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Date: 05-18-2018

Case Style: Michael Benaroya v. Bruce Willis

Case Number: B281761

Judge: Willhite

Court: California Court of Appeals Second Appellate District Division Four on appeal from the Superior Court, Los Angeles County

Plaintiff's Attorney: David Grossman and Robert J. Catalano

Defendant's Attorney: Martin D. Singer, Allison S. Hart, Jeremy B. Rosen and John F. Querio

Description: Benaroya Pictures (Benaroya) contracted with Westside
Corporation (Westside) to pay the well-known actor Bruce Willis, the
2
president of Westside, to perform in a movie to be produced by
Benaroya. After a dispute arose regarding Willis’ payment, Willis and
Westside (collectively respondents) commenced arbitration proceedings
against Benaroya, pursuant to the arbitration clause in the agreement.
While in arbitration, respondents moved to amend their arbitration
demand to name appellant Michael Benaroya individually, even though
he was not a party to the agreement, on the ground that he was the
alter ego of Benaroya. The arbitrator granted the request, found
appellant to be Benaroya’s alter ego, and awarded damages to
respondents for which both Benaroya and appellant, as Benaroya’s alter
ego, were liable. The trial court denied appellant and Benaroya’s
petition to vacate the award as to appellant, and granted respondents’
petition to confirm the award. In this appeal from the confirmation of
the award, appellant contends the trial court erred because he was a
nonsignatory to the arbitration agreement, and only the court, not the
arbitrator, had authority to determine whether he was compelled to
arbitrate as the alter ego of Benaroya. We agree and therefore reverse
the judgment. We remand the case to the trial court with directions to:
(1) set aside its rulings denying appellant and Benaroya’s petition to
vacate the award and granting respondent’s petition to confirm; and
(2) enter new orders granting appellant and Benaroya’s petition to
vacate the award as to appellant, and granting respondents’ petition to
confirm the award only as to Benaroya.
FACTUAL AND PROCEDURAL BACKGROUND
3
In September 2014, Benaroya and Westside entered an escrow
agreement for Creative Artists Agency to hold $8 million in trust for the
services of Bruce Willis in a movie. Willis signed the agreement as
president of Westside, designated in the contract as “Lender,” and
appellant signed on behalf of Benaroya Pictures, identified as
“Producer.” The agreement contained an arbitration clause, providing
in relevant part: “If there is any dispute between Producer and Lender
with respect to the disposition of funds deposited in the Escrow
Account, the parties agree that such dispute shall be resolved
exclusively through arbitration . . . pursuant to the rules and
regulations of JAMS [Judicial Arbitration and Mediation Service] before
a single arbitrator. If the parties are unable to agree upon an
arbitrator, the arbitrator will be selected according to the Commercial
Arbitration Rules of JAMS.”
1
In May 2015, respondents filed a demand for arbitration pursuant
to the arbitration clause, alleging that Benaroya breached the escrow
agreement by failing to pay Willis. Benaroya filed an answer and
counterclaim, alleging money had and received, conversion, and breach
of the contract by Willis.
On September 10, 2015, respondents moved before the arbitrator
to amend the arbitration demand to name appellant as an additional
party. The motion for leave to amend asserted that appellant is “the

