Procedural Posture

Procedural Posture

Defendants, a company’s former officers, directors, and employees, challenged an order from the Superior Court of Los Angeles County (California), which denied their Code Civ. Proc., § 1281.2, motion to compel arbitration of a dispute with plaintiff investor.

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The investor brought suit on its own behalf and derivatively on behalf of the company, alleging that the company’s former officers, directors, and employees defrauded the investor and harmed the company by diverting an asset to their own use. The former officers, directors, and employees were not parties to the agreement between the investor and the company, which contained an arbitration clause that extended to “any dispute or other disagreement” arising from or out of the agreement. The court concluded that the broad language of the arbitration clause extended to the disputes alleged in the investor’s complaint because the agreement established and governed the investor’s relationship with the company. If the investor and the company had never entered into the agreement, the parties’ disputes would never have arisen. The language of the arbitration clause was sufficiently broad to encompass tort causes of action. Thus, the trial court erred in denying the motion to compel arbitration. Because the trial court did not reach standing and waiver issues that the investor had asserted in its opposition to the motion to compel arbitration, a remand was necessary.


The court reversed the order that had denied the motion to compel arbitration and remanded with directions to the trial court to consider the issues of standing and waiver.