Judge Kerry Bensinger, Case 20STCV44666 2023-03-27 Tentative Ruling

On November 20, 2020, plaintiff Sarkis Avagyan (“Plaintiff”) initiated this action against defendants The State of California (the “State”), California Highway Patrol (“CHP”), Officer Leal (I.D. No. 21879) (“Leal”), Lyft, Inc. (“Lyft”), Jose Gabriel Martinez (“Martinez”), and Eugene Min Lee (“Lee”) alleging causes of action for (1) general negligence (2) negligence per se; (3) and statutory negligence. The first and second causes of action were asserted against Defendants Lyft, Martinez, and Lee, and the third cause of action was asserted against Defendants the State, CHP, and Leal.

On November 18, 2022, Plaintiff filed the operative First Amended Complaint (“FAC") asserting six additional causes of action against Lyft for negligence/gross negligence, negligent supervision, fraud, intentional misrepresentation, negligent misrepresentation, and violation of Business & Professions Code § 17200 et seq.

According to the FAC, on December 23, 2019, Plaintiff was a passenger in a vehicle operated by Martinez in service of Lyft. The vehicle was involved in an accident on the freeway, causing Plaintiff’s injuries. At the time of the accident, Martinez was blocked from using the Lyft application as a driver. However, Martinez logged into the Lyft app using his brother’s username and password. Martinez drove his own vehicle, which was listed on Martinez’s own Lyft profile, and added his vehicle under his brother’s profile.

On November 23, 2022, Lyft filed this Motion to Compel Arbitration (“Motion”). Plaintiff opposed.

The Court heard argument on the Motion on February 8, 2023. At the hearing, counsel for Lyft asked the Court to reconsider its tentative with respect to two issues: (1) whether the delegation clause of the arbitration agreement requires the arbitrator to rule on waiver and the arbitrability of the case and (2) whether the new causes of action asserted in Plaintiff’s FAC revive Lyft’s right to arbitration. The Court continued the matter to revisit the two issues.

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-972.) The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, the party opposing the petition then bears the burden of proving by a preponderance of the evidence any fact necessary to demonstrate that there should be no enforcement of the agreement, and the trial court sits as a trier of fact to reach a final determination on the issue. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) The Court is empowered by Code of Civil Procedure, section 1281.2 to compel parties to arbitrate disputes pursuant to an agreement to do so.

“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:

(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. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.”

The party petitioning to compel arbitration under written arbitration agreement bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, and party opposing petition must meet the same evidentiary burden to prove any facts necessary to its defense. The trial court acts as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence. (Code Civ. Proc., § 1281.2; Provencio v. WMA Securities, Inc. (2005) 125 Cal.App.4th 1028, 1031.)

Here, the arbitration agreement expressly states that “the agreement to arbitrate is governed by the Federal Arbitration Act.” (Henry Decl., Ex. 3.) Parties to an arbitration agreement may voluntarily elect to have the Federal Arbitration Act (“FAA”) govern enforcement of that agreement. (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355.) Here, the parties have so elected. Accordingly, the Court finds that the FAA applies.

Under both Title 9 section 2 of the United States Code (known as the FAA) and 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 that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ., Proc. § 1281.2.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) Once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement, and no evidence or authentication is required to find the arbitration agreement exists. (See Condee v. Longwood Mgt. Corp. (2001) 88 Cal.App.4th 215, 219.)

“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. (See Condee, supra, 88 Cal.App.4th at 218; see also Cal. Rules of Court, rule 3.1330 [“A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 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 physically or electronically attached to the petition and incorporated by reference”].) 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. [Citation]” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Here, Lyft has met its initial burden of showing that an arbitration agreement exists between the parties. On August 26, 2019, Plaintiff accepted Lyft’s updated Terms of Service. (Henry Decl. ¶ 15.) As found in Lyft’s August 2019 Terms, the arbitration provision states in pertinent part:

Except as expressly provided below, ALL DISPUTES AND CLAIMS BETWEEN US (EACH A “CLAIM” AND COLLECTIVELY, “CLAIMS”) SHALL BE EXCLUSIVELY RESOLVED BY BINDING ARBITRATION SOLELY BETWEEN YOU AND LYFT. These Claims include, but are not limited to, any dispute, claim or controversy, whether based on past, present, or future events, arising out of or relating to: … the Lyft Platform … background checks performed by or on Lyft’s behalf, … unfair competition, … fraud, defamation … claims arising under federal or state consumer protection laws; … and all other federal and state statutory and common law claims.”

