2019, the court denied the motion,

finding the CAA, not the FAA, applied. Specifically, the

court found that “the question is not whether the Federal

Arbitration Act (‘FAA’) ‘applies’ to this Agreement, but

rather, whether the parties expressly incorporated the FAA’s

procedural provisions into the Agreement. If the parties did

not, the Court is not precluded from exercising its discretion

under CCP § 1281.2(c), because § 1281.2 is not preempted by

the FAA.” The court relied principally on Valencia v. Smyth

(2010) 185 Cal.App.4th 153. There, the court held the

8

parties had agreed to be bound by the CAA, notwithstanding

language in the arbitration agreement that “Interpretation

of this agreement to arbitrate shall be governed by the

Federal Arbitration Act.” (Valencia v. Smyth, supra, 185

Cal.App.4th at 159, emphasis added.) Recognizing the

provision in the instant agreement stated “‘Enforcement of

this agreement [to arbitrate] shall be governed by the

Federal Arbitration Act’” (emphasis added), the court

characterized the change in wording as “a distinction

without a difference.” It concluded the CAA applied, and it

was thus free to determine under Section 1281.2(c) whether

to decline to compel arbitration. The court found that

because the other defendants named in Victrola’s complaint

had not agreed to arbitrate, there was “a possibility of

conflicting rulings on a common issue of law or fact

regarding the Jaman Defendants’ liability . . . .” The court

then exercised its discretion under Section 1281.2(c) to

decline to enforce the arbitration agreement between

Victrola and the Jaman Parties.

On January 24, 2019, the Jaman Parties appealed the

court’s denial of their motion. The Jaman Parties do not

argue the trial court abused its discretion in its application

of Section 1281.2(c), only that the court erred in applying the

section in the first place.

9

DISCUSSION

A. The FAA Governs Whether the Agreement’s

Arbitration Provision Should Be Enforced

“In accordance with choice-of-law principles, the

parties may limit the trial court’s authority to stay or deny

arbitration under the CAA by adopting the more restrictive

procedural provisions of the FAA.” (Valencia v. Smyth,

supra, 185 Cal.App.4th at 157.) “[T]he FAA’s procedural

provisions (9 U.S.C. §§ 3, 4, 10, 11) do not apply unless the

contract contains a choice-of-law clause expressly

incorporating them.” (Id. at 174.) “[T]he question is not

whether the parties adopted the CAA’s procedural

provisions: The state’s procedural statutes (§§ 1281.2,

1290.2) apply by default because Congress intended the

comparable FAA sections (9 U.S.C. §§ 3, 4, 10, 11) to apply in

federal court. The question, therefore, is whether the parties

expressly incorporated the FAA’s procedural provisions into

their agreements.” (Id. at 177; see also Cronus Investments,

Inc. v. Concierge Services (2005) 35 Cal.4th 376, 387, 394

[“Our opinion does not preclude parties to an arbitration

agreement to expressly designate that any arbitration

proceeding should move forward under the FAA’s procedural

provisions rather than under state procedural law” (italics

omitted)].)

“The question of whether the Agreement incorporated

the FAA’s procedural provisions, thereby eliminating the

trial court’s authority under section 1281.2(c), ‘is a question

10

of law involving interpretation of statutes and the contract

(with no extrinsic evidence). We therefore apply a de novo

standard of review.’” (Valencia v. Smyth, supra, 185

Cal.App.4th at 161-162.)

1. The FAA Was Incorporated into the

Agreement

While no party has cited a case analyzing the meaning

of the sentence “Enforcement of this agreement to

arbitrate shall be governed by the Federal Arbitration

Act,” and we have found none, we conclude the parties

intended to incorporate the FAA with respect to compelling

arbitration. As set forth below, previous cases have held

that when an arbitration agreement provides that its

“enforcement” shall be governed by California law, the CAA

governs a party’s motion to compel arbitration. It follows

that when an agreement provides that its “enforcement”

shall be governed by the FAA, the FAA governs a party’s

motion to compel arbitration.

By its terms, the FAA “provides for the enforcement of

arbitration provisions in any contract evidencing a

transaction involving interstate commerce.” (Mount Diablo

Medical Center v. Health Net of Cal., Inc. (2002) 101

Cal.App.4th 711, 717 (Mount Diablo).) But agreements to

have such enforcement governed by state rules are

enforceable. (Volt Info. Scis. V. Bd. of Trs. (1989) 489 U.S.

468, 479 (Volt) [“Arbitration under the Act is a matter of

consent, not coercion, and parties are generally free to

11

structure their arbitration agreements as they see fit. Just

as they may limit by contract the issues which they will

arbitrate, [citation] so too may they specify by contract the

rules under which that arbitration will be conducted.

