Sometimes “May” Means “Shall” and Sometimes “May” Means “May”

     When does an ADR provision that provides for arbitration require arbitration?

     Truplug, the inventor of a product used as an emergency plug for boat leaks, sued Forespar, which had exclusive rights to market the product, for misrepresentation and negligence in marketing the Truplug product.  After the trial court denied Forespar’s motion to compel arbitration, Forespar appealed.  Truplug v. Forespar Products Corp., Case No. G046983 (4th Dist. Div. 3 April 2, 2013) (O’Leary, P.J., author  3:0) (unpublished).

      The problem presented by the ADR provisions was that they were a mish-mash.  Thus, one sentence read, “the parties shall try in good faith to settle the dispute by mediation . . . before resorting to arbitration, litigation, or some other dispute resolution procedure.”  Another sentence read:  “In the event . . . mediation does not resolve the dispute, either party may deliver a copy thereof to the American Arbitration Association . . . “   Yet another sentence read, “Whenever a party desires to institute litigation proceedings against the other party concerning this Agreement, it shall provide written notice . . . “  And another sentence provided that actions shall be brought in the County of Orange.

     Appellant Forespar argued that the use of the word “may” meant that a party had the option to arbitrate, and that arbitration was triggered by a party’s choice to arbitrate.  In fact there are cases holding that mandatory arbitration will be triggered when a party “may” arbitrate and opts to arbitrate.

      However, looking “at the arbitration language in the context of the entire Agreement,” the Court of Appeal concluded that there was no “clear agreement to arbitrate any and all controversies between the parties,” sinking Forestar’s argument.

      The Merrimac sinks the Cumberland.  1862.  Library of Congress.

      The order of the trial court was affirmed.

     TIP:  If you are arguing in favor of arbitration, emphasize “contractual arbitration being a favored method of resolving disputes, every intendment will be indulged to give effect to such proceedings.”  Titan Group, Inc. v. Sonoma Valley County Sanitation Dist., 164 cal.App.3d 1122, 1127 (1985).  If you are opposing arbitration, argue that there is no clear and unequivocal agreement to waive the right to a court trial of controversies between the parties.   Wolschlager v. Fidelity National Title Ins. Co., 111 Cal. App.4th 784, 789 (2003).