Judge Armen Tamzarian, Case Number: 22STCV36289, Date: 2023-05-22 Tentative Ruling

Judge: Armen Tamzarian, Case: 22STCV36289, Date: 2023-05-22 Tentative Ruling

Case Number: 22STCV36289 Hearing Date: May 22, 2023 Dept: 52

Defendant Vroom Automotive, LLC’s Motion to Compel Arbitration

Defendant Vroom Automotive, LLC moves to compel arbitration and stay this action by plaintiff Michael Devin Grimes.

Plaintiff argues defendant waived its right to compel arbitration. “[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 (St. Agnes).)

It is not settled whether waiving the right to arbitrate requires prejudice to the opposing party. (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 966, fn. 5 (Davis); see also Desert Regional Medical Center, Inc. v. Miller (2022) 87 Cal.App.5th 295, 322.) As Davis notes, the question is pending before the California Supreme Court in Quach v. California Commerce Club, Inc. (2022) 78 Cal.App.5th 470, 479, review granted August 24, 2022, S275121.

The California Supreme Court has held the issue of prejudice “is critical in waiver determinations.” (St. Agnes, supra, 31 Cal.4th at p. 1203.) “Because 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.” (Ibid.)

Assuming prejudice is required, plaintiff fails to show sufficient prejudice to establish waiver. Plaintiff demanded arbitration before filing this action. The parties’ retail purchase agreement provides, “A party seeking arbitration must first send to the other, by certified mail, a written notice of dispute (‘Notice’). The Notice to Vroom should be addressed to Vroom, Inc., Attn: Legal Department, 1375 Broadway, 11th Floor, New York, New York 10018.” (Cousin Decl., Ex. 1, § 15(e).) Plaintiff did that on February 22, 2022. On that day, plaintiff’s counsel “personally mailed Defendant a notice of dispute/demand for arbitration via certified mail.” (Thiel Decl., ¶ 2, Ex. 1.) Plaintiff ultimately filed this action on November 16, 2022. Defendant filed this motion to compel arbitration on April 10, 2023.

Plaintiff shows no prejudice from the delay between February 2022 and April 2023. He makes only a conclusory argument that defendant’s delay of 14 months caused prejudice. (Opp., p. 2.) Delay alone is not sufficient. In Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 376, the California Supreme Court held a party did not waive its right to compel arbitration despite litigating the case for three years.

Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th 651 is instructive. There, the defendants waited 14 months before moving to compel arbitration. (Id. at p. 663.) The court held, “Participating in litigation itself does not result in waiver. [Citation.] Causing the other party to incur expenses as part of litigation also does not result in waiver. [Citation.] Here, there was no evidence that defendants stretched out the litigation process, gained information about plaintiff’s case they could not have learned in an arbitration, or waited until the eve of trial to move to compel arbitration. [Citation.] Plaintiff identifies no information revealed during discovery that would not have been revealed in an arbitration. The motion to compel arbitration was made over a year before trial, not weeks before trial… . Because plaintiff demonstrated no prejudice from defendants’ delay in moving to compel arbitration, the court erred in finding waiver.” (Ibid.)

Here, though defendant did not agree to arbitrate when plaintiff demanded it in February 2022, defendant promptly moved to compel arbitration before its deadline to respond to the complaint. There is no evidence defendants have done any discovery or gained any information they could not have learned in arbitration. No trial date has been set. Plaintiff has suffered no prejudice.

Moreover, plaintiff could have avoided this delay despite defendant’s failure to respond to plaintiff’s demand to arbitrate in 2022. The parties’ retail purchase agreement provides, “If you and Vroom cannot resolve the Demand within 30 days after the Notice is received, you or Vroom may commence an arbitration proceeding.” (RPA, § 15(e).) Vroom’s failure to respond meant the parties did not resolve the demand. Plaintiff did not need to wait for defendant to respond. He could have simply commenced an arbitration proceeding by filing a demand with JAMS or AAA in March 2022.

