Pacific States Environmental Contractors, Inc. v. Steleco LLC et al.

Pursuant to the Court’s (Hon. Panteha E. Saban) February 27, 2026 Order for Supplemental Briefing, the parties simultaneously submitted supplemental briefs on March 19, 2026, addressing seven discrete questions identified by the Court.

As discussed below, the Court tentatively rules as follows: (1) Owners’ Motion to Consolidate is GRANTED IN PART and DENIED IN PART; (2) DPR’s Motion to Compel Mediation and Arbitration is GRANTED IN PART and DENIED IN PART; (3) the consolidated state-court action is STAYED in its entirety pending the issuance of the arbitration award, subject to limited exceptions described herein.

II.

Background

A. The Prime Contract and Multiparty Proceeding Clause

The Prime Contract was executed by Steleco, as Agent for Owner, and DPR. Kipling Post is not a signatory. Article 13 of the Prime Contract is captioned “Dispute Mitigation and Resolution” and provides, in relevant part: § 13.2 (Direct Discussions): A 60-day pre-dispute negotiation period. § 13.4 (Mediation): Mediation under the AAA Construction Industry Mediation Rules before any arbitration.

§ 13.5 (Binding Dispute Resolution): “If the matter is unresolved after submission of the matter to a mitigation procedure or to mediation, the Parties shall submit the matter to the binding dispute resolution procedure selected below: Arbitration using: the current JAMS Engineering and Construction Arbitration Rules and Procedures and administered by JAMS....”

§ 13.8 (Multiparty Proceeding): “All parties necessary to resolve a matter agree to be parties to the same dispute resolution proceeding, if possible. Appropriate provisions shall be included in all other contracts relating to the Work to provide for the joinder or consolidation of such dispute resolution procedures.”

§ 13.9 (Lien Rights): “Nothing in this article shall limit any rights or remedies not expressly waived by [DPR] which [DPR] may have under lien laws.”

§ 14.3 (Governing Law): “The Law in effect at the location of the Project shall govern this Agreement.”

The DPR/subcontractor agreements typically contain a flow-down clause providing that the dispute resolution procedures of the Prime Contract apply to disputes arising in connection with the Work where such disputes “involve or are alleged to involve acts or omissions of Owner or its representatives or involve a dispute between Owner and DPR.” Section 17.1 of those subcontracts further provides that, in those circumstances, “Owner, [DPR] and Subcontractor shall participate together in the same dispute resolution proceeding”—with at least two subcontracts (Bigge Crane and Berkeley Cement) including the qualifying phrase “unless Owner or Contractor disapproves Subcontractor’s participation.”

TKE’s subcontract is materially different. The TKE Master Subcontract Agreement amends DPR’s standard arbitration provision and substitutes Section 17.2.4, providing that “litigation shall be utilized in lieu of arbitration.” That amendment also expressly states that it “shall have the highest priority over any conflicting language” in the subcontract.

B. The KO Architects Design Contract

KO’s September 1, 2017 design agreement is with Kipling Post (not Steleco), predates the DPR Prime Contract by sixteen months, contains no arbitration clause, and contains a $10,000 limitation-of-liability provision in KO’s favor. Owners’ cross-complaint against KO sounds in breach of contract, professional negligence, and declaratory and indemnity relief. KO has cross-claimed against DPR for indemnity, expressly invoking Article 11.1.1 of the Prime Contract.

C. The JAMS Arbitration

Owners themselves filed the JAMS arbitration demand on November 1, 2022, naming DPR. The Arbitration Demand was signed and prosecuted by Steleco “as Agent for Owner” and Kipling Post jointly. In Scheduling Order No. 1 (May 23, 2023), Arbitrator Duryee expressly found the matter arbitrable under Article 13.5 of the Prime Contract. Eleven scheduling orders have followed. DPR represents that it has produced more than 200,000 pages of documents and has incurred substantial JAMS fees. In Scheduling Order No. 10 (May 17, 2024), the arbitrator declined to set further pre-hearing dates pending this court’s ruling on the consolidation motion, while reaffirming arbitrability and noting that consolidation is a matter for this court.