Here, Plaintiff suffered an injury on December 23, 2019 arising out of his use of the Lyft Platform. Further, Plaintiff’s new causes of action in the FAC include negligence/gross negligence, negligent supervision, fraud, intentional misrepresentation, negligent misrepresentation, and violation of Business & Professions Code § 17200 et seq. Consequently, this arbitration agreement would encompass Plaintiff’s injury and the new causes of action alleged in the FAC. Plaintiff does not dispute having assented to the August 2019 Terms of Service or deny the existence of the arbitration agreement.

Based on the foregoing, the Court finds that Lyft has proven the existence of the arbitration agreement.

In opposition, Plaintiff contends that (1) Lyft waived the right to arbitrate by failing to plead arbitration as an affirmative defense and through its litigation conduct, and (2) the FAC does not expand the scope of the case such that Lyft’s right to arbitration has been revived.

The Court finds that Lyft waived the right to arbitrate. “To decide whether a waiver has occurred, the court focuses on the actions of the person who held the right.” (Morgan v. Sundance (2022) 142 S.Ct. 1708, 1713.) “Courts have recognized that where the FAA applies, whether a party has waived a right to arbitrate is a matter of federal, not state, law. [Citation.]” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 963.)

In St. Agnes v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196, the California Supreme Court adopted a multi-factor test from the Tenth Circuit opinion in Peterson v. Shearson/American Express, Inc. (10th Cir. 1988) 849 F.2d 464 wherein a court may 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.¿ (Peterson, supra, 849 F.2d at pp. 467-68; St. Agnes, at p. 1196.) ¿¿However, following the U.S. Supreme Court’s decision in Morgan, courts may no longer condition a determination of waiver on prejudice. (See Morgan, supra, at p. 1713.) The remaining Peterson factors are proper considerations in the waiver inquiry. (Davis, supra, at p. 963.)

Here, the sum of Lyft’s conduct demonstrates a waiver of the right to arbitrate. Lyft did not plead arbitration as an affirmative defense; Lyft conducted discovery and resorted to the Court’s discovery procedures to enforce discovery; Lyft filed oppositions to Plaintiff’s motions to continue the trial and to amend the complaint; Lyft’s counsel represented to the court that she had reserved a date for a motion for summary judgment for November 2023, and that Lyft would need time to defend and litigate issues in support of its summary judgment motion, which prompted the Court to change the trial date from April 19, 2023, to December 4, 2023 in the Court’s tentative ruling to grant Plaintiff’s motion to continue trial; and, Lyft waited over two years before invoking its right to arbitrate. (Burunsuzyan Decl. ¶ 6, Ex. 4.) Lyft has plainly acted inconsistently with its right to arbitrate.

In response, Lyft argues (1) waiver is an issue of arbitrability delegated to the arbitrator under this arbitration agreement and (2) even if Lyft waived its right to arbitrate, the assertion of new causes of action in Plaintiff’s FAC revived Lyft’s right to arbitrate. The Court addresses each argument in turn.

Waiver by litigation conduct is presumptively for the court to decide. (Martin v. Yasuda (2016) 829 F.3d 1118, 1123.) “If the parties intend that an arbitrator decide [whether a party has waived his right to arbitration by litigation conduct] under a particular contract, they must place clear and unmistakable language to that effect in the agreement.” (Hong v. CJ CGV America Holdings, Inc. (2013) 222 Cal.App.4th 240, 258.)

Here, the arbitration agreement’s delegation clause does not contain clear and unmistakable language delegating the issue of waiver by litigation conduct to an arbitrator. Lyft points to the arbitration language “all disputes concerning the arbitrability of a claim” as a clear and unambiguous expression of delegation regarding the arbitrability of waiver issues. (Henry Decl., ¶¶ 14-15, Ex. 3, at 17(a).) However, the language highlighted by Lyft relates to “dispute[s] about the scope, applicability, enforceability, revocability, or validity of arbitration agreement.” It does not clearly and expressly cover issues of waiver by litigation. Counsel for Lyft conceded the point at the February 8, 2023 hearing that the language does not specifically include waiver by conduct. Absent clear and unmistakable language, the issue of waiver by litigation conduct is properly before this Court.

Upon further review and reconsideration, the Court concludes the FAC revives Lyft’s right to compel arbitration.

The revival doctrine generally involves consideration of two factors: (1) the general policy favoring arbitration and (2) fairness.[1] When a party amends the complaint, courts must determine whether the amendment significantly alters the course of the litigation. If so, fairness requires that the moving party be given an opportunity to reassert its right to arbitrate unless outweighed by other countervailing interests. When considering fairness, the moving party’s diligence in seeking arbitration is relevant.

Here, prior to the filing of the FAC, Lyft waived by litigation its right to seek arbitration. Lyft concedes as much. After the filing of the FAC, however, Lyft acted diligently. Lyft filed its motion to compel arbitration five days after the Court granted Plaintiff leave to amend.