1 We describe the terms of the arbitration agreement in more detail
below in our Discussion.
4
founder, principal, managing member, sole officer and Chief Executive
Officer of Benaroya Pictures.”
Benaroya opposed the motion, arguing that appellant was not a
party to the escrow agreement and arbitration clause, and that the
question whether a nonsignatory can be compelled to arbitrate is a
question for the trial court alone.
After the arbitrator issued a tentative ruling granting
respondents’ motion for leave to amend, Benaroya and appellant
informed the arbitrator and respondents “that they would submit” on
the tentative ruling. The arbitrator then granted the motion to amend
and named appellant as a party to the arbitration, relying on Rule 11(b)
of the JAMS Comprehensive Arbitration Rules and Procedures, which
“provides that jurisdictional disputes, including regarding who are
proper parties to the Arbitration, ‘shall be submitted to and ruled on by
the Arbitrator. The Arbitrator has the authority to determine
jurisdiction . . . issues as a preliminary matter.’” In support of the
ruling, the arbitrator cited Comerica Bank v. Howsam (2012) 208
Cal.App.4th 790 (Comerica) for the proposition that “[a]n arbitrator
may decide the question whether an alter ego relationship exists when
the designated arbitration rules give the arbitrator the power to
determine the question.”
Following the ruling, Benaroya’s arbitration brief continued to
dispute the arbitrator’s exercise of jurisdiction over appellant. For their
part, respondents’ brief asked the arbitrator to draw an adverse
inference against appellant on the alter ego issue, because Benaroya
had not produced financial documents in response to a subpoena.
5
Benaroya and appellant opposed the request, reiterating their position
that the arbitrator lacked authority to bind appellant as Benaroya’s
alter ego.2 Appellant and Benaroya challenged the alter ego theory
again in their post-hearing closing brief.
The matter proceeded through arbitration. Ultimately, in the
final arbitration award, the arbitrator determined appellant to be
Benaroya’s alter ego. The arbitrator found “considerable unity of
interest between [Benaroya] and [appellant],” reasoning that appellant
“solely controls” and “adds funds” to Benaroya. He further reasoned
that appellant “personally made the misrepresentations to Willis’
agents on behalf of [Benaroya].” The arbitrator further cited appellant’s
admission of “sloppy record-keeping,” his failure to “produce many
documents,” and his lack of credibility. The arbitrator concluded that,
although it was “a close call, . . . an inequity would result if [appellant]
was not found to be [Benaroya’s] alter ego.” On the merits of the
contract dispute, the arbitrator found in favor of respondents and
awarded them $5,024,778.61 in damages, plus prejudgment interest,

2 They also contended that the subpoenas were served only three
days before the commencement of the arbitration hearing, and were
extremely overbroad and irrelevant to the alter ego issue. The
subpoenas sought, among other documents, “All statements for any
account at any financial institution of any kind in which Benaroya
Pictures has held any interest from January 1, 2012 to the present” and
“All documents evidencing or memorializing all monies paid by
Benaroya Pictures for the production of the motion picture entitled
Idol’s Eye from January 1, 2013 to November 30, 2014.”
6
attorney fees, and costs, for which Benaroya and appellant (as
Benaroya’s alter ego) were liable.
Appellant and Benaroya moved to vacate the arbitration award or
to correct it to remove appellant as a party. They argued that the
arbitrator exceeded his authority by making the alter ego finding and
exercising jurisdiction over appellant, a nonsignatory to the arbitration
agreement. They further argued that the arbitrator’s determination
usurped the authority of the court and was legally unsupportable.
Respondents filed a petition to confirm the award. The trial court
granted respondents’ petition, denied appellant and Benaroya’s
petition, and entered judgment in favor of respondents. Appellant
timely appealed.
DISCUSSION
Appellant contends the trial court erred in confirming the
arbitration award because the decision whether a nonsignatory to an
arbitration agreement can be compelled to arbitrate is a matter solely
within the authority of the trial court, not the arbitrator. We agree:
while the relevant JAMS rule here permits an arbitrator to determine
whom among signatories to an arbitration agreement are proper parties
for the dispute to be arbitrated, the rule cannot (and does not) permit
the arbitrator to determine whether a nonsignatory to the arbitration
agreement can be compelled to arbitrate. The authority to decide that
question resides, by law, solely with the trial court.
The escrow agreement stated that it was “between Benaroya
Pictures (‘Producer’) and Westside Corp . . . (‘Lender’) [for the services
7
of] Bruce Willis (‘Artist’).” As we have noted, the arbitration provision
in the escrow agreement provided in pertinent part: “If there is any
dispute between Producer and Lender with respect to the disposition of
funds deposited in the Escrow Account, the parties agree that such
dispute shall be resolved exclusively through arbitration in Los Angeles,
California pursuant to the rules and regulations of JAMS before a
single arbitrator. If the parties are unable to agree upon an arbitrator,
the arbitrator will be selected according to the Commercial Arbitration
Rules of JAMS.” In the provision on governing law, the agreement
stated, in part that “all disputes which may arise between the parties
hereto under or with respect to this Escrow Agreement . . . will be
determined pursuant to California law and shall be resolved either by
arbitration in accordance with the rules of JAMS or by a determination
by a SAG-AFTRA arbitration tribunal, based upon the election of fora
permitted by this Escrow Agreement. All such procedures shall be held
in Los Angeles, California and Producer and Lender hereby submit to
personal jurisdiction in the State of California for such purposes.”
The trial court reasoned that the arbitrator’s powers derive from
the agreement to arbitrate and therefore examined the arbitration
provision in the escrow agreement to determine if the arbitrator
exceeded his powers. Because the escrow agreement stated that the
rules of JAMS applied, the court looked to those rules, which state that
the arbitrator shall determine its own jurisdiction, and concluded that
8
the arbitrator correctly determined the alter ego issue and did not
impermissibly expand the scope of the arbitration provision.3
“We review de novo the trial court’s order confirming the
arbitration award. [Citations.]” (Greenspan v. LADT, LLC (2010) 185
Cal.App.4th 1413, 1435 (Greenspan).) “Whether an arbitration
agreement is binding on a third party (e.g., a nonsignatory) is a
question of law subject to de novo review. [Citation.]” (Daniels v.
Sunrise Senior Living, Inc. (2013) 212 Cal.App.4th 674, 680 (Daniels);
see also Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1512 (Suh)
[“Whether an arbitration agreement is operative against a nonsignatory
is determined by the trial court and reviewed de novo.”].)
Here, while it is true that the language of an arbitration
agreement determines the scope of the arbitrator’s powers granted by
the signatories, the agreement cannot bind nonsignatories, absent a
judicial determination that the nonsignatory falls within the limited

