[Update: After I filed an amicus curiae request for publication of this opinion, the Court granted rehearing on its own motion, and re-issued a modified and partially published opinion. The Court published its holding that the defendant seeking arbitration here had not waived arbitration by litigating for 13 months. The result is the same, but the Court further stresses that "Quach admitted he incurred no costs in litigation that he would not otherwise have expended had the case gone to arbitration earlier." The Court also deleted a reference to the rule that the moving party prejudices the nonmoving party "by depriving that party of the advantages of arbitration." This was one of the challenges in the dissent, to which the majority also now includes a direct response.
Takeaway: The holding stands for a narrower rule that litigation costs are not prejudice for purpose of establishing a waiver of the right to arbitrate. But the holding now implicitly acknowledges that the delay does deprive the nonmoving party of the intended benefits of arbitration. This represents an anomaly in the Supreme Court's St. Agnes doctrine.]
An employer-defendant answered a wrongful-termination complaint, served multiple sets of discovery, and took the employee-plaintiff’s deposition during 13 months’ of litigation, before finally moving to compel arbitration. The trial court refused to compel arbitration, ruling the employer waived arbitration by its unreasonable delay. That seemed unsurprising.
So it seemed surprising that the majority in Quach v. Calif. Commerce Club, Inc. (D2d1 Apr. 14, 2022 no. B310458) 2022 WL 1113998 (nonpub. opn.) found that these facts, as a matter of law, do not waive arbitration. The court noted that the California Supreme Court in *Saint Agnes Medical Center v. PacifiCare of California* (2003) 31 Cal.4th 1187, 1203, had held that mere participation in litigation, and merely driving up court costs and expenses, are not enough to establish waiver of the right to arbitrate.
True, undue delay and waiting until the eve of trial can be grounds for waiver. But the court here found—again, as a matter of law—that “almost seven months before the trial date” is “not on the ‘eve of trial.’”
Good to know.
The employee also made a good point that the Supreme Court subsequently acknowledged, apparently with approval, a number of subsequent Court of Appeal opinions tending to support the employee’s argument that spending time and money litigation for 13 months can support a waiver of the right to arbitrate. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 374–375.)
But the Quach court distinguished each of those cases. (The fact that the court took the time to analyze each, drawing rather fine distinctions, suggests that the employee had hit fairly close to the mark.)
Several other Court of Appeal opinions tended to support the employee’s argument that spending time and money litigating for 13 months can support a waiver of the right to arbitrate.
Judge Crandall (a San Luis Obispo trial judge sitting by assignment) would have affirmed. Here is the nub of the dissent:
“Although the legality of these compulsory arbitration agreements must be acknowledged for the present moment as water under the judicial bridge, we should not overextend ourselves to preserve a compulsory arbitration agreement that the employer has clearly waived, as appellant California Commerce Club, Inc. (Commerce Club) did in this case with respect to their at-will employee of 29 years, respondent Peter Quach.”
On a point of appellate procedure, Judge Crandall noted that the Court of Appeal must accept the trial court’s finding that the employer’s excuse for its 13-month delay—that it couldn’t find the arbitration agreement—was untruthful. Beyond that, it was not the employee’s burden to prove subjective bad faith. The employer’s lack of candor alone should have played more prominently in the majority’s analysis.
Giving due credit to the trial court’s finding the employer’s excuse for delay to be untruthful, Judge Crandall went on to address the implied finding that follows: that the employer delayed for 13 months precisely “to intimidate a vulnerable at-will employee who lacks the economic resources to cope with such delay.”
Judge Crandall was persuaded by the employee’s argument in his brief: “Quach's appellate brief hits the nail on the head: “[By now], all benefits of a speedy resolution [Quach] could have obtained through arbitration [have] been lost.””
That was the prejudice of the delay: it “deliberately and forever undermined the very nature of a quick resolution that is the central tenet of arbitration.” (OTO, L.L.C. v. Ken Kho (2019) 8 Cal.5th 111, 125.)
Comment: There is an interesting footnote commenting on a briefing faux pas. Here is the footnote, concerning the employee-respondent’s argument that a delay that imposes litigation expenses can be prejudicial if the delay was unreasonable:
“In making this argument in his respondent's brief, Quach copies a lengthy paragraph from Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035 (Bower), without attribution or quotation marks to indicate the material is not original. We have identified at least one other instance of unattributed language elsewhere in the brief. We will give Quach the benefit of the doubt that this was unintentional, but caution counsel to take greater care in the future to indicate when language is taken from another source.”
I have heard a Court of Appeal research attorney express disapproval of cribbing from unpublished opinions. (”We will find out,” was the warning.) But judicial opinions are not protected by copyright. And briefs are not works of artistic expression; their authors score no points for originality. (”That’s a novel argument” is not a comment an attorney likes to hear.) Briefs are tools of persuasion. So the rule is: whatever works. Now, I don’t know why a litigant would not want to attribute a favorable argument to a published opinion. But I don’t see how copying arguments from a court decision is in any way unethical.
Still, take note that some jurists and research attorneys just don’t like it.
The Upshot: Although arbitration waivers are not supposed to be driven by any single factor, expect that the court will insist on a showing of prejudice or unfair advantage. Try to show the party seeking arbitration obtained some tactical advantage. (The dissent noted that the arbitration rules here might—or might not—have permitted the discovery employer had already obtained. Unfortunately, the majority did not find that persuasive.) And while delay is relevant, a delay of even 13 months might not suffice.
But do not rely on mere participation in litigation or driving up litigation costs.
Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.
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