Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-06-15903/USCOURTS-ca9-06-15903-0/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

THOMAS R. COX, 

Plaintiff-Appellee,

v. No. 06-15903

OCEAN VIEW HOTEL CORPORATION, D.C. No.

doing business as Radisson; JOHN  CV- 05-0765-

DOES 1 TO 50; JANE DOES 1 TO 50; JMS/BMK

DOE PARTNERSHIPS 1-50; DOE OPINION CORPORATIONS 1-50; DOE ENTITIES

1-50,

Defendants-Appellants. 

Appeal from the United States District Court

for the District of Hawai‘i

J. Michael Seabright, District Judge, Presiding

Argued and Submitted

November 2, 2007—Honolulu, Hawaii

Filed July 23, 2008

Before: Diarmuid F. O’Scannlain, A. Wallace Tashima, and

Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Tashima;

Partial Concurrence and Partial Dissent by

Judge O’Scannlain

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COUNSEL

Richard M. Rand, Torkildson, Katz, Fonseca, Moore &

Hetherington, Honolulu, Hawaii, for the defendantsappellants.

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Stephen T. Hioki, Honolulu, Hawaii, for the plaintiffappellee. 

OPINION

TASHIMA, Circuit Judge: 

Ocean View Hotel Corporation (“Ocean View”) and

Thomas Cox executed an employment agreement containing

a mandatory arbitration clause. When a dispute arose during

the course of employment, Cox wrote a letter to Ocean View

requesting arbitration, but Ocean View responded by telling

Cox that it did not consider his claim ripe for arbitration. Following termination of his employment, Cox filed a complaint

in the Circuit Court of Hawai‘i. At that point, Ocean View

decided that it wanted to arbitrate Cox’s claim. After removing the action to federal court, Ocean View moved to compel

arbitration. The district court denied its motion to compel

arbitration and granted Cox’s motion for partial summary

judgment on the ground that Ocean View previously breached

its agreement and waived its right to arbitrate disputes with

Cox. Cox v. Ocean View Hotel Corp., 433 F. Supp. 2d 1171

(D. Haw. 2006) (“Cox I”). We have jurisdiction over the district court’s denial of a motion to compel arbitration under 9

U.S.C. § 16(a)(1)(B). See Ingle v. Circuit City, 408 F.3d 592,

594 (9th Cir. 2005). 

We hold that the district court erred in granting partial summary judgment in favor of Cox based on his breach-ofagreement theory, because Cox did not properly initiate arbitration under the terms of his employment agreement. We also

hold that the district court improperly granted summary judgment in Cox’s favor on the issue of waiver. 

BACKGROUND

On July 17, 2001, Cox and Ocean View signed a Letter of

Agreement of Cox’s employment as the Director of Finance

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for the Radisson Hotel Waikiki Prince Kuhio. In addition to

setting forth Cox’s job description and compensation, the letter included the following arbitration clause:

Any disputes between Employer and Employee arising out of the employment relationship shall be settled by arbitration in accordance with the then

current Model Employment Arbitration Procedures

of the American Arbitration Association (AAA) in

lieu of jury trial and all other judicial dispute resolution methods. Employee fully understands and

accepts this. . . . Any controversy except for Workmen’s Compensation, involving the construction or

application of the terms, provisions, or conditions of

this Agreement or otherwise arising out of or related

to this Agreement shall likewise be settled by arbitration. This agreement to arbitrate covers all

employment disputes including but not limited to

those involving tort, wrongful discharge, and discrimination claims. The cost of the arbitration shall

be paid by the Company. The location of the arbitration shall be paid by the Company. The location of

the arbitration shall be in the County in which the

Company is located. This clause cannot be amended

without written consent of both parties. 

The letter also provided that “[t]he validity, interpretation,

enforceability, and the performance of this Agreement shall

be governed by and construed in accordance with the law of

the State of California.” 

The employment relationship began to sour by October

2003, when Cox’s supervisor Gary Jutz raised allegations that

Cox was involved in a sexual relationship with one of his

female subordinates. The events that gave rise to the current

litigation began the following year, on October 5, 2004, when

Jutz sent a memorandum to Cox demanding that Cox end his

personal relationship with that subordinate. Although the let9068 COX v. OCEAN VIEW HOTEL

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ter did not describe the relationship as a romantic or sexual

one, it stated that the perception of the alleged relationship

was disrupting the performance of the department. Jutz ended

the letter by warning Cox that “[f]ailure to change [his]

behavior and maintain expected work responsibilities is a serious disciplinary matter” and that “[a] continued failure to

work within the organization to resolve this situation” could

“ultimately be deemed an act of insubordination and grounds

for immediate termination of employment.” 

