California

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

COURT OF APPEAL OF CALIFORNIA, FOURTH APPELLATE DISTRICT,
DIVISION THREE

December 20, 2004, Filed

NOTICE: [*1] NOT TO BE PUBLISHED IN OFFICIAL REPORTS. CALIFORNIA RULES OF COURT, RULE 977(a), PROHIBIT COURTS AND PARTIES FROM CITING OR RELYING ON OPINIONS NOT CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED, EXCEPT AS SPECIFIED BY RULE 977(B). THIS OPINION HAS NOT BEEN CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED FOR THE PURPOSES OF RULE 977.

PRIOR HISTORY: Appeal from an order of the Superior Court of Orange County, No. 03CC00417. Jonathan H. Cannon, Judge.

DISPOSITION: Affirmed.

COUNSEL: Law Offices of Kristine L. Adams, Kristine L. Adams; Law Office of George L. Baugh, George L. Baugh for Defendants and Appellants.

Thagard & Reiss, Richard R. Therrien; Outwater & Pinckles, Randi E. Pinckles for Plaintiff and Respondent.

JUDGES: O'LEARY, ACTING P. J.; MOORE, J., FYBEL, J. concurred.

OPINIONBY: O'LEARY

OPINION: We have for our review the trial court's denial of a petition to compel arbitration. The trial court, in making this ruling, was upholding an arbitrator's order to divide the parties' dispute and have the parties' contractual issues heard first in arbitration and then have the remaining claims decided in a civil trial. We conclude, the trial court correctly interpreted the scope of the arbitration clause and properly [*2] exercised its discretion under Code of Civil Procedure section 1281.2, subdivision (c), when it refused to compel arbitration of all the claims. n1 The order is affirmed.

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n1 All further statutory references are to the Code of Civil Procedure.

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I

SUMMARY OF FACTS

In 2002, Sylvia Chen hired general contractor Hall Construction to help with a $ 200,000 remodel of her Laguna Niguel residence. Chen and Hall Construction executed a "Construction Agreement" containing a mandatory arbitration provision. After only a few months of construction, Chen and Hall Construction had a billing dispute. Chen stopped making payments and eventually Hall Construction deserted the project. Chen attempted to contact some of the subcontractors to finish the job, which prompted Hall Construction to file a civil action.

HALL CONSTRUCTION'S CIVIL COMPLAINT

Hall Construction recorded a mechanic's lien in the amount of $ 42,893.11 and then filed a lawsuit alleging: (1) defamation (based on the [*3] contents of a letter Chen wrote to a roofing subcontractor); and (2) interference with prospective economic relations (based on Chen's contacts with other subcontractors and attempts to have them finish the project without Hall Construction).

In the complaint, Hall Construction acknowledged its billing dispute with Chen was subject to arbitration, but argued the available "remedies for nonpayment" would do nothing to address Chen's "refusal to pay and simultaneous" further use of subcontractors to finish the project, while knowing Hall Construction was still contractually bound to pay those subcontractors.

One day after filing its lawsuit, Hall Construction filed a section 1281.8 statement seeking injunctive relief pending contractual arbitration. Hall Construction alleged: (1) Chen was recently served with a demand for arbitration pursuant to the terms of the parties' construction agreement; (2) arbitration had not yet commenced; (3) the actions in Hall Construction's civil complaint "are not contemplated by [the] agreement to arbitrate and as such do not operate to waive [Hall Construction's] rights to arbitrate the arbitrable disputes;" (4) "if . . . Chen is successful [*4] in obtaining completion of [her remodeling project] through the existing subcontractors, or through third parties, [she] will be likewise successful in circumventing enforcement of the nonpayment remedies to which [Hall Construction] is entitled under . . . the agreement;" and (5) Chen's recent libelous communications with the subcontractors "threaten to ruin" Hall Construction's reputation in the community. Hall Construction concluded any award received in arbitration "may be rendered ineffectual without provisional relief." The court denied the request for relief.

The parties began conducting discovery. Chen asserts after she served deposition subpoenas on the subcontractors she received notice Hall Construction had dismissed the complaint. Hall Construction maintains it did not intend to avoid discovery but dismissed "to focus on an efficient arbitration for all parties[.]" Chen sought attorney fees incurred to respond to the section 1281.8 statement seeking injunctive relief. The motion was denied.

HALL CONSTRUCTION'S AND CHEN'S ARBITRATION PROCEEDINGS

While its civil action was pending, Hall Construction served its notice of claims as requested by the arbitrator. [*5] It alleged: (1) breach of contract based on Chen's alleged wrongful failure to make payments, her interference with subcontractors, an her refusal to execute change orders in a timely manner; and (2) breach of the implied covenant of good faith and fair dealings. It sought payment for $ 85,000 in work completed, plus a 1.5 percent monthly service charge on the unpaid bills and attorney fees.

