Arbitration Agreement Is Enforceable in the Absence of Agreed Method or Alternative Options for Appointing Arbitrator

On September 20, 2013, in HM DG, Inc., et al. v. Amini and Beizai, etc., et al., Case No.B242540 (LASC Case No. BC475302), the California Court of Appeal (Second District, Division Three) held that, because the court has the power to appoint an arbitrator under Code of Civil Procedure section 1281.6, “neither the absence of a definite method, nor the presence of ‘alternative options’ for appointing an arbitrator renders an otherwise valid arbitration agreement unenforceable.”

The trial court denied the defendant homeowners’ petition to compel contractual arbitration in an action by their home remodeling contractor for unpaid progress payments. The trial court held that the defendants failed to establish the existence of a valid arbitration agreement due to uncertainty as to the method of appointing an arbitrator. The Court of Appeal reversed.

It is clear that the California courts intend to enforce written arbitration agreements, even in the absence of contractual specifics about selecting an arbitrator. Code of Civil Procedure section 1281.6 gives the parties and the courts a basis on which to select and appoint an arbitrator in the event their arbitration agreement fails to do so.

The opinion also addresses the requirements of an arbitration demand. The court remanded the case to the trial court to consider whether the demand was properly made pursuant to the terms of the arbitration agreement and was refused, as required by Code of Civil Procedure section 1281.2 and explained in the case of Mansouri v. Superior Court (2010) 181 Cal.App.4th 633. The trial court was to consider the plaintiffs’ various defenses to the petition to compel arbitration, such as waiver under section 1281.2(a).

Word to the wise – Before sending your demand for contractual arbitration, be sure to review the entire chapter on Enforcement of Arbitration Agreements, Code of Civil Procedure sections 1281 – 1281.96, as well as the HM DG and Mansouri cases.