Cox v. Ocean View Hotel ( 2008 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
THOMAS R. COX, 
Plaintiff-Appellee,
v. No. 06-15903
OCEAN VIEW HOTEL CORPORATION, D.C. No.
doing business as Radisson; JOHN  CV- 05-0765-
DOES 1 TO 50; JANE DOES 1 TO 50; JMS/BMK
DOE PARTNERSHIPS 1-50; DOE
OPINION
CORPORATIONS 1-50; DOE ENTITIES
1-50,
Defendants-Appellants.

Appeal from the United States District Court
for the District of Hawai‘i
J. Michael Seabright, District Judge, Presiding
Argued and Submitted
November 2, 2007—Honolulu, Hawaii
Filed July 23, 2008
Before: Diarmuid F. O’Scannlain, A. Wallace Tashima, and
Milan D. Smith, Jr., Circuit Judges.
Opinion by Judge Tashima;
Partial Concurrence and Partial Dissent by
Judge O’Scannlain
9063
9066 COX v. OCEAN VIEW HOTEL
COUNSEL
Richard M. Rand, Torkildson, Katz, Fonseca, Moore &
Hetherington, Honolulu, Hawaii, for the defendants-
appellants.
COX v. OCEAN VIEW HOTEL 9067
Stephen T. Hioki, Honolulu, Hawaii, for the plaintiff-
appellee.
OPINION
TASHIMA, Circuit Judge:
Ocean View Hotel Corporation (“Ocean View”) and
Thomas Cox executed an employment agreement containing
a mandatory arbitration clause. When a dispute arose during
the course of employment, Cox wrote a letter to Ocean View
requesting arbitration, but Ocean View responded by telling
Cox that it did not consider his claim ripe for arbitration. Fol-
lowing termination of his employment, Cox filed a complaint
in the Circuit Court of Hawai‘i. At that point, Ocean View
decided that it wanted to arbitrate Cox’s claim. After remov-
ing the action to federal court, Ocean View moved to compel
arbitration. The district court denied its motion to compel
arbitration and granted Cox’s motion for partial summary
judgment on the ground that Ocean View previously breached
its agreement and waived its right to arbitrate disputes with
Cox. Cox v. Ocean View Hotel Corp., 433 F. Supp. 2d 1171(D. Haw. 2006) (“Cox I”). We have jurisdiction over the dis-
trict court’s denial of a motion to compel arbitration under 9
U.S.C. § 16(a)(1)(B). See Ingle v. Circuit City, 408 F.3d 592,
594 (9th Cir. 2005).
We hold that the district court erred in granting partial sum-
mary judgment in favor of Cox based on his breach-of-
agreement theory, because Cox did not properly initiate arbi-
tration under the terms of his employment agreement. We also
hold that the district court improperly granted summary judg-
ment in Cox’s favor on the issue of waiver.
BACKGROUND
On July 17, 2001, Cox and Ocean View signed a Letter of
Agreement of Cox’s employment as the Director of Finance
9068 COX v. OCEAN VIEW HOTEL
for the Radisson Hotel Waikiki Prince Kuhio. In addition to
setting forth Cox’s job description and compensation, the let-
ter included the following arbitration clause:
Any disputes between Employer and Employee aris-
ing out of the employment relationship shall be set-
tled by arbitration in accordance with the then
current Model Employment Arbitration Procedures
of the American Arbitration Association (AAA) in
lieu of jury trial and all other judicial dispute resolu-
tion methods. Employee fully understands and
accepts this. . . . Any controversy except for Work-
men’s Compensation, involving the construction or
application of the terms, provisions, or conditions of
this Agreement or otherwise arising out of or related
to this Agreement shall likewise be settled by arbi-
tration. This agreement to arbitrate covers all
employment disputes including but not limited to
those involving tort, wrongful discharge, and dis-
crimination claims. The cost of the arbitration shall
be paid by the Company. The location of the arbitra-
tion shall be paid by the Company. The location of
the arbitration shall be in the County in which the
Company is located. This clause cannot be amended
without written consent of both parties.
The letter also provided that “[t]he validity, interpretation,
enforceability, and the performance of this Agreement shall
be governed by and construed in accordance with the law of
the State of California.”
The employment relationship began to sour by October
2003, when Cox’s supervisor Gary Jutz raised allegations that
Cox was involved in a sexual relationship with one of his
female subordinates. The events that gave rise to the current
litigation began the following year, on October 5, 2004, when
Jutz sent a memorandum to Cox demanding that Cox end his
personal relationship with that subordinate. Although the let-
COX v. OCEAN VIEW HOTEL 9069
ter did not describe the relationship as a romantic or sexual
one, it stated that the perception of the alleged relationship
was disrupting the performance of the department. Jutz ended
the letter by warning Cox that “[f]ailure to change [his]
behavior and maintain expected work responsibilities is a seri-
ous disciplinary matter” and that “[a] continued failure to
work within the organization to resolve this situation” could
“ultimately be deemed an act of insubordination and grounds
for immediate termination of employment.”