Chen filed "affirmative defenses and counterclaims." She raised 23 affirmative defenses: (1) "failure to state cause of action;" (2) "reasonable value less than already paid;" (3) "excuse for non-performance" (based on the lack of documentation to support the requests for progress payments); (4) fraud; (5) "contrary to public policy" (attacking the claim for liquidated damages); (6) carelessness and gross negligence; (7) estoppel; (Cool waiver; (9) failure of conditions precedent; (10) laches; (11) failure to mitigate; (12) unconscionable agreement; (13) unclean hands; (14) failure of consideration; (15) breach of contract; (16) offset (for uncompleted work or poor workmanship); (17) "mechanic's lien is barred by Civil Code section 3144;" (1Cool mechanic's lien is invalid; [*6] (19) "failure to serve preliminary 20-day notice" (attacking validity of mechanic's lien); (20) value limitation of mechanic's lien; (21) Hall Construction lacks capacity because he is not duly licensed; (22) Hall Construction's claim is barred by Business and Professions Code section 7031; and (23) Hall Construction's claim is barred by Business and Professions Code section 7125.2.

Chen raised five counter claims: (1) breach of contract based on Hall Constructions' failure to provide an accounting of percentage of completion, or invoices listing all amounts to be paid, or lien releases with each invoice; (2) fraud based on Hall Construction's alleged attempt to conceal double charging for services and materials; (3) common count to receive amount of overpayment; (4) negligence based on Hall Construction's inadequate supervision of the contractors; and (5) breach of implied warranty based on allegations the construction failed to meet Chen's reasonable expectations of quality.

CHEN'S CIVIL ACTION

Approximately three months after giving notice of her affirmative defenses and counterclaims in arbitration, and after conducting [*7] more discovery, Chen filed a complaint in the trial court alleging 15 causes of action against Hall Construction, four alter egos, and 24 subcontractors. The complaint included some of the same causes of action made in Chen's arbitration counterclaims, i.e., breach of contract, fraud, common count to recover amount of overpayment, negligence, and breach of warranty. She also included new claims for strict products liability, nuisance, abuse of process of civil action, conspiracy to commit abuse of process of civil action, unfair business practice, conspiracy to defraud, negligent misrepresentation, and a common count for money had and received.

Unhappy with this new development, Hall Construction requested a hearing before the arbitrator to complain about Chen's new lawsuit. The parties dispute what occurred during the unrecorded telephone conference with the arbitrator. Hall Construction maintains Chen was ordered "to dismiss the duplicative, but not intertwined, claims from" her complaint. Chen recalls the parties agreed she would dismiss those claims from arbitration. The arbitrator signed an order prepared by Chen, over Hall Construction's objection, stating Chen would dismiss [*8] "without prejudice" the "construction defect counterclaims from the arbitration." Chen maintains that in an attempt to appease opposing counsel, her dismissal included all five counterclaims, rather than just the construction defect causes of action.

The dismissal prompted Hall Construction to file an ex parte application in superior court for an order "staying arbitration dates and deadlines pending hearing on [its] forthcoming . . . motion to compel arbitration of all related claims and/or to consolidate all pending actions in superior court." The court granted a temporary stay.

The court then heard the "motion for a order compelling arbitration and staying [the civil action] pending completion of arbitration." On November 6, 2003, the trial court denied the petition to compel arbitration of Chen's claims, but stayed the trial pending completion of the arbitration between Hall Construction and Chen. At the hearing, the court indicated that once the arbitrator decides "if there's liability on the contract, then we can resolve these other claims." The trial judge advised counsel that "if you come back to me," the parties must bring to his attention any "overlapping issues. [*9] "

In the minute order, the court stated, "The wording of the Arbitration Agreement is not broad enough to encompass all of the causes of action. The contract states: 'If a dispute or claim arises alleging a violation of this agreement, the parties agree to waive any rights each may have to a jury or court trial and to use binding arbitration to resolve all such disputes between them.' [P] Where the wording of an arbitration clause is sufficiently broad to encompass all of the causes of action, virtually any kind of claim may be arbitrable. For example, where the agreement states 'any dispute relating to or arising out of' a contract shall be subject to binding arbitration, the court has discretion to compel arbitration for a discrimination claim 'arising out of' the agreement. [Citation.] [P] Where, as here, the wording of the agreement is significantly narrower, the result is different. For example, in Mansdorf v. California Physicians' Service, Inc. (1978) 87 Cal. App. 3d 412, 151 Cal. Rptr. 388 the court found a bad faith claim was not arbitrable under an agreement to arbitrate 'disputes with respect to any of the terms, conditions or benefits of this [*10] agreement.' [Chen's] claims here include fraud, abuse of process, unfair business practices and other 'tort' claims. Those claims clearly are not violations of the contract at issue. [P] . . . The motion to compel arbitration is DENIED. Some of the defenses asserted by Chen in the arbitration are necessarily the subject of this action. [P] Therefore, this action is stayed pending resolution [of the arbitration]."

