Silber v. Hanover Builders CA2/7

Filed 5/12/14 Silber v. Hanover Builders CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

REAGAN SILBER, B246975

Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SC105924)
v.

HANOVER BUILDERS, et al.,

Defendants and Respondents.

APPEAL from a judgment of the Superior Court of Los Angeles County, Craig D.
Karlan, Judge. Reversed.
Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, Amir H. Alavi, Alisa Lipski
and Jane L. Robinson, for Plaintiff and Appellant.
Northrup Schlueter, Linda L. Northrup and Melissa M. Barcena, for Defendant
and Respondent Hanover Builders.
The Morrison Law Group and Edward F. Morrison, Jr., for Defendant and
Respondent Eberhard.
Waters, McCluskey & Boehle and Michael T. Montgomery, for Defendant and
Respondent Westoaks Glass and Mirror.
Lewis Brisbois Bisgaard & Smith, Charles L. Harris and Stephen L. Culp, for
Defendant and Respondent Ultimate Metal Productions.
________________________
 After selling his home, Reagan Silber was sued for making intentional
misrepresentations on a real estate transfer disclosure form. An arbitrator found Silber
failed to inform the purchaser that numerous prior water intrusions had occurred at the
property. The purchaser was awarded damages, which included the costs of repairing
existing leaks and structural defects caused by the water intrusions. After the award was
judicially confirmed, Silber filed an indemnity action against several subcontractors who
had been hired to repair the property prior to its sale. The subcontractors demurred,
arguing the arbitrator’s finding that Silber had deceived the purchaser barred any
subsequent claim for indemnification. The trial court sustained the demurrer without
leave to amend and entered a judgment in favor of the subcontractors. We reverse.

FACTUAL AND PROCEDURAL BACKGROUND
A. The Arbitration
In January of 2006, Reagan Silber sold his private residence located in Bel Air,
California. In connection with the sale, Silber provided the purchaser a “Real Estate
Transfer Disclosure Statement” representing that he was not aware of any “leaks” or
“water intrusion into any part of any physical structure on the property.” The disclosure
statement also indicated Silber was not aware of any “recurring maintenance on the
[p]roperty”; “[a]ny past defects in . . . drainage”; or “[a]ny alterations, modification,
replacements or material repairs to the property.”
After the close of escrow, the purchaser began renovating the property and
discovered extensive water damage throughout the residence. A subsequent investigation
revealed numerous defects, including, among other things: 55 “leaks” into the residence;
“water intrusion and damage to various interior areas”; “ponding and deterioration within
the roof”; water damage to the electrical system; and severe wood rot in the exterior
decks. Following the investigation, the purchaser sent Silber a letter demanding that he
accept rescission of the sales contract “[i]n light of . . . misrepresentations made [on the
disclosure statement].” Silber refused to rescind the sale and the matter was referred to
arbitration.

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 Silber’s personal assistant, Christine Stafford, testified at the arbitration. Stafford
reported that, during the winter of 2005, she had repeatedly seen substantial amounts of
water leaking into numerous parts of the residence.1 Stafford, who was responsible for
managing the property, hired ARYA Architect and Builders to address the water issues.
In January of 2005, Stafford sent an email to ARYA and Silber describing numerous
“major leaks” that had caused water damage throughout the home. Stafford’s email
stated that she was concerned the water intrusion issues would require more than “a
simple patch up,” and requested that Silber and ARYA schedule a conference call to
“execute a proper and complete action plan to fix this once and for all.” Several days
later, Silber sent ARYA a text message stating that there was a “major water problem at
the house” and that he could hear “a massive amount of water . . . swishing behind the
walls.”
Silber’s groundskeeper testified the “house leaked ‘every time it rained.’” He also
stated that he had seen ARYA “crews attempt numerous leak repairs around the home,
the last [of] which was ‘around the end of 2005.’” The groundskeeper recalled that, on
one occasion, Silber had joked to him that the house was worth over $20 million, but had
to be “covered with plastic” every time it rained.
Additional evidence at the arbitration showed that, early in 2005, Silber asked
ARYA to “prepare the house for sale.” In March of 2005, ARYA informed Silber it had
repaired 21 items listed in a prior inspection report, which included “fixing a leak in the
office and powder room, another leak at the east of the garage, installing drains for the
garage and the roof, . . . and cleaning the leaks in the master bath and library.” In
response, Silber sent ARYA a message stating: “Thanks for the update. Does this mean

1 The arbitrator’s preliminary award vividly describes the extent of these leaks:
“Water appeared in the home’s foyer, master bedroom and bath. It stole into the media
room, Stafford’s office and the garage. It trickled down the insides of window panes, it
slid down a shower door. It crept under a glass door in the study and it loosened the
bright leather wall cover in [Stafford’s] powder room. It invaded the air conditioning
ducts, where it sloshed disturbingly as it circulated through the system. It bled into the
house through the wall of an outside mechanical room and it ponded upon the roof.”

