California Courts of Appeal Reports

SHEPPARD v. LIGHTPOST MUSEUM FUND, H029574 (Cal.App.
12-29-2006) TERRANCE J. SHEPPARD, Plaintiff and Respondent,
v. LIGHTPOST MUSEUM FUND, et al., Defendants and
Appellants. H029574 Court of Appeal of California, Sixth
District December 29, 2006 Certified for Publication

Appeal from Santa Clara County Superior Court No. CV041254.

Attorneys for Appellants: Rhonda Cate Canby, Philip T.
Darke, DOWNEY BRAND.

Attorney for Respondent: J. Joseph Wall, Jr.KORDA, JOHNSON
& WALL.

MIHARA, Acting P.J.

Defendants submitted an arbitration claim to an
arbitration organization asserting that plaintiff had
breached the parties’ contracts. Plaintiff responded by
filing a complaint against defendants in superior court.
Plaintiff then filed a Code of Civil Procedure section[fn1]
425.16 motion to strike defendants’ arbitration claim. The
superior court partially granted plaintiff’s motion. We
conclude that Code of Civil Procedure section 425.16 does
not authorize a superior court to grant a motion to strike
an arbitration claim filed only in an agreed arbitral forum
and not asserted by the claimant in any complaint,
cross-complaint or petition filed in court. We therefore
reverse the superior court’s order.

I. Background

In October 2002, plaintiff Terrance J. Sheppard entered
into employment agreements with defendants Lightpost Museum
Fund, Inc. (LMF) and Art for Children Charities, Inc.
(ACC). Each agreement included a non-disclosure clause that
remained applicable “at any time after Employee leaves
employment of Employer.” The employment agreements provided
for binding arbitration before Christian Dispute Resolution
Professionals, Inc. (CDRP) of any dispute that “arises out
of, or relates to this Agreement, or the breach thereof, or
otherwise between the parties. . . .”

Sheppard’s employment was terminated in September 2003. His
wrongful termination claim and LMF and ACC’s claims of
breach of contract and for declaratory relief were
submitted to CDRP for binding arbitration in 2004. LMF and
ACC’s declaratory relief claim asserted that Sheppard had
violated the agreements’ non-disclosure clauses. The
arbitrator awarded no relief to any of the parties.

In April 2005, LMF and ACC sent a letter to CDRP requesting
that the arbitrator “revisit[]” their claim that Sheppard
had violated the non-disclosure clauses because, after the
2004 arbitration, Sheppard, as a third party witness, had
turned over confidential documents and testified about
confidential information in arbitration proceedings, and
had expressly stated that he was not bound by the
non-disclosure clauses. LMF and ACC asserted that Sheppard
“continued” to possess confidential documents and disclose
confidential information to others in violation of the
non-disclosure clauses. “At issue now is not evidence
already adduced in [unrelated arbitration] proceedings [in
which Sheppard had testified regarding confidential
information], but Terry Sheppard’s continued [possession
and disclosure] of confidential information. . . .” “[LMF
and ACC] will suffer continuing harm from Mr. Sheppard’s
breaches of the confidentiality agreements, so they seek
injunctive relief that will force Mr. Sheppard to return
company documents and to immediately stop releasing
confidential information. They also seek an award of
damages in an amount to be determined by the arbitrator.”
CDRP deemed LMF and ACC’s April 2005 letter to be “a new
Demand for Arbitration and Notice of Claim.” CDRP notified
Sheppard of the demand and allowed him time to file a
response to the demand with CDRP. Sheppard did not file a
response with CDRP.

On May 16, 2005, Sheppard filed a complaint against LMF and
ACC[fn2] in Santa Clara County Superior Court alleging tort
causes of action and seeking declaratory relief. His
declaratory relief cause of action alleged that there was a
controversy between the parties regarding Sheppard’s right
to testify in certain legal actions. Sheppard alleged:
“Defendants are also attempting to obtain a prior restraint
on Sheppard’s constitutional right of free speech by
precluding him from writing a book involving Kinkade.
Defendants’ conduct is in violation of Code of Civil
Procedure § 425.16 and is subject to a motion to
strike.” He sought an unspecified “judicial determination
of his rights and a declaration by the court. . . .”

In June 2005, Sheppard filed in superior court a special
motion to strike “the arbitration claim pending before the
[CDRP] pursuant to Code of Civil Procedure §
425.16.”

In July 2005, LMF and ACC filed a demurrer to three of the
four causes of action in Sheppard’s complaint and a
“motion” seeking “an order compelling this case to
arbitration” under section 1281.7. The demurrer did not
challenge the declaratory relief cause of action. The motion
to compel asserted that Sheppard’s declaratory relief cause
of action in his complaint was “identical to the claim
pending in arbitration” and should be “compelled to binding
arbitration” in accordance with the employment agreement.
LMF and ACC did not seek to compel arbitration of their own
claim that they had previously asserted in their
arbitration demand.

