14-Month Period From Filing Of Original Complaint To Filing Of Motion To Compel Is Insufficient To Support Waiver, Absent Showing Of Prejudice
Khalatian v. Prime Time Shuttle, Inc., Case No. B255945 (2/8 June 9, 2015) (Grimes, author; Bigelow concurring, Flier concurring and dissenting) (published) nicely bookends our penultimate post on Oregel v. PacPizza, about waiver of the right to arbitrate. In Khalatian, a 14-month delay, absent a showing of prejudice, was insufficient to establish waiver of the right to arbitrate, leading to reversal of the trial court’s order denying defendants’ motion to compel arbitration. In contrast, a 17-month delay in Oregel, together with a high level of litigation activity unlikely to be found in arbitration, led to affirmance of an order denying a motion to compel arbitration based on waiver of the right to arbitrate.
Why did the Court in Khalatian believe that the Plaintiff/Respondent failed to establish prejudice, despite the 14 months that elapsed between the filing of the original complaint and the motion to compel arbitration?
First, discovery was limited. (Compare the 25 depositions taken by the party moving to compel arbitration in Oregel). Second, the defendant moved to compel arbitration more than a year before the trial date. Third, the fact that the party petitioning for arbitration has participated in litigation, short of a determination on the merits, does not by itself constitute a waiver. Fourth, the party seeking to establish waiver “bears a heavy burden of proof.” Fifth, there was “no evidence that defendants stretched out the litigation process, gained information about plaintiff’s case they could not have learned in an arbitration, or waited until the eave of trial to move to compel arbitration.”
Though plaintiff filed a first amended complaint, defendant filed a demurrer and a motion to strike, plaintiff filed a second amended complaint, and defendants answered the second amended complaint, there was no merits based determination, because the demurrer was taken off calendar when the parties agreed plaintiffs could file a second amended complaint. While the Court of Appeal notes that a demurrer “may lead to a determination on the merits,” we note that a demurrer also may not lead to a determination on the merits, e.g., when it is granted without prejudice, when it is denied, and when it is simply taken off calendar, as was the case in Khalatian.
Justice Flier concurred in the holding that no waiver occurred in Khalatian. She dissented on other grounds, believing that the scope of the arbitration provision did not completely encompass the whole dispute.