II

On appeal, the parties focus their arguments primarily on whether the causes of action alleged in Chen's complaint are subject to arbitration. Before determining the scope of the arbitration clause, we start with the more basic question of which defendants can seek enforcement of this contractual provision.

It is undisputed the construction agreement states the contracting parties are Chen and Hall Construction. Certainly those parties are bound by the contract's arbitration provision. In her complaint, Chen alleged the following four defendants were Hall Construction's alter egos: (1) the owner of Hall Construction, Corbett Allen Hall, as an individual; (2) Robert Hall Construction, "a sole proprietorship owned by Robert Allen Hall;" (3) Robert Allen Hall [*11] as an individual; and (4) Hall Development, Inc., a California Corporation (collectively referred to as the Hall Entities). Hall Construction and the Hall Entities jointly filed the petition to compel arbitration.

In the petition, the Hall Entities maintained they were not parties to the contract, asserted they were not Hall Construction's alter egos, and denied they had any involvement in the disputed remodeling project. n2 Nevertheless, the Hall Entities argued they were subject to the arbitration provision because Chen alleged they were alter egos of a contracting party (Hall Construction). The trial court, in denying the motion for other reasons, did not indicate whether it found the Hall Entities had standing to file the petition. We conclude they did not.

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n2 In the petition, "Hall Construction" asserted its name was actually "Robert Hall Construction" and identified itself as a party to the contract. Robert Hall executed the construction agreement on Hall Construction's behalf. However, Chen maintains the contracting party was "Hall Construction" owned by Corbett Allen Hall. In the petition, Corbett Allen Hall indicated his dba was "Hall Construction," but denied being a contracting party. The issue of who manages or owns Hall Construction is not before us. The only relevant fact we can rely on is that the entity, Hall Construction, entered into a contract, containing an arbitration clause, with Chen.

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"The right to arbitration depends on a contract. [Citations.] Accordingly, a party can be compelled to submit a dispute to arbitration only where he has agreed in writing to do so. [Citation.] While arbitration is a favored method of resolving disputes, the policy favoring arbitration cannot displace the necessity for an agreement to arbitrate [citation] and does not extend to those who are not parties to such an agreement. [Citation.] Whether or not an arbitration agreement is operative against a person who has not signed it involves a question of 'substantive arbitrability' which is to be determined by the court. [Citation.]" (Boys Club of San Fernando Valley, Inc. v. Fidelity & Deposit Co. (1992) 6 Cal.App.4th 1266, 1271.)

If Hall Construction and the Hall Entities were in fact alter egos, the acts of one would bind the other. (See Hennessey's Tavern, Inc. v. American Air Filter Co. (1988) 204 Cal. App. 3d 1351, 1358, 251 Cal. Rptr. 859.) Thus, in order for the Hall Entities to show they were entitled to enforce the arbitration clause, they needed to prove they were alter egos of Hall Construction, the signing party. However, as noted [*13] above, the Hall Entities steadfastly deny having any relationship to Hall Construction or Chen's construction project. Indeed, they predicted Chen's alter ego theory would be among the first issues addressed in arbitration "should [the] Court grant this motion to compel." As aptly noted by Chen, "it would be an exercise in futility to pull the remaining Hall Entities from the Chen complaint and have them added to the Arbitration only to seek to have them dismissed from the Arbitration due to their own asserted lack of involvement with the [construction] agreement."

Alternatively, the Hall Entities argue the doctrine of equitable estoppel compels the finding they had standing to enforce the arbitration clause. There are several problems with this argument. First and foremost, it was not raised below. Indeed, as the Hall Entities noted in their brief, "Though not identifying [their] argument as "estoppel," [their] discussion of the grounds for compelling to arbitration the claims against the alter-ego defendants was premised on an 11th Circuit decision" applying the doctrine (citing MS Dealer Service Corp v. Franklin (11th Cir. 1999) 177 F.3d 942, 947 (MS [*14] Dealer).) We are not persuaded.

A short paragraph making only a passing reference to a federal circuit opinion does not qualify as sufficient notice to the trial court and opposing counsel. Invoking the principles of equitable estoppel to compel a contract's signator to arbitrate her claims against four nonsignatories is a complex issue available only "in appropriate factual circumstances[.]" (Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1714, citing MS Dealer, supra, 177 F.3d 942.) Application of the doctrine would require the trial court to analyze: (1) the relationship between the nonsignators and the contracting parties; and (2) consider whether claims made against the nonsignatory are based "on the same facts as, and are inherently inseparable from, arbitrable claims against signatory defendants," i.e., the claims against the nonsignatories must be intertwined with the underlying contractual obligations. (See Metalclad, supra, 109 Cal.App.4th at pp. 1715-1716.)

