Sheppard v. Lightpost Museum Fund

52 Cal. Rptr. 3d 821, 146 Cal. App. 4th 315, 2007 Cal. Daily Op. Serv. 74, 2007 Daily Journal DAR 84, 25 I.E.R. Cas. (BNA) 849, 2006 Cal. App. LEXIS 2069
CourtCalifornia Court of Appeal
DecidedDecember 29, 2006
DocketH029574
StatusPublished
Cited by12 cases

This text of 52 Cal. Rptr. 3d 821 (Sheppard v. Lightpost Museum Fund) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sheppard v. Lightpost Museum Fund, 52 Cal. Rptr. 3d 821, 146 Cal. App. 4th 315, 2007 Cal. Daily Op. Serv. 74, 2007 Daily Journal DAR 84, 25 I.E.R. Cas. (BNA) 849, 2006 Cal. App. LEXIS 2069 (Cal. Ct. App. 2006).

Opinions

Opinion

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 section1 425.16 motion to strike defendants’ arbitration claim. The superior court partially granted plaintiff’s motion. We conclude that 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 nondisclosure 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 [319]*319any 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’ nondisclosure 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 nondisclosure 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 nondisclosure clauses. LMF and ACC asserted that Sheppard “continued” to possess confidential documents and disclose confidential information to others in violation of the nondisclosure 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 ACC2 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. . . .”

[320]*320In 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.’ [f] 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.

[321]*321At 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.

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Sheppard v. Lightpost Museum Fund
52 Cal. Rptr. 3d 821 (California Court of Appeal, 2006)

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Bluebook (online)
52 Cal. Rptr. 3d 821, 146 Cal. App. 4th 315, 2007 Cal. Daily Op. Serv. 74, 2007 Daily Journal DAR 84, 25 I.E.R. Cas. (BNA) 849, 2006 Cal. App. LEXIS 2069, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sheppard-v-lightpost-museum-fund-calctapp-2006.