Court Opinion

ID: 4648913
Source: CourtListenerOpinion
Date Created: 2021-01-04 23:01:52.998482+00
Date Added: 2024-06-11T08:01:19.498744
License: Public Domain

Filed 1/4/21
               CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

               SECOND APPELLATE DISTRICT

                        DIVISION FIVE

PAUL GARCIA et al.,                B296923

     Plaintiffs and                (Los Angeles County
Respondents,                       Super. Ct. No. BC660723)

       v.

HARALAMBOS BEVERAGE
CO.,

       Defendant and Appellant.

      APPEAL from an order of the Superior Court of Los
Angeles County, Maren E. Nelson, Judge. Affirmed.
      Gordon Rees Scully Mansukhani, R. Scott Sokol, Matthew
G. Kleiner, and Travis Jang-Busby for Defendant and Appellant.
      Mara Law Firm, David Mara and Matthew Crawford;
Cohelan Khoury & Singer and Jeff Geraci for Plaintiffs and
Respondents.
                        I. INTRODUCTION

      Defendant Haralambos Beverage Co. appeals from an order
denying its motion to compel arbitration, contending that there
was insufficient evidence to support the trial court’s finding that
it had waived its right to arbitrate. We affirm.

                        II. BACKGROUND

A.    Agreement to Arbitrate Employment Disputes

       Defendant, a beverage distributor, employed plaintiffs Paul
Garcia and Pierre Atme as truck drivers. Since 2003, defendant’s
employee handbooks recited a policy that “any and all claims,
disputes or controversies between employees and [defendant]
shall be resolved by binding arbitration pursuant to the
provisions of this policy, except as otherwise specifically
prohibited by law. [¶] To the fullest extent permitted by law,
this policy applies to all claims, disputes or controversies, of any
kind whatsoever, including but not limited to those arising out of
or related to an employee’s hiring, employment, the terms and
conditions of that employment, and the termination of
employment . . . .” 1

1     The 2003 and 2010 versions of the handbooks stated that
interpretation and enforcement of the arbitration policy would be
governed by the California Arbitration Act. The 2013 handbook
stated that the policy would be governed by the Federal
Arbitration Act. The trial court found that the procedural
provisions of the California Arbitration Act applied and
defendant did not challenge that ruling on appeal.

                                 2
       On March 20, 2009, Atme executed an Employee Handbook
Acknowledgement, Receipt, and Consent form (arbitration
agreement) in which he “agree[d] that all claims, disputes and
controversies of any kind whatsoever, between [him] and
[defendant] including, but by no means limited to, those arising
out of or related to [his] employment with [defendant], whether
during or after that employment, will be submitted to binding
arbitration to the fullest extent permitted by law, in accordance
with the Employment Arbitration policy set forth in the Employee
Handbook.” On April 2, 2009, Garcia executed an identical
arbitration agreement.

B.    Lawsuit and Litigation Conduct

       On November 11, 2016, Garcia served his original
complaint on defendant. On January 31, 2017, plaintiffs filed the
operative amended putative class action complaint in Kern
County Superior Court, alleging various violations of wage and
hour laws. On March 7, 2017, the parties stipulated to transfer
venue to the Los Angeles County Superior Court. On
March 15, 2017, defendant filed its answer, asserting, among
other defenses, that plaintiffs’ claims were subject to an executed
arbitration agreement.
       On June 23, 2017, the trial court stayed the action to
facilitate case management. The order precluded defendant from
filing motions challenging jurisdiction and stayed discovery. The
court’s order also required the parties to file a joint status
conference statement that included, among other things, the
parties’ positions on “[a]ny issues of jurisdiction, venue,