D. DPR’s Disputed Licensure Status

Owners allege that DPR’s qualifiers disassociated from California Contractors’ State License Board License No. 953749, that the license was thereafter suspended, and that DPR therefore performed work as an unlicensed contractor in violation of Business and Professions Code section 7031. DPR represents that it secured License No. 1083716 before the prior license was suspended, and that it was continuously licensed throughout the Project under one or both license numbers. The licensure dispute is unresolved on this record.

III. Owners’ Motion to Consolidate

A. Legal Standard for Consolidation

Code of Civil Procedure section 1048(a) authorizes the court to order a joint hearing or trial of any or all matters in issue, or to consolidate the actions, when actions involving a common question of law or fact are pending before the court. “California procedural law is infused with a solicitude, if not an altogether outright preference for the economies of scale achieved by consolidating related cases into a single, centrally managed proceeding.” (Petersen v. Bank of America Corp. (2014) 232 Cal.App.4th 238, 248.)

Consolidation should not, however, prejudice substantial rights of any party. (Stickley v. Eisner (1935) 5 Cal.App.2d 441, 444 [“[s]uch actions may be consolidated in the discretion of the court whenever it can be done without prejudice to a substantial right”].)

Section 1281.2(c) provides separate authority for the court, where a party to an arbitration agreement is also a party to a pending court action with a third party arising out of the same transaction and there is a possibility of conflicting rulings on a common issue of law or fact, to (i) refuse to enforce the arbitration agreement and order joinder of all parties; (ii) order arbitration as to those parties who agreed to arbitrate and stay the court action; (iii) stay the arbitration; or (iv) consolidate or join the arbitration for all or limited purposes. The California Supreme Court has confirmed the court’s authority to consolidate an arbitration with a state-court action under section 1281.2(c). (Mercury Ins. Group v. Superior Court (1998) 19 Cal.4th 332, 345–346 (Mercury Ins. Group).)

B. Consolidation of State-Court Actions: GRANTED

Owners seek to join four additional state-court actions: Acco Engineered Systems, Inc. v. DPR Construction (22CV404194); Pacific Steel Group v. Kipling Post, LP, et al. (23CV416531); W. Bradley Electric, Inc. v. Kipling Post LP, et al. (23CV418900); and Steleco LLC v. DPR Construction, et al. (24CV439209) (the Defect Lawsuit). These four matters all arise out of the construction of the Project, are governed by overlapping prime and subcontract documents, involve the same Owners and the same general contractor, and turn on substantially overlapping questions of fact regarding the scope, sequence, quality, completeness, and payment of work performed. Seven actions were already consolidated by this Court on November 22, 2023, on essentially the same reasoning. The newly consolidated actions follow nearly identical fact patterns.

Here, no party has identified any substantial right that would be prejudiced by litigating these matters in a single, coordinated state-court proceeding. To the contrary, separate proceedings would generate duplicative discovery, inconsistent case-management deadlines, and a substantial risk of inconsistent factual findings on overlapping issues. The motion to consolidate is therefore GRANTED as to the above-listed state-court actions, which shall proceed under Lead Case No. 22CV400012 for all purposes through trial pursuant to California Rules of Court, rule 3.350.

C. Consolidation of JAMS Arbitration into State-Court Action: DENIED

Owners further request that the court consolidate the pending JAMS arbitration into the state-court matter under section 1281.2(c). That request is DENIED.

First, the JAMS arbitration was initiated by Owners themselves more than three years ago. Owners filed the demand, jointly identified themselves as claimants, agreed to and benefited from the appointment of Arbitrator Duryee, and have actively prosecuted their claims through eleven scheduling orders. Owners are accordingly bound by their election. (Gerard v. Salter (1956) 146 Cal.App.2d 840, 844 [“[o]nce a controversy is submitted to arbitration, it remains before the arbitrators until they have completed their determination of the matter, unless the parties mutually agree to withdraw it”]; NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 80 [“a party may not agree to arbitrate a matter, participate in the arbitration and then attempt to avoid its binding nature when the result is unfavorable”].)

Second, the Multiparty Proceeding clause (Article 13.8) reflects the parties’ affirmative contractual choice that the same dispute-resolution forum apply to disputes involving necessary parties “if possible.” That language manifests an intent to expand rather than dissolve the arbitral forum when third parties are present and weighs against bringing the arbitration into state court.

