Filed 7/14/20 Alfaro v. North Hills Village Apartments CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

REYNA DEL CARMEN DURAN ALFARO et al.,

Plaintiffs and Respondents,

v.

NORTH HILLS VILLAGE APARTMENTS, LLC et al.,

Defendants and Appellants.

B296898

(Los Angeles County

Super. Ct. No. BC691922)

APPEAL from an order of the Superior Court of Los Angeles County, Maureen Duffy-Lewis, Judge. Affirmed.

The Cameron Law Firm, Parry G. Cameron, James K. Autrey, for Defendants and Appellants.

Castelblanco Law Group, Eric E. Castelblanco, Shilpa Anand, for Plaintiffs and Respondents.

__________________________

Plaintiffs and respondents are 22 tenants living in five separate apartments (collectively “Tenants”) who filed an action for breach of the implied warranty of habitability and other claims against defendants and appellants North Hills Village Apartments, LLC, H.K. Realty, Inc., J.K. Residential Services, Inc., and Anil Mehta (collectively “Landlord”). More than a year after the action was filed, Landlord sought to compel arbitration pursuant to the lease agreements, and the trial court found Landlord had waived the right to arbitrate. Landlord appeals from the order denying the motion to compel arbitration. On appeal, Landlord contends the arbitration provisions of the lease agreements were not waived. We conclude the trial court’s finding of waiver is supported by substantial evidence of litigation conduct inconsistent with the right to demand arbitration and prejudice to Tenants. We affirm.

FACTUAL AND PROCEDURAL HISTORY

On January 26, 2018, Tenants filed an action against Landlord. They filed an amended action on April 9, 2018, for breach of the implied warranty of habitability, private nuisance, negligence, and violations of Civil Code section 1942.4 and Business and Professions Code section 17200. Tenants demanded a jury trial.

On June 25, 2018, Landlord filed an answer asserting 26 affirmative defenses, but the answer did not allege that the action was subject to arbitration.

On February 18, 2019, Landlord contacted Tenants to discuss submitting the matter to binding arbitration. Landlord had not yet even produced to Tenants’ counsel the alleged arbitration agreements; Tenants’ counsel requested the agreements in order to engage in meaningful discussions about arbitration, and Landlord’s counsel promised to do so. Landlord provided only one tenant’s agreement and did not respond further to Tenants’ counsels request to discuss the matter. The following day, on February 19, 2019, Landlord filed a motion to compel binding arbitration based on the arbitration provisions of the lease agreements. The lease agreements provide in pertinent part: “Should any dispute arise between LANDLORD and TENANT relating to any matter (excluding an Unlawful Detainer case or other case, filed by LANDLORD, for possession, arrearages under this LEASE, as such may constitute past due rent/fees/costs and associated damages), such dispute shall be submitted to Arbitration instead of litigated in Court. The specific terms of Arbitration are stated in Addendum ‘B’, receipt of which is hereby acknowledged by TENANT.” The provision quoted above was initialed by each of the adult Tenants in their respective leases.

Tenants opposed the motion on several grounds, including that Landlord had waived the right to assert the arbitration provisions. Tenants argued that Landlord participated in the litigation for more than a year, including invoking the litigation machinery through substantial discovery and law and motion practice, without mentioning arbitration until approximately 120 days before trial. Multiple individual plaintiffs submitted declarations stating that addendum B was not attached to the lease agreement and had not been explained to them.

Landlord filed a reply on several grounds, including that there had been no waiver of the arbitration provisions, because Landlord had not availed itself of any court advantage, such as by filing a demurrer, and Tenants were not prejudiced in any way. Landlord argued that the motion to compel arbitration was filed at the earliest opportunity. Tenants had filed two motions to compel further responses to interrogatories and requests for production of documents, which were denied, but Landlord had not applied for any relief and no depositions had been taken.

With the reply, Landlord submitted an unsigned form entitled “Addendum B”; Landlord’s litigation counsel represented the form was the addendum B referred to in the lease provisions, which Tenants had acknowledged receiving by specifically initialing the paragraph regarding disputes in their lease agreements. Addendum B provides in pertinent part, “3.5 Limited discovery shall be permitted pursuant to the then applicable arbitration rules of JAMS, provided that the parties shall be entitled to discovery sufficient to adequately arbitrate their claims and defenses. The arbitrator is authorized to rule on discovery motions brought under the applicable discovery rules.” Landlord also submitted the declaration of the property manager.

Tenants filed a sur-reply objecting to new arguments, as well as the submission of addendum B and the property manager’s declaration. Tenants noted that Landlord had engaged in substantial discovery, including serving on Tenants 440 special interrogatories, more than 500 requests for production of documents, and a complete set of form interrogatories for each of the 22 plaintiffs. All of this discovery had been due prior to the hearing on the motion to compel arbitration. Tenants’ attorney submitted a declaration describing the discovery propounded by Landlord. Landlord objected to the sur-reply.

