Procedural Posture

Plaintiff sued defendants, alleging that defendants breached their oral joint venture agreement to split the profits from their business entities. Pursuant to Code Civ. Proc., § 1281.2, defendants petitioned to compel arbitration of plaintiff’s claims, but the Los Angeles County Superior Court, California, entered an order denying defendants’ petition. Defendants appealed.

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Overview

Pursuant to the joint venture agreement, the parties had formed several business entities to buy, develop, and manage real property. The instant court concluded that the trial court erred by denying defendants’ petition to compel arbitration as to disputes over the operating agreements of two of the business entities. Arbitration was mandatory under these business entities’ operating agreements. Any lawsuit that was brought to enforce or interpret the operating agreements or resolve disputes between members to those agreements had to be arbitrated. Although the trial court refused to compel arbitration on the ground one of the business entities was not a party to plaintiff’s action and the complaint did not include allegations that raised any issues concerning the enforcement or interpretation of that agreement, or any disputes between the business entity’s member-investors, it was not necessary that the business entity itself be named as a defendant to invoke the terms of the arbitration provision based on allegations that defendants violated the terms of the operating agreement.

Outcome

The order denying defendants’ petition to compel arbitration was reversed, and the trial court was directed to enter a new and different order granting that petition.