Third, dissolving an active arbitration in which substantial discovery, scheduling, and ruling has occurred, and which the parties affirmatively chose, would impose substantial prejudice on DPR’s bargained-for substantive right to limited judicial review and an expeditious arbitral resolution. (Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 831 [“[b]y choosing private arbitration, parties ‘evince [their] intent to bypass the judicial system and thus avoid potential delays at the trial and appellate levels.’ [Citation.]”) The Court accepts that section 1281.2(c) authorizes such consolidation in appropriate cases, (Mercury Ins. Group, supra, 19 Cal.4th at pp. 345–346), but declines to exercise that discretion here.

Fourth, as discussed below, the Court can mitigate the risk of inconsistent rulings without consolidating the arbitration into court, by compelling arbitration of the contractually arbitrable claims and staying the state-court action as to those claims and parties under section 1281.4. That approach respects both the contractual choice and the statutory framework. Accordingly, the motion to consolidate the JAMS arbitration is DENIED.

IV. DPR’s Motion to Compel Mediation and Arbitration

DPR moves to compel mediation and arbitration and to stay proceedings, seeking to enforce the Prime Contract’s mediation and arbitration provision and to stay the consolidated state-court matters pending the conclusion of the JAMS arbitration.

Although the Federal Arbitration Act (“FAA”) governs the substantive enforceability of arbitration agreements that affect interstate commerce, California’s procedural rules (including Code of Civil Procedure section 1281.2) apply in California court unless the parties have expressly chosen the FAA's procedural provisions. (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 393–394 (Cronus); Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177 (Valencia); Los Angeles Unified Sch.

Dist. v. Safety Nat'l Cas. Corp. (2017) 13 Cal.App.5th 471, 482–483 (LA Unified).) Article 14.3 of the Prime Contract provides only that “[t]he Law in effect at the location of the Project shall govern this Agreement,” in other words, California law. Nothing in the Prime Contract designates the FAA’s procedural sections as the procedural rules governing the arbitration. Under Cronus, Valencia, and LA Unified, section 1281.2 therefore applies. DPR’s supplemental brief candidly acknowledges this. (DPR Supplemental Brief, p. 17 [“the FAA’s procedural provisions do not apply in state court unless the parties expressly adopt them.

The state’s procedural statutes (§§ 1281.2, 1290.2) apply by default”].) The Court finds no actual conflict between the FAA and section 1281.2 on these facts that would warrant displacing California’s procedural framework. Accordingly, the motion is decided under section 1281.2.

Under Code of Civil Procedure section 1281.2, the Court must order arbitration of a controversy if it determines that an agreement to arbitrate exists, unless it determines that (a) the right to compel arbitration has been waived; (b) grounds exist for revocation of the agreement; or (c) “[a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.”

Where subdivision (c) applies, the Court has broad discretion. It may: (1) refuse to enforce the arbitration agreement and order intervention or joinder; (2) order intervention or joinder as to certain issues; (3) order arbitration among the parties who agreed to arbitrate and stay the pending court action pending arbitration; or (4) stay the arbitration pending the outcome of the court action. (Code Civ. Proc. § 1281.2; Mercury Ins. Group, supra, 19 Cal.4th at pp. 345–346.)

An opponent of arbitration need only show that conflicting rulings are “possible,” not inevitable. (Lindemann v. Hume (2012) 204 Cal.App.4th 556, 567 [the issue under section 1281.2 subdivision (c), “is not whether inconsistent rulings are inevitable but whether they are possible if arbitration is ordered”].) The Court asked seven supplemental questions in its Order for Supplemental Briefing, discussed in turn below.

A. Scope of Arbitrability for Non-Signatories (Question 1)

The Court asked: “The arbitration clause in the agreement between Steleco and DPR appears contractually limited to those two parties. On what legal basis, if any, should the Court compel arbitration of disputes involving subcontractors who are not signatories to that specific agreement?”

California recognizes several doctrines under which a non-signatory may be compelled to arbitrate: (a) incorporation by reference; (b) assumption; (c) agency; (d) alter ego; (e) equitable estoppel; and (f) third-party beneficiary. (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 859 (Cohen); Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 306 (Jensen) [“[a] non-signatory plaintiff may be estopped from refusing to arbitrate when he or she asserts claims ‘dependent upon, or inextricable intertwined with,’ the underlying contractual obligations of the agreement containing the arbitration clause”].) The Court applies the foregoing principles to each category of party.