On October 11, 2004, Cox responded in a letter to Jutz’s

supervisor, Clyde Guinn, in which he laid out various arguments in support of his claim that he was a victim of sex discrimination. In the first line, Cox called the letter a “request

to enter into arbitration.” He also stated that assertions in

Jutz’s memo violated provisions in his employment handbook, by amounting to “sex discrimination, harassment,

intimidation, interference with others in the performance of

their jobs, threatening, making maliciously false and/or

defamatory statements concerning an associate, and retaliation . . . .” Cox’s letter concluded by requesting that Guinn

“provide the date and time of the arbitration hearing and any

questions” to his attorney at a listed address. 

Guinn responded on October 27, 2004, in a letter to Cox

(“Guinn’s letter”). In it, Guinn disagreed with Cox’s characterization of Jutz’s memo as accusing Cox of having a romantic or sexual relationship with that subordinate. He also

disagreed with Cox’s statements that Jutz was guilty of the

violations asserted in Cox’s letter. The essential portions of

Guinn’s letter are contained in the following two paragraphs:

In summary, therefore, I do not consider this a case

for arbitration. Gary Jutz believes that your behavior,

as a senior member of the hotel management team,

is cause for censure. You do not accept this is the

case. Clearly, if you continue to pursue the activities

which Gary Jutz has complained of, you run the risk

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of being terminated. At that point, assuming you

then consider it a wrongful termination, arbitration

may be in order. 

In the meantime, if you feel that Gary Jutz is “guilty

of” the issues set out above, it may be that we should

have an independent investigation by an outside

attorney to establish whether or not there is in the

Hotel a perception of a “relationship” existing

between you and your direct subordinate . . . ,

thereby justifying the complaints made by Mr. Jutz

to you on numerous occasions. . . . At the conclusion

of any such investigation I believe the position will

be much clearer for all parties and we could then

each decide on what course of action each wishes to

adopt in the circumstances. 

Jutz terminated Cox’s employment on December 20, 2004.

On February 10, 2005, Cox filed a Charge of Discrimination

with the Hawai‘i Civil Rights Commission, and on September

26, 2005, the Commission granted him the right to sue. Cox

then filed a complaint in state court, which Ocean View

removed to federal district court. In its answer, Ocean View

requested “that the Complaint herein be stayed and that Plaintiff be required to submit all of his claims to final and binding

arbitration . . . .” Cox moved for partial summary judgment

denying arbitration on the theory that Ocean View breached

its agreement to engage in arbitration by refusing arbitration

in Guinn’s letter. 

The district court ruled in favor of Cox, granting his motion

for partial summary judgment and denying Ocean View’s

motion to compel arbitration. Cox I, 433 F. Supp. 2d at 1181.

The district court concluded that Cox properly initiated arbitration, id. at 1176; Ocean View refused to arbitrate, id. at

1177; and, as a result, Ocean View both breached its agreement to arbitrate, id. at 1178, and waived its right to enforce

the agreement. Id. at 1180. This appeal followed. 

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STANDARD OF REVIEW

We review the denial of a motion to compel arbitration de

novo. Brown v. Dillard’s, Inc., 430 F.3d 1004, 1009 (9th Cir.

2005). Because denial of a motion to compel arbitration has

the same effect as a grant of partial summary judgment denying arbitration, Cox’s motion for partial summary judgment

was the functional equivalent of an opposition to Ocean

View’s motion, and we will treat it as such. Cf. Craft v.

Campbell Soup Co., 177 F.3d 1083, 1084 n.4 (9th Cir. 1999)

(treating a motion for summary judgment as a de facto motion

to compel arbitration), abrogated on other grounds by Circuit

City Stores, Inc. v. Adams, 532 U.S. 105 (2001).1

ANALYSIS

I

[1] Preliminarily, we must decide whether Cox’s challenges

to enforcing the arbitration clause are for the court, or for the

arbitrator, to decide. We have previously determined that the

federal law of arbitrability under the Federal Arbitration Act

(“FAA”) governs the allocation of authority between courts

and arbitrators. Chiron Corp. v. Ortho Diagnostic Sys., Inc.,

207 F.3d 1126, 1131 (9th Cir. 2000). Because the FAA mandates that “district courts shall direct the parties to proceed to

arbitration on issues as to which an arbitration agreement has

been signed[,]” the FAA limits courts’ involvement to “determining (1) whether a valid agreement to arbitrate exists and,

if it does, (2) whether the agreement encompasses the dispute

at issue.” Id. at 1130 (citation and quotation marks omitted).

1We assume without deciding that the “dispute” Cox wanted arbitrated

is an arbitrable dispute within the meaning of the parties’ arbitration

agreement. Also, on this appeal, we resolve only the legal questions presented and not any factual disputes, which the parties are free to contest

on remand. See Brown, 430 F.3d at 1006 (“To the degree that our conclusion that Dillard’s breached its arbitration agreement with Brown depends

on disputed facts, Dillard’s is free on remand to contest those facts.”). 