                                 3
contractual arbitration/judicial reference that any party
intend[ed] to raise.”
      The parties filed their joint status conference statement on
November 2, 2017. Defendant advised that “‘[a]t the moment,
[d]efendant does not intend to raise [jurisdiction or contractual
arbitration;] however it reserves the right to do so at a later
time.’” 2
       At the November 9, 2017, initial status conference, the
parties agreed to participate in classwide mediation and
defendant did not express an intention to arbitrate plaintiffs’
individual claims.
       On February 20, 2018, the parties agreed to a protective
order to facilitate the production of classwide information, data,
and documents in anticipation of the mediation. Defendant
produced 1,182 responsive documents, including plaintiffs’
personnel files. Plaintiffs analyzed the information provided and
retained a consulting group to create a classwide damages model
and a financial expert to research defendant’s assets and ability
to pay a classwide settlement.
       On March 15, 2018, the parties filed another joint status
conference statement. Under the heading “JURISDICTION,
VENUE, CONTRACTUAL ARBITRATION/JUDICIAL
REFERENCE” (emphasis removed), defendant indicated: “At
this time, [d]efendant does not intend to challenge jurisdiction,
venue or contractual arbitration . . . . Defendant reserves the
right to raise any of these at a later date if discovery should

2     The first joint status conference statement is not part of the
record on appeal, but it was quoted by the trial court as part of its
ruling.

                                 4
reveal new facts or evidence, including its right to compel
arbitration . . . .”
       On March 21, 2018, the parties appeared for a post-
mediation status conference and advised the trial court that the
case had not settled. The court lifted the stay, set a hearing on a
motion for class certification and a further status conference, and
ordered the parties to file a joint status report by
November 28, 2018.
       The next day, plaintiffs propounded classwide discovery,
including a document request for any arbitration agreements
between plaintiffs and defendant. Defendant produced
approximately 2,131 documents in response, including documents
that it had previously produced informally.
       On April 24, 2018, plaintiffs propounded further classwide
discovery on defendant’s affirmative defenses. Defendant
asserted objections, but did not object to the discovery on the
grounds that the parties had agreed to arbitrate their claims.
The parties continued to meet and confer on discovery disputes
and over the details of the Belaire-West 3 notice that would be sent
to putative class members.
       On June 29, 2018, defendant sent a letter to plaintiffs
demanding arbitration and stating its intent to file a motion to
compel arbitration if plaintiffs did not agree to arbitrate by
July 6, 2018.

3     Belaire-West Landscape, Inc. v. Superior Court (2007) 149
Cal.App.4th 554 (Belaire-West). In wage and hour class actions, a
Belaire-West notice is sent to putative class members to inform
them that their contact information will be disclosed unless they
timely object to such disclosure in writing. (Id. at pp. 561–562.)

                                 5
       On July 3, 2018, plaintiffs filed a request for an informal
discovery conference with the trial court to discuss, among other
things, documents that were relevant to the Belaire-West notice
process. On July 6, 2018, defendant filed its answer to the
request, asserting that it had “recently discovered plaintiffs’
executed arbitration agreements . . . [and] intend[ed] to file a
motion to compel arbitration.”
       On August 14, 2018, the trial court held an informal
discovery conference at which it ordered defendant to produce
certain materials by August 24, 2018. The court also ordered the
parties to complete the Belaire-West notice process by
August 31, 2018. Finally, the court ordered: “If [defendant]
intends to file a [p]etition to [c]ompel [a]rbitration, parties are to
meet and confer first. If there is no agreement, the [p]etition to
[c]ompel [a]rbitration may be filed and briefed. Counsel are to
contact [the court] to clear a hearing date.” On or about
August 30, 2018, defense counsel contacted the court and
received a hearing date of March 6, 2019, for the motion.
       Between the end of August and early November 2018, the
parties continued to meet and confer on discovery disputes and
the Belaire-West notice process. On November 7, 2018, plaintiffs
filed a motion to compel further discovery responses and for
attorney fees, asserting that defendant had failed to comply with
the trial court’s August 14, 2018, order.

