JSM Tuscany, LLC v. Superior Court

In JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, the plaintiffs sued, among other things, for breach of three purchase and sale agreements (PSA's), which contained arbitration provisions, and three related deed restrictions agreements. The PSA's were signed by only two of the four plaintiffs and five of the twenty-seven defendants. The court reiterated the rule in Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262 that the signing plaintiffs who sue on an agreement with an arbitration provision may be compelled by both signatory and nonsignatory defendants to arbitrate their claims if the claims are inextricably intertwined. (JSM, supra, 193 Cal.App.4th at p. 1239.) "'Courts applying equitable estoppel against a signatory have "looked to the relationships of the persons, wrongs and issues, in particular whether the claims that the nonsignatory sought to arbitrate were '"'intimately founded in and intertwined with the underlying contract obligations."'"'' " (Id. at p. 1238.) JSM went on to hold "this doctrine should . . . be equally applicable to a nonsignatory plaintiff. When that plaintiff is suing on a contract--on the basis that, even though the plaintiff was not a party to the contract, the plaintiff is nonetheless entitled to recover for its breach, the plaintiff should be equitably estopped from repudiating the contract's arbitration clause. " (JSM, supra, 193 Cal.App.4th at pp. 1239-1240.) The court found that rule was particularly germane "where, as appears to be the case here, all of the plaintiffs, signatory and nonsignatory, are related entities." (JSM, supra, 193 Cal.App.4th at p. 1240.) Thus, "a nonsignatory plaintiff can be compelled to arbitrate a claim even against a nonsignatory defendant, when the claim is itself based on, or inextricably intertwined with, the contract containing the arbitration clause." (Id. at p. 1241.)