Judge David S. Cunningham, Case 21STCV28131 2023-01-13 Tentative Ruling

Judge: David S. Cunningham, Case: 21STCV28131, Date: 2023-01-13 Tentative Ruling

Opposing Party: Edward Barragan (“Barragan”) and Jeffrey Mosby (“Mosby”) (jointly “Plaintiffs”)

Barragan and Mosby worked as wine delivery drivers for Defendant. They allege multiple “wage and hour” violations and seek to represent a class of similarly situated current and former employees.

Plaintiffs argue that Defendant waived the right to compel arbitration. They claim Defendant waited 17 months to file the instant motion, participated in class discovery, and scheduled private mediation to settle the class claims. (See Opposition, pp. 2-4, 7-11.)

Defendant contends it did not delay or act inconsistently with the right to arbitrate:

Defendant contacted Plaintiffs’ counsel immediately after receiving Plaintiffs’ Arbitration Agreements and requested Plaintiffs to submit their claims to arbitration pursuant to the Agreements’ terms. [Citation.] No discovery has occurred in this action, and no status conference, trial setting conference, or other case dates have been scheduled with the court. [Citation.] As such, Plaintiffs will not be prejudiced by arbitration as this case is in its beginning stages and discovery has yet to take place. [Citation.] Because Plaintiffs cannot meet the heavy burden of providing that they will be prejudice[d], it is appropriate for the Court to find no waiver and compel arbitration as requested and stay the pending litigation.

(Motion, p. 19; see also Reply, pp. 2-4 [arguing that (1) the case was not at issue until 7/7/22, “approximately only three months before Defendant contacted Plaintiffs’ counsel regarding the arbitration issue,” (2) “Plaintiffs and Defendant agreed to an informal exchange of documents, but for the sole purpose of facilitating settlement negotiations at mediation and not for litigation purposes[,]” and (3) “[a]ny delay by Defendant was not unreasonable nor in bad faith, and Plaintiffs will not be prejudiced if compelled to arbitration, especially considering there is no trial date set, no formal discovery has been exchanged, and the mediation was taken off calendar”].)

“The right to compel arbitration arises from the parties' contract and, as with other contractual rights, is subject to waiver. Such waiver may be express or implied from the parties' conduct. [Citations.]” (Knight, et al., Cal. Prac. Guide: Alt. Disp. Res. (The Rutter Group 2022) ¶ 5:167.)

“Waiver usually ‘denotes the voluntary relinquishment of a known right . . .’ But ‘it can also refer to the loss of a right as a result of a party's failure to perform an act it is required to perform, regardless of the party's intent to relinquish the right.’ [Citation.]” (Id. at ¶ 5:167.1.)

“Waiver of the right to arbitrate ‘does not require a voluntary relinquishment of a known right . . .’ For example, a party may waive the right by an untimely demand even without any intent to forgo the procedure.” (Ibid.) “In this circumstance, waiver is similar to ‘a forfeiture arising from the nonperformance of a required act.’ [Citation.]” (Ibid.)

“In the arbitration context, . . . ‘waiver’ has also been used as a shorthand statement for the conclusion that a contractual right to arbitration has been lost.” (Ibid.)

“A party seeking to prove waiver of a right to arbitration must demonstrate ‘“(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration.”’ [Citation.]” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4^th 1193, 1203.)

(1) the party's actions are inconsistent with the right to arbitrate; (2) “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) a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) “important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place”; and (6) the delay “affected, misled, or prejudiced” the opposing party.

(Knight, supra, at ¶ 5:168 [quoting Saint Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4^th 1187, 1196].)

As Plaintiffs points out, “[c]ourts have provided many examples of conduct that is inconsistent with seeking arbitration of individual claims, such as filing dispositive motions, engaging in class discovery, mediating class claims, and other attempts to gain a strategic advantage.” (Opposition, p. 8, emphasis deleted; see also id. at pp. 9-10 [discussing case law]; Oregel v. PacPizza, LLC (2015) 237 Cal.App.4^th 342 [finding waiver because the defendant engaged in class discovery, opposed class certification, incurred 1,300 attorney hours, did not assert an arbitration affirmative defense in the answer, paid jury fees, and demanded a jury trial].)

Moreover, in terms of delay, arbitration must be demanded “within a reasonable time” to avoid waiver. (Knight, supra, at ¶ 5:174.) “What constitutes a ‘reasonable time’ is a question of fact depending on the situation of the parties, the nature of the transaction, and the facts of the particular case.” (Id. at ¶ 5:175.)

Courts have found delays of 17 months to less than a year to be unreasonable. (See Davis v. Sheikh Shoes, LLC (2022) 84 Cal.App.5^th 956 [17 months]; see also Oregel, supra, 237 Cal.App.4^th 342 [17 months]; Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4^th 553 [three months]; Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4^th 1443 [six months]; Sobremonte v. Superior Court (1998) 61 Cal.App.4^th 980 [10 months]; Burton v. Cruise (2010) 190 Cal.App.4^th 939 [11 months].)

