Court Opinion

ID: 1033816
Source: CourtListenerOpinion
Date Created: 2013-07-16 00:02:13.640348+00
Date Added: 2024-06-11T09:19:16.636150
License: Public Domain

FILED
                                                               JUL 15 2013
                                                           SUSAN M SPRAUL, CLERK
 1                                                           U.S. BKCY. APP. PANEL
                                                             OF THE NINTH CIRCUIT
 2
 3                   UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                             OF THE NINTH CIRCUIT
 5   In re:                        )         BAP No.   CC-12-1386-DKiPa
                                   )
 6   ATECO, INC.,                  )         Bk. No.   10-22623-MT
                                   )
 7             Debtor.             )         Adv. No. 11-01198-MT
     ______________________________)
 8                                 )
     LAW OFFICES OF JOHN F.L. HEBB,)
 9                                 )
               Appellant,          )
10                                 )
     v.                            )         M E M O R A N D U M1
11                                 )
     ATECO, INC.,                  )
12                                 )
               Appellee.           )
13   ______________________________)
14                     Argued and Submitted on June 20, 2013
                              at Pasadena, California
15
                               Filed - July 15, 2013
16
                  Appeal from the United States Bankruptcy Court
17                    for the Central District of California
18            Honorable Maureen A. Tighe, Bankruptcy Judge, Presiding
19
     Appearances:     John F.L. Hebb argued for Appellant Law Offices of
20                    John F.L. Hebb; Steven J. Krause of Ananda & Krause,
                      APLC, argued for Appellee Ateco, Inc.
21
22   Before:    DUNN, KIRSCHER and PAPPAS, Bankruptcy Judges.
23
24        1
               This disposition is not appropriate for publication.
25   Although it may be cited for whatever persuasive value it may have
     (see Fed. R. App. P. 32.1), it has no precedential value. See 9th
26   Cir. BAP Rule 8013-1.

                                         1
 1        For the second time, Appellant Law Offices of John F.L. Hebb
 2   (“Hebb”) has invoked the jurisdiction of this Panel in conjunction
 3   with his attorney fee dispute with Debtor/Appellee, Ateco, Inc.
 4   (“Ateco”).    The briefs and the record submitted by the parties
 5   obscure the limited issues on appeal, i.e., whether the bankruptcy
 6   court erred when it determined that the Federal Arbitration Act2
 7   (“FAA”) did not apply to the dispute between the parties, and
 8   whether Hebb waived any right he might have had under the California
 9   Arbitration Act.    We AFFIRM.
10                                    I.   FACTS
11        The dispute between the parties stems from Ateco’s
12   dissatisfaction with the legal services Hebb rendered on its behalf
13   beginning in 2002.    In September 2002, Ateco entered into an
14   Attorney-Client Retainer Agreement (“Retainer Agreement”) with Hebb,
15   pursuant to which Hebb was to represent Ateco “in investigating,
16   negotiating, enforcing and/or advising regarding:    [Ateco’s] rights,
17   settlement possibilities and any causes of action arising out of
18   [Ateco’s] business dealings with R.A. Hales . . . .”    (Emphasis in
19   the original.)    The Retainer Agreement provided that Hebb’s hourly
20   rate was $225.00, which represented a “special discount from
21   [Hebb’s] customary $300-$325 hourly rate.”    The Retainer Agreement
22   also purported to grant Hebb a lien on Ateco’s claim or recovery
23   against Hales:
24        [Hebb] is hereby given a lien on the said claim or cause
25
          2
26                9 U.S.C. §§ 1-16.

