Filed 5/4/20 Vosoghian v. Javaherforoush CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 SIX

SAM VOSOGHIAN,

Appellant,

v.

JAVID JAVAHERFOROUSH,

Respondent.

2d Civ. No. B291985

(Super. Ct. No. 56-2017-00503628-CU-PT-VTA)

(Ventura County)

In 2002, appellant Sam Vosoghian filed a complaint against his uncle, respondent Javid Javaherforoush, alleging claims arising out of their joint business investments and properties. The parties agreed to submit those claims to binding arbitration and dismissed the litigation.

After nine years of unsuccessful efforts to enforce the arbitration agreement, appellant filed a complaint in Los Angeles County Superior Court (Van Nuys court). Five years later, the Van Nuys court entered a post-trial judgment in respondent’s favor.

The judgment, however, did not resolve all of appellant’s claims. At trial, the Van Nuys court determined the complaint was limited to the parties’ dispute over a residence at 22944 Ardwick Street in Woodland Hills (Ardwick property). Believing his other claims were still subject to the arbitration agreement, appellant demanded arbitration and then filed a petition to compel arbitration in this case. The trial court denied that petition and a second petition without prejudice. It denied his third petition with prejudice, finding appellant had waived his right to arbitrate by attempting to litigate his claims in the Van Nuys court rather than pursuing arbitration. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND
II.
The 2002 action, which was filed in Ventura County Superior Court, involved properties that were then jointly owned by the parties, i.e., the Ardwick property, a Mobil station in Simi Valley (Mobil station), and real property located at 1443 Bundy Drive in Santa Monica (Bundy property) and in Long Island, New York (NY property). In 2003, the parties stipulated to binding arbitration as to “all parties and all claims” in both that case and a separate case brought by respondent in Van Nuys court.

Over the next nine years, the parties’ counsel periodically discussed selecting an arbitrator and scheduling the arbitration, but neither event occurred. After writing numerous letters to respondent’s counsel, appellant’s counsel considered filing a petition to compel arbitration but elected instead to file a new action in the Van Nuys court.

That complaint, which was filed on June 11, 2012, sought to quiet title to the Ardwick property and requested declaratory relief and an accounting. The only property specifically mentioned in the two causes of action was the Ardwick property. In a general allegation, appellant alleged: “Over the course of years [the parties] have had joint bank accounts and together made various investments, including but not limited to, apartment buildings and businesses, and engaged in other business and personal relationships. The status and ownership of these assets is now in question. For purposes of identification these include real property located at 1443 Bundy Drive in Brentwood California, an apartment building in New Jersey[,] [r]eal estate in New York and a gas station business located in Simi Valley California.” The complaint made no further reference to these properties and the only attachment was a copy of the deed to the Ardwick property.

Not only did the quiet title cause of action relate solely to the Ardwick property, but the second cause of action for declaratory relief and an accounting also appeared to be similarly limited. The cause of action alleged that “[a]n actual controversy has arisen in [and] now exists relating to the validity on and the rights and duties of the parties herein in that Defendant contends that he is entitled to the record interest set forth in the deed to the real property described above, by virtue of monies owed him from the various investments, business relationships, and personal loans, as set forth above. Plaintiff contends that not only is he entitled to clear title and sole ownership of the above described real property, but that he is owed money by the Defendant.”

Notwithstanding this language, the parties proceeded as though all five properties were at issue. In their 2015 joint mandatory settlement statement, the parties represented that the litigation involves the Ardwick property, Bundy property, Mobil station, NY property and a New Jersey property (NJ property). Specifically, they explained: “Plaintiff and Defendant would sometimes combine their financial resources for both investment and personal convenience without any writings or other documentation of their actions. Some years ago, the parties had a parting of the ways and despite some attempts to resolve the issues between them, this action for an accounting was ultimately filed. Counsel for the parties have in good faith sought to seek a resolution of the matter and have worked towards obtaining [a] complete accounting between the parties.” (Italics added.) Appellant’s 2017 mediation brief and his trial brief also discussed the five properties.

