EDWARD J. LYONS, Plaintiff and Appellant, v. ERWIN WICKHORST et al., Defendants and Respondents, 42 Cal. 3d 911

Opinion BIRD, C. J. Does a trial court exceed its authority when it dismisses a plaintiff’s action with prejudice because no evidence was presented at a court-ordered arbitration? I. In June of 1980, appellant Edward Lyons filed a lawsuit against respondent Erwin Wickhorst seeking actual, compensatory, and punitive damages for unlawful arrest and false imprisonment. Since appellant did not seek damages in excess of $25,000, the trial court ordered mandatory arbitration pursuant to Code of Civil Procedure

section 1141.11. The first arbitration hearing was set for November of 1982. Immediately prior to the arbitration, appellant informed the arbitrator and counsel for respondent that he did not intend to present any evidence in support of his case. In response, respondent made no attempt to refute appellant’s claims. Thus, no evidence was introduced at the first hearing. The superior court appointed a new arbitrator and set a new hearing for June of 1983. During this second attempt at arbitration, appellant once again declined to present evidence.

Respondents did not attend the hearing after informing the arbitrator that attendance would be futile in light of appellant’s refusal to proceed. Although no evidence was presented during either of the two hearings, the arbitrator entered an award in favor of respondents. On the same day that the award was entered, appellant requested a trial de novo pursuant to

section 1141.20. Upon motion by respondent, the court dismissed the action stating that appellant’s refusal to offer any evidence at the court-ordered arbitration hearings “border[ed] on contempt,” and was a “continuing and willful rejection of the whole arbitration program.” Appellant challenges the authority of the trial court to dismiss his action for failure to participate in the mandatory arbitration procedures. II. In dismissing appellant’s action, the trial court relied in part on

section 581 and the “Rules of Court Ordered Arbitration.”

Section 581 authorizes dismissal by the court in any of the following situations: (1) neither party appears at the trial following 30 days notice of time and place; (2) a demurrer is sustained without leave to amend; (3) the plaintiff abandons the case prior to final submission, or (4) either party fails to appear and the other party requests dismissal. None of these scenarios occurred in the present case. Similarly, neither the judicial arbitration statutes (§§ 1141.10-1141.32) nor the rules of judicial arbitration (Cal.

Rules of Court, rules 1600-1617) permit the courts to dismiss an action because of a plaintiff’s failure to present evidence at a judicially mandated arbitration proceeding. A separate provision—section 128.5—authorizes a trial court to order a party to a judicial arbitration proceeding to pay “any reasonable expenses, including attorney’s fees” which the opposing party incurs “as a result of bad-faith actions” or frivolous or delaying tactics in such a proceeding. Thus, the trial court’s dismissal of appellant’s action was not expressly authorized by statute.

In the absence of express statutory authority, a trial court may, under certain circumstances, invoke its limited, inherent discretionary power to dismiss claims with prejudice. (See 6 Witkin, Cal. Procedure (3d ed. 1985) Proceedings Without Trial, § 212, pp. 517-518.) However, this power has in the past been confined to two types of situations: (1) the plaintiff has failed to prosecute diligently (Romero v. Snyder (1914) 167 Cal. 216 [138 P. 1002]); or (2) the complaint has been shown to be “fictitious or sham” such that the plaintiff has no valid cause of action (Cunha v. Anglo California Nat.

Bank (1939) 34 Cal.App.2d 383, 388 [93 P.2d 572]). The discretion to dismiss an action for lack of prosecution has recently been recodified in

section 583.410.

Section 583.410 permits the court to dismiss an action for lack of prosecution provided that one of several enumerated conditions has occurred. Generally, the court may not dismiss unless “(1) [s]ervice is not made within two years after the action is commenced ... (2) [t]he action is not brought to trial within . . . [t]hree years after [it] is commenced . . . [or] (3) [a] new trial is granted and the action is not again brought to trial . . . within . . . two years . . . .” (§ 583.420.) As this court noted in Weeks v.

Roberts (1968) 68 Cal.2d 802, 805 [69 Cal.Rptr. 305, 442 P.2d 361], this two-year statutory period was intended to “limit[] the court’s independent power to dismiss an action for want of prosecution at any time.” Thus, a minimum delay of two years is required before a trial court can exercise its discretionary dismissal powers. (See Hartman v. Gordon H. Ball, Inc. (1969) 269 Cal.App.2d 779 [75 Cal.Rptr. 618] [dismissal was improper under both the five-year and two-year periods and was therefore not justified as an exercise of the trial court’s inherent power to dismiss]; see also Raggio v.

