Van Kleef v. Azria CA2/2 ( 2022 )

Filed 8/25/22 Van Kleef v. Azria CA2/2
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
PAUL VAN KLEEF, B314772
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No.
v. 19STCV28303)
LUBOV AZRIA, as Executor,
etc.,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County, Maurice A. Leiter, Judge. Affirmed.
Jeffer, Mangels, Butler & Mitchell and Vatche J. Zetjian for
Defendant and Appellant.
Affeld Grivakes, David W. Affeld, and Damion D. D.
Robinson for Plaintiff and Respondent.
******
A person who signed contracts ceding his controlling
percentage over a company was subsequently fired by the
company’s new owner. The new owner subsequently died. The
person sued the owner’s estate and others. The estate
participated in the litigation for nearly two years before moving
to compel arbitration. The trial court denied the motion to
compel on the grounds that (1) the claims at issue in the lawsuit
fell outside of the pertinent arbitration agreement, and (2) the
estate had waived its right to seek arbitration. We conclude that
the trial court’s second rationale was correct, and have no
occasion to reach the first. Accordingly, we affirm.
FACTS AND PROCEDURAL BACKGROUND
I. Facts1
A. Clean Concept, LLC (the LLC)
In 2015, Paul Van Kleef (plaintiff) and Robert McFarlane
(McFarlane) invented what they deemed to be an “innovative pest
control product.” It was a bug zapper. In early 2016, plaintiff
and McFarlane, as 50/50 partners, formed the LLC as a vehicle
for manufacturing and distributing their so-called “Zapplight.”
The LLC was created in Nevada, but its principal place of
business was Los Angeles, California.
1 These facts are based on the allegations in the operative
complaint as well as facts contained in the declarations filed by
the parties.
2
B. Max Azria (Max)2 acquires a controlling interest
in the LLC, and uses it to raid the LLC and fire plaintiff
Plaintiff and McFarlane needed capital to expand the LLC.
The LLC’s online sales consultant, Yasmine Hanane (Hanane),
recommended Max as a potential source of funding. At that time,
Max was Hanane’s mentor as well as her paramour. Max was
married to Lubov Azria (Lubov).
In the spring of 2016, plaintiff and McFarlane spoke with
Max. In those discussions, Max agreed to invest $2 million in the
LLC and to pay its day-to-day operating expenses.
Based on those promises, plaintiff, McFarlane, and Max in
June 2016 signed an operating agreement for the LLC that (1)
named Max, plaintiff, and McFarlane as “members” of the LLC;
(2) granted Max a controlling 68 percent ownership interest in
the LLC, with plaintiff and McFarlane each retaining a minority
16 percent interest in the LLC; and (3) named Max, plaintiff,
McFarlane, and Hanane as “managers” of the LLC.
In November 2016, the parties executed a first amended
operating agreement. That further agreement added Hanane as
a “member,” with Max retaining a 52 percent controlling interest,
Hanane being granted a 24 percent interest, and plaintiff and
McFarlane each retaining a 12 percent interest. Plaintiff asserts
that he signed this new agreement “under extreme financial
duress.”
Max never made the promised, $2 million investment in the
LLC.
2 Because Max Azria and Lubov Azria share the same last
name, we will use their first names for clarity’s sake. We mean
no disrespect.
3
Max thereafter proclaimed himself to be a “god” who would
thenceforth, as the LLC’s controlling member, make all decisions
for the LLC. In that vein, Max used the LLC’s assets and funds
to finance his other business ventures and for nonbusiness
purposes, usurped the LLC’s business opportunities, and paid
himself (and Hanane) exorbitant salaries.
In late November 2017, Max terminated plaintiff’s
employment with the LLC, which was governed by a separate
“services agreement” that the parties executed in June 2016.
Max provided no reason for the termination, and did not pay
plaintiff the severance package required for terminations without
cause under the services agreement.
After his termination, plaintiff in April 2018 and November
2018 invoked his right as a member of the LLC to inspect the
LLC’s books and records; his requests were denied.
C. Max dies, and Lubov assumes control of the LLC
Max passed away on May 6, 2019. By virtue of the original
operating agreement, Lubov—as Max’s spouse—became a
nonvoting member with Max’s 52 percent of the LLC’s interest.
In August 2019, Hanane convened an “emergency meeting”
of the LLC’s remaining members. Two of the voting members—
Hanane and McFarlane—voted to convert Lubov’s nonvoting
interest into a voting interest, thereby making her the controlling
member of the LLC. Plaintiff objected to the meeting on the
basis of improper notice, so did not vote. According to plaintiff,
McFarlane sanctioned this maneuver because Max’s and Lubov’s
lax control over the LLC had also allowed McFarlane to raid the
LLC for his “personal benefit.”