C.    Motion to Compel Arbitration

      On November 20, 2018, defendant filed its notice of motion
to compel arbitration and request for a stay. On
November 27, 2018, plaintiffs filed their preliminary opposition,

                                  6
asserting, among other things, that defendant had waived its
right to arbitrate by its unreasonable delay and conduct
inconsistent with the right to arbitrate, which misled and
prejudiced them.
       On January 16, 2019, defendant filed its memorandum of
points and authorities in support of its motion to compel
arbitration with supporting documents. Defendant submitted,
among other exhibits, plaintiffs’ executed arbitration agreements.
It also submitted the declaration of its former human resources
manager, Christine Shannon, in which she declared: “At the
outset of this litigation, I searched for arbitration agreements
signed by both [p]laintiffs but was unable to locate them in their
personnel files. In late June[] 2018, while obtaining documents
to produce to [p]laintiffs in response to their discovery requests
after mediation failed, I discovered [the arbitration agreements]
signed by each [p]laintiff and others . . . . I immediately provided
them to [defense] counsel . . . .”
       On February 13, 2019, plaintiffs filed their memorandum of
points and authorities and supporting documents in support of
their opposition to defendant’s motion to compel arbitration.
       The trial court held a hearing on defendant’s motion on
March 6, 2019, during which defendant asserted that it had not
located copies of plaintiffs’ signed arbitration agreements until
June 2018. Defendant conceded, however, that at the time the
lawsuit was filed, it had located documents confirming its policy
of requiring employees to sign arbitration agreements and “the
checklist[s] that showed what each employee had received,
including the arbitration agreement . . . .” 4

4     The trial court and defense counsel engaged in the
following exchange:

                                  7
      On March 18, 2019, the trial court denied defendant’s
motion to compel arbitration. The court found that defendant
knew, from the time it filed its answer, that it had an arbitration
policy and failed to demonstrate that it conducted a diligent
search for the signed arbitration agreements. The court also
found that, even after locating the signed arbitration agreements,
defendant continued to act in a manner that was inconsistent
with the right to arbitrate. Finally, the court found that
plaintiffs had been prejudiced by the delay by expending time
and money engaging in classwide discovery and related disputes;

      “The Court: Did you have an arbitration agreement that
was part of [the] mandatory term[s] of employment?
      “[Defense Counsel]: There were arbitration agreements at
the time these [plaintiffs] were hired but, again, we didn’t have
those documents. They could not be located.
      “The Court: I appreciate the fact that you didn’t have
signed documents from them. [¶] Did you have a policy that if
you wish to work for [defendant], you are required to enter into
an agreement to arbitrate?
      “[Defense Counsel]: Well, yes, Your Honor. And that was
in our papers. That was the general policy at that time.
      “[The Court]: And that’s in the documents you had when
this action was filed, correct?
      “[Defense Counsel]: Well, [defendant] certainly understood
that they had that policy but, again, no signed agreements from
the two plaintiffs in this case could be located.
      “The Court: You did locate, though, if I’m correct, the
documents that were the checklist that showed what each
employee had received, including the arbitration agreement,
correct?
      “[Defense Counsel]: There were checklists that were
located.”

                                 8
preparing and serving the Belaire-West notices to putative class
members; and filing a discovery motion.
     Defendant timely filed a notice of appeal.

                        III. DISCUSSION

A.    Legal Principles and Standard of Review

       “‘Arbitration is not a matter of absolute right’” and it can be
waived. (Sobremonte v. Superior Court (1998) 61 Cal.App.4th
980, 991 (Sobremonte).) “‘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 advantage of judicial discovery procedures not available in
arbitration] had taken place’; and (6) whether the delay ‘affected,
misled, or prejudiced’ the opposing party.”’ [Citations.]” (St.
Agnes Medical Center v. PacifiCare of California (2003) 31
Cal.4th 1187, 1196 (St. Agnes).) “No one of these factors
predominates and each case must be examined in context.”
(Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th
436, 444 (Lewis).) The three St. Agnes factors that are significant
in the context of this case are defendant’s actions inconsistent

                                  9
with the right to arbitrate, its delay before seeking a stay, and
the prejudice to plaintiffs.
       “The question of waiver is generally a question of fact, and
the trial court’s finding of waiver is binding on us if it is
supported by substantial evidence. [Citation.] ‘We infer all
necessary findings supported by substantial evidence [citations]
and “construe any reasonable inference in the manner most
favorable to the judgment, resolving all ambiguities to support an
affirmance.”’ [Citation.] Reversal is not justified simply because
the trial court could have potentially reached a different
conclusion on the question of waiver. ‘[R]ather, we may reverse
the trial court’s waiver finding only if the record establishes a
lack of waiver as a matter of law.’ [Citation.]” (Bower v. Inter-
Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035, 1043
(Bower), italics omitted.)