Southern Pacific Co. (1919) 181 Cal. 472, 475 [185 P. 171]; Tew v. Tew (1958) 160 Cal.App.2d 141, 144 [324 P.2d 625].) No such delay occurred in the present case. Similarly, no claims were made by respondents that appellant’s complaint did not allege a sufficient basis upon which to plead a valid cause of action. Nor did the trial court state on the record that its order of dismissal was entered for this reason. In those situations in which a dismissal pursuant to the court’s discretionary power has been upheld, affirmance has not been without reservation. (See, e.g., Karras v. Western Title Ins.

Co. (1969) 270 Cal.App.2d 753, 758 [76 Cal.Rptr. 141].) The courts have long recognized a policy favoring a trial on the merits. (Ibid.) As the courts of this state have stressed, “[although a defendant is entitled to the weight of the policy underlying the dismissal statute, which seeks to prevent unreasonable delays in litigation, the policy is less powerful than that which seeks to dispose of litigation on the merits rather than on procedural grounds.” (Denham v. Superior Court (1970) 2 Cal.3d 557, 566 [86 Cal.Rptr. 65, 468 P.2d 193]; Daley v. County of Butte (1964) 227 Cal.

App.2d 380, 389-390 [38 Cal.Rptr. 693].) In sum, although the discretionary power to dismiss with prejudice has been upheld in this state, its use has been tightly circumscribed. Similarly, federal appellate courts have also construed this power narrowly. Rule 41(

b) of the Federal Rules of Civil Procedure permits a trial court to dismiss an action involuntarily. The rule authorizes dismissal upon a defendant’s motion when the plaintiff has failed to comply with the Federal Rules of Civil Procedure or any order of the court. In addition, the court, pursuant to its inherent power, may dismiss an action sua sponte for the same reasons. (Jones v. Caddo Parish School Bd. (5th Cir. 1983) 704 F.2d 206, 215, fn. 17, rehg. en banc granted on other grounds (1984) 735 F.2d 923.) If read literally, rule 41(

b) would authorize dismissals with prejudice for the most trivial noncompliance with procedural rules or court orders. (9 Wright & Miller, Federal Practice and Procedure (1st ed. 1982) § 2369, p. 191.) However, an examination of federal decisional authority demonstrates that the utilization of rule 41(

b) has been carefully circumscribed. An order dismissing an action on one of the grounds delineated in rule 41(

b) constitutes an adjudication on the merits unless the trial court specifies otherwise. (Fed. Rules Civ. Proc., rule 41(b), 28 U.S.C.) Thus, further adjudication of the same cause of action is barred even though the substantive issues of the case have never been addressed. (Saylor v. Lindsley (2d Cir. 1968) 391 F.2d 965, 968.) The effect of a dismissal under rule 41(

b) is to forever deny a litigant access to the courts for the impartial resolution of potentially meritorious claims. (See Moore v. St. Louis Music Supply Co., Inc. (8th Cir. 1976) 539 F.2d 1191, 1193.) For this reason, the federal courts, when called upon to determine the propriety of an involuntary dismissal, have repeatedly stressed that such a dismissal is a “drastic” measure which should be “used only in extreme situations” where “lesser sanctions would not serve the best interests of justice.” (Pond v. Braniff Airways, Incorporated (5th Cir. 1972) 453 F.2d 347, 349; see also Industrial Bldg. Materials, Inc. v. Interchemical Corp. (9th Cir. 1970) 437 F.2d 1336, 1339.) While rule 41(

b) authorizes dismissals for a plaintiff’s failure to comply with “any order of court,” the scope of rule 41(

b) is not as broad as its language would indicate. As demonstrated by the federal cases construing rule 41(b), there are two important inquiries to be made by trial courts when determining whether a plaintiff’s actions warrant a dismissal with prejudice. First, the court must discern whether the plaintiff’s pattern of conduct was so “severe [and] deliberate” as to constitute extreme circumstances. (Wrenn v. American Cast Iron Pipe Co. (5th Cir. 1978) 575 F.2d 544, 547.) Second, the court must look to see whether alternatives less severe than dismissal are available.