A hearing was held on March 13, 2019. The trial court noted that the contractual arbitration rights were subject to waiver for failing to bring an earlier motion, if the party seeking arbitration had significantly participated in the litigation. The court found the parties had engaged in written discovery and law and motion, and there had been significant participation. As a result, the court determined Landlord had waived the right to compel arbitration.

Landlord filed a timely notice of appeal from the order denying the motion to compel arbitration.

DISCUSSION

Applicable Arbitration Principles

“‘A party seeking to prove waiver of a right to arbitration must demonstrate “‘(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration.’”’ (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1203 (Hoover).) Waiver does not require a voluntary relinquishment of the right to arbitrate, and a party may waive the right without any intent to do so. (Ibid.) Although participating in the litigation of an arbitrable claim does not by itself waive a party’s right to later seek to arbitrate the matter, at some point continued litigation of the dispute justifies a finding of waiver. (Id. at p. 1204.) ‘The relevant factors establishing waiver include whether the party’s actions are inconsistent with the right to arbitrate; 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; whether a party delayed for a long period before seeking a stay; whether important intervening steps (e.g., taking advantage of judicial discovery procedures not available in arbitration) had taken place; and whether the delay affected, misled, or prejudiced the opposing party.’ (Ibid.; accord, St. Agnes Medical Center[ v. PacifiCare of California (2003)] 31 Cal.4th [1187,] 1196 [(St. Agnes Medical Center)].)” (Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035, 1042 (Bower).)

“Because the law favors arbitration, waiver will not be lightly inferred. (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1195.) A party asserting waiver of the right to arbitrate ‘bears a heavy burden of proof,’ with all doubts to be resolved in favor of arbitration. (Ibid.)” (Bower, supra, 232 Cal.App.4th at p. 1042.)

“‘There is no fixed stage in a lawsuit beyond which further litigation waives the right to arbitrate. Rather, the court views the litigation as a whole in determining whether the parties’ conduct is inconsistent with a desire to arbitrate.’ (Hoover, supra, 206 Cal.App.4th at p. 1204.) Prejudice is a determinative issue. (Id. at p. 1205.) ‘Because of the strong policy favoring arbitration, prejudice typically is found only where the petitioning party has unreasonably delayed seeking arbitration or substantially impaired an opponent’s ability to use the benefits and efficiencies of arbitration. [Citations.] Prejudice is not found where the party opposing arbitration shows only that it incurred court costs and legal expenses in responding to an opponent’s pleadings and motions. [Citation.] Prejudice sufficient for waiver will be found where instead of seeking to compel arbitration, a party proceeds with extensive discovery that is unavailable in arbitration proceedings.’ (Ibid.)” (Bower, supra, 232 Cal.App.4th at p. 1042.)

The issue of waiver is generally a question of fact for the trial court, which we review for substantial evidence. (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1196.) “‘We infer all necessary findings supported by substantial evidence [citations] and “construe any reasonable inference in the manner most favorable to the judgment, resolving all ambiguities to support an affirmance.”’ [Citation.] Reversal is not justified simply because the trial court could have potentially reached a different conclusion on the question of waiver. . . . When the relevant facts are undisputed and only one inference may reasonably be drawn from the facts, the waiver issue may be reviewed de novo. (St. Agnes Medical Center, supra, at p. 1196; Hoover, supra, 206 Cal.App.4th at p. 1202.)” (Bower, supra, 232 Cal.App.4th at p. 1043.) The trial court’s order is presumed to be correct; the appellant bears the burden to affirmatively demonstrate error. (Shenouda v. Veterinary Medical Bd. (2018) 27 Cal.App.5th 500, 512.)

Standard of Review is Substantial Evidence

Landlord argues that we should review the order de novo, because the underlying facts are uncontroverted. However, independent review is appropriate only when the facts permit just one reasonable inference. (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1196.) In this case, more than one permissible inference can be drawn from the facts on the issue of waiver. Some facts are consistent with the right to demand arbitration, while other facts are not consistent with enforcing the arbitration agreement. Under the circumstances, where different inferences may be drawn depending upon the weight to be afforded to certain facts, we review the trial court’s ruling under the more deferential substantial evidence standard of review.

Evidence Supports Finding of Waiver

Landlord contends there was no waiver of the right to demand contractual arbitration. We conclude substantial evidence supports the trial court’s finding that Landlord waived the right to compel arbitration.

It is not disputed that Landlord was aware from the inception of the litigation that the lease provided for arbitration. The lease agreements were in Landlord’s possession at all times.

