Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford Jr. U.

Chief Justice Rehnquist delivered the opinion of the Court.

Unlike its federal counterpart, the California Arbitration Act, Cal. Civ. Proc. Code Ann. §1280 et seq. (West 1982), contains a provision allowing a court to stay arbitration pending resolution of related litigation. We hold that application of the California statute is not pre-empted by the Federal Arbitration Act (FAA or Act), 9 U. S. C. §1 et seq., in a case where the parties have agreed that their arbitration agreement will be governed by the law of California.

Appellant Volt Information Sciences, Inc. (Volt), and ap-pellee Board of Trustees of Leland Stanford Junior University (Stanford) entered into a construction contract under which Volt was to install a system of electrical conduits on the Stanford campus. The contract contained an agreement to arbitrate all disputes between the parties “arising out of or relating to this contract or the breach thereof.”[1] The contract also contained a choice-of-law clause providing that “[t]he Contract shall be governed by the law of the place where the Project is located.” App. 37. During the course of the project, a dispute developed regarding compensation for extra work, and Volt made a formal demand for arbitration. Stanford responded by filing an action against Volt [*471] in California Superior Court, alleging fraud and breach of contract; in the same action, Stanford also sought indemnity from two other companies involved in the construction project, with whom it did not have arbitration agreements. Volt petitioned the Superior Court to compel arbitration of the dispute.[2] Stanford in turn moved to stay arbitration pursuant to Cal. Civ. Proc. Code Ann. § 1281.2(c) (West 1982), which permits a court to stay arbitration pending resolution of related litigation between a party to the arbitration agreement and third parties not bound by it, where “there is a possibility of conflicting rulings on a common issue of law or fact.”[3] The Superior Court denied Volt’s motion to compel arbitration and stayed the arbitration proceedings pending the outcome of the litigation on the authority of § 1281.2(c). App. 59-60.