4
II. Procedural Background
A. Pleadings
1. Plaintiff’s operative complaint
After filing an initial complaint in August 2019, plaintiff
filed a 269-paragraph operative first amended complaint in
September 2019,3 and later a supplemental complaint adding
allegations against Lubov. In 20 different claims, plaintiff sued
the LLC, Max, Hanane, McFarlane, and Lubov as well as the
“Estate of Max Azria” (Max’s estate) (collectively, defendants).
Plaintiff alleged that he would “amend his complaint to
substitute the executor, administrator, or trustee of [Max’s
estate] once the identity of the person becomes known.”
Plaintiff brought some claims in his individual capacity,
and other claims as derivative claims on behalf of the LLC.
As an individual, plaintiff (1) brought two claims based on
a breach of contract—namely, (a) all defendants’ failure to allow
plaintiff to inspect the LLC’s books and records (claim No. 3), and
(b) Lubov’s conduct in “causing” the LLC’s members to vote to
make her a voting member (claim No. 8); (2) brought five tort or
tort-related claims—namely, (a) three breach of fiduciary duty
claims against Max, Max’s estate, Hanane, McFarlane, and
Lubov for misappropriating the LLC’s assets and opportunities,
for elevating Lubov to be the voting, controlling member of the
LLC, and for oppressing the LLC’s minority owners (claim Nos. 4,
7 and 9), (b) a claim that Max, Max’s estate, and Hanane
fraudulently induced plaintiff to sign the June 2016 operating
3 These complaints were filed mere months after plaintiff
pled no contest to the misdemeanor crime of accessing or using
the LLC’s computer data and taking supporting documentation
without permission.
5
agreement (claim No. 2), and (c) a claim for declaratory relief that
defendants committed these various torts and breaches of
contract (claim No. 1); (3) brought a claim for an equitable
accounting of the LLC’s assets (claim No. 13); and (4) brought six
employment-related claims against the LLC premised on breach
of contract, tort, or Labor Code violations—namely, (a) failure to
pay earned wages in accordance with the services agreement
(claim No. 14), (b) failure to provide itemized wage statements
(claim No. 15), (c) failure to indemnify plaintiff for employment-
related expenses (claim No. 16), (d) breach of the services
agreement (claim No. 17), (e) wrongful termination in violation of
public policy (claim No. 18), and (f) retaliation under Labor Code
section 1102.5 (claim No. 19), which was also brought against
Max and Max’s estate.
On behalf of the LLC, plaintiff (1) brought two claims for
breach of fiduciary duty against Max, Max’s estate, Hanane,
McFarlane, and Lubov—namely, (a) for misappropriating the
LLC’s assets and opportunities, and (b) for elevating Lubov to a
voting, controlling member (claim Nos. 5 and 10); (2) brought a
claim against all defendants for conversion of the LLC’s funds as
well as a claim against Max, Max’s estate, and Hanane for money
had and received (claim Nos. 11 and 12); and (3) brought a claim
against Max, Max’s estate, and Hanane for civil theft under
Penal Code section 496 (claim No. 20).
As relief, plaintiff seeks compensatory and punitive
damages. In other pleadings, plaintiff estimated that his
individual compensatory damages total $36,671,150 and that the
LLC’s compensatory damages total $80 million.
6
2. Responsive pleadings
a. From Max’s estate
Max’s estate retained counsel, which was the same counsel
Lubov retained.4 Through its counsel, Max’s estate
acknowledged receipt of plaintiff’s operative complaint; answered
that complaint, and in so doing, alleged 24 affirmative defenses;
and filed a case management statement jointly with other
defendants demanding a jury trial.
b. From the other defendants
The LLC, Hanane, and McFarlane answered the operative
complaint jointly with Max’s estate, and Lubov answered
separately. The LLC, Hanane, and McFarlane each filed cross-
complaints against plaintiff.
B. Postcomplaint litigation
1. Preliminary injunction(s)
After Lubov wrote to the LLC’s members in September
2020 informing them that she was going to wind down the LLC
and liquidate its assets, plaintiff sought—and the trial court
issued—a preliminary injunction prohibiting Lubov, the LLC,
and the LLC’s other members from “taking any action to
liquidate, dissolve, or wind up [the LLC]” or “causing [the LLC] to
pay any asserted debts to [Lubov] outside the ordinary course of
business.” In December 2020 and again in June 2021, the trial
court modified the preliminary injunction to require Lubov and
the LLC to grant plaintiff access to the LLC’s offices, its cloud
computer system, and its online data.