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Cox challenges the arbitration agreement only on the first

ground. Therefore, we decide whether Cox’s contract-based

challenges to enforcement — breach of the agreement and

waiver — are properly before the court. 

[2] Section 2 of the FAA creates a policy favoring enforcement of agreements to arbitrate. 9 U.S.C. § 2; Buckeye Check

Cashing, Inc. v. Cardegna, 546 U.S. 440, 443-44 (2006).

Under that provision, arbitration clauses in contracts “shall be

valid, irrevocable, and enforceable, save upon such grounds

as exist at law or in equity for the revocation of any contract.”

9 U.S.C. § 2. The Supreme Court has recently clarified that

contract-based challenges to the validity of arbitration agreements come in two types: “[o]ne type challenges specifically

the validity of the agreement to arbitrate . . . . [and] [t]he

other challenges the contract as a whole, either on a ground

that directly affects the entire agreement . . . or on the ground

that the illegality of one of the contract’s provisions renders

the whole contract invalid.” Buckeye Check Cashing, 546

U.S. at 444 (emphasis added). Challenges to the contract’s

validity are considered by the arbitrator in the first instance.

Id. at 445-46. Where, however, “the crux of the complaint is

. . . the arbitration provision itself, then the federal courts . . .

must decide whether the arbitration provision is invalid and

unenforceable . . . .” Davis v. O’Melveny & Myers, 485 F.3d

1066, 1072 (9th Cir. 2007) (citing Nagrampa v. MailCoups,

Inc., 469 F.3d 1257, 1264 (9th Cir. 2006) (en banc)). In sum,

our case law makes clear that courts properly exercise jurisdiction over claims raising (1) defenses existing at law or in

equity for the revocation of (2) the arbitration clause itself.

See, e.g., Nagrampa, 469 F.3d at 1263-64 (holding that courts

should address a procedural unconscionability defense to the

enforcement of an arbitration provision); Brown, 430 F.3d at

1010, 1012 (considering plaintiff’s breach of contract and

waiver defenses to enforcement of an otherwise valid arbitration agreement).2

2Other courts have considered waiver as a defense to a motion to compel arbitration. See, e.g., Khan v. Parsons Global Servs., 521 F.3d 421,

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[3] In this case, neither party disputes the validity of the

Letter of Agreement. Instead, Cox challenges enforcement of

the arbitration clause on the grounds that Ocean View

breached the agreement to arbitrate and therefore had no right

to enforce the clause or, alternatively, that Ocean View’s conduct amounted to a waiver of the right to arbitrate. Therefore,

under Buckeye Check Cashing, the particular contractual

defenses to enforcement of the arbitration clause at issue in

this case, breach and waiver, were properly heard by the district court.3

Ocean View contends that the issue of waiver was for the

arbitrator to determine. The cases on which it relies, however,

Omar v. Ralphs Grocery Company, 13 Cal. Rptr. 3d 562 (Ct.

App. 2004), and Howsam v. Dean Witter Reynolds, Inc., 537

U.S. 79 (2002), do not discuss whether courts or arbitrators

should consider challenges to the validity of arbitration agreements, but instead, focus on the separate inquiry of whether

courts or arbitrators should determine the scope of the arbitration clause. See Omar, 13 Cal. Rptr. 3d at 566; Howsam, 537

U.S. at 83 (addressing “[t]he question whether the parties

have submitted a particular dispute to arbitration”).4

424-25 (D.C. Cir. 2008); In re Tyco Int’l Ltd. Sec. Litig., 422 F.3d 41, 44

(1st Cir. 2005); PPG Indus., Inc. v. Webster Auto Parts Inc., 128 F.3d 103,

107 (2d Cir. 1997); Great W. Mortgage Corp. v. Peacock, 110 F.3d 222,

232 (3d Cir. 1997). 

3The partial dissent is based on the premise that the arbitration agreement is valid. Dissent at 9085. As discussed below, however, we can only

reach that conclusion after considering, and rejecting, the defenses raised

by Cox. The Supreme Court has noted that because the duty to arbitrate

originates in a contractual agreement between the parties, a party “cannot

be compelled to arbitrate if an arbitration clause does not bind it at all.”

John Wiley & Sons v. Livingston, 376 U.S. 543, 547 (1964). It is the binding nature of the arbitration clause that Cox contests, and that we must

review. 

4

Indeed, the California Court of Appeal noted that the issue “whether

there is an enforceable arbitration agreement between the parties” was

antecedent to the issue whether particular procedural matters, such as

waiver, are covered by the agreement. Omar, 13 Cal. Rptr. 3d at 566. 

