These days, many consumer and other types of contracts routinely include arbitration clauses. Not unexpectedly, litigation over the enforcement of such clauses has increased significantly over the last several years, with both trial and appellate courts repeatedly asked to decide issues involving public policy, federal preemption, and unconscionability, among others.
To manage such litigation effectively, savvy practitioners need to understand under what circumstances an order involving an arbitration issue is appealable. A meritorious appeal from an appealable arbitration order can expedite a case’s outcome, but a party’s failure to exercise the right to appeal, when it exists, may sacrifice that right forever. (See, e.g., Allstate Ins. Co. v. Orlando (1968) 262 Cal.App.2d 858, 867 [party’s failure to appeal from order partially vacating arbitration award, an appealable order, foreclosed challenge to vacation order on appeal from final judgment].)
We begin with Code of Civil Procedure section 1294, which sets forth the list of appealable orders and judgments in arbitration matters. Section 1294 states that an “aggrieved party” may appeal from “[a]n order dismissing or denying a petition to compel arbitration”; “[a]n order dismissing a petition to confirm, correct or vacate an award”; “[a]n order vacating an award unless a rehearing in arbitration is ordered”; “[a] judgment entered pursuant to this title”; and “[a] special order after judgment.” (Id., subds. (a)-(e).)
Of the appealable orders listed, perhaps the most commonly appealed is an order denying a motion to compel arbitration. Because such an order forecloses the parties from resolving their dispute in the way they have arguably agreed, to delay appellate review of such an order until after final judgment would defeat an important goal of arbitration—to resolve cases quickly and avoid what can be more costly court litigation.
Moreover, in California state court, an appeal from the denial of a motion to compel arbitration automatically stays all further trial court proceedings, essentially placing the trial court action on hold until the resolution of arbitrability. (See Prudential-Bache Securities, Inc. v. Superior Court (1988) 201 Cal.App.3d 924, 925.) This automatic stay rule is different from the rule in the Ninth Circuit, where the courts have discretion to stay district court proceedings pending appeal from an order denying arbitration. (Britton v. Co-Op BankingGroup, 916 F.2d 1405, 1412 (9th Cir. 1990).)
One recent decision—that, as of this writing is not yet final—held that an order denying a petition to confirm an arbitration should be construed as an order “dismissing” the petition, making the order appealable under section 1294. (Cinel v. Christopher (No. B231679, Jan. 20, 2012 (ordered published Feb. 16, 2012)) __ Cal.App.4th __.) This result, the Court said, “makes sense” in light of the California Arbitration Act as a whole, since “[i]in all instances under section 1294, either the order itself is appealable, or an appeal lies from the subsequently entered judgment,” and if a court denies a petition to confirm, the parties would be “left in limbo” since no judgment could be entered and no appeal could be taken.
In other instances, such as an order denying a petition to vacate or correct an arbitration award, no appeal lies, since such orders are not listed in section 1294. (Mid-Wilshire Assocs. v. O'Leary (1992) 7 Cal.App.4th 1450, 1454.) Nor does an appeal lie from an order confirming an arbitration award. (Cummings v. Future Nissan (2005) 128 Cal.App.4th 321-326, 327.) Rather, such orders are reviewable by extraordinary writ or on appeal from any judgment entered after the award’s confirmation. (§ 1294, subd. (d).)
Similarly, an order granting a motion to compel arbitration is not appealable, but is reviewable only by extraordinary writ or by appeal after final judgment. (Mid-Wilshire Assocs., supra, 7 Cal.App.4th at p. 1454.) “The rationale behind the rule making an order compelling arbitration nonappealable is that inasmuch as the order does not resolve all of the issues in controversy”—as a judgment after confirmation would—“to permit an appeal would delay and defeat the purposes of the arbitration statute.” (State Farm Fire & Casualty v. Hardin (1989) 211 Cal.App.3d 501, 506.)
But what is the rule on appealability when a trial court grants in part and denies in part a motion to compel arbitration? A recent decision from the First District, Division Three, Reyes v. Macy’s, Inc. (Dec. 21, 2011, ordered published Jan. 19, 2012) __ Cal.App.4th ___, No. A133411, 2011 WL 6416432, provides some guidance, but only by implication.
In Reyes, a Macy’s employee sued a group of Macy’s entities, alleging various Labor Code violations and other claims on behalf of herself and a class of similarly-situated employees. In addition to other remedies, the employee sought civil penalties that the Private Attorneys General Act of 2004 (“PAGA”) permits a plaintiff to recover on behalf of herself and any other employees against whom Macy’s allegedly committed Labor Code violations.
Based on the parties’ arbitration agreement, Macy’s moved to compel arbitration of the employee’s individual claims, to dismiss the class and representative allegations, and to stay the court proceedings until the completion of arbitration. The trial court severed the employee’s individual claims and ordered them into arbitration. The trial court also ordered the PAGA representative claims and the class claims stayed, ruling that they should remain in the trial court “until the individual claims are arbitrated.”
Macy’s appealed, but Reyes moved to dismiss the appeal because Macy’s had appealed from a nonappealable order. Macy’s argued that by declining to compel Reyes to arbitrate her PAGA claims, the trial court had partially denied its motion to compel, “rendering the order appealable.” The Court of Appeal disagreed, stating that neither “literally nor functionally did Macy’s request the trial court to compel the arbitration of these claims, nor did the [trial] court refuse to do so.”
Rather, the Court said, in staying the class and PAGA claims, the trial court “ha[d] not yet determined whether some or all of these claims should eventually be dismissed or may warrant judicial relief.” And construing that order as the denial of a motion to dismiss did not aid Macy’s, since such an interlocutory order “is not yet subject to appeal” under Code of Civil Procedure section 904.1, which “provides the general list of appealable orders and judgments” and does not list the denial of a motion to dismiss. (See Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 486, 489 [order denying motion to dismiss not appealable].) Because no appeal lies from such an order, appellate review may be only extraordinary writ—which Macy’s had not sought—or appeal after a final judgment or order.
The Court also explained that it could not construe the trial court’s order as partially denying Macy’s motion to compel arbitration—an order that, the Court implied, would be appealable. This was because Macy’s had sought arbitration only of plaintiff’s individual claims, and “[a] plaintiff asserting a PAGA claim may not bring the claim simply on his or her own behalf but must bring it as a representative action and include ‘other current or former employees.’ ” Concluding that a PAGA claim is not an individual claim, the Court said the representative claim was outside the scope of Macy’s motion to compel such that the Court could not construe the trial court’s order as a denial of that motion. In short, because “no portion of the trial court’s order [was] appealable,” Reyes’ motion to dismiss the appeal was well taken.
The takeaway from Reyes is that when a court issues a “split decision” on arbitrability—compelling arbitration of some claims but denying arbitration of others, even by implication, an appeal lies from that portion of the order that denies arbitration. And when the order cannot be construed as a denial of arbitration, a writ petition is the fastest (albeit by no means guaranteed) route to appellate court relief.
Reyes is also a good reminder that when a trial court issues an order that is not appealable because a party has neither “literally nor functionally” been denied relief that an appellate court may afford by way of appeal, the party’s failure to seek a writ may mean no relief is on the horizon until appeal after final judgment.
A version of this article appeared in the San Francisco and Los Angeles Daily Journal, February 16, 2012.