Unpublished Disposition, 855 F.2d 862 (9th Cir. 1988)

No. 87-6423.

United States Court of Appeals, Ninth Circuit.

C.D. Cal.

AFFIRMED.

Appeal from the United States District Court for the Central District of California; Richard S. Lew, District Judge, Presiding.

Before BRUNETTI and DAVID R. THOMPSON, Circuit Judges, and PHILIP M. PRO, District Judge.^** 

MEMORANDUM^* 

Harold Z. Taines ("Harold") and Craig Taines ("Craig") appeal from the district court's grant of summary judgment on their complaint against Bear, Stearns & Co. ("Bear Stearns"), and two of its employees, Barry Zelin ("Zelin") and David Jordan ("Jordan"). In their complaint, Harold and Craig alleged eight causes of action, some against all the defendants and others against Jordan alone. All eight of their causes of action have been dismissed as either time barred or barred by the preclusive effect of a prior arbitration award between Harold, Zelin and Bear Stearns. On appeal, the Tainses present only two issues for our consideration. First, Harold argues the court erred in granting summary judgment against him on his federal securities law claim against Bear Stearns, Zelin and Jordan based on the preclusive effect of the prior arbitration award. Second, Craig contends that the district court erred in concluding that his breach of fiduciary duty claim is time barred.

We have jurisdiction of this appeal pursuant to 28 U.S.C. § 1291, and we affirm.

* Standard of Review

This court reviews a grant of summary judgment de novo. Ford v. Manufacturers Hanover Mortgage Corp., 831 F.2d 1520, 1523 (9th Cir. 1987). Viewing the evidence in the light most favorable to the nonmoving party, we must decide whether there are any triable issues of material fact and whether the district court correctly applied the relevant substantive law. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir. 1986). We may affirm the district court on any basis supported by the record. Ford, 831 F.2d at 1523. The availability of claim or issue preclusion is a legal question reviewed de novo, see C.D. Anderson & Co. v. Lemos, 832 F.2d 1097, 1100 (9th Cir. 1987), as is the district court's choice and application of the appropriate statute of limitations. Donoghue v. County of Orange, 828 F.2d 1432, 1436 (9th Cir. 1987).

II

Preclusive Effect of Prior Arbitration Award

Harold argues that the district court erred in holding his federal securities law claim against Bear Stearns, Zelin, and Jordan is barred by the res judicata effect of the earlier arbitral award. Harold acknowledges that it is our rule that an arbitration award may have a preclusive effect on subsequent litigation in federal court. See C.D. Anderson & Co. v. Lemos, 832 F.2d 1097, 1100 (9th Cir. 1987). Harold argues, however, that because he did not submit his securities law claim to arbitration, the arbitrators' decision cannot prevent him from litigating his federal claim in district court. We disagree. We recently have explained that there are two distinct types of preclusion that comprise the res judicata doctrine. Robi v. Five Platters, Inc., 838 F.2d 318, 321 (9th Cir. 1988). The first is "claim preclusion," which "treats a judgment, once rendered, as the full measure of relief to be accorded between the same parties on the same claim or cause of action." Id. at 322 (internal quotation marks and citations omitted). The second type of preclusion is "issue preclusion [, which] prevents relitigation of all issues of fact or law actually litigated and necessarily decided in a prior proceeding." Id. (internal quotation marks and citations omitted). Because we review the availability of claim or issue preclusion de novo, Lemos, 832 F.2d at 1100, and because we may affirm the district court on any ground supported by the record, Donoghue v. County of Orange, 828 F.2d 1432, 1436 (9th Cir. 1987), we will affirm the trial court if either claim or issue preclusion supports its decision.

A. Claim Preclusion and the Arbitration Award

In our recent decision in C.D. Anderson & Co. v. Lemos, 832 F.2d 1097 (9th Cir. 1988), we explained that a party cannot be compelled to arbitrate a claim that it did not agree to arbitrate. Id. at 1099. The reason for this rule is simple: "Arbitration is undeniably a matter of contract and parties are bound by arbitration awards only if they agree to arbitrate the matter." Fortune, Alweet & Eldridge, Inc. v. Daniel, 724 F.2d 1355, 1356 (9th Cir. 1983). Claim preclusion applies to bar "all grounds for recovery which could have been asserted, whether they were or not, in a prior suit between the same parties ... on the same cause of action." Lemos, 832 F.2d at 1100 (internal quotation marks and citations omitted). In the arbitration context, however, whether a ground of recovery "could have been asserted" depends on the scope of the parties' arbitration agreement. In Lemos, the parties agreed to arbitrate "any dispute" between them. Id. at 1099. Because the court concluded that the federal securities claim actually had been submitted to arbitration, it was unnecessary to decide whether that claim "could have been" asserted in the arbitration proceeding, absent the agreement to arbitrate all disputes between the parties. The court therefore affirmed the district court's grant of summary judgment based on the claim preclusive effect of the arbitration award. Id.