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In Howsam, the Court confronted the issue whether a court

or a National Association of Securities Dealers (“NASD”)

arbitrator should apply a NASD procedural rule to a dispute

between the parties. Id. at 81. The NASD provision at issue

included a six-year statute of limitations which the plaintiff,

Dean Witter Reynolds, Inc., attempted to enforce in court

against a disgruntled client. Id. at 82. The precise question

presented to the Court was whether the parties agreed to submit enforcement of this procedural rule to an arbitrator, rather

than the courts. Id. at 83. In answering, the Court distinguished between two gateway disputes. The first was

“whether the parties are bound by a given arbitration

clause[,]” a question for a court to decide, id. at 84, and one

not at issue in the case. The second was “whether an arbitration clause in a concededly binding contract applies to a particular type of controversy . . . .” Id. In addressing the second

gateway issue, the Court reasoned that “ ‘procedural’ questions which grow out of the dispute and bear on its final disposition are presumptively not for the judge, but for an

arbitrator, to decide[,]” because “parties would likely expect

that an arbitrator would decide [that] gateway matter.” Id.

(citation and quotation marks omitted). Because the parties

would likely have committed interpretation of a NASD rule

to a NASD arbitrator, that particular issue of procedure was

left for the arbitrator to decide. Id. at 86. 

The reasoning of Howsam is simply inapplicable to resolution of the first gateway issue: whether the parties are bound

by the arbitration clause.5 As discussed above, Cox does not

5

Indeed, Howsam does not even cite Prima Paint Corp. v. Flood &

Conklin Mfg. Co., 388 U.S. 395 (1966), or its progeny, which discuss the

allocation of authority between the court and arbitrators over challenges

to the validity of arbitration clauses. Similarly, Buckeye Check Cashing

does not cite to Howsam and its predecessors discussing the scope of arbitrable issues. The Court has hitherto kept those two inquiries separate.

Further, to treat breach and waiver as procedural issues for the arbitrator,

as the partial dissent suggests, see Dissent at 9085, would create a strange

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concede that he is bound by the arbitration clause; instead, he

contends that Ocean View revoked the clause through its own

breach or waiver of the agreement to arbitrate. Cox does not

contend that waiver is not arbitrable, but raises it as a defense

to a motion to compel arbitration brought against him in federal court. Far from disputing the arbitrability of his claim, he

initially sought arbitration. Therefore, the district court properly decided the issues presented in this case.

II

[4] Section 2 of the FAA provides that arbitration clauses

in contracts “shall be valid, irrevocable, and enforceable, save

upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Under the FAA, a party

may challenge the validity or applicability of the arbitration

provision by raising the same defenses “available to a party

seeking to avoid the enforcement of any contract.” Brown,

430 F.3d at 1010. These contract-based challenges are governed by applicable state law. See Davis, 485 F.3d at 1072.

Here, as we have previously noted, the parties selected California law to govern the resolution of disputes arising out of

the employment agreement. 

A

[5] Breach or repudiation of a contract by one party excuses

nonperformance by the other. “A bedrock principle of California contract law is that he who seeks to enforce a contract

result: the arbitrator would get first crack at defenses to a motion to compel arbitration based on waiver or breach. In essence, the court would have

to compel arbitration without reviewing the parties’ contentions. If the

arbitrator resolves the issue in favor of the party asserting a waiver

defense, however, the parties would likewise have no recourse in the arbitral forum. Therefore, Judge O’Scannlain’s suggestion virtually eliminates

waiver as a defense to a motion to compel arbitration, a defense widely

recognized by other courts. See supra note 2. 

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must show that he has complied with the conditions and

agreements of the contract on his part to be performed.”

Brown, 430 F.3d at 1010 (citation and quotation marks omitted). See also Local 659, I.A.T.S.E. v. Color Corp. of Am., 302

P.2d 294, 299 (Cal. 1956) (In Bank) (“A repudiation of a contract accepted by the promisor excuses performance by the

promisee.”). Before reaching the question whether Ocean

View’s actions constituted a repudiation of the agreement,

Cox must first establish that he properly initiated arbitration.

If he failed to do so, then Ocean View could not have repudiated the agreement, regardless of the contents of Guinn’s letter. 

[6] Cox argues that his October 11, 2004, letter to Guinn

constituted a proper demand for arbitration. We disagree. The

arbitration clause in the employment agreement clearly states

that “disputes . . . shall be settled . . . in accordance with the

then current Model Employment Arbitration Procedures of

the [AAA] . . . .” Our court, as well as the California Court

of Appeal, has concluded that such language incorporates the

applicable rules of the AAA into the terms of the contract. See

Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010,

1012 (9th Cir. 2004); O’Hare v. Mun. Res. Consultants, 132

Cal. Rptr. 2d 116, 126 (Ct. App. 2003). Accord Howsam, 537

U.S. at 86 (finding incorporation of a NASD arbitration procedure in similar circumstances). The AAA employment rules

and procedures are available on the AAA website. See American Arbitration Association, Employment Arbitration Rules,

http://www.adr.org/sp.asp?id=32904 (last visited Dec. 3,

2007). Rule 4, “Initiation of Arbitration,” requires that the initiating party: (1) “file a written notice (hereinafter ‘Demand’)

of its intention to arbitrate” in duplicate; (2) provide a copy

of the Demand to the other party; and (3) include the applicable filing fee. Cox, who was then represented by counsel,

does not dispute that he failed to comply with any of these

basic requirements. 

