Procedural Posture

Procedural Posture

Plaintiff obligee sought review of the decision of the Superior Court of Los Angeles County (California), which denied its petition to compel defendant surety to participate in arbitration between plaintiff and principal.

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Overview

Plaintiff obligee filed a petition to compel defendant surety to participate in arbitration between plaintiff and principal. The trial court denied plaintiff’s petition. The court reversed. It concluded that by the language in its performance bond incorporating by reference the contract between plaintiff and principal, defendant intended, and agreed, to be bound by the arbitration provision in the contract even though it was not a party to the contract. The court rejected defendant’s claim that plaintiff waived its right to arbitration. It found that defendant made no showing that plaintiff’s delayed filing of its amended complaint for arbitration had caused defendant to believe that it was not subject to the arbitration provision of the contract or that such delay impaired its ability to participate in the arbitration in a meaningful way. The court also concluded that defendant should have asserted its statute of limitations defense in the arbitration proceeding.

Outcome

The court reversed the lower court. It found that by the language in its performance bond incorporating by reference the contract between plaintiff obligee and principal, defendant surety intended and agreed to be bound by the arbitration provision in the contract even though defendant was not a party to the contract.