Waiver: Substantial Evidence of Waiver of Right to Arbitrate Results in Affirmance of Trial Court’s Order Denying Petition to Compel Arbitration

 

 

     Our next case involves a business and a relationship gone sour. Slagter v. Maiao, No. D057368 (4^th Dist. Div. 1 January 5, 2012) (unpublished). However, as the Court notes that the parties are well aware of the facts, and the facts are not relevant to the present legal issue, neither we nor the Court needs to recite those facts.

     The case involves defendant/cross-complainant Maiao’s attempt to invoke an arbitration provision in a property sharing agreement in order to compel arbitration, after a lawsuit had already been filed. The case is somewhat unusual in that the trial court found a waiver of the right to arbitrate, even though the pleadings had not progressed to the point where Maiao had answered, and Maiao waited only four months to invoke the right to arbitrate. In many cases, courts have found no waiver where the defendant had only demurred, or in circumstances where even more time passed before a party petitioned to compel arbitration.

     But waiver is a question of fact that is evaluated under a multi-factor test. Saint Agnes Medical Center v. PacifiCare of California , 31 Cal.4th 1187, 1196 (2003). Significantly – to the Court of Appeal – Maiao filed a cross-complaint without seeking a stay, used a demurrer to address the merits, and attacked a lis pendens. Additionally, compelling arbitration would have resulted in continuance of a trial date.

     The Court was not sympathetic to Maiao’s argument that he was dragged into the litigation by the “hyper-aggressive litigation tactics” of Slagter. That problem could have been addressed by seeking a stay concurrently with petitioning to arbitrate.

     COMMENT: There may be good tactical reasons for delaying a request to arbitrate. For example, a demurrer that removes causes of action can sometimes result in a case becoming more suited for arbitration. Here, however, Maiao’s counsel told the trial judge that a demurrer might remove the need to arbitrate, and that was cited by the Court of Appeal as evidence that Maiao sought to use the judicial process to litigate the case on the merits. Would it have made a difference if counsel had said that the demurrer could narrow the case and make it more amenable for arbitration? Bottom line: the deeper one gets into judicial proceedings, the riskier it becomes that a waiver of the right to arbitrate will be found.