On October 11, 2004, Cox responded in a letter to Jutz’s
supervisor, Clyde Guinn, in which he laid out various argu-
ments in support of his claim that he was a victim of sex dis-
crimination. In the first line, Cox called the letter a “request
to enter into arbitration.” He also stated that assertions in
Jutz’s memo violated provisions in his employment hand-
book, by amounting to “sex discrimination, harassment,
intimidation, interference with others in the performance of
their jobs, threatening, making maliciously false and/or
defamatory statements concerning an associate, and retalia-
tion . . . .” Cox’s letter concluded by requesting that Guinn
“provide the date and time of the arbitration hearing and any
questions” to his attorney at a listed address.
Guinn responded on October 27, 2004, in a letter to Cox
(“Guinn’s letter”). In it, Guinn disagreed with Cox’s charac-
terization of Jutz’s memo as accusing Cox of having a roman-
tic or sexual relationship with that subordinate. He also
disagreed with Cox’s statements that Jutz was guilty of the
violations asserted in Cox’s letter. The essential portions of
Guinn’s letter are contained in the following two paragraphs:
In summary, therefore, I do not consider this a case
for arbitration. Gary Jutz believes that your behavior,
as a senior member of the hotel management team,
is cause for censure. You do not accept this is the
case. Clearly, if you continue to pursue the activities
which Gary Jutz has complained of, you run the risk
9070 COX v. OCEAN VIEW HOTEL
of being terminated. At that point, assuming you
then consider it a wrongful termination, arbitration
may be in order.
In the meantime, if you feel that Gary Jutz is “guilty
of” the issues set out above, it may be that we should
have an independent investigation by an outside
attorney to establish whether or not there is in the
Hotel a perception of a “relationship” existing
between you and your direct subordinate . . . ,
thereby justifying the complaints made by Mr. Jutz
to you on numerous occasions. . . . At the conclusion
of any such investigation I believe the position will
be much clearer for all parties and we could then
each decide on what course of action each wishes to
adopt in the circumstances.
Jutz terminated Cox’s employment on December 20, 2004.
On February 10, 2005, Cox filed a Charge of Discrimination
with the Hawai‘i Civil Rights Commission, and on September
26, 2005, the Commission granted him the right to sue. Cox
then filed a complaint in state court, which Ocean View
removed to federal district court. In its answer, Ocean View
requested “that the Complaint herein be stayed and that Plain-
tiff be required to submit all of his claims to final and binding
arbitration . . . .” Cox moved for partial summary judgment
denying arbitration on the theory that Ocean View breached
its agreement to engage in arbitration by refusing arbitration
in Guinn’s letter.
The district court ruled in favor of Cox, granting his motion
for partial summary judgment and denying Ocean View’s
motion to compel arbitration. Cox I, 433 F. Supp. 2d at 1181.
The district court concluded that Cox properly initiated arbi-
tration, id. at 1176; Ocean View refused to arbitrate, id. at
1177; and, as a result, Ocean View both breached its agree-
ment to arbitrate, id. at 1178, and waived its right to enforce
the agreement. Id. at 1180. This appeal followed.
COX v. OCEAN VIEW HOTEL 9071
STANDARD OF REVIEW
We review the denial of a motion to compel arbitration de
novo. Brown v. Dillard’s, Inc., 430 F.3d 1004, 1009 (9th Cir.
2005). Because denial of a motion to compel arbitration has
the same effect as a grant of partial summary judgment deny-
ing arbitration, Cox’s motion for partial summary judgment
was the functional equivalent of an opposition to Ocean
View’s motion, and we will treat it as such. Cf. Craft v.
Campbell Soup Co., 177 F.3d 1083, 1084 n.4 (9th Cir. 1999)
(treating a motion for summary judgment as a de facto motion
to compel arbitration), abrogated on other grounds by Circuit
City Stores, Inc. v. Adams, 532 U.S. 105 (2001).1
ANALYSIS
I
[1] Preliminarily, we must decide whether Cox’s challenges
to enforcing the arbitration clause are for the court, or for the
arbitrator, to decide. We have previously determined that the
federal law of arbitrability under the Federal Arbitration Act
(“FAA”) governs the allocation of authority between courts
and arbitrators. Chiron Corp. v. Ortho Diagnostic Sys., Inc.,
207 F.3d 1126, 1131 (9th Cir. 2000). Because the FAA man-
dates that “district courts shall direct the parties to proceed to
arbitration on issues as to which an arbitration agreement has
been signed[,]” the FAA limits courts’ involvement to “deter-
mining (1) whether a valid agreement to arbitrate exists and,
if it does, (2) whether the agreement encompasses the dispute
at issue.” Id. at 1130 (citation and quotation marks omitted).
1
We assume without deciding that the “dispute” Cox wanted arbitrated
is an arbitrable dispute within the meaning of the parties’ arbitration
agreement. Also, on this appeal, we resolve only the legal questions pre-
sented and not any factual disputes, which the parties are free to contest
on remand. See Brown, 430 F.3d at 1006 (“To the degree that our conclu-
sion that Dillard’s breached its arbitration agreement with Brown depends
on disputed facts, Dillard’s is free on remand to contest those facts.”).
