Court Opinion

ID: 4646347
Source: CourtListenerOpinion
Date Created: 2020-12-23 22:02:08.384762+00
Date Added: 2024-06-11T08:00:57.344011
License: Public Domain

Filed 12/23/20 IMACO Investments, Inc. v. Nazarian Properties, LLC CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                        DIVISION TWO

 IMACO INVESTMENTS, INC.,                                               B303807

           Plaintiff and Appellant,                                     (Los Angeles County
                                                                        Super. Ct. No. 19STCV07438)
           v.

 NAZARIAN PROPERTIES, LLC et
 al.,

           Defendants and Respondents.

     APPEAL from an order of the Superior Court of Los
Angeles County, Gregory Keosian, Judge. Affirmed.
     Jones, Bell, Abbott, Fleming & Fitzgerald, William M.
Turner, Asha Dhillon and Neil M. Katsuyama for Plaintiff and
Appellant.
     Slaughter, Reagan & Cole and Gabriele M. Lashly for
Defendants and Respondents.
       Plaintiff and appellant IMACO Investments, Inc. (tenant)
appeals from an order denying its petition to compel arbitration
of a lease dispute with defendants and respondents Nazarian
properties, LLC and Sam Nazarian Properties, LLC (collectively,
landlord). We affirm the order.

                          BACKGROUND
      In 2015, the parties entered into three separate gas station
lease agreements (the leases). Each of the leases restricts
tenant’s ability to assign or transfer its interest without first
obtaining landlord’s written consent, not to be unreasonably
withheld.
      Each of the leases also contains a dispute resolution
provision that states in relevant part:
      “36. DISPUTE RESOLUTION:
            “A. MEDIATION: Tenant and Landlord agree
            to mediate any dispute or claim arising
            between them out of this agreement, or any
            resulting transaction, before resorting to
            arbitration or court action, subject to
            paragraph 36B(2) below….If for any dispute or
            claim to which this paragraph applies, any
            party commences an action without first
            attempting to resolve the matter through
            mediation, or refuses to mediate after a request
            has been made, then that party shall not be
            entitled to recover attorney fees, even if they
            would otherwise be available to that party in
            any such action….

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“B. ARBITRATION OF DISPUTES: (1)
Tenant and Landlord agree that any dispute or
claim in Law or equity arising between them
out of this agreement or any resulting
transaction, which is not settled through
mediation, shall be decided by neutral, binding
arbitration, including and subject to
paragraphs 36B(2) and (3) below. The
arbitrator shall be a retired judge or justice, or
an attorney with at least 5 years of real estate
transactional law experience, unless the parties
mutually agree to a different arbitrator, who
shall render an award in accordance with
substantive California Law. In all other
respects, the arbitration shall be conducted in
accordance with Part III, Title 9 of the
California Code of Civil Procedure. Judgment
upon the award of the arbitrator(s) may be
entered in any court having jurisdiction. The
parties shall have the right to discovery in
accordance with Code of Civil Procedure §
1283.05.
“(2) EXCLUSIONS FROM MEDIATION AND
ARBITRATION: The following matters are
excluded from Mediation and Arbitration
hereunder: (i) a judicial or non-judicial
foreclosure or other action or proceeding to
enforce a deed of trust, mortgage, or
installment land sale contract as defined in
Civil Code §2985; (ii) an unlawful detainer

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             action; (iii) the filing or enforcement of a
             mechanic’s lien; (iv) any matter that is within
             the jurisdiction of a probate, small claims, or
             bankruptcy court; and (v) an action for bodily
             injury or wrongful death, or for latent or patent
             defects to which Code of Civil Procedure §337.1
             or §337.15 applies. The filing of a court action
             to enable the recording of a notice of pending
             action, for order of attachment, receivership,
             injunction, or other provisional remedies, shall
             not constitute a violation of the mediation and
             arbitration provisions….”
      In 2017, tenant sold its gas station businesses and assigned
the leases to a third party. Landlord refused to consent to the
requested assignments, and on March 4, 2019, tenant filed a
complaint against landlord asserting three causes of action for
breach of contract. Tenant alleged that it entered into an
agreement to sell its businesses, contingent upon landlord
consenting to assignment of the leases; that landlord
unreasonably refused to consent to the assignments; and that
landlord’s refusal would prevent the sale, causing tenant
damages exceeding $25,000. The complaint sought unspecified
injunctive relief.
      On March 12, 2019, landlord sent tenant a letter
demanding mediation of the pending civil action. Between March
and June 2019, the parties negotiated selecting a mediator. A
mediation held on September 4, 2019 did not resolve the dispute.
      On March 22, 2019, landlord filed an answer and cross-
complaint. The cross-complaint alleged that tenant breached the
leases by assigning its rights under the lease without landlord’s