[7] Instead, Cox justifies his failure to follow AAA procedures by arguing that the employment agreement did not

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specify how arbitration was to be initiated, just that it would

take place “in accordance” with AAA rules. This position is

untenable because, as discussed above, the agreement clearly

integrated those rules and procedures. Besides challenging the

clarity of the provision, Cox does not assert any traditional

contract defenses. Recently, the California Court of Appeal

noted that it was aware of no cases “that stand for the extreme

proposition that a party who fails to read a contract but nonetheless objectively manifests his assent by signing it — absent

fraud or knowledge by the other contracting party of the

alleged mistake — may later rescind the agreement on the

basis that he did not agree to its terms.” Stewart v. Preston

Pipeline Inc., 36 Cal. Rptr. 3d 901, 921 (Ct. App. 2005) (citing Brookwood v. Bank of Am., 53 Cal. Rptr. 2d 515, 520 (Ct.

App. 1996) (commenting that “plaintiff was bound by the provisions of [an] arbitration agreement regardless of whether

she read it or was aware of the arbitration clause when she

signed the document”) (citation and quotation marks omitted)). Cox’s contention amounts to the same “extreme proposition” noted in Stewart. Although the arbitration clause did

not explicitly articulate the requirement of formally initiating

arbitration proceedings with the AAA, we are satisfied that

Cox consented to the terms of the agreement he signed. The

fact that Cox was hired for a managerial position and was represented by counsel at the time he made his flawed request for

arbitration reinforces this view. 

Cox also contends that Ocean View’s refusal to arbitrate

placed him in the situation of having to pay his own filing fee,

because AAA rules require a party to pay a fee in order to initiate arbitration. Therefore, he argues, compliance with AAA

procedures would violate the terms of the employment agreement because Ocean View agreed to pay “[t]he cost of arbitration . . . .” The language of the AAA rules bears directly on

this argument. The item described “Filing Fees” is listed

under a general heading called “Costs of Arbitration.” The

positioning of the items suggests that filing fees are one of

various costs, including hearing fees, postponement fees,

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room rental, abeyance fees, and expenses. Though this seems

to lend support to Cox’s contention, each of the aforementioned costs specifies which party is expected to pay them,

and all save for the filing fee are to be charged to the

employer. Thus, the text of the Rule itself avoids the problem

of ambiguity identified by Cox.6

[8] The district court also determined that Ocean View

should be equitably estopped from denying that Cox initiated

arbitration because of its own refusal to arbitrate. The facts

established by the pleadings do not support this view. The

doctrine of equitable estoppel “provides that a person may not

deny the existence of a state of facts if he intentionally led

another to believe a particular circumstance to be true and to

rely upon such belief to his detriment.” Aerojet-Gen. Corp. v.

Commercial Union Ins. Co., 65 Cal. Rptr. 3d 803, 814 (Ct.

App. 2007) (citation and quotation marks omitted). In order

to apply the doctrine, “(1) the party to be estopped must be

apprised of the facts; (2) he must intend that his conduct shall

be acted upon, or must so act that the party asserting the

estoppel has a right to believe it was so intended; (3) the other

party must be ignorant of the true state of facts; and (4) he

must rely upon the conduct to his injury.” Id. (citation and

quotation marks omitted). See also United States v. GeorgiaPac. Co., 421 F.2d 92, 96 (9th Cir. 1970) (articulating a substantially similar list of elements). To satisfy the second element, the district court reasoned that “the Defendant’s letter

came from the Senior Vice President of Operations, and the

Plaintiff is certainly entitled to believe the Defendant’s statement that the Defendant did not consider this a case for arbitration[.]” Cox I, 433 F. Supp. 2d at 1177. There is no

indication in the record that Ocean View intended that Cox

rely upon its letter to his detriment. Nor did Cox assert that

he believed Ocean View intended him to rely, or did in fact

rely, on Guinn’s letter. Cf. O’Donnell v. Vencor Inc., 465 F.3d

6Moreover, Cox presumably could seek reimbursement of any filing

fees he advanced as part of the arbitration award. 

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1063, 1067 (9th Cir. 2006) (affirming denial of equitable

estoppel on the grounds that there was no “evidence of

improper purpose on the part of the defendant”) (citation and

quotation marks omitted). Therefore, the district court erred in

concluding that Ocean View was estopped from denying

Cox’s initiation of arbitration. Because Cox did not abide by

the terms of the arbitration clause, we hold that Ocean View

did not breach its agreement to arbitrate. 