9072 COX v. OCEAN VIEW HOTEL
Cox challenges the arbitration agreement only on the first
ground. Therefore, we decide whether Cox’s contract-based
challenges to enforcement — breach of the agreement and
waiver — are properly before the court.
[2] Section 2 of the FAA creates a policy favoring enforce-
ment of agreements to arbitrate. 9 U.S.C. § 2; Buckeye Check
Cashing, Inc. v. Cardegna, 546 U.S. 440, 443-44 (2006).
Under that provision, arbitration clauses in contracts “shall be
valid, irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of any contract.”
9 U.S.C. § 2. The Supreme Court has recently clarified that
contract-based challenges to the validity of arbitration agree-
ments come in two types: “[o]ne type challenges specifically
the validity of the agreement to arbitrate . . . . [and] [t]he
other challenges the contract as a whole, either on a ground
that directly affects the entire agreement . . . or on the ground
that the illegality of one of the contract’s provisions renders
the whole contract invalid.” Buckeye Check Cashing, 546
U.S. at 444 (emphasis added). Challenges to the contract’s
validity are considered by the arbitrator in the first instance.
Id. at 445-46. Where, however, “the crux of the complaint is
. . . the arbitration provision itself, then the federal courts . . .
must decide whether the arbitration provision is invalid and
unenforceable . . . .” Davis v. O’Melveny & Myers, 485 F.3d
1066, 1072 (9th Cir. 2007) (citing Nagrampa v. MailCoups,
Inc., 469 F.3d 1257, 1264 (9th Cir. 2006) (en banc)). In sum,
our case law makes clear that courts properly exercise juris-
diction over claims raising (1) defenses existing at law or in
equity for the revocation of (2) the arbitration clause itself.
See, e.g., Nagrampa, 469 F.3d at 1263-64 (holding that courts
should address a procedural unconscionability defense to the
enforcement of an arbitration provision); Brown, 430 F.3d at
1010, 1012 (considering plaintiff’s breach of contract and
waiver defenses to enforcement of an otherwise valid arbitra-
tion agreement).2
2
Other courts have considered waiver as a defense to a motion to com-
pel arbitration. See, e.g., Khan v. Parsons Global Servs., 521 F.3d 421,
COX v. OCEAN VIEW HOTEL 9073
[3] In this case, neither party disputes the validity of the
Letter of Agreement. Instead, Cox challenges enforcement of
the arbitration clause on the grounds that Ocean View
breached the agreement to arbitrate and therefore had no right
to enforce the clause or, alternatively, that Ocean View’s con-
duct amounted to a waiver of the right to arbitrate. Therefore,
under Buckeye Check Cashing, the particular contractual
defenses to enforcement of the arbitration clause at issue in
this case, breach and waiver, were properly heard by the dis-
trict court.3
Ocean View contends that the issue of waiver was for the
arbitrator to determine. The cases on which it relies, however,
Omar v. Ralphs Grocery Company, 13 Cal. Rptr. 3d 562 (Ct.
App. 2004), and Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79 (2002), do not discuss whether courts or arbitrators
should consider challenges to the validity of arbitration agree-
ments, but instead, focus on the separate inquiry of whether
courts or arbitrators should determine the scope of the arbitra-
tion clause. See Omar, 13 Cal. Rptr. 3d at 566; Howsam, 537
U.S. at 83 (addressing “[t]he question whether the parties
have submitted a particular dispute to arbitration”).4
424-25 (D.C. Cir. 2008); In re Tyco Int’l Ltd. Sec. Litig., 422 F.3d 41, 44
(1st Cir. 2005); PPG Indus., Inc. v. Webster Auto Parts Inc., 128 F.3d 103,
107 (2d Cir. 1997); Great W. Mortgage Corp. v. Peacock, 110 F.3d 222,
232 (3d Cir. 1997).
3
The partial dissent is based on the premise that the arbitration agree-
ment is valid. Dissent at 9085. As discussed below, however, we can only
reach that conclusion after considering, and rejecting, the defenses raised
by Cox. The Supreme Court has noted that because the duty to arbitrate
originates in a contractual agreement between the parties, a party “cannot
be compelled to arbitrate if an arbitration clause does not bind it at all.”
John Wiley & Sons v. Livingston, 376 U.S. 543, 547 (1964). It is the bind-
ing nature of the arbitration clause that Cox contests, and that we must
review.
4
Indeed, the California Court of Appeal noted that the issue “whether
there is an enforceable arbitration agreement between the parties” was
antecedent to the issue whether particular procedural matters, such as
waiver, are covered by the agreement. Omar, 13 Cal. Rptr. 3d at 566.