                                           2
 1       of action, on any recovery by way of settlement, and on
         any judgment that may be obtained, for the sum and/or
 2       share hereinbefore mentioned due [Hebb], and it is further
         agreed that [Hebb] shall have all permissible general,
 3       possessory, or retaining liens, and all permissible
         special or charging liens known to common law.
 4
 5        On Ateco’s behalf, Hebb initiated litigation against Hales
 6   (“Hales Litigation”) in the Ventura County (California) Superior
 7   Court (“State Trial Court”).   Hebb filed three complaints in the
 8   Hales Litigation.   The first two were dismissed by demurrer.   When
 9   the second amended complaint was facing a motion for judgment on the
10   pleadings, Ateco retained new counsel (“the Hathaway Firm”) to
11   represent it in the Hales Litigation.    Despite the Hathaway Firm’s
12   representation of Ateco in the Hales Litigation, it does not appear
13   that Ateco terminated Hebb’s services.   Ateco contends that Hebb’s
14   work product was so defective his services were no longer used after
15   the Hathaway Firm was retained; Hebb disagrees.
16        The Hales Litigation resulted in judgment in Ateco’s favor in
17   the amounts of $333,743 for compensatory damages and $159,000 for
18   punitive damages.   Hebb and the Hathaway Firm thereafter filed
19   separate motions for attorney’s fees in the Hales Litigation.
20   Following a hearing, the State Trial Court granted all fees
21   requested by the Hathaway Firm ($334,276.50), but took under
22   submission Hebb’s request for attorneys fees in the amount of
23   $510,873, billed at the rate of $300 per hour.    The State Trial
24   Court ultimately determined that the reasonable value of Hebb’s
25   services was $200,000 and granted Hebb’s attorney fee motion in that
26   amount through a minute order entered February 26, 2006.

                                       3
 1        Hebb thereafter asserted an attorney’s lien against any payment
 2   due Ateco in the Hales Litigation.     Ateco disputed Hebb’s right to
 3   assert a lien, contending it already had paid him $250,000 in
 4   attorney’s fees.   Sometime in 2008, Hebb initiated a state court
 5   proceeding (“Fee Litigation”) against Ateco and its principal based
 6   upon the Retainer Agreement.   Trial in the Fee Litigation was
 7   scheduled to commence September 20, 2010.    On August 17, 2010, the
 8   parties stipulated (“Arbitration Stipulation”)3 to submit the Fee
 9   Litigation to binding arbitration, notwithstanding the absence of an
10   arbitration provision in the Retainer Agreement, with the result
11   that the imminent trial date in the Fee Litigation was vacated.     The
12   Arbitration Stipulation provided that the fee dispute was to be
13   submitted to a private arbitrator using JAMS ADR or ADR Services,
14   Inc., and that arbitration was to be completed no later than
15   November 15, 2010.
16        Ateco filed a chapter 114 petition on October 5, 2010
17
          3
18               As relevant to this appeal, the Arbitration Stipulation
     provides:
19
          1. The within case shall be submitted to binding
20        arbitration before a private arbitrator mutually selected
21        by the parties using JAMS ADR or ADR Services, Inc. The
          parties agree to select an arbitrator and complete the
22        arbitration on or before November 15, 2010. Costs of
          arbitration are to be borne equally by [Hebb] on the one
23        hand and [Ateco and its principal] on the other
24        hand. . . .
          4
25             Unless otherwise indicated, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
26                                                         (continued...)

                                        4
 1   (“Petition Date”), staying arbitration proceedings under the
 2   Arbitration Stipulation.5   Hebb filed a proof of claim (“Claim”) in
 3   Ateco’s bankruptcy case, asserting entitlement to $324,546 in unpaid
 4   attorney’s fees plus $1,087,867.29 for “interest and alleged future
 5   ‘tort causes of action.’”   On March 1, 2011, Ateco objected (“Claim
 6   Objection”) to Hebb’s Claim, on the bases that (1) Hebb failed to
 7   provide any evidence he had a valid secured claim, and (2) that the
 8   State Trial Court had determined in the Hales Litigation that Hebb’s
 9   attorneys fees were $200,000.   Hebb did not respond to the Claim
10   Objection, but instead, on March 2, 2011, filed a motion for relief
11   from the automatic stay (“Relief From Stay Motion”) to allow
12   arbitration proceedings to go forward.   On March 17, 2011, Ateco
13   filed an adversary complaint (“Adversary Proceeding”) against Hebb
14   seeking (1) a determination of the validity of Hebb’s asserted lien,
15   and (2) disallowance of Hebb’s claim.    Ateco also alleged claims
16   against Hebb based upon breach of fiduciary duty, professional
17   negligence, breach of contract, fraud, and unjust enrichment.
18        The bankruptcy court heard the Relief from Stay Motion on
19   April 7, 2011 (“April 7 Hearing”), at which time it took the
20   position that judicial economy would not be served by sending the
21
22
          4
           (...continued)
23   all “Local Bankruptcy Rule” references are to the Local Bankruptcy
24   Rules of the Bankruptcy Court for the Central District of
     California.
25        5
               No arbitration proceeding had been initiated as of the
26   Petition Date.