                                4
consent and by misleading landlord. Tenant filed an answer to
the cross-complaint on April 30, 2019. The parties attended a
case management conference on May 16, 2019.
       In September 2019, tenant served deposition notices for
landlord’s principals. Landlord in turn propounded written
discovery, including form and special interrogatories, requests for
admissions, and requests for production of documents. The
depositions of landlord’s principals did not occur; however, tenant
responded to landlord’s written discovery. The parties met and
conferred on tenant’s discovery responses, and an informal
discovery conference was scheduled for November 22, 2019. Trial
was set for November 24, 2020.
       On September 3, 2019, tenant sent landlord a letter
requesting arbitration of the dispute. Landlord refused the
request, arguing that tenant had waived the right to arbitrate.
Tenant filed a petition and motion to compel arbitration on
October 7, 2019.
       On November 22, 2019, the trial court denied tenant’s
petition to compel arbitration, finding that tenant had waived its
right to arbitration. This appeal followed.

                          DISCUSSION
I. Standard of review
      Whether a party has waived its right to arbitrate is
generally a question of fact, and the trial court’s determination, if
supported by substantial evidence, is binding on a reviewing
court. (St. Agnes Medical Center v. PacifiCare of California
(2003) 31 Cal.4th 1187, 1196 (St. Agnes).) When the facts are
undisputed and only one inference may reasonably be drawn
from those facts, the issue is one of law subject to de novo review.

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(Ibid.) If more than one reasonable inference may be drawn from
undisputed facts, however, the substantial evidence rule requires
indulging the inferences favorable to the trial court’s judgment.
(Davis v. Continental Airlines, Inc. (1997) 59 Cal.App.4th 205,
211 (Davis).)
       The parties disagree on whether substantial evidence or de
novo review governs our determination of this appeal. Tenant
contends it acted consistently with the intent to arbitrate and did
not take advantage of judicial discovery procedures, while
landlord frames the same conduct as inconsistent with tenant’s
claim to arbitration. Given the competing inferences that may be
drawn from the record in this case, we review the trial court’s
ruling for substantial evidence. (Davis, supra, 59 Cal.App.4th at
p. 211.) We bear in mind the need for “close judicial scrutiny” of
the waiver claim, which may not be “lightly inferred.” (St. Agnes,
supra, 31 Cal.4th at p. 1195.)

II. Waiver of right to arbitrate
       No single test determines the nature of the conduct that
will constitute a waiver of the right to arbitrate. (St. Agnes,
supra, 31 Cal.4th at p. 1195.) Our Supreme Court has suggested
that the following factors are relevant to that determination:
“‘“(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

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of the proceedings; (5) ‘whether important intervening steps [e.g.,
taking advantage of judicial discovery procedures not available in
arbitration] had taken place’; and (6) whether the delay ‘affected,
misled, or prejudiced’ the opposing party.”’” (Id. at p. 1196,
quoting Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980,
992.)
       Substantial evidence supports a finding of waiver under
factors one, two, and three. It is undisputed that tenant knew of
the dispute resolution provisions set forth in the leases. Tenant
failed to comply with those provisions. Tenant did not initiate
mediation before commencing this action, as required under the
dispute resolution provisions. Although the filing of a lawsuit
alone does not waive a party’s right to arbitrate (Doers v. Golden
Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 188), tenant here did
more than merely file a lawsuit. Tenant filed a peremptory
challenge to the judge initially assigned to the case, resulting in
reassignment to another judge. Tenant also filed an answer to
landlord’s cross-complaint, participated in discovery by serving
deposition notices on landlord and objecting and then responding
to landlord’s written discovery, and participated in a case
management conference and trial setting conference at which a
trial date was set. While undertaking these actions, tenant never
mentioned or requested arbitration.
        We are unpersuaded by tenant’s argument that the
parties’ agreement excludes from mediation and arbitration the
filing of an action for injunctive relief. The parties’ arbitration
agreement excludes only actions for provisional remedies. It
states: “The filing of a court action to enable the recording of a
notice of pending action, for order of attachment, receivership,
injunction, or other provisional remedies, shall not constitute a