Here, the Hall Entities clearly desired to distance themselves from Hall Construction, the project, and [*15] the billing dispute. Consequently, the business relationship, if any, between the nonsignatories and the contracting parties was not discussed in the petition. Moreover, the Hall Entities never provided the trial court with facts or legal analysis showing "substantial interdependent and concerted misconduct" by the nonsignatories and Hall Construction. Accordingly, we find the issue waived. (Ochoa v. Pacific Gas & Electric Co. (1998) 61 Cal.App.4th 1480, 1488, fn. 3 [issues not raised in the trial court will ordinarily not be considered on appeal]." The Hall Entities lacked standing to seek arbitration of Chen's claims.

We digress briefly to discuss the 24 other defendants (primarily subcontractors who worked on Chen's home) who did not seek to compel arbitration. In her complaint, Chen suggested there were alter ego relationships between some of the subcontractors, but she did not allege the subcontractors were alter egos of Hall Construction or the Hall Entities. Chen alleged construction defect claims against the subcontractors, and singled out a roofing subcontractor in her conspiracy to commit abuse of process, fraud, conspiracy to defraud, and negligent misrepresentation [*16] claims. n3

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n3 The roofing contractors were "Goff Roofing, Melvin Eugene Goff, and Melvin Eugene Goff d.b.a. Goff Roofing."

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Hall Construction and the Hall Entities never argued Chen's causes of action against these subcontractors must be arbitrated. They do not suggest how the trial court should handle these third party claims. They simply noted, "In the event the court would be inclined to determine that this action qualifies as a pending action between a party to the arbitration and third parties rather than a subterfuge of the existing arbitration proceeding, Section 1281.2 [subdivision (c)] states that: 'The court . . . may order . . . all claims arising out of the contract between plaintiff and defendants to arbitration and stay this action pending the outcome of that arbitration.' [See also § 1281.5, subd. (b)]." (Original indentation not retained.) We conclude the subcontractors and the Hall Entities lacked standing to compel arbitration. Only Hall Construction had grounds to file the petition. n4 [*17]

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n4 Having decided the only party with standing to compel arbitration was Hall Construction, we will disregard the remaining arguments made by the Hall Entities regarding the court's ruling.

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III

Hall Construction contends, "the trial court dispensation of claims under [section] 1281.2 [subdivision] (c) was improper and erroneous." It argues the court was required to move all claims between Hall Construction and Chen to arbitration (regardless of the presence of third party nonarbitrating defendants). We disagree.

Section 1281.2 provides the trial court, upon receiving a petition to compel arbitration, must order the parties to "arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [P] . . . [P] (c) A party to the arbitration agreement is also a party to a pending court action . . . with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a [*18] common issue of law or fact."

When the court determines there is a pending court action with a third party, section 1281.2, subdivision (c), gives the court several choices on how to proceed. The court: "(1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding." The court picked option number three.

Hall Construction argues subdivision (c) is inapt because Chen's "civil action was not 'pending'" within the meaning of section 1281.2. It asserts Chen had already agreed to submit her dispute to arbitration and the provision required that her civil action predate the commencement of arbitration. Hall Construction misconstrues the rules of statutory construction and has misinterpreted section 1281.2.

Section 1281.2 does not define "pending court action" but [*19] provides a time limit for such actions. It states, "For purposes of this section, a pending court action . . . includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition." ( § 1281.2, subd. (c).)

The Legislature gave the petition's opposing party a window of opportunity to make his best case for keeping some or all of the litigation out of arbitration. The filing of the petition obviously alerts the opposing party that the trial court may lose jurisdiction over the dispute. The Legislature made clear that before the hearing on the petition, the opposing party may file a complaint, amend his complaint, file a cross-complaint or complaint in intervention, and have those new or amended claims qualify as a "pending action" for the purposes of section 1281.2, subdivision (c). This rule satisfies the goals of judicial economy. The court (before losing jurisdiction) n5 is timely alerted to the "possibility of conflicting rulings on a common issue of law or fact" due to the fact "[a] party to the arbitration agreement is also a party to a pending [*20] court action . . . with a third party, arising out of the same transaction or series of related transactions[.]" ( § 1281.2, subd. (c).) Requiring related actions to be filed before the petition is heard ensures the court will make a well-informed decision on whether some or all of the dispute should be arbitrated.