In addition, on April 29, 2015, appellant’s counsel sent an email to respondent’s counsel suggesting that they schedule depositions concerning the Bundy property. He stated: “[I]t may [also be] necessary for us to, if the parties continue to have such diametrically opposed positions as to the Bundy property, that we schedule the deposition of [appellant’s] father and if appropriate his mother and hear what they have to say and what evidence they have. . . . We should schedule that for early July and have a follow-up final attempt to resolve the matters in mid-July, given that if we have no resolution, the Judge made it clear we are going to trial.” (Italics added.)

The five-day trial began on June 5, 2017. Respondent’s new counsel filed a motion in limine seeking to limit the trial to the Ardwick property. He argued the complaint’s two causes of action involved only that property. The Van Nuys court agreed, noting “[t]he first cause of action of that complaint is as defense counsel has just represented to the Court. Paragraph 5 . . . states that the quiet title action is only against or only concerns the property known as 22944 Ardwick Street, Woodland Hills, California.” As for the second cause of action, the court observed “there’s absolutely no reference to any of those other properties in your complaint” and concluded “we are just talking about the Ardwick property.” Nothing in the record suggests the court considered any claims regarding the other four properties. Near the end of the trial, appellant served a demand for arbitration of those claims.

The Van Nuys court ruled in respondent’s favor on both causes of action. Appellant did not appeal the subsequent judgment. Instead, he petitioned to compel arbitration in this case. The trial court denied his first two petitions without prejudice. It denied the third petition with prejudice, finding appellant had waived his right to compel arbitration of his claims regarding the Bundy property, Mobil station, NJ property, NY property and Ardwick property. The court explained: “Petitioner filed a lawsuit in 2012 wherein he unequivocally raised these claims. He then participated in litigation for almost five years before the matter went to trial. Ultimately, the [Van Nuys] court declined to consider these matters and then, and only then, did [P]etitioner demand arbitration. This constitutes a knowing waiver of the right to compel arbitration . . . , regardless of the final judgment in the 2012 case. The passage of many years is inherently prejudicial to Respondent.”

III. DISCUSSION
IV.
Appellant contends the trial court erred by denying his petition to compel arbitration. He claims the court improperly determined he had waived his right to arbitrate. We disagree.

A. Standard of Review
B.
A petition to compel arbitration may be denied where “[t]he right to compel arbitration has been waived by the petitioner.” (Code Civ. Proc., § 1281.2, subd. (a).) A finding of waiver is usually reviewed for substantial evidence. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196 (St. Agnes).) “‘When, however, the facts are undisputed and only one inference may reasonably be drawn, the issue is one of law and the reviewing court is not bound by the trial court’s ruling.’ [Citations.]” (Ibid.; Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 319.) Here, appellant urges us to apply de novo review, while respondent insists the substantial evidence test applies. Under either standard, we would reach the same disposition in this appeal.

B. Appellant’s Waiver of Right to Arbitrate

As used in section 1281.2, the term “‘waiver’” may be used “‘as a shorthand statement for the conclusion that a contractual right to arbitration has been lost.’” (St. Agnes, supra, 31 Cal.4th at p. 1195, fn. 4.) It does not require proof of a voluntary relinquishment of a known right but may arise from a party’s failure to perform an act it was required to perform, regardless of the party’s intent to relinquish the right. (Ibid.) Nonetheless, because California law reflects a strong public policy favoring arbitration, “waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof.” (Id. at p. 1195; Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 189.)

“[N]o single test delineates the nature of the conduct that will constitute a waiver of arbitration.” (St. Agnes, supra, 31 Cal.4th at p. 1195.) Rather, the court must consider six factors: “‘“(1) whether the party’s actions [were] 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 . . . requested arbitration . . . 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 [requesting] a stay . . . ; (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. 1196; Spracher v. Paul M. Zagaris, Inc. (2019) 39 Cal.App.5th 1135, 1138 (Spracher); Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 992.)