Where, as here, the parties have agreed to abide by state

rules of arbitration, enforcing those rules according to the

terms of the agreement is fully consistent with the goals of

the FAA, even if the result is that arbitration is stayed

where the Act would otherwise permit it to go forward”].) In

Volt, the United States Supreme Court held that the FAA

did “not prevent application of Cal. Civ. Proc. Code Ann.

§ 1281.2(c) to stay arbitration where, as here, the parties

have agreed to arbitrate in accordance with California law.”

(Volt, supra, at 477.)

In Mount Diablo, the arbitration agreement involved

interstate commerce, and thus the FAA presumptively

applied. (Mount Diablo, supra, 101 Cal.App.4th at 717 & fn.

5.) However, the arbitration agreement contained a

choice-of-law provision, stating the agreement’s “‘validity,

construction, interpretation and enforcement’” would be

governed by California law. (Id. at 716.) The court found

this provision compelled application of state procedural law.

Specifically, the court held that the “explicit reference to

enforcement reasonably includes such matters as whether

proceedings to enforce the agreement shall occur in court or

before an arbitrator.” (Id. at 722.) In so holding, the court

noted that “Chapter 2 (in which § 1281.2 appears) of title 9

of part [3] of the California Code of Civil Procedure is

12

captioned ‘Enforcement of Arbitration Agreements.’” (Ibid.)

From this, the court concluded that “[a]n interpretation of

the choice-of-law provision to exclude reference to this

chapter would be strained at best.” (Ibid.)

In Gravillis v. Coldwell Banker Residential Brokerage

Co. (2006) 143 Cal.App.4th 761 (Gravillis), the Court of

Appeal considered an arbitration provision in a preprinted

real estate purchase agreement prepared by CAR.

(Gravillis, supra, at 768.) The agreement contained a

provision stating: “‘By initialing in the space below you are

agreeing to have any dispute arising out of the matters

included in the “Arbitration of Disputes” provision decided

by neutral arbitration as provided by California law . . . . If

you refuse to submit to arbitration after agreeing to this

provision, you may be compelled to arbitrate under the

authority of the California Code of Civil Procedure.’ (Italics

added, all capitals omitted.)” (Id. at 784.) Defendants

moved to compel arbitration under the FAA. (Gravillis,

supra, at 769.) The Court of Appeal held that “[b]ecause the

Agreement provides that a motion to compel arbitration is to

be decided under California law, we need not decide if the

FAA applies,” and directed the trial court to determine

whether to stay or deny arbitration under Section 1281.2(c).

(Gravillis, at 784.) Notably, though the parties disagreed

whether the agreement in Gravillis involved interstate

commerce, it contained no language purporting to

incorporate the FAA.

13

In Valencia v. Smyth, the court considered another

arbitration provision contained in a CAR form. (Valencia v.

Smyth, supra, 185 Cal.App.4th at 156.) This provision was

identical to that in Gravillis, but with “the addition of a

single sentence: ‘Interpretation of this agreement shall be

governed by the [FAA].’ (Italics added.)” (Id. at 157.) The

Court of Appeal characterized the question as “whether this

additional language warrants a different conclusion than the

one we reached in Gravillis.” (Id. at 176.) The court

concluded it did not, “because the CAA and the FAA employ

the same rules of contract interpretation.” (Ibid.) The court

held that “interpreting an arbitration agreement in

accordance with the FAA does not accomplish the . . . goal of

displacing section 1281.2(c).” (Id. at 178.) The court

explained:

“In Mount Diablo, supra, 101

Cal.App.4th 711, the choice-of-law provision

stated, ‘“The validity, construction,

interpretation and enforcement of this

Agreement shall be governed by the laws of

the State of California”’ (id. at p. 716).

Mount Diablo relied in large part on the

provision’s ‘explicit reference’ to

‘enforcement’ in concluding the CAA’s

procedural provisions applied. (See Mount

Diablo, supra, 101 Cal.App.4th at 722, 724.)

We do not read Mount Diablo to suggest

14

that an explicit reference to ‘interpretation,’

by itself, would determine the applicable

procedural law.” (Valencia v. Smyth, supra,

at 179.)3

If, as the courts in Mount Diablo and Valencia v.

Smyth held, contracting parties’ explicit reference to

“enforcement” under California law required the trial court

to consider any motions to compel arbitration under the

CAA, it follows that the instant parties’ reference to

“enforcement” under the FAA required the court to consider

the Jaman Parties’ motion to compel arbitration under the

FAA.