3 The court cited JAMS Rule 11(b), which provided: “Jurisdictional
and arbitrability disputes, including disputes over the formation,
existence, validity, interpretation or scope of the agreement under
which Arbitration is sought, and who are proper Parties to the
Arbitration, shall be submitted to and ruled on by the Arbitrator. The
Arbitrator has the authority to determine jurisdiction and arbitrability
issues as a preliminary matter.” The court also relied on JAMS Rule
24(c): “In determining the merits of the dispute, the Arbitrator shall be
guided by the rules of law agreed upon by the Parties. . . . The
Arbitrator may grant any remedy or relief that is just and equitable and
within the scope of the Parties’ agreement, including, but not limited to,
specific performance of a contract or any other equitable or legal
remedy.”
9
class of third-parties who can be compelled to arbitrate. (See Sandquist
v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 252 (Sandquist) [“To
presume arbitrability without first establishing, independently, consent
to arbitration is to place the proverbial cart before the horse.”].)
“‘Although California has a strong policy favoring arbitration
[citations], our courts also recognize that the right to pursue claims in a
judicial forum is a substantial right and one not lightly to be deemed
waived. [Citations.] Because the parties to an arbitration clause
surrender this substantial right, the general policy favoring arbitration
cannot replace an agreement to arbitrate. [Citations.] Thus, the right
to compel arbitration depends upon the contract between the parties,
[citations], and a party can be compelled to submit a dispute to
arbitration only where he has agreed in writing to do so. [Citation.]’
[Citation.]” (Smith v. Microskills San Diego L.P. (2007) 153
Cal.App.4th 892, 896 (Smith); Matthau v. Superior Court (2007) 151
Cal.App.4th 593, 598 (Matthau) [“Arbitration is a favored method of
resolving disputes, but the policy favoring arbitration does not
eliminate the need for an agreement to arbitrate and does not extend to
persons who are not parties to an agreement to arbitrate.”].) Numerous
cases confirm the general rule that “a party cannot be compelled to
arbitrate a dispute that he or she has not agreed to resolve by
arbitration. [Citations.]” (Daniels, supra, 212 Cal.App.4th at p. 680;
see, e.g., Hotels Nevada, LLC v. L.A. Pacific Center, Inc. (2012) 203
Cal.App.4th 336, 347 [“‘The right to arbitration depends upon contract;
a petition to compel arbitration is simply a suit in equity seeking
10
specific performance of that contract. [Citations.] There is no public
policy favoring arbitration of disputes which the parties have not agreed
to arbitrate.’”]; Adajar v. RWR Homes, Inc. (2008) 160 Cal.App.4th 563,
569 [arbitration cannot be compelled unless there is an agreement to
arbitrate]; Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d
473, 481 [“There is indeed a strong policy in favor of enforcing
agreements to arbitrate, but there is no policy compelling persons to
accept arbitration of controversies which they have not agreed to
arbitrate and which no statute has made arbitrable.”]; Goldman v.
SunBridge Healthcare, LLC (2013) 220 Cal.App.4th 1160, 1169
(Goldman) [“‘“‘there is no policy compelling persons to accept arbitration
of controversies which they have not agreed to arbitrate’”’”].)
“There are circumstances in which nonsignatories to an
agreement containing an arbitration clause can be compelled to
arbitrate under that agreement. As one authority has stated, there are
six theories by which a nonsignatory may be bound to arbitrate:
‘(a) incorporation by reference; (b) assumption; (c) agency; (d) veilpiercing
or alter ego; (e) estoppel; and (f) third-party beneficiary’
[citations].” (Suh, supra, 181 Cal.App.4th at p. 1513.)
Although a nonsignatory can be compelled to arbitrate, California
caselaw is clear that “an arbitrator has no power to determine the
rights and obligations of one who is not a party to the arbitration
agreement. [Citation.] The question of whether a nonsignatory is a
party to an arbitration agreement is one for the trial court in the first
instance.” (American Builder’s Assn. v. Au-Yang (1990) 226 Cal.App.3d
11
170, 179 (American Builder’s); see also Matthau, supra, 151 Cal.App.4th
at p. 604 [“‘Whether or not an arbitration agreement is operative
against a person who has not signed it involves a question of
“substantive arbitrability” which is to be determined by the court.’”];
City of Hope v. Bryan Cave, L.L.P. (2002) 102 Cal.App.4th 1356, 1369