An analysis of these factors supports the trial court’s determination that appellant waived his right to arbitrate based on his prejudicial delay in compelling arbitration, his conduct inconsistent with arbitration, and his decision, after five years of litigation, to demand arbitration following an unfavorable ruling at trial. (See St. Agnes, supra, 31 Cal.4th at p. 1196, 1203.)

1. Delay

The parties’ first binding arbitration agreement was signed in 2003. Over the next nine years, the parties’ counsel did nothing more than occasionally discuss scheduling an arbitration. On May 5, 2012, appellant’s counsel sent respondent’s counsel a letter, which stated: “I’ve not had a reply from you from my multiple correspondence requesting the picking of an arbitration date in the above referenced matter. My client is extremely impatient with me and with our inability to move forward and is pressuring me to bring a motion to compel if we cannot agree on a date to move this forward.”

Instead of petitioning to compel arbitration, appellant’s counsel filed the new action in Van Nuys court in June 2012. The parties spent nearly five years litigating that case without any request for arbitration. Appellant had no need to seek arbitration because, as reflected in letters between counsel and documents filed in the case, he believed the litigation encompassed all five properties. It was only when the Van Nuys court ruled otherwise that appellant again sought arbitration. The court entered judgment on July 3, 2017, and appellant filed his first petition to compel arbitration on November 7, 2017. Under these circumstances, a delay of 14 years between the signing of the first arbitration agreement and the filing of a petition to compel arbitration was unreasonable. (See Spracher, supra, 39 Cal.App.5th at p. 1138 [“Unreasonable delay in seeking arbitration may, standing alone, constitute a waiver of [the] right to arbitrate”].)

Appellant contends respondent waived his right to contest the scope of the complaint by continuing “to litigate, argue over, negotiate, submit joint briefs on, and attend settlement conferences and mediation on all . . . issues between the parties through the early months of 2017.” (Emphasis omitted.) He claims respondent’s new counsel essentially “sandbagged” him at trial by arguing the complaint involved only the Ardwick property. At oral argument in this appeal, appellant’s counsel represented that appellant opposed the motion to limit the trial to that one property, but it is unclear from the record whether appellant asserted waiver, equitable estoppel or some other defense to the motion. Given the parties’ long-standing pretrial assumption that all issues concerning the five properties were joined, the Van Nuys court may have been persuaded by such an argument or at least allowed an amended complaint.

In any event, the Van Nuys court’s interpretation of the scope of the complaint is not relevant to the arbitration waiver analysis. To the extent appellant disagreed with that ruling, he could have taken it up with the court in a post-trial motion or appealed the judgment. His displeasure with an unexpected unfavorable ruling at trial does not justify a 14-year delay in petitioning to compel arbitration.

2. Conduct Inconsistent with Arbitration

Aside from that delay, appellant’s conduct was inconsistent with an intent to pursue arbitration. The parties took no significant steps toward scheduling an arbitration for nine years. After previously threatening to file a petition to compel arbitration, appellant decided to pursue his claims through litigation. That litigation spanned five years, and if the Van Nuys court had resolved all of appellant’s claims regarding the five properties, as he had expected, there would have been no arbitration demand. That demand was precipitated by the court’s unanticipated narrow reading of the complaint rather than a good-faith intent to arbitrate the claims. Thus, appellant’s decision to invoke the litigation machine and to wait until trial to demand arbitration supports the denial of his petition. (See St. Agnes, supra, 31 Cal.4th at p. 1196; Spracher, supra, 39 Cal.App.5th at p. 1139.)

3. Prejudice to Respondent

Finally, whether or not litigation results in prejudice is critical in waiver determinations. (St. Agnes, supra, 31 Cal.4th at p. 1203.) The fact that the party petitioning for arbitration has participated in litigation of the dispute, short of a determination on the merits, does not by itself constitute a waiver. (Ibid.) A party claiming the other party has waived its right to arbitrate must show prejudice. (Ibid.) “Prejudice typically is found only where the petitioning party’s conduct has substantially undermined this important public policy or substantially impaired the other side’s ability to take advantage of the benefits and efficiencies of arbitration. [¶] For example, courts have found prejudice where the petitioning party used the judicial discovery processes to gain information about the other side’s case that could not have been gained in arbitration [citations]; where a party unduly delayed and waited until the eve of trial to seek arbitration (e.g., Sobremonte v. Superior Court, supra, 61 Cal.App.4th at pp. 995-996); or where the lengthy nature of the delays associated with the petitioning party’s attempts to litigate resulted in lost evidence [citation].” (St. Agnes, at p. 1204.)

