Judge: Gregory Keosian, Case: 21STCV30798, Date: 2022-10-04 Tentative Ruling

Case Number: 21STCV30798    Hearing Date: October 4, 2022    Dept: 61

Defendant Budee, Inc.’s Motion to Compel Arbitration is GRANTED.

I.                MOTION TO COMPEL ARBITRATION

On petition of a party to an arbitration agreement to arbitrate a controversy, a court must order the petitioner and respondent to arbitrate the controversy if it determines the arbitration agreement exists, unless (1) the petitioner has waived its right to arbitrate; (2) grounds exist for the revocation of the agreement; or (3) “[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.” (Code Civ. Proc., § 1281.2.)

“[T]he party moving to compel arbitration bears the burden of establishing the existence of a valid agreement to arbitrate, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. The role of the trial court is to sit as a trier of fact, weighing any affidavits, declarations, and other documentary evidence, together with oral testimony received at the court's discretion, to reach a determination on the issue of arbitrability.” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 758.)

Defendant Budee, Inc. (Defendant) presents two arbitration agreements executed by Plaintiffs Sheila Contreras and Karla Cervera (Plaintiffs) on May 17, 2020, each of which provides for arbitration of all claims arising from employment with Defendant. (Cresap Decl. Exhs. A, B.) 

Plaintiffs in opposition argue that Defendant has waived its right to compel arbitration. They argue that since this matter was filed on August 20, 2021, Defendant has engaged in several acts inconsistent with an intent to arbitrate. Defendant filed an answer on October 15, 2021, which did not include an affirmative defense related to the existence of an arbitration contract. Defendant served discovery requests on November 29, 2021, which Plaintiff responded to on December 31, 2021. (Dogra Decl. ¶ 4.) On December 30, 2021, Defendant served a case management statement that made no mention of arbitration. (Dogra Decl. ¶ 9, Exh. C.) The present motion was served after Plaintiffs obtained leave to allege class claims, and after they served class-related discovery. (Dogra Decl. ¶ 10.)

“In the past, California courts have found a waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration, to instances in which the petitioning party has unreasonably delayed in undertaking the procedure.” (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1196, internal citations omitted.) In evaluating whether the right to compel arbitration has been waived, courts 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 e.g., 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.

(Id. at p. 1193, internal quotation marks and alterations omitted.)

In Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, the court upheld a trial court’s determination that a defendant had waived arbitration under these circumstances:

Here, approximately four months elapsed from the time Lewis commenced this action until Fletcher Jones first expressed a desire to arbitrate Lewis's claims. After making its first arbitration demand, Fletcher Jones waited almost another month before filing its motion to compel arbitration. During this nearly five-month period, Fletcher Jones litigated the merits of Lewis's claims through multiple demurrers and motions to strike and participated in discovery without raising its right to arbitration.

(Id. at p. 446.)

In Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, the court found waiver when the demand for arbitration had been deferred for “three months,” when the party moving for arbitration “did not plead its purported right to arbitrate as an affirmative defense,” and when the party participated in discovery, objected to interrogatories and document demands, and attended depositions. (Id. at p. 558.) The court also found that the moving party’s conduct had prejudiced the party being compelled to arbitrate. (Ibid.)

Conversely, in Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th 651, the court held that the trial court had erroneously found waiver when, while “there was a 14-month period from the filing of the original complaint to the filing of the motion to compel,” the moving party had gained no advantage from the limited discovery conducted in that time that it would not have gained from arbitration. (Id. at p. 663.) This was so even though the moving party had previously filed a demurrer and motion to strike. (Id. at p. 662.) However, Khalatian has been distinguished on the grounds that “no depositions were taken and no discovery motions were filed; the defendants’ demurrer and motion to strike were taken off calendar, not overruled or denied, and therefore the motion to compel arbitration was not filed as a last resort; and the trial was scheduled to commence more than a year later.” (Garcia v. Haralambos Beverage Co. (2021) 59 Cal.App.5th 534, 544.)

Here, although Defendant has engaged in certain acts inconsistent with the right to arbitrate, these acts have not been substantial, and Plaintiff has suffered no prejudice resulting from Defendant’s delay or the acts described. Although Defendant has served and answered discovery, it has taken no depositions and  has filed no motions, the present one excepted. Nor does Plaintiff identify any prejudice from Defendant’s delay. While “[w]aiver does not occur by mere participation in litigation if there has been no judicial litigation of the merits of arbitrable issues, waiver could occur prior to a judgment on the merits if prejudice could be demonstrated.” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1203, internal quotation marks omitted.)

Plaintiff argues that the United States Supreme Court has held that prejudice is not necessary for a finding of waiver. (Opposition at p. 3 fn. 1, citing Morgan v. Sundance (2022) 142 S.Ct. 1708.) But that case decided only a matter concerning “federal procedural rules,” not the doctrine of waiver applicable under California state law, in which prejudice remains “critical in waiver determinations.” (Quach v. California Commerce Club, Inc. (2022) 78 Cal.App.5th 470, 478.)

Accordingly, Defendant has shown the existence of arbitration agreements applicable to both plaintiffs, and no waiver has occurred. The motion is therefore GRANTED.