1. Steleco LLC

Steleco is a signatory to the Prime Contract and has affirmatively initiated and prosecuted the JAMS arbitration. Its claims against DPR are quintessential Article 13.5 disputes “arising out of” the Prime Contract. Steleco is bound to arbitrate. Accordingly, the motion is GRANTED as to Steleco.

2. Kipling Post LP

Kipling Post did not sign the Prime Contract. Owners argue that for that reason it cannot be compelled to arbitrate. The Court disagrees on this record. Kipling Post is the actual record owner of the Project and is named alongside Steleco as a co-claimant in the JAMS arbitration demand it filed in November 2022. It has prosecuted that arbitration, paid arbitration fees, taken discovery, and attended hearings for more than three years. By voluntarily invoking the arbitration forum, Kipling Post is properly compelled under the doctrines of assumption and equitable estoppel. (Cohen, supra, 31 Cal.App.5th at p. 859 (assumption); Jensen, supra, 18 Cal.App.5th at p. 306 [estoppel where non-signatory’s claims are inextricably intertwined with the contract].)

Kipling Post’s claims for breach of contract, defective workmanship, breach of implied warranty, and disgorgement against DPR are all dependent on the rights and duties created by the Prime Contract. Accordingly, the motion is GRANTED as to Kipling Post.

3. DPR Construction

DPR is a signatory to the Prime Contract and the moving party. The motion is GRANTED as to DPR. The Court reminds DPR of its concurrent obligation under Article 13.4 to participate in mediation under the AAA Construction Industry Mediation Rules. The parties shall mediate in good faith before further substantive arbitration hearings if they have not already done so to a conclusion.

4. The Subcontractors With “Standard” Flow-Down Provisions

The subcontracts produced on this record contain a flow-down clause that incorporates the Prime Contract’s dispute resolution procedures “as if fully set forth” and binds the subcontractor to participate in the same proceeding when the dispute involves Owner. As to those subcontractors, the flow-down clause is a written arbitration agreement directly binding the subcontractor. They are not “third parties” within the meaning of section 1281.2(c). (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 612 [“[a]s used in section 1281.2, subdivision (c), the term ‘third party’ means a party to the action that is not bound by or entitled to enforce the arbitration agreement”].)

Accordingly, the motion is GRANTED as to subcontractors holding “standard” flowdown provisions whose claims are presently before the court and involve, or are alleged to involve, acts or omissions of the Owner or are tied to the Owner–DPR dispute. Based on the record presented, this includes (subject to verification of the operative subcontract for each): Pacific States Environmental Contractors, Inc.; Acco Engineered Systems, Inc.; Air Systems, Inc.; Schnabel Foundation Company; Freas Plastering Company, Inc.; Alcal Specialty Contracting, Inc.; Alcal Glass Systems, Inc.; W.

Bradley Electric, LLC; Pacific Steel Group, LLC; Academy Awning, Inc.; Alliance Roofing Company, Inc.; Anning-Johnson Company; Cornerstone Masonry, Inc.; Cosco Fire Protection, Inc.; George E. Masker, Inc.; Joseph J. Albanese, Inc.; Lee’s Imperial Welding, Inc.; Service Metal Products, Inc.; Superior Gunite; and Therma LLC.

5. Subcontractors With “Owner Disapproval” Language (Bigge Crane and Berkeley Cement)

At least two subcontractors (Bigge Crane and Rigging Co. and Berkeley Cement, Inc.) have a Section 17.1 clause or provision that contains an additional qualifier providing that, in disputes involving Owner, “Contractor and Subcontractor will participate together in the same dispute resolution proceeding unless Owner or Contractor disapproves Subcontractor’s participation.” Owners have expressly disapproved their participation in arbitration as to these two subcontractors. The clause is clear on its face and enforceable as it states.

Accordingly, the motion is DENIED as to Bigge Crane and Rigging Co. and Berkeley Cement, Inc. The state-court claims by and against those subcontractors will be stayed under section 1281.4 pending the conclusion of arbitration. Should further review reveal that any other subcontract contains comparable “disapproval” language not yet briefed to the Court, the parties may move for clarification. The Court directs DPR to lodge complete copies of all subcontracts on the record within fifteen (15) days, in light of the assertion in Owners’ supplemental brief that some subcontracts have been produced only as work authorizations.