In the present case, unlike Lemos, the parties did not agree to arbitrate all disputes between them. In their submission agreement, Harold agreed to arbitrate "the present matter in controversy, as set forth in the attached statement of claim." The statement of claim did not specifically identify Harold's complaint as one arising under the federal securities laws. Because Harold did not agree to arbitrate "any" disputes with Bear, Stearns, we cannot say that his securities claim is precluded simply because he failed to assert a claim that "could have been" arbitrated. We also agree with the District of Columbia Circuit that "in the case of disputes under the federal securities laws, any doubt as to whether a particular item falls within the ambit of matters actually and necessarily submitted to arbitration must be resolved in favor of allowing access to federal courts." Williams v. E.F. Hutton & Co., 753 F.2d 117, 120 (D.C. Cir. 1985). Consequently, because Harold's arbitration contract did not specify that all disputes between him and Bear, Stearns were to be arbitrated, we assume for purposes of this appeal that his securities law claim was not submitted or subject to arbitration. Claim preclusion therefore does not bar Harold from asserting his federal securities law claim in federal district court.

That claim preclusion does not bar Harold's claim, however, does not mean that the arbitration award is without any preclusive effect. As we observed above, the res judicata doctrine has two branches: claim preclusion and issue preclusion. It is the rule in this circuit that an arbitration award "can have res judicata [claim preclusive] or collateral estoppel [issue preclusive] effect, even if the underlying claim involves the federal securities laws." C.D. Anderson & Co. v. Lemos, 832 F.2d at 1100. Issue preclusion "precludes relitigation of issues actually litigated and necessarily determined" by the arbitrators. Davis & Cox v. Summa Corp., 751 F.2d 1507, 1518 (9th Cir. 1985). The burden is on the party asserting issue preclusion to plead and prove what issues were decided in his favor in the previous action. Id.

Harold asserts that there can be no issue preclusion in this case because the arbitrators did not make specific findings of fact. Harold contends, therefore, that Bear Stearns cannot show what issues were necessarily decided in its favor. We disagree. "If a court does not make specific findings, the party [seeking preclusion] must introduce a record sufficient to reveal the controlling facts and pinpoint the exact issues litigated in the prior action. Necessary inferences from the judgment, pleadings and evidence will be given preclusive effect." Davis & Cox, 751 F.2d at 1518 (emphasis added). Moreover, the absence of written findings has not prevented the application of issue preclusion in other cases involving arbitration awards. See, e.g., Lemos, 832 F.2d at 1100 (drawing necessary inferences about matters resolved by arbitrators even though the award did "not specify the grounds for the arbitrators' decision); accord Greenblatt v. Drexel Burnham Lambert, Inc., 763 F.2d 1352, 1361-62 (11th Cir. 1985) ("The arbitration panel did not make specific factual findings. However, in order to conclude that Drexel Burnham was entitled to the entire debit balance ... the panel had to determine [the relevant issues in Drexel Burnham's favor]. Appellants presented evidence on all these issues during the arbitration proceeding, and clearly had a full and fair opportunity to litigate these issues.... Therefore, these factual findings are binding on this court.").

To determine the issues of fact common to the arbitration proceeding and the present suit in federal court, we compare the statement of claim given to the arbitrators with the complaint filed in the district court. Except in minor details these documents are identical. Although the arbitrators' award did not make specific factual findings, the arbitration panel necessarily resolved all of Harold's allegations against him and in favor of Bear Stearns. Because Harold's present complaint alleges identical facts to those found against him by the arbitrators, he is barred by issue preclusion from attempting to relitigate those facts anew in federal court. Because there are no new facts for the district court to find, Harold has failed to state a claim and the district court properly granted summary judgment against him.