In August 2005, LMF and ACC filed opposition to Sheppard’s
special motion to strike. They asserted: “[T]he motion . .
. does not even belong before this court because [LMF and
ACC] have not filed any `causes of action’ against Sheppard
in this forum. Stated differently, Sheppard’s motion to
strike is fatally flawed because the subject of the motion,
the [LMF/ACC] arbitration demand, is not before this court
and thus there is no complaint for this court to `strike.’
[…] Sheppard’s motion must be denied on its face
because this court has no jurisdiction to strike a pleading
submitted to a completely different adjudicatory body. If
Sheppard wants to pursue a motion to strike, he should be
required to do so in the CDRP forum. . . .”

Also in August 2005, Sheppard filed opposition in the
superior court to LMF and ACC’s motion to compel
arbitration of Sheppard’s declaratory relief cause of
action. He contended that arbitration could not be
compelled because “defendants’ current arbitration claim . .
. is in direct violation of Code of Civil Procedure section
425.16(e)(1).” However, Sheppard did not file a special
motion to strike the motion to compel arbitration nor did
he amend his pending special motion to strike to encompass
the motion to compel. Sheppard’s opposition to the demurrer
asserted that his declaratory relief cause of action was not
identical to LMF and ACC’s claim in the arbitral forum.

At a September 2005 hearing, the superior court asserted
that it had jurisdiction to address the motion to strike.
“I think that it’s this Court’s job to reach the motion to
strike issue.” It directed the parties to “prepare
supplemental pleading on the issue of the merits.” The
court stated that LMF and ACC’s motion to compel arbitration
of Sheppard’s declaratory relief cause of action was not
“ripe” until the court ruled on the motion to strike. The
hearing was continued to October 2005.

At the October 2005 hearing, the superior court reasoned
that the motion to strike and the motion to compel “are
sort of opposite sides on the same point.” The court
divided LMF and ACC’s April 2005 arbitration claim into two
parts. One part of the arbitration claim was that Sheppard
possessed confidential documents that LMF and ACC had a
right to have returned. The other part of the arbitration
claim was that Sheppard had disclosed confidential
information at arbitration hearings without a subpoena and
was writing a book containing confidential information.

The court ruled that the first part of the arbitration
claim, which was not part of LMF and ACC’s motion to
compel, was subject to arbitration, but the other part of
the arbitration claim, which had never been asserted in a
complaint, crosscomplaint or petition filed in court, was
within the court’s jurisdiction under section 425.16 and
subject to Sheppard’s motion to strike. The superior court
concluded that it was “not proper for the arbitrator to
decide” if Sheppard had breached the agreement by
testifying and writing a book. The court granted the motion
to strike as to the second part of the claim and denied it
as to the first part of the claim.

The superior court thereafter issued a single order ruling
on the motion to strike, the motion to compel arbitration
and the demurrer. The court reiterated its earlier
assertion that the motion to compel and the motion to
strike “are the pro[v]erbial `opposite sides of the same
coin.'” The court purported to grant LMF and ACC’s motion to
compel “on the issue of whether Mr. Shep[p]ard has
documents in his possession that were not turned over in
violation of his employment agreement.”[fn3] The court
asserted that LMF and ACC’s motion to compel sought to
compel arbitration of the portion of LMF and ACC’s
arbitration claim which asserted that Sheppard had breached
the non-disclosure clause by testifying and writing a book.
Because, in the court’s view, this part of the claim
implicated Sheppard’s right to free speech, this part of
the “arbitration claims” was subject to Sheppard’s motion
to strike under section 425.16. The court granted
Sheppard’s motion to strike this part of the arbitration
claim because it targeted “protected activity” and LMF and
ACC had not demonstrated a probability of prevailing on
this part of the claim. Sheppard’s request for attorney’s
fees was denied because his motion to strike had been only
partially successful. The court sustained LMF and ACC’s
demurrer without leave to amend as to the three tort causes
of action, so that only the declaratory relief cause of
action remained. LMF and ACC filed a timely notice of
appeal from the court’s order partially granting Sheppard’s
motion to strike.

II. Analysis

LMF and ACC contend that the superior court erred in
striking a part of their arbitration claim filed in the
arbitral forum because section 425.16 does not authorize a
superior court to strike all or part of such a claim.
Sheppard maintains that section 425.16 does authorize a
court to strike all or part of an arbitration claim even if
the claim has never been asserted by the claimant in a
complaint, cross-complaint or petition filed in a court.