6. TK Elevator Corporation

TKE’s subcontract is materially different from the others. The TKE Master Subcontract Agreement substitutes Section 17.2.4 with the express provision that “litigation shall be utilized in lieu of arbitration” and provides that this amendment “shall have the highest priority over any conflicting language” in the subcontract. DPR concedes the language but contends that Sections 17.1, 17.3, and 17.5 still apply where Owner is involved. The Court declines to adopt DPR’s reading. The TKE amendment is by its terms a deliberate, negotiated departure from the standard arbitration regime, with an express priority clause.

Reading Sections 17.1, 17.3, and 17.5 to override the amendment would render the negotiated amendment a nullity. Because TKE has expressly preserved its right to litigate as to its disputes with DPR, and has unambiguously objected to participating in arbitration, the Court will respect TKE’s contracted-for forum choice. Accordingly, the motion is DENIED as to TKE. The state-court claims by and against TKE shall be stayed under section 1281.4 pending the conclusion of the arbitration, to avoid inconsistent factual findings on overlapping issues.

7. KO Architects, Inc.

KO’s 2017 design contract with Kipling Post predates the Prime Contract by sixteen months and contains no arbitration clause. The Owners owed a contractual obligation under Article 13.8 of the Prime Contract to bring KO into the same dispute-resolution forum, but they did not. That contractual breach is between Owners and DPR; it does not retroactively impose an arbitration agreement on KO. DPR argues that KO is equitably estopped because KO’s cross-complaint expressly invokes Article 11.1.1 of the Prime Contract for indemnity.

Equitable estoppel is a colorable theory, but on this record the Court is not persuaded that KO’s status as a contractually identified “Design Professional” entitled to indemnity is sufficient to override the absence of any arbitration agreement, particularly where KO has consistently disclaimed any intention to participate in the arbitration and the Owner-KO relationship is governed by an earlier, separate contract with no arbitration clause. Accordingly, the motion is DENIED as to KO. Pursuant to section 1281.4, the statecourt claims by and against KO shall be stayed pending the conclusion of the arbitration.

KO’s indication that it intends to file a motion for summary judgment will be addressed when the stay is lifted.

8. Hohbach-Lewin and Consolidated Engineering Laboratories

On this record, both Hohbach-Lewin and CEL hold separate professional services agreements with the Owners that contain no arbitration clause. Both also hold contracts with DPR. DPR proffers that the DPR/Hohbach-Lewin and DPR/CEL contracts each contain a Section 23 incorporating the Prime Contract’s dispute resolution procedures whenever the Owner is “involved.” To the extent the claims by or against Hohbach-Lewin and CEL arise out of, or are inextricably intertwined with, their DPR contracts in disputes that involve Owner, those claims are arbitrable through the flow-down mechanism, on the same logic that governs the standard subcontractors above.

To the extent claims arise solely under the separate Owner-direct professional services agreements that contain no arbitration clause, those claims are not arbitrable. Accordingly, the Court tentatively GRANTS the motion as to Hohbach-Lewin and CEL on claims tied to their DPR contracts, and DENIES the motion as to claims arising solely from their separate Owner-direct contracts; those latter claims shall be stayed under section 1281.4 pending arbitration. The parties may seek further clarification upon a more complete showing of the operative agreements.

9. DPR Employees Amelia Kraus and Robert Skinner

Owners have named two DPR employees as defendants in the Defect Lawsuit. Where the claims against these individuals are derivative of DPR’s alleged breaches of the Prime Contract and are within the scope of their employment, the claims are inextricably intertwined with DPR’s arbitration agreement, and equitable estoppel principles permit them to invoke that agreement. Accordingly, the motion is GRANTED as to Kraus and Skinner.

B. Severability of Claims (Question 2)

The Court asked: “Can the Court legally compel a portion of the claims to arbitration while retaining jurisdiction over others for a civil trial?” Yes. Section 1281.2 expressly contemplates the partial arbitration outcome: when a controversy presents both arbitrable and non-arbitrable issues, the Court may order the arbitrable issues to arbitration and stay the remainder. Section 1281.4 makes that stay mandatory upon request. The Court may also elect to retain non-arbitrable claims while staying them pending the arbitral award, where doing so will mitigate inconsistent rulings.