“[T]he critical factor in demonstrating prejudice is whether the party opposing arbitration 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, 948 (Burton), quoting St. Agnes, supra, 31 Cal.4th at p. 1204.) “Arbitration loses much, if not all, of its value if undue time and money [are] lost in the litigation process preceding a last-minute petition to compel.” (Ibid., quoting Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 996; see Diaz v Professional Community Management, Inc. (2017) 16 Cal.App.5th 1190, 1216 [“A significant delay in seeking arbitration may, in itself, result in a finding of prejudice”].)

In Sobremonte, the defendant bank petitioned to compel arbitration a little over a month before trial. By that time, the plaintiffs’ counsel had spent 200 hours in 10 months preparing for a full trial. (Sobremonte v. Superior Court, supra, 61 Cal.App.4th at pp. 995-996.) The Court of Appeal reversed the order granting the petition. It determined the delay in seeking arbitration affected, misled and prejudiced the plaintiffs, and that the reasons for arbitrating the case, i.e., speedy resolution and reduced cost, no longer applied. (Ibid.)

Other courts also have found prejudice in cases involving much shorter delays than the 14 years in this case. (See, e.g., Spracher, supra, 39 Cal.App.5th at pp. 1138-1141 [right to arbitrate waived in class action where defendants sought arbitration after almost two years of active litigation and three months before the deadline for filing for class certification]; Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 555-559 (Guess?) [right to arbitrate waived where petition to compel arbitration was filed four months after lawsuit was filed and moving party engaged in extensive discovery before pursuing arbitration]; Burton, supra, 190 Cal.App.4th at pp. 946-951 [arbitration waived where defendant waited 11 months after lawsuit was filed to seek an order compelling arbitration]; Kaneko Ford Design v. Citipark, Inc. (1988) 202 Cal.App.3d 1220, 1228-1229 [arbitration waived where motion to compel was filed less than six months after lawsuit was filed and moving party gained insight into opposing party’s litigation strategies by waiting until the answer was filed]; S & H Contractors, Inc. v. A.J. Taft Coal Co., Inc. (11 Cir. 1990) 906 F.2d 1507, 1514 [arbitration waived where moving party waited eight months after lawsuit was filed, engaged in discovery and filed dispositive motions before pursuing an order compelling arbitration].)

The facts in this case paint an even more compelling picture of waiver. Appellant did not wait until the eve of trial to demand arbitration. He made the demand after the trial had started and the Van Nuys court limited his claims to just one property. Appellant could have appealed that ruling if he believed it was incorrect. He cannot, however, resuscitate claims he assumed were in the complaint by seeking arbitration of those claims after nine years of delays and five years of litigation. “‘“[T]he courtroom may not be used as a convenient vestibule to the arbitration hall so as to allow a party to create his own unique structure combining litigation and arbitration.”’ [Citation.]” (Guess?, supra, 79 Cal.App.4th at p. 558.) Both the law and substantial evidence support the trial court’s decision.

V. DISPOSITION
VI.
The order denying appellant’s petition to compel arbitration with prejudice is affirmed. Respondent shall recover his costs on appeal.

NOT TO BE PUBLISHED.

PERREN, J.

We concur:

GILBERT, P. J.

TANGEMAN, J.  

Vincent O’Neill, Judge

Superior Court County of Ventura

______________________________

Law Offices of Michael D. Kwasigroch, Michael D. Kwasigroch, for Appellant.

Azadegan Law Group, Ramin Azadegan and John L. Wollman, for Respondent.