Appendix — Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford Jr. U.

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Text

Bupreme Court, u,

EFILED

FER 8 i9n9

Sposrex I. SPANIOL

CLERK

No.

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1987

VOLT INFORMATION SCIENCES, INC.,

Appellant,

Vs.

BOARD OF TRUSTEES OF LELAND STANFORD

JUNIOR UNIVERSITY, Appellee.

ON APPEAL FROM THE

COURT OF APPEAL OF CALIFORNIA

SIXTH APPELLATE DISTRICT

APPENDICES TO

JURISDICTIONAL STATEMENT

JAMES E. HARRINGTON

(Counsel of Record)

ROBERT B. THUM

DEANNE M. TULLY

PETTIT & MARTIN

101 CALIFORNIA STREET

SAN FRANCISCO, CA 94111

PHONE: (415) 434-4000

COUNSEL FOR APPELLANT

No.

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1987

VOLT INFORMATION SCIENCES, INC.,

Appellant,

vs.

BOARD OF TRUSTEES OF LELAND STANFORD

JUNIOR UNIVERSITY, Appellee.

ON APPEAL FROM THE

COURT OF APPEAL OF CALIFORNIA

SIXTH APPELLATE DISTRICT

APPENDICES TO

JURISDICTIONAL STATEMENT

JAMES E. HARRINGTON

(Counsel of Record)

ROBERT B. THUM

DEANNE M. TULLY

PETTIT & MARTIN

101 CALIFORNIA STREET

SAN FRANCISCO, CA 9411]

PHONE: (415) 434-4000

COUNSEL FOR APPELLANT

Appendix

LIST OF CONTENTS

Opinion and Judgment of the

California Court of Appeal from

Which This Appeal Is Taken

Order of the California Supreme

Court Denying Appellant's Petition

for Review

Order of the State Trial Court

Denying Appellant's Petition to

Compel Arbitration

Appellant's Notice of Appeal

Excerpts from Appellant's Brief

in the State Trial Court

Excerpts from Appellant's Opening

Brief in the State Court of Appeal

Excerpts from Appellant's Petition

for Review in the California

Supreme Court

Relevant Statutes and Constitu-

tional Provisions

APPENDIX A -

OPINION AND JUDGMENT OF

THE CALIFORNIA COURT OF APPEAL

FROM WHICH THIS APPEAL IS TAKEN

APPENDIX A

CERTIFIED FOR PUBLICATION

SEE DISSENTING OPINION

FILED

October 5, 1987

Richard J. Eyman,

Clerk

IN THE COURT OF APPEAL

OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

BOARD OF TRUSTEES

OF LELAND STANFORD

JUNIOR UNIVERSITY,

Plaintiff-Respondent, No. H002634

(Santa Clara

County Super.

Court P48603)

vs.

VOLT INFORMATION

SCIENCES, INC.,

Defendant-Appellant.

ee ee ee ee ee ee ee ee”

The Board of Trustees of the Leland

Stanford Junior University (Stanford) and Volt

Information Sciences, Inc. (Volt) are parties

to a written contract under which Volt was to

construct a system of electrical conduits

throughout the Stanford campus. The contract

contains an agreement to arbitrate any disputes

arising therefrom. It also contains this

language: “The contract shall be governed by

the law of the place where the project is

APPENDIX }

located."

A dispute developed regarding compensation

for additional work. Volt submitted a claim

which Stanford refused to pay; whereupon Volt

served on Stanford a formal demand for

arbitration of its claim. Approximately a week

later Stanford filed suit in Superior Court.

The complaint alleged fraud and breach of

contract, inter alia, against Volt and in

addition sought indemnity from two companies

involved in the design and management of the

project. Stanford did not have arbitration

agreements with these two firms.

Volt then filed a petition to compel

arbitration and to stay prosecution of the

lawsuit. Stanford —e with a motion to

stay the arbitration pursuant to the terms of

Code of Civil Procedure section 1281.2,

subdivision (c),+ on the ground that a lawsuit

was pending involving defendants not bound by

1/ “On petition of a party to an arbitration

agreement alleging the existence of a written

agreement to arbitrate a controversy, the court

shall order the petitioner and the respondent

to arbitrate the controversy if it (contd.)

APPENDIX A

the arbitration agreement. The court denied

Volt's petition and granted Stanford's motion

under authority of section 1281.2. Volt

appeals from that ruling.

The parties agree that their contract

involves interstate commerce, and that,

generally, the Federal Arbitration Act (the

FAA) governs contracts in interstate commerce.

There is no provision in the FAA corresponding

to Code of Civil Procedure section 1281.2,

subdivision (c) which would allow a court to

stay arbitration when third not subject to

arbitration are involved in the dispute; thus

it is apparent that were the federal rules to

(footnote contd.) determines that an agreement

to arbitrate the controversy exists, unless it

determines that: ... [94] (c) 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 question of law or fact.

-+» [4] If the court determines that a party to

the arbitration is also a party to litigation

in a pending court action or special proceeding

with a third party as set forth under

subdivision (c) herein, the court ... (4) may

stay arbitration pending the outcome of the

court action or special proceeding."

APPENDIX A

apply, Volt's petition to compel arbitration

would have to be granted. On the other hand,

Stanford and Volt have agreed, as we interpret

their choice of law provision, that the laws of

California, of which section 1281.2 is

certainly a part, are to govern their contract.

It is Stanford's position that enforcement of

the arbitration agreement in accordance with

the chosen California rules of procedure does

not create a conflict with the federal act,

Since the purpose of the Act was to ensure that

private agreements to arbitrate are enforceable

contracts. Moreover, application of the

federal rules in this case would force the

parties to arbitrate in a manner contrary to

their agreement. On balance it is this last

point we find persuasive. Accordingly we will

affirm the trial court's ruling.

We start with the well-established

principle that the interpretation of a written

agreement is a legal question unless the

interpretation turns upon the credibility of

extrinsic evidence. {Estate of Dodge (1971) 6

APPENDIX A

Cal.3d 311, 318.) There was no extrinsic

evidence here and thus no issue of fact.

Consequently we are not bound by the trial

court's construction but must reach our own

determination of the meaning of this provision.

(Rooney v- Vermont Investment Corp. (1973) 10

Cal.3d 351, 372.) In this case we agree with

the trial judge that by choosing "the law of

the place where the project is located," the

parties chose to be governed by California law.

The quoted words are a standard choice of

law provision contained in an American

Institute of Architects document entitled

“General Conditions of the Contract for

Construction,"2 intended for use by contracting

parties across the nation. It is therefore not

remarkable that the particular site of the

project in question is not named. We have no

doubt that the word “place” was intended to

mean the forum state. Courts in other states

faced with this identical language have reached

the same conclusion we do here. (Lane-Tahoe,

2/ AIA Document A201, § 7.1.1.

APPENDIX A

Inc. v- Kindred Construction Company (Nev.

1975) 536 P.2dad 491, 493; Eric A. Calstrom

Construction v. Independent Sch. Dist. (Minn.

1977) 256 N.W.2d 479, 483; Standard Co., etc.

v. Elliott Const. Co., Inc. (La. 1978) 363

So.2d 671.) Likewise, in the California case

of Garden Grove Community Church v. Pittsburgh-

Des Moines Steel Co. (1983) 140 Cal.App.3d 251,

handed down the year before the Stanford-Volt

agreement was forged, parties to a construction

contract agreed to be governed by the law of

the construction site, which the court took to

mean California.

We do not find reasonable Volt's

interpretation that the “place” where the

project is located be construed to mean not

only the state of California but also the

nation of the United States of America. The

question whether the Federal Arbitration Act

nonetheless applies by virtue of the fact that

the contract is one in interstate commerce is

another matter, to which we turn next.

II.

Volt argues even if the choice of law

APPENDIX A

provision is taken to mean that California law

shall govern, the supremacy clause of the

United States Constitution operates to preempt

California law because the contract is in

interstate commerce. The parties’ choice of

law insofar as it results in direct conflict

with federal law under the provisions of the

FAA would thus be rendered void and the federal

rule would prevail.

We cannot countenance such a result. At

the outset, it is by mo means entirely clear

that the parties cannot choose to arbitrate

under the state rather than the federal

statutory scheme. The court in Garden Grove

considered this question. “The Federal

Arbitration Act by its terms applies to all

commercial agreements involving interstate

commerce; thus, on the face of it, it would

appear federal law controls. However, in this

case the parties agreed by contract to be

governed by the law of the construction site,

California. While California courts have held

the Federal Arbitration Act (FAA) applies to

California cases involving contracts of

APPENDIX A

interstate commerce, we have not found any

cases applying it where the parties committed

to be governed by state law. In the face of

such a choice of laws provision, California law

applies unless preempted by the FAA." (Garden

Grove Community Church v. Pittsburgh-Des Moines

Steel Co., supra, 140 Cal.App.3d at p. 262.)

State law is preempted only to the extent

that it stands as an obstacle to the

accomplishment of the aims of the federal

enactment. (Perez v. Campbell (1971) 402 U.S

637, 644; Waysl, Inc. v. First Boston Corp.

(9th Cir. 1987) 813 F.2d 1579.) The FAA was

intended to “revers[e] centuries of judicial

hostility to arbitration agreements." (Scherk

v. Alberto-Culver Co. (1974) 417 U.S. 506, 510

[94 S.Ct. 2449, 2453].) The purpose behind its

passage was “to ensure judicial enforcement of

privately made agreements to arbitrate. ... The

Act ... does not mandate the arbitration of all

claims, but merely the enforcement - upon the

motion of one of the parties - of Privately

made arbitration agreements. ... [I]ts purpose

was to place an arbitration agreement ‘upon the

APPENDIX A

same footing as other contracts, where it

belongs,’ .--" (Dean Witter Reynolds, Inc. v.

Byrd (1985) 470 U.S. 213, 219 [105 S.Ct. 1238,

1242).)

Bearing this in mind there is Little doubt

that the FAA preempts state common law under

which arbitration agreements are unenforceable.

(See, e-.g-, Episcopal Housing Corp. v. Federal

Ins. Co., (S.C. 1977) 239 S.E.2d 647.) It is

equally apparent that state statutes which bar

the enforcement of arbitration agreements in

particular areas of the law must give way to

the federal policy. Thus in two recent United

States Supreme Court cases California's

Franchise Investement Law (Corp. Code, §

31512), and Labor Code section 229,

respectively, hoth of which allow for a

judicial forum notwithstanding a valid

arbitration agreement, were heid to be

preempted by the FAA.

It does not follow, however, that the

3/ Southland Corp. v. Keating 465 U.S. 1 (1984)

and Perry v. Thomas (1987) 432 U.S. , (96

L.Ed. 26).

APPENDIX A

federal law has preclusive effect in a case

where the parties have chosen in their

agreement to abide by state rules. In fact it

would appear that the federal law mandates

enforcement of such an agreement according to

its terms, since the recognized aim of the Act

was to make arbitration agreements “as

enforceable as other contracts." (Prima Paint

v. Flood & Conklin (1967) 388 U.S. 395, 404,

fn. 12.)

The thrust of the federal law is that

arbitration is strictly a matter of contract.

In this California law is entirely in accord:

“Arbitration is ... a matter of contract, and

the parties may freely delineate the area of

its application." (O'Malley v-. Wilshire Oil

Co. (1963) 59 Cal.2d 482, 490.) Since “(t]he

‘"Act does not dictate that we should disregard

parties' contractual agreements ... outlining

the boundaries of the areas intended to be

arbitrable"'" (Chan v. Drexel Burnham Lambert,

Inc. (1986) 178 Cal.App.3d 632, 640), it

follows that the parties are at liberty to

choose the terms under which they will

APPENDIX A

arbitrate, and such a choice will not run afoul

of the FAA. Stated another way, the Act does

not operate to require the parties to submit to

arbitration any dispute which they have not

agreed so to submit. (AT&T Tech., Inc. v-

Communications Workers (1986) U.S. .

___, (106 S.Ct. 1415, 1418]. )

If the parties here had expressly stated in

their agreement that they wished to arbitrate

only those disputes between themselves which

did not involve third parties not bound by the

arbitration agreement, this provision would

presumably be enforceable. In our view they

accomplished the same thing by choosing to be

governed by California law, thus incorporating

the California rules of civil procedure

governing arbitration agreements.

Were the federal rules to be imposed in

this case to override the parties' choice of

law, the effect would be to force the parties

to arbitrate where they agreed not to

arbitrate. This result is not only inimical to

the policies underlying state and federal

arbitration law as expressed above, it also

APPENDIX A

violates basic principles of contract law.