9074 COX v. OCEAN VIEW HOTEL
In Howsam, the Court confronted the issue whether a court
or a National Association of Securities Dealers (“NASD”)
arbitrator should apply a NASD procedural rule to a dispute
between the parties. Id. at 81. The NASD provision at issue
included a six-year statute of limitations which the plaintiff,
Dean Witter Reynolds, Inc., attempted to enforce in court
against a disgruntled client. Id. at 82. The precise question
presented to the Court was whether the parties agreed to sub-
mit enforcement of this procedural rule to an arbitrator, rather
than the courts. Id. at 83. In answering, the Court distin-
guished between two gateway disputes. The first was
“whether the parties are bound by a given arbitration
clause[,]” a question for a court to decide, id. at 84, and one
not at issue in the case. The second was “whether an arbitra-
tion clause in a concededly binding contract applies to a par-
ticular type of controversy . . . .” Id. In addressing the second
gateway issue, the Court reasoned that “ ‘procedural’ ques-
tions which grow out of the dispute and bear on its final dis-
position are presumptively not for the judge, but for an
arbitrator, to decide[,]” because “parties would likely expect
that an arbitrator would decide [that] gateway matter.” Id.
(citation and quotation marks omitted). Because the parties
would likely have committed interpretation of a NASD rule
to a NASD arbitrator, that particular issue of procedure was
left for the arbitrator to decide. Id. at 86.
The reasoning of Howsam is simply inapplicable to resolu-
tion of the first gateway issue: whether the parties are bound
by the arbitration clause.5 As discussed above, Cox does not
5
Indeed, Howsam does not even cite Prima Paint Corp. v. Flood &
Conklin Mfg. Co., 388 U.S. 395 (1966), or its progeny, which discuss the
allocation of authority between the court and arbitrators over challenges
to the validity of arbitration clauses. Similarly, Buckeye Check Cashing
does not cite to Howsam and its predecessors discussing the scope of arbi-
trable issues. The Court has hitherto kept those two inquiries separate.
Further, to treat breach and waiver as procedural issues for the arbitrator,
as the partial dissent suggests, see Dissent at 9085, would create a strange
COX v. OCEAN VIEW HOTEL 9075
concede that he is bound by the arbitration clause; instead, he
contends that Ocean View revoked the clause through its own
breach or waiver of the agreement to arbitrate. Cox does not
contend that waiver is not arbitrable, but raises it as a defense
to a motion to compel arbitration brought against him in fed-
eral court. Far from disputing the arbitrability of his claim, he
initially sought arbitration. Therefore, the district court prop-
erly decided the issues presented in this case.
II
[4] Section 2 of the FAA provides that arbitration clauses
in contracts “shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revoca-
tion of any contract.” 9 U.S.C. § 2. Under the FAA, a party
may challenge the validity or applicability of the arbitration
provision by raising the same defenses “available to a party
seeking to avoid the enforcement of any contract.” Brown,
430 F.3d at 1010. These contract-based challenges are gov-
erned by applicable state law. See Davis, 485 F.3d at 1072.
Here, as we have previously noted, the parties selected Cali-
fornia law to govern the resolution of disputes arising out of
the employment agreement.
A
[5] Breach or repudiation of a contract by one party excuses
nonperformance by the other. “A bedrock principle of Cali-
fornia contract law is that he who seeks to enforce a contract
result: the arbitrator would get first crack at defenses to a motion to com-
pel arbitration based on waiver or breach. In essence, the court would have
to compel arbitration without reviewing the parties’ contentions. If the
arbitrator resolves the issue in favor of the party asserting a waiver
defense, however, the parties would likewise have no recourse in the arbi-
tral forum. Therefore, Judge O’Scannlain’s suggestion virtually eliminates
waiver as a defense to a motion to compel arbitration, a defense widely
recognized by other courts. See supra note 2.
9076 COX v. OCEAN VIEW HOTEL
must show that he has complied with the conditions and
agreements of the contract on his part to be performed.”
Brown, 430 F.3d at 1010 (citation and quotation marks omit-
ted). See also Local 659, I.A.T.S.E. v. Color Corp. of Am., 302
P.2d 294, 299 (Cal. 1956) (In Bank) (“A repudiation of a con-
tract accepted by the promisor excuses performance by the
promisee.”). Before reaching the question whether Ocean
View’s actions constituted a repudiation of the agreement,
Cox must first establish that he properly initiated arbitration.
If he failed to do so, then Ocean View could not have repudi-
ated the agreement, regardless of the contents of Guinn’s let-
ter.
[6] Cox argues that his October 11, 2004, letter to Guinn
constituted a proper demand for arbitration. We disagree. The
arbitration clause in the employment agreement clearly states
that “disputes . . . shall be settled . . . in accordance with the
then current Model Employment Arbitration Procedures of
the [AAA] . . . .” Our court, as well as the California Court
of Appeal, has concluded that such language incorporates the
applicable rules of the AAA into the terms of the contract. See
Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010,
1012 (9th Cir. 2004); O’Hare v. Mun. Res. Consultants, 132
Cal. Rptr. 2d 116, 126 (Ct. App. 2003). Accord Howsam, 537
U.S. at 86 (finding incorporation of a NASD arbitration pro-
cedure in similar circumstances). The AAA employment rules
and procedures are available on the AAA website. See Ameri-
can Arbitration Association, Employment Arbitration Rules,
http://www.adr.org/sp.asp?id=32904 (last visited Dec. 3,
2007). Rule 4, “Initiation of Arbitration,” requires that the ini-
tiating party: (1) “file a written notice (hereinafter ‘Demand’)
of its intention to arbitrate” in duplicate; (2) provide a copy
of the Demand to the other party; and (3) include the applica-
ble filing fee. Cox, who was then represented by counsel,
does not dispute that he failed to comply with any of these
basic requirements.