Because Lyft acted diligently once the FAC was filed, the question boils down to whether the FAC unexpectedly and dramatically broadened the scope of the case and the relief sought against Lyft.

A comparison of the two complaints demonstrates that the FAC broadens both the scope of the allegations and the relief sought. In the Complaint, Plaintiff pursues three relatively straight forward claims involving a car accident. The FAC initially added six additional causes of action, but on March 23, 2023, Plaintiff filed a request to dismiss two of the newly added claims: the Sixth Cause of Action for fraud and the Ninth Cause of Action for violation of Business & Professions Code § 17200 et seq.[2] The FAC therefore adds causes of action for gross negligence, negligent supervision, intentional misrepresentation, and negligent misrepresentation.

These new causes of action are not minor additions. To the contrary, they transform the case from a negligence based car-accident case to a sweeping challenge of Lyft’s business practices, including allegations that Lyft “drivers are unlikely to remain employed by LYFT for long”; “LYFT’s steep turnover rate creates a problem for the company as they are constantly in need of replenishing new drivers”; “LYFT’s relentless demand for new drivers incentivizes the company to hire quickly and ignore transportation industry standards for the selection of drivers. Thus, LYFT is motivated to forego stringent background checks on drivers and instead conduct abbreviated checks which fail to weed out bad actors”; Lyft “knew or should have known that many of its drivers were accessing the LYFT platform” by using another person’s credentials “despite having been blocked by both LYFT and Uber” and that this practice “increases the danger to their customers … [who] unknowingly accept rides from dangerous drivers with multiple moving violations, a history of vehicle collisions, convictions for driving under the influence, and convictions for physically violent acts” (FAC, ¶¶31, 32, 38, 39); that Lyft “was negligent in its development, implementation, and use of the LYFT mobile application in such a manner as to lead passengers, including Plaintiff, to believe that they would remain safe throughout the ride” (FAC, ¶ 44); that Lyft “intentionally and falsely represented to Plaintiff that its rides were safe, its drivers were properly screened and that its screening process was superior to that utilized by competing cab companies” (FAC, ¶ 66). None of these allegations appear in the original complaint. And based upon these allegations, Plaintiffs seeks punitive damages.

In Collado v. J & G Transport, Inc (11th Cir. 2016) 820 F.3d 1256 (Collado), Collado, a truck driver who worked approximately 85 hours weekly as an independent contractor, filed a Fair Labor Standards Act (FSLA) claim for overtime wages. Pursuant to the FSLA, J & G had the right to seek arbitration but did not. After the close of discovery, however, Collado added new claims under state law for breach of contract and quantum meruit based on information revealed in discovery showing that Collado was not paid the correct compensation for loads he delivered, pursuant to his contract. J & G immediately sought to compel arbitration of the new claims. The trial court denied the motion because the new claims “did not unexpectedly change the scope or theory of the litigation.” (Id., at p. 1258.)

The Eleventh Circuit reversed, finding that “[t]he change wrought by the amendment in this case was not in the number of plaintiffs but in the type of claim asserted. The case began as one asserting a federal claim. Only after J & G had waived by litigation its right to arbitrate that claim did Collado file the amendment changing the case to one asserting both federal and state claims.” (Id., at p. 1260.) Indeed, the facts relevant to the newly added claims for failure to pay contractually agreed amounts based on the number of loads delivered were distinct from the facts required to prove an FLSA violation based on hours worked.

Collado countered that it would be unfair to allow J & G to revive its right to arbitrate because J & G was aware of the existence of the breach of contract claims. The Eleventh Circuit rejected this argument. J & G was not required to anticipate claims which may “lurk in the shadows of a case.”

While Collado provides a good example of the application of the revival doctrine, other courts have revived the right to arbitrate in a variety of contexts. In Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194 (11th Cir. 2011), the court “revived” the defendant’s right to compel arbitration because Plaintiff changed the definition of the class which increased the class from hundreds of plaintiffs to thousands or tens of thousands of potential plaintiffs. In Brown v. E.F. Hutton & Co. (S.D. Fla. 1985) 610 F.Supp. 76, 78, the amended complaint changed the theory and scope of the case, and the defendant was permitted to “plead anew as though it were the original complaint.” (See also Keating v. Superior Court (1982) 31 Cal.3d 584, 607 [“[i]n seeking coordination and amendment of their complaints, franchisees considerably expanded the scope of their pleadings, raising several new causes of action, injecting new factual allegations, and refocusing direction of their claims”].) Similarly, a change in the scope of the case and potential liability will justify revival. (See Solis v. Experian Information Solutions (C.D. Cal. 2022) 2022 WL 4376077; __ F.Supp. __ [“That alteration in the scope of potential liability justifies revival of Experian’s right to arbitration”].)