[“‘The determination of standing to arbitrate as a party to the
contractual arbitration agreement is a question of law for the trial court
in the first instance.’”].)
This rule is grounded on policy concerns explained by the court in
American Builder’s: “If an arbitrator, rather than a trial court, were to
determine whether an arbitration provision were operative against a
nonsignatory, a stranger to the agreement might be subjected to and be
bound by an arbitration to which such stranger had not consented and
would be without effective review. While a court will vacate an
arbitration award if the arbitrators exceeded their powers, courts may
not examine the sufficiency of the evidence supporting the award.
[Citations.] [Fn. omitted.] Thus, if [the plaintiff] were to bring a motion
to vacate the award asserting the arbitrator had exceeded his powers in
ordering joinder due to insufficient evidence to support a finding that
[the corporation] was the [defendants’] principal, the trial court,
constrained by the limited grounds set forth in [Code of Civil Procedure
section] 1286.2, would decline to review the arbitrator’s factual finding.”
(American Builder’s, supra, 226 Cal.App.3d at pp. 179-180.)
In American Builder’s, a builder and a homeowner entered into a
written construction contract that contained an arbitration clause.
When a dispute arose about the contract, the plaintiff builder sued the
12
owners of the property. The defendant owners filed a demand for
arbitration. The arbitrator found that, although the defendants were
the signatories to the contract, they had signed the contract as agents
for a corporation. The arbitrator therefore ordered the defendants to
join the nonsignatory corporation in the proceedings. The plaintiff
moved to stay the proceedings to obtain judicial review of the order.
The arbitrator continued the hearing, and the plaintiff filed a complaint
seeking to enjoin the defendants from including the corporation in the
arbitration proceedings.
The trial court denied the injunction on the grounds that the
arbitrator had jurisdiction to determine whether the defendants signed
as agent for the corporation, and that the “‘all claims’” language in the
arbitration clause was sufficient to bind the plaintiff to arbitration.
(American Builder’s, supra, 226 Cal.App.3d at p. 175.) The appellate
court reversed, holding that “[t]he question of whether a nonsignatory is
a party to an arbitration agreement is one for the trial court in the first
instance.” (Id. at p. 179.) The court acknowledged that “an arbitrator is
authorized to determine all questions necessary to resolve the
controversy submitted for decision. [Citation.] However, ‘judicial
enthusiasm for alternative methods of dispute resolution “must not in
all contexts override the rules governing the interpretation of
contracts[,]” as the policy favoring arbitration cannot displace the
necessity for a voluntary agreement to arbitrate. [Citation.]’
[Citation.]” (Ibid.)
Similarly, in Retail Clerks Union v. L. Bloom Sons Co. (1959) 173
Cal.App.2d 701, the appellant petitioned to compel arbitration with a
13
corporate entity that was separate from the corporation that was a
party to the contract. The trial court denied the petition, and the
appellate court affirmed the denial. The appellate court explained that
the non-party “did not consent to have th[e] issue decided by an
arbitrator rather than by a court of competent jurisdiction.” (Id. at p.
703.) The court reasoned that appellant was “urging the patently
absurd proposition that two parties can by contract effectively stipulate
for the mode of determination of the rights of a third party who has not
only not assented to such a mode of determination but who also is not
even accorded an opportunity to participate in such determination.”
(Ibid.) Like respondents here, the appellant argued that the non-party
to the contract was merely the alter ego of the party. The court stated,
“[a]ppellant begs the question. It must first be determined whether [the
non-party] is in fact but the alter ego of respondent. . . . The proper
forum for that determination is, of course, a court of law.” (Ibid.)
In First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938
(First Options), the United States Supreme Court set forth the same
policy concerns as those expressed by American Builder’s in explaining
that the question regarding who has the power to decide whether a
party has agreed to arbitrate is crucial because of the deference
accorded an arbitrator’s decision. The court stated, “a party who has
