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In a defamation suit between two parties involved in a broader dispute among tenants in common, a state court in California held that an arbitration clause covering the "construction or application" of contract provisions was not broad enough to cover a defamation claim.
In Bono v. David, 147 Cal. App. 4th 1055 (Cal. Ct. App. Feb. 21, 2007), Bono sued David for defamation based on comments that David made to a third party about Bono's emotional stability and trustworthiness. David objected to the suit, arguing that Bono had failed to exhaust the remedies of mediation and arbitration as required by a Memorandum of Understanding (MOU) that was executed by tenants in common of property in California.
The Court held that the defamation suit was non-arbitrable because it was a "stand-alone action" that did not involve contractual interpretation. Dispute resolution provisions in the MOU provided for mediation and arbitration of "[a]ny controversy among the parties involving the construction or application of any provision of this Agreement." (Emphasis added.)
In arguing that the arbitration clause was applicable, David cited Larkin v. Williams, Woolley, Cogswell, Nakazawa & Russell, 76 Cal. App. 4th 227, 229-30 (Cal. Ct. App. 1999), which compelled arbitration of a complaint for dissolution and an accounting under a partnership agreement containing an arbitration clause with similar language. However, a more recent case interpreted such language as narrow enough to exclude a party's defamation claim. Medical Staff of Doctors Medical Ctr. in Modesto v. Kamil, 132 Cal. App. 4th 679 (Cal. Ct. App. 2005). Relying on Kamil and other authorities, the Court held that the MOU's arbitration clause was never intended to cover suits for defamation between parties to the agreement.
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