Here, the arbitrable claims are: Owners’ breach of contract, warranty, negligence, indemnity, and contract-based declaratory relief claims against DPR (Counts 1, 5, 6, 7, 10, 12, 14); the section 7031 disgorgement claim against DPR (Count 13); and DPR subcontractor cross-claims tied to flow-down agreements. The non-arbitrable claims are Owners’ claims against KO Architects, HL, CEL (on the direct contract), and TKE. DPR’s mechanic’s-lien remedies are preserved by Article 13.9 of the Prime Contract; the underlying contract dispute giving rise to the lien remains arbitrable.

C. Risk of Contradictory Rulings (Question 3)

The Court asked: “In the event of a ‘split’ proceeding . . . what specific risks exist regarding inconsistent or contradictory rulings, and how should the Court mitigate those risks under relevant statutes (e.g., CCP § 1281.2)?” Here, the risks are real and substantial. Owners allege that the Project has both design and construction defects. The construction defendants will likely attribute responsibility to the design professionals, and the design professionals (KO, HL) will likely attribute responsibility to construction means and methods.

If the arbitrator finds that the construction work met applicable standards because the contractors followed defective design instructions, Owners will still need to prove the design-defect theory in court. A jury could disagree, leaving Owners without a recovery on either side. The reverse risk also exists: a court finding of acceptable design could be undermined by an arbitral finding that the construction work was sound but unspecified design defects caused the loss. Section 1281.2(c) was enacted precisely to address this scenario. (Mercury Ins.

Group, supra, 19 Cal.4th at pp. 345–346.)

In this case, the Court will mitigate the risk in two ways. First, the Court will compel arbitration of the subcontractor claims that are subject to valid arbitration agreements, so that the arbitrator can resolve the bulk of the construction-side disputes in a single forum. Second, the Court will stay the court action as to KO Architects, HL, CEL (on the Owners’ direct contract), and TKE pending the arbitral award. That order of events will allow the arbitrator’s findings on construction and causation to provide context for the design-side claims when they later proceed in this Court, without binding the design-side defendants in a forum to which they did not consent. The Court will then resolve any remaining design-side issues with the benefit of a developed factual record.

D. Validity of Subcontractor Stipulations (Question 4)

The Court asked: “The parties must provide an updated, definitive list of stipulating parties [and] brief the scope of an attorney's authority to stipulate to arbitration on behalf of a client and whether extrinsic evidence (such as the signatures of the principals) is required to validate these stipulations.” Under Blanton v. Womancare, Inc. (1985) 38 Cal.3d 396, 407 (Blanton), “it is established that an attorney does not have implied plenary authority to enter into contracts on behalf of his client. [Citations.]” Thus, actual authority is required to bind a client to arbitration.

The counsel-signed draft stipulation, standing alone, is insufficient. The Court is satisfied, however, that subcontractors who have filed joinders to DPR’s motion or are represented by counsel who have joined the motion have ratified arbitration through litigation conduct. DPR is granted leave to cure the Blanton issue as to any other subcontractor within thirty (30) days by submitting joinders or principal-signed declarations of actual authority. The Court does not need to rely on the stipulations as to any subcontractor whose subcontract independently contains a flow-down arbitration provision; the contract itself provides the necessary basis.

The Court accepts Owners’ chart at pages 13–15 of their supplemental brief as a working list of stipulating, joining, and non-consenting parties, subject to update upon DPR’s submission of any additional ratifying joinders or declarations.

E. Effect of Non-Consenting Parties (Question 5)

The Court asked: “At least one subcontractor (TK Elevator) has filed an objection. How does the presence of non-consenting subcontractors — whose separate contracts with DPR may require arbitration — affect the Court's discretion to compel arbitration in the global Steleco matter?” Here, TKE is not only “non-consenting”; it is contractually outside the arbitration framework. Section 17.2.4 of the TKE MSA, which TKE expressly negotiated, provides that “litigation shall be utilized in lieu of arbitration” and gives that amendment “the highest priority over any conflicting language.” DPR’s argument that the standard Section 17.1 dispute provisions override TKE’s negotiated amendment is not consistent with ordinary principles of contract interpretation, which give effect to specific, bargained-for terms over general boilerplate. (See Civ. Code, § 3534.)