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that EVERYTHING that can be done (to make the house weatherproof AND perfect for
showing beginning next week) has been done with the exception of the scratch to the
front gate?”
Silber’s real estate agent testified that, prior to the sale, ARYA had “assured him”
all leaks had been fixed and that the house was “perfect.” The real estate agent further
testified that, as a courtesy to Silber, he had filled out the disclosure statements and then
forwarded them to Silber for his review and signature.
On March 31, 2008, the arbitrator issued a preliminary award in favor of the
purchaser. According to the arbitrator, the evidence clearly showed Silber was aware of
the water intrusion issues prior to the sale and that his responses on the disclosure
statement “were not truthful.” The arbitrator rejected Silber’s assertion that he could not
be held liable because he “believed [all defects] had been repaired.” The arbitrator
explained that even if Silber thought ARYA had repaired all the water-related issues, he
had “sign[ed] the [disclosure] forms . . . recklessly without reasonable grounds to believe
they were true,” and with the intent “to induce the buyer to act upon them.” The
arbitrator did, however, find there was insufficient evidence to show Silber had
committed fraud or made any intentional misrepresentations.
The arbitrator awarded the purchaser approximately $2.65 million in
compensatory damages that were “causally related to the misstatements on the seller
disclosure form.” The damages included, among other things, the costs of
“waterproofing” the residence; “roofing repairs”; installing a “new electrical system” and
constructing a “new exterior deck.” In a subsequent ruling on “post-arbitration motions,”
the arbitrator awarded the purchaser an additional $1.25 million in attorneys fees and
$850,000 in punitive damages.2 On July 2, 2008, the arbitrator entered his final award,
which the superior court confirmed in August of 2008.

2 At the punitive damages hearing, Silber argued the arbitrator’s finding that he did
not commit fraud or intentional misrepresentation precluded the award of any punitive
damages. The arbitrator, however, ruled that Silber’s “reckless” conduct was sufficient

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 B. Silber’s Complaint
In December of 2009, Silber filed an action seeking indemnification from ARYA
for the amount he was required to pay at the arbitration. The complaint alleged Silber
had retained ARYA to “address and fix . . . issues with the residence, including water
intrusion problems and damage.” Silber later instructed ARYA “to do whatever [was]
necessary to restore the residence to perfect condition in anticipation of a sale . . . in early
2006.” ARYA “assured” Silber the “residence was in perfect condition, and could be
marketed and sold as such.” However, shortly after the sale was completed, the
purchaser “demanded arbitration against [Silber] alleging, among other matters, that the
home suffered from various construction defects and other issues, including numerous
instances of water intrusion, leaks, and water damage.” The complaint alleged that
although ARYA had been “retained and requested to make all necessary repairs, and . . .
been paid millions to do just that, ARYA did not perform as it promised or agreed, and
misrepresented the condition of the residence . . . Accordingly, [Silber] seeks to recover
for his substantial damages . . . rendered against him in the arbitration.”
In May of 2012, Silber filed a second amended complaint that added a contractual
indemnity claim against several subcontractors ARYA had hired to work on the
residence. The amended complaint alleged each subcontractor had executed a contract
with ARYA containing a clause stating: “To the fullest extent possible by law,
Subcontractor shall indemnify and hold harmless Owner and Contractor . . . from claims .
. . and liabilities of every kind . . . (including attorneys fees and costs incurred in defense
of same) arising out of or in connection with Subcontractors operations performed under
this Agreement . . . The indemnity shall apply regardless of any active and/or passive
negligent act or omission of Owner and Contractor . . ., but Subcontractor shall not be

to support a punitive damages award. The arbitrator did, however, award substantially
less in punitive damages than the purchaser had requested based on “mitigating” evidence
showing that Silber “asked [ARYA] to do ‘everything to make the house weatherproof
and perfect.”

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obligated to indemnify any party for claim [sic] arising from the sole negligence or
willful misconduct of Owner or their agents.”
The complaint stated that, “pursuant to th[e] indemnity agreement,” Silber was
seeking compensation from the subcontractors for “the amounts paid as a result of the
arbitration claim as well as his own attorneys fees and costs incurred to defend the
arbitration claim.”