[7] Instead, Cox justifies his failure to follow AAA proce-
dures by arguing that the employment agreement did not
COX v. OCEAN VIEW HOTEL 9077
specify how arbitration was to be initiated, just that it would
take place “in accordance” with AAA rules. This position is
untenable because, as discussed above, the agreement clearly
integrated those rules and procedures. Besides challenging the
clarity of the provision, Cox does not assert any traditional
contract defenses. Recently, the California Court of Appeal
noted that it was aware of no cases “that stand for the extreme
proposition that a party who fails to read a contract but none-
theless objectively manifests his assent by signing it — absent
fraud or knowledge by the other contracting party of the
alleged mistake — may later rescind the agreement on the
basis that he did not agree to its terms.” Stewart v. Preston
Pipeline Inc., 36 Cal. Rptr. 3d 901, 921 (Ct. App. 2005) (cit-
ing Brookwood v. Bank of Am., 53 Cal. Rptr. 2d 515, 520 (Ct.
App. 1996) (commenting that “plaintiff was bound by the pro-
visions of [an] arbitration agreement regardless of whether
she read it or was aware of the arbitration clause when she
signed the document”) (citation and quotation marks omit-
ted)). Cox’s contention amounts to the same “extreme propo-
sition” noted in Stewart. Although the arbitration clause did
not explicitly articulate the requirement of formally initiating
arbitration proceedings with the AAA, we are satisfied that
Cox consented to the terms of the agreement he signed. The
fact that Cox was hired for a managerial position and was rep-
resented by counsel at the time he made his flawed request for
arbitration reinforces this view.
Cox also contends that Ocean View’s refusal to arbitrate
placed him in the situation of having to pay his own filing fee,
because AAA rules require a party to pay a fee in order to ini-
tiate arbitration. Therefore, he argues, compliance with AAA
procedures would violate the terms of the employment agree-
ment because Ocean View agreed to pay “[t]he cost of arbitra-
tion . . . .” The language of the AAA rules bears directly on
this argument. The item described “Filing Fees” is listed
under a general heading called “Costs of Arbitration.” The
positioning of the items suggests that filing fees are one of
various costs, including hearing fees, postponement fees,
9078 COX v. OCEAN VIEW HOTEL
room rental, abeyance fees, and expenses. Though this seems
to lend support to Cox’s contention, each of the aforemen-
tioned costs specifies which party is expected to pay them,
and all save for the filing fee are to be charged to the
employer. Thus, the text of the Rule itself avoids the problem
of ambiguity identified by Cox.6
[8] The district court also determined that Ocean View
should be equitably estopped from denying that Cox initiated
arbitration because of its own refusal to arbitrate. The facts
established by the pleadings do not support this view. The
doctrine of equitable estoppel “provides that a person may not
deny the existence of a state of facts if he intentionally led
another to believe a particular circumstance to be true and to
rely upon such belief to his detriment.” Aerojet-Gen. Corp. v.
Commercial Union Ins. Co., 65 Cal. Rptr. 3d 803, 814 (Ct.
App. 2007) (citation and quotation marks omitted). In order
to apply the doctrine, “(1) the party to be estopped must be
apprised of the facts; (2) he must intend that his conduct shall
be acted upon, or must so act that the party asserting the
estoppel has a right to believe it was so intended; (3) the other
party must be ignorant of the true state of facts; and (4) he
must rely upon the conduct to his injury.” Id. (citation and
quotation marks omitted). See also United States v. Georgia-
Pac. Co., 421 F.2d 92, 96 (9th Cir. 1970) (articulating a sub-
stantially similar list of elements). To satisfy the second ele-
ment, the district court reasoned that “the Defendant’s letter
came from the Senior Vice President of Operations, and the
Plaintiff is certainly entitled to believe the Defendant’s state-
ment that the Defendant did not consider this a case for arbi-
tration[.]” Cox I, 433 F. Supp. 2d at 1177. There is no
indication in the record that Ocean View intended that Cox
rely upon its letter to his detriment. Nor did Cox assert that
he believed Ocean View intended him to rely, or did in fact
rely, on Guinn’s letter. Cf. O’Donnell v. Vencor Inc., 465 F.3d
6Moreover, Cox presumably could seek reimbursement of any filing
fees he advanced as part of the arbitration award.
COX v. OCEAN VIEW HOTEL 9079
1063, 1067 (9th Cir. 2006) (affirming denial of equitable
estoppel on the grounds that there was no “evidence of
improper purpose on the part of the defendant”) (citation and
quotation marks omitted). Therefore, the district court erred in
concluding that Ocean View was estopped from denying
Cox’s initiation of arbitration. Because Cox did not abide by
the terms of the arbitration clause, we hold that Ocean View
did not breach its agreement to arbitrate.
