Judge: Armen Tamzarian, Case: 21STCV04753, Date: 2022-12-07 Tentative Ruling

Case Number: 21STCV04753    Hearing Date: December 7, 2022    Dept: 52

Defendant Nissan North America, Inc.’s Motion to Compel Arbitration and Stay Proceedings

            Defendant Nissan North America, Inc. (Nissan) moves to compel arbitration of the complaint by plaintiffs Maria Castro and Gabino Castro and to stay this action pending arbitration.

Waiver          

            Defendant waived any right to compel arbitration.  Nissan relies on the proposition that “merely participating in litigation, by itself, does not result in a waiver, courts will not find prejudice where the party opposing arbitration shows only that it incurred court costs and legal expenses.”  (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1203 (St. Agnes.)) 

That rule does not apply.  “[W]here the FAA applies, whether a party has waived a right to arbitrate is a matter of federal, not state, law.”  (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 2022 WL 16546189 at *4 (Davis).)  The FAA applies to this agreement—as defendant argues in its own moving papers.  (Memo, pp. 6-7.)  The agreement provides, “Any arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act… and not by any state law concerning arbitration.”  (Tang Decl., Ex. 4.) 

Under federal law, waiver does not require prejudice to the opposing party.  Davis held that under the recent United States Supreme Court decision Morgan v. Sundance, Inc. (2022) ––– U.S. ––––, 142 S.Ct. 1708, 212 L.Ed.2d 753, “prejudice … is no longer required to demonstrate a waiver of one’s right to arbitration, and the waiver inquiry should instead focus on the actions of the holder of that right.”  (Davis, supra, at *6.)

Apart from prejudice, courts consider factors including “(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place.”    (St. Agnes, supra, 31 Cal.4th at p. 1196, internal quotes omitted.)  The first three factors strongly support a finding of waiver.

Defendant’s actions are inconsistent with the right to arbitrate.  It responded to discovery.  (Tracy Decl., ¶ 4, Ex. 3.)  Nissan prepared for trial in submitting joint proposed jury instructions, a joint statement of the case to be read to the jury, and a joint special verdict form.  It also demanded exchange of expert witness information.  (Tracy Decl., Ex. 4.)  Its only actions that were consistent with the right to arbitrate were asserting an affirmative defense of “demand for arbitration” (Answer, ¶ 22) and filing this motion.

The parties were well into preparing of this lawsuit before Nissan notified plaintiffs of an intent to arbitrate.  Though Nissan asserted that right in its answer in April 2021, there is no indication they brought it up again until they filed this motion on November 7, 2022—19 months later.  As in Davis, Nissan’s “lengthy delay moving to compel arbitration cannot be squared with an intent to arbitrate.”  There, the court noted, “By the time [defendant] filed its motion, 17 months had elapsed since it was served with the complaint.”  (Davis, supra, 2022 WL 16546189 at *7.)  Nissan delayed an additional two months.

Nissan also requested arbitration on the eve of trial.  Defendants filed this motion on November 7, 2022.  This motion is being heard on the same day as the final status conference  The trial date is December 14, only one week away. 

Defendant relies on Quach v. Cal. Commerce Club, Inc. (2022) 78 Cal.App.5th 470, which distinguished a prior case because there “the plaintiff moved to compel arbitration so close to the trial date that she had to seek ex parte relief to shorten time to hear the motion.”  (Id. at p. 481.)  Here, though defendant did not need to seek shortened time, defendant had to apply ex parte to advance the hearing to a date before the trial.  When defendant served notice of this motion, it was set for January 13, 2023—a month after the trial.  Defendant had to apply ex parte to advance the hearing to a date before the trial. 

Finally, Nissan did not give a reasonable explanation for its delay.  “[T]he absence of a reasonable explanation for delay is a significant factor weighing in favor of finding waiver.”  (Davis, supra, 2022 WL 16546189 at *8.)  Defendant offers no explanation for the delay.  As it states, the arbitration provision it relies on is part of “the standardized form used by independent Nissan dealers.”  (Tang Decl., ¶ 7.)  Defendant should have known early on that plaintiffs purchased their vehicle via a contract with this arbitration provision.  They should have moved to compel arbitration long ago.

After considering all the relevant factors, the court finds Nissan waived any right to compel arbitration.

Delegation Clause

            Defendant argues that an arbitrator, not this court, must determine whether the arbitration agreement is enforceable.  “Parties to an arbitration agreement may agree to delegate to the arbitrator, instead of a court, questions regarding the enforceability of the agreement.  [Citation.]  They ‘can agree to arbitrate almost any dispute—even a dispute over whether the underlying dispute is subject to arbitration.’  [Citation.]”  (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 241.)  “[T]he language of the [delegation] clause must be clear and unmistakable.”  (Id. at p. 242.)

            The retail installment sales contract between plaintiffs and non-party dealership Stadium Nissan includes the following delegation provision:  “Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision and the arbitrability of the claim or dispute)” must be “resolved by neutral, binding arbitration and not by a court action.”  (Tang Decl., Ex. 4.)           

As discussed above, the court’s ruling on this motion turns on waiver.  Persuasive authority supports the conclusion that the arbitration provision does not clearly and unmistakably delegate the question of waiver to the arbitrator.  The Ninth Circuit held so in a case with a similar delegation clause.  “The arbitration clause at issue in this case states that ‘any dispute as to the arbitrability of a particular issue or claim pursuant to this arbitration provision is to be resolved in arbitration.’  This language, requiring that the arbitrability of individual issues or claims be resolved by the arbitrator, does not encompass disputes over whether the clause remains valid in light of the parties’ litigation conduct.”  (Morgan Stanley & Co. LLC v. Couch (9th Cir. 2016) 659 Fed.Appx. 402, 404–405.)  “The arbitration clause is not clear and unmistakable evidence that the parties intended for an arbitrator to decide claims of waiver by litigation.”  (Id. at p. 405.) 

Similarly, the Third Circuit held a provision delegating “the issue of arbitrability of any claim or dispute” did not include the issue of waiver.  (Ehleiter v. Grapetree Shores, Inc. (3d Cir. 2007) 482 F.3d 207, 222.)  The court stated, “While it is clear from this provision that the parties intended to have an arbitrator determine the gateway question of whether the underlying substantive dispute between them is arbitrable, whether it be a Title VII claim, a common law tort action, or any other legal claim for relief, we do not believe that this provision similarly evinces a clear and unmistakable intent to have an arbitrator decide procedural questions of arbitrability that arise only after the parties have bypassed a gateway determination of substantive arbitrability by the arbitrator and actively litigated the underlying dispute in court.”  (Ibid.)  “Litigants would expect the court, not an arbitrator, to decide the question of waiver based on litigation conduct, and the Agreement here does not manifest a contrary intent.”  (Ibid.)

Here, the delegation clause in this case provides for arbitrating “the interpretation and scope of this Arbitration Provision and the arbitrability of the claim or dispute” (Tang Decl., Ex. 4) rather than the enforceability of the agreement.  One would expect an arbitrator to interpret the arbitration provision to determine whether it applies to the underlying substantive dispute—not whether a party’s conduct during the course of a dispute results in waiver. 

Disposition

Defendant Nissan North America, Inc.’s motion to compel arbitration and stay proceedings is denied.