As more and more commercial agreements incorporate arbitration provisions, it is increasingly common for business disputes to be subject to arbitration. However, sophisticated parties often want seasoned judges to decide their right to injunctive relief even though they want the efficiencies that arbitration has to offer. For that reason, it is fairly typical for an arbitration provision to include a “carve out” that allows the contracting parties to seek injunctive relief in Court. For example, an arbitration agreement might provide:
“Any dispute arising out of or in connection with this Agreement shall be referred to and finally resolved by arbitration before a single arbitrator. The foregoing, however, shall not preclude the parties from applying to a court for any preliminary or injunctive relief to preserve the status quo.”
When a party to such an agreement wants to have its substantive dispute heard in arbitration but seek injunctive or other provisional relief from a California state court, there are a few practical considerations to keep in mind.
First, a complaint is not required if a party filed an arbitration demand first. The California Arbitration Act (“CAA”), codified at Code of Civil Procedure (“CCP”) §§ 1280-1294.4, allows a party to an arbitration agreement to file a complaint in state court or an arbitration demand and then seek a provisional remedy from the Court. If the party chooses to file its arbitration demand first, it need only file an application for provisional relief in the court in the county in which the arbitration proceeding is pending. See CCP § 1281.8(b). The application must be accompanied by a copy of the arbitration demand and any response to it. Id.
Second, guard against the risk of waiver of the right to arbitrate. If a party decides to file a complaint along with their application for provisional relief, they should take several safeguards to ensure they do not waive their right to arbitration. These include:
File a statement pursuant to CCP § 1281.8(b) that indicates they are reserving their right to arbitrate.
File a motion to stay all other proceedings in the action (other than the application for provisional relief) pending the arbitration of any “issue, question, or dispute which is claimed to be arbitrable” and which is “relevant to the action pursuant to which the provisional remedy is sought.” See CCP § 1281.8(d). Failure to file a motion to stay contemporaneously with the complaint and application for provisional relief is not a waiver on its own, but it is a factor a court can consider in finding waiver if prejudice to the other party has occurred because the court action was not stayed. See Simms v. NPCK Enterprises, Inc., 109 Cal.App.4th 233, 240-241 (2003) (no waiver despite parties’ failure to include a request for stay with their application for provisional relief).
If you are certain you can arbitrate all of the substantive claims in the dispute, be careful how you approach your request for a jury trial both in the complaint and in your case management statement. Consider using conditional language that requests a jury trial as to any claims or issues not subject to arbitration.
Only plead causes of action that are necessary to the request for injunctive relief. Adding claims beyond the limited set you wish the court to adjudicate may cause further confusion regarding whether your client intends to arbitrate those claims or litigate them in court.
Third, confidentiality must be safeguarded. keep in mind that arbitration proceedings are, by their nature, confidential. Confidential information can be included in an arbitration demand without the need to seek special protection. But a party who files a copy of a confidential arbitration demand concurrently with their application for provisional relief, should evaluate the need to file under seal any confidential portions of the arbitration demand.
For more information regarding Alto Litigation’s litigation practice, please contact one of Alto Litigation’s partners: Bahram Seyedin-Noor, Bryan Ketroser, or Joshua Korr.
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