The “‘sound exercise of discretion requires the judge to consider and use lesser sanctions’” unless the court’s authority cannot possibly be otherwise vindicated. (Schenck v. Bear, Stearns & Co., Inc., supra, 538 F.2d at p. 60.) The constraints placed on the discretion of the trial court in this area clearly attest to the fact that rule 41(

b) motions for involuntary dismissal are not looked upon favorably by the federal appellate courts. Likewise, this court must examine the circumstances under which appellant’s motion for a trial de novo was dismissed. The dismissal of appellant’s complaint was both without notice and without an opportunity to be heard. At the time of appellant’s motion, neither the judicial arbitration statutes, nor the rules of judicial arbitration provided standards to guide the exercise of the court’s discretion in granting or denying the motion. Hebert v.

Harn (1982) 133 Cal.App.3d 465 [184 Cal.Rptr. 83] was the first appellate opinion to address the question of the appropriate sanction for a party’s nonparticipation in the judicial arbitration process. In Hebert, the defendant failed to participate in a mandated arbitration proceeding, and the arbitrator issued an award in favor of the plaintiff.

The trial court denied the defendant’s timely request for a trial de novo, relying on a local rule of court which required a party who had failed to participate in an arbitration proceeding to demonstrate good cause for its nonparticipation as a prerequisite for obtaining a trial de novo. On appeal, the Hebert court concluded that the governing statutes did not authorize denial of a de novo trial under these circumstances and invalidated the local rule.

The court in Hebert noted that unlike the legislation establishing prerequisites to appealing a small claims court judgment (see § 117.8, subds. (c) & (d)), the judicial arbitration provisions did not authorize the dismissal of timely motions for a trial de novo even where the moving party had failed to participate in the proceeding. (Hebert v.

Harn, supra, 133 Cal.App.3d at pp. 469-470.) The omission of similar requirements in the arbitration statute was held to demonstrate a legislative intent that access to the court for a new trial be procedurally unfettered. (Id., at p. 470.) In addition, the court suggested that the local rule of court might have been intended to improve the administration of the judicial arbitration scheme, and, therefore, expressly invited the Legislature to consider amending the statute. (Id., at p. 470.) Within two years, the Legislature responded by amending

section 128.5 to make clear that the sanctions authorized by that statute for frivolous or delaying tactics were applicable to judicial arbitration proceedings. (Stats. 1984, ch. 355, § 1, introduced as Assem. Bill No. 2752 (1983-1984 Reg. Sess.).) The State Bar and the Judicial Council were joint sponsors of the bill providing for the amendment. A staff report to the Assembly Committee on the Judiciary indicates that the bill was a response to the Hebert decision. (Staff Rep. on Assem. Bill No. 2752 (1983-1984 Reg. Sess.) to Assem.

Com. on Judiciary (Mar. 19, 1984), p. 2.) According to the report, the sponsors of the bill contended that the legislation would “ ‘ameliorate the unfairness’ that results when a party requests a trial de novo after failing to appear and participate in a judicial arbitration hearing.” (Ibid.; see Staff Rep. on Assem. Bill No. 2752 (1983-1984 Reg. Sess.) to Sen. Com. on Judiciary, p. 3.) Thus, the 1984 amendment to

section 128.5 addressed the precise problem that is presented here. The Legislature chose not to provide for dismissal as a sanction if a party refuses to participate. Rather, it authorized a court to impose additional costs and attorney fees on the errant party or his attorney. The Legislature squarely considered the problem of nonparticipation in judicial arbitration proceedings and decided to put teeth into the “mandatory” nature of the process by authorizing the assessment of expenses, including attorney’s fees, against a nonparticipating party.

An immediate and unconditional dismissal entered at the first suggestion of noncooperation is too drastic a remedy in light of the fact that arbitration was not intended to supplant traditional trial proceedings, but to expedite the resolution of small civil claims. We, therefore, reverse the trial court’s order dismissing appellant’s action and remand for proceedings consistent with this opinion. Mosk, J., Broussard, J., and Grodin, J., concurred. In the underlying action, appellant represented a hotel that leased space to a restaurant owned by respondent Wickhorst.

