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Turner v. Schultz

July 13, 2009

JOE D. TURNER, PLAINTIFF AND APPELLANT,
v.
GREGORY E. SCHULTZ ET AL., DEFENDANTS AND RESPONDENTS.



(San Francisco County Super. Ct. No. CGC-05-445009). Trial Judge: Honorable Peter Busch.

The opinion of the court was delivered by: Rivera, J.

CERTIFIED FOR PUBLICATION

Plaintiff Joe D. Turner appeals an award of attorney fees to defendants Asset Allocation Advisors, Inc. (the company), Gregory E. Schultz, and Bruce D. Grenke (collectively defendants) made after Turner unsuccessfully sought declaratory and injunctive relief to forestall the arbitration of the dispute between the parties. He contends that it is too early to determine a prevailing party, and that any award should be made by the arbitrator rather than the court. We conclude attorney fees were properly awarded in this discrete legal action.

I. BACKGROUND

This is the third time we have considered an appeal in this case. (Turner v. American Arbitration Assn. (Oct. 24, 2007, No. A112884) [nonpub. opn.] (Turner I); Turner v. American Arbitration Assn. (Oct. 24, 2007, No. 113905) [nonpub. opn.] (Turner II).) We quote at length from our discussion of the facts in Turner I:*fn1

Turner, a shareholder in the company, entered into a "Buy/Sell Agreement II" (the agreement) in 2003 with Schultz and Grenke, two other shareholders in the company.

The agreement provided a formula for buying out the shares of a shareholder who was terminated as an employee of the company. The agreement also contained an arbitration clause, which provided in pertinent part: "[I]n the event any controversy or claims arising out [of] this Agreement cannot be settled by the parties hereto or their legal representatives, . . . such controversy or claims shall be settled by arbitration in accordance with the then current rules of the American Arbitration Association and judgment upon the award may be entered in any Court having jurisdiction thereof." [] According to the complaint in this action, the company‟s board of directors terminated Turner‟s employment in 2004, and Turner was dissatisfied with the amount the company offered him for his shares. The company, Schultz, and Grenke demanded arbitration of the dispute[, describing it as one over "the interpretation and application of a buy/sell agreement as it relates to Turner‟s interest in Asset Allocation Advisors, Inc. . . ."]

Through his attorney, Turner took part in a discussion with a manager for defendant American Arbitration Association (the AAA) on June 10, 2005, and requested that arbitration take place in San Francisco. However, on June 28, 2005, he informed defendants that he refused to participate in the arbitration absent a court order compelling arbitration, taking the position that the agreement was void ab initio because it was procured by "fraud in the inception." The next day, the AAA notified the parties that it would proceed with the arbitration unless the parties agreed or a court ordered otherwise.

Turner filed an action against the company, Schultz, Grenke and another corporation in the Contra Costa County Superior Court on August 9, 2005 (Turner v. Schultz (2006, No. C-05-01521) (the Contra Costa action)), which included allegations that Grenke and Schultz made false representations to induce Turner to enter into the agreement. Nine days later, Turner wrote to the AAA, taking the position that the AAA lacked jurisdiction because Turner had filed his action in superior court. Turner also objected to the arbitrators proposed by the AAA because of that lack of jurisdiction. The AAA administratively appointed three arbitrators on August 22, 2005, and later confirmed the appointment.[]

Turner brought the action that is the subject of this appeal against the AAA, Schultz, Grenke, and the company in the San Francisco Superior Court on September 20, 2005 (the San Francisco action). He sought a declaration that the defendants could not proceed with arbitration relating to the agreement without first obtaining a court order; he also sought an injunction requiring the AAA to stay its proceedings until the defendants obtained an order compelling arbitration pursuant to Code of Civil Procedure section 1281.2 (section 1281.2).

Turner then filed an application in the San Francisco action for a temporary restraining order and order to show cause, seeking a preliminary injunction prohibiting defendants from "taking any action concerning the American Arbitration Association arbitration entitled Bruce Grenke and Gregory Schultz and Asset Allocation Advisors, Inc. v. Joe Turner, 74 168 Y 00529 05 DEAR, other than dismissing that arbitration, unless an order compelling arbitration is issued." The trial court denied the temporary restraining order, but issued an order to show cause. After further briefing and a hearing, the trial court denied Turner‟s application on November 7, 2005. Turner filed his notice of appeal [in Turner I] on January 5, 2006.

Meanwhile, on December 21, 2005, the company, Schultz, and Grenke filed a petition to compel arbitration in the Contra Costa action. Turner opposed the petition, but against the possibility that the petition would be granted, he also requested that the court take action to allow him to participate in a new selection of the arbitrators. The Contra Costa County Superior Court granted the petition on March 13, 2006, and declined to intervene in the AAA‟s procedures for selecting an arbitrator. [End of quotation from Turner I.]

In Turner I, this court granted defendants‟ motion to dismiss the appeal, concluding that any decision we made in connection with Turner‟s request for an order and injunction restraining the defendants from taking any action concerning the arbitration unless an order compelling arbitration was issued could have no practical effect on the parties, because such an order had been issued in the Contra Costa action. (Turner I, supra, at pp. 1, 3, 4.) In Turner II, for the same reason, we dismissed as moot Turner‟s appeal of the judgment entered after the trial court sustained the demurrer of AAA, which was also a defendant in the action, on the ground that it enjoyed arbitral immunity. (Turner II, supra, at pp. 1, 3-5.)

Defendants thereafter moved in the trial court for judgment on the pleadings, and the trial court granted the motion and entered judgment in defendants‟ favor. The court also ruled that defendants were entitled to their costs and attorney fees in an amount to be determined. Defendants moved for an award of the attorney fees they incurred in their successful defense of the San Francisco action, ...


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