                                       5
 1   fee dispute to arbitration.   The bankruptcy court set a further
 2   briefing schedule on the Relief From Stay Motion, giving Hebb until
 3   May 5, 2011, to submit a further brief on the issue, and Ateco until
 4   June 16, 2011, to respond.    At the April 7 Hearing, the Bankruptcy
 5   Court also joined the Claim Objection with the Adversary Proceeding
 6   (“Substantive Proceedings”) and set a schedule for filing documents
 7   which would allow a summary judgment motion from Ateco to be heard
 8   on July 26, 2011 (“July 26 Hearing”) in the Substantive Proceedings
 9   in conjunction with the further hearing on the Relief From Stay
10   Motion.
11        On April 27, 2011, prior to the deadline for filing his
12   additional brief on the Relief From Stay Motion, Hebb filed his
13   first appeal to this Panel (“First Appeal”), requesting that the
14   Panel direct the bankruptcy court to grant the Relief From Stay
15   Motion to allow immediate arbitration of the fee dispute.     On
16   June 23, 2011, the Panel in the First Appeal granted a stay of the
17   Substantive Proceedings and remanded to the bankruptcy court to
18   determine “whether the [Arbitration Stipulation] made in the state
19   court proceedings is subject to the [Federal Arbitration Act], and
20   if so, is there any valid basis to deny arbitration.”   The
21   bankruptcy court held the July 26 Hearing, and in light of the
22   remand from the Panel, orally granted the Relief From Stay Motion
23   and continued the summary judgment proceedings on the Substantive
24   Proceedings to November 9, 2011 (“November 9 Hearing”) to allow
25   arbitration proceedings to conclude before ruling on Ateco’s summary
26   judgment motion.

                                        6
 1        Ultimately the Panel dismissed the First Appeal as moot because
 2   the bankruptcy court had granted the Relief From Stay Motion.6
 3   However, it was a complicated process getting to that dismissal
 4   based substantially on the action, or more precisely, the inaction,
 5   of Hebb.   As the prevailing party, Hebb was required by Local
 6   Bankruptcy Rule 9021-1(1) to prepare and submit an order granting
 7   the Relief From Stay Motion.   He did not.   On December 29, 2011, the
 8   Panel, noting that no order had yet been entered granting the Relief
 9   From Stay Motion, issued a remand order (“Remand Order”), which
10   directed Hebb to file a written response stating why the First
11   Appeal should not be dismissed as moot in light of the bankruptcy
12   court’s July 26, 2011 ruling on the Relief From Stay Motion.     The
13   Remand Order also informed Hebb he could request and obtain an order
14   granting the Relief From Stay Motion so that he could proceed with
15   binding arbitration.   Despite the Remand Order, Hebb still did not
16   submit an order for the bankruptcy court to sign as required by
17   Local Bankruptcy Rule 9021-1(1).   Instead, on January 17, 2012,
18   after learning of the Remand Order, the bankruptcy court entered its
19   own order (“Relief From Stay Order”).
20        The Relief From Stay Order provided that it applied to “the
21   following non-bankruptcy case or administrative proceeding” and
22   identified the Fee Litigation as follows:
23        Case name: Hebb vs. Ateco, Inc., et al.
          Court or agency where pending: LA County
24
25
          6
26              The First Appeal was dismissed on February 7, 2012.

                                        7
 1   The Relief From Stay Order further provided:
 2       5. Movant may proceed in the non-bankruptcy forum to
         final judgment (including any appeals) in accordance with
 3       applicable non-bankruptcy law.
         . . .
 4       6.a. Movant is granted leave to continue with arbitration
         and liquidate the amount of the claim.
 5
 6         The state court held a status hearing in the Fee Litigation on
 7   September 14, 2011, at which time the state court dismissed the Fee
 8   Litigation based upon (1) the existence of the Arbitration
 9   Stipulation and (2) the bankruptcy court’s grant of relief from stay
10   to allow the parties to proceed to arbitration.   Hebb did not appear
11   at the status hearing in the Fee Litigation but contends that he was
12   aware of the intended disposition of the Fee Litigation, having
13   “consulted with” the state court prior to the hearing.   Thereafter,
14   Hebb requested the assistance of the bankruptcy court in selecting
15   an arbitrator and compelling arbitration, which the bankruptcy court
16   ultimately denied because (1) relief from stay had been granted to
17   proceed to arbitration in the Fee Litigation, and (2) Hebb had
18   provided no authority for the bankruptcy court to compel the
19   arbitration where relief from stay had been granted.
20        When the bankruptcy court issued a show cause order why both
21   the bankruptcy case and the adversary proceeding should not be
22   dismissed since the parties were making no attempt to resolve the
23   dispute through arbitration, Hebb moved the state court to vacate
24   the dismissal of the Fee Litigation.
25        The state court held a hearing on the motion on April 18, 2012.
26   At that time the state court clarified that the Relief From Stay

