Waiver: First District, Div. 2 Applies Federal Rule Governing Waiver Of The Right To Arbitrate
Because The Parties Agreed That The Federal Arbitration Act Applied, Applying The Federal Rule In Morgan v. Sundance, Inc. Was Necessary.
When the first paragraph of an opinion tells us that the party seeking to compel arbitration waited 19 months to bring a motion to compel arbitration, the court has pretty much telegraphed that one way or another, it will find a waiver of the right to arbitrate. That was the case in Britani Davis v. Shiekh Shoes, LLC, No. A161961 (1/2 10/31/22) (Richman, Miller, Mayfield).
Basically, the federal rule applied in Davis when determining whether a party has waived its right to arbitrate, because the parties agreed that the Federal Arbitration Act applied to the case. As set forth in Morgan v. Sundance, Inc., 142 S.Ct. 1708 (2022), the federal rule asks whether the party seeking to compel arbitration has evinced an intent to forego arbitration by acting inconsistently with the right to arbitrate. In contrast, California courts have required a finding of prejudice to the party seeking to avoid arbitration before they will find a waiver of the right to arbitrate. Quach v. California Commerce Club, Inc., 78 Cal.App.5th 470 (2022).
We now have a situation where, if the Federal Arbitration Act and Morgan apply, a California court will not require a finding of prejudice in order to find a waiver of the right to arbitrate. The FAA can apply if the parties contracted for it to apply, or if interstate commerce is involved. However, if the California Arbitration Act, Quach, and a long line of California cases apply, then prejudice may be determinative to a finding of waiver of the right to arbitrate. The California Supreme Court has accepted a petition for review of Quach, so perhaps we will find out if California will require prejudice in the future in cases where the FAA does not apply, or whether California will conform its case law to the federal rule.
COMMENT: I have written two recent articles in the Daily Journal about the subject: Waiver of the right to arbitrate revisited (November 3, 2022) and The United States and the California Supreme Courts are not on the same page (June 10, 2022). The links to the article will work if you subscribe to the Daily Journal, which, alas, is behind a paywall.
Settlement: A 998 Settlement Offer Automatically Expires When Trial Court Orally Grants SJ
TL:DR — The Headline Is What You Need To Know.
"Does a 998 offer automatically expire when a trial court orally grants the offeror’s summary judgment motion? We hold that that answer is 'yes.' Because the trial court came to the same conclusion, we affirm." Ana Isabel Trujillo v. City of Los Angeles, B314042 (2/2 10/27/22) (Hoffstadt, Lui, Chavez).
COMMENT: Busy practitioners like it when the Court of Appeal states the issue presented and its holding in the first paragraph. Don't bury the lede.
Miscellaneous: Note To Readers: We’re Back !
Typepad Has Cured Its Problems.
I have been using the Typepad platform since 2012 to post this blog. Typepad recently had problems with its system, and I stopped posting until I felt assured that the system was stable. Now the problems, whatever their origin, appear to be fixed. So I hope to catch up on my posting.
Reviews: Jamal Greene’s How Rights Went Wrong
Your Blogger Reviews How Rights Went Wrong: Why Our Obsession With Rights Is Tearing America Apart, by Jamal Greene, with Foreword by Jill Lepore.
My review of this very interesting book appears in Volume 35, Issue 2 at p. 21 (2022) of The Journal of the Litigation Section of the California Lawyers Association. With the permission of the CLA, and its journal, I have reprinted the review. You can access the reprint by clicking on this link.
Enforceability, FAA Preemption: Second Dist. Div. 7 Holds That Failure To File Fictitious Business Name Statement Makes Arbitration Agreement Unenforceable — With A Wrinkle
The Wrinkle Is That After A Year, Defendant/Appellant Filed A Fictitious Business Name Statement.
Wrinkles. "Val Morgan, a retired attorney for the U.S. agency that oversees federal health-care payments, relaxes with two of her three wrinkly-faced, short-muzzle pug dogs, 14-year old Loretta, left, and 17-year-old Gus." Library of Congress. Photographer: Carol M. Highsmith.
Plaintiff Albert Villareal sued his employer after he injured his knee and his employer terminated his employment. The employer moved to compel arbitration. The trial court and the Court of Appeal both agreed that the employer's failure to file a fictitious business name statement prevented it from enforcing an arbitration provision at the time defendant moved to compel arbitration. Albert Villareal v. LAD-T, LLC et al, No. B313681 (2/7 10/27/22) (Feuer, Perluss, Segal).
Business and Professions Code § 17918 provides that a party who fails to file a valid fictitious business name statement cannot “maintain any action upon or on account of any contract made . . . in the fictitious business name in any court of this state until the fictitious business name statement” has been filed. Section 17918 would be dispositive, but for the fact that the failure to file the fictitious business statement only abates the action (in this case, a motion to compel arbitration, i.e., a suit in equity to compel performance of the arbitration agreement). And here, the defendant corrected the problem a year after filing its motion to compel.
So the Court of Appeal vacated the order denying the motion to compel arbitration, and remanded with directions. Plaintiff Villareal can argue in the trial court on remand that defendant LAD-T, LLC's year delay in filing a fictitious business name statement resulted in waiver of the right to arbitrate, an issue that the trial court would then need to decide.
COMMENT: Why isn't the § 17918 requirement to file a fictitious business name statement preempted by the Federal Arbitration Act, since the FAA applied to this case? As the Court of Appeal explains, the requirement to file a fictitious business name statement doesn't uniquely burden a motion to compel arbitration, because it also applies to the filing of lawsuits in general.
Waiver: 4th District Div 1 Rules Defendant Waived Right To Arbitrate Despite Comparatively Minor Delay, Given Unusual Circumstances
Defendant Waived Right To Arbitrate, Despite Minor Delay In Seeking To Compel Arbitration.
The unusual circumstances in our next case explain the Court of Appeal's conclusion that defendant waived the right to arbitrate, despite a comparatively minor delay in seeking arbitration. Mary Leger v. R.A.C. Rolling Hills et al, D080705 (4/1 10/17/22) (McConnell, Irion, Do).
Plaintiff Leger "suffers from late-stage dementia, severe diabetes, and severe contractures." She sued, alleging improper care during hospice care. Her complaint was served on March 10. On March 29, her guardian ad litem filed a motion for trial preference. Defendant answered the complaint on April 6, alleging the existence of an agreement to arbitrate. On April 11, defendant filed an opposition to the motion for preference, without mentioning it wanted to arbitrate in its papers, or in the hearing. On April 22, the trial court granted Leger's motion for a preference, and three days later, defendant's counsel wrote a letter asking plaintiff to arbitrate. Defendant filed a petition to arbitrate, a hearing was held on May 26, the trial court took the matter under submission, and then denied the request to arbitrate.
The trial court found that although defendant's delay in seeking arbitration was "comparatively minor", it was “unreasonable, manifest and prejudicial given the unique circumstances of this action.” The Court of Appeal affirmed the order denying the petition to compel arbitration.
COMMENT: The Court of Appeal acknowledged that it had not found a case on point with the unusual circumstances of this case. Usually such a short delay in petitioning to arbitrate would not result in a waiver of the right to arbitrate. However, as this case shows, there are situations in which even a "comparatively minor" delay in seeking arbitration may be inconsistent with asserting the right to arbitrate and may be prejudicial to the other side.