B.    Analysis

       Defendant contends that insufficient evidence supported
the trial court’s finding that it waived its right to arbitrate. We
disagree.

      1.    Delay Before Seeking a Stay

       According to defendant, it acted reasonably in waiting to
file the motion to compel until after it located the signed
arbitration agreements in June 2018.
       There is no dispute that defendant was aware of its right to
arbitrate at the outset of litigation. Indeed, defendant asserted
its right to arbitrate as an affirmative defense in its answer and

                                 10
further “reserved” its right to arbitrate in the joint status
conference statements. Defendant also concedes in its opening
brief that it “was aware that its employee handbook required its
employees to arbitrate all employment disputes with [defendant],
and that it was customary for its employees to execute
arbitration agreements.”
       “Under the California Rules of Court, rule 3.1330, a party
petitioning to compel arbitration must state ‘the provisions of the
written agreement and the paragraph that provides for
arbitration.’ ‘The provisions must be stated verbatim or a copy
must be physically or electronically attached to the petition and
incorporated by reference.’ (Ibid., italics added.) Thus, under
this rule, unless there is a dispute over authenticity, it is
sufficient for a party moving to compel arbitration to recite the
terms of the governing provision.” (Sprunk v. Prisma, LLC
(2017) 14 Cal.App.5th 785, 793; Condee v. Longwood
Management Corp. (2001) 88 Cal.App.4th 215, 219.) We
therefore reject defendant’s contention that it was reasonable to
wait until it located the executed arbitration agreements before
filing its motion, particularly in light of its concession that at the
outset of the litigation, it was not only aware of its policy
requiring arbitration, but had located checklists that
demonstrated both plaintiffs had received a copy of the
arbitration agreement.
       Moreover, substantial evidence supported a finding that
the length of defendant’s delay prior to filing its motion to compel
arbitration and for a stay was unreasonable. Twenty-four
months elapsed from the time defendant was served with
Garcia’s original complaint, on November 11, 2016, to when it
filed its motion to compel arbitration, on November 20, 2018.

                                  11
Twenty months elapsed from the time it asserted arbitration as
an affirmative defense in its answer on March 15, 2017, to when
it filed its motion. Even excluding the nine-month period during
which the action was stayed pending mediation, from
June 23, 2017, to March 21, 2018, the delay was still
unreasonably long. (See, e.g., Lewis, supra, 205 Cal.App.4th at
p. 446 [finding five-month delay unreasonable]; Augusta v. Keehn
& Associates (2011) 193 Cal.App.4th 331, 338 [finding six-and-
one-half-month delay unreasonable]; Sobremonte, supra, 61
Cal.App.4th at p. 996 [finding 10-month delay unreasonable].)

      2.    Actions Inconsistent With the Right to Arbitrate

       We next consider whether defendant acted in a manner
inconsistent with its right to arbitrate. Although defendant
initially asserted arbitration as an affirmative defense, it
subsequently represented in two status conference statements
that it did not intend to arbitrate. Further, defendant argued
that classwide arbitration was unavailable under the arbitration
agreements because plaintiffs agreed to arbitrate their individual
claims against defendant. Nonetheless, during the two years
that elapsed between service of Garcia’s complaint and the filing
of defendant’s motion to compel arbitration, defendant: agreed to
a protective order to facilitate the production of classwide
information; engaged in classwide mediation; responded to
plaintiffs’ discovery requests, including requests for classwide
information; met and conferred with plaintiffs on classwide
discovery disputes; participated in the classwide Belaire-West
notice process; and participated in an informal discovery
conference regarding documents relevant to the Belaire-West