Turning to the evidence, Plaintiffs’ counsel’s declaration provides a timeline and exhibits showing extensive litigation conduct by Defendant:

3. On September 8, 2021, Plaintiff’s counsel sent Defendant a letter requesting the complete copy of Edward Barragan’s personnel file (which should have included the Arbitration Agreement). (See Exhibit 1; a true and correct copy of Plaintiff’s counsel’s September 8, 2021 correspondence).

4. On October 27, 2021, the parties attended an Initial Status Conference whereby Defendant made zero reference or mention of any Arbitration agreements.

5. On or about February 21, 2022, the parties met and conferred on conducting class data discovery for the class size that Defendant represented to be about 65 employees. No mention of an Arbitration agreement was brought up at the time. (See Exhibit 2; a true and correct copy of Plaintiffs’ counsel’s February 21, 2022 correspondence to Defendant’s counsel).

6. On February 23, 2022, the parties filed a Joint Status Conference Report whereby Defendant made zero reference or mention of any Arbitration agreements. Moreover, the Joint Status Conference Report provided that “Plaintiff intends to add Jeff Mosby as an additional class representative within 90 days.”

7. On March 2, 2022, the parties attended a Further Status Conference whereby Defendant made zero reference or mention of any Arbitration agreements.

8. On March 30, 2022, the parties filed a Stipulation and Protection Order without any discussions regarding a potential Arbitration agreement.

9. On May 31, 2022, the parties attended a Further Status Conference whereby Defendant made zero reference or mention of any Arbitration agreements.

10. On or about June 7, 2022, the parties met and conferred to stipulate to allow Plaintiff to file a First Amended Complaint – no mention of an Arbitration agreement was brought up at this time. (See Exhibit 3; a true and correct copy of my e-mail exchange with Defendant’s counsel).

11. On June 7, 2022, Plaintiff filed his First Amended Complaint adding Jeffrey Mosby as a co-Plaintiff and adding a cause of action for Violation of the Private Attorneys General Act of 2004 (“PAGA”) [Labor Code §2698 et seq.].

12. On or about June 22, 2022, Defendant’s counsel, Nicole Allen, e-mailed Plaintiff’s counsel confirming that Defendant would be producing documents for the class sample of the nonexempt drivers shortly. No mention of any Arbitration agreements were brought up at this time. (See Exhibit 4; a true and correct copy of Ms. Allen’s June 22, 2022 email).

13. On or about June 22, 2022, Defendant produced the entirety of Plaintiff Edward Barragan’s employment records, including his personnel file, pay statements, and time records. Defendant also produced Mr. Mosby’s pay statements and time records. (See Exhibit 5; a true and correct copy of Ms. Deborah Barton’s email sharing a secure Sharefile link to Defendant’s document production).

14. On or about June 28, 2022. Ms. Allen confirmed that Defendant would be producing additional documents “immediately upon receipt.” No mention of any Arbitration agreements were brought up at the time. (See Exhibit 6; a true and correct copy of Ms. Allen’s June 28, 2022 email).

15. On July 7, 2022, Defendant filed its Answer to Plaintiffs’ First Amended Complaint. Defendant raised forty-eight (48) affirmative defenses, “Arbitration” not being one of them.

16. On July 12, 2022, Ms. Allen proposed a random sample size of 25% non-exempt delivery drivers for one pay period per quarter (or 4 pay periods). No mention of an Arbitration agreement was brought up at this time. (See Exhibit 7; a true and correct copy of Ms. Allen’s July 12, 2022 email).

17. On July 13, 2022, Ms. Allen proposed producing records for all non-exempt delivery drivers for 25% of pay periods (6 pay periods per year; 1 pay period every 2 months). No mention of an Arbitration agreement was brought up at this time. (See Exhibit 8; a true and correct copy of Ms. Allen’s July 13, 2022 email).

18. On or about July 27, 2022, the parties scheduled a full day mediation session with Judge Casserly for November 14, 2022 to mediate Plaintiffs’ class claims. The parties agreed to split the mediation fees evenly between the two parties. No mention of an Arbitration agreement was brought up at this time. (See Exhibit 9; a true and correct copy of the July 27, 2022 e-mail confirmation of the parties’ November 14, 2022 mediation).

19. On September 2, 2022, the parties filed a Joint Status Conference Report without any mention or reference to any Arbitration agreements.

20. On September 8, 2022, the parties attended a Further Status Conference whereby Defendant made zero reference or mention of any Arbitration agreements.

21. On or about September 15, 2022, Defendant produced the entirety of its sample pay and time period records for the agreed upon class data. No mention of any arbitration agreements were brought up at this time. (See Exhibit 10; a true and correct copy of Ms. Barton’s September 15, 2022 email sharing a secure Sharefile link to Defendant’s production of the class time and pay sample records).

