Judge: Deborah C. Servino, Case: 30-2020-01143061, Date: 2022-10-14 Tentative Ruling

MOTION TO COMPEL ARBITRATION

Defendant PIH Health Physicians’ motion to compel Plaintiff Verio Health Care, Inc. to arbitrate its claims against Defendant, is granted.

As an initial matter, Defendant’s assertion that Supervising Judge Layne Melzer’s setting of a trial date without a case management conference ran “counter to Cal. Rules of Court rule 3.722(a)” is inaccurate.  (Mot., at p. 5, fn. 8.)  Rule 3.722(a) is the rule of court that addresses case management conferences.  However, California Rules of court, rule 3.720(b) provides: “A court by local rule may exempt specified types or categories of general civil cases from the case management rules in this chapter, . . . . The court must include the alternative procedures in its local rules.” Due to the COVID-19 pandemic, this Court approved Local Emergency Rule 1, which suspended case management conferences through March 31, 2021.  Local Emergency Rule 1 also set forth that for cases that otherwise would have been subject to the case management procedures, a trial date would be scheduled by the court 19 to 21 months from the date the case was filed.  Local Emergency Rule 1 was effective as of May 6, 2020.  In other words, at the time the Court set a trial date in this case, rule 3.722(a) did not apply.  On July 21, 2020, the Court set a trial date in this case pursuant to Local Emergency Rule 1.  (ROA 7.)  Counsel is expected to be familiar with and observe the Local Rules of this Court.

Applicable Law

Code of Civil Procedure section 1281.2 provides, inter alia:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(a)  The right to compel arbitration has been waived by the petitioner; or

(b)  Grounds exist for rescission of the agreement.

(c)  A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. . . .

California Rules of Court, rule 3.1330 requires that a petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure section 1281.2 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be attached to the petition and incorporated by reference

“‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable.  Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.’”  (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 761, quoting Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)

Agreement to Arbitrate

Notwithstanding California’s “strong public policy in favor of arbitration as an expeditious and cost-effective way of resolving disputes,” a party can only be compelled to arbitrate when he or she has agreed to do so. “Whether an agreement to arbitrate exists is a threshold issue of contract formation and state contract law.” The burden of “proving the existence of a valid arbitration agreement” is on the party seeking to compel arbitration. (Avila v. Southern California Specialty Care, Inc. (2018) 20 Cal.App.5th 835, 843–844, internal citations omitted.)  As a result, the first step is to determine whether there was an agreement to arbitrate the pending dispute. 

Defendant has shown the existence of an agreement to arbitrate.  Plaintiff does not affirmatively dispute the existence or validity of the Agreement, or that by its terms it covers Plaintiff’s claims in this action. 

Plaintiff does not dispute the signature on the Agreement that is identified as Eric Shrier, President.  Rather, Plaintiff takes the position that Defendant has not presented admissible evidence of the Agreement, so the motion should be denied on that basis.  (Opp., at pp. 1:25-2:1, 4:1-5.)

For purposes of a petition to compel arbitration, it is unnecessary “to follow the normal procedures of document authentication . . . [A]s a preliminary matter the court is only required to make a finding of the agreement's existence, not an evidentiary determination of its validity.” (Condee v. Longwood Mgmt. Corp. (2001) 88 Cal.App.4th 215, 218-219 [finding it error to deny petition on ground that arbitration agreement not properly authenticated where signature on agreement not challenged].)  Condee v. Longwood Management Corp. is directly on point here. By its motion and counsel’s supporting declaration, Defendant alleges the existence of an arbitration agreement and has attached that agreement.  The burden thus shifted to Plaintiff to prove the falsity of the agreement.  It has not done so.  Accordingly, an arbitration agreement exists.

Waiver

Plaintiff contends that Defendant has waived its right to compel arbitration under that agreement.

Waiver of arbitration is not to be lightly inferred, and the party contending that such a waiver exists bears the burden of proof.  (Saint Agnes Med. Ctr. v. Pacificare of Calif. (2003) 31 Cal.4th 1187, 1195.)  The determinative issue is the “presence or absence of prejudice from the litigation of the dispute.”  (Id. at p. 1203.)  Courts “will not find prejudice where the party opposing arbitration shows only that it incurred court costs and legal expenses.”  (Ibid.)  In determining waiver of the right to arbitration, a court can consider (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, such as taking advantage of judicial discovery procedures not available in arbitration, had taken place, and (6) whether the delay affected, misled, or prejudiced the opposing party.

