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On Behalf of | May 16, 2020 | Firm News

Younan worked for Fleming, 2009-2016. In 2017, he filed a complaint with the Labor Commission, seeking $22,000 in commissions, plus penalties and interest. Fleming asserted to the Labor Commissioner that the complaint should be dismissed because the parties signed an (attached) arbitration agreement.

The Commissioner did not dismiss the complaint but Fleming did not file a petition to compel arbitration. A hearing was set for August 2018. In July, Fleming filed an Answer that contained affirmative defenses, including that arbitration was the proper forum.

On August 7, Fleming moved to vacate the August 13 hearing and dismiss the complaint because Younan’s employment application and agreement required arbitration, again stating that “[Fleming] is prepared to file a motion with the Superior Court seeking to compel arbitration.”

Both parties appeared at the August 13 hearing. Fleming’s motion was denied because Fleming had failed to obtain a stay from the superior court.

In December, the Labor Commissioner awarded Younan commissions plus interest and liquidated damages. Fleming filed a notice of appeal; a de novo trial was scheduled for March 2019. In February, Fleming filed an unsuccessful petition to compel arbitration, stay proceedings and vacate the order.

Appellant Fleming Distribution Company (Fleming) appeals from a trial court order denying its petition to compel arbitration, stay proceedings, vacate a Labor Commissioner award of $27,412.60 to former Fleming employee, respondent Alfonus Younan (Younan), and dismiss the action.   Fleming contended the court erred in denying its petition because Younan’s employment application and employment agreement contained enforceable arbitration clauses and Fleming did not waive its right to arbitration.

Code of Civil Procedure section 1281.2 allows the trial court to deny a petition to compel arbitration where “[t]he right to compel arbitration has been waived by the petitioner.” The term “waiver” as used in the statute is “ ‘a shorthand statement for the conclusion that a contractual right to arbitration has been lost.’ ” (St. Agnes Medical Center v. PacifiCare of California et al. (2003) 31 Cal.4th 1187, 1195, fn. 4 (St. Agnes).) Both federal and state law favor arbitration as a “ ‘speedy and relatively inexpensive means of dispute resolution.’ ” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.)

Because the law favors arbitration, waiver will not be lightly inferred and the party asserting waiver “bears a heavy burden of proof,” with any doubts to be resolved in favor of arbitration. (St. Agnes, supra, 31 Cal.4th at p. 1195.)

“The relevant factors establishing waiver include whether the party’s actions are inconsistent with the right to arbitrate; 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; whether a party delayed for a long period before seeking a stay; whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and whether the delay affected, misled, or prejudiced the opposing party.” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1204 (Hoover); accord, St. Agnes, supra, 31 Cal.4th at p. 1196.) “ ‘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.]

The decisions likewise hold that the “bad faith” or “willful misconduct” of a party may constitute a waiver and thus justify a refusal to compel arbitration. [Citation.]’ ” (Iskanian v. CLS Transportation Los Angeles, LLC. (2014) 59 Cal.4th 348, 374-375 (Iskanian).) Waiver is not a mechanical process and no one factor is predominant. (St. Agnes, supra, 31 Cal.4th at p. 1195.)

Relatedly, a party that wishes to pursue arbitration must take “ ‘active and decided steps to secure that right’ ” because an arbitration agreement “ ‘is not . . . self-executing.’ ” (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1795.)

The court of appeal affirmed, finding that Fleming waived its right to arbitration by taking steps inconsistent with an intent to invoke arbitration, including delaying its request to the superior court until after a full hearing. Fleming also failed to establish an agreement to arbitrate existed.

See  Younan v. Fleming Distribution Co.

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