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n5 Once the petition is granted, and the matter ordered to arbitration, the court's jurisdiction over the parties or the controversy is limited. As discussed in Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796 (Brock), "Once a court grants the petition to compel arbitration and stays the action at law, the action at law sits in the twilight zone of abatement with the trial court retaining merely a vestigial jurisdiction over matters submitted to arbitration. This vestigial jurisdiction over the action at law consists solely of making the determination, upon conclusion of the arbitration proceedings, of whether there was an award on the merits . . . or not . . . . [Citations.]" "Absent an agreement to withdraw the controversy from arbitration . . . no other judicial act is authorized. [Citation.]" (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487.)

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As noted by both parties, very few cases have been published discussing the "pending action" time limitation. As aptly stated by Chen, "Perhaps this is because the language is so clear, that no discussion is necessary."

Bos Material Handling, Inc. v. Crown Controls Corp. (1982) 137 Cal. App. 3d 99, 186 Cal. Rptr. 740, is somewhat instructive. In that case, after the trial court granted the defendant's petition to compel arbitration, the plaintiff attempted to identify a fictitiously named defendant in order to establish a nonarbitrable claim against a third party. The court determined, "The attempted substitution is not appropriate for our judicial notice, because a pending court action or special proceeding as defined under section 1281.2, subdivision (c), does not include an action or proceeding initiated by the party refusing to arbitrate after the date of the hearing on the petition. Accordingly, our review is limited to the claims against third parties existing at the time of the trial court ruling." (Id. at p. 112, italics added.) Thus, the court in Bos determined the hearing date, rather than the status of the arbitration proceedings, [*22] was relevant in defining a "pending action" under section 1281.2.

Without supporting case authority, Hall Construction argues Chen's action fails to qualify as a "pending action" because the parties had already commenced arbitration. It asserts there is no appreciable difference between arbitration ordered by the court and arbitration voluntarily commenced without a court order. Hall Construction maintains the only relevant fact is the start of arbitration. It asserts the Legislature intended this event to trigger the cut-off time on pending actions for parties seeking relief under section 1281.2, subdivision (c). It reasons such a rule supports public policy favoring arbitration and limiting the court's power over arbitration proceedings. However, to adopt the interpretation suggested, we would be forced to ignore the clear language setting the time limit in the context of a petition and the court's hearing. It is well settled this is something we cannot do.

"In construing any statute, 'well-established rules of statutory construction require us to ascertain the intent of the enacting legislative body so that we may adopt the construction that best effectuates the purpose of [*23] the law.' [Citation.] 'We first examine the words themselves because the statutory language is generally the most reliable indicator of legislative intent. [Citation.] The words of the statute should be given their ordinary and usual meaning and should be construed in their statutory context.' [Citation.] If the statutory language is unambiguous, 'we presume the Legislature meant what it said, and the plain meaning of the statute governs.' [Citation.]" (Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 484-485.)

The Legislature could have easily chosen to specify that any actions filed after arbitration had commenced do not qualify as "pending" for purposes of section 1281.2, subdivision (c). However it did not. It specified the cut-off date for "pending actions" was "on or before the date of the hearing on the petition." As discussed above, the Legislature recognized a petition is a significant triggering event because it definitively alerts the opposing party that the trial court could lose jurisdiction of the entire dispute after the hearing. To follow the rule proposed by Hall Construction, we would have to imply the Legislature [*24] intended to limit the court's jurisdiction anytime a party voluntarily submitted one issue to arbitration, regardless of the nature or scope of that dispute. That is simply not the law. And, in any event, "'We may not, under the guise of construction, rewrite the law or give the words an effect different from the plain and direct import of the terms used.' [Citation.] More specifically, we may not 'insert qualifying provisions not included in the statute.' [Citation.]" (Whaley v. Sony Computer Entertainment America, Inc., supra, 121 Cal.App.4th at p. 486.)

IV

Finally, we review the court's ruling on the petition. The court recognized the parties had agreed to arbitrate their billing dispute as required by the contract. It properly decided those claims should remain in arbitration, ruling the arbitration provision was enforceable. Accordingly, the arbitration currently consists of Hall Construction's breach of contract claim based on allegations Chen failed to make payments, interfered with subcontractors, and refused to execute change orders. Chen has raised several affirmative defenses. She claims Hall Construction is not owed any money because she has been [*25] over billed, double charged, and has already paid a reasonable amount for the work performed. She challenges the validity of Hall Construction's mechanic's lien, asserts his liquidated damages claim is against public policy, and maintains Hall Construction is not a licensed contractor and, therefore, lacks capacity to sue.

In denying the petition, the trial court agreed with the arbitrator that several claims were not arbitrable (a ruling we review de novo) and other claims involved third parties not bound by the arbitration agreement implicating section 1281.2, subdivision (c) (a ruling we review under the abuse of discretion standard). (See Henry v. Alcove Investment, Inc. (1991) 233 Cal. App. 3d 94, 284 Cal. Rptr. 255.) We find no error under either standard.