Max’s estate filed oppositions to plaintiff’s motion for the
injunction as well as its subsequent modifications.
4 Max’s estate and Lubov later each retained separate
counsel.
7
2. Discovery
Plaintiff served extensive discovery on defendants. Max’s
estate also propounded form interrogatories jointly with the other
defendants.
Max’s estate served responses to plaintiff’s discovery
requests, including his requests for document production,
requests for admissions, form interrogatories, and special
interrogatories. The attorney for Max’s estate endorsed each of
those responses, and Lubov verified the estate’s supplemental
responses to plaintiff’s requests for admission and requests for
document production.
Plaintiff filed motions to compel further responses, and
defendants—including Max’s estate—opposed those motions.
The trial court granted the motions to compel, and ultimately
issued monetary sanctions against the LLC and Lubov.
3. Substitution of Lubov as the “personal
representative” of Max’s Estate
In April 2020, plaintiff asked the probate court to appoint
Lubov—as the executor named in Max’s will—as the personal
representative for Max’s estate. Lubov filed a competing petition.
In November 2020, the probate court issued an order naming
Lubov as the “Executor” and personal representative of Max’s
estate and thereafter issued letters testamentary.
In January 2021, Lubov rejected the claims on Max’s estate
that plaintiff had filed back in April 2020—demanding $80
million on behalf of the LLC and over $36 million on his own
behalf.
On April 26, 2021, the trial court granted plaintiff’s motion
to substitute, in place of Max’s estate in the operative complaint,
8
Lubov in her capacity as “personal representative” of Max’s
estate.
C. Personal representative’s motion to compel
arbitration
On June 21, 2021, Lubov—acting as personal
representative for Max’s estate—moved to compel arbitration.
The basis for the motion was the arbitration clause in the
operating agreement, which required mediation and then
arbitration of “any controversy, dispute or claim between any of
the parties hereto arising out of or related to this Agreement or
any transactions resulting hereunder.”
After further briefing and a hearing, the trial court denied
the motion on two grounds. First, the court ruled that Max’s
estate had “failed to meet the burden of establishing the . . .
applicability of an agreement to arbitrate” because the operating
agreement did not apply to many of the parties and claims in
plaintiff’s operative complaint. Second, the court found that
Max’s estate had “waived the right to arbitrate” because it had,
for nearly two years, “active[ly]” participated in the lawsuit by
“answer[ing] the complaint,” “engag[ing] in discovery and
significant motion practice,” litigating the preliminary injunction
and its modifications, and “attend[ing] multiple hearings in this
action and various related actions.” The court rejected Lubov’s
argument that her “recent appointment as [the estate’s personal
representative] . . . relieve[d] her and the estate from the
obligation to timely seek arbitration.”
D. Appeal
Lubov, as personal representative for Max’s estate, filed
this timely appeal.
9
DISCUSSION
Max’s estate argues that the trial court erred in denying its
motion to compel arbitration because (1) the disputes in this case
were within the scope of the operating agreement’s arbitration
clause, and (2) the trial court was wrong to find that the estate
had waived its right to arbitrate. We review an order denying a
motion to compel arbitration for an abuse of discretion. (Whaley
v. Sony Computer Entertainment America, Inc. (2004) 121
Cal.App.4th 479, 484.) In so doing, we review de novo questions
of law as well as the application of that law to undisputed facts,
and review for substantial evidence any factual findings made by
the trial court. (Coast Plaza Doctors Hospital v. Blue Cross of
California (2000) 83 Cal.App.4th 677, 684; Julian v. Glenair, Inc.
(2017) 17 Cal.App.5th 853, 864.) Waiver is typically a factual
finding. (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 319;
Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59
Cal.4th 348, 375 (Iskanian), abrogated on another ground by
Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906.)
Because, as we explain, the trial court’s waiver finding is
supported by substantial evidence, we have no occasion to
consider the trial court’s first rationale regarding the scope of the
arbitration clause.
I. The Law on Waiver, Generally
Although a trial court must issue an order compelling
arbitration if the controversy at issue is within the ambit of a
mutually agreed upon arbitration clause (Code Civ. Proc., §
1281.2; Vandenberg v. Superior Court (1999) 21 Cal.4th 815,
830), a party to such a clause may waive its right to seek
arbitration by litigating the matter at issue in court rather than
insisting upon arbitration (Code Civ. Proc., § 1281.2, subd. (a); St.
10
Agnes Medical Center v. PacifiCare of California (2003) 31
Cal.4th 1187, 1196 (St. Agnes); Douglass v. Serenivision, Inc.