Since contractual terms are rarely agreed to

without reason, it is assumed that no part of

an agreement is superfluous or without effect,

but that each term was bargained for. (Rest.

Contracts 2d. § 203.) Where a party is

deprived of a benefit of his bargain by the

operation of law, that party is excused from

his duty to perform. (Rest. Contracts §§ 458,

463, 464; 6 Corbin, Contracts (1962) Discharge

by Failure of Consideration Either Existing orr

Prospective, § 1255; 1 Witkin, Summary of Cal.

Law (8th ed.) Contracts, Frustration of Purpose

§ 612, Operation of Law § 607.) Thus even if

we were to decide, which we do not, that

federal law preempted here, Stanford would be

entitled to raise this defense to further

performance under the arbitration agreement.

III.

Shortly before oral argument in this matter

the case of Liddington v. The Energy Group,

Inc. (1987) 192 Cal.App.3d 1520 was decided by

the First District. That case involved a

service contract in interstate commerce

APPENDIX A

containing both an arbitration agreement and

also a choice of law provision designating

California to be the forum state. The contract

further provided that the parties “'shall be

deemed to have agreed to binding arbitration in

the State of California ...'" (Id., at p-

1523, fn. 3.) When the Liddingtons were sued

by a bank for default on a promissory note,

they cross-complained against The Energy Group,

assignee of the service contract, for failure

to install energy systems financed by the bank.

The Energy Group then filed a petition to

compel arbitration pursuant to the arbitration

clause. The trial court stayed arbitration

pending the resolution of the litigation, on

the basis of Code of Civil Procedure section

1281.2, subdivision (c)- On appeal The Energy

Group argued that Code of Civil Procedure

section 1281.2 was preempted to the extent it

was used to stay arbitration proceedings

governed by the FAA. The Court of Appeal

agreed and reversed.

Despite the striking similarity between

this case and ours, we conclude that the

APPENDIX A

precise question before us was not decided in

Liddington he analysis in Liddington

approached the preemption issue from the

standpoint of whether the state law in question

was a general principle applicable to all

contracts, or a rule pertaining exclusively to

arbitration contracts. If it was the latter,

it would be preempted by the rules contained in

the FAA to the extent that they conflicted. In

reaching its decision that section 1281.2 fell

into this category, the Liddington court relied

upon a footnote in the United States Supreme

Court case of Perry v- Thomas, supra, 482 U.S.

‘ [96 L.Ed.2d 426, 437] decided only two

weeks earlier. In footnote nine in that case

the court said this: “Thus state law, whether

of legislative or judicial origin, is

applicable if that law arose to govern issues

concerning the validity, revocability, and

enforceability of contracts generally. A state

law principle that takes its meaning precisely

from the fact that a contract to arbitrate is

at issue does not comport with this requirement

APPENDIX A

In Perry the court was faced on the one

hand with a private agreement to arbitrate

according to state law, and on the other with a

state law expressly providing for a judicial

forum in spite of the arbitration agreement.

State policy was therefore directly at

loggerheads with the purposes behind the FAA,

and the federal law prevailed to enforce the

private agreement. In our case the issue is

not whether the state law is one directly

affecting the enforceability of arbitration

agreements, but rather whether the federal

rules can be applied to compel parties to

arbitrate contrary to the choice of law in

their agreement. Neither Perry nor Liddington

addresses this question.

Nor do we find the cases of Moses H. Cone

Hospital v. Mercury Constr. Corp. (1983) 460

U.S. 1 [103 S.Ct. 927] or Dean Witter Reynolds,

Inc. v- Byrd (1985) 470 U.S. 213 [105 S.Ct.

1238], relied upon by Volt, to be on point

here. Both of these cases arose in the context

of competing claims in federal and state

courts. Neither concerned the enforceability

APPENDIX A

of a contractual choice of law provision.

IV.

As an additional ground for appeal Volt

contends that even if California law were to

apply, section 1281.2, subdivision (c) cannot

be construed to authorize a stay under the

circumstances presented here. Volt argues that

application of the statute where Stanford has

brought the separate action as a "reactive"

response to the demand for arbitration, would

amount to giving license to a party to avoid

its obligations under an arbitration agreement

by simply filing a lawsuit against the party

seeking arbitration and joining others not part

of the agreement.

As Volt concedes, the language of section

1281.2 is sufficiently broad to encompass the

present procedural posture. Moreover the

statute does not provide for a stay in every

case in which the moving party has filed a

separate lawsuit, but rather gives the court

discretion to make such a ruling in an

appropriate case.

It is well known that a court of review

APPENDIX A

will not reverse a discretionary ruling in the

absence of a clear abuse of discretion.

(Barajas v- USA Petroleum Corp. (1986) 184

Cal.App-.3d 974, 989.)

The guidelines for the exercise of

discretion here are set forth in the statute

itself. The court may grant the stay if it

determines that there is a pending court action

involving a third party “arising out of the

same transaction or series of related

transactions and there is a possibility of

conflicting rulings of law or fact.”

Volt claims there is no evidence

establishing common issues of law or fact since

its demand for arbitration concerned a claim

for payment of additional compensation against

Stanford alone. In the body of the demand,

however, Volt has stated that the changes and

additional work it was required to perform were

due to a “defective and unsuitable” design and

“improper contract administration." Volt does

not dispute that the two companies named by

Stanford in its complaint were instrumental in

the design and management of the project.

APPENDIX A

Stanford has not merely asserted anciliary

claims against unnamed Does in its lawsuit, as

was the case in Bos Material Handling, Inc. v.

Crown Controls Corp. (1982) 137 Cal.App.3d 99.

In that case the court found that this was

insufficient to show a third party claim which

would create "a possibility of conflicting

rulings on a common issue of law or fact.”

(Code Civ. Proc., § 1281.2, subd. (c).) Rather

Stanford has named two parties both closely

involved in the management and design of the

project, who conceivably could play a role in

the present dispute. The possibility of

conflicting rulings is readily apparent. Under

the circumstances we need go no further than to

say we find no abuse of discretion.

The order of the trial court is affirmed.

Brauer, J.

I concur:

Agliano, P.J.

APPENDIX A

CAPACCIOLI, J., dissenting:

I respectfully dissent. I find that the

majority's analysis is flawed because it is

based upon an erroneous premise, namely that

the parties chose California arbitration law

over federal law by agreeing that the contract

would be "... governed by the law of the place

where the project is located.”

Analytically, it makes no difference in

this case whether California and the United

States or California alone is the "place."

There can be no conflict between federal and

state law because a state law is void to the

extent it conflicts with federal law under the

Supremacy Clause of the United States

Constitution and all the states in our republic

are bound by the same federal law. (U.S.

Const., art. 6, cl. 2; Maryland v. Louisiana

(1981) 451 U.S. 725, 746-47 [68 L.Ed.2d 576,

595-96]; Perez v. Campbell (1971) 402 U.S. 637,

649 [29 L.Ed.2d 233, 242].) The Supremacy

Clause of the United States Constitution

provides: "The Constitution, and the Laws of

APPENDIX A

the United States which shall be made in

Pursuance thereof ... shall be the supreme Law

of the Land; and the Judges in every State

shall be bound thereby, any Thing in the

Constitution or Laws of any State to the

Contrary notwithstanding." (U.S. Const., art.

6, cl. 2.)

California's Constitution as well as the

U.S. Constitution establishes that federal law

is paramount: "The State of California is an

inseparable part of the United States of

America, and the United States Constitution is

the supreme law of the land.“ (Cal. Const.,

art. 3, § 1.) Furthermore, the California

Supreme Court has held that the California

courts have a nondiscretionary duty to enforce

federal law where they have concurrent

jurisdiction. (Gerry of California v. Superior

Court (1948) 32 Cal.2d 119, 122; Brown v.

Pitchess (1975) 13 Cal.3d 518, 523.) Thus,

under California law, federal law governs

matters cognizable in California upon which the

United States has definitively spoken.

Thus, the parties’ choice of law provision,

APPENDIX A

even assuming arguendo that it must be

interpreted as an agreement to have California

law govern, does not invariably lead to the

conclusion that federal law is inapplicable.

To the contrary, where federal law is supreme,

California law mandates that federal law

controls.

The Federal Arbitration Act requires state

and federal courts to enforce any arbitration

agreement contained in a contract “evidencing a

transaction involving commerce” “... save upon

such grounds as exist at law in equity for the

revocation of any contract." (See 9 U.S.C., §

2; see Perry v. Thomas (1987) 482 U.S. _— (96

L.-Ed.2d 426, 435-37]; Dean Witter Reynolds,

L.Ed.2d 158, 161-63, 165]; Southland Corp. v.

Keating (1984) 465 U.S. 1, 10-16 [79 L.Ed.2d l,

12-16].) To the extent California law permits

a court to deny or stay arbitration in the face

of an unqualified agreement to arbitrate, that

law is preempted by the Federal Arbitration Act

where a contract “evidencing a transaction

involving commerce” is concerned. (Liddington

APP=NDIX A

v. The Energy Group, Inc. (1987) 192 Cal.App.3d

1520, 1525-29; see Perez v. Campbell, supra,

402 U.S. at pp. 644, 649 [29 L.Ed.2d 233, 239,

244]; cf. Perry v- Thomas, supra; Southland

Corp. v- Keating, supra. )

While I agree with the majority that the

Federal Arbitration Act does not preclude

parties from contractually limiting the scope

of their arbitration agreement (see Seaboard

Coast Line R. Co. v. Trailer Train Co. (1982)

690 F.2d 1343, 1348, 1352; Davis v. Chevy Chase

Financial Ltd. (1981) 667 F.2d 160, 165;

Alabama Ed. Ass'n. v- Alabama Prof. Staff

Organ. (1981) 655 F.2d 607; Lounge-A-Round v.

GCM Mills, Inc. (1980) 109 Cal.App.3d 190, 195;

cf. United Steelworkers v. Warrior & Gulf Co.

(1960) 363 U.S. 574 [4 L.Ed.2d 1409]), the mere

choice of California law is not a selection of

California law over federal law and does not in

any way limit an otherwise unqualified

agreement to arbitrate.

The majority concedes that Volt's petition

to compel arbitration would have to be granted

if the federal law applied. I think there is

APPENDIX A

no doubt that it does.

I would reverse and remand.

‘Capaccioli, J.

APPENDIX A

APPENDIX B -

ORDER OF THE CALIFORNIA

SUPREME COURT DENYING

APPELLANT'S PETITION FOR REVIEW

APPENDIX B

FILED

Dec. 17, 1987

Lawrence P. Gill,

Clerk

ORDER DENYING REVIEW

AFTER JUDGMENT BY THE COURT OF APPEAL

6th District, No. H002634

IN THE SUPREME COURT

OF THE STATE OF CALIFORNIA

IN BANK

BOARD OF TRUSTEES OF THE

LELAND STANFORD JUNIOR UNIVERSITY, Respondent

VOLT INFORM. SCIENCES, INC., Appellant

Appellant's petition for review DENIED.

The Reporter of Decisions is directed not

to publish in the Official Appellate Reports

the opinion in the above-entitled appeal filed

October 5, 1987, which appears at 195

Cal.App.3d 349. (Cal. Const., Art. VI, sec.

14; Rule 976, Cal. Rules of Court.)

/s/ Malcolm Lucas

Chief Justice

APPENDIX B

APPENDIX C -

ORDER OF THE STATE TRIAL

COURT DENYING APPELLANT'S

PETITION TO COMPEL ARBITRATION

APPENDIX C

FILED

Nov. 21, 1986

Grace Yamakawa

County Clerk

SUPERIOR COURT OF THE STATE OF CALIFORNIA

IN AND FOR THE COUNTY OF SANTA CLARA

BOARD OF TRUSTEES OF THE LELAND

STANFORD JUNIOR UNIVERSITY, a

body having corporate powers,

Plaintiff,

No. P48603

VOLT INFORMATIONS SCIENCES,

INC., TELECOMMUNICATIONS

INTERNATIONAL, INC., BRIAN-

KANGAS-FOULK & ASSOCIATES, and

DOES I through XX, inclusive,

ORDER

Defendants.

me ee ee ee ee ee ee ee ee ee ee

Plaintiff's motion to stay arbitration is

granted and defendant's motion to compel

arbitration is denied. The court believes that

the principals [sic] enunciated in Garden Grove

Community Church vs. Pitsburgh-Des Moines Steel

Co., 140 Cal.App.3d 251 and Prestressed

Concrete, Inc. v. Adolphson & Peterson, Inc.,

240 N.W.2d 551, as well as California Code of

APPENDIX C

Civil Procedure §1281.2(c) apply in this case.

