CALIFORNIA APPELLATE COURT FINDS THAT FEDERAL ARBITRATION ACT DID NOT PREEMPT CALIFORNIA’S STATUTE GOVERNING ARBITRATION PROCEDURE

In Los Angeles Unified School District v. Safety National Casualty Corp., 13 Cal.App. 5^th 471, 220 Cal.Rptr.3d 546 (2^nd Dist. 2017) the court held that California Code of Civil Procedure §1281.2(c) was not preempted by the Federal Arbitration Act. See 9 U.S.C. §1. Under the California Code provision, California courts were permitted to refuse to enforce arbitration agreements when there was a possibility of conflicting rulings in situations where a party to the arbitration agreement was also a party to a court proceeding involving third parties who were not bound by the agreement. The appellate court reaffirmed the trial court’s ruling when the trial court denied the insurance company’s motion to compel arbitration in a dispute involving coverage for a school district’s negligent hiring of several teachers who abused students. In the underlying litigation, the teachers in question abused students for decades and because of this, 26 other insurance companies were also parties to the school district lawsuit. The school district argued that the abuse arose out of a single occurrence. The trial court found that there was a possibility that the arbitrator and the court might issue conflicting rulings and therefore the trial court refused to order arbitration.