not agreed to arbitrate will normally have a right to a court’s decision
about the merits of its dispute . . . . But, where the party has agreed to
arbitrate, he or she, in effect, has relinquished much of that right’s
practical value. The party still can ask a court to review the arbitrator’s
decision, but the court will set that decision aside only in very unusual
14
circumstances. [Citations.] Hence, who–court or arbitrator–has the
primary authority to decide whether a party has agreed to arbitrate can
make a critical difference to a party resisting arbitration.” (Id. at p.
942.)
The trial court here relied on Greenspan, supra, 185 Cal.App.4th
1413, to conclude that the arbitrator had power under the JAMS rules
to compel appellant, a nonsignatory to the escrow agreement, to
arbitrate the dispute. But Greenspan is inapposite: it is a case in which
parties to an arbitration agreement were ordered to arbitrate by the
trial court, and the question presented was whether the JAMS rules
they agreed would apply gave the arbitrator the authority to determine
what specific issues were arbitrable in the parties’ dispute. Nothing in
Greenspan suggests that an arbitrator can somehow reach out to compel
a non-party to the arbitration agreement to arbitrate a dispute under a
contract to which he was not a party.
Distilling Greenspan’s complicated procedural background to its
essence, the essential facts were as follows. After the plaintiff in
Greenspan filed a civil action alleging breach of contract, the defendants
filed a petition to compel arbitration in the trial court. (Greenspan,
supra, 185 Cal.App.4th at p. 1425.) The plaintiff opposed the petition,
contending that it was not a party to any agreement containing an
arbitration clause, and that the arbitration agreement cited in the
petition did not encompass the causes of action in the plaintiff’s
complaint. The trial court disagreed, found that the parties had entered
a valid arbitration agreement, ordered the plaintiff to initiate mediation
15
and, if that was unsuccessful, commence arbitration proceedings.
(Ibid.) The mediation failed, and the parties then agreed to resolve
their disputes through an arbitration proceeding that would be
governed by JAMS rules. (Id. at pp. 1426-1427.) In rendering an award
in the plaintiff’s favor, the JAMS arbitrator concluded that the
defendants were jointly and severally liable.
Appealing from the trial court’s denial of their petition to vacate
the award, the defendants argued that the arbitrator exceeded his
authority, because the plaintiff did not plead the theory of joint and
several liability, and therefore, under relevant JAMS rules, the theory
of joint and several liability was not an issue the arbitrator could
decide. (Greenspan, supra, 185 Cal.App.4th at pp. 1435-1436.)
In that context, the Greenspan court framed the initial issue
presented as “who in this case determines what issues were arbitrable–
the arbitrator or a judge. In other words, does the arbitrator or the
court decide the question of arbitrability?” (185 Cal.App.4th at p. 1439.)
Relying on First Options, Greenspan observed that “[s]imply put, ‘[t]he
question whether the parties have submitted a particular dispute to
arbitration, i.e., the “question of arbitrability,” is “an issue for judicial
determination [u]nless the parties clearly and unmistakably provide
otherwise.”’ [Citations.]” (Id. at p. 1440.) The parties in Greenspan
“did not clearly and unmistakably agree in the Arbitration Agreement
that the arbitrator would decide arbitrability,” but they did agree to
arbitrate their dispute under JAMS rules, and those rules gave the
arbitrator the authority to decide what issues were arbitrable. (Ibid.)
16
The court concluded that, “‘when . . . parties explicitly incorporate rules
that empower an arbitrator to decide issues of arbitrability, the
incorporation serves as clear and unmistakable evidence of the parties’
intent to delegate such issues to an arbitrator.’ [Citations.]” (Id. at p.
1442.)
The holding of Greenspan–that by incorporating JAMS rules in
their agreement the parties to that agreement gave the arbitrator the
power to decide what issues in their dispute were arbitrable–does not
stand for the proposition that by incorporating JAMS rules, parties to
an arbitration agreement can give the arbitrator the power to compel a
nonsignatory to the agreement to become a party to the arbitration.4
The trial court also relied on Keller Construction Co. v. Kashani
(1990) 220 Cal.App.3d 222 (Keller), but Keller, too, is inapposite. Based

