The California Supreme Court will review a surprising appellate court holding from earlier this year (writeup here; podcast here) that held that a defendant did not waive the right to arbitrate, even though the defendant had answered the complaint, served multiple sets of discovery, took the employee-plaintiff’s deposition, and otherwise happily litigated for 13 months before finally moving to compel arbitration.
The majority in Quach v. Calif. Commerce Club, Inc. (D2d1 Apr. 14, 2022 no. B310458) 78 Cal.App.5th 470 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.
The dissent would have found a waiver. The dissent would have relied on the trial court’s implied finding 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.” “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.””
David Ettinger notes that the opinion was filed less than two weeks before the U.S. Supreme Court held prejudice to the other side is not essential to finding an arbitration waiver in federal courts. (Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708.)
The Quach opinion was originally unpublished. After I filed an amicus curiae request for publication, the Court of Appeal 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 stressed 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.
The appellate holding now stands for a narrower rule that litigation costs are not prejudice for purposes 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. We will see if the Supreme Court addresses this in its review.