“We begin as always `with the fundamental premise that the
objective of statutory interpretation is to ascertain and
effectuate legislative intent.’ [Citation.] To discover
that intent we first look to the words of the statute,
giving them their usual and ordinary meaning. [Citations.]
`Where the words of the statute are clear, we may not add
to or alter them to accomplish a purpose that does not
appear on the face of the statute or from its legislative
history.’ [Citation.]” (Trope v. Katz (1995) 11 Cal.4th
274, 280.)

Section 425.16 is expressly intended to target “abuse of
the judicial process.” (Code Civ. Proc., § 425.16,
subd. (a).) “A cause of action against a person arising
from any act of that person in furtherance of the person’s
right of petition or free speech under the United States or
California Constitution in connection with a public issue
shall be subject to a special motion to strike, unless the
court determines that the plaintiff has established that
there is a probability that the plaintiff will prevail on
the claim.” (Code Civ. Proc., § 425.16, subd.
(b)(1).) “The special motion may be filed within 60 days of
the service of the complaint or, in the court’s discretion,
at any later time upon terms it deems proper.” (Code Civ.
Proc., § 425.16, subd. (f).) “For purposes of this
section, `complaint’ includes `cross-complaint’ and
`petition,’ `plaintiff’ includes `cross-complainant’ and
`petitioner,’ and `defendant’ includes `cross-defendant’
and `respondent.'” (Code Civ. Proc., § 425.16, subd.
(h).)

Section 425.16 does not expressly make arbitration claims
asserted only in an arbitral forum “subject to” a motion to
strike. The statute makes a “cause of action” in a
“complaint,” which “includes cross-complaint and petition,”
“subject to” a motion to strike. Nevertheless, the
statute’s failure to expressly include arbitration claims
asserted only in an arbitral forum within its ambit is not
necessarily conclusive. “The term `includes’ is ordinarily a
word of enlargement and not of limitation. [Citation.] The
statutory definition of a thing as `including’ certain
things does not necessarily place thereon a meaning limited
to the inclusions.” (People v. Western Air Lines, Inc.
(1954) 42 Cal.2d 621, 639.) “[W]hen a statute contains a
list or catalogue of items, a court should determine the
meaning of each by reference to the others, giving
preference to an interpretation that uniformly treats items
similar in nature and scope.” (Moore v. California State
Bd. of Accountancy (1992) 2 Cal.4th 999, 1011-1012.)
Complaints, cross-complaints and petitions are pleadings
which are filed in courts to initiate judicial proceedings.
(Code Civ. Proc., §§ 22, 420, 422.10.)
Arbitration claims filed only in an arbitral forum, while
in some ways similar to pleadings, are very different
because they are not filed in courts and they do not
initiate judicial proceedings. These distinctions indicate
that the Legislature did not intend to include such claims
within the term “complaint.”

Section 425.16’s timing provisions provide additional
evidence of the Legislature’s intent to exclude arbitration
claims filed only in an arbitral forum from the reach of
the statute. Section 425.16 requires a motion to strike to
be brought within a certain time period after “service of
the complaint.” “[S]ervice of the complaint” is a term of
art that refers to the means by which a court obtains
jurisdiction over a defendant. (Code Civ. Proc.,
§§ 410.50, 413.10, 415.10.) Arbitration
claims filed only in private arbitral forums are not subject
to these statutory jurisdictional limitations. By
restricting the timing of a motion to strike in terms that
are exclusively applicable to an action in court, the
Legislature expressed its intent to limit the pleadings
that are subject to a motion to strike to those pleadings
that have been filed in court.

Finally, the Legislature expressly stated its intent that
section 425.16 target “abuse of the judicial process.”
(Code Civ. Proc., § 425.16, subd. (a), italics
added.) Private arbitration proceedings are not part of the
judicial process; they are “nonjudicial” proceedings.
“Nonjudicial [private contractual] arbitration proceedings
are generally regulated by the procedural rules established
by the arbitration agency; such proceedings are not
necessarily controlled by the Code of Civil Procedure
unless expressly provided by that code (Code Civ. Proc.,
§ 1280 et seq.), by the arbitration rules, by the
parties’ contract, or other provisions of law regulating
such nonjudicial arbitration.” (Paramount Unified School
Dist. v. Teachers Assn. of Paramount (1994) 26 Cal.App.4th
1371, 1387, italics added.)

Section 425.16 does not “expressly provide[]” that it
applies to claims asserted only in nonjudicial arbitration
proceedings. This statute was expressly intended to prevent
abuse of the “judicial process,” and its terms are not
reconcilable with a legislative intent to extend it to
arbitration claims filed only in private nonjudicial
forums. It follows that the Legislature did not authorize
superior courts to strike arbitration claims filed only in
arbitral forums under section 425.16.

