Defendant Waived Its Right to Compel Arbitration Because of Delay, Taking Actions Inconsistent with the Right to Arbitrate, and the Prejudice to Plaintiff.

Garcia v. Haralambos Beverage Co., 2021 WL 22015 (Jan. 4, 2021)

Defendant sought to compel Plaintiffs, truck drivers, to arbitrate their individual claims. The trial court denied the motion to compel, holding Defendant had waived its right to compel arbitration because it had unreasonably delayed in bringing the motion and had acted in a manner inconsistent with the right to arbitrate. Defendant contended that the trial court’s finding that it had waived its right to compel was not supported by sufficient evidence.

The Second Appellate District affirmed, noting that in the two years that had passed between the time Plaintiffs filed their lawsuit and Defendant demanded arbitration Defendant had: stipulated to transfer the action from Ventura County Superior Court to Los Angeles County Superior Court; filed an answer in which it asserted its right to arbitrate as an affirmative defense; represented to the trial court one year into litigation, “At the moment, Defendant does not intend to raise [jurisdiction or contractual arbitration;] however it reserves the right to do so at a later time”; entered into a protective order to facilitate the informal production of classwide data and produced 1,182 responsive documents, including Plaintiffs’ personnel files; participated in a classwide mediation in which the parties did not resolve their dispute; again represented to the trial court 16 months into litigation that it did not intend to pursue arbitration “At this time”; produced 2,131 documents in response to formal class discovery requests, some of which it previously had produced informally; responded to further class discovery but did not object that the parties had agreed to arbitrate their claims; and met and conferred extensively regarding the details of a Belaire-West privacy notice and regarding disputes over Defendant’s responses to written discovery. Only after Plaintiffs had filed a motion to compel further discovery responses did Defendant file its motion to compel arbitration.

Defendant submitted a declaration from its former human resources managers in which she stated that she had not found any arbitration agreements signed by Plaintiffs (even in their personnel files) until 19 months into litigation, at which point she “immediately provided them to [defense] counsel.” Yet defense counsel admitted in open court that Defendant had a mandatory arbitration policy in effect when Plaintiffs were hired, and that Defendant knew of such policy at the time Plaintiffs filed their lawsuit. The appellate court rejected Defendant’s argument it had timely filed its motion to compel upon “discovering” Plaintiffs’ signed arbitration agreements, finding that Defendant could have filed a copy of the arbitration agreements or simply “recite[d] the terms of the governing provision.”[i]

In addition to unreasonable delay, the Court of Appeal found that engaging in classwide discovery, representing in two status conferences that it did not intend to arbitrate, and participating in a mediation in which the parties attempted to resolve the matter on a classwide basis was inconsistent with arguing that Plaintiffs had agreed to arbitrate their individual claims against Defendant. Further, the Garcia court found that substantial evidence showed Defendant had continued to act in a manner inconsistent with arbitration even after it supposedly found the signed arbitration agreements when it met and conferred extensively regarding class discovery and the Belaire notice.

The Garcia court also found substantial evidence showed Defendant’s delay had prejudiced Plaintiffs’ “ability to realize the benefits and efficiencies of arbitration” and had forced Plaintiffs to incur needless expenses, including pursuing classwide discovery and retaining experts to evaluate Defendant’s ability to pay a settlement on a classwide basis.

[i] Sprunk v. Prisma, LLC (2017) 14 Cal.App.5th 785, 793.

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