2. Victrola’s Contrary Arguments Are

Unpersuasive

(a) Incorporating the FAA Is Not

Limited to Enforcing an

Arbitration Award

Victrola argues that “Enforcement of this agreement to

arbitrate shall be governed by the Federal Arbitration Act”

3 In their opening brief, the Jaman Parties note: “What

happened next [after the Valencia v. Smyth9 decision] came as a

surprise to no one: CAR revised its form language to substitute

the magic language (‘enforcement’) for the deficient language

(‘interpretation’).” CAR and Victrola agree with this sequence of

events, but Victrola disputes whether CAR’s substitution

sufficiently “displace[d] the CAA procedural provisions.”

15

refers “only to post-arbitration procedures – i.e., enforcement

of any judgment resulting from arbitration.” The words used

to incorporate the FAA in the Agreement are not susceptible

to Victrola’s interpretation. We need look no further than

our own Code of Civil Procedure for confirmation: Chapter 2

of Title 9 of Part 3 is entitled “Enforcement of Arbitration

Agreements” (underline added) and contains provisions

(§§1281-1281.99) relating to how arbitration agreements are

enforced. (See, e.g., Code Civ. Proc., § 1281.2 [“On 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 that controversy,

the court shall order the petitioner and the respondent to

arbitrate the controversy if it determines that an agreement

to arbitrate the controversy exists”].) A separate chapter --

Chapter 4 of Title 9 of Part 3 -- is entitled “Enforcement of

the Award” (underline added) and contains provisions (Code

Civ. Proc., §§ 1285-1288.8) pertaining to the enforcement of

an arbitration award. (See, e.g., Code Civ. Proc., § 1285

[“Any party to an arbitration in which an award has been

made may petition the court to confirm, correct or vacate the

award”].) “Enforcement of this agreement to arbitrate” does

not and cannot mean “Enforcement of the arbitration award

that may result from an arbitration undertaken pursuant to

this agreement to arbitrate.”

16

(b) References to California Law Do

Not Override the Agreement’s

Directive That Its Enforcement Be

Governed by the FAA

Pointing to the Agreement’s numerous references to

California law, Victrola argues “the arbitration provision in

the Purchase Agreement reiterates that California law

applies to substantive and procedural issues . . . .”

Specifically, Victrola points out that paragraph 22.B

provides that: (1) the parties “shall have the right to

discovery in accordance with Code of Civil Procedures

§1283.05” but “[i]n all other respects, the arbitration shall be

conducted in accordance with Title 9 of Part 3 of the Code of

Civil Procedure”; and (2) by initialing, the parties agree to

arbitration “as provided by California law” and that if a

party refuses to arbitrate it “may be compelled to arbitrate

under the authority of the California Code of Civil

Procedure.” As explained below, these references to

California law do not override the Agreement’s provision

that “Enforcement of this agreement to arbitrate shall be

governed by the Federal Arbitration Act.”

4

4 Victrola also attaches significance to paragraph 29 of the

agreement, which contained the language that “[e]xcept as

otherwise specified, this Agreement shall be interpreted and

disputes shall be resolved in accordance with the Laws of the

State of California.” This language does not help Victrola

because the agreement in fact “otherwise specified.”

17

The parties were free to agree that discovery would be

conducted in accordance with Code of Civil Procedure section

1283.05. Their choice does little to inform us about what law

the parties intended to apply when deciding whether the

arbitration agreement should be enforced. Similarly, a

directive that arbitration shall be “conducted” in accordance

with the CAA in all other respects has no bearing on the law

that should be used to determine whether arbitration is

required. (Warren-Guthrie v. Health Net (2000) 84

Cal.App.4th 804, 816, overruled on another point in Cronus

Investments, Inc. v. Concierge Services, supra, 35 Cal.4th at

393, fn. 8 [“Agreement to apply California contractual

arbitration law is expressly limited to that law which bears

on how the arbitration shall be conducted, as distinguished

from agreeing that the plan shall be governed by California

law for all purposes, including the determination . . .

whether or not arbitration is required”]; accord, Gravillis,

supra, 143 Cal.App.4th at 784, fn. 4 [“The language in the

Agreement that the ‘arbitration shall be conducted in

accordance with [the CAA]’ (italics added) does not indicate,

by itself, that the arbitration provision should be governed

by California law”].)

Victrola is correct that arbitration agreements

providing for disputes to be “‘decided by neutral arbitration

as provided by California law,’” and informing a party that it

“‘may be compelled to arbitrate under the authority of the

California Code of Civil Procedure,’” have previously been

held to mean that enforcement of the agreement shall be

18

decided under California law (see, e.g., Gravillis, supra, 143

Cal.App.4th at 784), but only in the absence of an express

proviso that “Enforcement of this agreement to arbitrate

shall be governed by the [FAA].” “Under well-established

principles of contract interpretation, when a general and a

particular provision are inconsistent, the particular and

specific provision is paramount to the general provision.”

(Kashmiri v. Regents of University of California (2007) 156

Cal.App.4th 809, 834.) Thus, the Agreement’s specific

directive that its enforcement will be governed by the FAA is

paramount to any general statement that disputes will be

decided as provided by California law.

