Opinion ID: 2519923
Heading Depth: 2
Heading Rank: 3

Heading: Prejudice from Participating in Litigation

Text: More than two decades ago, we observed that [u]nder federal law, it is clear that the mere filing of a lawsuit does not waive contractual arbitration rights. The presence or absence of prejudice from the litigation of the dispute is the determinative issue under federal law. ( Doers, supra, 23 Cal.3d at p. 188, 151 Cal.Rptr. 837, 588 P.2d 1261, fn. omitted, relying on Merrill Lynch, Pierce, Fenner & Smith v. Lecopulos, supra, 553 F.2d at p. 845; Demsey & Associates v. S.S. Sea Star (2d Cir.1972) 461 F.2d 1009, 1018; Chatham Shipping Co. v. Fertex Steamship Corp., supra, 352 F.2d at p. 293.) Our review of more recent federal authorities discloses that this rule remains largely intact. [6] In California, whether or not litigation results in prejudice also is critical in waiver determinations. ( Keating v. Superior Court (1982) 31 Cal.3d 584, 605, 183 Cal.Rptr. 360, 645 P.2d 1192, disapproved on other grounds, Southland Corp. v. Keating (1984) 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1; Doers, supra, 23 Cal.3d at pp. 188-189, 151 Cal.Rptr. 837, 588 P.2d 1261; Davis v. Continental Airlines, Inc. (1997) 59 Cal.App.4th 205, 212, 69 Cal.Rptr.2d 79.) That is, while `[w]aiver does not occur by mere participation in litigation' if there has been no judicial litigation of the merits of arbitrable issues, `waiver could occur prior to a judgment on the merits if prejudice could be demonstrated.' ( Christensen v. Dewor Developments, supra, 33 Cal.3d at p. 782, 191 Cal.Rptr. 8, 661 P.2d 1088). Because merely participating in litigation, by itself, does not result in a waiver, courts will not find prejudice where the party opposing arbitration shows only that it incurred court costs and legal expenses. (See Groom v. Health Net (2000) 82 Cal.App.4th 1189, 1197, 98 Cal.Rptr.2d 836 [mere expense of responding to motions or other preliminary pleadings filed in court is not the type of prejudice that bars a later petition to compel arbitration]; accord, Crysen/Montenay Energy Co. v. Shell Oil Co. (2d Cir.2000) 226 F.3d 160, 163.) Rather, courts assess prejudice with the recognition that California's arbitration statutes reflect `a strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution' and are intended `to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of their differences by a tribunal of their own choosing.' ( Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 10 Cal.Rptr.2d 183, 832 P.2d 899.) Prejudice typically is found only where the petitioning party's conduct has substantially undermined this important public policy or substantially impaired the other side's ability to take advantage of the benefits and efficiencies of arbitration. For example, courts have found prejudice where the petitioning party used the judicial discovery processes to gain information about the other side's case that could not have been gained in arbitration (e.g., Berman v. Health Net (2000) 80 Cal.App.4th 1359, 1366, 96 Cal.Rptr.2d 295; Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 558, 94 Cal.Rptr.2d 201; Davis v. Continental Airlines, Inc., supra, 59 Cal.App.4th at p. 215, 69 Cal.Rptr.2d 79); where a party unduly delayed and waited until the eve of trial to seek arbitration (e.g., Sobremonte v. Superior Court, supra, 61 Cal.App.4th at pp. 995-996, 72 Cal.Rptr.2d 43); or where the lengthy nature of the delays associated with the petitioning party's attempts to litigate resulted in lost evidence (e.g., Christensen v. Dewor Developments, supra, 33 Cal.3d at p. 784, 191 Cal.Rptr. 8, 661 P.2d 1088). The record in this case does not reflect that the parties have litigated the merits or the substance of Saint Agnes's arbitrable claims, or that any discovery of those claims has occurred. Nor is there any indication that PacifiCare used the Los Angeles and Fresno actions to gain information about Saint Agnes's case that otherwise would be unavailable in arbitration. [7] Finally, there appears no claim that PacifiCare's actions have impaired Saint Agnes's ability to have the arbitrable disputes in this action resolved fairly through arbitration. Saint Agnes, however, claims it has been prejudiced because it incurred substantial costs and expenses in opposing PacifiCare's motion to change venue in this action, as well as PacifiCare's unsuccessful attempt to block a venue change to Fresno in its Los Angeles action. [8] This claim is not well taken. Although we have found no California or United States Supreme Court decisions on point, other courts that have addressed this issue hold that a petitioning party does not waive its arbitration rights merely by seeking to change judicial venue of an action prior to requesting arbitration. (E.g., American Heart Disease Prevention Foundation, Inc. v. Hughey (4th Cir. Feb. 4, 1997, No. 96-1199) 106 F.3d 389, 1997 WL 42714, p. ; Thompson v. Skipper Real Estate Co. (Ala.1999) 729 So.2d 287, 292-293; but see R.W. Roberts Construction Co., Inc. v. Masters & Co., Inc. (Fla.Dist.Ct.App.1981) 403 So.2d 1114, 1115 [upholding trial court's waiver finding without addressing the matter of prejudice].) In so holding, those courts reason that a party is not required to litigate the issue of arbitration in an improper or inconvenient venue, and that a party's position on venue does not necessarily reflect a position on arbitrability. We agree with that reasoning, and find it consistent with California and federal case law holding that a waiver determination requires the consideration of all circumstances, including the absence or presence of prejudice. Under the foregoing authorities, PacifiCare did not waive or otherwise forfeit its contractual arbitration rights by seeking to transfer venue of the Fresno action or by opposing a venue change of the Los Angeles action. Although PacifiCare did not prevail on its venue positions, there has been no finding that it acted wrongly in asserting them. Moreover, both the Los Angeles and Fresno lawsuits involve nonarbitrable causes of action that belong in court; this circumstance further reinforces the conclusion that PacifiCare's efforts to secure a particular judicial venue for each action are not so inconsistent with the exercise of the right to arbitration as to constitute a waiver of that right. Because PacifiCare's venue-related efforts do not support an inference of waiver, it follows logically that the costs and expenses Saint Agnes incurred in responding to such efforts likewise do not support a finding of waiver or prejudice. (See Becker v. DPC Acquisition Corp. (S.D.N.Y. May 30, 2002, No. 00  Civ.1035) 2002 WL 1144066, p. .) [9]