DATED: November 21, 1986

s/ Charles Gordon

CHARLES GORDON

Judge of the Superior Court

APPENDIX C

APPENDIX D -

APPELLANT'S

NOTICE OF APPEAL

APPENDIX D

PETTIT & MARTIN

JAMES E. HARRINGTON

ROBERT B. THUM FILED

DEANNE M. TULLY Jan. 14, 1988

101 California Street Richard J. Eyman

San Francisco, CA 94111 Clerk

Phone: (415) 434-4000

Attorneys for Appellant

Volt Information Sciences, Inc.

COURT OF APPEAL OF CALIFORNIA

SIXTH APPELLATE DISTRICT

BOARD OF TRUSTEES

OF LELAND STANFORD

JUNIOR UNIVERSITY,

No. H002634

Plaintiff-Respondent

NOTICE OF APPEAL

TO THE SUPREME

COURT OF THE

UNITED STATES

vs.

VOLT INFORMATION

SCIENCES, INC.

Defendant-Appellant.

me ee ee eee ee ee”

On Appeal from the Superior Ccurt

for the County of Santa Clara,

Honorable Charles Gordon, Presiding

This court having rendered its decision and

judgment herein on October 5, 1987, affirming

the order of the trial court denying appel-

lant's petition to compel arbitration, and the

APPENDIX D

Supreme Court of California having entered its

order herein on December 17, 1987, denying

appellant's

Information

the Supreme

pursuant to

of Title 28

petition for review, appellant Volt

Sciences, Inc., hereby appeals to

Court of the United States,

the provisions of section 1257(2)

of the United States Code, from the

aforesaid decision and judgment of this court

entered herein on October 5, 1987.

Dated: January ll, 1988

Respectfully submitted,

PETTIT & MARTIN

By /s/ James Harrington

Attorneys for Appellant

APPENDIX D

APPENDIX E -

EXCERPTS FROM

APPELLANT'S BRIEF

IN THE STATE TRIAL COURT

APPENDIX E

PETTIT & MARTIN FILED

ROBERT B. THUM October 30, 1981

DEANNE M. TULLY Grace Yamakawa,

101 California Street, County Clerk

35th Floor

San Francisco, California 94111

Telephone (415) 434-4000

Attorneys for Defendant

VOLT INFORMATION SCIENCES, INC.

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF SANTA CLARA

THE BOARD OF TRUSTEES ) No. P 48603

OF THE LELAND STANFORD )

JUNIOR UNIVERSITY, a body) MEMORANDUM OF

having corporate powers, ) POINTS AND

AUTHORITIES IN

OPPOSITION TO

PLAINTIFF’S

MOTION TO STAY

ARIBITRATION

AND IN SUPPORT

OF DEFENDANT’S

VOLT INFORMATION

SCIENCES INC.’S

PETITION TO

COMPEL ARBITRATION

Plaintiff,

vs.

VOLT INFORMATION

SCIENCES, INC.,

TELECOMMUNICATIONS

INTERNATIONAL, INC.

BRIAN-KANGAS-FOULK &

ASSOCIATES, and DOES I

through XX, inclusive,

Defendants.

Defendant Volt Information Sciences,

Inc. ("Volt") submits the following Memorandum

of Points and Authorities In Opposition to

-l-

APPENDIX E

e. Se Pew te

Plaintiff’s Motion To Stay Arbitration and In

Support of Volt’s Petition to Compel

Arbitration pursuant to the Federal Arbitration

Act, 9 U.S.C. Section 1, et seq., and the

California Arbitration Act, Code of Civil

Procedure, Section 1280, et seq.

*~*«* «

II. THE FEDERAL ARBITRATION ACT IS APPLICABLE

TO ANY CONTRACT INVOLVING INTERSTATE

COMMERCE, NOTWITHSTANDING A CHOICE OF LAW

PROVISION WITHIN THE CONTRACT AND,

THEREFORE, THE ISSUE OF WHETHER TO COMPEL

ARBITRATION MUST BE DECIDED ACCORDING TO

TRATION ACT

The FAA applies to any contract

involving interstate commerce. 9 U.S.C.

Section 2. It is clear, and Stanford does not

contest, that the contract for the construction

of the Distribution Conduit System involves

interstate commerce. (See Affidavit of Eugene

F. Curran.) Rather, Stanford contends that the

choice of law provision within the contract

somehow nullifies the application of the FAA

and requires the Court to rely on California

law. In so contending, however, Stanford

APPENDIX E

ignores one of the most fundamental concepts in

American law.

A. THE FEDERAL ARBITRATION ACT IS THE

SUPREME LAW OF THE LAND

It is well settled that Congress has

the authority to regulate interstate commerce

under the Commerce Clause of the United States

Constitution. Gibbons v. Ogden. 22 U.S. 1, 196

(1824). The FAA rests on the authority of

Congress to enact substantive rules under the

Commerce Clause.

In the leading case of Prima Paint

Corp. v. Flood and Conklin, 388 U.S. 395

(1967), a federal district court applied

federal substantive law in determining whether

an arbitration agreement had been fraudulently

induced. The United States Supreme Court, in

considering whether the district court’s

holding was constitutionally permissible under

the Erie Doctrine (Erie R.R. Co v. Tompkins,

304 U.S. 64 (1938)) stated:

The question in this case, however,

is not whether Congress may fashion

federal substantive rules to govern

questions arising in simple diversity

cases. {[citation.] Rather, the

-3-

APPENDIX E

question is whether Congress may

prescribe how federal courts are to

conduct themselves with respect to

subject matter over which Congress

Plainly has the power to legislate.

The answer to that can only be in the

affirmative. And it is clear beyond

dispute that the federal arbitration

statute is based upon and confined to

the incontestable federal foundations

of control over interstate commerce

and over admiralty.

Prima Paint at 405.

Whereas the court in Prima Paint did

not specifically address a choice of law

clause, it plainly implied that the substantive

law of the FAA was applicable both in federal

and state courts. In Moses H. Cone Memorial

Hospital v. Mercury Construction Corp., 460

U.S. 1 (1983), the United States Supreme Court

reaffirmed the Prima Paint holding that the FAA

created a substantive body of law and expressly

held that the FAA was applicable in state

courts as well as federal courts. Id. at 24.

Moreover, in Southland Corp. v.

Keating, U.S. __, 104 §.Ct. 852 (1984),

the Supreme Court held that the FAA applied to

any arbitration provision in a contract

evidencing interstate commerce. The Court

-4-

APPENDIX E

ruled that state courts are required to apply

the FAA, and to the extent state law conflicts

with the FAA, it is preempted under the

Supremacy Clause in Article VI of the United

States Constitution. In so ruling the United

States Supreme Court overruled the California

Supreme Court’s holding in Keating v. Southland

Corp., 31 Cal.3d 584 (1982).

In Keating v. Southland Corp.,

Plaintiff, the franchisee of a 7-Eleven

convenience store, sued Southland Corp.

("Southland"), the owner and franchiser of the

stores, for various violations of the

California Franchise Investment Law,

Corporations Code Section 31000, et seq.

Pursuant to an arbitration provision in all

franchise contracts, Southland sought

arbitration of plaintiff's claims according to

the provisions of the FAA. The California

court ruled that arbitration of the claims was

precluded by Corporations Code Section 31512,

which states that contractual provisions

waiving application of the California franchise

law are void. The California court went on to

-5-

APPENDIX E

state that the strong policy to protect

California franchisees, as evidenced by

Corporations Code Section 31512 did not

conflict with the principles of arbitration

embodied in the FAA.

The United States Supreme Court

expressly overruled the California Supreme

Court’s holding. Writing for the majority,

Chief Justice Burger stated:

In creating a substantive rule

applicable in state as well as

federal courts, Congress intended to

foreclose state legislative attempts

to undercut the enforceability of

arbitration agreements. Southland

Corp. v. Keating, supra,

U.S. , 104 S.Ct. at 861.

To the extent that any California law could be

interpreted as preventing enforcement of or

interfering with the arbitration agreement, it

violated the Supremacy Clause and is null and

void. Moses H. Cone Memorial Hospital v.

Mercury Construction Corp., supra, 460 U.S. l,

24.

B. INSERTION OF A CHOICE OF LAW

PROVISION DOES NOT AFFECT THE

APPLICABILITY OF THE FAA

APPENDIX E

Once it has been determined that a

contract involves interstate commerce, the FAA

will apply notwithstanding the insertion of a

choice of law provision in the contract.

Commonwealth Edison Co. v. The Gulf Oil Corp.,

541 F.2d 1263 (7th Cir. 1973). In

Commonwealth, the parties included both an

arbitration provision and a choice of law

provision in their contract. After defendant

terminated the contract, plaintiff sought to

compel defendant to arbitrate controversies

related to that termination. The district

court refused to apply state law and ordered

defendant to arbitration. The court of appeals

affirmed the district court and held that

notwithstanding the inclusion of a choice of

law provision, the FAA rather than state law

governs any arbitration contract involving

interstate commerce. The court stated:

Congress, in enacting the Federal

Arbitration Act, exercised its power

over admiralty and interstate

commerce. Any arbitration contract

involving one of those areas is

governed by the Federal Act. To

permit the parties to contract away

the application of the Act by

adopting state law to govern their

APPENDIX E

agreement would be inconsistent with

the Act itself and the holding in

Prima Paint. Id. at 1269.

Since the FAA applies in state courts

as well as federal, it requires state courts to

enforce the arbitration agreement despite

contrary state law or policy. R.J. Palmer

Construction Co., Inc. v. Wichita Band

Instrument Co., Inc., 642 P.2d 127 (Kan. 1982),

Allison v. Medicab Intern, Inc., 597 P.2d 380

(Wash. 1979), Communications Workers of America

v. Pacific Telephone & Telegraph Co., 462

F.Supp. 736 (C.D. Cal. 1978) Main v. Merrill,

Lynch, Pierce, Fenner & Smith, Inc., 67

Cal.App.3d 19 (1977).

Stanford relies on Garden Grove

Community Church v. Pittsburg-Des Moines Steel

Co., 140 Cal.App.3d 251 (1983) as support for

its contention that by inserting a choice of

law provision in the contract, the FAA cannot

apply. Stanford’s analysis of this case is

misleading and incomplete.

APPENDIX E

In Garden Grove, the parties agreed

. to be governed by the law of the construction

site, in this case California. The Court

stated:

While California courts have held the

FAA applies to California cases

involving contracts of interstate

commerce, we have not found any cases

applying it where the parties

committed to be governed by state

law. In the face of such a choice of

law provision, California law applies

unless preempted by the FAA.

{Emphasis added. ]}

Id. at 262.

The Court in Garden Grove was addressing the

issue of consolidating several arbitrations

into one arbitration. On this specific issue,

the FAA and the California Arbitration Act are

substantially similar. The Court recognized

this. Therefore, the Court held that on the

consolidation issue, the FAA neither preempted

nor conflicted with the equivalent California

statute.

The provisions of California Code of

Civil Procedure Section 1281.2(c), however,

directly conflict with the principles embodied

in the FAA. Section 1281.2(c) states that a

-9-

APPENDIX E

court need not compel arbitration if a party to

an arbitration agreement is also a party to a

pending lawsuit with a third party and there is

a possibility of conflicting rulings. This

provision is completely contradictory to case

law interpreting the FAA. Under the FAA,

arbitration must be compelled even in the

presence of third party defendants. As the

United States Supreme Court held in Dean Witter

Reynolds, Inc. v. Byrd, 105 S.Ct. 1238 (1985):

The act requires district courts to

compel arbitration of pendent

arbitrable claims when one of the

parties files a motion to compel,

even where the results would be the

possibly inefficient maintenance of

separate proceedings in different

forums. [Emphasis added. }

Id. at 1241.

Moreover, the Garden Grove decision

contains no discussion whatsoever of federal

preemption principles and the court cites no

authority for reaching its conclusion. Garden

Grove was decided prior to the United States

Supreme Court’s holdings in Moses M. Cone

Memorial Hospital v. Mercury Construction

Corp., supra, 460 U.S. 1 and Southland Corp. v.

-10-

APPENDIX E

Keating, supra, U.S. , 104 S.Ct.

852. Clearly, then, Garden Grove has been

explicitly overruled.

Finally, Paragraph 7.1.1 of the

General Conditions does not specifically state

California law will apply. It states the law

of the place shall apply. In this case, the

applicable law of the place is federal.

