Issue: Under California law, when may a court refuse to compel arbitration?
|Area of Law:||Alternative Dispute Resolution, Litigation & Procedure|
|Keywords:||Refusal to compel arbitration; Arbitration agreement; Pending court action|
|Cited Cases:||236 Cal. Rptr. 167; 284 Cal. Rptr. 255; 233 Cal. App. 3d 94|
|Cited Statutes:||Cal. Civ. Proc. Code § 1281.2(c)|
A court may refuse to compel arbitration where
(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 issue of law or fact. . . .
Cal. Civ. Proc. Code § 1281.2(c) (1982).
In C.V. Starr & Co. v. Boston Reinsurance Corp., 190 Cal. App. 3d 1637, 236 Cal. Rptr. 167 (1987), the court considered a dispute between two groups of excess coverage reinsurers. C. V. Starr, the excess coverage manager, had allocated responsibility for payment of a $24.9 million settlement equally between the two groups. Two of the companies disputed this distribution and brought a petition to compel arbitration.FN1 The court noted that the potential for conflicting rulings was readily apparent if one allocation were made through arbitration (binding only the reinsurers involved) and a second through court action. 190 Cal. App. 3d at 1641, 236 Cal. Rptr. at 170. Depending on the respective allocations, C.V. Starr would be either over- or under-indemnified. Id.
The court rejected the petitioners’ argument that the court action should have been stayed pending arbitration and the arbitration award used in […]