C. Subcontractors’ Demurrers
Two of the subcontractor defendants, Hanover Builders and Ebherhard, filed
demurrers that were joined by five other subcontractor defendants (collectively
subcontractors).3 The subcontractors argued Silber’s claim was precluded by Civil Code
section 2782, subdivision (a), which prohibits agreements in construction contracts that
“purport to indemnify the promisee against liability or damages . . . arising from the sole
negligence or willful misconduct of the promisee.” The subcontractors asserted that the
arbitrator had found that the damages for which Silber was seeking indemnification (the
amount of the arbitration award) were solely the result of his own negligence or willful
misconduct: withholding information on the real estate disclosure statement. The
subcontractors further asserted that, under the doctrine of res judicata, Silber was
precluded from re-litigating whether he had made willful misrepresentations that were the
sole cause of the damages awarded in the arbitration.
In opposition, Silber argued that, under the Supreme Court’s holding in
Vandenberg v. Superior Court (1999) 21 Cal.4th 815 (Vandenberg), a private arbitration
award is not entitled to collateral estoppel effect in favor of nonparties to the arbitration.
Although Silber recognized Vandenberg did not affect the claim preclusion effect of an
arbitration award, he contended that the arbitration and his indemnity action did not

3 Eberhard filed its demurrer on June 25, 2012 and Hanover Builders filed its
demurrer on September 5, 2012. James H. Cowan & Associates, Ultimate Metal
Production, Pyramid Plastering, Hermosa Terrazzo, and Westoaks Glass and Mirror
joined in one or both the demurrers. Subcontractor D.J. Scheffler also filed a demurrer,
but was subsequently “voluntarily dismissed from the case by . . . Silber.”

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involve the same cause of action. Silber also argued that even if he was precluded from
re-litigating issues decided in the arbitration, the arbitrator had not resolved whether the
purchaser’s damages were caused “solely” by Silber’s conduct. Rather, according to
Silber, the arbitrator had merely found his misrepresentations were “causally related” to
the purchaser’s damages.
Following a hearing, the court issued an order sustaining the subcontractors’
demurrers without leave to amend. The court concluded that, under principles of res
judicata, Silber’s “express indemnity claim [was] barred by the arbitrator’s finding
coupled with the language of . . . Civil Code § 2782.” The court explained the demurrer
raised two issues: (1) whether Silber was precluded from re-litigating factual issues that
had been decided in the arbitration; and (2) whether the arbitrator had found the
purchaser’s damages were solely the result of Silber’s negligence or willful misconduct,
and therefore not subject to indemnification pursuant to Civil Code section 2782.
On the first issue, the court found the arbitrator’s “award preclude[d] relitigating
the issues [decided in that proceeding].” The court explained that Vandenberg’s
limitation on the collateral estoppel effect of private arbitration awards was inapplicable
where “the liability of the defendant asserting the plea of res judicata is dependent upon
or derived from the liability of one who was exonerated in an earlier suit brought by the
same plaintiff upon the same facts.” The court further explained this exception to the
Vandenberg rule applied here because Silber was “attempting to hold the subcontractors
liable in express indemnity based on the arbitration award . . . The sole theory of liability
against the new subcontractor defendants is derivative of the arbitration award. Therefore
the court may properly consider whether plaintiff’s express indemnity claim is barred by
the arbitrators finding[s] . . . .”
On the second issue, the court concluded the arbitration award made clear that “the
damages set forth therein were caused by [Silber’s own] failure to disclose.” In support,
the court quoted language from the award stating that the arbitrator had determined the
damages it was awarding were “‘causally related to the misstatement on the seller’s
disclosure forms . . . .’” The trial court concluded such statements showed Silber was

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seeking indemnity for damages that had been caused by his own willful conduct in
violation of section 2782.
On November 28, 2012, the trial court entered a judgment in favor of the seven
subcontractors that had either filed or joined in a demurrer. Silber filed a timely appeal.

DISCUSSION
Silber argues the trial court erred in dismissing the portion of his contractual
indemnity claim seeking repayment of the compensatory damages, attorney’s fees and
costs awarded in the underlying arbitration.4 Silber contends the trial court made two
errors. First, he asserts the court erred in concluding a private arbitration may have
collateral estoppel effect in favor of a nonparty to the arbitration. Second, he contends
the trial court erred in concluding that the arbitrator found the purchaser’s damages were
caused “solely” by Silber’s misrepresentations, thereby triggering the prohibition set
forth in section 2782.

A. Standard of Review
“A demurrer tests the legal sufficiency of the factual allegations in a complaint.
We independently review the superior court’s ruling on a demurrer and determine de
novo whether the complaint alleges facts sufficient to state a cause of action or discloses
a complete defense. [Citations.] We assume the truth of the properly pleaded factual
allegations, facts that reasonably can be inferred from those expressly pleaded and
matters of which judicial notice has been taken. [Citations.] We liberally construe the
pleading with a view to substantial justice between the parties.” [Citation]” (Regents of
University of California v. Superior Court (2013) 220 Cal.App.4th 549, 557-558.)
“[A] demurrer based on res judicata is properly sustained only if the pleadings and
judicially noticed facts conclusively establish the elements of the doctrine. [Citation].”