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violation of the mediation and arbitration provisions.” That
limited exclusion is consistent with Code of Civil Procedure
section 1281.8, subdivision (b), which allows a party to an
arbitration agreement to file in court an application for a
provisional remedy:
       “A party to an arbitration agreement may file in the
       court in the county in which an arbitration
       proceeding is pending, or if an arbitration proceeding
       has not commenced, in any proper court, an
       application for a provisional remedy in connection
       with an arbitrable controversy, but only upon the
       ground that the award to which the applicant may be
       entitled may be rendered ineffectual without
       provisional relief. The application shall be
       accompanied by a complaint or by copies of the
       demand for arbitration and any response thereto. If
       accompanied by a complaint, the application shall
       also be accompanied by a statement stating whether
       the party is or is not reserving the party’s right to
       arbitration.”
(Code Civ. Proc., § 1281.8, subd. (b).)
The term “provisional remedies” is defined in Code of Civil
Procedure section 1281.8, subdivision (a) to include preliminary
injunctions and temporary restraining orders. (Code Civ. Proc.,
§ 1281.8, subd. (a).) Tenant did not file an application for a
preliminary injunction or a statement reserving its right to
arbitration, and its complaint does not seek a preliminary
injunction or other provisional relief.
       The fourth factor for determining waiver of the right to
arbitrate -- whether a defendant seeking arbitration filed a

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counterclaim without asking for a stay of the proceedings – does
not apply, since tenant is the plaintiff in this case. We note,
however, that tenant filed an answer to landlord’s cross-
complaint without requesting a stay or asserting its right to
arbitrate the dispute. The fifth factor -- whether tenant took
advantage of judicial discovery procedures not available in
arbitration -- is also inapplicable. Although tenant noticed
depositions, none occurred. The parties’ arbitration agreement,
moreover, gives them the right to take depositions and obtain
discovery.
       The sixth factor -- whether tenant’s delay in requesting
arbitration was unreasonable and prejudiced landlord – weighs
in favor of waiver. “Unreasonable delay in seeking arbitration
may, standing alone, constitute a waiver of a right to arbitrate.”
(Spracher v. Paul M. Zagaris, Inc. (2019) 39 Cal.App.5th 1135,
1138.) Tenant was aware of the relevant arbitration provisions
when it filed the complaint but delayed filing a petition to compel
arbitration for nearly seven months. Tenant offers no
explanation for its delay. There is no evidence that tenant
mentioned arbitration in any court filing or at any hearing. The
record supports a finding that tenant’s delay was unreasonable
and unjustified.
       Substantial evidence also supports the finding that tenant’s
conduct prejudiced landlord. “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.” (St. Agnes, supra,
31 Cal.4th at p. 1203.) Prejudice can arise, however, “where the
petitioning party’s conduct has substantially undermined” the
policy in favor of arbitration as a speedy and relatively

                                 9
inexpensive means of dispute resolution or “substantially
impaired the other side’s ability to take advantage of the benefits
and efficiencies of arbitration.” (Id. at p. 1204.) As our Supreme
Court has recognized, courts have considered “the expenditure of
time and money in determining prejudice where the [petitioner’s]
delay is unreasonable.” (Iskanian v. CLS Transportation Los
Angeles, LLC (2014) 59 Cal.4th 348, 377.) Tenant’s unreasonable
and unjustified conduct substantially undermined landlord’s
ability to benefit from the relative speed and cost efficiencies of
arbitration and thereby prejudiced landlord. (Fleming
Distribution Co. v. Younan (2020) 49 Cal.App.5th 73, 83-84
[plaintiff suffered prejudice where defendant unreasonably
delayed in seeking arbitration and plaintiff incurred costs and
fees in litigation]; Lewis v. Fletcher Jones Motor Cars, Inc. (2012)
205 Cal.App.4th 436, 451-453 [plaintiff suffered prejudice where
defendant unreasonably delayed seeking arbitration for five
months and plaintiff was forced to litigate demurrers and
motions to compel further discovery]; accord, Burton v. Cruise
(2010) 190 Cal.App.4th 939, 948 [“[A] petitioning party’s conduct
in stretching out the litigation process itself may cause prejudice
by depriving the other party of the advantages of arbitration as
an ‘expedient, efficient and cost-effective method to resolve
disputes”’].)
       Substantial evidence supports the trial court’s finding that
tenant waived its right to arbitration.

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                        DISPOSITION
      The order denying tenant’s motion to compel arbitration is
affirmed. Landlord shall recover its costs on appeal.
           NOT TO BE PUBLISHED IN THE OFFICIAL
REPORTS.

                       ____________________________, J.
                       CHAVEZ

We concur:

__________________________, Acting P. J.
ASHMANN-GERST

__________________________, J.
HOFFSTADT

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