22. On or about October 24, 2022, Defendant produced Plaintiff Jeffrey Mosby’s personnel file. (See Exhibit 11; a true and correct copy of Ms. Barton’s October 24, 2022 email sharing a secure Sharefile link to Defendant’s production of Mr. Mosby’s records).

(Bral Decl., ¶¶ 2-22, Exhs. 1-11.) These facts and documents, coupled with the 17 months between the lawsuit’s commencement and Defendant’s filing of the motion, suffice to establish waiver given that Defendant participated in status conferences, filed joint status conference reports without discussing arbitration, stipulated to the filing of the first amended complaint, filed an answer without pleading arbitration as an affirmative defense, filed a joint protective order, met and conferred regarding class discovery, produced documents, including class documents, and scheduled private mediation. (See 1/26/22 Minute Order, p. 1 [defense counsel appearing telephonically at further status conference]; see also 2/23/22 Joint Status Conference Report, p. 3, ¶ 8 [parties stating that they are “unaware of any relevant arbitration or class action waiver clauses applicable to this case”]; 3/2/22 Minute Order, p. 1 [defense counsel appearing telephonically at further status conference and stating that the parties “are to meet and confer regarding early mediation and protective order”]; 3/30/33 Stipulation and Protective Order – Confidential Designation Only, p. 10 [signed by defense counsel]; 5/31/22 Minute Order, p. 1 [defense counsel appearing at further status conference via Court Connect and stating that the parties “selected a mediator with mediation to be completed in September 2022” and “stipulate to submit a first amended complaint within thirty days to add an additional class representative and a PAGA cause of action”]; 9/2/22 Joint Status Conference Statement, p. 3, ¶ 8 [parties stating that they are “currently unaware of any relevant arbitration or class action waiver clauses applicable to this case”]; 9/8/22 Minute Order, p. 1 [defense counsel appearing at further status conference via Court Connect and stating that (1) “[t]he Court and counsel confer regarding Belaire West notice and class contact information[,]” and (2) “[t]he parties are working toward mediation and are working on their discovery issues”]; 12/8/22 Joint Status Conference Statement, p. 3, ¶ 8 [parties stating that, “[o]n October 20, 2022 and November 1, 2022 respectively, Defendant made Plaintiffs aware of relevant arbitration agreements purportedly signed by Plaintiffs Jeffrey Mosby and Edward Barragan that may potentially affect the disposition of this case”], emphasis added; 12/15/22 Minute Order, p. 1 [defense counsel appearing at further status conference via Court Connect].)

The Court notes that the case was stayed until the initial status conference, but the outcome is the same. The fact remains that Defendant litigated the case for months prior to moving to compel arbitration. Defendant – the employer – had, or should have had, access to Plaintiffs’ personnel files and the purported arbitration agreements from the outset and likely before the litigation started. (See, e.g., Motion, pp. 5-6 [Defendant claiming Plaintiffs executed the purported agreements in 2020].) The decision to wait until 12/16/22 to file the motion was, and continues to be, inconsistent with the right to arbitrate.

Defendant’s reply is unavailing. Defendant participated in the litigation on several occasions in several ways well before it filed the answer on 7/7/22. It knew Barragan’s identity from the start of the case and Mosby’s identity by at least 2/23/22 (see 2/23/22 Joint Status Conference Report, p. 2, ¶ 3 [stating that “Plaintiff intends to add Jeff Mosby as an additional class representative within 90 days”]), yet it chose to not allege an arbitration affirmative defense. Instead, it raised the arbitration issue for the first time on 10/20/22 and 11/1/22 despite having actual or constructive knowledge of – and, to reiterate, access to – the personnel files and the alleged agreements much earlier. (See Reply, p. 3.) The Court finds that Defendant’s conduct and the 17 months of delay demonstrate waiver and created prejudice by (1) “substantially impair[ing] [P]laintiff’s ability to obtain the cost savings and other benefits provided by arbitration[,]” and (2) “causing significant legal expenses.” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4^th 1193, 1205 [finding waiver where the defendant delayed for a year, tried to remove the case to federal court twice, and engaged in discovery, and the plaintiff suffered legal expenses].)[1]

Existence, Unconscionability, and Armendariz v. Foundational Health Psychcare Services, Inc. (2000) 24 Cal.4^th 83

Plaintiffs assert that Defendant fails to show agreements to arbitrate and, alternatively, that the purported agreements are unconscionable and fail to satisfy the Armendariz factors. (See Opposition, pp. 11-16.)

In light of the preceding analysis, it is unnecessary – and the Court declines – to reach these issues.

[1] Hoover instructs that prejudice requires more than just “incurred court costs and legal expenses[.]” (Ibid.) There is more here. Defendant’s delay was unreasonable and “impaired the other side’s ability to take advantage of the benefits and efficiencies of arbitration.” (Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4^th 1443, 1451.)