Judge: Armen Tamzarian, Case: 22STCV28809, Date: 2022-12-31 Tentative Ruling

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Case Number: 22STCV28809    Hearing Date: December 31, 2022    Dept: 52

Tentative Ruling:

Plaintiff Bobak Khalessi’s Motion to Dismiss or Alternatively Stay Arbitration

Plaintiff Bobak “Bobby” Khalessi moves to dismiss or stay an arbitration proceeding between him and defendant loanDepot.com. 

Background Facts

In 2021, plaintiff initiated an arbitration proceeding against defendant loanDepot.com, JAMS Case No. 120058727, in 2021.  (Escobedo Decl., ¶ 3, Ex. 1.)  In 2022, plaintiff filed an additional complaint in that proceeding to assert new claims.  (Id., ¶ 8, Ex. 5.)  Defendant moved to exclude the additional claims from the proceeding,  (Id., ¶ 11, Ex. 6.)  The arbitrator granted defendant’s request in part.  (Id., ¶ 15, Ex. 9.)   Plaintiff then filed this action on September 2, 2022.

Dismissal or Stay of Arbitration Proceeding

            Plaintiff argues defendant repudiated and waived the parties’ arbitration agreement because it refused to arbitrate all of plaintiff’s claims.  Plaintiff relies on three cases as authority permitting a court to dismiss an ongoing arbitration proceeding when one party asserts the other has waived the right to arbitrate.  Those cases do not support plaintiff’s position. 

First, plaintiff cites Reed v. Mutual Service Corp. (2003) 106 Cal.App.4th 1359.  There, the Court of Appeal stated, “ ‘A party who questions the validity of the arbitration agreement may not proceed with arbitration and preserve the issue for later consideration by the court after being unsuccessful in the arbitration.’ ”  (Id. at p. 1372.)  “This rule applies even if the party does not discover the basis for opposing arbitration until after arbitration proceedings have begun.  In such a case, the objecting party must withdraw from the arbitration process, and commence litigation on the issue of enforceability.  At that point, the adverse party could petition to compel arbitration, thereby freeing the court to consider at the outset the issue of the enforceability of the allegedly offending clause.”  (Id. at p. 1372, fn. 12.)

Reed does not apply because plaintiff does not challenge the enforceability of the agreement.  Rather, he asserts defendant waived the right to compel arbitration based on conduct during an arbitration proceeding. 

Second, plaintiff relies on Brown v. Dillard's, Inc. (9th Cir. 2005) 430 F.3d 1004, 1013, which stated that “when an employer enters into an agreement requiring its employees to arbitrate, it must participate in the process or lose its right to arbitrate.”  Here, defendant did participate in the process.  And in that process, the parties already litigated this issue.  Plaintiff sought to add new claims via a new complaint in arbitration.  (Escobedo Decl., Ex. 5.)  Defendant requested that the arbitrator deny the additional pleadings.  (Id., Ex. 6.)  The arbitrator granted that requested in part.  (Id., Ex. 9.)  Rather than defendant failing to participate in the arbitration as in Brown, plaintiff makes a collateral attack on a ruling by the arbitrator. 

Third, plaintiff relies on an unpublished federal district court order, Samson v. Nama Holdings, LLC (C.D. Cal., May 20, 2009, No. CV 09-01433 MMM PJWX) 2009 WL 9150841.  (Motion, pp. 17-20.)  There, the court denied a motion to compel arbitration because the moving parties had previously refused to arbitrate the same claims.  The court did not dismiss or stay any arbitration in progress. 

None of these three cases provides authority for staying or dismissing an arbitration because a party waived the right to enforce the agreement.  Reed was an appeal from an order confirming an arbitration award under Code of Civil Procedure section 1286.  Brown was an appeal from an order denying a motion to compel arbitration.  Samson was an order denying a motion to compel arbitration.

This court has no power to interfere with the ongoing arbitration as plaintiff seeks.  The California Arbitration Act provides that when parties have agreed to arbitrate a controversy, the court shall order them to arbitrate “unless it determines that: (a) The right to compel arbitration has been waived by the petitioner.”  (CCP § 1281.2(a).)  Waiver is a defense to a motion to compel arbitration—not a basis to dismiss or stay an ongoing arbitration.

In the alternative, the court finds defendant has not waived its right to compel arbitration of this dispute.  “[A] party who resists arbitration on the ground of waiver bears a heavy burden [citation], and any doubts regarding a waiver allegation should be resolved in favor of arbitration.”  (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195.)  Defendant has not resisted arbitration.  Defendant only sought to prohibit plaintiff from adding new claims into the arbitration on the eve of its summary judgment motion.  (Escobedo Decl., Ex. 6.)  Plaintiff’s conduct in the arbitration was analogous to filing a supplemental complaint without leave of court under Code of Civil Procedure section 464.  The arbitrator exercised his discretion to permit only part of plaintiff’s supplemental complaint.

Disposition

            The motion is denied.