Outdoor Services v. Pabagold, Inc.

Pabagold, Inc. (Pabagold) (defendant) contracted with Mediasmith, an advertising agency, to market one of its products. The marketing agreement authorized Mediasmith to contract with third parties to promote Pabagold’s product and to pay those third parties from Pabagold’s account. The contract also contained an arbitration provision stating that all disputes arising under the agreement would be arbitrated. Mediasmith entered into an agreement with Outdoor Services, Inc. (Outdoor) (plaintiff) under which Mediasmith would use Pabagold’s account to pay for Outdooor to purchase billboard space. Mediasmith provided Pabagold with a written estimate for the billboard advertising but did not mention Outdoor. Outdoor purchased the billboard space and requested payment from Mediasmith. Mediasmith requested payment from Pabagold, and Pabagold refused. Outdoor filed a demand against Pabagold with the American Arbitration Association for arbitration as a third-party beneficiary of Mediasmith and Pabagold’s contract. The association granted arbitration to Mediasmith but instructed Outdoor to get a court order compelling Pabagold to arbitrate because Pabagold refused to consent to the process. Outdoor petitioned for compelled arbitration in California state court, and the trial court granted Outdoor’s petition. Pabagold’s attorney failed to appear at a prehearing conference with the parties to set an arbitration date. Pabagold’s attorney filed for a continuance, which the arbitrator granted. After the three-month continuance, Pabagold’s counsel again failed to appear. Pabagold informed the arbitrator that it would represent itself at the hearing and made no mention of attempting to find new counsel. The day before the hearing, Pabagold requested to continue the arbitration by one day. All parties agreed. At the arbitration hearing, Pabagold requested an additional two-month continuance to obtain counsel. The arbitrator refused. The arbitration concluded, and the arbitrator ruled in favor of Outdoor. A trial court confirmed the award, and Pabagold appealed to the California Court of Appeal. Pabagold claimed that Outdoor was not entitled to enforce the arbitration clause and alternatively that Outdoor had waived the right to arbitrate. Pabagold also argued that the arbitrator’s denial of a continuance allowing Pabagold to find counsel improperly violated its rights. Finding that Outdoor was a valid third-party beneficiary with an unwaived right to arbitrate under the agreement, the appellate court addressed Pabagold’s continuance claim.