Judge: Helen Zukin, Case: 22STCV04170, Date: 2023-01-20 Tentative Ruling

Case Number: 22STCV04170    Hearing Date: January 20, 2023    Dept: 207

Background

Plaintiff Kyle Roberts (“Plaintiff”) brings this action alleging causes of action for negligence, strict products liability, and negligent products liability against Defendant Skinny Labs, Inc., dba Spin (“Defendant”). This action arises out of an incident where Plaintiff was riding one of Defendant’s electric scooters when it allegedly malfunctioned and caused Plaintiff to be ejected from the scooter as it would not stop. Defendant brings this motion to compel Plaintiff’s claims to arbitration. Plaintiff opposes the motion.

Legal Standard

Under both the Title 9 section 2 of the United States Code (known as the Federal Arbitration Act) and the Title 9 of Part III of the California Code of Civil Procedure commencing at section 1281 (known as the California Arbitration Act, hereinafter “CAA”), arbitration agreements are valid, irrevocable, and enforceable, except on such grounds which exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

California Code of Civil Procedure section 1281.2 permits a party to file a motion to request the Court order the parties to arbitrate a controversy. (Code Civ. Proc., § 1281.2.) Under Code of Civil Procedure section 1281.2, the Court must grant the motion “if the Court determines that an agreement to arbitrate the controversy exists”, unless one of four limited exceptions apply. (Ibid.)  The statutory exceptions arise where: (a) the right to compel arbitration has been waived by the petitioner; (b) grounds exist for rescission of the agreement; (c) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues; or (d) the petitioner is a state or federally chartered depository institution seeking to compel arbitration pursuant to a contract whose agreement was induced by fraud or without respondent’s consent. (Ibid.)

Under Code of Civil Procedure section 1281.2, the party moving to compel arbitration bears the burden of demonstration “that an agreement to arbitrate the controversy exists.” (Code Civ. Proc., § 1281.2.)  “With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160 [emphasis in original].) “Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges.” (Ibid.; see also Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [“The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability”].)

Section 1281.2 “was intended primarily to prevent conflicting rulings resulting from arbitration proceedings and other related litigation arising out of the same transaction.” (Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 488.) In enacting section 1281.2 “the Legislature has … authorized trial courts to refuse enforcement of an arbitration agreement where, as here, there is a possibility of conflicting rulings” (C.V. Starr & Co. v. Boston Reinsurance Corp. (1987) 190 Cal. App. 3d 1637, 1642.) “[T]he presence of a nonarbitrable cause of action is not sufficient by itself to invoke the trial court’s discretion to deny arbitration under Code of Civil Procedure section 1281.2, subdivision (c).” (Laswell v. AG Seal Beach, LLC (2010) 189 Cal.App.4th 1399, 1409.) “The mere fact that some claims are arbitrable and some are not is surely not the ‘peculiar situation’ meant to be addressed by section 1281.2(c).” (RN Solution, Inc. v. Catholic Healthcare West (2008) 165 Cal.App.4th 1511, 1521.)

For section 1281.2(c) to apply, “[a] party to the arbitration agreement” must also be “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 must be “a possibility of conflicting rulings on a common issue of law or fact.” (§ 1281.2(c), italics added.) For purposes of section 1281.2(c), a third party is a party who is not bound by the arbitration agreement. (See, e.g., id. at 1521.) “[C]ourts have routinely relied on the allegations contained in the operative pleading to determine whether there is the possibility of conflicting rulings within the meaning of section 1281.2, subdivision (c).” (Abaya v. Spanish Ranch I, L.P. (2010) 189 Cal.App.4th 1490, 1499 [citations omitted].)

Analysis

Plaintiff argues Defendant has waived its right to compel arbitration, citing Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443. In Adolph the defendant waited six months to bring a motion to compel arbitration. In the intervening time, defendant challenged the sufficiency of plaintiff’s pleadings by filing multiple demurrers. Defendant also participated in discovery by providing deficient responses to written discovery propounded by plaintiff. It was only after the trial court overruled defendant’s second demurrer that defendant moved to compel arbitration. The trial court denied the motion, finding defendant’s delay in seeking arbitration and participation in litigation operated as a waiver of defendant’s right to compel arbitration. The Court of Appeal affirmed, based on similar findings of delay and participation in litigation:

We are loathe to condone conduct by which a defendant repeatedly uses the court proceedings for its own purposes (challenging the pleadings with demurrers) while steadfastly remaining uncooperative with a plaintiff who wishes to use the court proceedings for its purposes (taking depositions), all the while not breathing a word about the existence of an arbitration agreement, or a desire to pursue arbitration, and, in fact, withholding production of the arbitration agreement until after the demurrer hearing on the day the demurrer is overruled. To believe that defendant was not aware of its late-asserted right to arbitrate until plaintiff filed its SAC strains our imagination to the breaking point. Plaintiff's CLRA notice plainly identified her name and the date of the transaction at issue, together with the vehicle identification number of the traded-in Escort. Magically, however, at the very moment defendant's demurrer was overruled, the arbitration agreement was produced and enforcement sought.

(Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443, 1452.)

The Court finds Adolph persuasive as similar circumstances are present here. Defendant admits it waited four months to raise the issue of arbitration with Plaintiff, and five months before filing of the instant motion. In that time Defendant challenged Plaintiff’s pleadings by filing multiple motions to strike. It was only after the Court denied Defendant’s second motion to strike that Defendant made any indication that it would be moving to compel arbitration.

Defendant does not discuss Adolph in its moving papers or reply. Instead, citing St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, it argues its participation in litigation, standing alone, is insufficient to find a waiver of the right to compel arbitration. The Adolph Court expressly acknowledged the holding of St. Agnes and nonetheless found a waiver based on findings of delay coupled with participation in litigation.

Defendant also claims its “limited activity in this case has been necessary to protect its rights which would have been waived if Spin did not act.” (Reply at 4.) Defendant offers no explanation as to what rights would have been waived if it did not move to compel arbitration at the initiation of this lawsuit, nor has it offered any authority demonstrating it was in danger of a finding of waiver of those rights. Defendant appears to be claiming it would have lost the ability to challenge the sufficiency of Plaintiff’s claim for punitive damages if it did not bring two motions to strike in this Court. Defendant has made no showing it would be unable to challenge such claims in arbitration. Defendant also offers no explanation why it did not move to extend the time to respond to Plaintiff’s complaints pursuant to California Rules of Court, rule 3.110(d) to allow a motion to compel arbitration to be heard before the time to respond elapsed. The Court also notes Defendant could have filed its motion to compel arbitration concurrently with its first motion to strike, or could have moved for a stay of proceedings and discovery until its motion to compel arbitration was heard.

On such facts, the Court finds Defendant made an intentional choice to participate in litigation in this forum in the hopes of narrowing Plaintiff’s claims and delayed in seeking to compel arbitration of Plaintiff’s claims. Plaintiff necessarily was prejudiced in responding to Defendant’s pleading challenges, amending its complaint, and attempting to propound written discovery on Defendant, all of which would be rendered lost costs to Plaintiff if Defendant’s motion were granted. On such facts, the Court finds Defendant has waived the right to compel arbitration of Plaintiff’s claims under Adolph. Accordingly, Defendant’s motion to compel arbitration is DENIED.

As the Court has found Defendant has waived the right to compel arbitration, the Court need not address the other arguments raised in Defendant’s motion and declines to do so.

Conclusion

Defendant’s motion to compel arbitration is DENIED.