Further, that a party “may” be compelled to arbitrate

under the CAA is permissive, whereas the sentence that

enforcement of the agreement “shall” be governed by the

FAA is mandatory. “The whole of a contract is to be taken

together, so as to give effect to every part, if reasonably

practicable, each clause helping to interpret the other.” (Civ.

Code, § 1641.) Taken as a whole, the Agreement’s references

to California law fail to override its explicit provision that

enforcement of the Agreement is to be governed by the FAA.5

5 We note additionally that Code of Civil Procedure section

1298, subdivision (c) (Section 1298(c)), mandates the quoted

language that a party agree to have disputes “decided by neutral

arbitration as provided by California law” and that a party “may

be compelled to arbitrate under the authority of the California

Code of Civil Procedure.” The Jaman Parties argue the FAA

preempts Section 1298(c) because “[i]f the mere act of inserting a

(Fn. is continued on the next page.)

19

(c) It Is Irrelevant Whether the

Initialed Portion of the Agreement

Mentioned the FAA

Victrola observes that “[t]he portion of the arbitration

provision that Respondent initialed and agreed to is the

portion in all capital letters – i.e., ‘BY INITIALING IN THE

SPACE BELOW, YOU ARE AGREEING TO . . . NEUTRAL

ARBITRATION AS PROVIDED BY CALIFORNIA LAW . . .’

– not the portion referencing the FAA.” Victrola argues that

“[t]he purpose of requiring a purchaser to initial an

arbitration provision is to ensure that he/she/it understands

what types of claims will and will not be subject to

arbitration and what rules will apply to that determination,

in large part due to the importance of a right to a jury trial.”

We are unpersuaded that the lack of initials directly under

the sentence referencing the FAA renders it meaningless.

First, Victrola has provided no authority holding that a

party’s lack of initials directly under a sentence

incorporating the FAA renders such incorporation

ineffective. In fact, requiring such initials would arguably

statutorily required consumer notice into an arbitration contract

is interpreted as an election of California procedural law, that

directive inherently conflicts with the FAA and flouts a

contracting party’s freedom to choose the FAA’s procedural

rules.” We do not so construe Section 1298(c). Indeed, Victrola

admits that “CCP § 1298 does not prohibit the application of the

FAA’s procedural provisions where such provisions are expressly

incorporated.”

20

violate California law, which provides that certain language

must appear “[i]mmediately before the line or space provided

for the parties to indicate their assent or nonassent to the

arbitration provision described in subdivision (a) or (b), and

immediately following that arbitration provision . . . .” (Code

Civ. Proc., § 1298, subd. (c).) Had the Agreement required

the parties to initial immediately after the sentence in

question, it would arguably have violated the requirements

of Section 1298(c), because the requisite language would not

have appeared “[i]mmediately before the line or space

provided for the parties to” initial or “immediately following

th[e] arbitration provision.”

Second, the paragraph immediately preceding the

parties’ initials expressly stated the party was agreeing to

arbitrate matters “included in the ‘Arbitration of Disputes’

provision.” The “Arbitration of Disputes” provision appeared

directly above this paragraph and both described what

claims would be arbitrated and specified that “[e]nforcement

of this agreement to arbitrate shall be governed by the

Federal Arbitration Act.” Victrola’s concern that parties will

be unaware of what law governs the enforcement of such

agreements is unfounded.

(d) Arbitration Is Favored

Finally, Victrola argues that “[a]ny ambiguity in the

terms of [the] arbitration agreement (e.g., whether the FAA

or CAA applies) must be interpreted against Appellants”

because “ambiguities are interpreted against the party that

21

caused the ambiguity.” Victrola further contends, “[h]ere,

the contract was selected by Appellants who occupied

superior bargaining position.” But Victrola’s complaint

expressly alleges that Victrola “originally offered to purchase

the Property on November 11, 2016” and notes the

agreement to purchase the Property is made up of the

“California Residential Purchase Agreement and Joint

Escrow Instructions, dated November 11, 2016” and several

counteroffers. There is no allegation or evidence in the

record that JP8 compelled Victrola to use the CAR form to

make its offer, nor does any evidence support Victrola’s

argument that JP8 was in a “superior bargaining position.”

Indeed, that each side made two counteroffers suggests that

each exercised leverage in the negotiations.

Moreover, “the Legislature has expressed a ‘strong

public policy in favor of arbitration as a speedy and

relatively inexpensive means of dispute resolution.’