The hotel management and respondent were engaged in several disputes concerning compliance with the terms of the lease agreement. Appellant, pursuant to a request by the hotel’s owner, made an examination of the kitchen of the restaurant to determine whether the building was in violation of health and safety regulations. During the inspection, an employee of the restaurant phoned the police. Upon leaving the restaurant, appellant was placed under citizen’s arrest by respondent Wickhorst. No criminal complaint was ever filed against him.

Unless otherwise specified, all statutory references are to the Code of Civil Procedure.

Section 1141.11 states in pertinent part: “(

a) In each superior court with 10 or more judges, all at-issue civil actions pending on or filed after the operative date of this

chapter shall be submitted to arbitration, by the presiding judge or the judge designated . . . . [1] (

e) In the countfy] of Los Angeles . . . actions in which the amount in controversy does not exceed twenty-five thousand dollars ($25,000) shall be submitted to arbitration.”

Section 1141.20 provides in relevant part that: “Any party may elect to have a de novo trial, by court or by jury, both as to law and facts.” Several additional grounds for dismissal have been recognized over the years. These include: (1) lack of jurisdiction; (2) inconvenient forum (see § 410.30 [generally without prejudice]); (3) nonjusticiable controversy; and (4) plaintiff’s failure to give security for costs (See 6 Witkin, op. cit. supra, § 212, pp. 517-518). None of these miscellaneous grounds is applicable here. Rule 41(

b) states in pertinent part: “For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim against him. . . . Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision . . . operates as an adjudication upon the merits.” A host of cases evidence this reluctance to bar a party from trial on the merits of his or her claim. See, e.g., Schenck v.

Bear, Stearns & Co., Inc. (2d Cir. 1978) 583 F.2d 58, 60 [dismissal constituted an abuse of discretion despite plaintiff’s lack of diligent prosecution because new counsel expressed willingness to go forward at the pretrial conference and lesser sanctions would have been sufficient to vindicate court’s authority]; J.F. Edwards Const. Co. v. Anderson Safeway, etc. (7th Cir. 1976) 542 F.2d 1318, 1324 [plaintiff’s repeated refusals to agree to a stipulation of facts did not justify dismissal]; Pond v.

Braniff Airways, Incorporated, supra, 453 F.2d at p. 349 [dismissal without prejudice constituted an abuse of discretion even though plaintiff’s counsel failed to submit a required pretrial order, jury instructions, and proposed findings of fact and conclusions of law]; and Council of Federated Organizations v.

Mize (5th Cir. 1964) 339 F.2d 898, 900 [dismissal inappropriate although plaintiffs did not comply with an order to appear in court personally].) The only procedural prerequisite imposed upon a party before he may seek a trial de novo in the superior court is that the request be made within 30 days following the arbitration award. (§ 1141.20 and Cal. Rules of Court, rule 1616.) Appellant asserts that he relied on this

interpretation of the arbitration statute in making his decision not to support his claims at the arbitration proceeding. Even if he did not rely on Hebert, appellant could not have anticipated that a refusal to present evidence would jeopardize his right to a judicial determination of the merits of his case. The lack of substantive guidelines constituted a significant impairment of appellant’s right to notice of the standards by which his conduct was to be judged. The legislative history discussing the amendment to

section 128.5 does not mention Genovia v. Cassidy (1983) 145 Cal. App.3d 452, 459-460 [193 Cal.Rptr. 454], which declined to follow Hebert and upheld a dismissal under similar circumstances. However, the materials before the Legislature at the time of the amendment suggest that it believed that the sanctions of

section 128.5 were sufficient to address the problem of nonparticipation in mandated arbitration proceedings.

In addition, an examination of the judicial arbitration schemes of other states which inspired California’s judicial arbitration statute provide further evidence that the Legislature did not intend a party’s failure to participate to preclude a trial de novo. (See generally, Judicial Council of Cal., A Study of the Role of Arbitration in the Judicial Process (1972); Note, Compulsory Judicial Arbitration in California: Reducing the Delay and Expense of Resolving Uncomplicated Civil Disputes (1978) 29 Hastings L.J. 475; Lee v.

Cel-Pek Industries, Inc. (1977) 251 Pa.Super. 568 [380 A.2d 1243], 1243-1244; Associated Sprinkler Co., Inc. v. Giansante (1981) 286 Pa.Super. 8 [428 A.2d 211, 213-214].)