4 Silber is not seeking indemnification for the $850,000 in punitive damages
awarded in the arbitration.

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(Planning and Conservation League v. Castaic Lake Water Agency (2009) 180
Cal.App.4th 210, 231.)5

B. Summary of Applicable Law

“The doctrine of res judicata is composed of two parts: claim preclusion and issue
preclusion. Claim preclusion prohibits a party from relitigating a previously adjudicated
cause of action; thus, a new lawsuit on the same cause of action is entirely barred.
[Citation.] Issue preclusion, or collateral estoppel, applies to a subsequent suit between
the parties on a different cause of action. Collateral estoppel prevents the parties from
relitigating any issue which was actually litigated and finally decided in the earlier action.
[Citation.] The issue decided in the earlier proceeding must be identical to the one
presented in the subsequent action. If there is any doubt, collateral estoppel will not
apply.” (Flynn v. Gorton (1989) 207 Cal.App.3d 1550, 1554 (Flynn).) “The prerequisite
elements for applying the doctrine to either an entire cause of action or one or more
issues are the same: (1) A claim or issue raised in the present action is identical to a claim
or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final
judgment on the merits; and (3) the party against whom the doctrine is being asserted was
a party or in privity with a party to the prior proceeding.” (Brinton v. Bankers Pension
Services, Inc. (1999) 76 Cal.App.4th 550, 556 (Brinton).)
In Vandenberg, supra, 21 Cal.4th 815, the California Supreme Court considered
whether “private contractual arbitration decisions may have collateral estoppel effect in
favor of nonparties.” (Id. at p. 827.) The plaintiff in Vandenberg leased property that he

5 Generally, when a demurrer “is sustained without leave to amend, we decide
whether there is a reasonable possibility that the defect can be cured by amendment: if it
can be, the trial court has abused its discretion and we reverse; if not, there has been no
abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable
possibility is squarely on the plaintiff. [Citation.]” (Blank v. Kirwan (1985) 39 Cal.3d
311, 318.) In this case, Silber has argued only that his second amended complaint
properly states an indemnification claim against each of the subcontractors; he has not
offered any possible amendment. Accordingly, the only issue in this appeal is whether
the current version of the operative complaint adequately states a claim against the
subcontractor defendants.

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used to operate an automobile service facility. After the lease terminated, the property
owner filed an action alleging that oil seeping from plaintiff’s underground storage tanks
had caused petroleum contamination in the soil. Plaintiff’s insurance policies only
covered pollution-related damages that were caused by a “‘sudden and accidental’”
discharge. Several of plaintiff’s insurers refused to provide a defense, contending that oil
leakage from storage tanks was not “sudden.” Plaintiff and the property owner thereafter
agreed to arbitrate whether the contamination of the property constituted a breach of the
lease. The arbitrator entered an award in favor of the property owner finding, among
other things, that the contamination was caused by plaintiff and that the discharge of
contaminants had not been sudden or accidental.
After the award was judicially confirmed, plaintiff filed an indemnification action
against his insurers seeking repayment of the arbitration award. The insurers moved for
summary judgment, arguing they had no duty to “indemnify because the pollution
exclusion in their policies was triggered by the arbitrator’s determination . . . the
contamination was not sudden and accidental. [The] insurers contended that [plaintiff’s]
relitigation of the ‘sudden and accidental’ issue was precluded by principles of collateral
estoppel.” (Vandenberg, supra, 21 Cal.4th at p. 827.) The trial court granted the motion,
ruling that “relitigation of issues regarding the source and causation of the contamination
was precluded by collateral estoppel.” (Ibid.) The Court of Appeal reversed the order.
The Supreme Court affirmed, concluding that “a private arbitration award, even if
judicially confirmed, can have no collateral estoppel effect in favor of third persons
unless the arbitral parties agreed, in the particular case , that such a consequence should
apply.” (Vandenberg, supra, 21 Cal.4th at p. 834.) In its analysis, the Court emphasized
“the contractual basis of private arbitration, i.e., the principle that the scope and effect of
the arbitration are for the parties themselves to decide.” (Id. at pp. 833-834.) The Court
explained that “[a]n agreement to arbitrate particular claims reflects each party’s
conclusion that the immediate stakes make it preferable to avoid the delay and expense of
court proceedings, and instead to resolve the matter between themselves without resort to
the judicial process. Under such circumstances, each party is willing to risk that the