[Citations.] Consequently, courts will ‘“indulge every

intendment to give effect to such proceedings.”’” (Moncharsh

v. Heily & Blase (1992) 3 Cal.4th 1, 9.) As our Supreme

Court has concluded: “Any doubts or ambiguities as to the

scope of the arbitration clause itself should be resolved in

favor of arbitration.” (Cronus Investments, Inc. v. Concierge

Services, supra, 35 Cal.4th at 386.)

22

B. Unless the Jaman Parties Are Estopped,

Victrola Must Be Compelled to Arbitrate Its

Claims Against Them

Aside from its contention that the court correctly

applied Section 1281.2(c), Victrola proffers several other

arguments regarding why it should not be required to

arbitrate its disputes with the Jaman Parties. Though the

trial court did not rule on these grounds, we nevertheless

address them as alternative bases for affirming the trial

court’s denial of the motion to compel arbitration. (See, e.g.,

Muller v. Fresno Community Hospital & Medical Center

(2009) 172 Cal.App.4th 887, 906-907 [“It is the ruling, and

not the reason for the ruling, that is reviewed on appeal”].)

We note additionally that, with the exception of judicial

estoppel addressed below in subsection 4, the standard of

review on each issue is de novo.

1. JP and Manheim Have Standing to

Enforce the Arbitration Provision of the

Agreement

“The determination of standing to arbitrate as a party

to the contractual arbitration agreement is a question of law

. . . .” (Valley Casework, Inc. v. Comfort Construction, Inc.

(1999) 76 Cal.App.4th 1013, 1017, citing Unimart v. Superior

Court (1969) 1 Cal.App.3d 1039, 1045-1047.) “As a general

matter, only signatories to an arbitration agreement may

enforce it.” (Rowe v. Exline (2007) 153 Cal.App.4th 1276,

1284.) “However, in many cases, nonparties to arbitration

23

agreements are allowed to enforce those agreements where

there is sufficient identity of parties.” (Valley Casework, Inc.

v. Comfort Construction, Inc., supra, at 1021.)

Victrola argues that “even if Respondent [Victrola] is

compelled to arbitrate with Seller [JP8], Respondent should

not be required to arbitrate with Designer [JP] or Manheim,

as Respondent did not agree to arbitrate with either of

them.” Victrola further argues that “[d]espite Appellants’

contention that the Trial Court ruled Respondent must

arbitrate with Designer and Manheim under an equitable

estoppel theory, the Trial Court made no such ruling.”

Rather, as Victrola notes, the trial court stated that it

“‘assumes that Jaman Properties, Inc. and Michael Manheim

may enforce the arbitration agreement as non-signatories

based upon an equitable estoppel argument,’” citing DMS

Services, Inc. v. Superior Court (2012) 205 Cal.App.4th 1346,

1354.

JP and Manheim counter that because Victrola alleged

them to be alter egos of JP8, “they are entitled to enforce the

agreement to arbitrate given that Respondent has elected to

sue them for claims arising out of that agreement.” As

explained below, we conclude that JP and Manheim have

standing to enforce the Agreement’s arbitration provision

under an equitable estoppel theory.

“Under [the] doctrine [of equitable estoppel], as applied

in ‘both federal and California decisional authority, a

nonsignatory defendant may invoke an arbitration clause to

compel a signatory plaintiff to arbitrate its claims when the

24

causes of action against the nonsignatory are “intimately

founded in and intertwined” with the underlying contract

obligations.’” (Molecular Analytical Systems v. Ciphergen

Biosystems, Inc. (2010) 186 Cal.App.4th 696, 706, quoting

Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th

262, 271.) “‘By relying on contract terms in a claim against a

nonsignatory defendant, even if not exclusively, a plaintiff

may be equitably estopped from repudiating the arbitration

clause contained in that agreement.’” (Molecular Analytical

Systems v. Ciphergen Biosystems, Inc., supra, at 706, quoting

Boucher v. Alliance Title Co, supra, at 272.) “Where the

equitable estoppel doctrine applies, the nonsignatory has a

right to enforce the arbitration agreement.” (Molecular

Analytical Systems v. Ciphergen Biosystems, Inc., at p. 706.)

6

Victrola names JP and Manheim in seven of its nine

causes of action (all but the first and third). All such causes

of action are “intimately founded in and intertwined” with

the Agreement. Specifically:

- In the second cause of action (“Violations of Title

VII of the California Civil Code”), Victrola alleges:

6 “Even if the FAA applies, the question whether a contract

containing an arbitration provision can be enforced by or against

nonparties to the contract is governed by state law principles.

[Citation.] In any event, for purposes of equitable estoppel,

California and federal law are identical. [Citations.]” (DMS

Services, LLC v. Superior Court, supra, 205 Cal.App.4th at 1353,

fn. 3.)

25

“As a direct and proximate result of Defendants’

material breaches of the Purchase Agreement,

the Warranty, the implied covenant of good faith

and fair dealing, and Title 7 of the California

Civil Code, Owner has sustained damages, the

precise amount of which will be established

according to proof at trial.” (Underline added.)