                               12
notice process. Defendant’s conduct related to classwide issues
was inconsistent with its claimed right to arbitrate individual
claims and strongly supported the trial court’s finding that
defendant acted in a manner inconsistent with its right to
arbitrate.
      Substantial evidence also supported the trial court’s
conclusion that defendant continued to act in a manner
inconsistent with arbitration even after it located the arbitration
agreements in June 2018. After that date, defendant continued
to meet and confer with plaintiffs regarding discovery and the
Belaire-West notice process. Defendant also participated in an
informal discovery conference on August 14, 2018, at which it
was ordered by the court to produce certain materials by
August 24, 2018. Defendant apparently did not comply with that
order, which caused plaintiffs to file a motion to compel discovery
and request attorney fees. It was only then that defendant, on
November 20, 2018, nearly five months after locating the signed
arbitration agreements, filed its motion to compel arbitration. 5
       Defendant’s citation to Khalatian v. Prime Time Shuttle,
Inc. (2015) 237 Cal.App.4th 651 (Khalatian) is inapposite. The
court in Khalatian reversed the trial court’s finding that the
defendants had waived their right to arbitrate by waiting 14

5      Defendant argues that the trial court erred by failing to
consider that it stayed the action pending mediation. Mediation
is not generally inconsistent with arbitration. (See Zamora v.
Lehman (2010) 186 Cal.App.4th 1, 20.) But engaging in
mediation on a classwide basis is inconsistent with the right to
arbitrate individual claims. (Bower, supra, 232 Cal.App.4th at
p. 1045.) In any event, we conclude that defendant continued to
act in a manner inconsistent with its arbitration rights even after
the stay was lifted on March 21, 2018.

                                13
months to file their motion. (Id. at p. 663.) The court found no
waiver because: no depositions were taken and no discovery
motions were filed; the defendants’ demurrer and motion to
strike were taken off calendar, not overruled or denied, and
therefore the motion to compel arbitration was not filed as a last
resort; and the trial was scheduled to commence more than a
year later. (Id. at p. 662.)
       Here, by contrast, defendant engaged in conduct related to
classwide, rather than individual, issues. Moreover, defendant
only filed its motion to compel arbitration after it failed to settle
the classwide case and after it was served with plaintiffs’ motion
to compel discovery responses and for fees. Such acts support an
inference that, unlike the defendants in Khalatian, defendant
here raised arbitration as a belated strategy, if not as a strategy
of last resort.

      3.    Prejudice to Plaintiffs

      “Because of the strong policy favoring arbitration, prejudice
typically is found only where the petitioning party has
unreasonably delayed seeking arbitration or substantially
impaired an opponent’s ability to use the benefits and efficiencies
of arbitration. [Citations.] Prejudice is not found where the
party opposing arbitration shows only that it incurred court costs
and legal expenses in responding to an opponent’s pleadings and
motions.” (Hoover v. American Income Life Ins. Co. (2012) 206
Cal.App.4th 1193, 1205.) On the other hand, “‘[e]specially in
class actions, the combination of ongoing litigation and discovery
with delay in seeking arbitration can result in prejudice.’”
(Bower, supra, 232 Cal.App.4th at p. 1046.)

                                 14
       Substantial evidence supported the trial court’s finding
that defendant’s delay impaired plaintiffs’ ability to realize the
benefits and efficiencies of arbitration. During the two-year
period of litigation, defendant agreed to participate in classwide
mediation, which resulted in plaintiffs incurring additional
expenses to retain experts to assess defendant’s ability to pay a
classwide settlement. Plaintiffs also expended time and
resources propounding and pursuing classwide discovery, which
was useful for their class claims, but not for their individual
claims. And, plaintiffs incurred expenses in completing the
Belaire-West notice process, which, again, was unnecessary for
plaintiffs’ individual claims. (See Bower, supra, 232 Cal.App.4th
at p. 1047 [“[Plaintiff] incurred expenses attributable to
[defendant’s] discovery and its decision to pursue classwide
resolution of the dispute. As a result of [defendant’s] actions,
[plaintiff] devoted time and energy to activities that had no
bearing on an arbitration of [plaintiff’s] individual claims.”].)
Finally, plaintiffs expended resources in filing a motion to compel
further discovery responses and for attorney fees. On this record,
substantial evidence supported the trial court’s conclusion that
plaintiffs were prejudiced by defendant’s unreasonable delay in
seeking arbitration of plaintiffs’ individual claims.

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                       IV. DISPOSITION

      The order denying the motion to compel arbitration is
affirmed. Plaintiffs are entitled to recover their costs on appeal.

                                           KIM, J.

We concur:

      BAKER, Acting P. J.

      MOOR, J.

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