Assuming prejudice is no longer required, the court would still find defendant did not waive its right to compel arbitration. In Davis, the Court of Appeal explains that under the United States Supreme Court’s decision in Morgan v. Sundance, Inc. (2022) 212 L.Ed.2d 753, 142 S.Ct. 1708 (Morgan), “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, 84 Cal.App.5th at p. 966.) Under federal law, the “waiver inquiry would focus on” the moving party’s “conduct” and whether it “knowingly relinquish[ed] the right to arbitrate by acting inconsistently with that right.” (Morgan, supra, 142 S.Ct. at p. 1714.)

Defendant’s conduct does not show it knowingly relinquished the right to arbitrate. Its only conduct inconsistent with the right to arbitrate was an omission: it did not respond to plaintiff’s demand to arbitrate in 2022. Plaintiff presents no evidence that defendant affirmatively refused to arbitrate. The record shows only inaction rather than any actions inconsistent with the right to arbitrate.

On the other hand, defendant has engaged in substantial acts consistent with its right to arbitrate. After being served with the summons in this action, defendant promptly moved to compel arbitration. Aside from this motion to compel arbitration, defendant has filed only one other paper in this action: its case management statement. Where the form asks if defendant requests a jury or nonjury trial, defendant did not check either option. (Form CM-110, ¶ 5.) Defendant indicated it seeks to participate in binding private arbitration. (Id., ¶ 10.c.(5).) Twice, defendant specified that this motion is pending. (Id., ¶¶ 15, 18.) There is no evidence in the record that defendant conducted discovery or invoked the machinery of litigation in any way except for filing its motion to compel arbitration.

The court concludes defendant did not waive its right to compel arbitration.

Selection of Arbitration Provider

Defendant argues plaintiff must arbitrate with the American Arbitration Association (AAA). Its motion states, “Defendant requests an arbitration before AAA pursuant to the RPA and RISC as the parties have already agreed to arbitrate with AAA. (Cousin Dec., ¶ 2, Exhibits ‘1-2’; Sirey Dec., ¶ 4, Exhibit ‘2.’) The RPA provides, ‘The arbitration shall be administered by ... American Arbitration Association.’ (Cousin Dec., ¶ 2; Exhibit ‘1.’) The RISC provides, ‘You may choose the American Arbitration Association, 1633 Broadway, 10t [sic] Floor, New York, New York 10019 (www.adr.org), or any other organization to conduct the arbitration subject to the other party’s approval." (Cousin Dec., ¶ 2; Exhibit ‘2.’) (Emphasis Added.) Defendant does not approve of JAMS or any other arbitration provider.” (Motion, p. 8.) Defendant then continues to argue why AAA is more suitable than JAMS.

But defendant did approve JAMS. Defendant uses a misleading ellipsis in this sentence: “The RPA provides, ‘The arbitration shall be administered by … American Arbitration Association.’ ” (Motion, p. 8.) Without that ellipsis, the RPA provides: “The arbitration shall be administered by (i) JAMS, pursuant to its Comprehensive Arbitration Rules and Procedures (https://www.jamsadr.com/rules-comprehensive-arbitraiton/) and in accordance with its Expedited Procedures contained in those rules, or (ii) American Arbitration Association, in accordance with Consumer Arbitration Rules… If you initiate arbitration, you may choose one of the above administrators. If Vroom initiates arbitration, we will give you 20 calendar days to choose one of the above administrators.” (Cousin Decl., Ex. 1, § 15(f).) The retail purchase agreement thus expressly provides that plaintiff may choose JAMS. Indeed, it begins by providing for JAMS before it refers to AAA as an alternative.

Defendant cannot require plaintiff to arbitrate with AAA exclusively. Plaintiff has the express contractual right to select JAMS.

Disposition

Defendant’s motion to compel arbitration is granted. Plaintiff Michael Devin Grimes is ordered to arbitrate this action against defendant Vroom Automotive, LLC. Plaintiff may select either JAMS or AAA to administer the arbitration. The court hereby stays the entire action pending resolution of the arbitration proceeding.