Judge: David S. Cunningham, Case: 21STCV28131, Date: 2023-02-21 Tentative Ruling
Case Number: 21STCV28131 Hearing Date: February 21, 2023 Dept: 11
21STCV28131 (Barragan)
Tentative Ruling Re: Supplemental Briefing Re: Motion to Compel
Arbitration
Date: 2/21/23
Time: 10:00
am
Moving Party: J.F.
Hillebrand USA, Inc. (“Defendant”)
Opposing Party: Edward Barragan (“Barragan”) and Jeffrey
Mosby (“Mosby”) (jointly “Plaintiffs”)
Department: 11
Judge: David
S. Cunningham III
________________________________________________________________________
TENTATIVE RULING
Defendant’s motion to compel arbitration is denied.
BACKGROUND
“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.” (1/13/23 Tentative Ruling Re: Motion to
Compel Arbitration, p. 1.)
On 1/13/23, the Court heard
Defendant’s motion to compel arbitration.
The Court tentatively denied the motion due to waiver but continued the
hearing to give Plaintiffs an opportunity to submit supplemental evidence regarding
prejudice. (See 1/13/23 Minute Order, p.
1.)
On 1/20/23, Plaintiffs’ counsel
filed a supplemental declaration.
On 1/27/23, Defendant filed a
supplemental reply brief.
Now, the Court considers the
supplemental documents.
LAW
“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.4th
1193, 1203.)
Factors considered include:
(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.4th
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 [to Motion to
Compel Arbitration], p. 8, emphasis deleted; see also id. at pp. 9-10
[discussing case law]; Oregel v. PacPizza, LLC (2015) 237 Cal.App.4th
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.5th 956 [17 months]; see also Oregel, supra, 237
Cal.App.4th 342 [17 months]; Guess?, Inc. v. Superior Court
(2000) 79 Cal.App.4th 553 [three months]; Adolph v. Coastal Auto
Sales, Inc. (2010) 184 Cal.App.4th 1443 [six months]; Sobremonte
v. Superior Court (1998) 61 Cal.App.4th 980 [10 months]; Burton
v. Cruise (2010) 190 Cal.App.4th 939 [11 months].)
(1/13/23
Tentative Ruling Re: Motion to Compel Arbitration, pp. 2-3.)
DISCUSSION
Plaintiffs’ counsel’s
supplemental declaration shows 73 hours of attorney time spent on the case so
far. The attorney fees incurred to date
equal $34,350, and the costs incurred to date equal $4,259.26. (See Supp. Maldonado Decl., ¶¶ 1-6.)
Defendant responds:
No prejudice exists
here. Defendant and Plaintiffs have not engaged in any formal discovery, no
depositions were taken by any party, no mediation (on an individual or
class-wide basis) took place, and no trial date has been set in this matter.
Moreover, and importantly, there has been no judicial litigation of the merits
or arbitrable issues. The informal documents exchanged in anticipation for the
November 11, 2022 mediation were produced by Defendant, and such documents
would have been disclosed with Defendant’s Initial Disclosure pursuant to [the
American Arbitration Association’s] Rules [citations]; Plaintiffs have not
disclosed any evidence at all, as the document exchange was one-sided and
provided by Defendant only. As such, Plaintiffs’ ability to arbitrate their
claims has not been impaired whatsoever.
Plaintiffs’
contention that they suffered prejudice due to incurring legal expenses and
costs is unpersuasive, as California courts have consistently held that court
costs and legal expenses alone do not constitute prejudice.
[Citations.] As such, Plaintiffs have not satisfied their burden and their
claims should be compelled to arbitration.
(Supp. Reply to
Motion to Compel Arbitration, p. 3, emphasis added.)
The Court disagrees. Plaintiffs’ prejudice is based on more than just
incurring legal expenses. While
counsel’s supplemental declaration confirms that they sustained significant
fees and costs, “Defendant’s conduct and the 17 months of delay” also “impaired
[P]laintiff[s’] ability to obtain the cost savings and other benefits provided
by arbitration.” (1/13/23 Tentative
Ruling Re: Motion to Compel Arbitration, p. 6.)
In other words, Plaintiffs additionally and independently suffered
prejudice in the form of lost “ability to take advantage of” arbitration’s
“benefits and efficiencies[.]” (Adolph
v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443, 1451.)
Next, Defendant contends it acted
consistent with the right to compel arbitration because “it pursued
arbitration” “as soon as [defense] counsel was made aware of the arbitration
agreements[.]” (Supp. Reply to Motion to
Compel Arbitration, p. 3.)
The Court disagrees. As the employer, “Defendant . . . had, or
should have had, access to Plaintiffs’ personnel files and the purported
arbitration agreements from the outset and likely before the litigation
started.” (1/13/23 Tentative Ruling Re:
Motion to Compel Arbitration, p. 6.) “It
knew Barragan’s identity from the start of the case and Mosby’s identity by at
least 2/23/22 [citation], yet it chose to not allege an arbitration affirmative
defense.” (Ibid.) “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.”
(Ibid.)
“The fact remains that Defendant
litigated the case for months prior to moving to compel arbitration.”
(Ibid.) For example,
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.
(Id. at p. 5 [citing minute
orders, joint status conference reports, etc.].) Given this “extensive litigation conduct[,]”
“[t]he decision to wait until 12/16/22 to file the motion was, and continues to
be, inconsistent with the right to arbitrate.”
(Id. at pp. 3, 6.)
“The Court finds that Defendant’s
conduct and the 17 months of delay demonstrate waiver and created
prejudice[.]” (Id. at p. 6.)
Defendant’s reliance on Quach
v. California Commerce Club, Inc. (2022) 78 Cal.App.5th 470
fails to change the result. (See Supp.
Reply, pp. 3-4.) The California Supreme
Court is set to review Quach.
Regardless, it appears distinguishable.
Even though the defendant waited 13 months to move to compel
arbitration, propounded a “large amount of written discovery,” and took the
plaintiff’s deposition, the Court of Appeal reversed the trial court’s waiver
finding because the plaintiff admitted that he “incurred no costs in litigation
that he would not otherwise have expended had the case gone to arbitration
earlier.” (Quach, supra, 78
Cal.App.5th at 474, 482.)
Here, differently, Defendant claims the purported arbitration agreements
preclude class claims (see Motion to Compel Arbitration, p. 17), yet the
parties “met and conferred regarding class discovery, produced documents,
including class documents, and scheduled private mediation” pertaining to the
class claims. (1/13/23 Tentative Ruling
Re: Motion to Compel Arbitration, p. 5; see also, e.g., Bral Decl., ¶¶ 5, 12,
16, 17, 18, 21.) By Defendant’s own
argument, such costs would not have been expended in arbitration.
Thus, the motion to compel
arbitration is denied.