Quach v. Cal. Commerce Club, Inc.

• Decision Date: 10 May 2022
• Docket Number: B310458
• Parties: Peter QUACH, Plaintiff and Respondent, v. CALIFORNIA COMMERCE CLUB, INC., Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

78 Cal.App.5th 470

293 Cal.Rptr.3d 737

Peter QUACH, Plaintiff and Respondent,

v.CALIFORNIA COMMERCE CLUB, INC., Defendant and Appellant.

B310458

Court of Appeal, Second District, Division 1, California.

Filed May 10, 2022

Certified for Partial Publication.^*

Sanders Roberts, Reginald Roberts, Jr., Los Angeles, Eric S. Mintz, Valley Village, Ayan K. Jacobs ; Benedon & Serlin, Wendy S. Albers, Woodland Hills, and Gerald M. Serlin for Defendant and Appellant.

Law Offices of Dilip Vithani, Dilip Vithlani ; Law Office of Jonathan J. Moon and Jonathan J. Moon, Los Angeles, for Plaintiff and Respondent.

BENDIX, J.

California Commerce Club, Inc. (Commerce Club) appeals from an order denying its motion to compel arbitration of a dispute with its former employee, Peter Quach, respondent here. Quach argued below that Commerce Club had waived its right to arbitrate by waiting 13 months after the filing of the lawsuit to move to compel arbitration, and by engaging in extensive discovery during that period. Quach claimed the delay prejudiced him by forcing him to expend time and money preparing for litigation. The trial court agreed, finding Commerce Club had waived the right to arbitrate by propounding a "large amount of written discovery," taking Quach's deposition, and expending "significant time meeting and conferring."

We disagree with the trial court. Our Supreme Court has made clear that participation in litigation alone cannot support a finding of waiver, and fees and costs incurred in litigation alone will not establish prejudice on the part of the party resisting arbitration. ( St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1203, 8 Cal.Rptr.3d 517, 82 P.3d 727 ( St. Agnes Medical Center ).) This rule has particular force here, where Quach admitted he incurred no costs in litigation that he would not otherwise have expended had the case gone to arbitration earlier.

Although Quach argues later Supreme Court authority has approved of Court of Appeal cases diluting the rule from St. Agnes Medical Center , those cases nonetheless involved a showing that a party's unreasonable delay in asserting the right to arbitrate prejudiced the party resisting arbitration. That showing is absent in the instant case.

In the unpublished portion of the opinion, we reject Quach's alternative argument that the arbitration agreement is unconscionable.

Accordingly, we reverse and direct the trial court to grant Commerce Club's motion to compel arbitration.

FACTUAL AND PROCEDURAL BACKGROUND¹

Commerce Club operates a hotel and casino in Commerce, California. In 1989, it hired Quach to supervise activity on the gambling floor of the casino.

In 2015, Commerce Club required all its employees to sign a new arbitration policy as a condition of continued employment. The agreement required employees to submit any covered dispute to an informal resolution process within the company, and, if necessary, to resolve the dispute through arbitration. The agreement covered "all matters directly or indirectly related to [Quach's] recruitment, employment, or termination of employment." Quach signed and returned his copy of the agreement on February 18, 2015.

On November 16, 2018, Commerce Club terminated Quach's employment after a customer paid the casino with $100 in counterfeit bills during Quach's shift.

On November 22, 2019, after receiving a right-to-sue letter from the Department of Fair Employment & Housing, Quach filed a lawsuit against Commerce Club. Among other things, the lawsuit alleged causes of action for wrongful termination, age discrimination, retaliation, and harassment.

On January 7, 2020, Commerce Club filed its answer to the complaint. Although it asserted Quach should be compelled to arbitrate "[t]o the extent that [he] has agreed to arbitrate any or all of the purported claims asserted in the [c]omplaint," Commerce Club did not move to compel arbitration at that time. It propounded an initial set of discovery requests, consisting of form interrogatories, special interrogatories, requests for admission, and requests for production of documents. It posted jury fees on March 3, 2020, and sent responses to Quach's discovery requests on March 6, 2020.