California courts have long recognized that

where federal law is supreme, they are required

to apply that federal law.

III. UNDER THE PRINCIPLES EMBODIED IN THE

FEDERAL ARBITRATION ACT, THE COURT

MUST ENFORCE THE ARBITRATION

PROVISION

The Supreme Court’s holding in Moses

H. Cone Memoricl Hospital v. Mercury

Construction Corp., supra. 460 U.S. 1, was

based on facts almost identical to those in the

present case.

In Moses H. Cone, the hospital

entered into a contract with Mercury

Construction Corp. ("Mercury") for the

construction of an additional hospital wing.

The hospital drafted and inserted in the

-ll-

APPENDIX E

contract an arbitration provision, the terms of

which are nearly identical to the language in

the arbitration provision drafted by Stanford

here. The hospital did not include an

arbitration provision . its separate contract

with the architect for the project. A dispute

arose regarding Mercury’s claim for additional

compensation due to the hospital’s errors and

omissions during the course of construction.

The same day Mercury filed a Demand for

Arbitration, the Hospital filed and served a

complaint, naming both Mercury and the

architect as defendants. The hospital’s claim

against the architect was for declaratory

relief of entitlement to indemnity should the

hospital be found liable to Mercury. The

hospital claimed the dispute could not go to

arbitration because the architect could not be

compelled to participate, and this would

necessarily result in piecemeal litigation.

The Supreme Court held:

It is true, therefore, that if

Mercury obtains an arbitration order

for its dispute, the Hospital will be

forced to resolve these related

disputes in different forums. That

“12

APPENDIX E

misfortune, however, is not the

result of any choice between the

federal and state courts; it occurs

because the relevant federal law

requires piecemeal resolution when

necessary to give effect to an

arbitration agreement. Id. at 20.

{Emphasis added. }

The Court ordered the parties to arbitration.

The Supreme Court’s clear holding

that arbitration agreements must be enforced

even if this results in piecemeal litigation

has been emphatically endorsed by subsequent

decisions. In Southland Corp. v. Keating,

supra, U.S. , 104 §.Ct. 852 the court

held that

Contracts to arbitrate are not to be

avoided by allowing one party to

ignore the contract and resort to the

courts. Such a course could lead to

prolonged litigation, one of the very

risks the parties, by contracting for

arbitration, sought to eliminate.

Id. at 856.

And, in Dean Witter Reynolds, Inc. v.

Byrd, supra, - » 863 B.C. 1238,

the court emphasized the mandatory nature of

the court’s obligation to enforce arbitration

even if it results in the “possibly inefficient

-]3-

APPENDIX E

maintenance of separate proceedings in

different forums." Id. at 1241.

The plain mandate from the United

States Supreme Court is that the FAA applies to

all contracts arising out of interstate

commerce. Under the FAA, a court is required

to enforce an arbitration agreement even if

this results in piecemeal litigation.

Significantly, in its opposition to Volt’s

Petition, Stanford has not even attempted to

discuss, much less dispute, the Supreme Court’s

decrees in Moses H. Cone, Southland Corp. and

Dean Witter. Any such attempt would, if made,

of course be futile.

IV. EVEN IF FEDERAL LAW DID NOT APPLY,

CALIFORNIA LAW OVERWHELMINGLY SUPPORTS

ARBITRATION OF THIS DISPUTE

~*~ «& * *

VI. CONCLUSION

Under both the Federal Arbitration

Act and the California Arbitration Act, the

Court is required to enforce valid arbitration

agreements. Such an arbitration agreement is

present in this case. The fact that Stanford

has chosen to pursue additional claims against

-14-

APPENDIX E

third party defendants does not affect the

arbitrability of the dispute between Stanford

and Volt. Consequently, the Court should

compel Stanford to arbitrate its dispute with

Volt and stay the action pending the outcome of

the arbitration.

DATED: October 30, 1986.

PETTIT & MARTIN

BY:

Deanne M. Tully

Attorneys for Defendant

VOLT INFORMATION SCIENCES, INC.

-15-

APPENDIX E

APPENDIX F -

EXCERPTS FROM APPELLANT'S

OPENING BRIEF IN THE

STATE COURT OF APPEAL

APPENDIX F

PETTIT & MARTIN

JAMES E. HARRINGTON

ROBERT B. THUM FILED

DEANNE M. TULLY Jan. 13, 1987

101 California Street Richard J. Eyman

San Francisco, CA 94111 Clerk

(415) 434-4000

Attorneys for Defendant

and Appellant

Volt Information Sciences, Inc.

COURT OF APPEAL

OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

BOARD OF TRUSTEES

OF LELAND STANFORD

JUNIOR UNIVERSITY,

Plaintiff-Respondent,

No. H0O0O2634

vs.

VOLT INFORMATION

SCIENCES, INC.,

Defendant-Appellant.

ee ee ee ee ee ee ee ee ee”

Appeal from the Superior Court

for the County of Santa Clara

Honorable Charles Gordon, Judge

OPENING BRIEF

OF DEFENDANT AND APPELLANT

VOLT INFORMATION SCIENCES, INC.

APPENDIX F

TABLE OF CONTENTS

INTRODUCTION l

STATEMENT OF THE CASE 2

ARGUMENT 6

I. Certain Basic Propositions Are 6

Beyond Controversy - Namely,

(1) That the Federal Arbitration

Act Generally Governs the Arbitra-

bility of All Disputes Involving

Interstate Commerce and to That

Extent Preempts Any Conflicting

Provisions of State Law, (2) That

the Present Dispute Involves Inter-

state Commerce and Would Therefore

Be Governed by the Federal Arbitra-

tion Act in the Absence of a Valid

Choice-of-Law Clause in the Parties’

Contract Specifying Some Other Body

of Law to Govern Application of Their

Agreement, and (3) That Application

of the Federal Arbitration Act to

This Case Would Require Reversal of

the Superior Court's Order.

A. The General Coverage of the 6

Federal Arbitration Act

B. The Applicability of the Act 8

to This Case

C. The Result That Would Be 10

Dictated by the Act

D. Conclusion 14

II. For Each of Three Independently 15

Sufficient Reasons, the Clause of

the Parties’ Contract Specifying

That It “Shall Be Governed by the

Law of the Place Where the Project

Is Located” Must Be Interpreted to

Permit, Indeed to Require, Resolu-

tion of This Controversy in Exclu-

APPENDIX F

sive Accordance with the Dictates of

the Federal Arbitration Act.

A. The Literal Terms of the 15

Contractual Provision

B. The Dictates of Federalism 18

Cc. The Legal Invalidity of a 21

Contrary Interpretation

D. The Two Decisions Espousing 22

a Minority View

E. Conclusion 25

III. In Any Event, Even if This Con- 25

troversy Were to Be Resolved In

Accordance With State Law, Rever-

sal of the Superior Court's Order

Would Still Be Required Because

C.C.P. §1281.2(c) Does Not Author-

ize the Type of Stay Order Entered

by the Court in the Circumstances

Presented Here.

CONCLUSION 37

APPENDIX F

INTRODUCTION

This is an appeal, pursuant to C.C.P.

§1294(a), from an order of the superior court

denying appellant's petition to compel

arbitration of a dispute between the parties

pursuant to the terms of an arbitration clause

in their agreement. By the same order, the

court granted a cross-motion by respondent to

stay any such arbitration pending the outcome

of a law suit that had been commenced by

respondent against appellant and certain third

persons arising out of the same transaction

that was the subject of the arbitration. The

court's order was entered pursuant to C.C.P.

§1281.2(c), which permits a superior court,

under certain conditions, to deny a petition to

compel arbitration or to stay a pending

arbitration when the dispute sought to be

arbitrated is the subject of pending litigation

between the parties in which claims are also

asserted against third persons who are not

parties to the arbitration agreement.

The primary issue presented by this appeal

is whether the provisions of C.C.P. §1281.2(c)

APPENDIX F

have any application whatever to the present

controversy, or whether, on the other hand, the

question of arbitrability of this interstate

contract dispute should have been determined by

exclusive reference to the terms of the Federal

Arbitration Act, 9 U.S.C. §§l et seq., which

have been specifically held to require

arbitration and to preclude entry of a stay

order under precisely the conditions that are

presented here. The superior court's refusal

to apply the federal statute in this case was

apparently based on a clause in the parties’

contract providing that “(t]he Contract shall

be governed by the law of the place where the

project is located," which the court evidently

interpreted to require resolution of the issue

of arbitrability solely in accordance with

California statutory law. Appellant contends

that the court erred in this regard, because

the term “the law of the place where the

project is located" must be construed to

include, not only California law, but also the

laws of the United States, including the

Federal Arbitration Act and the Supremacy

APPENDIX F

Clause of the United States Constitution.

Alternatively, appellant contends that, even if

California law were to to be applied here,

reversal of the court's order would still be

required because, under a proper construction

of C.C.P. §1281.2(c), that statute would not

afford any justification for the entry of an

order staying the arbitration in the particular

circumstances of this case.

~*kkx

ARGUMENT

I. Certain Basic Propositions Are Beyond

Controversy - Namely, (1) That the Federal

Arbitration Act Generally Governs the Arbi-

trability of All Disputes Involving Inter-

state Commerce and to That Extent Preempts

Any Conflicting Provisions of State Law,

(2) That the Present Dispute Involves

Interstate Commerce and Would Therefore Be

Governed by the Federal Arbitration Act in

the Absence of a Valid Choice-of-Law Clause

in the Parties’ Contract Specifying Some

Other Body of Law to Govern Application of

Their Agreement, and (3) That Application

of the Federal Arbitration Act to This Case

Would Require Reversal of the Superior

Court's Order.

A. The General Coverage of the Federal

Arbitration Act

Section 2 of the Federal Arbitration Act

states that the Act governs the application and

APPENDIX F

enforcement of any “written provision in any

maritime transaction or a contract evidencing a

transaction involving commerce to settle by

arbitration a controversy thereafter arising

out of such contract or transaction." 9 U.S.C.

§2. The term “commerce” is earlier defined to

mean “commerce among the several states." Id.

§l. The Act then goes on to declare the

validity and enforceability of all such

arbitration provisions and to prescribe certain

procedures for their enforcement by the courts.

Id. §§$2-4. Although some of the remedial

provisions of the Act refer to actions brought

in the federal district courts (id. §4), it has

now become well settled that the Act was

intended to create a comprehensive body of

substantive law governing all arbitrations

arising out of interstate transactions, and

that its provisions are therefore required to

be enforced in state courts, as well as federal

courts, to the exclusion of any conflicting

provisions of state law. Southland Corp. v.

Keating, 465 U.S. 1, 12 (1984); Moses H. Cone

Mem. Hosp. v. Mercury Constr. Corp., 460 U.S.

APPENDIX F

1, 24, 26 (1983); Communication Workers of

Amer. v. Pac. Tel. & Tel. Co., 462 F.Supp. 736,

739 (C.D.Cal. 1978); Ford v. Shearson Lehman

Amer. Express, Inc., 180 Cal.App.3d 1011, 1O017-

18 (1986); Lewis v. Prudential Bache

Securities, Inc., 179 Cal.App.3d 935, 941

(1986); *** As the United States Supreme Court

recently stated in its opinion in Moses H. Cone

Mem. Hosp. v. Mercury Constr. Corp., supra, the

Act “create[s] a body of federal substantive

law of arbitrability, applicable to any

arbitration agreement within the coverage of

the Act ... [which] governs that issue in

either state or federal court ...

notwithstanding any state substantive or

procedural policies to the contrary." Id., 460

U.S. at 24. The principles thus summarized by

the Court are by now quite familiar and un-

controversial, and apparently are not disputed

by Stanford in this case (see JA 225-27)

B. The Applicability of the Act to

This Case

Equally beyond dispute is the proposition

that the arbitration agreement at issue in this

APPENDIX F

case “evidenc[es] a transaction involving ...

commerce among the several states” within the

meaning of the Federal Arbitration Act, and

that it therefore falls within the overall

coverage of the Act. 9 U.S.C. §§1-2. Volt

established by an uncontradicted affidavit in

the court below that all of its supervisory

personnel and much of its work force for the

Stanford project were transferred to California

from other states for the exclusive purpose of

participating in that project, that a large.

proportion of the equipment and material used

on the project was shipped from other states,

and that overall administration of the project

was conducted from Volt's offices outside

California (JA 207-8). Under the standards

enunciated in numerous prior decisions on this

issue, these facts clearly establish a

sufficient nexus with interstate c mmerce to

bring this transaction well within the scope of

the federal Act. E.g., Prima Paint Corp. v.