On the other hand, “a defendant’s waiver of the right to arbitration is not automatically nullified by the plaintiff’s filing of an amended complaint.” (Krinsk, supra, 654 F.3d at p. 1202.) For example, in Singh v. Mednax Services Inc. (S.D. Fla. 2018) 2018 WL 5098962, the district court found that Plaintiff Singh’s claim of unequal pay did not unexpectedly expand the scope of the litigation.[3] Indeed, if the changes brought about by the amendment are minor factual changes, which do not alter the scope or theory of the plaintiff’s claim, courts will not permit revival. (See Gilmore v. Shearson/American Express, Inc. (2nd Cir. 1987) 811 F.2d 108, 113-114.)

The FAC is a game changer. It’s a sea change in this litigation. As discussed above, Plaintiff’s FAC changes the landscape of the case vis-à-vis Lyft. Not only does it add new claims and new allegations, but it also adds exposure to new damages (punitive damages). If there were a checklist of reasons to order revival, this case would check almost every box.[4]

While Plaintiff alleges Lyft was aware of the nature of the claims raised in the FAC, the broad scope and breadth of the challenges raised in the FAC undermines Plaintiff’s argument. Being sued for negligence involving a car accident is a far cry from the alleging that LYFT was “negligent in its development, implementation, and use of the LYFT mobile application in such a manner so as to lead passengers, including plaintiff, to believe that he would remain safe throughout the ride.” (FAC, Para. 44.) While Plaintiff maintains that Lyft knew early in the litigation that Martinez was an unauthorized driver on the Lyft platform, (See Burunsuzyan Decl. ¶ 2, Ex. 1; ¶ 3, Ex. 2.), such knowledge does not foretell the breadth of the allegations contained in the FAC. As the Court in Collado aptly stated, “[K]nowing that a potential claim may lurk in the shadows of a case is not the same as litigating against a claim that has been brought out into the open in a pleading. A defendant is not required to litigate against potential but unasserted claims.” (Collado, supra, 820 F.3d at 1261.) Fairness dictates that Lyft be afforded an opportunity to assert anew its right to arbitration.

Although Lyft waived by litigation its right to compel arbitration in the first instance, Plaintiff’s FAC unexpectedly expanded the scope, breadth, and relief sought against Lyft. The FAC starts this case “anew” and revives Lyft’s right to compel arbitration. Lyft asserted that right soon after Plaintiff filed the FAC. Lyft’s motion to compel arbitration is granted.

The Court will hear from the parties regarding further proceedings. The Court will consider whether to stay the case with respect to the first three causes of actions while the arbitration proceeds[5]; stay the arbitration pending the resolution of the first three causes of action; or proceed in both forums simultaneously.

Parties who intend to submit on this tentative must send an email to the Court at SSCDEPT27@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.

[1] Prior to the U.S. Supreme Court’s decision in Morgan, supra, some federal circuit courts considered prejudice in determining a party’s right to arbitrate. After Morgan and the California Court of Appeal’s decision in Davis, supra, approving of Morgan, prejudice is no longer a consideration. Accordingly, the Court does not consider prejudice to Plaintiff in determining Lyft’s motion to compel arbitration.

[2] On March 23, 2023, one court day before the hearing, Plaintiff filed a request for dismissal of the Sixth and Ninth Causes of Action. For purposes of the hearing on Lyft’s motion to compel, Plaintiff argues dismissal of these two causes of action undermines Lyft’s motion to compel arbitration because Plaintiff has narrowed the issues before the Court. (Decl. of Maro Burunsuzyan, Para. 6.) The Court has broad discretion to accept or reject late-filed papers. (Rancho Mirage County Club Homeowners Assn. v. Hazelbaker (2016) 2 Cal.App.5^th 252, 262; see also Samaniego v. Empire Today, LLC (2012) 205 Cal.App.4^th 1138, 1146.) No doubt, this filing is untimely with respect to reconsideration of the motion to compel arbitration. Nonetheless, the dismissal of the Sixth and Ninth Causes of Action does not change the outcome of the ruling. The bulk of the operative, new factual allegations are found in the Fourth Cause of Action. (See FAC, para. 28-49.)

[3] In Singh, the court nonetheless ordered the matter to arbitration because the plaintiff did not demonstrate prejudice.

[4] Because this is not a class action case, the expansion of the class is a box left unchecked.

[5] None of the named defendants in first three causes of action, other than Lyft, either seek arbitration or are parties to the arbitration agreement.