## Facts

- Pabagold hired Mediasmith under a written agreement to plan and place an advertising campaign and authorized Mediasmith to contract with third parties for Pabagold’s account; Pabagold was responsible for authorized expenditures.
- The Pabagold–Mediasmith agreement included an arbitration clause covering disputes arising under the contract.
- Mediasmith orally retained Outdoor Services, an outdoor advertising broker, to purchase billboard space for Pabagold’s campaign in exchange for a commission.
- Outdoor Services procured billboard posting and maintenance services and earned commissions, but Pabagold refused to pay Mediasmith’s billings, and Mediasmith did not pay Outdoor Services.
- Outdoor Services sought arbitration against Pabagold, asserting rights as a third-party beneficiary of the Pabagold–Mediasmith contract; Pabagold refused to arbitrate absent a court order.
- The trial court compelled Pabagold to arbitrate and later confirmed an arbitration award in Outdoor Services’ favor.
- During arbitration scheduling, Pabagold’s counsel failed to appear for conferences; after a continuance and a short postponement, Pabagold requested an additional two-month continuance to obtain new counsel, which the arbitrator denied.
- In separate litigation brought by a billboard company against Outdoor Services, Outdoor Services filed a cross-complaint against Pabagold for indemnity/contribution while continuing to pursue arbitration.

## Issues

1. Whether Outdoor Services, though not named in the Pabagold–Mediasmith contract, was an intended third-party beneficiary entitled to enforce that contract’s arbitration clause against Pabagold.
2. Whether Outdoor Services waived arbitration by filing a cross-complaint against Pabagold in related litigation.
3. Whether denial of Pabagold’s requested continuance to obtain counsel deprived Pabagold of a fair arbitration hearing requiring vacatur.

## Decision

- The court affirmed the judgment confirming the arbitration award for Outdoor Services.
- Outdoor Services qualified as an intended third-party beneficiary and could enforce the Pabagold–Mediasmith arbitration clause against Pabagold.
- Outdoor Services did not waive arbitration; the cross-complaint was protective and not inconsistent with an intent to arbitrate, and Pabagold failed to show prejudice.
- The arbitrator acted within his discretion in denying the last-minute, lengthy continuance request; the proceeding remained fundamentally fair.

## Legal Principles

- A nonparty may enforce a contract made expressly for its benefit under California third-party beneficiary doctrine; intended beneficiaries, not incidental beneficiaries, may sue on the contract.
- An intended third-party beneficiary may enforce an arbitration clause contained in the contract made for its benefit.
- Waiver of arbitration requires conduct inconsistent with arbitration and resulting prejudice to the opposing party; protective pleadings in related litigation do not necessarily establish waiver.
- Arbitrators have discretion to control scheduling; an award is not set aside absent substantial prejudice or a denial of a fair hearing, and denial of a continuance is reviewed deferentially in light of prior continuances and the party’s opportunity to prepare.

## Conclusion

The court upheld confirmation of the arbitration award, concluding that the advertising broker was an intended third-party beneficiary entitled to compel arbitration, that its protective cross-complaint did not waive arbitration, and that the arbitrator’s refusal to grant a further continuance did not deny a fair hearing.


Outdoor Servs., Inc. v. Pabagold, Inc., 185 Cal. App. 3d 676, 230 Cal. Rptr. 73 (Ct. App. 1986)