Sheppard asserts that section 425.16 is nevertheless
applicable here because he “plac[ed] [LMF and ACC’s]
arbitration demand before the court” and LMF and ACC also
did so by filing a motion to compel arbitration of
Sheppard’s complaint. His contentions do not affect our
analysis of the narrow legal issue before us. This appeal is
solely from the superior court’s ruling on Sheppard’s
motion to strike. The court’s rulings on the demurrer and
the motion to compel are not before us.[fn4]

The validity of Sheppard’s motion to strike cannot depend
on LMF and ACC’s motion to compel arbitration since
Sheppard filed his motion to strike before LMF and ACC
filed their motion to compel, and the motion to compel did
not seek to compel arbitration of LMF and ACC’s own claims.
Sheppard’s motion to strike did not target any cause of
action in a complaint, cross-complaint or petition filed by
LMF and ACC in the superior court.[fn5] Sheppard’s motion
to strike explicitly targeted only LMF and ACC’s April 2005
arbitration claim, not their subsequently filed motion to
compel.[fn6] And obviously Sheppard did not move to strike
his own declaratory relief cause of action that he claims
“plac[ed]” LMF and ACC’s arbitration claim “before the
court.”

Since Sheppard’s motion to strike targeted only LMF and
ACC’s arbitration claim, which had been asserted by the
claimants only in the arbitral forum and not as part of a
complaint, cross-complaint or petition filed in court, and
this claim was not subject to section 425.16, the superior
court erred in partially granting Sheppard’s motion.

III. Disposition

The superior court’s order is reversed, and the superior
court is directed to vacate its order and enter a new order
denying Sheppard’s motion to strike in its entirety. LMF
and ACC shall recover their appellate costs.

I CONCUR:

Duffy, J.

[fn1] Subsequent unspecified statutory references are to the
Code of Civil Procedure.

[fn2] Sheppard’s complaint also named Thomas Kinkade and The
Thomas Kinkade Company, who are not parties to this appeal.

[fn3] As noted above, this claim was not the subject of the
motion to compel.

[fn4] We therefore have no reason to examine the scope or
validity of the arbitration clauses in the agreements
between the parties.

[fn5] Sheppard did not even move to strike LMF and ACC’s
motion to compel.

[fn6] LMF and ACC do not challenge the superior court’s
partial denial of their motion to compel in this appeal.
This appeal is limited to the court’s ruling on Sheppard’s
motion to strike.

McAdams, J., concurring.

I agree with my colleagues that Code of Civil Procedure
section 425.16 (section 425.16) does not authorize a motion
to strike an arbitration claim pending in an arbitral forum
under the circumstances present in the matter before us. I
write separately in order to commend and comment upon the
trial court’s attempt to resolve what was essentially an
arbitration dispute.

In spite of the inartful pleadings and the unusual
procedural posture of the case, the trial court recognized
the essence of the dispute between the parties as a
disagreement over proceeding to arbitration: the former
employer viewed the matter as a breach of the employment
contract and subject to arbitration under the terms of that
agreement; the former employee claimed he was being forced
into arbitration for engaging in constitutionally protected
activity. Each side sought the protection of the court in
support of its position concerning the former employer’s
demand for arbitration.

Courts in California have long recognized that “California
law, like federal law, favors enforcement of valid
arbitration agreements.” (Armendariz v. Foundation Health
Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97; see
also, Code Civ. Proc., § 1281.) However, the
arbitrability of a claim is a matter to be decided by the
court. (Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14
Cal.3d 473, 479-480; Code Civ. Proc. § 1281.2; see
also, Litton Financial Printing Div. v. NLRB (1991) 501
U.S. 190, 208 [“Whether or not a company is bound to
arbitrate, as well as what issues it must arbitrate, is a
matter to be determined by the court, and a party cannot be
forced to `arbitrate the arbitrability question’ “].)

Here, the trial court sensed that it was the responsibility
of the court to consider and resolve whether constitutional
rights might be implicated in this demand for arbitration,
as opposed to declining to entertain the claim and thus
delegating the determination to an arbitrator or leaving
the former employee with no forum for consideration of his
constitutional claim. Without ruling on the correctness of
the trial court’s conclusions or suggesting the outcome of
any further proceedings, I commend the trial court’s
instincts. The problem is that the issue was presented to
the trial court through a section 425.16 special motion to
strike, a procedural device not available under the
pleading and procedural posture of this case.

Therefore, I would remand the matter for further
consideration of the issue of arbitrability where a party
to an otherwise valid arbitration agreement objects to
arbitration, in a proper law and motion proceeding, based
on the assertion that the claim sought to be arbitrated
involves a constitutionally protected activity.