                                      8
 1   Order was broad enough to encompass resolution of the fee dispute
 2   outside of the bankruptcy court, construed the motion to vacate as a
 3   request to set a trial date on the merits, and offered a trial date
 4   of July 2, 2012, contending that the parties should have been nearly
 5   ready for trial at the time they entered the Arbitration
 6   Stipulation.   Hebb declined to proceed to trial, insisting instead
 7   upon arbitration, and withdrew his motion to vacate on the record.
 8   Hebb apparently was acting under the impression that a motion to
 9   compel arbitration could be a separate proceeding such that he no
10   longer needed the Fee Litigation in light of the existence of the
11   Arbitration Stipulation.
12        Hebb finally initiated arbitration proceedings through JAMS on
13   April 20, 2012.   Thereafter, Ateco took the position that the
14   Arbitration Stipulation was ineffective in the face of the dismissal
15   of the litigation in which it arose.   Ateco alternatively asserted
16   that the Arbitration Stipulation expired on its own terms when
17   arbitration was not completed by November 15, 2010, and that Hebb,
18   through his delay in initiating arbitration, had waived his right to
19   arbitrate the fee dispute.
20        On May 9, 2012 (“May 9 Hearing”), the bankruptcy court,
21   apprised of the recent proceedings in the State Trial Court, held a
22   status hearing and took under advisement the issue of whether the
23   bankruptcy case should be dismissed where the fee dispute,
24   resolution of which was central to confirmation of any chapter 11
25   plan, had stalled the case for more than 21 months.
26        On June 27, 2012, the bankruptcy court entered its Memorandum

                                       9
 1   Re: Whether This Case Should Be Dismissed (“Memorandum”).   In the
 2   Memorandum, the bankruptcy court determined (1) the FAA did not
 3   apply to the Arbitration Stipulation, and (2) to the extent the CAA
 4   might apply to the Arbitration Stipulation, Hebb, through his delay,
 5   had waived any right to enforce the Arbitration Stipulation.   In
 6   light of that waiver, the bankruptcy court set the Substantive
 7   Proceedings for resolution through summary judgment proceedings,
 8   with oral argument to be held September 5, 2012.   A contemporaneous
 9   status hearing was set so that once the fee dispute was resolved,
10   “it will be clear whether the proposed plan can proceed or not, and
11   each of the remaining motions can be addressed in order.”
12        On July 11, 2012, Hebb filed a timely motion for
13   reconsideration of the Memorandum, which the bankruptcy court denied
14   by its order entered July 31, 2012.    In the interim, on July 30,
15   2012, Hebb filed a premature Notice of Appeal from the Memorandum.
16   On July 31, 2012, the bankruptcy court denied Hebb’s motion for stay
17   pending appeal.   On August 1, 2012, Hebb filed an emergency motion
18   for stay pending appeal with the Panel, which also was denied.
19        On August 29, 2012, our Clerk issued an “Order re Finality”
20   which required Hebb to establish that the bankruptcy court’s order
21   was final such that the Notice of Appeal could confer jurisdiction
22   on the Panel.   The Panel thereafter deemed Hebb’s response to the
23   Order re Finality to be a motion for leave to appeal, which it
24   granted by order entered October 25, 2012, in order to determine
25   whether any alleged right Hebb had to arbitration was implicated by
26   continuing the Substantive Proceedings in the bankruptcy court.