4 We note that the cases relied upon by Greenspan similarly
concerned whether a claim was within the scope of the arbitration
agreement–not the initial determination whether a nonsignatory can be
compelled to arbitrate. (See Greenspan, supra, 185 Cal.App.4th at p.
1441, discussing Rodriguez v. American Technologies, Inc. (2006) 136
Cal.App.4th 1110, 1123 [where there was no dispute that parties were
subject to the arbitration clause, the plaintiffs contended “two of their
grievances fall outside the clause’s scope”]; Dream Theater, Inc. v.
Dream Theater (2004) 124 Cal.App.4th 547, 553-556 [where parties had
arbitration agreement, holding that they clearly agreed upon
arbitration of all contested claims of loss]; Monex Deposit Co. v. Gilliam
(C.D. Cal. 2009) 616 F.Supp.2d 1023, 1025 [where there was no dispute
parties were subject to the arbitration agreement, compelling
arbitration of all counterclaims, noting that the arbitration agreement
“incorporates JAMS Rules providing that the arbitrator decides scope
and validity disputes with respect to particular claims”].)
17
on provisions of the Corporations Code, Keller held that “a sole general
partner of a limited partnership under the facts of this case is subject to
an arbitration agreement between the partnership and a third party.”
(Id. p. 229.) However, as noted by American Builder’s, “Keller did not
address which forum should determine the existence of an agency
relationship in the first instance in the event there is a factual dispute
as to that issue.” (American Builder’s, supra, 226 Cal.App.3d at p. 179,
fn. 4.) California law makes the answer to that question clear: a
“logical condition precedent” that a court must decide before a case can
be sent to arbitration “is whether, in fact, the parties agreed to arbitrate
at all; it makes no sense to compel parties to go before an arbitrator
without first determining they agreed to do so.” (Sandquist, supra, 1
Cal.5th at p. 254.)
None of the decisions cited by respondent is to the contrary. For
example, respondents rely on Suh, 181 Cal.App.4th 1504, which (as we
have noted) discussed the circumstances in which a nonsignatory can be
compelled to arbitrate. Suh, however, stated that “[w]hether an
arbitration agreement is operative against a nonsignatory is
determined by the trial court and reviewed de novo. [Citation.]” (Id. at
p. 1512, italics added; see also Daniels, supra, 212 Cal.App.4th at p. 676
[trial court and appellate court determined whether nonsignatory
should be compelled to arbitrate]; Goldman, supra, 220 Cal.App.4th at
p. 1169 [determination whether nonparty who signed arbitration
agreement on husband’s behalf should be compelled to arbitrate made
by court]; Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1284 [decision
18
that “a nonsignatory sued as the alter ego of a signatory can enforce an
arbitration provision” made by the court]; Smith, supra, 153
Cal.App.4th at p. 901 [affirming trial court order denying
nonsignatory’s motion to compel arbitration]; Matthau, supra, 151
Cal.App.4th at p. 598 [court was the forum for determining whether a
nonsignatory should be bound by an arbitration agreement]; Boucher v.
Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 265, 268 [trial court
and appellate court determined whether defendant, a nonsignatory to
the agreement, could compel plaintiff to arbitrate his causes of action];
Harris v. Superior Court (1986) 188 Cal.App.3d 475, 477–478 [decision
to compel nonsignatory to arbitration made by court]; cf. Mormile v.
Sinclair (1994) 21 Cal.App.4th 1508, 1511 [holding that “a patient can
bind his or her nonsignatory spouse to arbitrate a loss of consortium
claim against a health care provider” and therefore reversing trial court
order denying petition to compel arbitration].)
5
Finally, although respondents concede that the alter ego issue is
normally for the courts to decide, they argue that, here, “the parties