(2018) 20 Cal.App.5th 376, 389). A waiver of the right to
arbitrate is “not to be lightly inferred and the party seeking to
establish a waiver”—here, plaintiff—“bears a heavy burden of
proof.” (St. Agnes, at p. 1195.) However, and as noted above, we
review a trial court’s factual finding of waiver only for substantial
evidence, which obligates us to view the record in the light most
favorable to the court’s finding. (Id. at p. 1196; Conservatorship
of O.B. (2020) 9 Cal.5th 989, 1011-1012.)
Whether a party has waived its right to arbitrate in any
particular case is not governed by any “single test.” (St. Agnes,
supra, 31 Cal.4th at p. 1195; Christensen v. Dewor Developments
(1983) 33 Cal.3d 778, 782.) Instead, courts look to the totality of
the circumstances. Our Supreme Court has identified several
such circumstances: “‘“(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 to arbitrate 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 available in arbitration] had taken place’; and (6)
whether the delay ‘affected, misled, or prejudiced’ the opposing
party.’”’” (St. Agnes, at p. 1196.)
11
II. Analysis
A. Substantial evidence supports the trial court’s
finding that Max’s estate waived its right to arbitrate
From the time Max’s estate was named as a defendant in
plaintiff’s September 2019 operative complaint until Lubov, as
personal representative for the estate, moved in June 2021 to
compel arbitration, the estate actively litigated plaintiff’s lawsuit
in a judicial forum. Through its counsel, Max’s estate
acknowledged receipt of plaintiff’s complaint, filed an answer to
that complaint, filed a case management statement demanding a
jury trial on the complaint, responded to multiple discovery
requests, opposed plaintiff’s motions for a preliminary injunction
and its modifications, opposed plaintiff’s motions to compel
discovery responses and to impose discovery sanctions,
propounded discovery, and acceded to all of the trial court’s
injunctive and discovery orders. During this nearly two-year
period while the estate actively litigated these matters, the estate
uttered not a word about arbitration.
Although a party will not be deemed to have waived its
right to arbitration merely by responding to a complaint, by
participating in litigation to any extent, or by responding to
“preliminary court motions” (Iskanian, supra, 59 Cal.4th at p.
377; Groom v. Health Net (2000) 82 Cal.App.4th 1189, 1197),
Max’s estate took actions that are wholly inconsistent with an
intention to arbitrate by invoking the machinery of judicial
litigation to request a jury trial and oppose plaintiff’s motions for
discovery and injunctive relief, by delaying nearly two years
before requesting arbitration, and by taking advantage of judicial
discovery procedures when it joined with the other defendants in
propounding written discovery. What is more, this delay
12
certainly misled and prejudiced plaintiff, who—if the estate’s
motion to compel arbitration were granted—would have to
relitigate each and every one of the various motions that occupied
the trial court’s time for nearly two years.
B. Counterarguments
Max’s estate attacks the trial court’s waiver finding with
two broad categories of arguments—namely, (1) there can be no
waiver against the estate as a matter of law, and (2) even if there
can be, the trial court erred in its analysis of the pertinent
factors.
1. No waiver as a matter of law
Max’s estate makes what boils down to two arguments
regarding why it cannot be deemed, as a matter of law, to have
waived its right to arbitration.
First, Max’s estate argues that it could not have waived its
right to arbitrate because it requested arbitration mere months
after Lubov was substituted into this case as the estate’s personal
representative; all of the estate’s conduct before the trial court
allowed that substitution, it argues, must be ignored. (Cf. Prob.
Code, § 9621 [duly appointed personal representative can enter
into an arbitration agreement].) The estate’s argument in this
regard seems to have four steps: (1) “[a] person has no power to
administer [an] estate until the person is appointed personal
representative and the appointment becomes effective” (Prob.
Code, § 8400, subd. (a); Ferraro v. Camarlinghi (2008) 161
Cal.App.4th 509, 546); (2) compliance with the statutory
requirements for appointment is mandatory, as there is no such
thing as a “de facto” personal representative (Pryor v. Downey
(1875) 50 Cal. 388, 399-400 (Pryor) [“Under our system, there is
probably no such thing as an executor de son tort”]; Bowden v.