- In the fourth cause of action (“Breach of

Warranty”), Victrola alleges: “Pursuant to the

express terms of the Purchase Agreement, the

Warranty and Title 7 of the California Civil Code,

Jaman [defined in the complaint as JP8, JP, and

Manheim] expressly warranted that Seller would

sell the Property as if it were a new construction .

. . .” (Underline added.) “Defendants breached

their express and implied warranties to Owner

because the work performed was not free from

defect as alleged above.”

- In the fifth cause of action (“Fraudulent

Concealment”), Victrola alleges JP and Manheim

(among others) intentionally concealed the

defects “to deceive Owners into purchasing the

Property . . . .” A similar allegation is made in

the sixth cause of action (“Fraudulent

Misrepresentation”).

- The seventh cause of action (“Negligent

Misrepresentation”) also alleges JP and Manheim

(among others) told Victrola that certain portions

of the Property were without defects when they

had no reason to believe this to be true.

26

- The eighth cause of action (“Fraudulent

Inducement”) alleges JP and Manheim (among

others) lied to Victrola to induce Victrola to waive

a $3,000 per day fee accruing due to the failure to

timely repair the Property’s defects.

- The ninth cause of action (“Negligence”) alleges

the “[n]on-[s]eller [d]efendants” (i.e., all

defendants but JP8) breached their duty of care

to Victrola by failing to construct/repair the

Property ipn a good and workmanlike manner.

These causes of action are all intertwined with the

Agreement and the obligations found therein. Accordingly,

JP and Manheim have standing to enforce the Agreement.

2. The FAA Preempts Section 1298.7

Victrola argues “[p]ursuant to CCP § 1298.7,

Respondent is not required to arbitrate its construction

defect claims.” As discussed above, however, because

enforcement of the arbitration agreement is governed by the

FAA, Section 1298.7 is preempted.

“[F]ederal preemption presents a pure question of law.”

(Farm Raised Salmon Cases (2008) 42 Cal. 4th 1077, 1089,

fn. 10.) “The FAA’s displacement of conflicting state law is

‘now well-established,’ Allied-Bruce Terminix Cos. v. Dobson,

513 U.S. 265, 272, 115 S. Ct. 834, 130 L. Ed. 2d 753 (1995),

and has been repeatedly reaffirmed, see, e.g., Buckeye [Check

Cashing, Inc. v. Cardegna], 546 U.S. [440], at 445-446

27

[(2006)], 126 S. Ct. 1204, 163 L. Ed. 2d 1038; Doctor’s

Associates, Inc. v. Casarotto, 517 U.S. 681, 684-685, 116 S.

Ct. 1652, 134 L. Ed. 2d 902 (1996); Perry v. Thomas, 482

U.S. 483, 489, 107 S. Ct. 2520, 96 L. Ed. 2d 426 (1987).”

(Preston v. Ferrer (2008) 552 U.S. 346, 353.) “[A] state

procedural statute or rule that frustrated the effectuation of

section 2 [of the FAA]’s central policy would, where the

federal law applied, be preempted by the [FAA].” (Rosenthal

v. Great Western Fin Securities Corp. (1996) 14 Cal.4th 394,

408.)

“‘[T]he FAA pre-empts state laws which “require a

judicial forum for the resolution of claims which the

contracting parties agreed to resolve by arbitration.”’”

(Pinnacle Museum Tower Assn. v. Pinnacle Market

Development (US), LLC (2012) 55 Cal.4th 223, 235, quoting

Volt, supra, 489 U.S. at 478.) “One of the consequences of

the FAA’s applicability is its effect on Code of Civil

Procedure section 1298.7, which allows a purchaser to

pursue a construction and design defect action against a

developer in court, even when the parties have signed a real

property purchase and sale agreement containing an

arbitration clause. . . . [T]he FAA would preempt its

application here because it discriminates against

arbitration.” (Pinnacle Museum Tower Assn. v. Pinnacle

Mkt. Dev. (US), LLC at 235, fn. omitted; see also Basura v.

U.S. Home Corp. (2002) 98 Cal.App.4th 1205, 1212

[“[S]ection 1298.7 directly conflicts with section 2 of the FAA

because the California statute is a state law applicable only

28

to arbitration agreements, allowing a purchaser to pursue a

construction and design defect action against a developer in

court, despite having signed an agreement to convey real

property containing an arbitration clause”].)

Victrola does not deny that the FAA may preempt

Section 1298.7, but contends the FAA is inapplicable because

the Jaman Parties failed to submit evidence that the parties’

dealings involved interstate commerce.7 But the presence of

interstate commerce is not the only manner under which the

FAA may apply. As discussed above, the parties may also

voluntarily elect to have the FAA govern enforcement of the

Agreement, as they did here. This incorporation of the FAA

prevents Victrola from using Section 1298.7 as an escape

hatch from the parties’ agreement to arbitrate.