THE 1ST THROUGH 7TH CAUSES OF ACTION

The first through seventh causes of action (breach of implied warranty of merchantability, breach of implied warranty of fitness for intended use, strict products liability, breach of contract, breach of contract - third party beneficiary, and nuisance), all involve construction defect allegations. For example, Chen alleged there are "defects in the development, workmanship, [*26] repairs, materials, planning, designing, engineering, construction and remodeling" of her home. She delineated over 17 specific defects, ranging from faulty soil compaction to the improper installation of an incomplete roof. Her allegations in these claims implicate every named subcontractor hired by Hall Construction and its alleged alter egos. These claims are premised on actions taken by parties not subject to the arbitration provision. Indeed, the arbitrator ordered Chen to dismiss all construction defect related claims from the arbitration. The trial court properly honored this ruling and denied the petition to compel arbitration of those causes of action.

THE 8TH THROUGH 10TH CAUSES OF ACTION

The premise underlying the eighth through tenth causes of action is Hall Construction's allegedly improper attempt to use the litigation process to prevent Chen from contacting subcontractors to complete the remodel project. She alleged it was an abuse of process and unfair business practice for Hall Construction to file a civil action and request injunctive relief without cause. She alleged Hall Construction conspired with its alter egos and the roofing contractor to accomplish its [*27] misdeeds. She believes the complaint was dismissed to stop her from contacting the subcontractors for evidence during discovery. The court denied Hall Construction's efforts to obtain immediate injunctive relief.

Hall Construction asserts these claims "find their basis in actions arising out of the relationship created between the parties pursuant to the provisions of the agreement." However, this argument is completely inconsistent with statements Hall Construction made in its civil action requesting injunctive relief, and its section 1281.8 statement seeking an immediate restraining order and other provisional relief. Hall Construction repeatedly stated its civil claims (the sole basis for Chen's eighth through tenth causes of action) were not subject to arbitration. We find most telling Hall Construction's section 1281.8 statement, in which it declares the civil action claims are "not contemplated" by the written agreement to arbitrate. The parties were (at one point) in agreement on something. Nevertheless, because waiver was not the basis of the court's ruling we will address the merits. (See Berman v. Health Net (2000) 80 Cal.App.4th 1359, 1363 [the question [*28] of waiver is one of fact for the trial court].)

The court determined the arbitration agreement was not broad enough to encompass these tort causes of action. Article 18 of the contract, titled "ARBITRATION" contains a prefatory paragraph followed by two paragraphs typed in capital letters specifying the parties' agreement to arbitrate. There are also several paragraphs typed in lower case that specify the arbitration forum and allocation of costs. The court found the two paragraphs typed in capital letters contained the operative language, narrowly defining the scope of arbitrable disputes. Both paragraph contain the identically worded phrase: "IF A DISPUTE OR CLAIM ARISES ALLEGING A VIOLATION OF THIS AGREEMENT . . ." it must be arbitrated. The court concluded tort actions do not pertain to a violation of the agreement and consequently need not be arbitrated.

Hall Construction would have liked the court to have focused on the language in the prefatory paragraph which states, "Mindful of the high costs of litigation, the parties to this agreement hereby establish a final and binding out-of-court dispute resolution procedure to be used whenever any controversy arising out of this [*29] agreement that [sic] cannot be otherwise resolved." Obviously, this paragraph contains broader language and could be interpreted as including a tort action related to the contract.

We conclude the court properly rejected this paragraph as defining the scope of arbitration. The parties clearly designated the applicable language by highlighting the binding provision in capital letters and stating the same definition twice. Moreover, placement of the second paragraph immediately above the signature lines indicates it was the parties' agreement. Indeed, the paragraph affirmatively states: "THE PARTIES AGREE TO RESOLVE BY NEUTRAL ARBITRATION ANY CLAIMS OR DISPUTES ALLEGING A VIOLATION OF THE AGREEMENT . . . ." Hall Construction fails to explain why the prefatory paragraph should trump these explicit provisions. n6 Like the trial court, we conclude the arbitration provision typed in capital letters was controlling.

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n6 Hall Construction contends Chen somehow agreed to be bound by prefatory language by citing it in her opposition to the petition to compel arbitration. This argument is a red herring. We are reviewing the court's determination of arbitrability, which in the absence of extrinsic evidence in dispute, is subject to de novo review. Like the trial court, we interpret the contract as providing a narrow arbitration provision (which controls over the generalized statements contained in the prefatory paragraph).

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Furthermore, we agree with the trial court's interpretation of the contract provision. "The issue before us being solely of construction of unambiguous contractual terms [citations], our review of the arbitration clause is de novo. [Citation.]" (Larkin v. Williams, Woolley, Cogswell, Nakazawa & Russell (1999) 76 Cal.App.4th 227, 229 (Larkin).)