                                       10
 1                               II.   JURISDICTION
 2        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
 3   and 157(b)(2)(A) and (O).    We have jurisdiction under 28 U.S.C.
 4   § 158.
 5                                 III.   ISSUES7
 6        Whether the bankruptcy court erred when it determined that the
 7   FAA did not apply to the Arbitration Stipulation.
 8        Whether the bankruptcy court abused its discretion when it
 9   determined that Hebb had waived any right to arbitration he might
10   have had under the CAA.
11                         IV.    STANDARDS OF REVIEW
12        Whether a dispute is subject to the Federal Arbitration Act is
13   a question of law we review de novo.      See Dean Witter Reynolds, Inc.
14   v. Byrd, 470 U.S. 213, 218 (1985)(by its terms the Arbitration Act
15   leaves no place for the exercise of discretion by a trial court).
16   De novo review requires that we consider a matter afresh, as if no
17   decision had been rendered previously.     United States v. Silverman,
18   861 F.2d 571, 576 (9th Cir. 1988); B-Real, LLC v. Chaussee (In re
19   Chaussee), 399 B.R. 225, 229 (9th Cir. BAP 2008).
20        We review the bankruptcy court’s determination that Hebb waived
21   his right to arbitrate under the CAA for an abuse of discretion.
22   “‘[T]he question of waiver is one of fact, and an appellate court's
23
          7
               Hebb did not raise any issue in this appeal with respect
24
     to the denial of the motion for reconsideration. Accordingly, any
25   such issue is waived. See Arpin v. Santa Clara Valley Transp.
     Agency, 261 F.3d 912, 919 (9th Cir. 2001) (issues not specifically
26   argued in opening brief are waived).

                                          11
 1   function is to review a trial court's findings regarding waiver to
 2   determine whether [they] are supported by substantial evidence.’
 3   ‘The appellate court may not reverse the trial court's finding of
 4   waiver unless the record as a matter of law compels finding
 5   nonwaiver.’” (Internal citations omitted).       Augusta v. Keehn &
 6   Assocs., 193 Cal. App. 4th 331 (2011) (quoting Berman v. Health Net,
 7   80 Cal. App. 4th 1359, 1363–1364 (2000)).
 8        We apply a two-part test to determine whether the bankruptcy
 9   court abused its discretion.       United States v. Hinkson, 585 F.3d
10   1247, 1261-62 (9th Cir. 2009)(en banc).      First, we consider de novo
11   whether the bankruptcy court applied the correct legal standard to
12   the relief requested.   Id.    Then, we review the bankruptcy court’s
13   fact findings for clear error.       Id. at 1262 & n.20.   We must affirm
14   the bankruptcy court’s fact findings unless we conclude that they
15   are “(1) ‘illogical,’ (2) ‘implausible,’ or (3) without ‘support in
16   inferences that may be drawn from the facts in the record.’” Id.
17        This standard of review is similar to that applied by
18   California appellate courts.       Under California law, “[a]n abuse of
19   discretion is shown if there is no substantial basis for the trial
20   court's ruling or the court applied an incorrect legal standard.”
21   Ibarra v. Super. Ct., ___ Cal. Rptr. 3d ___, 2013 WL 3242955 (Cal.
22   App. 2d Dist. 2013)(citation omitted).
23                                 V.    DISCUSSION
24   I.   The FAA Does Not Apply to the Fee Dispute.
25        The FAA applies to maritime transactions or contracts
26   “evidencing a transaction involving commerce. . . .”       9 U.S.C. § 2.

                                           12
 1   The FAA defines “commerce” to exclude purely intrastate contracts.
 2   9 U.S.C. § 1 (“‘[C]ommerce,’ as defined herein, means commerce among
 3   the several States or with foreign nations, or in any Territory of
 4   the United States or in the District of Columbia and any State or
 5   Territory or foreign nation. . . .”).   Thus, the bankruptcy court
 6   did not err when it determined the FAA did not apply to the
 7   Arbitration Stipulation.
 8         The dispute underlying the Arbitration Stipulation arises
           out of wholly intrastate legal services between a
 9         California attorney and a California client, conducted
           solely in a California state court. No portion of this
10         transaction affects interstate commerce. It is
           inappropriate to apply the FAA to the Arbitration
11         Stipulation.
12   Memorandum at 11:20-23.
13   II.   Hebb Waived Any Right He Might Have Had to Compel Arbitration
           Under the CAA.
14
15         The CAA provides:
16         A written agreement to submit to arbitration an existing
           controversy or a controversy thereafter arising is valid,
17         enforceable and irrevocable, save upon such grounds as
           exist for the revocation of any contract.
18
19   Cal. Code Civ. Proc. § 1281.   As noted by the bankruptcy court,
20   waiver not only is a ground for revocation of contracts generally,
21   it is an explicit basis upon which the right to arbitration may be
22   denied.
23         On petition of a party to an arbitration agreement
           alleging the existence of a written agreement to arbitrate
24         a controversy and that a party thereto refuses to
           arbitrate such controversy, the court shall order the
25         petitioner and respondent to arbitrate the controversy if
           it determines than an agreement to arbitrate the
26         controversy exists, unless it determines that:

                                       13
 1             (a) The right to compel arbitration has been
          waived by the petitioner. . . .
 2
 3   Cal. Code Civ. Proc. § 1281.2 (emphasis added).
 4        The issue of waiver under the CAA is not novel.   The Supreme
 5   Court of California has identified the factors a trial court must
 6   consider in determining whether a right to arbitration has been
 7   waived:
 8       In determining waiver, a court can consider: (1) whether
         the party’s actions are inconsistent with the right to
 9       arbitrate; (2) whether the litigation machinery has been
         substantially invoked and the parties were well into
10       preparation of a lawsuit before the party notified the
         opposing party of an intent to arbitrate; (3) whether a
11       party either requested arbitration enforcement close to
         the trial date or delayed for a long period before seeking
12       a stay; (4) whether a defendant seeking arbitration filed
         a counterclaim without asking for a stay of the
13       proceedings; (5) whether important intervening steps [e.g.
         taking advantage of judicial discovery procedures not
14       available in arbitration] had taken place; and (6) whether
         the delay affected, misled, or prejudiced, the opposing
15       party.
16   St. Agnes Med. Ctr. v. PacifiCare of Cal., 31 Cal. 4th 1187, 1196
17   (2003)(internal quotation marks and citations omitted).
18        The bankruptcy court observed that waiver under the CAA is
19   commonly found “where the party seeking arbitration has . . .
20   unreasonably delayed in seeking arbitration.”   Memorandum at
21   12:25-26 (citing Augusta, 193 Cal. App 4th at 337).    However, the
22   bankruptcy court also noted the existence of a strong public policy
23   favoring arbitration as a counterpoint to waiver.   Memorandum at
24   12:15-18 (citing St. Agnes Med. Ctr., 31 Cal. 4th at 1195).
25        Under the unreasonable delay standard, Hebb was responsible to
26   “timely seek relief either to compel arbitration or dispose of the

                                      14
 1   lawsuit.”   Lewis v. Fletcher Jones Motor Cars, Inc., 2012 Cal. App.
 2   LEXIS 489 *10 (Cal. App. 4th Dist. 2012).   The bankruptcy court
 3   reviewed Hebb’s actions in seeking arbitration and concluded that
 4   they supported a finding that Hebb had waived his right to
 5   arbitration under the CAA.
 6        First, Hebb waited approximately five months after Ateco filed
 7   its bankruptcy case to file the Relief From Stay Motion.    Second,
 8   after the Panel issued its remand in the First Appeal, the
 9   bankruptcy court orally granted the Relief From Stay Motion at the
10   July 26 Hearing.   Hebb thereafter failed completely to pursue the
11   entry of an order which would allow him to proceed with arbitration.
12   He was on notice through the bankruptcy court’s local rules that, as
13   the prevailing party, the responsibility to submit an order was his.
14   Hebb did not act as required under the local rules.   Neither did he
15   act when, in the First Appeal, we brought the lack of an order to
16   his attention and reminded him that he could request the order from
17   the bankruptcy court.   Ultimately, the bankruptcy court itself
18   prepared and entered the Relief From Stay Order on January 17, 2012.
19   Hebb is accountable for the nearly six-months delay in the entry of
20   the Relief From Stay Order.
21        Even then, Hebb took no appropriate action to pursue
22   arbitration until the bankruptcy court issued its order to show
23   cause.   While during this time Hebb did request that the bankruptcy
24   court compel arbitration, that action was not within the realm of
25   the bankruptcy court’s authority where relief from stay had been
26   granted to proceed to arbitration through the Fee Litigation and