III

State of Limitations for Breach of Fiduciary Duty

Craig contends the district court erred in dismissing his breach of fiduciary duty claim as time barred. The district court applied Vucinich v. Paine, Webber, Jackson & Curtis, Inc., 739 F.2d 1434 (9th Cir. 1984), in which we stated that California applies a two-year statute of limitations to actions for breach of fiduciary duty. Id. at 1436 (citing Cal.Civ.Proc.Code Sec. 339(1)). Craig points out, however, that in Robuck v. Dean Witter & Co., 649 F.2d 641 (9th Cir. 1980), and Davis & Cox v. Summa Corp., 751 F.2d 1507 (9th Cir. 1985), we concluded that California applies a four-year limitations period to claims for breach of fiduciary duty. See Davis & Cox, 751 F.2d at 1520 (citing discussion in Robuck, 649 F.2d at 644, in which we relied on the four-year statute contained in Cal.Civ.Proc. Code Sec. 343). Craig contends that we should follow Robuck and Davis & Cox. Bear Stearns vigorously disagrees and urges us to follow Vucinich. We conclude that neither party has identified correctly the relevant limitations period that applies to the allegations of Craig's complaint. We further conclude, however, that California courts would apply the three-year statute of limitations found in Code of Civil Procedure 338(4) to Craig's complaint. As a result, we affirm the judgment of the district court dismissing Craig's time barred claim for breach of fiduciary duty.

We begin our analysis by observing that it is the rule in California that "the selection of the proper limitations provision [is determined by] the 'gravamen' of the plaintiff's complaint." Robuck, 649 F.2d at 645 n. 2. "The statute of limitations to be applied is determined by the nature of the right sued upon, not by the form of the action or the relief demanded." Day v. Greene, 59 Cal. 2d 404, 411, 380 P.2d 385, 389, 29 Cal. Rptr. 785, 789 (1963). In the present case, the gravamen of Craig's complaint is that Bear Stearns breached its fiduciary duty by failing to disclose to him material facts about the stock it recommended he purchase. The California Supreme Court has said that a fiduciary's breach of the duty of disclosure amounts to constructive fraud. See Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 6 Cal. 3d 176, 189, 491 P.2d 421, 429, 98 Cal. Rptr. 837, 845 (1971); see also Day v. Greene, 59 Cal. 2d at 411, 380 P.2d at 389, 29 Cal. Rptr. at 790; Nelson v. Nevel, 154 Cal. App. 3d 132, 140-41, 201 Cal. Rptr. 93, 97 (1984) (observing that allegations of breach of fiduciary relationship "constitute an action for constructive fraud"); April Enterprises, Inc. v. KTTV, 147 Cal. App. 3d 805, 827 n. 11, 195 Cal. Rptr. 421, 433 n. 11 (1983) ("We also note that section 338(4) of the Code of Civil Procedure, which expressly allows three years from the discovery in actions based on fraud or mistake, is also applicable in this case since the breach of fiduciary duty often constitutes a constructive fraud.").

From the conclusion that the gravamen of Craig's complaint is an action for constructive fraud, we are led to the application of Code of Civil Procedure Sec. 338(4), which provides a three-year limitation period in " [a]n action for relief on the ground of fraud or mistake." Cal.Civ.Proc.Code Sec. 338(4). Craig does not dispute that he discovered the "facts constituting the fraud or mistake," id., no later than April 1983. He commenced his action against Bear Stearns in July 1986, after the expiration of the limitations period. The court correctly dismissed his complaint as time barred.

We note, of course, that there are other cases decided by California courts that have applied a four-year limitations period to actions for breach of fiduciary duty. See, e.g., Wyatt v. Union Mortgage Co., 141 Cal. Rptr. 361, 368 (1977) ("The statute for breach of fiduciary duty falls within the four-year statute [of Cal.Civ.Proc.Code Sec. 343]."); Schneider v. Union Oil Co., 6 Cal. App. 3d 987, 994, 86 Cal. Rptr. 315, 318 (1970) (to same effect); Kornbau v. Evans, 66 Cal. App. 2d 677, 686, 152 P.2d 651, 656 (1944) (same). Of these cases, Schneider and Kornbau came before the California Supreme Court's decisions in Neel v. Magana, Olney, Levy, Cathcart & Gelfand and Day v. Greene, both of which stated that the three-year statute applies when the gravamen of the claim for breach of fiduciary duty is a breach of the duty of disclosure. Furthermore, the statement in Wyatt that there is a four-year statute for breach of fiduciary duty claims is dicta. In that case, neither the three nor the four-year statute had expired because the last of the acts that formed the basis for the complaint occurred two weeks before the plaintiff commenced its action. See Wyatt, 141 Cal. Rptr. at 370 (Reynoso, J., concurring). Consequently, we conclude that no California case actually holds that a four-year limitations period applies to a claim of breach of the fiduciary obligation to make full disclosure to the beneficiary of the confidential relationship. Rather, California case law strongly supports our conclusion that the appropriate limitations period is the three-year period prescribed by California Code of Civil Procedure section 338(4).

AFFIRMED.