For the foregoing reasons, Cox’s reliance on Brown is mis-
placed. In Brown, an employer, Dillard’s, terminated Brown
for allegedly adding ten minutes to her timecard. Thereafter,
she filed a notice of intent to arbitrate with the AAA as
required by Dillard’s arbitration policy. Id. at 1008. Under the
arbitration policy, Brown’s share of the arbitration fee was
$100. Id. She paid the fee. Id. After filing, the AAA informed
Brown that Dillard’s had not responded to its requests for
information. Id. Brown was able to speak with a person in
Dillard’s legal department once to notify the employer of this
delinquency, but did not receive a response to subsequent
communications. Id. Furthermore, the AAA sent two letters to
Dillard’s notifying it that Brown had already paid her portion
of the fee and that Dillard’s owed the remaining $400 of the
filing fee. Id. After Dillard’s failed to respond to the AAA, the
AAA notified Brown that Dillard’s had not paid its share of
the filing fee, and returned her notice of arbitration. Id. at
1009. Brown made attempts to contact Dillard’s for two
months to discuss its refusal to arbitrate, and only succeeded
in making contact once, at which time the legal department
told her that “her complaint had no merit and that Dillard’s
refused to arbitrate.” Id. After Brown filed suit, Dillard’s
removed the case to federal district court and moved to com-
pel arbitration. Id.This court concluded, based on the facts summarized
above, that Dillard’s “breached its agreement with Brown by
refusing to participate in the arbitration proceedings Brown
initiated.” Id. at 1010. We rejected the notion that the
9080 COX v. OCEAN VIEW HOTEL
employer could make an independent determination of the
suitability of the employee’s claims for arbitration, stating
that Dillard’s “proper course of action was to make that argu-
ment in arbitration.” Id. (emphasis added). Thus, we con-
strued Dillard’s refusal as a breach of the agreement which
excused Brown from having to arbitrate the matter instead of
pursuing her lawsuit. Id. at 1011.
[9] The plaintiff in Brown made heroic efforts to initiate
arbitration, clearly going beyond the requirements of the arbi-
tration agreement. Here, in contrast, Cox did not comply with
the terms of the agreement; he simply failed properly to initi-
ate arbitration. As the non-complying party in this case, Cox
cannot establish that Ocean View repudiated the arbitration
agreement. Brown simply does not apply under the facts of
this case.
B
Cox argues in the alternative that Guinn’s letter amounted
to a waiver of Ocean View’s right to arbitrate Cox’s dispute.
Recently, the California Supreme Court set forth the factors
to be considered under California law to determine whether
arbitration has been waived:
In determining waiver, a court can consider (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 arbitra-
tion 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 intervening steps [e.g., taking
advantage of judicial discovery procedures not avail-
COX v. OCEAN VIEW HOTEL 9081
able in arbitration] had taken place; and (6) whether
the delay affected, misled, or prejudiced the oppos-
ing party.
St. Agnes Med. Ctr. v. PacifiCare of Cal., 82 P.3d 727, 733
(Cal. 2003) (citations and internal quotation marks omitted).7
We note preliminarily that, while Cox’s failure properly to
initiate arbitration under the AAA rules may make it more dif-
ficult for him to establish waiver, it does not foreclose his
assertion, as it does in the breach of agreement context dis-
cussed above, of waiver by Ocean View. That is because
waiver focuses on the actions of the party charged with
waiver. To be sure, Cox’s conduct may bear upon the factors
discussed above, but a fact finder might reasonably determine
that Ocean View waived its right independently of whether
Cox perfected his request for arbitration.
[10] Thus, the district court properly considered whether
Ocean View waived its right to compel arbitration, notwith-
standing Cox’s failure to file a claim with the AAA, because
arbitration is a matter of private contract law. See Howsam,
537 U.S. at 83; see also Cronus Inv., Inc. v. Concierge Servs.,
107 P.3d 217, 222 (Cal. 2005) (noting that the FAA does not
provide special status for arbitration agreements, but simply
makes them only as enforceable as other contracts, and that
the FAA does not require any specific set of procedural rules)
(citations and quotation marks omitted). This stands in
marked contrast, for example, to the Federal Rules of Civil
Procedure, which govern the manner in which parties bring
suits regardless of whether parties would have chosen those
particular rules. As discussed above, a party may fail to com-
7
In concluding that Ocean View had “waived its right to enforce the
arbitration agreement,” the district court relied on the three-factor test
articulated in Brown. Cox I, 433 F. Supp. 2d at 1180. After tracing its lin-
eage, however, we conclude that the Brown three-factor test, 430 F.3d at
1012, is not based on California law.
9082 COX v. OCEAN VIEW HOTEL
ply with the terms of the agreement, resulting in a breach of
contract. In such a situation, though, waiver has long been
recognized as a valid defense to nonperformance by the
breaching party. See, e.g., Westfed Holdings, Inc. v. United
States, 407 F.3d 1352, 1361 (Fed. Cir. 2005) (“Implied waiver
may be inferred by conduct or actions that mislead the breach-
ing party into reasonably believing that the rights to a claim
arising from the breach was [sic] waived.”); Extension Oil Co.
v. Richfield Oil Corp., 125 P.2d 895, 896 (Cal. Ct. App. 1942)
(discussing the established rule that acceptance of the benefit
of a contract following breach by the other party constitutes
a waiver of the breach).