Flood & Conklin, supra, 388 U.S. at 401; Mesa

Operating Ltd. P'ship. v. Louisiana Intrastate

Gas Corp., 797 F.2d 238, 243 (5th Cir. 1986);

APPENDIX F

In re Mercury Constr. Corp., 656 F.2d 933, 942

(4th Cir. 1981), affd. sub nom. Moses H. Cone

Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. l

(1983); *** It follows that, in the absence of

a valid choice-of-law provision in the parties’

contract selecting some other body of law to

govern the application of their agreement, the

question of arbitrability of the present

dispute would have to be resolved in exclusive

accordance with federal law. Once again, this

conclusion is apparently not seriously

questioned by Stanford (see JA 225-27).

C. The Result That Would Be Dictated

by the Act

Finally, there is no disagreement that, if

federal law does indeed govern the resolution

of this controversy, its application will

necessarily require reversal of the order of

the superior court denying Volt's petition to

compel arbitration and granting Stanford's

motion to stay the arbitration pending the

judicial resolution of its claims against the

project designers. As noted earlier, the sole

basis of the court's order was the provision of

° APPENDIX F

C.C.P. §1281.2(c) that authorizes a stay of

arbitration where non-arbitrable claims arising

out of the same transaction have been asserted

against third parties in a pending law suit.

The Federal Arbitration Act contains no

counterpart provision authorizing a stay of

arbitration in these circumstances, and,

indeed, the decisions applying the Act have

repeatedly held that the existence of such soe

arbitrable third-party claims does not afford a

proper ground for denying enforcemeut of an

otherwise valid arbitration agreement or for

delaying the commencement of arbitration of an

otherwise ripe dispute between the parties to

the agreement. E.g., Moses H. Cone Mem. Hosp.

v. Mercury Constr. Corp., supra, 460 U.S. at

20; C. Itoh & Co. (America), Inc. v. Jordan

Intl. Co., 552 F.2d 1228, 1231 (7th Cir. 1977);

Acevedo Maldonado v. PPG Industries, Inc., 514

F.2d 614, 617 (lst Cir. 1975); *** See Dean

Witter Reynolds, Inc. v. Byrd, U.S. P

105 S.Ct. 1238, 1242-43 (1985). *** Since this

settled federal rule would directly preempt the

contrary prescription of C.C.P. §1281.2(c), and

would thus invalidate the stay order entered by

the superior court in reliance upon that

statute in this case, it necessarily follows

that reversal of the court's order will be

required if and to the extent that the Federal

Arbitration Act is found to govern the

disposition of this case. Stanford, once

again, has not disputed this conclusion (see JA

225-27, RT 20-22).

xe&*

D. Conclusion

It has thus been demonstrated (1) that the

Federal Arbitration Act governs the enforcement

of all arbitration agreements covered by its

terms in both state and federal courts, and to

that extent preempts any state laws that

prescribe any different method of enforcement,

(2) that the agreement at issue in this case

falls within the scope of the Act and would

therefore be governed by the terms of the Act

in the absence of a valid choice-of-law clause

in the parties’ contract prescribing some other

body of law to govern the application of their

agreement, and (3) that, if the disposition of

ANMMDaATMAT VT ro

the present case is indeed governed by the

Federal Arbitration Act, the superior court's

order staying the arbitration of Volt's dispute

with Stanford will have to be reversed, because

the Act precludes the entry of such a stay

order in the circumstances presented here. All

of these propositions are free from any genuine

dispute. Thus, the only remaining issue that

needs to be addressed - and the only issue that

has been seriously contested by Stanford - is

whether the clause in the parties’ agreement

specifying that "“({tJhe Contract shall be

governed by the law of the place where the

project is located" effectively precludes the

application of federal law to this case and

hence permitted the superior court to resolve

the controversy in exclusive accordance with

California statutory law and in disregard of

the dictates of the Federal Arbitration Act.

That issue is discussed in the next section.

AMMmMOATM TT TT

For Each of Three Independently Suffi-

cient Reasons, the Clause of the Parties’

Contract Specifying That It "Shall Be

Governed by the Law of the Place Where

the Project Is Located" Must Be Inter-

preted to Permit, Indeed to Require,

Resolution of This Controversy in Exclu-

sive Accordance with the Dictates of the

Federal Arbitration Act.

As recited earlier, the provision of the

parties’ contract requiring its application in

accordance with “the law of the place where the

project is located" was apparently interpreted

by the superior court as an exclusive reference

to California statutory law and as a consequent

mandate to ignore the prescriptions of the

Federal Arbitration Act in ruling upon Volt's

petition and Stanford's motion to stay the

arbitration (RT 13-14; JA 252-53). As will now

be demonstrated, this fnterpretation of the

quoted provision of the contract was erroneous.

For at least three independently sufficient

reasons, each of which is supported by ample

authority, the contractual reference to “the

law of the place where the project is located"

must be deemed to include federal law as well

as California law and hence to require

resolution of this dispute in accordance with

ADDPNNHTY

the otherwise clearly applicable terms of the

Federal Arbitration Act.

A. The Literal Terms of the Contractual

Provision

This conclusion is dictated, first of all,

by the literal language of the contractual

provision itself. The words, “the place where

the project is located," literally refer, not

only to the State of California, but also to

the City of Palo Alto, the County of Santa

Clara, and the nation of the United States of

America. All of these political entities have

laws, ordinances, and constitutional provisions

that were applicable in one way or another to

the activities occurring during the performance

of the parties’ contract. The literal words of

the contractual provision therefore afford no

basis whatsoever for choosing the laws of only

one of these entities, to the exclusion of all

of the others, as constituting “the law of the

place where the project is located." To the

contrary, the only literally proper

interpretation of that phrase is that it refers

collectively to all of the laws of all these

APPENDIX F

political entities within whose boundaries the

project site was situated. Under that

interpretation, the term encompasses, not only

the statutory law of California, but also the

statutes of the United States, including the

Federal Arbitration Act. Moreover, it

encompasses the Supremacy Clause of the United

States Constitution, which generally dictates

that federal law takes precedence over state

law in the event of overlapping coverage of the

same subject matter, and which specifically

dictates that the Federal Arbitration Act

preempts any state law, including C.C.P.

§1281.2(c), that purports to impose

restrictions on the enforcement of arbitration

agreements of a kind not authorized by the

federal Act. See cases cited at page 7, supra.

The conclusion is unavoidable that, by its

clear literal terms, the contractual provision

mandating application of the contract in

accordance with “the law of the place where the

project is located," not only does not

preclude, but specifically compels reliance

upon the Federal Arbitration Act to determine

APPENDIX F

the arbitrability of disputes arising under the

agreement at issue in this case, and that the

trial court's ruling to the contrary was

erroneous.

x**

B. The Dictates of Federalism

Secondly, the same result would follow even

if the choice-of-law clause in the agreement at

issue here had explicitly and exclusively

adopted “the law of California," rather than

merely “the law of the place where the project

is located," to govern the application of its

provisions. For it is basic to the nature of

our federal union, and inherent in the notion

of federal primacy expressed in the Supremacy

Clause, that the law of California, as of every

other state, includes the laws of the United

States, and that every federal enactment, in

that sense, constitutes a law of each state to

the same extent as if it had been passed by the

state's own legisiature. See The Federalist,

Nos. 16, 27. This fundamental tenet of

American federalism has found frequent

expression in the opinions of the Supreme

APPENDIX F

Courts of both the United States and of

California. E.g., Testa v. Katt, 330 U.S. 386,

392-93 (1947); Mondou v. New York, New Haven &

Hartford R.R. Co. (Second Employers’ Liability

Act Cases), 223 U.S. 1, 57-58 (1912); Claflin

v. Houseman, 93 U.S. 130, 136-37 (1876); Gerry

of California v. Superior Court, 32 Cal.2d 119,

122 (1948); Estate of Lundquist, 25 Cal.2d 697,

704-5 (1944); Leet v. Union Pac. R.R.°’Co., 25

Cal.2d 605, 612 (1944); Miller v. Municipal

Court, 22 Cal.2d 818, 848, 850 (1943). Thus,

for example, in Mondou v. New York, New Haven &

Hartford R.R. Co., supra, in the course of

reversing a decision of the Connecticut Supreme

Court that the Federal Employers’ Liability Act

was unenforceable on “public policy" grounds in

the courts of that state, Justice Van Devanter

stated for a unanimous United States Supreme

Court (id., 223 U.S. at 57; emphasis added):

“When Congress, in the exertion of the

power confided in it by the Constitution,

adopted that act, it spoke for all the people

and all the states, and thereby established a

policy for all. That policy is as much the

policy of Connecticut as if the Act had

emanated from its own legislature, and should

be respected accordingly in the courts of the

state. As was said by this court in Claflin

APPENDIX F

v- Houseman, 93 U.S. 130, 136, 137, 23 L.Ed.

833, 838, 839: '... The fact that a state

court derives its existence and functions

from the state laws is no reason why it

should not afford relief; because it is

subject also to the laws of the United

States, and is just as much bound to

recognize these as operative within the state

as it is to recognize the state laws. The

two together form one system of jurispru-

dence, which constitutes the law of the land

for the state. ...°”

This passage from the Mondou opinion was later

quoted and relied upon by the Supreme Court of

this state in Miller v. Municipal Court, supra,

where the Court issued a writ of mandate to

compel the respondent municipal court to

entertain an action brought under the Federal

Emergency Price Control Act notwithstanding the

contention that the Act was “penal” in nature

and hence unenforceable in the California state

courts. Id., 22 Cal.2d at 848. Besides

quoting from the opinion in Mondou, the

California Supreme Court justified its issuance

of the writ in that case by the additional

observation that “[t]Jhe legislation of Congress

is a portion of the law of each State" and is

accordingly entitled to enforcement as such in

the courts of California. Id. at 850.

APPENDIX F

The basic principle enunciated in these

opinions has been specifically invoked in at

least two decisions to sustain the enforcement

of the Federal Arbitration Act in the face of a

contention that its enforcement was precluded

by a clause in the arbitration agreement

expressly stating that it was to be applied in

accordance with the law of a particular state.

Thus, in Mamlin v. Susan Thomas, Inc., supra,

the Texas Court of Civil Appeals held that the

Federal Arbitration Act governed the issue of

the arbitrability of the parties’ dispute

despite a provision in their agreement

requiring that this issue be resolved "in

accordance with the then current arbitration

rules of the American Arbitration Association

and the laws of the State of New York." Id.,

490 S.W.2d at 636. In support of its holding

to this effect, the court stated simply that

"CtjJhe Federal Arbitration Act is the law of

New York and also the law of Texas with respect

to any ‘contract evidencing a transaction

involving commerce,'" and that application of

its terms to the instant dispute was accord-

APPENDIX F

ingly consistent with the choice-of-law

provision of the parties’ agreement. Id., 490

S.W.2d at 637. This passage from the Mamlin

opinion was subsequently quoted and relied upon

as one of several alternative grounds for

reaching the same result in Commonwealth Edison

Co. v- Gulf Oil Corp., 541 F.2d 1263 (7th Cir.

1976), where the court held that arbitrability

of the parties’ dispute should be determined

under the Federal Arbitration Act despite the

presence in their agreement of a provision

requiring that application of the agreement

“shall be determined and governed by the law of

the State of Illinois." Id., 541 F.2d at 1266,

1270. Thus, these decisions and the basic

principle of federalism upon which they rely

provide yet a second, independently sufficient

reason why the choice-of-law clause in the

agreement at issue in this case cannot be

deemed to preclude the application of the

Federal Arbitration Act to resolve the present

controversy.

APPENDIX F

C. The Legal Invalidity of a Contrary

Interpretation

Finally, a third alternative justification

for this conclusion is furnished by a

substantial number of decisions which hold that

the parties to an arbitration agreement

involving interstate commerce are not free to

exempt themselves from the coverage of the

Federal Arbitration Act by designating some

other body of law to govern their agreement,

and that any choice-of-law clause that attempts

to accomplish that result is to that extent

invalid. The leading decision to this effect

is the ruling of the federal court of appeals

in Commonwealth Edison Co. v. Gulf Oil Corp.,

supra, *** The holding in Commonwealth Edison

has been followed in several subsequent

decisions which similarly hold that the Federal

Arbitration Act ettentivels invalidates any

choice-of-law clause in an arbitration

agreement that purports to preclude the

application of federal law to the agreement,

particularly where this would have the effect

of preventing the enforcement of a promise to

APPENDIX F

arbitrate that would have been enforceable

under the federal Act. E.g., Mesa Operating

Ltd. P*ship. v. Louisiana Intrastate Gas Comn.,

supra, 797 F.2d at 243-44; Huber, Hunt &

Nichols, Inc. v. Architectural Stone Co.,

supra, 625 F.2d at 25n.8; Paul Allison, Inc. v.

