Judge: Layne H. Melzer, Case: 2022-01255363, Date: 2022-12-22 Tentative Ruling
Petitioner Annabel Pastrana
Petition to Compel Arbitration
The court is inclined to GRANT petitioners Anabel and Lianne Pastrana petition to compel respondents Edmond Eldabe and Jessica Castro to arbitrate.
The court also notes that Petitioners mis-filed their reply in the related action and there is no proof of service showing it was served on Respondents.
Compelling Arbitration
Code Civ. Proc. § 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 the revocation 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. …”
(Emphasis supplied.)
Existence of an Arbitration Agreement
The parties do not dispute that there is an agreement to arbitrate claims arising out of the retainer agreement, including fees, quality of service, and malpractice.
Notably, the agreement provided names only Anabel. Only she is named as client and only she signed the agreement. [Petition/motion, Ex. 1.] However, Anabel is the GAL for Lianne. Respondents also concede they represented both Anabel and Lianne, albeit it is not clear if it was under the same retainer agreement. [Opp. at 2.] Petitioners allege that the arbitration agreement covers them both. And significantly, Respondents concede there is an arbitration agreement “as alleged” but defend that the right to arbitration has been waived.
Waiver
Respondents contend that Petitioners waived their right to arbitration by waiting so long since they complained of Respondents’ representation and by filing the related action – which appears to be regarding only the fee dispute because it is concerns the funds withheld.
Although a court may deny a petition to compel arbitration on the ground of waiver (§ 1281.2, subd. (a)), waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof. (Christensen v. Dewor Developments, supra, 33 Cal.3d at p. 782, 191 Cal.Rptr. 8, 661 P.2d 1088; see also Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 189, 151 Cal.Rptr. 837, 588 P.2d 1261 (Doers ).)
St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195.
In St. Agnes Medical Center v. Pacificare of California, the California Supreme Court set forth a multi-factor test to assess waiver claims. While waiver is not a mechanical process, and no one factor is predominant, the pertinent factors for this appeal are: (1) Did the party seeking arbitration act inconsistently with the right to arbitrate or otherwise substantially invoke the litigation process? (2) Are the parties “well into preparation” of the lawsuit? (3) Is there an imminent trial date? (4) Has the delay affected, misled, or prejudiced the opposing party? 31 Cal.4th at 1196.
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. Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 992.
In Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal. App. 4th 1443, 1452, the court of appeal recognized that a party could not blow hot-and-cold by pursuing a strategy of courtroom litigation only to turn towards the arbitral forum at the last minute, thereby frustrating the goal of arbitration as a speedy and relatively inexpensive means of dispute resolution: “We are loathe to condone conduct by which a [litigant] repeatedly uses the court proceedings for its own purposes ... all the while not breathing a word about the existence of an arbitration agreement, or a desire to pursue arbitration....” Id. at p. 1452. See also Burton v. Cruise (2011) 190 Cal. App. 4th 939 (reaffirming Adolph and finding plaintiff had waived right to arbitrate by filing and litigating complaint).
Prejudice is a critical, but not dispositive issue in determining waiver. Kokubu v. Sudo (2022) 76 Cal.App.5th 1074, 1084.
“Prejudice will be found where the ‘petitioning party's conduct has substantially undermined [the] important public policy [of arbitration as a speedy and relatively inexpensive means of dispute resolution] or substantially impaired the other side's ability to take advantage of the benefits and efficiencies of arbitration.’ (St. Agnes, supra, 31 Cal.4th at p. 1204, 8 Cal.Rptr.3d 517, 82 P.3d 727; see also Lewis v. Fletcher Jones Motor Cars, Inc., supra, 205 Cal.App.4th at p. 452, 140 Cal.Rptr.3d 206 [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, 118 Cal.Rptr.3d 613 [‘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.
Petitioners argue they did not unduly delay in bringing their petition to compel arbitration of disputes because they did not know until completion of their underinsured motorist arbitration against their insurance company that they had an action against their insurance broker that Respondents missed.
Petitioners’ filing a separate complaint and FAC in the related action – even after they filed their petition to compel arbitration here – was contrary to arbitration. But both the complaint and FAC acknowledge arbitration as an acceptable substitute. And, because the related action was stayed, the case did not go far. Respondents did incur the costs of filing a demurer and motion to strike, however.
On the filing of the related action alone, the court does not find waiver.
But pre-filing correspondence from Petitioners’ counsel rejects the arbitration agreement. Arguably, this is an express waiver. On the other hand, Petitioners did not follow it with a lawsuit. They followed it with a petition to compel arbitration, and then a lawsuit that acknowledged arbitration as an option.
While counsel’s words, in that moment, were a rejection of the arbitration agreement, Petitioners’ actions that followed were not. In this instance, “actions speak louder than words.” For this reason, the court does not find waiver of rights to arbitrate.
Appointment of an Arbitrator
Under Code Civ. Proc. § 1281.6, “If the arbitration agreement does not provide a method for appointing an arbitrator, the parties to the agreement who seek arbitration and against whom arbitration is sought may agree on a method of appointing an arbitrator and that method shall be followed. In the absence of an agreed method, or if the agreed method fails or for any reason cannot be followed, or when an arbitrator appointed fails to act and his or her successor has not been appointed, the court, on petition of a party to the arbitration agreement, shall appoint the arbitrator.” Code Civ. Proc. § 1281.6
When a party petitions the court to appoint an arbitrator, the court shall nominate 5 persons from (A) lists of persons supplied jointly by the parties; (B) obtained from a governmental agency concerned with arbitration, or (C) obtained from a private disinterested association concerned with arbitration. The parties have 5 days after the court’s nomination to jointly select an arbitrator. If they fail to do so, the court shall appoint the arbitrator from the nominees. Code Civ. Proc. § 1281.6.
The parties have not yet submitted a joint list of possible nominees. If the court orders arbitration as contemplated, the parties are to submit a joint list of possible arbitrator within 14 days.
This matter shall be continued to 2/2/23 at 2PM for the Court to select the arbitrator and to discuss ongoing case management pending arbitration.