                                       15
 1   therefore was meaningless other than to delay and confuse the
 2   proceedings.    We also note that the state court was prepared to try
 3   the Fee Litigation by July 2, 2012, which would have “disposed of
 4   the lawsuit.”   Instead, Hebb chose to withdraw the dispute from the
 5   purview of the state court and initiate an arbitration despite
 6   protestations from Ateco regarding the continuing validity of the
 7   Arbitration Stipulation, thus again delaying any ultimate resolution
 8   of the dispute.8
 9        The bankruptcy court cited numerous California state court
10   decisions in which a party was found to have waived its right to
11   arbitration based on delays significantly shorter than the
12   twenty-one months involved in the fee dispute here.   See, e.g.,
13   Lewis, 2012 Cal. App. LEXIS 489 (less than five months); Augusta,
14   193 Cal. App 4th 331 (six-and-one-half months); Adolph v. Coastal
15   Auto Sales, Inc., 184 Cal. App. 4th 1443 (2010) (six months);
16   Guess?, Inc. v. Super. Ct., 79 Cal. App. 4th 553, 556 (2000) (less
17   than four months); Kaneko Ford Design v. Citipark, Inc., 202 Cal.
18   App. 3d 1220, 1228-29 (1988) (five-and-one-half months).   These
19   cases adequately support the bankruptcy court’s fact finding that
20   Hebb’s delay in exercising his right to arbitrate under the CAA was
21
          8
22             An additional, affirmative, waiver of his right to
     arbitrate the fee dispute under the CAA is reflected in Hebb’s
23   argument to the bankruptcy court at the November 9 Hearing, where he
     states his understanding that only the FAA applied to the
24
     Arbitration Stipulation. See Tr. of November 9, 2011 Hr’g at
25   10:13-11:19. It appears this also was the basis for Hebb’s
     withdrawal of his motion to vacate dismissal of the Fee Litigation
26   in the state court.

                                        16
 1   unreasonable.
 2        In evaluating whether a delay is sufficient to support a
 3   finding that a party has waived its rights under the CAA, California
 4   courts also consider not only whether the delay was unreasonable,
 5   but whether it was prejudicial to the other party.   See Augusta,
 6   193 Cal. App 4th at 337, 340-42.    Here, Ateco has pending a
 7   relatively small chapter 11 case.    It is self-evident that the
 8   prospects for a reorganization do not get better the longer a case
 9   lingers.   As the bankruptcy court stated numerous times, until the
10   Fee Dispute is resolved, no determination can be made whether
11   Ateco’s reorganization efforts ultimately will be viable.   Ateco has
12   been further prejudiced by the excessive cost it has incurred in
13   responding to Hebb’s uncertainty about how, and even where, to
14   proceed to enforce the Arbitration Stipulation.
15        Under these circumstances, we cannot determine that the
16   bankruptcy court abused its discretion when it found that Hebb had
17   waived his right to arbitration under the CAA.9
18
19        9
               Hebb filed his proof of claim in Ateco’s bankruptcy case,
20   and Ateco objected to the claim. Pursuant to 28 U.S.C.
     § 157(b)(2)(B), allowance or disallowance of Hebb’s claim is a core
21   proceeding, notwithstanding that state law might be applied to
     resolve the fee dispute. Under Ninth Circuit precedent, the
22
     bankruptcy court had discretion to decline to enforce the
23   Arbitration Stipulation in a core proceeding if arbitration would
     conflict with the underlying purposes of the Bankruptcy Code.
24   Cont’l Ins. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation
     Co.), 671 F.3d 1011 (9th Cir. 2012). Thorpe Insulation stands as an
25   alternative basis upon which the bankruptcy court could have
26   proceeded to resolve the fee dispute, independent of any waiver by
     Hebb under the CAA.

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 1                              VI.   CONCLUSION
 2         The bankruptcy court correctly determined that the Arbitration
 3   Stipulation was not subject to the FAA, where it did not implicate
 4   interstate commerce.   The bankruptcy court did not abuse its
 5   discretion when it determined that Hebb waived his right to enforce
 6   the Arbitration Stipulation under the CAA through his dilatory lack
 7   of action over a prolonged period.     We AFFIRM.
 8
 9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26

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