Minikin Storage of Omaha, Inc., supra, 486

F.Supp. at 3; Cone Mills Corp. v. August F.

Nielsen Co., 455 N.Y¥.S.2d 625, 627 (N.Y.App.

1982). Thus, these decisions establish that

the choice-of-law provision at issue in this

case would not be effective to prevent the

application of the Federal Arbitration Act to

this dispute even if it had provided in so many

words, which it clearly does not, that

California law should govern the resolution of

the dispute to the complete exclusion of the

federal Act.

D. The Two Decisions Espousing a

Minority View

The foregoing discussion demonstrates that

there are at least a dozen decisions holding,

on one rationale or another, that the type of

choice-of-law clause that appears in the

APPENDIX F

parties’ contract in this case cannot be deemed

to foreclose the application of the Federal

Arbitration Act to determine the arbitrability

of a dispute arising under the contract.

Arrayed against this overwhelming body of

authority are two decisions which have reached

a contrary result, holding that such a choice-

of-law clause is indeed effective to preclude

reliance on the Act to resolve the issue of

arbitrability. Garden Grove Comm. Churcna v.

-Pittsburgh Des Moines Steel Co., 140 Cal.App.3d

251 (1983); Standard Co. of New Orleans v.

Elliott Constr. Co., 363 So.2d 671 (La. 1978).

One of these decisions, a ruling of the

California Court of Appeal for the Fourth

District, was expressly relied upon by the

trial court to support its refusal to follow

the Federal Arbitration Act in adjudicatir~ the

present controversy (JA 252). Garden Grove

Comm. Church v. Pittsburgh Des Moines Steel

Co. ’ supra.

exe

Although the holdings in these two cases

are thus clearly distinguishable, Volt submits,

APPENDIX F

nevertheless, that the more correct and

forthright disposition of these decisions would

be simply to acknowledge that both of them were

wrongly decided with respect to the issue

presented here. For reasons already reviewed

at length above, a clause in a contract which

merely specifies that the contract is to be

governed by the law of the place of performance

simply cannot be interpreted, either literally

or consistently with the character of our

federal system, to preciude the application of

otherwise applicable federal statutes. To the

extent these decisions adopt such an

interpretation of this type of clause, they are

wrong and should not be followed by this court.

E. Conclusion

The discussion in this section has

demonstrated that, for at least three

compelling reasons, the choice-of-law provision

in the contract between Volt and Stanford

presents no obstacle to the application of the

Federal Arbitration Act to this case. Indeed,

it has been shown that, if anything, the

application of the Act in this context is

22 :

APPENDIX F

affirmatively required by the terms of that

provision. Since it has also been

demonstrated, in the preceding section, that

the Federal Arbitration Act, if applicable to

this case, would mandate immmediate arbitration

of the parties’ current dispute and prohibit

any stay of the arbitration pending the outcome

of Stanford's law suit, it follows that the

trial court erred in ordering such a stay and

in denying Volt's motion to compel Stanford to

proceed with the arbitration.

III. In Any Event, Even if This Controversy

Were to Be Resolved in Accordance with

State Law, Reversal of the Superior

Court's Order Would Still Be Required

Because C.C.P. §1281.2(c) Does Not

Authorize the Type of Stay Order Entered

by the Court in the Circumstances

Presented Here.

xxx

CONCLUSION

The foregoing discussion has demonstrated

that the Federal Arbitration Act governs the

issue of arbitrability of the interstate

contract dispute that is at issue in this case,

and that the superior court's ruling to the

contrary was therefore erroneous. It has also

APPENDIX F

been demonstrated that the Act specifically

forbids a trial court from refusing to order

arbitration on the ground that non-arbitrable

claims arising out of the same transaction have

been asserted against third parties in a

pending law suit, and that the superior court

therefore further erred in refusing to order

arbitration on that ground in this case.

Finally, it has been shown that, even if the

case were to be resolved under state law, the

superior court's order would still be improper

because a reasonable application of the terms

of C.C.P. §1281.2(c) would not authorize such

an order in the circumstances that are

presented here. For ali of these reasons, it

is submitted that the order of the superior

court denying Volt's petition to compel

arbitration and granting Stanford's motion to

stay the arbitration should be reversed. The

mandate accompanying the reversal should

include a direction to the superior court to

enter a new order requiring the immediate

arbitration of Volt's claim against Stanford

and staying the prosecution of Stanford's

APPENDIX F

pending action against Volt until that

arbitration has been completed.

Dated: January 13, 1987

Respectfully submitted,

PETTIT & MARTIN

JAMES E. HARRINGTON

ROBERT B. THUM

DEANNE M. TULLY

Attorneys for Appellant

Volt Information

Sciences, Inc.

APPENDIX F

APPENDIX G -

EXCERPTS FROM APPELLANT'S

PETITION FOR REVIEW IN

THE CALIFORNIA SUPREME COURT

APPENDIX G

PETTIT & MARTIN

JAMES E. HARRINGTON

ROBERT B. THUM FILED

DEANNE M. TULLY Nov. 12, 1987

101 California Street Lawrence P. Gill

San Francisco, CA 94111 Clerk

(415) 434-4000

Attorneys for Petitioner

and Appellant

Volt Information Sciences, Inc.

IN THE SUPREME COURT

OF THE STATE OF CALIFORNIA

BOARD OF TRUSTEES

OF LELAND STANFORD

JUNIOR UNIVERSITY,

Plaintiff-Respondent, No. $003107

vs. Court of Appeal

No. H00O2634

VOLT INFORMATION

SCIENCES, INC.,

Defendant-Appellant.

me ee ee ee ee ee ee ee ee”

Appeal from the Superior Court

for the County of Santa Clara

Honorable Charles Gordon, Judge

PETITION FOR REVIEW

APPENDIX G

TABLE OF CONTENTS

ISSUES PRESENTED l

INTRODUCTORY SUMMARY 1

STATEMENT OF THE CASE 2

REASONS FOR GRANTING REVIEW 7

I. There Is No Serious Dispute That, 7

Unless the Choice-of-Law Clause

Were Found to Require a Different

Result, Federal Law Would Govern

the Disposition of This Case and

Would Dictate That Volt's Petition

to Compel Arbitration Should Be

Granted.

II. The Decision of the Court of ll

Appeal on the Effect of the Choice-

of-Law Clause Is in Clear Conflict

with the Decisions of Other Cali-

fornia Courts of Appeal, as Well as

the Virtually Unanimous Decisions of

the Courts in Other Jurisdictions.

A. The Decision of the First District ll

in the Liddington Case

B. The Decision of the Fourth District 14

in the Garden Grove Case

C. The Decision of the Second District 17

in the Ford Case

D. The Numerous and Virtually Unani- 18

mous Contrary Decisions of the

Courts of Other Jurisdictions

III. The Issue Presented Here Is of 21

Substantial Importance, Both

Because It Is Likely to Arise

with Great Frequency and Because

Its Proper Resolution Will Deter-

mine the Ultimate Enforceability

APPENDIX G

of Arbitration Agreements in Pre-

cisely Those Categories of Transac-

tions in Which Arbitration Is Most

Commonly Utilized as a Means of

Settling Disputes.

IV. The Opinion of the Court of Appeal

Reflects a Wholly Unsatisfactory

Resolution of the Question Presented

Here, in Both Its General Aspect and

in the Context of the Particular

Facts Presented by This Case.

A. The Language of the Agreement

B. The Intent of the Parties

C. The Implications of Federalism

V. If the Court Grants This Petition,

It Should Also Entertain Volt's

Alternative Argument That the

Provisions of C.C.P. §1281.2(c)

Should Not Be Construed to Author-

ize a Party's Avoidance of Its Duty

to Arbitrate in the Circumstances

Presented by This Case.

CONCLUSION

APPENDIX G

ISSUES PRESENTED

The principal issue which is presented by

this case, and which evoked divided opinions

from the members of the panel that heard the

case in the court of appeal, is whether a

choice-of-law clause in a construction contract

specifying that the contract “shall be governed

by the law of the place where the project is

located" effectively precludes reliance on the

Federal Arbitration Act to enforce an agreement

to arbitrate any dispute arising under the

contract, and thus authorizes a trial court to

deny such enforcement pursuant to a provision

of state law that directly conflicts with the

otherwise applicable mandate of the federal

Act.

A secondary issue which the court may be

required to address in the event it should

grant this petition is whether §1281.2(c) of

the Code of Civil Procedure, which empowers the

superior courts to refuse enforcement of an

arbitration agreement when one party to the

agreement is also a party to related litigation

with third persons, may properly be invoked to

APPENDIX G

deny such enforcement where the party resisting

arbitration has himself initiated the

litigation with such third persons in direct

response to the demand for arbitration.

INTRODUCTORY SUMMARY

This case presents the single most

important unresolved issue concerning the

relationship between the dictates of the

Federal Arbitration Act ont the laws of the

several states governing the enforcement of

arbitration agreements. That issue is whether

and under what circumstances an agreement to

arbitrate that is otherwise clearly enforceable

under the federal Act may nevertheless be

denied enforcement pursuant to a conflicting

state statute on the ground that a choice-of-

law clause in the parties’ contract precludes

reliance on the federal Act. This question has

never been addressed by either this court or

the United States Supreme Court. Meanwhile,

however, the issue has continued to arise with

great frequency and has evoked sharply

divergent opinions in the other state courts

and lower federal courts. This divergence of

APPENDIX G

opinion has particularly manifested itself in

the decisions of the courts of appeal of this

state, which have reached entirely disparate

conclusions regarding the proper disposition of

this issue in the four cases arising in

California in which the question has so far

been presented. The divided opinions of the

justices of the court of appeal in this very

case furnish a telling illustration of the

serious disagreement over this issue which

currently exists among the judiciary. There is

thus little doubt that the issue is in grave

need of definitive resolution by this court.

As such, it comprises a virtual paradigm of the

sort of issue for which review by the court is

“necessary to secure uniformity of decision or

the settlement of important questions of law”

within the meaning of the provisions of Rule

29(a) of the Rules of Court that define the

conditions under which a petition for review

should be granted. The remainder of this

petition, following the Statement of the Case,

will be devoted to a more detailed

demonstration of this conclusion.

APPENDIX G

STATEMENT OF THE CASE

ene

REASONS FOR GRANTING REVIEW

I. There Is No Serious Dispute That, Unless

the Choice-of-Law Clause Were Found to

Require a Different Result, Federal Law

Would Govern the Disposition of This Case

and Would Dictate That Volt's Petition to

Compel Arbitration Should Be Granted.

As stated above, the major issue presented

by this case i¢ whether the application of the

Federal Arbitration Act to this controversy is

foreclosed by the choice-of-law clause in the

parties’ agreement. Most of this petition will

consist of a discussion of the general

importance of this issue and a description of

the conflict over the issue that has arisen

among the courts of appeal. Preliminarily,

however, it is useful to place the issue in

perspective within the context of this

particular case by demonstrating that it is

indeed dispositive of the outcome of this

lawsuit. This demonstration will involve

nothing more than the brief statement of

certain basic and uncontroversial propositions

regarding the general applicability of the

APPENDIX G

federal Act. Taken together, these

propositions establish that, unless the choice-

of-law clause were found to dictate a different

result, the provisions of the federal Act would

govern this proceeding and would require that

Volt's petition to compel arbitration be

granted.

First, it is by now well settled that the

Federal Arbitration Act creates a comprehensive

body of substantive law governing all

arbitrations arising out of transactions

affecting interstate commerce, and that its

provisions are therefore required to be

enforced in state courts, as well as federal

courts, to the exclusion of any conflicting

provisions of state law. Perry v. Thomas,

U.S. , 107 S.Ct. 2520, 2525 (1987);

Southland Corp. v. Keating, 465 U.S. l, 12

(1984); Moses H. Cone Mem. Hosp. v. Mercury

Constr. Co., 460 U.S. 1, 24, 26 (1983);

Liddington v. The Energy Group, Inc., 192

Cal.App.3d 1520, 1526 (1987); Tonetti v.

