Gilbert Street Developers, LLC v. La Quinta Homes, LLC

In this case we hold that a contract which contains the mere possibility that American Arbitration Association rules might one day in the future provide that arbitrators would have the power to decide their own jurisdiction does not “clearly and unmistakably” provide that arbitrators will determine their own jurisdiction.

I. BACKGROUND

In July 1998, Tone Yee Investments and La Quinta Homes, LLC, formed Gilbert Street Developers, LLC, in order to acquire and develop certain property on Gilbert Street in Garden Grove. A third entity, Prince Properties, also controlled by Yee, became a member of the company in February 1999. The operating agreement had an arbitration clause that provided for arbitration of all disputes arising out of or related to the agreement, the arbitration to be “conducted in accordance with the Rules of the American Arbitration Association existing at the date thereof.” However, there was an express exception in the arbitration clause for “matters which are expressly within the discretion of the Members.”

At the time the agreement was signed in 1998, and at the time Prince Properties became a member in 1999, the American Arbitration Association had…