WAIVER OF ARBITRATION
Campbell v. Sunshine Behavioral Health LLC., 105 Cal. App. 5th 419
Quach v. Commerce Club of California, Inc.. 16 Cal. 5th 562
Semprini v. Wedbush Securities, Inc.., 101 Cal. App. 5th 518
Campbell v. Sunshine Behavioral Health LLC., 105 Cal. App. 5th 419
On May 23, 2022, Campbell filed a class action alleging labor law violations against Sunshine, her former employer. Sunshine filed an answer that asserted that some members of the putative class had executed arbitration agreements. In September, Sunshine proposed classwide mediation. On December 7, Sunshine informed Campbell that on November 22, it found an arbitration agreement that she had executed. On the same day, the parties stipulated to mediate the class action. The court issued an order to mediate on March 24, 2023. Sunshine immediately informed Campbell that it would ignore the court order and not mediate and that it would file a motion to compel arbitration, which it did on May 3. The motion was accompanied by declarations by two human relations persons, Gray and Endo, stating that they maintained the employees’ personnel files and that arbitration agreements were part of the files. Neither declaration stated when Campbell’s file was found. The court held that Sunshine had waived arbitration and denied the motion.
Sunshine appealed and the Court of Appeal affirmed. Nothing in Gray's or Endo's declarations stated that Campbell's personnel file or the arbitration agreement allegedly contained therein had ever been missing or inaccessible. Indeed, nothing Gray or Endo said sheds light on the six-month delay between the beginning of this litigation and Sunshine's “discovery” of the arbitration agreement. The lack of any admissible evidence to the contrary strongly supported the finding that Campbell's personnel file, and the arbitration agreement included in it, had not been suddenly discovered in November 2022, but had been available to Sunshine prior to that date. Gray's detailed testimony as to how and where the files were maintained could only support two possible conclusions—either an intentional and willful decision to withhold the arbitration agreement, or a complete lack of diligence amounting to bad faith in its review of Campbell's personnel file. The court concluded it was “‘highly probable’” that Sunshine knew of its right to attempt to compel arbitration. Thus, Sunshine's delay in asserting any right to arbitration was not from its alleged discovery in November 2022, it was from the outset of the case…..Here we have the entire mediation debacle, followed by a court order violated by Sunshine.
Sunshine also failed to immediately disclose the arbitration agreement, waiting weeks to do so. An additional fact that weighed in favor of finding that Sunshine intentionally waived the right to arbitrate was that even if it had a plausible argument that it could not locate an arbitration agreement for Campbell, surely, according to the declarations of the human resources specialists, they had in their possession signed arbitration agreements for most, if not all, of the putative class members. Yet the stipulation Sunshine agreed to was on a classwide basis, not only as to Campbell's claim. There was no plausible reason to agree to mediate on a classwide basis if Sunshine intended to pursue the right to arbitrate.
Quach v. Commerce Club of California, Inc.. 16 Cal. 5th 562
Plaintiff Quach filed a lawsuit against Commerce Club, his former employer, alleging wrongful termination and age discrimination. In its answer, Commerce Club raised several affirmative defenses, including arbitration, but did not file a motion to compel arbitration. Instead, it engaged in discovery, including taking Quach’s deposition. Thirteen months after the suit commenced, it filed a motion to compel arbitration. It asserted that the delay was caused by an inability to find a complete arbitration agreement executed by Quach. The trial court denied the motion on the ground of waiver. Commerce Club appealed and the Court of Appeal reversed holding that there was no showing of prejudice as required by St. Agnes Medical Center, Inc. v. PacifiCare of California, 31 Cal. 4th 1187 (2003). Two weeks later, the United States Supreme Court decided in Morgan v. Sundance, Inc. 596 U.S. 411 (2022) that prejudice was not necessary to establish waiver under the FAA. Quach appealed to the California Supreme Court, arguing that it should adopt the Morgan holding because the CAA was similar to the FAA.
The California Supreme Court reversed. Commerce Club sought to distinguish Morgan by arguing that California law embraces a policy favoring arbitration over litigation. But California policy, like federal policy, is fundamentally about making arbitration agreements as enforceable as other contracts, but not more so. The language of the CAA closely parallels the language of the FAA. From this shared language and history, it is apparent that the state policy favoring arbitration, like the federal policy, is about treating arbitration contracts like all others, not about fostering arbitration. Nothing in the legislative history of the CAA suggests that the Legislature intended courts to apply an arbitration-specific rule in the waiver context.
Semprini v. Wedbush Securities, Inc.., 101 Cal. App. 5th 518
In March 2015, Semprini filed suit against Wedbush, his former employer, alleging 11 causes of action personal to him and seven class action causes of action alleging wage and hour claims. Subsequently, he added a PAGA claim. In May, the parties stipulated that the 11 personal claims would be arbitrated and that the class action and PAGA claims would proceed to trial. After Semprini fell ill, Swain replaced him as the class plaintiff. In June 2022, the Supreme Court decided Viking River, supra. Shortly thereafter, Wedbush asked its employees to sign new arbitration agreements which, inter alia, required arbitration of individual PAGA claims. Swain and 24 other members of the class signed the agreements. In the meantime, Wedbush continued to prosecute the class action in court. Finally, in March 2023, it moved to compel arbitration, citing Viking River in the case of Swain and the execution of the new arbitration agreements in the case of the 24 other class members. The plaintiffs argued that Wedbush had waived its right to arbitrate by executing the stipulation. Wedbush appealed, asserting that it could not compel arbitration under existing law in 2015 and could only do so if there was a change in the law, citing Piplack v. In-n-Out Burgers, Inc., 88 Cal. App. 5th 128 (2023).
The court found this case to be distinguishable from Piplack. In Piplack, the defendant raised its right to arbitrate as soon as it had any chance of success, filing its motion to compel arbitration in February 2022 while Viking River was still pending before the Supreme Court. Here, Wedbush waited until nine months after the Supreme Court issued the Viking River decision to file its motion to compel arbitration. During those nine months Wedbush engaged in conduct inconsistent with an intent to compel arbitration, including motion practice and discovery, and there was nothing in the record to suggest Wedbush advised the plaintiffs of its plans to compel arbitration during that time. That nine-month delay, coupled with Wedbush's other conduct inconsistent with an intent to compel arbitration, resulted in a waiver.