Substantial evidence supports the trial court’s finding that Landlord acted inconsistently with the right to compel arbitration. Landlord did not file a timely petition to compel arbitration at the outset of the case. Landlord did not assert the right to arbitration in the answer and did not raise arbitration rights in response to discovery propounded by Tenants. In fact, Landlord did not raise the issue of arbitration with Tenants or file a motion to compel arbitration for more than a year after the action was filed. Landlord also strategically propounded substantial discovery, including over 400 special interrogatories, over 500 requests for production, and form interrogatories issued to each of 22 plaintiffs, all of which was due prior to the hearing on the motion to compel arbitration. The arbitration agreement contained in addendum B allowed for limited discovery only. Seeking extensive documentary and interrogatory discovery as to each of 22 plaintiffs was inconsistent with the right to arbitrate under the circumstances of this case. We conclude there was substantial evidence to support the finding that Landlord’s actions were inconsistent with enforcing a right to arbitrate.

Tenants also established the prejudice required to support a finding of waiver when there is unreasonable delay in seeking to compel arbitration. “As the court explained in Hoover, supra, 206 Cal.App.4th at page 1205, ‘prejudice typically is found only where the petitioning party has unreasonably delayed seeking arbitration or substantially impaired an opponent’s ability to use the benefits and efficiencies of arbitration. [Citations.] Prejudice is not found where the party opposing arbitration shows only that it incurred court costs and legal expenses in responding to an opponent’s pleadings and motions. [Citation.] Prejudice sufficient for waiver will be found where instead of seeking to compel arbitration, a party proceeds with extensive discovery that is unavailable in arbitration proceedings.’ (Italics added.)” (Bower, supra, 232 Cal.App.4th at p. 1046.)

“In Hoover, the court observed that the party seeking arbitration had conducted litigation in a style inconsistent with the right to arbitrate. (Hoover, supra, 206 Cal.App.4th at p. 1205.) Its recalcitrant responses to discovery suggested it was more interested in delay than expeditious resolution through arbitration. It availed itself of discovery unavailable in arbitration and caused the opposing party to incur significant legal expenses, resulting in delay and prejudice to the opposing party. (Ibid.) The court concluded its discussion of waiver by noting, ‘Especially in class actions, the combination of ongoing litigation and discovery with delay in seeking arbitration can result in prejudice.’ (Id. at pp. 1205–1206.)” (Bower, supra, 232 Cal.App.4th at p. 1046.)

In this case, Landlord’s actions substantially impaired Tenants’ ability to obtain the cost savings and other benefits associated with arbitration. In addition to the delay in seeking to arbitrate the matter, Landlord required Tenants to provide responses to discovery that may not have been available under the more limited discovery of an arbitration proceeding. And it was not just that Tenants incurred legal fees and costs; it was also that the expenses were associated with work that would be unusable in arbitration. In response to the extensive discovery sought by Landlord, Tenants were required to file discovery motions in the trial court that would clearly have been within the arbitrator’s jurisdiction to rule upon. The trial court was in the best position to assess whether Landlord’s actions were inconsistent with asserting the right to compel arbitration and whether Tenants were prejudiced as a result. In light of the permissible inferences from discovery activity and the deference we give to the trial court’s factual findings, we cannot say there is no substantial evidence to support the trial court’s finding that Tenants were prejudiced by Landlord’s actions. We affirm the trial court’s finding of waiver.

DISPOSITION

The order denying the motion to compel arbitration is affirmed. Respondents Reyna del Carmen Duran Alfaro, Domingo Clemente Mejia Arias, Katia Melissa Mejia Duran through her guardian ad litem Reyna del Carmen Duran Alfaro, Marlen Mendez Aguilar, Javier Sandoval Perez, Jaime Rosa Aguilar Ramirez, Miguel Rafael Mendez Cruz, Darlene Alexa Bravo though her guardian ad litem Marlen Mendez Aguilar, Kevin David Bravo Mendez through his guardian ad litem Marlen Mendez Aguilar, Javier Matthew Sandoval Mendez through his guardian ad litem Marlen Mendez Aguilar, Argelio Arael Perez Vasquez, Vitalino Simeon Perez Vasquez, Jose Elias Valle, Sandra Elizabeth Hernandez Jaco, Jose Miguel Valles Jaco through his guardian ad litem Sandra Elizabeth Hernandez Jaco, Sofia Elizabethe Valles Jaco through her guardian ad litem Sandra Elizabeth Hernandez Jaco, Valery Anabella Valles Jaco through her guardian ad litem Sandra Elizabeth Hernandez Jaco, Luis Anguiano Aguirre, Hermelinda Flores Torres, Laila Yamilet Anguiano through her guardian ad litem Hermelinda Flores Torres, Solange Shakira Anguiano Flores through her guardian ad litem Hermelinda Flores Torres, and Uriel Camilo Anguiano Flores through his guardian ad litem Hermelinda Flores Torres are awarded their costs on appeal.

MOOR, J.

We concur:

RUBIN, P. J.

BAKER, J.