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arbitration will result in a ‘final’ and ‘binding’ defeat with respect to the submitted
claims, even though the party would have won in court, and even though the arbitrator’s
errors must be accepted without opportunity for review. [Citation.] But this does not
mean each arbitral party also consents that issues decided against him by this informal,
imprecise method may bind him, in the same manner as a court trial, in all future
disputes, regardless of the stakes, against all adversaries, known and unknown.” (Id. at
p. 832.)
After announcing it was “adopt[ing] . . . the rule that a private arbitration award
cannot have nonmutual collateral estoppel effect unless the arbitral parties so agree”
(Vandenberg, supra, 21 Cal.4th at pp. 836-837), the Court applied the “rule to the facts
before [it],” stating: “[None of the insurers] was a party to the arbitration between
[plaintiff] and [the property owner]. Moreover, [plaintiff’s] current insurance coverage
claims against [the insurers] are entirely distinct from the breach of lease claims decided
in favor of [the property owner], and against [the plaintiff], in the [underlying]
arbitration. Hence, [the insurers] seek to give the arbitrator’s decision nonmutual
collateral estoppel effect against [plaintiff]. They may not do so unless [plaintiff] and
[the property owner] so agreed.” (Id. at p. 837.)
In a footnote, however, the Court clarified that its decision was not intended to
“impose[] or impl[y] any limitations on the strict res judicata, or ‘claim preclusive,’ effect
of a California law private arbitration award.” (Vandenberg, supra, 21 Cal.4th at p. 825,
fn 2.) This statement was accompanied by citations to two prior appellate court
decisions: Thibodeau v. Crum (1992) 4 Cal.App.4th 749 (Thibodeau) and Sartor v.
Superior Court (1982) 136 Cal.App.3d 322. In a parenthetical, the Court described
Thibodeau as having held that a private arbitration between a homeowner and a general
contractor “bar[red] homeowner’s identical claim against [a] subcontractor.”
(Vandenberg, supra, 21 Cal.4th at p. 825, fn. 2.) The Court provided a similar
parenthetical for Sartor, stating that the case held an arbitration between a homeowner
and an architectural firm barred the “homeowner’s identical causes of action against [the
architectural] firm’s employees.” (Ibid.)

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 Several subsequent decisions applying Vandenberg have permitted a private
arbitration to have a claim preclusive effect in favor of a nonparty to the arbitration, but
not a collateral estoppel (issue preclusive) effect. For example, in Brinton, supra, 76
Cal.App.4th 550, a plaintiff arbitrated fraud claims against his securities broker, Ronald
Thon, that were predicated on a series of failed investments. After an arbitration panel
ruled in favor of Thon, the plaintiff filed a complaint against Thon’s employer asserting
essentially identical claims that were predicated on the same failed investments. The trial
court ruled the claims were precluded under principles of res judicata, but failed to state
whether it had proceeded under claim preclusion or issue preclusion.
The appellate court began it its analysis by explaining that, under Vandenberg,
“the issue preclusion aspect of the res judicata doctrine cannot support the trial court’s
decision . . . This leaves the question whether the res judicata doctrine’s claim preclusion
rule supports the trial court’s decision. As Vandenberg recognized, a prior judgment
confirming an arbitration award may bar a subsequent lawsuit on the same cause of
action.” (Brinton, supra, 76 Cal.App.4th at pp. 556-557.) The court then applied “the
primary rights theory to determine if [the] two successive proceedings involve[d] the
same cause of action. [Citations.]” (Id. at p. 557.) The court concluded the arbitration
claim and the present law suit sought “recovery for the same injury[:] . . . financial losses
[that were allegedly caused by] Thon’s purported misrepresentations concerning the
character of the investments.” (Ibid.) The court further explained that although Thon’s
employer was not a party to the original matter, it was nonetheless permitted to assert a
claim preclusion defense based on principles of derivative liability: “Defendant was not
a party to the arbitration proceeding. But since defendant’s liability is merely derivative
of Thon’s, it is unnecessary for defendant to have been a party to the prior action to assert
a claim preclusion defense in this case.” (Id. at pp. 557-558.)
Richard B. LeVine, Inc. v. Higashi (2005) 131 Cal.App.4th 566 (LeVine), which
was decided several years after Brinton, reached a similar holding. The plaintiff in
LeVine initiated an arbitration proceeding against his medical partnership alleging that it
had wrongfully withheld the distribution of certain profits. After the arbitrator ruled