[11] Moreover, waiver is an equitable doctrine. See gener-
ally Wyler Summit P’ship v. Turner Broad. Sys., Inc., 235
F.3d 1184, 1194 (9th Cir. 2000). As such, courts can apply it
to redress injustice in situations where technical requirements
prevent the court from otherwise providing adequate legal
remedies. See Toscano v. Greene Music, 21 Cal. Rptr. 3d 732,
738 (Ct. App. 2004) (noting that “[t]he object of equity is to
do right and justice[,]” and that “[t]he powers of a court of
equity . . . are not cribbed or confined by the rigid rules of
law”) (citations and internal quotation marks omitted). And
“an action to compel arbitration is in essence a suit in equity
to compel specific performance of [the arbitration agree-
ment].” Wagner Constr. Co. v. Pac. Mech. Corp., 157 P.3d
1029, 1034 (Cal. 2007). Thus, it is possible that Ocean View
could have waived its right to arbitrate notwithstanding Cox’s
failure to file a claim with the AAA, and the district court
properly engaged in that inquiry. We note, however, that
“[a]ny examination of whether the right to compel arbitration
has been waived must be conducted in light of the strong fed-
eral policy favoring enforcement of arbitration agreements.”
Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th
Cir. 1986) (citing Moses H. Cone Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24-25 (1983)).
COX v. OCEAN VIEW HOTEL 9083
[12] We conclude that the district court erred in determin-
ing that Ocean View waived its right to arbitrate its dispute
with Cox. None of the St. Agnes factors supports waiver.
Even under the first factor, given Guinn’s understanding that
the dispute was not yet ripe for arbitration, it is at least a
debatable proposition “whether [Guinn’s] actions [were]
inconsistent with the right to arbitrate.” St. Agnes, 82 P.3d at
733. Second, all of factors (2) through (5), which have to do
with the invocation of “the litigation machinery” and its use,
militate in favor of Ocean View because Ocean View did not
resort to litigation itself and acted to invoke arbitration imme-
diately upon learning that Cox had instituted litigation.
Finally, factor (6) strongly favors Ocean View. The district
court found prejudice in the “delay and costs” alleged by Cox.
Cox I, 433 F. Supp. 2d at 1180. It is not self-evident, however,
that those costs and delay should be attributed to Ocean View
rather than to Cox himself for not properly filing his claim
with the AAA. In any event, the delay was minimal —
approximately 30 days from Cox’s filing his lawsuit in state
court to Ocean View’s motion to compel arbitration upon
removal of the action to federal court. As to costs, the Califor-
nia Supreme Court has noted that “costs and expenses . . .
incurred in responding to such [litigation] efforts likewise do
not support a finding of waiver or prejudice.” St. Agnes, 82
P.3d at 739. Thus, Cox’s argument that he was prejudiced by
the delay finds no support in the record or under California law.8
[13] Because none of the St. Agnes factors supports Cox’s
waiver argument and given the strong federal policy favoring
the enforcement of arbitration agreements, we hold that the
district court erred in concluding that Ocean View had waived
its right to enforce the arbitration agreement.
8
Cox also contends that he was prejudiced because he “would have pre-
vailed [in arbitration] and [Ocean View] would not have a basis for termi-
nating [his] employment.” Any argument premised on the ultimate
outcome of the arbitration, however, is speculative and, as such, cannot
support a prejudice argument.
9084 COX v. OCEAN VIEW HOTEL
CONCLUSION
We reverse the district court’s grant of partial summary
judgment in favor of Cox, and remand for further proceedings
consistent with this opinion.
REVERSED and REMANDED.
O’SCANNLAIN, Circuit Judge, concurring in part and dis-
senting in part:
While I concur in the court’s decision that the motion to
compel arbitration was erroneously denied by the district
court, I respectfully disagree with its conclusion that the
waiver issue was for the court to decide. In my view, arbitra-
bility is a matter for the court; whether or not the agreement
to arbitrate was properly invoked, by either side, at any time,
is a matter for the arbitrator to decide. Thus I would reverse
on the very narrow ground that a motion to compel must be
granted because the arbitration clause is valid. I would leave
all other issues to the arbitrator.