“Prejudice typically is found only where the petitioning party’s conduct has substantially undermined this important public policy [in favor of arbitration] or substantially impaired the other side’s ability to take advantage of the benefits and efficiencies of arbitration.”  (Id. at p. 1204.)  Examples in which prejudice has been found include situations where the moving party used the judicial discovery process to gain information about the other side’s case that could not have been gained in arbitration or waiting until the eve of trial to seek arbitration.  (Ibid.; see Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 452 [prejudice may be found where the party demonstrates it has been substantially deprived of the advantages of arbitration as a speedy and relatively inexpensive   means of dispute resolution.]; Burton v. Cruise (2010) 190 Cal.App.4th 939, 943 [a petitioning party's conduct in stretching out the litigation process itself may cause prejudice by depriving the other party of the advantages of arbitration as an expedient, efficient and cost-effective method to resolve disputes]; Oregel v. PacPizza, LLC (2015) 237 Cal.App.4th 342, 360 [party petitioned for arbitration after conducting extensive discovery unrelated to claims in arbitration and having delayed for 17 months].)

Formal discovery of facts during the pendency of court proceedings but before an order to arbitrate does not waive arbitration, when the discovered information would have been available during discovery had the parties been in arbitration. (Iskanian v. CLS Transp. Los Angeles LLC (2014) 59 Cal.4th 348, 378.)

A defendant’s knowledge of its right to arbitrate and failure to plead it in his answer may be a basis (in context) to find waiver.  (Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 557–558.)

Here, Plaintiff does not make a showing of prejudice but points to Defendant’s delay in raising arbitration.  Understood in the context of the COVID-19 pandemic – the court closure, shut down of offices and schools, and related disruptions – and the complete dormancy of this action (so far as Defendant knew), Defendant’s failure to determine that there was an applicable arbitration agreement is not inherently unreasonable.  In this light, the two-year period from when the case was filed to when Defendant sought arbitration, is not an undue delay.  Rather, Defendant demanded and then moved for arbitration once it realized that it had a right to it.

Moreover, even if Defendant should have known about its right to arbitration and its conduct is assessed on that basis, the only inconsistent act taken by Defendant was its filing of an answer that does not plead a right to arbitration.  Defendant has propounded and responded to limited discovery.  But the arbitration provision specifically provides for such discovery as part of the arbitration proceedings.  The parties also participated in a mandatory settlement conference.  However, the mandatory settlement conference occurred after defense counsel had alerted Plaintiff’s counsel of the arbitration provision.  Plaintiff has not articulated how it was prejudiced by attending the mandatory settlement conference. And while Defendant has filed a motion to compel discovery, Defendant clarified in its reply that the motion to compel discovery was made in the alternative should the court deny the motion to compel arbitration.  Defendant also obtained on an ex parte basis an order staying proceedings pending the hearing on the motion to compel arbitration, except for the filing of opposition and reply briefs regarding Defendant’s motion to compel discovery, and keeping the hearing on the motion to compel discovery as scheduled.  (Order [ROA 78].) 

Plaintiff points out that Defendant brought its motion to compel arbitration three weeks before what was then the trial date.  Plaintiff asserts in its opposition, but does not provide evidence, that it was well into its trial preparation by the time Defendant moved.  More than five weeks before this, though, Defendant asked Plaintiff to arbitrate and Plaintiff failed to respond.  (Anderson Decl., at ¶¶ 16-23.)  Defendant’s demand for arbitration was not as last minute as Plaintiff suggests.

For these reasons, Defendant did not waive its right to arbitration.  The motion to compel arbitration is granted.  This action is stayed pending completion of arbitration proceedings.  The court hereby sets a status conference regarding the arbitration for April 14, 2023 at 9 am in Department C21.  The June 20, 2023 trial is hereby vacated.

SPECIAL INTERROGATORIES, REQUESTS FOR PRODUCTION, MOTIONS TO COMPEL DEPOSITIONS

The Court’s ruling on the motion to compel arbitration renders Defendant’s discovery motions moot.

Defendant shall give notice of this ruling and of the April 14, 2023 arbitration status conference.