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against the plaintiff, he filed an action against the partnership’s accountant. Plaintiff
alleged the accountant had conspired with the partnership to wrongfully withhold the
same profits at issue in the arbitration. The trial court granted the accountant’s motion
for summary judgment, ruling that the “awards in the arbitration proceeding between
plaintiff [and the partnership] . . . estopped plaintiff from proceeding on the conspiracy
claim.” (Id. at p. 573.)
The appellate court affirmed, holding that “claim preclusion” provided a
“complete defense to the claim for civil conspiracy.” (LeVine, supra, 131 Cal.App.4th at
p. 573.) The court began by explaining that, under “the . . . principle[s] applicable to . . .
civil conspiracy,” the accountant’s “liability depend[ed] upon the actual commission of a
tort. . . . [¶] Unless plaintiff’s [partnership] committed the underlying tort alleged here,
i.e., breach of fiduciary duty, [the accountant] cannot be held liable either as a conspirator
or as an aider and abettor.” (Id. at p. 575.) The court next assessed “whether the findings
of the arbitrator must be given preclusive effect in the instant action brought against [the
accountant].” (Ibid.) As in Brinton, the court applied the “primary right theory” and
concluded plaintiff’s causes of action against the accountant and the partnership were
“identical[:] . . .[¶] The primary right asserted in the arbitration against the [partnership]
was the right to be free of the wrongful diversion of plaintiff’s rightful share of
partnership profits . . . The instant conspiracy . . . claim against defendant[] asserts the
identical primary right. Thus plaintiff’s claim against the [partnership] is identical to its
claim against defendant[].” (Id. at pp. 575-576.)
The court further explained that although Vandenberg “held that arbitration
awards do not support nonmutual collateral estoppel” (LeVine, supra, 131 Cal.App.4th at
p. 576), the decision had specifically approved of prior cases holding that “a claim
preclusion defense” (id. at p. 578) was available where the prior “arbitration award[] . . .
eliminate[s] the basis for [the] non-arbitrating party’s derivative liability.” (Id. at p. 575.)
The court clarified that, for the purposes of claim preclusion, claims brought against two
different parties may nonetheless be treated as “identical” based on the “derivative nature
of the liability.” (Id. at p. 578.)

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 Finally, in Benasra v. Mitchell Silberberg & Knupp (2002) 96 Cal.App.4th 96
(Benasra), the court addressed “whether a claim for breach of duty of loyalty against the
claimants’ former attorneys for representing an opposing party in an arbitration should be
foreclosed on res judicata grounds where the claimants had previously submitted an
unsuccessful motion to disqualify to the arbitration panel.” (Id. at p. 99.) Plaintiffs were
former licensees of the designer “Guess.” After the parties’ relationship deteriorated,
Guess initiated an arbitration to terminate the licensing agreement. During the
arbitration, plaintiffs filed a motion to disqualify Guess’s attorney, Mitchell Silberberg &
Knupp, based on the firm’s prior representation of plaintiffs in various related matters.
The arbitration panel denied the request.
The plaintiff then filed a suit against Mitchell Silberberg alleging the firm had
violated rule 3-310(C) of the California State Bar Rules of Professional Conduct by
agreeing to represent Guess in the underlying arbitration. Mitchell Silberberg filed a
motion for summary judgment arguing that the arbitrator’s denial of plaintiff’s motion to
disqualify precluded their current claim. The trial court “ruled that [plaintiffs’] claims
against [Mitchell Silberberg] were ‘barred by the doctrine of res judicata,’” because the
“‘conflict asserted by [plaintiffs] as the basis of their complaint, was . . . finally decided
in the underlying arbitration proceedings.’” (Benasra, supra, 96 Cal.App.4th at pp. 103-
104.)
On appeal, the court explained that, under Vandenberg, “an arbitration decision
could have no collateral estoppel effect on later litigation, [but] . . . recognized that claim
preclusion was a different matter.” (Benasra, supra, 96 Cal.App.4th at p. 107.) Thus,
according to the court, “the crucial issue [was] . . . whether the arbitrators’ denial of the
motion to disqualify was properly asserted as a complete bar to the present action for
breach of duty of loyalty, or whether the trial court improperly used the arbitration
panel’s determination of a legal or factual issue for collateral estoppel purposes in
violation of Vandenberg.” (Id. at p. 108.)
In applying this analytical framework, the court rejected Mitchell Silberberg’s
contention that plaintiffs had “asserted the same violation of the same primary right that

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they asserted in the [a]rbitration – the purported right to [defendant’s] undivided loyalty
and confidentiality.” (Benasra, supra, 96 Cal.App.4th at p. 109.) The court explained
that Mitchell Silberberg had “overlook[ed] an important step. Before we can compare the
present claim with the claim or cause of action asserted in the first forum, we must
identify the cause of action or claim asserted there.” (Ibid.) The court further explained
that the parties’ “arbitration involved claims and counterclaims between [plaintiffs] and
Guess, which were disputing product-licensing agreements. The question of whether a
conflict prevented Guess’s attorneys of choice . . .from representing Guess in the
arbitration was raised as an ancillary or collateral issue.” (Ibid.) The court concluded
that because the motion to disqualify related to a single, ancillary issue raised in the
arbitration, it could not have a collateral estoppel effect in the subsequent proceedings
involving a nonparty to the arbitration.