I
As the en banc opinion in Nagrampa v. Mailcoups, Inc.,
469 F.3d 1257 (9th Cir. 2006) (en banc) has revealed, there
are continued tensions in our arbitration jurisprudence which
have failed to clarify this area. Very recently, the Supreme
Court has renewed its commitment to support arbitration in
Hall Street Associates, L.L.C. v. Mattel, 128 S. Ct. 1396, 1402
(2008). But Prima Paint Corp. v. Flood & Conklin Manufac-
turing Co., 388 U.S. 395, 400 (1967) (holding that a federal
court must “order arbitration once it is satisfied that an agree-
ment for arbitration has been made and has not been hon-
ored”), Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79,
85 (2002) (holding that “in the absence of an agreement to the
COX v. OCEAN VIEW HOTEL 9085
contrary, issues of substantive arbitrability . . . are for a court
to decide and issues of procedural arbitrability, i.e., whether
prerequisites such as time limits, notice, laches, estoppel, and
other conditions precedent to an obligation to arbitrate have
been met, are for the arbitrators to decide” (quoting the
Revised Uniform Arbitration Act of 2000 (RUAA) §6(c) cmt.
2) (emphasis added and in the original)), Buckeye Check
Cashing, Inc. v. Cardegna, 546 U.S. 440, 449 (2006) (“[A]
challenge to the validity of the contract as a whole, and not
specifically to the arbitration clause, must go to the arbitra-
tor.” (emphasis added)), and Nagrampa, 469 F.3d at 1293-94(holding that an arbitration agreement that was invalid due to
unconscionability was not enforceable), are absolutely clear
that once the legal decision is made by the court that an arbi-
tration clause is valid, all remaining issues are for the arbitra-
tor.
The Supreme Court in Howsam could not be clearer: “the
presumption is that the arbitrator should decide allegation[s]
of waiver, delay, or a like defense to arbitrability.” 537 U.S.
at 84 (internal quotation marks and citation omitted). Thus, I
find perplexing the majority’s attempt to distinguish Howsam.
Here, I see no relevant distinction between Cox’s attempt
to avoid the arbitrability of his employment dispute based on
whether or not he properly followed the procedures of the
AAA and Dean Witter’s challenge to arbitrability in Howsam
based on the National Association of Securities Dealers
(NASD) procedural rules. See Howsam, 537 U.S. at 81. In
this case I would follow the reasoning of the Supreme Court
in Howsam that “[b]ecause the parties would likely have com-
mitted interpretation of a [AAA] rule to a [AAA] arbitrator,
that particular issue of procedure was left for the arbitrator to
decide.”1 Opinion at 9074 (citing Howsam, 537 U.S. at 86).
1
Such approach is correct notwithstanding the majority’s citation to out
of circuit cases considering waiver based on extensive participation in liti-
gation. See, e.g., Khan v. Parsons Global Servs., 521 F.3d 421, 428 (D.C.
9086 COX v. OCEAN VIEW HOTEL
Here, neither party disputes the existence nor validity of the
arbitration agreement. Therefore, I concur in the majority’s
decision to compel arbitration. However, I would remand all
other issues to the arbitrator, including the issues of whether
the arbitration provision was waived or breached, and there-
fore dissent to the extent the court holds otherwise.2 See How-
sam, 537 U.S. at 85.
II
Let me add that I find the majority’s treatment of Brown v.
Dillard’s, Inc., 430 F.3d 1004 (9th Cir. 2005), to be problem-
atic and I would not reach it. If I, rather than the arbitrator,
Cir. 2008) (holding that Parsons waived right to compel arbitration by “fil-
ing a motion for summary judgment based on matters outside of the plead-
ings”); In re Tyco Int’l Ltd. Sec. Litig., 422 F.3d 41, 43, 46 (1st Cir. 2005)
(considering question of waiver after the “AAA dismissed the Tyco
demand for arbitration . . . for lack of written consent”); PPG Indus., Inc.
v. Webster Auto Parts Inc., 128 F.3d 103, 107 (2d Cir. 1997) (holding that
“a party waives its right to arbitration when it engages in protracted litiga-
tion that prejudices the opposing party (emphasis added)); Great W. Mort-
gage Corp. v. Peacock, 110 F.3d 222, 233 (3d Cir. 1997) (“Indeed, a party
waives the right to compel arbitration only in the following circumstances:
when the parties have engaged in a lengthy course of litigation, when
extensive discovery has occurred, and when prejudice to the party resist-
ing arbitration can be shown.” (emphasis added)).
2
The majority opinion states that my approach leads to “a strange result:
the arbitrator would get first crack at defenses to a motion to compel arbi-
tration based on waiver or breach.” Opinion at 9074-75 n.5. However, the
majority opinion’s approach is no less strange; it would require a court to
answer the question of waiver before deciding whether the question of
waiver is one for the arbitrator to decide. See Opinion at 9073 n.4, 9074-
75. Such an approach leads to a waste of judicial resources should the
court find that the arbitration clause was not breached or waived and it
does take into account the FAA’s policy favoring enforcement of arbitra-
tion agreements. Although not directly on point, Buckeye Check Cashing
instructs us that when faced such a “conundrum” we must “resolve[ ] it in
favor of the separate enforceability of arbitration provisions.” 546 U.S. at
448-49.
COX v. OCEAN VIEW HOTEL 9087
were to reach the question of whether or not arbitration was
properly invoked, however, I would reluctantly conclude that
Brown controls this case. In my view, there is simply no prin-
cipled difference between the holding that Ms. Brown prop-
erly invoked arbitration in Brown and the district court’s
finding that Mr. Cox properly invoked arbitration here.