If an arbitration clause is broadly worded, practically any claim, including a tort action, is arbitrable. (See Knight et al., Cal. Practice Guide: Alternative Dispute Resolution (The Rutter Group 2003) P 5:226, p. 5-128 (rev. # 1, 2003).) The most common "'broad form'" arbitration agreement covers all "claims or disputes arising out of or relating to" the agreement. (See Larkin, supra, 76 Cal.App.4th at p. 230; Knight et al., supra, P 5:215.4, p. 5-122.) Next on the spectrum are arbitration provisions covering "all disputes arising in connection with this agreement[.]" (Simula, Inc. v. Autoliv, Inc. (9th Cir. 1999) 175 F.3d 716, 720-725 (Simula), italics omitted.) This phrase "'does not limit arbitration to the literal interpretation or performance of the contract. It embraces [*31] every dispute between the parties having a significant relationship to the contract regardless of the label attached to the dispute.' [Citation.]" (Id. at p. 720.) The provision is "sufficiently broad in scope to include claims for unfair trade practices, libel, . . . defamation[,]" antitrust violations, and claims of misrepresentation. (Id. at pp. 720-721.)

There is a split of authority regarding interpretation of agreements using the phrases "arising out of" or "arising under" or "arising hereunder." (Tracer Research Corp v. National Environmental Services Co. (9th Cir. 1994) 42 F.3d 1292, 1295 (Tracer) [the phrases are synonymous].) The Ninth Circuit determined these phrases effectively restrict arbitration "to 'disputes and controversies relating to the interpretation of the contract and matters of performance.'" (Mediterranean Enterprises, Inc. v. Ssangyong Corp. (9th Cir. 1983) 708 F.2d 1458, 1464; Tracer, supra, 42 F.3d at p. 1294.) The Second, Fourth, Seventh, and Eleventh Circuits have refused to take such a restrictive approach and agree the clause "arising under" would also encompass [*32] contract formation issues such as claims of fraudulent inducement. (Goldberg v. Focus Affiliates, Inc. (N.D.Ill. 2001) 152 F. Supp. 2d 978, 981 [noting disagreement between circuit courts].)

The arbitration provision at issue here is more narrowly focused than any of the above. The language is simple, plain, and easily understood: The parties agreed to arbitrate only one type of dispute-"a violation of this agreement." A similar provision was at issue in the case cited by the trial court, Mansdorf v. California Physicians' Service, Inc., supra, 87 Cal. App. 3d 412. The plaintiff in that case was a subscriber to a health service plan who refused to pay her medical bills. After an arbitrator awarded her $ 7,142, the health plan paid plaintiff "only $ 6,999, withholding $ 125 as her share of the arbitration costs." (Id. at p. 415.) The plaintiff then filed a lawsuit alleging the health plan had "dealt with her in bad faith in delaying payment and refusing a settlement offer, thus forcing her to go to arbitration with resulting costs and damages." (Id. at p. 416.)

The trial court sustained the health plan's demurrer [*33] on the basis plaintiff's claim should have been litigated at the arbitration hearing. The appellate court reversed. It reasoned, "The arbitration clause herein involved . . . required arbitration only of 'disputes with respect to any of the terms, conditions or benefits of this agreement.' That clause is clearly more limited than the arbitration agreement involved in the cases cited by defendant. [P] [Plaintiff] has arbitrated, and has accepted an award, dealing with the only dispute to which the arbitration provision applies; she now . . . seeks to settle another, and quite different dispute, not involving the terms, conditions or benefits of the agreement." (Mansdorf v. California Physicians' Service, Inc., supra, 87 Cal. App. 3d at pp. 417-418.) Likewise, Chen's tort claims do not involve a violation of the construction contract. n7 The court properly refused to compel arbitration of these claims.

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n7 Hall Construction relies heavily on Merrick v. Writers Guild of America, West, Inc. (1982) 130 Cal. App. 3d 212, 217, 181 Cal. Rptr. 530, which held some tort actions are subject to arbitration if the action has "its roots in the relationship between the parties which was created by the . . . agreement." (Id. at p. 219.) Hall Construction asserts all of Chen's claims have such "roots." The case is inapt. First, the arbitration provisions are not comparable. Second, in Merrick the tort claims at issue could have been raised as defenses in the arbitration, but the plaintiff waited until after the arbitration had been completed. Chen's tort claims are unrelated to the arbitration proceedings, involve third parties, and were properly brought as a separate court action.