Shirley, 178 Cal.App.3d 632, 637-38 (1985). As

the United States Supreme Court stated in the

APPENDIX G

often quoted passage from its opinion in Moses

H. Cone Mem. Hosp. v. Mercury Constr. Co.,

supra, the Act “create[s] a body of federal

substantive law of arbitrability, applicable to

any arbitration agreement within the coverage

of the Act ... [which] governs that issue in

either state or federal court ...

notwithstanding any state substantive or

procedural policies to the contrary." Id., 460.

U.S. at 24.

Secondly, it is equally clear that if the

federal Act were to be applied to this case,

its application would necessarily require

reversal of the order of the superior court

denying Volt's petition to compel arbitration.

As noted earlier, the sole basis for that order

and for the court of appeal'’s decision

affirming the order was the provision of C.C.P.

§1281.2(c) that authorizes denial of a petition |

to compel arbitration where related non-

arbitrable claims have been asserted against

third parties in a pending lawsuit. The

Federal Arbitration Act contains no counterpart

provision permitting avoidance of an

APPENDIX G

arbitration agreement in these circumstances,

and the decisions of the state and federal

courts applying the Act have therefore

unanimously held that the existence of such

non-arbitrable third-party claims does not

afford a proper ground for denying or staying

the enforcement of such an agreement. Moses H

Cone Mem. Hosp. v. Mercury Constr. Co., supra,

460 U.S. at 19-20; C.Itoh & Co. v. Jordan Intl

Co., 552 F.2d 1228, 1231 (7th Cir. 1977);

Acevedo Maldonado v. PPG Industries, Inc., 514

F.2d 614, 617 (lst Cir. 1975); Liddington v.

The Energy Group, supra, 192 Cal.App.3d at

1528; Ford v. Shearson Lehman Amer. Express,

Inc., supra, 180 Cal.App.3d at 1017; R.J.

Palmer Constr. Co. v. Wichita Band Instr. Co.,

642 P.2d 127, 131 (Kan-.App. 1982); Episcopal

Housing Corp. v. Federal Ins. Co., 239 S.E.2d

647, 652 (S.C. 1977). Cf. Dean Witter

Reynolds, Inc. v. Byrd, 470 U.S. 213, 218-21

(1985). If applied in this case, this settled

federal rule would clearly preempt the

conflicting prescriptions of C.C.P. §1281.2(c)

and eliminate the only legal basis for the

APPENDIX G,

—

order denying Volt's petition. Liddington v.

The Energy Group, Inc., supra, 192 Cal.App.3d

at 1528. As the court of appeal itself

acknowledged, it is thus “apparent that were

the federal rules to apply, Volt's petition to

compel arbitration would have to be granted”

(Majority Opinion, p.- 3).

Finally, there is no question that, unless

otherwise dictated by the choice-of-law clause,

federal law would indeed govern the disposition

of this case, because the arbitration agreement

at issue here clearly “evidenc[es] a

transaction involving ... commerce among the

several states" within the meaning of the

provisions of the federal Act defining the

scope of its coverage. 9 U.S.C. §§$1-2. Volt

established by uncontradicted evidence in the

trial court that a large proportion of its

manpower and equipment was transferred or

shipped to California for use on the Stanford

project, and that the project was administered

from Volt's offices outside California (JA 207-

8). Under the standards enunciated in the case

law on this issue, these facts clearly

APPENDIX G

oe |

establish a sufficient nexus with inter- state

commerce to bring this transaction well within

the purview of the federal Act. Prima Paint

Co. v. Flood & Conklin, 388 U.S. 395, 401

(1967); Mesa Ltd. P'ship. v. Intrastate Gas

Corp., 797 F.2d 238, 243 (5th Cir. 1986); In re

Mercury Constr. Corp., 656 F.2d 933, 942 (4th

Cir. 1981), affd. 460 U.S. 1 (1983); Pathman

Const. Co. v. Knox Cty. Hosp. Assn., 326 N.E.2d_

844, 848-51 (Ind-.App. 1975); Episcopal Housing

Corp. v-. Federal Ins. Co., supra, 239 S.E.2d at

650-52; Allison v. Medicab Intl., Inc., 597

P.2d 380, 382 (Wash. 1979).

All of these settled propositions were

accepted by both the court of appeal and the

trial court, and in fact have never been

seriously contested by Stanford itself.* It

follows that the only remaining issue standing

This description of Stanford's position must

be qualified in one minor respect. In its

brief in the court of appeal, Stanford

attempted, somewhat obliquely, to cast some

doubt on the general applicability of the

remedial provisions of the federal Act in state

courts by pointing to an admittedly rather

puzzling footnote in the opinion of the United

States Supreme Court in Southland (continued)

APPENDIX G

in the way of a determination that Volt's

petition to compel arbitration pursuant to the

federal Act must be granted, and that the

(footnote contd.) Corp. v. Keating, supra,

where the court, in the course of responding to

one of the points made by the dissenting

justice, had suggested that certain sections of

the Act specifying the methods for enforcing

arbitration agreements might not be

specifically applicable in state trial courts.

(Stanford's Brief, pp. 12-13, citing Southland,

supra, 465 U.S. at 16n.10). In its reply

brief, Volt responded to this argument by

demonstrating at considerable length that the

actual holdings of the Supreme Court, including

the holding in Southland itself, as well as the

decisions of many state and lower federal

courts on the issue, had clearly established

that the remedies and procedures prescribed by

the federal Act, whether by virtue of these

particular sections or otherwise, were clearly

enforceable in state courts as well as in

federal courts (Volt's Reply Brief, pp. 15-34).

This entire debate was ultimately mooted by

another decision of the Supreme Court handed

down after the filing of the briefs but before

the oral argument in the court of appeal. In

that decision, Perry v. Thomas, supra, the

court squarely held, by sect PicatTy enforcing

a petition to compel arbitration brought in a

California superior court under the very

sections of the Act referred to in the

enigmatic Southland footnote, that these

procedural provisions of the federal Act were

indeed fully applicable in state courts. Id.,

107 S.Ct. at 2523 and n.l. As the court of _

appeal apparently assumed in its opinion in

this case, this intervening decision of the

Supreme Court has effectively eliminated any

serious possibility of further controversy over

this point.

APPENDIX G

contrary order of the trial court must be

reversed, is the question whether the

application of federal law to this case is

foreclosed by the clause in the parties’

agreement specifying that its enforcement

"shall be governed by the law of the place

where the project is located." Having thus

established that this issue is indeed

dispositive of this case, Volt will now turn to

a demonstration that the issue clearly warrants

its inherent importance and the conflict it has

plenary review by this court, because of both

engendered among the courts of appeal of this

state.

II. The Decision of the Court of Appeal on the

Effect of the Choice-of-Law Clause Is in

Clear Conflict with the Decisions of Other

California Courts of Appeal, as Well as

the Virtually Unanimous Decisions of the

Courts in Other Jurisdictions.

A. The Decision of the First District in

the Liddington Case

In holding that the choice-of-law clause in|

the Volt-Stanford contract precluded reliance

on the federal Act and thus permitted the trial

court to deny Volt's petition to compel

arbitration pursuant to C.C.P. §1281.2(c), the

APPENDIX

court of appeal in this case placed itself in

direct conflict with the decision rendered only

three months earlier by the Court of Appeal for

the First Appellate District in Liddington v.

The Energy Group, Inc., supra, 192 Cal.App.3d

1520. In the Liddington case, the contract

between the parties contained both an

arbitration clause and a choice-of-law clause

specifying that the contract would be

“construed under the laws of California." Id.,

192 Cal.App.3d at 1524. *** The party

resisting arbitration contended *** that

application of the federal Act was ***

precluded by the clause of the parties’

agreement requiring that it be construed in

accordance with California law. Id. *** The

trial court accepted this latter contention and

accordingly entered an order pursuant to C.C.P.

§1281.2(c) rejecting the petition to compel

arbitration and staying the arbitration pending

the outcome of the. lawsuit.

x*x*

The court of appeal reversed this ruling.

In its opinion, the court held that, not-

APPENDIX

withstanding the clause of the contract

requiring its interpretation in accordance with

California law, this choice-of-law provision

could not alter the conclusion, otherwise

mandated by the decisions of the United States

Supreme Court, that “Code of Civil Procedure

section 1281.2 is preempted to the extent it is

used to stay arbitration of a dispute governed

by the FAA." Id. at 1525. The court

accordingly remanded the case with a direction

that the stay of the arbitration should be

dissolved, and that the arbitration should be

allowed to proceed pursuant to the terms of the

federal Act. Id. at 1528-29.

eke

B. The Decision of the Fourth District in

the Garden Grove Case

The third California decision that has

addressed the issue of the effect of a choice-

of-law clause on the application of the Federal

Arbitration Act is the decision of the Court of

Appeal for the Fourth District in Garden Grove

Comm. Church v. Pittsburgh Des Moines Steel

Co., 140 Cal.App.3d 251 (1983). That decision

APPENDIX

attempts to steer something of a middle course

between the Liddington decision and the

decision of the court of appeal in this case,

and consequently ends up following an approach

to this issue that is at odds in various

respects with both of these other decisions.

The Garden Grove case, like this one,

involved a construction contract containing an

arbitration clause, a claim by the contractor

against the owner, and a claim for indemnity by

the owner against the project architect and

construction manager. Unlike the contract at

issue in this case, however, the contract

between the owner and the contractor expressly

provided that the owner would be excused from

his duty to arbitrate in the event of a dispute

with another participant in the project who

could not be compelled to join in the

arbitration; and a corresponding clause in the

owner-architect agreement provided that the

architect could not be compelled to join in any

arbitration involving the contractor or any

other third party. The contract between the

owner and the contractor also contained a

APPENDIX

clause which provided, according to the court's

description, that the contract would be

governed by "the law of the construction site."

Id. at 259.

x**x*

In the course of its opinion, the court

considered the question whether federal or

state law should govern the disposition of the

case in the light of the choice-of-law clause

in the owner-contractor agreement. The court

interpreted the language of the clause as a

reference to California law, and opined that

“CijJn the face of such a choice of laws

provision, California law applies unless

preempted by the FAA." Id. at 262 (emphasis

added). The court went on to conclude that ene

provisions of C.C.P. §1281.3 requiring the

consolidation of related arbitrations were not

in fact preempted by the federal Act because,

in its view, there was "no conflict between ...

this policy [of consolidating arbitrations] ...

and the federal scheme of regulation embodied

in the FAA." Id.

On the one hand, this decision is

APPENDIX

consistent with the decision of the court of

appeal in this case - and correspondingly

inconsistent with the Liddington decision - to

the extent that it construes the choice-of-law

clause in the parties’ agreement as an

exclusive reference to California law and holds

that such a contractual provision may

effectively preclude the application of the

Federal Arbitration Act in appropriate

circumstances. On the other hand, the decisio

is wholly inconsistent with the decision in

this case to the extent that it declares that

state law may only be applied pursuant to a

choice-of-law clause “unless preempted by the

FAA," and that federal law would have to be

applied even in the face of such a contractual

stipulation in the event of a direct conflict

between the dictates of the federal Act and thé

prescriptions of state law.

***

Cc. The Decision of the Second District in

the Ford Case

The issue of the effect of a choice-of-law

clause on federal preemption was also present

APPENDIX

by the facts, though not explicitly argued by

the parties or addressed by the court, in the

1986 decision of the Court of Appeal for the

Second District in Ford v. Shearson, Lehman

Amer. Express, Inc., supra, 180 Cal.App.3d

1011. The parties* contract in that case

provided for arbitration “pursuant to the

arbitration laws of the State of New York."

Id., 180 Cal-App-.3d at 1016. The parties

apparently chose to ignore this provision in

urging that the issue before the court - the

arbitrability of a claim of fraud in the

inducement - be resolved in exclusive

accordance with federal law. The court

expressly approved this approach, observing in

this regard that “(tJhe parties are correct in

urging that federal law, namely the Federal

Arbitration Act (9 U.S.C.A. §2), is applicable

since the agreements in question involve

securities transactions in interstate

commerce." Id. at 1017. The court went on to

adjudicate the fraud issue pursuant to federal

law, although it also referred in passing to

certain decisions of the California and New

ADDPRANANNHTY

York courts that it viewed as consistent with

the federal rule. Id. at 1018-24.

D. The Numerous and Virtually Unanimous

Contrary Decisions of the Courts of

Other Jurisdictions

Besides departing from the holdings of the

other courts of appeal in this state, the

decision of the court of appeal on the issue

presented here conflicts with the virtually

unanimous decisions addressing the same issue

in other jurisdictions. With a single

exception, these decisions have uniformly held

that a choice-of-law clause in an arbitration

agreement of the kind involved in this case is

ineffective to displace the otherwise

applicable provisions of the Federal

Arbitration Act.

