2017-00212201-CU-OE

Arthur Cavanaugh vs. Three J’s Distributing, Inc.

Nature of Proceeding: Petition to Compel Arbitration and Stay

Filed By: Hanlon, Alexa R.

Defendant Three J’s Distributing, Inc.’s Motion to Compel Arbitration and Stay this action is granted.

This matter was continued to this date to allow the filing of a Reply. The Reply was timely filed and has been considered.

On May 9, 2017, Plaintiff, who was a former driver for defendant, filed this putative class action Complaint alleging wage and hour violations under the Labor Code. Plaintiff served discovery on the defendant seeking information including any arbitration agreement (See Request for Production # 37, Ex. A, p. 38). On July 6, defendant served a Request for Production of Documents and Form Interrogatories on the plaintiff. Plaintiff provided responses but did not produce any documents. Defendant was not aware of the existence of an arbitration agreement at the time it filed its Answer on July 10, 2017, which did not contain an affirmative defense regarding arbitration.

After plaintiff served his discovery the parties met and conferred extensively over discovery responses. It was not until this time, approximately six months after defendant made its appearance, did counsel become aware of the existence of an arbitration agreement after reviewing the file. Upon discovery of the existence of a valid and enforceable arbitration agreement, defense counsel promptly notified Plaintiffs counsel. (Declaration of David E. Amaya in Support of Motion to Compel Arbitration and Stay the Action, hereinafter “Amaya Decl.,¶¶ 3-5.)(See Points and Authorities in support of motion to compel arbitration page 7:8-9)

The Federal Arbitration Act (“FAA”) governs a motion to compel arbitration. 9 U.S.C.

§§ 1 et seq. “The FAA reflects the fundamental principle that arbitration is a matter of contract. . . .The FAA thereby places arbitration agreements on an equal footing with other contracts, [citation], and requires courts to enforce them according to their terms.
.. .” Rent-A-Center, West, Inc. V. Jackson (2010) 561 U.S. 63, 67-68; accord AT&T Mobility LLC v. Concepcion (2011) 563

U.S. 333, 339; Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1142-1143) (citations omitted). The FAA asks: (1) whether a valid arbitration agreement exists and, if so, (2) whether the agreement encompasses the dispute at issue. Lifescan, Inc. v.
Premier Diabetic Servs. Inc. (9th Cir. 2004) 363 F.3d 1010, 1012.

Waiver

A party to an arbitration agreement may waive its right to compel arbitration:

[T]he court shall order the petitioner and 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… CCP 1281.2. “[N]o single test delineates the nature of the conduct of a party that will constitute such a waiver.” Davis v. Blue Cross of N. California (1979) 25 Cal. 3d 418, 426. “Although a written agreement to arbitrate an existing or future dispute is generally enforceable, a petition to compel arbitration will be denied when the right has been waived by the proponent’s failure to properly and timely assert

it.” (Code Civ. Proc, §§ 1281, 1281.2, subd (a).) Guess?, Inc. v. Superior Court (2000) 79 Cal. App. 4th 553, 557

In determining waiver, 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 [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. Sobremonte v. Superior Court (1998) 61 Cal. App. 4th 980, 992; see also Davis v. Blue Cross of Northern California (1979) 25 Cal.3d 418, 425-426 [whether the party seeking arbitration has previously taken steps inconsistent with an intention to invoke arbitration, has unreasonably delayed seeking arbitration, or has acted in ” ‘bad faith” or with ” ‘wilful misconduct.”] “Waiver does not occur by mere participation in litigation; there must be a judicial litigation of the merits of arbitrable issues.” (Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 188.)

In opposition to the motion, plaintiff contends that defendant waived its right to arbitrate by pursuing class discovery from plaintiff and responding to plaintiff’s discovery. However, as noted in the Reply, plaintiff has not explained how the limited information provided in the form interrogatories (no documents were produced) is prejudicial to plaintiff or puts defendant in a better position than it would be in had it sought the discovery in arbitration.

Plaintiff cites a number of cases on waiver that are distinguishable from this case. In those cases, extensive litigation was pursued with counsel’s knowledge that an arbitration agreement existed. In Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 557 the court found undue delay because the defendant’s attorney knew of the arbitration agreement long before the lawsuit was filed. The Court in Guess? focused on counsel’s knowledge of the agreement during the delay in addition to counsel’s propounding of substantial discovery, engaging in a meet and confer process regarding that discovery, and the conducting of four depositions and noticing of 11 others. In Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, the facts were even more prejudicial to plaintiff. In Sobremonte, where the defendant filed a motion to compel arbitration six weeks before trial, the Court found a 10 month delay from the start of litigation to constitute waiver because the defendant bank’s counsel had knowledge of the arbitration agreement at the onset of litigation despite continuing to engage in acts inconsistent with the right to arbitrate. Specifically, the Court pointed to defendant’s extensive motion practice (two demurrers, one cross-complaint, and a motion to transfer), propounding of substantial written discovery, conducting depositions, as well as participation in five trial court hearings, including two status

conferences, all while on notice of the arbitration agreement.

Here, Plaintiff failed to identify any discovery request that explicitly sought class discovery or other actions prejudicial to plaintiff. Instead, the evidence shows Three J’s served standard General Form Interrogatories and standard contention document demands. Plaintiff responded to the discovery, but provided no documents. Prejudice 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. 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.” Bower v. Inter-Con Sec. Sys., Inc. (2014) 232 Cal.App.4th 1035, 1046. Plaintiff has made no showing that the discovery propounded by defendants is unavailable in arbitration.

Plaintiff has not met the “heavy burden of proof of showing Three J’s waived the right to enforce the arbitration agreement. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187,1195; see also Roberts v. El Cajon Motors. Inc. (2011) 200 Cal.App.4th 832, 840-841.) The fact that the Answer did not raise the defense of arbitration, that some basic discovery was propounded before counsel was aware of the arbitration agreement, and that defendant waited six months from its appearance in this action to raise the right to arbitrate does not establish prejudice, including that this forum has been unfairly used to engage in discovery not contemplated by individual bilateral arbitration.

Contractual rights are subject to waiver, and waiver may be express or implied by the parties’ conduct. (§ 1281.2; St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195, fn. 4 (St. Agnes).) In the arbitration context, waiver does not require relinquishment of a known right, but arises from a party’s failure to perform an act it is required to perform, regardless of the party’s intent to relinquish the right to arbitration. (St. Agnes, at p. 1195, fn. 4.) There is a presumption against waiver, and the party seeking to demonstrate waiver bears a heavy burden of proof. (Id. at p.
1195.) A party seeking to prove waiver of a right to arbitration must show “ ‘(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration … .’ ” (U.S. v. Park Place Associates, Ltd. (9th Cir. 2009) 563 F.3d 907, 921.) Acts inconsistent with the right to arbitrate include (1) “pursuing a lawsuit on the same issue as [the issue] to be arbitrated,” (2) “expressly repudiating the arbitration agreement,” or (3) “failing to invoke the right to arbitration … .” (Service Employees Internat. Union, Local 1021 v. County of San Joaquin (2011) 202 Cal.App.4th 449, 460.

In weighing all of the evidence, the court finds that Three J’s has not attempted to gain an unfair advantage or unfairly take advantage of this forum’s discovery or

motion procedures prior to enforcing the arbitration agreement. Only minimal discovery was conducted, with no documents produced nor any depositions taken. At the first and only case management conference, Defendant informed the Court of the pre-dispute arbitration agreement and its intention to file the instant Motion.

This case is stayed pending the outcome of the arbitration.