For the foregoing reasons, Cox’s reliance on Brown is misplaced. In Brown, an employer, Dillard’s, terminated Brown

for allegedly adding ten minutes to her timecard. Thereafter,

she filed a notice of intent to arbitrate with the AAA as

required by Dillard’s arbitration policy. Id. at 1008. Under the

arbitration policy, Brown’s share of the arbitration fee was

$100. Id. She paid the fee. Id. After filing, the AAA informed

Brown that Dillard’s had not responded to its requests for

information. Id. Brown was able to speak with a person in

Dillard’s legal department once to notify the employer of this

delinquency, but did not receive a response to subsequent

communications. Id. Furthermore, the AAA sent two letters to

Dillard’s notifying it that Brown had already paid her portion

of the fee and that Dillard’s owed the remaining $400 of the

filing fee. Id. After Dillard’s failed to respond to the AAA, the

AAA notified Brown that Dillard’s had not paid its share of

the filing fee, and returned her notice of arbitration. Id. at

1009. Brown made attempts to contact Dillard’s for two

months to discuss its refusal to arbitrate, and only succeeded

in making contact once, at which time the legal department

told her that “her complaint had no merit and that Dillard’s

refused to arbitrate.” Id. After Brown filed suit, Dillard’s

removed the case to federal district court and moved to compel arbitration. Id.

This court concluded, based on the facts summarized

above, that Dillard’s “breached its agreement with Brown by

refusing to participate in the arbitration proceedings Brown

initiated.” Id. at 1010. We rejected the notion that the

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employer could make an independent determination of the

suitability of the employee’s claims for arbitration, stating

that Dillard’s “proper course of action was to make that argument in arbitration.” Id. (emphasis added). Thus, we construed Dillard’s refusal as a breach of the agreement which

excused Brown from having to arbitrate the matter instead of

pursuing her lawsuit. Id. at 1011. 

[9] The plaintiff in Brown made heroic efforts to initiate

arbitration, clearly going beyond the requirements of the arbitration agreement. Here, in contrast, Cox did not comply with

the terms of the agreement; he simply failed properly to initiate arbitration. As the non-complying party in this case, Cox

cannot establish that Ocean View repudiated the arbitration

agreement. Brown simply does not apply under the facts of

this case. 

B

Cox argues in the alternative that Guinn’s letter amounted

to a waiver of Ocean View’s right to arbitrate Cox’s dispute.

Recently, the California Supreme Court set forth the factors

to be considered under California law to determine whether

arbitration has been waived:

In determining waiver, a court can consider (1)

whether the party’s actions are inconsistent with the

right to arbitrate; (2) whether the litigation

machinery has been substantially invoked and the

parties were well into preparation of a lawsuit before

the party notified the opposing party of an intent to

arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for

a long period before seeking a stay; (4) whether a

defendant seeking arbitration filed a counterclaim

without asking for a stay of the proceedings; (5)

whether important intervening steps [e.g., taking

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able in arbitration] had taken place; and (6) whether

the delay affected, misled, or prejudiced the opposing party. 

St. Agnes Med. Ctr. v. PacifiCare of Cal., 82 P.3d 727, 733

(Cal. 2003) (citations and internal quotation marks omitted).7

We note preliminarily that, while Cox’s failure properly to

initiate arbitration under the AAA rules may make it more difficult for him to establish waiver, it does not foreclose his

assertion, as it does in the breach of agreement context discussed above, of waiver by Ocean View. That is because

waiver focuses on the actions of the party charged with

waiver. To be sure, Cox’s conduct may bear upon the factors

discussed above, but a fact finder might reasonably determine

that Ocean View waived its right independently of whether

Cox perfected his request for arbitration. 

[10] Thus, the district court properly considered whether

Ocean View waived its right to compel arbitration, notwithstanding Cox’s failure to file a claim with the AAA, because

arbitration is a matter of private contract law. See Howsam,

537 U.S. at 83; see also Cronus Inv., Inc. v. Concierge Servs.,

107 P.3d 217, 222 (Cal. 2005) (noting that the FAA does not

provide special status for arbitration agreements, but simply

makes them only as enforceable as other contracts, and that

the FAA does not require any specific set of procedural rules)

(citations and quotation marks omitted). This stands in

marked contrast, for example, to the Federal Rules of Civil

Procedure, which govern the manner in which parties bring

suits regardless of whether parties would have chosen those

particular rules. As discussed above, a party may fail to com7

In concluding that Ocean View had “waived its right to enforce the

arbitration agreement,” the district court relied on the three-factor test

articulated in Brown. Cox I, 433 F. Supp. 2d at 1180. After tracing its lineage, however, we conclude that the Brown three-factor test, 430 F.3d at

1012, is not based on California law. 