3. The Scope of the Arbitration Provision

Covers Victrola’s Claims Against the

Jaman Parties

“We review the scope of an arbitration provision de

novo when, as here, that interpretation does not depend on

conflicting extrinsic evidence.” (Lindemann v. Hume (2012)

204 Cal.App.4th 556, 570, fn. 11.) “In light of California’s

strong public policy favoring arbitration as a method of

7 The Jaman Parties argue that “the construction and sale of

a $22 million home is so massive that it ‘involves interstate

commerce’ so as to trigger Section 2 of the FAA.” While the

inference may be correct, the Jaman Parties presented no

evidence to support it.

29

dispute resolution, ‘[c]ourts should indulge every intendment

to give effect to such proceedings (Lewsadder v. Mitchum,

Jones & Templeton, Inc. [(1973)] 36 Cal.App.3d 255, 259 [111

Cal. Rptr. 405]) and order arbitration unless it can be said

with assurance that the arbitration clause is not susceptible

of an interpretation that covers the asserted dispute. (Retail

Clerks Union, Local 775 v. Purity Stores, Inc. [(1974)] 41

Cal.App.3d 225, 231 [116 Cal. Rptr. 40].)’ (Pacific Inv. Co. v.

Townsend (1976) 58 Cal.App.3d 1, 9–10 [129 Cal. Rptr.

489].) Hence, any reasonable doubt as to whether a claim

falls within the arbitration clause is to be resolved in favor of

arbitration. (Coast Plaza Doctors Hospital v. Blue Cross of

California (2000) 83 Cal.App.4th 677, 687 [99 Cal. Rptr. 2d

809].)” (Villacreses v. Molinari (2005) 132 Cal.App.4th 1223,

1229.) “The party opposing arbitration has the burden of

demonstrating that an arbitration clause cannot be

interpreted to require arbitration of the dispute.” (Rice v.

Downs (2016) 248 Cal.App.4th 175, 185.)

Here, the clause in question covers “any dispute or

claim in Law or equity arising between [buyer and seller] out

of this Agreement or any resulting transaction . . . .” The

“resulting transaction” was Victrola’s purchase of the

Property. Victrola’s claims against the Jaman Parties

concern the defects in the construction of the Property, along

with the defendants’ alleged deceit regarding those defects in

order to induce Victrola to purchase the Property. As such,

they arise out of the Agreement and the resulting

transaction.

30

Victrola argues that because “the arbitration provision

here is narrow, it applies only to contract issues, like breach

of the Purchase Agreement, and it excludes Respondent’s

fraud and negligence claims.” In support, Victrola cites

Tracer Research Corp. v. Nat’l Envtl. Servs. Co. (9th Cir.

1994) 42 F.3d 1292 (Tracer) for the proposition that “an

arbitration clause that covered disputes ‘arising under’ an

agreement, but omitted reference to claims ‘relating to’ an

agreement, covered only those disputes ‘relating to the

interpretation and performance of the contract itself.’” (Id.

at 1295.) But when an agreement provides that the parties

are to arbitrate “‘“any controversy . . . arising out of”’” an

agreement, “[t]he issue is not resolved simply by

determining whether the arbitration clause is narrow or

broad, whether the arbitration clause could encompass tort

claims, or even whether the claims in issue sound in tort, not

contract. The issue is whether the particular claims in issue

are controversies ‘arising out of’” the agreement. (Rice v.

Downs, supra, 248 Cal.App.4th at 186, 187.)

Here, the question is whether Victrola’s claims arise

“‘out of this Agreement or any resulting transaction.’”

Victrola cites cases analyzing whether claims arose out of,

arose under, or arose from various agreements. None is

relevant to our analysis, because none analyzed whether the

claims arose out of the transaction resulting from the

31

agreement. 8 Given that Victrola’s claims all center around

the defects in the Property -- purchased as a result of the

Agreement -- and the alleged misrepre-sentations and

concealments surrounding the purchase transaction, we

conclude the claims arise out of the “Agreement or any

resulting transaction,” and are thus within the scope of the

arbitration provision.

8 Cobler v. Stanley, Barber, Southard, Brown & Associates

(1990) 217 Cal.App.3d 518 is inapposite. The case did not

address whether a non-contract claim was within the scope of an

arbitration clause providing for arbitration “‘arising from this

Agreement,’” but whether any cause of action supporting an

award of damages for emotional distress was ever submitted to

the arbitrator. (Id. at 531-532; see id. at 531 [“Therefore, the

only basis for the emotional distress damages award must have

been in any tort issues properly submitted to the arbitrator”].)