TKE’s status reinforces the section 1281.2(c) discretion to keep at least some of the Project disputes in this Court. TKE is a Project participant whose work is implicated in Owners’ defect allegations; an arbitrator's findings on related construction issues could impact, but cannot bind, TKE. The Court therefore (a) denies the motion to compel as to TKE, and (b) factors TKE’s continued presence in this Court into the section 1281.2(c) discretion to deny arbitration as to the design professionals as well.

F. FAA Preemption – Directed to DPR (Question 6)

The Court asked: “Is there an actual conflict between the Federal Arbitration Act and Code of Civil Procedure section 1281.2?” DPR’s supplemental brief directly answers “No.” (DPR Supplemental Brief, p. 17). The Court agrees. The Cronus line of authority is settled: section 1281.2(c) is procedural, and the FAA’s procedural provisions do not displace it in California court absent an express adoption in the parties’ agreement. As there is no such express adoption in the Prime Contract, section 1281.2(c) governs.

G. Lapse in Licensure (Question 7)

An alleged section 7031 violation does not invalidate an arbitration agreement at the threshold. (Templo Calvario Spanish Assembly of God v. Gardner Constr. Corp. (2011) 198 Cal.App.4th 509, 519 [“entering into a contract with a contractor who is later shown to be unlicensed at the time of execution of the contract does not automatically render the contract void”]; Bus. & Prof. Code § 7031(f) [contemplating “actions or arbitrations”].) Loving & Evans v. Blick (1949) 33 Cal.2d 603 and Lindenstadt v.

Staff Builders, Inc. (1997) 55 Cal.App.4th 882 involved parties who were undisputedly unlicensed at all relevant times (in contrast to the contested record here). Owners’ concerns are protected by the standard of review under Ahdout, supra, 213 Cal.App.4th at pp. 38–39 (an arbitral award implicating section 7031 is subject to mandatory de novo judicial review). Accordingly, the disgorgement claim shall proceed in arbitration with full reservation of this Court’s de novo review of any award turning on DPR’s licensure.

V. Conclusion and Order

For the reasons set forth, the Court tentatively rules as follows:

1. Owners’ Motion to Consolidate is GRANTED IN PART and DENIED IN PART.

a. The motion is GRANTED in that Cases 22CV404194, 23CV416531, 23CV418900, and 24CV439209 are consolidated for all purposes through trial under Lead Case No. 22CV400012.

b. The motion is DENIED in that the Court declines to consolidate JAMS Case No. 5100000724 into the state-court proceeding. The arbitration shall continue before Arbitrator Duryee.

2. DPR’s Motion to Compel Mediation and Arbitration is GRANTED IN PART and DENIED IN PART.

a. The motion is GRANTED as to: Steleco LLC; Kipling Post LP; DPR Construction; subcontractors holding the standard flow-down arbitration provision (as identified herein); Hohbach-Lewin, Inc.; Consolidated Engineering Laboratories on claims arising under their respective contracts with DPR; and DPR employees Amelia Kraus and Robert Skinner.

b. The motion is DENIED as to: KO Architects, Inc.; TK Elevator Corporation; Bigge Crane and Rigging Co.; Berkeley Cement, Inc.; and as to claims arising solely under the Owner-direct professional services with Hohbach-Lewin and Consolidated Engineering Laboratories.

c. The parties shall complete mediation under the AAA Construction Industry Mediation Rules (Article 13.4) before further substantive arbitration hearings if they have not already done so to a conclusion. The arbitrator may, in her discretion, set a mediation deadline.

d. Owners’ 13th cause of action for disgorgement under Business and Professions Code section 7031 shall proceed in arbitration with all other Owner-DPR claims. The Court reserves de novo review under Ahdout v. Hekmetjah (2013) 213 Cal.App.4th 21.

3. All proceedings in this Court are STAYED pending the outcome of arbitration to mitigate the risk of inconsistent rulings (Code Civ. Proc., §§ 1281.2, 1281.4), except for (a) ministerial matters relating to mechanics lien releases or bonds that do not require adjudication of the underlying merits, and (b) any further proceedings the Court orders. KO Architects, Inc.’s anticipated motion for summary judgment may be filed and heard after the stay is lifted.

The Court will prepare the Order.

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