A California appellate court determined that a medical device company’s argument to arbitrate a contract dispute lacked merit, because the company simultaneously denied the existence of the underlying contract.

In Brodke v. Alphatec Spine Inc., No. G038591, 2008 WL 740379 (Cal. Ct. App. Mar. 20, 2008), Brodke, a surgeon, brought suit against Alphatec, a medical device company, for breach of contract and fraud. Brodke alleged that Alphatec filed a patent application for a product created by Brodke, and began selling the product without paying Brodke the royalties due under the contract.

The contract at issue contained an agreement to arbitrate. Thus, in response to Brodke’s suit, Alphatec filed a petition to compel arbitration. However, Alphatec contested the existence or validity of any written agreement with Brodke. The lower court denied Alphatec’s petition to compel arbitration.

On appeal, Alphatec argued that the lower court erred in denying its petition to compel arbitration, even though Alphatec contested the existence of the written agreement containing the arbitration agreement.

Alphatec contended that it could move to compel arbitration, and at the same time, deny the existence of the contract that contains the arbitration agreement. The Court rejected this argument. Under California law, a party moving to compel arbitration must allege the existence of an agreement to arbitrate the controversy.

The Court noted that Alphatec did not affirmatively allege the existence of a written agreement to arbitrate. Alphatec did the opposite by contesting the existence or validity of any agreement with Brodke.

Alphatec further argued that it did not need to allege the existence of a written agreement to arbitrate because Brodke admitted the existence of the agreement in his complaint. The Court stated that Alphatec could not rely on the allegations in the complaint to meet its pleading burden.

The Court noted that a plaintiff’s admissions are an appropriate means by which the existence of an agreement may be proved. However, Alphatec claimed that there was no written agreement with Brodke. Alphatec was not entitled to proceed with proof of an agreement to arbitrate without first alleging the existence of the contract. The Court affirmed the lower court’s decision denying Alphatec’s petition to compel arbitration.