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ply with the terms of the agreement, resulting in a breach of

contract. In such a situation, though, waiver has long been

recognized as a valid defense to nonperformance by the

breaching party. See, e.g., Westfed Holdings, Inc. v. United

States, 407 F.3d 1352, 1361 (Fed. Cir. 2005) (“Implied waiver

may be inferred by conduct or actions that mislead the breaching party into reasonably believing that the rights to a claim

arising from the breach was [sic] waived.”); Extension Oil Co.

v. Richfield Oil Corp., 125 P.2d 895, 896 (Cal. Ct. App. 1942)

(discussing the established rule that acceptance of the benefit

of a contract following breach by the other party constitutes

a waiver of the breach). 

[11] Moreover, waiver is an equitable doctrine. See generally Wyler Summit P’ship v. Turner Broad. Sys., Inc., 235

F.3d 1184, 1194 (9th Cir. 2000). As such, courts can apply it

to redress injustice in situations where technical requirements

prevent the court from otherwise providing adequate legal

remedies. See Toscano v. Greene Music, 21 Cal. Rptr. 3d 732,

738 (Ct. App. 2004) (noting that “[t]he object of equity is to

do right and justice[,]” and that “[t]he powers of a court of

equity . . . are not cribbed or confined by the rigid rules of

law”) (citations and internal quotation marks omitted). And

“an action to compel arbitration is in essence a suit in equity

to compel specific performance of [the arbitration agreement].” Wagner Constr. Co. v. Pac. Mech. Corp., 157 P.3d

1029, 1034 (Cal. 2007). Thus, it is possible that Ocean View

could have waived its right to arbitrate notwithstanding Cox’s

failure to file a claim with the AAA, and the district court

properly engaged in that inquiry. We note, however, that

“[a]ny examination of whether the right to compel arbitration

has been waived must be conducted in light of the strong federal policy favoring enforcement of arbitration agreements.”

Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th

Cir. 1986) (citing Moses H. Cone Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 24-25 (1983)). 

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[12] We conclude that the district court erred in determining that Ocean View waived its right to arbitrate its dispute

with Cox. None of the St. Agnes factors supports waiver.

Even under the first factor, given Guinn’s understanding that

the dispute was not yet ripe for arbitration, it is at least a

debatable proposition “whether [Guinn’s] actions [were]

inconsistent with the right to arbitrate.” St. Agnes, 82 P.3d at

733. Second, all of factors (2) through (5), which have to do

with the invocation of “the litigation machinery” and its use,

militate in favor of Ocean View because Ocean View did not

resort to litigation itself and acted to invoke arbitration immediately upon learning that Cox had instituted litigation.

Finally, factor (6) strongly favors Ocean View. The district

court found prejudice in the “delay and costs” alleged by Cox.

Cox I, 433 F. Supp. 2d at 1180. It is not self-evident, however,

that those costs and delay should be attributed to Ocean View

rather than to Cox himself for not properly filing his claim

with the AAA. In any event, the delay was minimal —

approximately 30 days from Cox’s filing his lawsuit in state

court to Ocean View’s motion to compel arbitration upon

removal of the action to federal court. As to costs, the California Supreme Court has noted that “costs and expenses . . .

incurred in responding to such [litigation] efforts likewise do

not support a finding of waiver or prejudice.” St. Agnes, 82

P.3d at 739. Thus, Cox’s argument that he was prejudiced by

the delay finds no support in the record or under California law.8

[13] Because none of the St. Agnes factors supports Cox’s

waiver argument and given the strong federal policy favoring

the enforcement of arbitration agreements, we hold that the

district court erred in concluding that Ocean View had waived

its right to enforce the arbitration agreement.

8Cox also contends that he was prejudiced because he “would have prevailed [in arbitration] and [Ocean View] would not have a basis for terminating [his] employment.” Any argument premised on the ultimate

outcome of the arbitration, however, is speculative and, as such, cannot

support a prejudice argument. 

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CONCLUSION

We reverse the district court’s grant of partial summary

judgment in favor of Cox, and remand for further proceedings

consistent with this opinion.

REVERSED and REMANDED. 

O’SCANNLAIN, Circuit Judge, concurring in part and dissenting in part: 

While I concur in the court’s decision that the motion to

compel arbitration was erroneously denied by the district

court, I respectfully disagree with its conclusion that the

waiver issue was for the court to decide. In my view, arbitrability is a matter for the court; whether or not the agreement

to arbitrate was properly invoked, by either side, at any time,

is a matter for the arbitrator to decide. Thus I would reverse

on the very narrow ground that a motion to compel must be

granted because the arbitration clause is valid. I would leave

all other issues to the arbitrator. 

