Opinion ID: 550160
Heading Depth: 2
Heading Rank: 3

Heading: Denial of Motion to Compel Arbitration.

Text: 26
27 The district court, relying on Van Ness Townhouses v. Mar Industries, Corp., 862 F.2d 754 (9th Cir.1988), held that Liebling had waived his right to arbitrate. A party seeking to prove waiver of a right to arbitrate must demonstrate (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts. The party arguing waiver of arbitration bears a heavy burden of proof. Fisher, 791 F.2d at 694; Van Ness Townhouses, 862 F.2d at 758. We conclude that appellees failed to sustain this heavy burden. Van Ness is distinguishable on its facts. 28 Appellees provided no evidence establishing when Liebling had knowledge of his right to compel arbitration. He wrote to appellees demanding arbitration on May 31, 1988--a year after appellees filed their complaint and six months before he moved the court to compel arbitration. Liebling did not have the benefit of counsel during this period. 29 Liebling's pre-trial actions--particularly his avoidance of discovery and his motions to stay the district court proceedings--were not inconsistent with his pursuit of arbitration although they may have been motivated more by his determination to avoid or frustrate the litigation. His pursuit of a court-appointed attorney and in forma pauperis status is less accurately characterized as active litigation than as an effort to protect his position should he be forced to litigate. The fact that Liebling failed to raise as an affirmative defense his right to arbitrate is not sufficient, absent a showing of prejudice, to establish waiver. Fisher, 791 F.2d at 698. 30 Finally, appellees' assertions of prejudice are unpersuasively conclusory. They argue that they have spent time and resources in discovery activity and motions practice over a period of two years that would be rendered nugatory by a direction that arbitration now be had. Appellees' Brief, 16-17. However, it was appellees who refused to arbitrate, and the costs they incurred in pursuing litigation should not count against Liebling's effort to avoid litigation. Just as Liebling must bear the risk that his appeal would not be successful, appellees, if they choose to resist Liebling's effort to arbitrate the dispute, must bear the risk that it will be successful. 31
32 In their response to Liebling's motion to compel arbitration before the district court as well as on appeal, appellees challenge Liebling's standing to compel arbitration. Despite the fact that this is a threshold issue, 9 the district court did not resolve it, ruling instead that Liebling had waived arbitration. 33 Liebling does not directly address the standing issue, but instead generally stresses the federal policy favoring arbitration. However, according to the undisputed allegation of appellees, Liebling was not a party to the contract providing for arbitration. 10 As the Supreme Court has explained repeatedly, the Federal Arbitration Act was designed 'to overrule the judiciary's longstanding refusal to enforce agreements to arbitrate.'  Volt Info. Sciences v. Bd. of Trustees, 489 U.S. 468, 109 S.Ct. 1248, 1253, 103 L.Ed.2d 488 (1989) (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219-220, 105 S.Ct. 1238, 1241-1242, 84 L.Ed.2d 158 (1985)). Although the Act reflects a federal policy favoring arbitration, Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985), the Act does not confer a right to compel arbitration of any dispute at any time; it confers only the right to obtain an order directing that 'arbitration proceed in the manner provided for in [the parties'] agreement.'  Volt, 109 S.Ct. at 1253 (quoting 9 U.S.C. Sec. 4). The right to compel arbitration derives from a contractual right, and, as we held in Lorber Industries v. Los Angeles Printworks Corp., 803 F.2d 523 (9th Cir.1986), one who is not a party to a contract has no standing to compel arbitration. 34 Lorber, however, also suggests that a third party beneficiary or an agent of one of the parties to the contract may have standing to compel arbitration. The nature of Liebling's relationship with Gold Depository, as well as the intent of the parties to the contract and the scope of arbitrability, were neither analyzed by the district court nor briefed on appeal. We decline to address this issue on appeal and instead remand the case to the district court for further determination and fact-finding as to whether the parties intended that a person in Liebling's position have the benefits of the arbitration provision.