C. The Trial Court Erred in Concluding the Arbitration Award Precluded Silber
from Asserting an Indemnification Claim Against the Subcontractors

In this case, the trial court ruled the doctrine of res judicata “preclude[d] [Silber
from] relitigating” whether his own willful misconduct caused the damages awarded in
the arbitration. The court agreed with the subcontractors’ assertion that although a
private arbitration generally has no collateral estoppel effect on non-arbitrating parties,
Brinton and LeVine recognized an exception to this rule where the defendant’s liability in
the subsequent proceeding derives from the arbitration award. The court then applied this
purported exception because Silber was “attempting to hold the subcontractors liable in
express indemnity based on the arbitration award.”
The trial court erred in accepting the subcontractors’ assertion that a private
arbitration may have collateral estoppel effect in favor of a nonparty where the liability
sought in the subsequent proceeding derives from the arbitration award. As Brinton,
LeVine and Benasra make clear, Vandenberg established a bright-line rule that “a private
arbitration award, even if judicially confirmed, can have no collateral estoppel effect in
favor of third persons unless the arbitral parties agreed, in the particular case, that such a

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consequence should apply.” (Vandenberg, supra, 21 Cal.4th at p. 834.) Although
Vandenberg clarified that a private arbitration award may be entitled to nonmutual claim
preclusive effect, the decision broadly proclaimed that, “for California purposes, . . . a
private arbitration award cannot have nonmutual collateral estoppel effect unless the
arbitral parties so agree.” (Id. at pp. 836-837.)
The facts of this case are essentially identical to Vandenberg. Like the plaintiff in
Vandenberg, Silber was found liable in an arbitration and then sought indemnification for
the award from parties who had not participated in the arbitration. Moreover, as in
Vandenburg, Silber’s current claim for contractual indemnity claim against the
subcontractors is entirely distinct from the misrepresentation claim decided in favor of
the purchaser, and against Silber, in the underlying arbitration. Hence, the subcontractors
seek to give the arbitrator’s decision nonmutual collateral estoppel effect against Silber.
They may not do so unless Silber and the purchaser so agreed. It is undisputed that the
record contains no evidence of any such agreement.
Contrary to the trial court’s findings, neither Brinton nor LeVine recognized or
established an exception to Vandenberg where a party to the arbitration subsequently
asserts claims against a non-arbitrating party that seek to impose liability that derives
from the arbitration award. Both cases merely held that an arbitration may have a
nonmutual claim preclusive effect (as opposed to collateral estoppel effect) where the
“arbitration award[] . . . eliminate[s] the basis for [the] non-arbitrating party’s derivative
liability.” (LeVine, supra, 131 Cal.App.4th at p. 578; see also Brinton, supra, 76
Cal.App.4th at pp. 557-558.) Stated differently, a non-party to the arbitration may assert
claim preclusion as a defense if his or “‘liability . . . is dependent upon or derived from
the liability of one who was exonerated in an earlier arbitration brought by the same
plaintiff upon the same facts’ [Citation.]” (LeVine, supra, 131 Cal.App.4th at p. 578.)
As explained in Brinton and LeVine, this situation arises when a plaintiff has arbitrated
and lost against a principal or direct tortfeasor, and then seeks to relitigate the same claim
against a different party under a theory of “derivative liability,” including, for example,
respondent superior, agency or conspiracy. (Id. at pp. 578-579.)

