Legal Question in Business Law in California

I can find nothing in a quick search that would support the idea that the filing of a lawsuit acts as an automatic stay on contractual arbitration. A motion to compel arbitration may be filed instead of an answer when a lawsuit is filed first, and that motion stays the lawsuit until the motion is heard. If the motion is granted that also stays the lawsuit until the arbitration is completed. If an arbitration is filed first, a court proceeding can be filed to block the arbitration if the case is not actually subject to arbitration, and THAT would stay the arbitration until that is ruled on. None of those fit your situation, though, where A filed a suit on a contract, B demands arbitration, and then neither A nor B follows proper procedure either to compel A to participate in the arbitration or to block B from conducting the arbitration, until after the arbitration has concluded.

I would have to say, however, that even if it wasn't really technically a stay on the arbitration, it was not proper for B and the arbitrator to proceed until B had complied with 1292.4 by filing the motion to compel in the lawsuit, and obtaining an order that A participate in the arbitration. That may be what the court was getting at.

Mr. McCormick is right about the law, but I'm not sure he read your question correctly. His answer is about whether a court case was stayed by an arbitration (something that comes up quite often), but your question seems to ask whether an arbitration was stayed by a court case (something that comes up only rarely).

It sounds to me as if Party B demanded that Party A arbitrate but that A did not agree. It also sounds like B did not ask the court to make A arbitrate (or at least that he failed to do so promptly) and instead started an arbitration on his own, so that the court case proceeded with A but not B while the arbitration proceeded with B but not A.

If that's what happened, B has a very serious problem on his hands.

When a defendant demands an arbitration but the plaintiff does not agree, the defendant has to bring a motion to compel arbitration. If the judge grants the motion, she will order the plaintiff to arbitrate and will stay the court case pending the outcome of the arbitration. But if the defendant fails to bring such a motion, the court case will proceed. If the defendant tries to arbitrate the same dispute anyway, the arbitration will be invalid. The lawsuit was filed first, and it would have blocked the arbitration unless and until the court ordered the parties to arbitrate.

So if Party B asked the judge to enforce the result of an arbitration that he'd commenced only after he was served with Party A's lawsuit, the judge was right to say no.

Please bear in mind that my answer is based on several assumptions about what happened in the case. (They're based on your question, but the question is ambiguous -- which is why Mr. McCormick and I read it so differently.) If I was mistaken about any of them, my conclusion may be wrong as well. Even if I'm right, there may still be ways for Party B to try to overcome his problems.

Feel free to contact me directly if you'd like to discuss this case further, especially if it's in Southern California.

Whether I hear from you or not, good luck.