I

As the en banc opinion in Nagrampa v. Mailcoups, Inc.,

469 F.3d 1257 (9th Cir. 2006) (en banc) has revealed, there

are continued tensions in our arbitration jurisprudence which

have failed to clarify this area. Very recently, the Supreme

Court has renewed its commitment to support arbitration in

Hall Street Associates, L.L.C. v. Mattel, 128 S. Ct. 1396, 1402

(2008). But Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 400 (1967) (holding that a federal

court must “order arbitration once it is satisfied that an agreement for arbitration has been made and has not been honored”), Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79,

85 (2002) (holding that “in the absence of an agreement to the

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contrary, issues of substantive arbitrability . . . are for a court

to decide and issues of procedural arbitrability, i.e., whether

prerequisites such as time limits, notice, laches, estoppel, and

other conditions precedent to an obligation to arbitrate have

been met, are for the arbitrators to decide” (quoting the

Revised Uniform Arbitration Act of 2000 (RUAA) §6(c) cmt.

2) (emphasis added and in the original)), Buckeye Check

Cashing, Inc. v. Cardegna, 546 U.S. 440, 449 (2006) (“[A]

challenge to the validity of the contract as a whole, and not

specifically to the arbitration clause, must go to the arbitrator.” (emphasis added)), and Nagrampa, 469 F.3d at 1293-94

(holding that an arbitration agreement that was invalid due to

unconscionability was not enforceable), are absolutely clear

that once the legal decision is made by the court that an arbitration clause is valid, all remaining issues are for the arbitrator. 

The Supreme Court in Howsam could not be clearer: “the

presumption is that the arbitrator should decide allegation[s]

of waiver, delay, or a like defense to arbitrability.” 537 U.S.

at 84 (internal quotation marks and citation omitted). Thus, I

find perplexing the majority’s attempt to distinguish Howsam.

Here, I see no relevant distinction between Cox’s attempt

to avoid the arbitrability of his employment dispute based on

whether or not he properly followed the procedures of the

AAA and Dean Witter’s challenge to arbitrability in Howsam

based on the National Association of Securities Dealers

(NASD) procedural rules. See Howsam, 537 U.S. at 81. In

this case I would follow the reasoning of the Supreme Court

in Howsam that “[b]ecause the parties would likely have committed interpretation of a [AAA] rule to a [AAA] arbitrator,

that particular issue of procedure was left for the arbitrator to

decide.”

1

 Opinion at 9074 (citing Howsam, 537 U.S. at 86).

1Such approach is correct notwithstanding the majority’s citation to out

of circuit cases considering waiver based on extensive participation in litigation. See, e.g., Khan v. Parsons Global Servs., 521 F.3d 421, 428 (D.C.

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Here, neither party disputes the existence nor validity of the

arbitration agreement. Therefore, I concur in the majority’s

decision to compel arbitration. However, I would remand all

other issues to the arbitrator, including the issues of whether

the arbitration provision was waived or breached, and therefore dissent to the extent the court holds otherwise.2

See Howsam, 537 U.S. at 85.

II

Let me add that I find the majority’s treatment of Brown v.

Dillard’s, Inc., 430 F.3d 1004 (9th Cir. 2005), to be problematic and I would not reach it. If I, rather than the arbitrator,

Cir. 2008) (holding that Parsons waived right to compel arbitration by “filing a motion for summary judgment based on matters outside of the pleadings”); In re Tyco Int’l Ltd. Sec. Litig., 422 F.3d 41, 43, 46 (1st Cir. 2005)

(considering question of waiver after the “AAA dismissed the Tyco

demand for arbitration . . . for lack of written consent”); PPG Indus., Inc.

v. Webster Auto Parts Inc., 128 F.3d 103, 107 (2d Cir. 1997) (holding that

“a party waives its right to arbitration when it engages in protracted litigation that prejudices the opposing party (emphasis added)); Great W. Mortgage Corp. v. Peacock, 110 F.3d 222, 233 (3d Cir. 1997) (“Indeed, a party

waives the right to compel arbitration only in the following circumstances:

when the parties have engaged in a lengthy course of litigation, when

extensive discovery has occurred, and when prejudice to the party resisting arbitration can be shown.” (emphasis added)). 

2The majority opinion states that my approach leads to “a strange result:

the arbitrator would get first crack at defenses to a motion to compel arbitration based on waiver or breach.” Opinion at 9074-75 n.5. However, the

majority opinion’s approach is no less strange; it would require a court to

answer the question of waiver before deciding whether the question of

waiver is one for the arbitrator to decide. See Opinion at 9073 n.4, 9074-

75. Such an approach leads to a waste of judicial resources should the

court find that the arbitration clause was not breached or waived and it

does take into account the FAA’s policy favoring enforcement of arbitration agreements. Although not directly on point, Buckeye Check Cashing

instructs us that when faced such a “conundrum” we must “resolve[ ] it in

favor of the separate enforceability of arbitration provisions.” 546 U.S. at

448-49. 

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were to reach the question of whether or not arbitration was

properly invoked, however, I would reluctantly conclude that

Brown controls this case. In my view, there is simply no principled difference between the holding that Ms. Brown properly invoked arbitration in Brown and the district court’s

finding that Mr. Cox properly invoked arbitration here.

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