The courts reaching this result have reli

on a variety of different rationales to justif

their decisions. Thus, in some of these cases

involving choice-of-law clauses identical to

the one at issue here, the courts have simply

interpreted the language of the clause as

encompassing federal as well as state law,

APPENDIX

_observing in this regard that the phrase "'the

law of the place where the project is located’

-++ would certainly include all applicable law,

including the Federal Arbitration Act."

Episcopal Housing Corp. v. Federal Ins. Co.,

supra, 239 S.E.2da at 650n.1. Accord Huber,

Hunt & Nichols, Inc. v: Architectural Stone

Co., 625 F.2d 22, 25n.8 (Sth Cir. 1980); See

Paul Allison, Inc. v- Minikin Storage, Inc.,

486 F.Supp. 1, 2-4 and n.l (D.Neb. 1979). A

second group of decisions have adopted the

alternative rationale espoused by the opinion

of the dissenting justice in this case -

namely, that any choice-of-law provision

designating the laws of a state of the United

States must be deemed to encompass federal as

well as state saw beenuee it is a familiar

tenet of our federal system that the laws of

every state incorporate and include the laws of

the United States. Commonwealth Edison Co. v.

Gulf Oil Corp., 541 F.2d 1263, 1270 (7th Cir.

1976); Mamlin v. Susan Thomas, Inc., 490 S.W.2d

634 (Tex.Civ.App. 1973). Thirdly, a number of

courts have gone so far as to hold that any

19 |

APPENDIX G

choice-of-law clause that purports to preclude

the application of the federal Act is simply

invalid to the extent that it would have the

effect of rendering the arbitration agreement

unenforceable in the case before the court and

of thus frustrating the federal policy favoring

arbitration. Mesa Ltd. P'ship. v. Louisiana

Intrastate Gas Corp., supra, 797 F.2d at 243-

44; Commonwealth Edison Co. v. Gulf Oil Corp.,

supra, 541 F.2d at 1269; Paul Allison, Inc. v.

Minikin Storage, Inc-, supra, 486 F.Supp. at 3-

4; Cone Mills Corp. v. August F. Nielsen Co.,

455 N.Y.S.2d 625, 627 (N.Y.App- 1982).

Finally, several decisions, like the decision

of the California Court of Appeal in Ford v.-

Shearson, Lehman Amer. Express Co., supra, have

simply proceeded to apply the Federal

Arbitration Act in the face of a contractual

provision selecting state law as the governing

law without explicitly stating any particular

rationale for refusing to accord preclusive

effect to such a choice-of-law provision.

E.g., LaFarge Conseils et Etudes, S-A. v-

Kaiser Cement & Gypsum Co., 791 F.2d 1331,

APPENDIX ¢

1338-39 (9th Cir. 1986); Collins Radio Co- v.-

Ex-Cell-O Corp., 467 F.2d 995, 997-98 (8th Cir.

1972); Hilti, Inc. v. Oldach, supra, 392 F.2d

at 370, 37ln.6; Pinkis v- Network Cinema Corp.,

512 P.2a 751, 753, 756-57 (Wash-App.- 1973).

There are thus a total of at least twelve

decisions in other jurisdictions that have

held, on one ground or another, that a choice-

of-law provision of the kind involved here is

ineffective to preclude reliance on the Federa:

Arbitration Act as the source of the law

governing the enforcement of an arbitration

agreement. Arrayed against this substantial

body of authority is a single decision, the

ruling of the Louisiana Supreme Court in

Standard Co. of New Orleans v-. Elliott Constr.

Co., 363 So.2d 671 (La. 1978), which is the

only decision outside California ever to hold

that such a choice-of-law provision may indeed

exclude the application of the federal Act. I

must therefore be concluded that the decision

of the court of appeal in the instant case,

besides contravening other decisions of the

courts of appeal in this state, also runs

APPENDIX

“

counter to the overwhelming majority of the

decisions on the same issue in other

jurisdictions.

III. The Issue Presented Here Is of Substan-

tial Importance, Both Because It Is

Likely to Arise with Great Frequency and

Because Its Proper Resolution Will

Determine the Ultimate Enforceability of

Arbitration Agreements in Precisely Those

Categories of Transactions in Which Arbi-

tration Is Most Commonly Used as a Means

of Settling Disputes.

IV. The Opinion of the Court of Appeal

Reflects a Wholly Unsatisfactory Resolu-

tion of the Question Presented Here, in

Both Its General Aspect and in the Con-

text of the Particular Facts Presented

by This Case.

Notwithstanding the importance of the issue

presented here and the existing conflict among

the views of the courts of appeal on this

issue, Volt recognizes that this court might

nevertheless be disinclined to address the

issue if it should appear that the opinion of

the court of appeal reflected such a persuasive

resolution of the problem that its decision

might well be accepted as authoritative in all

future cases raising the same issue.

Alternatively, this court might harbor the same

| 22

APPENDIX G

disinclination to reexamine the matter if it

should appear that this case involved special

facts that would support the court of appeal's

decision without regard to the correctness of

its resolution of the general question of the

effect of choice-of-law clauses on the

application of the Federal Arbitration Act. In

this final section of this petition, Volt will

demonstrate, by undertaking a particular

analyis of the reasoning of the court of

appeal, that neither of these circumstances is

present here, and that in fact the court of

appeal's opinion reflects a wholly

unsatisfactory resolution of this question in

both its general aspect and in the context of

the facts of this particular case.

***

A. The Language of the Agreement

***

B. The Intent of the Parties

***

Cc. The Implications of Federalism

Finally, the majority opinion of the court

of appeal entirely fails to take account of the

APPENDIX

serious obstacle raised by the opinion of the

dissenting justice to the conclusion reached by

the court regarding the precli sive effect of

the choice-of-law clause. As Justice

Cappacioli demonstrates in his dissent, even if

one accepts the majority's view that this

contractual provision requires the resolution

of this controversy in accordance with

California state law, this conclusion does not

preclude the application of the Federal

Arbitration Act, because, in the words of this

court, “(t]he legislation of Congress is a

portion of the law of each State” by virtue of

the mandate of the Supremacy Clause of the

federal Constitution, and is therefore just as

much the law of California as any of the

statutes enacted by its legislature. Miller v-

Municipal Court 22 Cal.2d 818, 848, 850 (1943).

Volt cannot improve upon Justice Cappacioli’s

lucid presentation of this point, and will

accordingly content itself with simply

observing that this consideration provides a

final persuasive reason why the majority

opinion of the court of appeal cannot be

APPENDIX

accepted as an adequate resolution of the

important issue that is presented by this case.

V. If the Court Grants This Petition, It

hould Also Entertain Volt's Aiternative

Argument That the Provisions of C.C.P.

§1281.2(c) Should Not Be Construed to

Authorize a Party's Avoidance of Its Duty

to Arbitrate in the Circumstances

Presented by This Case.

eke

CONCLUSION

Volt has demonstrated in this petition that

the decisions of the appellate courts on the

principal issue presented by this case are in

serious conflict, that this issue is of

determinative significance with respect to the

enforceability of a great many arbitration

agreements, and that the issue has not been

satisfactorily resolved by the opinion of the

court of appeal. This court's examination of

the issue is therefore clearly “necessary to

secure uniformity of decision or the settlement

of important questions of law” within the

meaning of Rule 29(a) of the Rules of Court.

APPENDIX 3

For this reason, Volt respectfully submits that

this petition should be granted.

Dated: November 12, 1987

Respectfully submitted,

PETTIT & MARTIN

JAMES E. HARRINGTON

ROBERT B. THUM

DEANNE M. TULLY

Attorneys for Petitioner

and Appellant Volt

Information Sciences, Inc.

APPENDIX G

APPENDIX H

RELEVANT STATUTES AND

CONSTITUTIONAL PROVISIONS

APPENDIX H

SUPREMACY CLAUSE OF

THE UNITED STATES CONSTITUTION

(U.S. Const., Art. VI, cl. 2)

This Constitution, and the laws of the

United States which shall be made in pursuance

thereof, and all treaties made, or which shall

be made, under the authority of the United

States, shall be the supreme law of the land;

and the judges in every State shall be bound

thereby, any thing in the Constitution or laws

of any State to the contrary notwithstanding.

FEDERAL ARBITRATION ACT, $$1-4

(9 U.S.C. §§1-4)

Section l. “Maritime transactions," as

herein defined, means charter perties, bills of

lading of water carriers, agreements relating

to wharfage, supplies furnished to vessels or

repairs to vessels, collisions, or any other

matters in foreign commerce which, if the

subject of controversy, would be embraced

within admiralty jurisdiction; “commerce,” as

herein defined, means commerce among the

several States or with foreign nations, or in

any territory of the United States or in the

District of Columbia, or between any such

APPENDIX H

Territory and another, or between any such

Territory and any State or foreign nation, or

between the District of Columbia and any State

or Territory or foreign nation, but nothing

herein contained shall apply to contracts of

employment of seamen, railroad employees, or

any other class of workers engaged in

interstate or foreign commerce.

Section 2. A written provision in any

maritime transaction or a contract evidencing a

transaction involving commerce to settle by

arbitration a controversy thereafter arising

out of such contract or transaction, or the

refusal to perform the whole or any part

thereof, or an agreement in writing to submit

to arbitration an existing controversy arising

out of such a contract, transaction, or

refusal, shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at

law or in equity for the revocation of any

contract.

Section 3. If any suit or proceeding be

brought in any of the courts of the United

States upon any issue referable to arbitration

APPENDIX

under an agreement in writing for such

arbitration, the court in which such suit is

pending, upon being satisfied that the issue

involved in such suit or proceeding is

referable to arbitration under such an

agreement, shall on application of one of the

parties stay the trial of the action until such

arbitration has been had in accordance with the

terms of the agreement, providing the applicant

for the stay is not in default in proceeding

with the arbitration.

Section 4. A party aggrieved by the

alleged failure, negiect, or refusal of another

to arbitrate under a written agreement for

arbitration may petition any United States

district court which, save for such agreement,

would have jurisdiction under Title 28, ina

civil action or in admiralty of the subject

matter of a suit arising out of a controversy

between the parties, for an order directing

that such arbitration proceed in the manner

provided for in such agreement. Five days’

notice in writing of such application shall be

served upon the party in default. Service

APPENDIX

thereof shall be made in the manner provided by

the Federal Rules of Civil Procedure. The

court shall hear the parties, and upon being

satisfied that the making of the agreement for

arbitration or the failure to comply therewith

is not in issue, the court shall make an order

directing the parties to proceed to arbitration

in accordance with the terms of the agreement.

The hearing and proceedings, under such

agreement, shall be within the district in

which the petition for an order directing such

arbitration is filed. If the making of the

arbitration agreement or the failure, neglect,

or refusal to perform the same be in issue, the

court shall proceed summarily to the trial

thereof. If no jury trial be demanded by the

party alleged to be in default, or if the

matter in dispute is within admiralty

jurisdiction, the court shall hear and

determine such issue. Where such an issue is

raised, the party alleged to be in default may,

except in cases of admiralty, on or before the

return day of the notice of application, demand

a jury trial of such issue, and upon such

APPENDIX

demand the court shall make an order referring

the issue or issues to a jury in the manner

provided by the Federal Rules of Civil

Procedure, or may specially call a jury for

that purpose. If the jury find that no

agreement in writing for arbitration was made

or that there is no default in proceeding

thereunder, the proceeding shall be dismissed.

If the jury find that an agreement for

arbitration was made in writing and that there

is a default in proceeding thereunder, the

court shall make an order summarily directing

the parties to proceed with the arbitration in

accordance with the terms thereof.

CALIFORNIA ARBITRATION ACT, §1281.2(c)

(Cal.Code Civ.Proc. §1281.2(c)

On petition of a party to an arbitration

agreement alleging the existence of a written

agreement to arbitrate a controversy and that a

party thereto refuses to to arbitrate such

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, unless it

—

determines that:

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. For purposes of this section, a

pending court action or special proceeding

includes an action or proceeding initiated by

the party refusing to arbitrate after the

petition to compel arbtration has been filed,

but on or before the date of the hearing on the

petition. This subdivision shall nor be

applicable to an agreement to arbitrate

disputes as to the professional negligence of a

health care provider made pursuant to Section

1295.

If the court determines that a party to the

arbitration is also 4 party to litigation ina

pending court action or special proceeding with

a third party as set forth under subdivision

APPENDIX E

the arbitration agreement and may order

intervention or joinder of all parties ina

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.

APPENDIX |]

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.