The court did not hold no such tort issues could have been

submitted, only that none were. (Id. at 532.)

The federal cases cited by Victrola are also unhelpful.

First, “[t]he decisions of the Ninth Circuit Court of Appeals . . .

are not binding on us.” (Roskind v. Morgan Stanley Dean Witter

& Co. (2000) 80 Cal.App.4th 345, 355.) Second, the cited cases

address whether disputes arose out of or from certain

agreements, not whether those disputes arose out of or from the

transactions resulting from those agreements. (Tracer, supra, 42

F.3d 1292, 1294-1295; Cape Flattery Ltd. v. Titan Mar., LLC (9th

Cir. 2011) 647 F.3d 914, 916-917, 924.)

32

4. We Remand to the Trial Court for a

Determination Whether the Jaman

Parties Are Judicially Estopped from

Asserting Application of the FAA

Finally, Victrola argues that “Appellants should be

estopped from asserting the FAA applies because Appellants

have successfully contended that C.C.P. § 1281.4, a

procedural provision of the CAA, applies.” Judicial estoppel

“prohibits a party from asserting a position in a legal

proceeding that is contrary to a position he or she

successfully asserted in the same or some earlier

proceeding.” (Owens v. County of Los Angeles (2013) 220

Cal.App.4th 107, 121.) “The elements of judicial estoppel are

‘(1) the same party has taken two positions; (2) the positions

were taken in judicial or quasi-judicial administrative

proceedings; (3) the party was successful in asserting the

first position (i.e., the tribunal adopted the position or

accepted it as true); (4) the two positions are totally

inconsistent; and (5) the first position was not taken as a

result of ignorance, fraud, or mistake.’” (Ibid., quoting

Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171,

183.)

“The determination of whether judicial estoppel can

apply to the facts is a question of law reviewed de novo, i.e.,

independently.” (Blix Street Records, Inc. v. Cassidy (2010)

191 Cal.App.4th 39, 46.) However, “[e]ven if the necessary

elements of judicial estoppel are satisfied, the trial court still

33

has discretion to not apply the doctrine.” (Owens v. County

of Los Angeles, supra, 220 Cal.App.4th at 121.)

When the Jaman Parties filed the motion to compel

arbitration, they argued the court “should compel arbitration

of the claims involving the Jaman Defendants pursuant to

the FAA,” but also argued the court “should stay the

litigation until the arbitration is completed,” citing Section

1281.4 and Twentieth Century Fox, supra, 79 Cal.App.4th

188, a case interpreting Section 1281.4. When they filed a

second motion to stay the case until the court could hear

their motion to compel arbitration, they again invoked

Section 1281.4, but made no mention of the FAA. The court

granted the motion to stay.

Victrola argues that all five elements of judicial

estoppel are therefore met: (1) “Appellants initially claimed

the CAA’s procedural provisions applied to the arbitration

provision, but now they claim that the FAA applies”; (2)

“these positions were taken in the same action”; (3)

“Appellants were successful in asserting they were entitled

to a stay pursuant to the CAA”; (4) “the two positions are

inherently inconsistent as the CAA and FAA’s procedural

provisions cannot both apply”; and (5) “the first position was

not taken out of ignorance, fraud, or mistake.”

In response, the Jaman Parties contend: (1) their

motion (to compel arbitration “expressly states that the

Motion is ‘brought under the Federal Arbitration Act (‘FAA’)

9 U.S.C. §§ 3-4”; (2) “having the Court stay discovery

pending the hearing on the Motion to Compel Arbitration” is

34

different than “enforcing . . . arbitration” and therefore the

positions are “not ‘totally inconsistent’”; and (3) there was no

“‘unfair strategy’” to justify the application of the judicial

estoppel doctrine.

Though we would review de novo any determination

whether the elements of judicial estoppel are met, we are

mindful that “[e]ven if the necessary elements of judicial

estoppel are satisfied, the trial court still has discretion to

not apply the doctrine.” (Owens v. County of Los Angeles,

supra, 220 Cal.App.4th at 121.) Additionally, while the

Jaman Parties have essentially argued the court should

decline to apply judicial estoppel because their successful

assertion of the CAA in their second motion to stay did not

prejudice Victrola, Victrola has not yet been afforded an

opportunity to argue that prejudice exists. We therefore

remand for the trial court to determine whether the

elements of judicial estoppel are satisfied and if so, whether

to exercise its discretion to apply the doctrine.

The court’s order denying the Jaman Parties’ motion to compel arbitration is vacated. On remand, the court is to determine whether the Jaman Parties should be estopped from asserting that the FAA’s procedural provisions should govern their motion to compel arbitration and, if so, whether to exercise its discretion to apply the doctrine. The parties are to bear their own costs.