BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 456
                                                                  Page 1

          Date of Hearing:  April 5, 2011

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
                     AB 456 (Wagner) - As Amended: March 17, 2011

                              As Proposed to be Amended
                                           
          SUBJECT  :  MECHANIC'S LIENS: STAY OF LITIGATION PENDING 
          ARBITRATION

           KEY ISSUE  :  SHOULD THE PROCEDURE BE CLARIFIED FOR REQUESTING A 
          STAY OF MECHANICS' LIEN LAWSUITS PENDING ARBITRATION?

           FISCAL EFFECT  :  As currently in print this bill is keyed 
          non-fiscal.

                                      SYNOPSIS
          
          This non-controversial bill is intended to clarify that 
          mechanics' lien claimants in construction disputes may seek a 
          stay of litigation pending the outcome of arbitration to which 
          the parties agree, without any necessity to move for an order to 
          compel arbitration, provided that if any party opposes the 
          motion to stay the action on the ground that the party objects 
          to arbitration of the dispute, the court shall determine whether 
          the claim of lien or any relevant issue, question or dispute is 
          subject to arbitration before staying the action.  Supporters 
          believe this revision will be helpful in providing guidance to 
          the court when there is no dispute about the need for and 
          relevance of a pending arbitration proceeding.  

           SUMMARY  :  Clarifies procedures for certain stays of litigation.  
          Specifically,  this bill  clarifies that mechanics' lien claimants 
          in construction disputes may seek a stay of litigation pending 
          the outcome of arbitration to which the parties agree, without 
          any necessity to move for an order to compel arbitration, 
          provided that if any party opposes the motion to stay the action 
          on the ground that the party objects to arbitration of the 
          dispute, the court shall determine whether the claim of lien or 
          any relevant issue, question or dispute is subject to 
          arbitration before staying the action.

           EXISTING LAW  :  









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           1)Provides that any person who proceeds to record and enforce a 
            mechanics' lien claim by commencement of an action does not 
            thereby waive any right of arbitration the person may have 
            pursuant to a written agreement to arbitrate, if, in filing an 
            action the claimant either:  (1) includes an allegation in the 
            complaint that the claimant does not intend to waive any right 
            of arbitration, and intends to move the court, within 30 days 
            after service of the summons and complaint, for an order to 
            stay further proceedings in the action; or (2) at the same 
            time that the complaint is filed, the claimant files an 
            application that the action be stayed pending the arbitration 
            of any issue, question, or dispute that is claimed to be 
            arbitrable under the agreement and that is relevant to the 
            action to enforce the claim of lien.  (Code of Civil Procedure 
            Section 1281.5.)

          2)Requires that within 30 days after service of the summons and 
            complaint, the claimant shall file and serve a motion and 
            notice of motion pursuant to Section 1281.4 to stay the action 
            pending the arbitration of any issue, question, or dispute 
            that is claimed to be arbitrable under the agreement and that 
            is relevant to the action to enforce the claim of lien.  The 
            failure of a claimant to comply with this subdivision is a 
            waiver of the claimant's right to compel arbitration.  (Code 
            of Civil Procedure Section 1281.5.)
           
          COMMENTS  :  The author argues that this bill is needed to clarify 
          existing law regarding the stay of litigation pending 
          arbitration of certain construction disputes.  

          Code of Civil Procedure section 1281.5 deals with arbitration of 
          construction disputes when there is a right to a mechanics lien. 
           It allows the lien foreclosure lawsuit to be filed to satisfy 
          the statute of limitations and notice to potential purchasers, 
          but requires that the arbitration be commenced promptly and 
          allows the lawsuit to be stayed.  

          According to the author, the statute has caused some confusion 
          because it has not been clear in some cases whether the claimant 
          must also file a motion to compel arbitration.  

          Supporters state that such a motion is frequently unnecessary 
          because the parties do not dispute that the claim is arbitrable. 
           









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          In these circumstances, it is sensible to stay any court 
          proceeding while the arbitration, once started, continues to be 
          prosecuted.  The sponsors contend that requiring a motion to 
          compel arbitration is not only superfluous but only serves to 
          "clog up" the courts.  

          The author's proposed amendments largely clarify and refocus the 
          bill appropriately.  However, the Committee recently received 
          further suggested revisions from the Judicial Council.  The 
          author and sponsor have committed to continuing to work with the 
          Committee and the Judicial Council to ensure that any remaining 
          concerns are addressed satisfactorily.

           Author's Clarifying Amendments.  To better capture the intent of 
          the bill, the author proposes the following clarifying 
          amendments:

          1281.5.  (a) Any person who proceeds to record and enforce a 
          claim
          of lien by commencement of an action pursuant to Title 15 
          (commencing
          with Section 3082) of Part 4 of Division 3 of the Civil Code, 
          does
          not thereby waive any right of arbitration the person may have
          pursuant to a written agreement to arbitrate, if, in filing an 
          action
          to enforce the claim of lien, the claimant does either of the
          following:
             (1) Includes an allegation in the complaint that the claimant 
          does
          not intend to waive any right of arbitration, and intends to 
          move
          the court, within 30 days after service of the summons and 
          complaint,
          for an order to stay further proceedings in the action.
             (2) At the same time that the complaint is filed, the 
          claimant
          files  a motion  an application   that the action be stayed pending 
          the
          arbitration of any issue, question, or dispute that is claimed 
          to be
          arbitrable under the agreement and that is relevant to the 
          action to
          enforce the claim of lien.
             (b) Within 30 days after service of the summons and 








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          complaint, the
          claimant shall file and serve a motion and notice of motion 
          pursuant
          to Section 1281.4 to stay the action pending the arbitration of 
          any
          issue, question, or dispute that is claimed to be arbitrable 
          under
          the agreement and that is relevant to the action to enforce the 
          claim
          of lien. Notwithstanding section 1281.4, the claimant may make a 
          motion 
          to stay the action pending arbitration even if none of the 
          parties to the action 
          has filed an application for an order to arbitrate the 
          controversy,  provided that
          if any party opposes the motion to stay the action on the ground 
          that 
          the party objects to arbitration of the dispute, the court shall 
          determine whether the claim of lien or any relevant issue, 
          question or dispute is subject to arbitration before staying the 
          action.  The failure of a claimant to comply with this 
          subdivision
          is a waiver of the claimant's right to compel arbitration.
             
          (c) The failure of a defendant either to file for a court
          order to arbitrate pursuant to Section 1281.2 or to  commence  
           demand
           arbitration pursuant to an agreement to arbitrate at or before 
          the time the defendant answers the complaint filed pursuant to 
          subdivision (a) is a waiver of the defendant's right to
          compel arbitration.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Fence Contractors' Association (co-sponsor)
          California Chapter of the American Fence Association 
          (co-sponsor)
          Engineering Contractors' Association (co-sponsor)
          Marin Builders' Association (co-sponsor)
          Flasher Barricade Association (co-sponsor)
          California Chamber of Commerce
          Civil Justice Association of California









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           Opposition 
           
          None on file
           

          Analysis Prepared by  :  Kevin G. Baker / JUD. / (916) 319-2334