5 Respondents also rely on Comerica, but the question there was not
whether a nonsignatory to the arbitration agreement could be
compelled to arbitrate as an alter ego. Rather, in Comerica, the
defendants who challenged the arbitrator’s alter ego finding were
signatories to the agreement and, in fact, they “all agreed to arbitrate
the claims contained in the first amended complaint, with its alter ego
allegations, under . . . international arbitration rules.” (Comerica,
supra, 208 Cal.App.4th at p. 834.) In concluding that “[t]he arbitrator
did not exceed his powers by deciding the alter ego issue,” the court
pointed out that the defendants not only agreed to arbitrate, but
“actively sought to arbitrate.” (Id. at pp. 831, 834.)
19
have clearly and unmistakably delegated such arbitrability issues to the
arbitrator.” They are mistaken. Appellant, a nonsignatory to the
agreement, did not agree to delegate any issues to the arbitrator.
Moreover, while in some circumstances a party’s conduct may evidence
an implied agreement to arbitrate (Douglass v. Serenivision, Inc. (2018)
20 Cal.App.5th 376, 387-388) “consent to arbitration (or to the
arbitrator’s power to decide arbitrability) will not be inferred solely
from a party’s conduct of appearing in the arbitral forum to object to the
arbitrator’s exercise of jurisdiction, at least if the party makes that
objection ‘prior to participat[ing]’ in the arbitration. [Citations.]” (Ibid.)
Here, appellant and Benaroya repeatedly disputed the arbitrator’s
power to determine the alter ego issue, and never voluntarily submitted
to the arbitrator’s jurisdiction.
“[M]erely arguing the arbitrability issue to an arbitrator does not
indicate a clear willingness to arbitrate that issue, i.e., a willingness to
be effectively bound by the arbitrator’s decision on that point. To the
contrary, insofar as [appellant and Benaroya] were forcefully objecting
to the arbitrator[] deciding their dispute . . . , one naturally would think
that they did not want the arbitrator[] to have binding authority over
them.” (First Options, supra, 514 U.S. at p. 946; see Ikerd v. Warren T.
Merrill & Sons (1992) 9 Cal.App.4th 1833, 1843 [corporate president’s
participation in arbitration proceeding on behalf of corporation did not
constitute a general appearance for jurisdictional purposes nor waive
his right to object to arbitrator’s imposition of jurisdiction over him
because “he necessarily [participated] as the person most
knowledgeable about the relevant facts.”].)
20
Harmless Error
Respondents contend that, even if the alter ego issue should have
been decided by the court rather than the arbitrator, the confirmation of
the arbitration award should be affirmed. The reason: any error was
harmless, because there was “overwhelming evidence” in the arbitration
of appellant’s alter ego status. We note that the arbitrator did not find
“overwhelming evidence.” Instead, the arbitrator described the issue as
a “close call.”
Regardless, the error in permitting the arbitrator to decide
whether appellant could be compelled to arbitrate as the alter ego of
Benaroya is not subject to harmless error. “[I]ts effects are
‘“unmeasurable”’ and ‘“def[y] analysis by ‘harmless-error’ standards.”’
[Citations.]” (Sandquist, supra, 1 Cal.5th at p. 261.) The wrong
decision-maker decided the issue; the arbitrator exceeded his authority
by purporting to compel appellant to arbitrate and making him liable
for the award as Benaroya’s alter ego. Therefore, the arbitration award
must be set aside insofar as it binds appellant. (Code Civ. Proc.,
§ 1286.2, subd. (a)(4) [ground for vacating arbitration award established
where “[t]he arbitrators exceeded their powers and the award cannot be
corrected without affecting the merits of the decision upon the
controversy submitted”].) There is no basis for finding the court’s
failure to do so was mere harmless error.

Outcome: The judgment is reversed. The case is remanded to the trial court
with directions to: (1) set aside its rulings denying appellant and
Benaroya’s petition to vacate the award and granting respondent’s
petition to confirm the award; and (2) enter new and different orders
granting appellant and Benaroya’s petition to vacate the award as to
appellant, and granting respondents’ petition to confirm the award only
as to Benaroya. Appellant is entitled to costs on appeal.

Plaintiff's Experts:

Defendant's Experts:

Comments:



 
 
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