Court Distinguishes Recent Cases Finding No Waiver Of Right To Arbitrate.
In Bower v. Inter-Con Security Systems, Inc., Case No. A135940 (1/3 Dec. 31, 2014) (McGuiness, Pollack, Siggins), the Court of Appeal held that substantial evidence supported the trial court’s finding that defendant waived its right to arbitrate individual claims with plaintiff in a putative class action wage lawsuit. Therefore the Court affirmed the trial court’s order denying the petition to compel.
Preliminarily, the Court makes an interesting observation about the substantial evidence standard of review. Waiver is usually a question of fact, and therefore the substantial evidence standard is typically appropriate. Here, even though the parties did not appear to contest the facts, the substantial evidence standard was still appropriate. “Independent review is appropriate only when the facts permit just one reasonable inference,” explained the Court, adding: “Here, the facts do not ineluctably lead to one conclusion on the issue of waiver.” Therefore, the Court applied the substantial evidence standard.
The Court found substantial evidence that defendant was aware of its right to arbitrate, because defendant acknowledged as much by pleading the right to arbitrate as an affirmative defense. Additionally, defendant acted inconsistently with its right to arbitrate only individual claims, by participating in class action discovery, by propounding discovery, and by participating in class action settlement discussions. As for the element of prejudice necessary to establish waiver, the Court explained:
“The crux of the prejudice suffered by Bower is that he suffered delay and incurred costs in litigating and attempting to settle class claims that Inter-Con led him to believe would be encompassed within the litigation. As a result of Inter-Con reversing course and choosing to pursue arbitration limited to Bower’s individual claims, Bower suffered prejudice in that much of the expense incurred and effort expended would have no value in arbitration.”
Along the way to concluding that defendant waived its right to arbitrate, the Court distinguished two recent cases. In Gloster v. Sonic Automotive, Inc.,
226 Cal.App.4th 438 (2014) [blawg post May 21, 2014] the claim of prejudice was based solely on legal expenses largely incurred as a result of plaintiff’s own discovery efforts, whereas in Bower, defendant propounded discovery. The Court also distinguished Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) [blawg post June 23, 2014], in which a finding of waiver was reversed, because in that case, defendant timely filed a petition to compel arbitration.