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 That is not the situation here. Silber was not the plaintiff in the arbitration nor
does his indemnity claim seek to impose liability on the subcontractors that derives from
the liability of the party exonerated at the arbitration (the purchaser). Silber’s claim
asserts only that he is entitled to indemnification for the portion of the arbitration award
that resulted from the subcontractors’ failure to adequately complete the repairs they were
hired to perform. The arbitration award did not address those issues; instead, it
determined only whether Silber had made misrepresentations regarding the residence and
amount of damages that were “causally related” to those misrepresentations. .”
The subcontractors, however, contend that even if the trial court erred in relying
on the collateral estoppel aspect of res judicata and misapplied LeVine and Binton, we
may nonetheless affirm its ruling under the claim preclusion aspect of the res judicata
doctrine because both proceedings involve the same cause of action. (See Brinton, supra,
76 Cal.App.4th at pp. 556-557 [“As Vandenberg recognized, a prior judgment confirming
an arbitration award may bar a subsequent lawsuit on the same cause of action”].) We
disagree.
“California employs the primary rights theory to determine if two successive
proceedings involve the same cause of action. [Citation.]” (Brinton, supra, 76
Cal.App.4th at p. 557-558.) “Under this theory, a ‘cause of action’ is comprised of a
primary right possessed by the plaintiff, a corresponding duty imposed upon the
defendant, and a wrong done by the defendant which is a breach of such primary right
and duty. [Citation.] The primary right is the plaintiff’s right to be free of the particular
injury, regardless of the legal theory on which liability is premised or the remedy which
is sought. [Citation.] Thus, it is the harm suffered that is the significant factor in
defining the primary right at issue.” (City of Oakland v. Oakland Police & Fire
Retirement System (2014) 224 Cal.App.4th 210, 228-229.)
Applying the “primary rights theory” here, it is apparent the arbitration and the
indemnity action do not involve the same cause of action. In the arbitration, the
purchaser asserted deceit claims (fraud and misrepresentation) arising from untruthful
information set forth in Silber’s real estate transfer disclosure statement. These claims

17
alleged the purchaser suffered harm as the result of Silber’s misrepresentations about the
condition of his residence. Silber’s indemnity action, in turn, sought contractual
indemnification for damages he incurred as a result of the subcontractors’ failure to
complete the repairs they were allegedly hired to perform. Thus, the primary right at
issue in the arbitration was the right to be free from injury caused by Silber’s deception;
the primary right at issue in the indemnity action was Silber’s right to be free from harm
caused by the subcontractors’ inadequate performance of their contractual duties.
Accordingly, claim preclusion is inapplicable.6
Having concluded the trial court erred in finding the arbitration award had a res
judicata effect on Silber’s indemnity claim, we need not address Silber’s alternative
contention that collateral estoppel was inapplicable because the arbitrator did not actually
or necessarily decide whether the purchaser’s damages were caused “solely” by his
misrepresentations on the disclosure statements. (See Murphy v. Murphy (2008) 164
Cal.App.4th 376, 398-399 [issue preclusion applies only if the issue was “actually
litigated” and “necessarily decided in the former proceeding”]; Smoketree-Lake Murray,
Ltd. v. Mills Concrete Construction Co. (1991) 234 Cal.App.3d 1724, 1737-1738 [under
Civil Code section 2782, “indemnity clauses in a construction contract may not provide
indemnification for injury or loss due to the indemnitee’s sole negligence or sole willful

6 We reject the subcontractors’ assertion that the “primary right” at issue in both the
arbitration and the indemnity action “is the right to have a home free of water intrusion,
leaks and defects.” The primary right at issue in the arbitration was not the purchaser’s
“right” to receive a home free from water intrusion; it was his right to receive truthful
responses on the real estate transfer disclosure statement. As explained by the arbitrator,
if Silber had provided truthful responses on the disclosure statement, the purchaser would
have had an opportunity to conduct a “further investigation [of the residence] or . . .
renegotiate the price.” Likewise, the primary right at issue in the indemnity action was
not Silber’s right to have a home free of water intrusion. Rather, it was Silber’s
contractual right to be compensated for any damages he incurred as the result of the
subcontractors failure to complete whatever work they were hired to perform.

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conduct; . . . [The section] does not . . .prohibit agreements for indemnification when the
loss or injury is due only in part to the indemnitee’s . . . willful misconduct”].)7

DISPOSITION
The judgment is reversed. Respondent shall recover his costs on appeal.

ZELON, J.
We concur:

WOODS, Acting P. J.

SEGAL, J. 

7 In the introductory section of its appellate brief, Hanover Builders states that even
if the court erred in applying the res judicata doctrine, Silber’s indemnity claim is
nonetheless precluded by the statute of limitations. However, the only legal analysis of
this issue is set forth in a footnote on the final page of the brief. The footnote argues
Silber’s claims are precluded by the four year statute of limitations set forth in Code of
Civil Procedure section 337.1 because he was aware of “leaking or water intrusion” more
than four years before he filed his indemnity claim. The trial court rejected this
argument, concluding Silber’s indemnity claim did not accrue until he paid the
underlying arbitration award, which occurred within four years of filing the current
action. We decline to consider Hanover’s statute of limitation argument, which appears
only in a footnote and contains no discussion explaining why the trial court erred in
ruling the indemnity claim did not accrue until Silber paid the arbitration award. (See
Evans v. CenterStone Development Co. (2005) 134 Cal.App.4th 151, 160 [“We do not
have to consider issues discussed only in a footnote”]; Roberts v. Lomanto (2003) 112
Cal.App.4th 1553, 1562 [assertions raised only in a footnote may be properly
“disregarded”].)

Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.

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