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HM DG, Inc. v. Amini

California Court of Appeals, Second District, Third Division

September 20, 2013

HM DG, INC., et al., Plaintiffs and Respondents,
v.
FARZAD ETEMAD AMINI AND POUNEH BEIZAI, Individually and as Trustees, etc., Defendants and Appellants

Appeal from an order of the Superior Court of Los Angeles County, No. BC475302 Charles F. Palmer, Judge.

Leo A. Schwarz for Defendants and Appellants.

Law Offices of James J. Hevener and James J. Hevener for Plaintiffs and Respondents.

HEESEMAN, J. [*]

INTRODUCTION

Plaintiffs and Respondents HM DG, Inc. and Hassan Majd doing business as Majd Design Group (HMDG) sued Defendants and Appellants Farzad Etemad Amini and Pouneh Beizai (Defendants) in the superior court to recover allegedly unpaid progress payments under a construction contract for a high-end remodel of Defendants’ home. After HMDG refused Defendants’ demand to submit the dispute to arbitration, Defendants filed a petition to compel arbitration pursuant to an arbitration clause in the parties’ contract. The trial court denied the petition, holding that Defendants failed to establish the existence of a valid arbitration agreement on the ground that the “arbitration clause at issue is uncertain in that it does not specify before what agency o[r] person the matter will be arbitrated, [or] how the arbitrator will be selected, but merely sets for[th] alternative options for these terms.” The trial court also awarded HMDG its attorneys fees incurred in opposing the petition to compel arbitration. We reverse.

Code of Civil Procedure section 1281.6[1] specifically contemplates the existence of an enforceable arbitration agreement even where the “arbitration agreement does not provide a method for appointing an arbitrator....” The statute further provides that “[i]n the absence of an agreed method, or if the agreed method fails..., the court, on petition of a party to the arbitration agreement, shall appoint the arbitrator.” (Ibid.) As we shall explain, because the court has the power to appoint an arbitrator under section 1281.6 when the parties fail to agree upon a method for appointment, we conclude that neither the absence of a definite method, nor the presence of “alternative options, ” for appointing an arbitrator renders an otherwise valid arbitration agreement unenforceable.

As we find the agreement to arbitrate is valid, and that Defendants demanded arbitration in accordance with the subject arbitration clause, we will reverse the trial court’s order. However, because the trial court did not reach the question of whether any other ground for denying the petition under section 1281.2 applies, we will remand the matter for the trial court to consider this issue.

FACTUAL SUMMARY

In early 2010, Defendants, husband and wife, approached HMDG about remodeling their home. After discussions regarding the project parameters, HMDG presented Defendants with a three page “Project Proposal & Agreement” (Agreement).

A clause entitled “Arbitration Clause” located directly above the Agreement’s signature line provides:

In the event a dispute shall arise between the parties to this contract, it is hereby agreed that the dispute shall be referred to [one of the following choices: (1) designate a specific USA&M office or alternate service by agreement of the parties; (2) provide a method of selecting the arbitrator and suits of the hearing, such as ‘from the county wherein the manufacturing plant is located’; or for multi-jurisdictional disputes (3) insert ‘a USA&M office to be designated by USA&M National Headquarters’] for arbitration in accordance with the applicable United States Arbitration and Mediation Rules of Arbitration. The arbitrator’s decision shall be final and legally binding and judgment may be entered thereon. “Each party shall be responsible for its share of the arbitration fees in accordance with the applicable Rules of Arbitration. In the event a party fails to proceed with arbitration, unsuccessfully challenges the arbitrator’s award, or fails to comply with the arbitrator’s award, the other party is entitled to costs of suit, including a reasonable attorney’s fee for having to compel arbitration or defend or enforce the award.”[2] (Bracketed text and italics in original.)

After reviewing the Agreement, which was prepared by HMDG, Defendants executed the Agreement without requesting any changes to the Arbitration Clause. Mr. Majd executed the Agreement on behalf of HMDG.

In mid-2011, a dispute arose between HMDG and Defendants regarding the quality of the remodeling work, Defendants’ requests to make substantial changes to the project’s scope, and Defendants’ alleged failure to make prompt progress payments as required by the Agreement. On July 9, 2011, HMDG made a proposal to resolve the dispute by having Defendants place funds sufficient to complete the remaining project items into an escrow account. Although HMDG’s proposal contained numerous references to arbitration, no formal demand for arbitration was made. When Defendants refused the proposal, HMDG served a 10-day stop work order and recorded a mechanic’s lien on the property.

On December 15, 2011, HMDG filed a complaint against Defendants in the superior court, asserting claims for breach of contract, a common count for money due under the contract, foreclosure of mechanics lien, unjust enrichment, and violation ...


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