On March 4, 2020, the Governor declared a statewide state of emergency due to the global COVID-19 pandemic. On March 23, 2020, the Chief Justice of the California Supreme Court issued the first in a series of emergency orders delaying lower court proceedings for the foreseeable future.²

On March 25, 2020, Commerce Club propounded a second set of special interrogatories on Quach. It also engaged in a meet and confer process with Quach to address concerns Quach raised with Commerce Club's discovery responses. Among other things, Quach informed Commerce Club in May 2020 that Commerce Club had not provided verifications for any of its discovery responses. According to a declaration provided by Quach's counsel, "the meet and confer process was put on hold while [Quach] waited for [Commerce Club] to provide verifications."

On June 23, 2020, Commerce Club took Quach's deposition via Zoom in a full-day session.

On September 16, 2020, the trial court on its own motion continued the trial date, previously set for December 7, 2020, to July 19, 2021, with the final status conference continued from November 19, 2020, to July 1, 2021.

Also on September 16, 2020, Commerce Club served the verifications Quach had requested in May 2020.

On October 9, 2020, Commerce Club participated in another meet and confer process with Quach, ultimately agreeing to provide supplemental responses to Quach's discovery requests.

On October 29, 2020, Commerce Club informed Quach's counsel that it had located Quach's complete arbitration agreement, and it asked for Quach's stipulation to stay his lawsuit and resolve the dispute through arbitration. Quach refused, asserting that Commerce Club had waived its right to arbitrate.

On December 23, 2020, 13 months after Quach filed his lawsuit, Commerce Club filed a motion to compel arbitration. The motion, citing a declaration from Commerce Club's executive director of human resources, contended that Commerce Club initially was unable to locate a complete copy of the arbitration agreement signed by Quach, and only discovered it when reviewing Quach's employment file in responding to Quach's requests for production of documents. Commerce Club argued Quach suffered no prejudice from the delay, because the parties had engaged in only "minimal discovery" due to Commerce Club closing operations during the COVID-19 pandemic, "which has impacted access to information and witnesses."

In opposition, Quach argued that Commerce Club had waived the right to arbitrate. He claimed Commerce Club was aware it possessed a copy of the arbitration agreement from the beginning, because it had provided him a copy of his signed signature page from the agreement before the lawsuit was filed. He asserted that Commerce Club's delay in seeking to arbitrate was prejudicial because he had spent time and money preparing for litigation. Alternatively, he argued the agreement was unconscionable and unenforceable.

On January 22, 2021, the trial court denied Commerce Club's motion, finding that Commerce Club had waived its right to arbitration. The court reasoned that Commerce Club had engaged in a "litany of pretrial exchanges and actions," despite knowing of its right to compel arbitration and its company policy to secure signed arbitration agreements from each employee. The trial court also found that Commerce Club had presented a "large amount of written discovery," "tak[en] [Quach's] deposition," and spent "significant time meeting and conferring over many months," and concluded that this evidence showed "a position inconsistent to arbitrate and resulting prejudice to [Quach]." The trial court did not reach the issue of unconscionability.

Commerce Club timely appealed.

DISCUSSION

A. Commerce Club Did Not Waive the Right To Arbitration

We disagree with the trial court's conclusion that Commerce Club, through its conduct, waived the right to demand arbitration.

1. Applicable law

"California law strongly favors arbitration" " ‘ "as a speedy and relatively inexpensive means of dispute resolution." ’ [Citation.]" ( OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125, 251 Cal.Rptr.3d 714, 447 P.3d 680 ( OTO ).) Code of Civil Procedure section 1281.2, subdivision (a), however, provides grounds for denying a petition to compel arbitration, including when "[t]he right to compel arbitration has been waived by the petitioner."

"... ‘California courts have found a waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration [citations] to instances in which the petitioning party has unreasonably delayed in undertaking the procedure. [Citations.] ... [Citation.]’ [Citation.]" ( Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 374–375, 173 Cal.Rptr.3d 289, 327 P.3d 129 ( Iskanian ).) "In light of the policy in favor of arbitration, ‘waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof.’ [Citation.]" ( Id. at p. 375, 173 Cal.Rptr.3d 289, 327 P.3d 129.)

Waiver of the right to arbitrate is assessed through a number of factors, including: " ‘ " ‘(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...