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THE 11TH THROUGH 13TH CAUSES OF ACTION

Chen's fraud, conspiracy to defraud, and negligent misrepresentation tort actions were alleged against Hall Construction, its alter egos, and the roofing subcontractor. Chen alleged she paid invoices the defendants knew were inflated and did not represent the actual amount due or the true value of the services rendered. Chen acknowledges these claims relate to billing practices established by the contract, but asserts they relate entirely to the misconduct of one of the Hall Entities (Hall Development Inc.), who issued every invoice and received all the payments. The possibility of conflicting rulings on a common issue of fact or law is obvious. As noted by the trial court, if the issue is resolved completely in arbitration, the parties need only alert the trial court of this fact and it will adjust the lawsuit accordingly. We are confident the trial court will not allow Chen to have two bites at the apple. It cannot be said the court abused its discretion in refusing to compel arbitration of these claims.

THE 14TH AND 15TH CAUSES OF ACTION

Chen admits these common counts (for "money had and received" and "to recover amount of overpayment [*35] made under a mistake of fact") are similar to the affirmative defenses she plans to raise in arbitration. However, she asserts the causes of action should remain because she believes a third party, Hall Development, Inc., received the money and possesses the overpayments. For this reason, these claims qualify for consideration under section 1281.2, subdivision (c). Moreover, as stated above, if the issue is resolved in arbitration, the trial court has indicated it will not permit Chen to retry it.

V

Hall Construction makes two arguments it never raised below. First it asserts Chen "stipulated by submission" to arbitrate all her claims. It is referring to the fact Chen submitted her counterclaims to the arbitrator and argues that once submitted the claims cannot be withdrawn. Aside from the fact this argument is waived, it also lacks legal support. The cases cited by Hall Construction involve situations where an arbitrator has ruled on a particular issue, with the parties' consent, and then the losing party seeks to vacate the ruling on the grounds the issue was not subject to arbitration. (See e.g., Cobler v. Stanley, Barber, Southard, Brown & Associates (1990) 217 Cal. App. 3d 518, 530, 265 Cal. Rptr. 868.) [*36] The circumstances before us are entirely different. In this case, many of the disputed claims were ordered dismissed from arbitration by the arbitrator. Moreover, the arbitrator has not yet ruled on any aspect of this dispute. Because the issues have not yet been submitted for decision, Chen had time to narrow the scope of arbitration to claims contemplated by the arbitration agreement.

The second argument asks this court to apply principles of equitable estoppel and reverse the trial court's order. Hall Construction argues, "In participating vigorously in arbitration and saying nothing about the impending Superior Court action wherein she was submitting augmented, enhanced versions of the claims in arbitration and then quietly filing the Action without notice or prompt service on Hall, Chen intended that Hall continue to incur costs and fees in preparation for defending against all of Chen's claims." Hall Construction claims it was injured directly by relying on Chen's action and had to pay costs and fees to "reconcile the chaos resulting" from her actions. Not surprisingly, Chen adamantly asserts these claims are untrue. She maintains the costs and time expended in the [*37] arbitration proceedings were "not in vain." She maintains, "[The] claims will be pursued in one forum or the other, and the work performed by Hall Construction's counsel will be put to use." In addition, she notes Hall Construction started the alleged "chaos": It requested withdrawal of the overlapping claims. In addition, she takes issue with Hall Construction's attempt to imply her civil claim was driven solely by the need to conduct discovery. She exclaims, "Nothing could be further from the truth."

Hall Construction's argument comes too little and too late. As discussed above, the existence of an estoppel is a factual question. (Aetna Casualty & Surety Co. v. Humboldt Loaders, Inc. (1988) 202 Cal. App. 3d 921, 930, 249 Cal. Rptr. 175.) The court must weigh the equities and consider the impact on public policy of permitting an estoppel in a given case. Only when the parties do not dispute the facts is our review de novo. (Metalclad, supra, 109 Cal.App.4th at p. 1716.) Here, the parties dispute several material facts and the credibility call of who is telling the truth was for the trial court, not us.

DISPOSITION

The order is affirmed. [*38] n8 The requests for judicial notice are granted. Hall Construction's request for attorney fees is denied. Respondent shall recover her costs on appeal.

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n8 In its reply brief, Hall Construction "respectfully requests that this court order all actions be consolidated in the Superior Court action in the event this court determines there is no basis for ordering to arbitration the claims [it has] requested to sent back." Hall Construction should know better than to request this relief -- we lack jurisdiction to make such an order. Like the trial court, we may not step into a case submitted to arbitration and currently before an arbitrator. As discussed in Titan/Value Equities Group, Inc. v. Superior Court, supra, 29 Cal.App.4th at p. 487, no other judicial act is authorized "absent an agreement to withdraw the controversy from arbitration." In the interests of judicial economy, we encourage the parties to execute a stipulation agreeing to withdraw the dispute from arbitration.

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O'LEARY, ACTING P. [*39] J.

WE CONCUR:

MOORE, J.

FYBEL, J.

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