13
Pierce (1887) 73 Cal. 459, 463 (Bowden) [same]); and (3) any
actions taken by a person who is not properly appointed as the
personal representative of an estate are void (Texas Co. v. Bank
of Amer. National Trust & Savings Assn. (1935) 5 Cal.2d 35, 40
(Texas Co.) [act by person who has not satisfied requirements for
appointment as administrator “is void”]; Aldrich v. Willis (1880)
55 Cal. 81, 85-86 [same]); such that (4) everything the estate did
prior to Lubov’s substitution into the case as the estate’s personal
representative in April 2021 was void and cannot count against
the estate, which means that the estate really only participated
in the litigation for two months before it moved to compel
arbitration.
We reject this argument on both factual and legal grounds.
Factually, it misses the mark because most of the actions the
estate took during the litigation before the trial court were not
taken by Lubov, but rather by the estate’s attorney, and it is well
settled that an attorney is an agent whose acts bind the client (as
the attorney’s principal). (Blanton v. Womancare, Inc. (1985) 38
Cal.3d 396, 403 [attorney is agent for client]; Hartford Casualty
Ins. Co. v. J.R. Marketing, L.L.C. (2015) 61 Cal.4th 988, 1011
[same]; Contreras v. Dowling (2016) 5 Cal.App.5th 394, 418
[same]; Civ. Code, § 2334 [principal bound by acts of agent].)
Legally, it misses the mark because the cases declaring the
personal representative’s conduct to be “void” deal with whether
an estate can void its transactions with private third parties.
(E.g., Pryor, supra, 50 Cal. at pp. 399-400; Texas Co., supra, 5
Cal.2d at p. 40; Bowden, supra, 73 Cal. at p. 462.) They do not
address the situation here, where the issue is whether an estate
can void its own prior actions before a court.
14
Second, Max’s estate argues that the waiver doctrine
cannot apply here as a matter of law because (1) waiver is a
doctrine that can apply only when a trial court has fundamental
jurisdiction in a case (People v. Lara (2010) 48 Cal.4th 216, 224-
225 (Lara)), and (2) the trial court in this case lacked
fundamental jurisdiction over the estate because a decedent’s
estate is just an amalgamation of “assets and liabilities of a
decedent” and is not an “entity known to the law” that can be a
“party” to a lawsuit or can have a lawyer unless and until a
personal representative is properly appointed (Tanner v. Estate of
Best (1940) 40 Cal.App.2d 442, 445; Meleski v. Estate of Albert
Hotlen (2018) 29 Cal.App.5th 616, 624-625; Estate of Bright v.
Western Air Lines, Inc. (1951) 104 Cal.App.2d 827, 828-829).
Because the estate was not a “party” until April 2021, the estate
reasons, nothing it did before then can count toward a finding of
waiver.
We reject this argument as well. The trial court in this
case had fundamental jurisdiction: No one disputes that the
court had fundamental jurisdiction over the subject matter of the
case, and whether or not an estate is considered an “entity” (for
whom there must be jurisdiction over the person) or instead a
collection of property (for which there must be jurisdiction over
the property), there is no dispute that the court had such
jurisdiction. That is because the estate answered the operative
complaint and because the property comprising the estate is all
subject to the court’s jurisdiction. (Factor Health Management v.
Superior Court (2005) 132 Cal.App.4th 246, 250; Code Civ. Proc.,
§§ 1014, 418.10, subd. (e)(3); Capra v. Capra (2020) 58
Cal.App.5th 1072, 1082-1083; Estate of Kampen (2011) 201
Cal.App.4th 971, 1003; Zaragoza v. Superior Court (1996) 49
15
Cal.App.4th 720, 725.) Thus, the absence of a properly appointed
personal representative is, at most, a defect in compliance with
statutory procedures. As such, it means that the trial court was,
at most, acting in excess of jurisdiction in permitting the estate to
litigate through its attorney, and “parties may be precluded from
setting . . . aside” “act[s] in excess of jurisdiction” “by such things
as waiver, estoppel, or the passage of time.” (Lara, supra, 48
Cal.4th at p. 225; Rogers v. Hirschi (1983) 141 Cal.App.3d 847,
851-852 (Rogers).)
What is more, the fact that Max’s estate may not have been
capable of being a party prior to Lubov’s appointment does not
mean it was incapable of waiving its right to arbitration. The
actions of the estate’s attorney, as noted above, are attributable
to the estate. There is no evidence that the estate did not
actually authorize the attorney to act on its behalf. And even if
we assume that the estate was incapable of being a “principal” at
that time, the estate’s attorney had ostensible authority to act on
its behalf. A principal can be bound by the acts of its ostensible
agent if (1) a third party (here, the trial court) “held a reasonable
belief in the [agent-attorney’s] authority,” (2) the principal’s
conduct—active or neglectful—“generated the [court’s] belief in
the [agent-attorney’s] authority,” and (3) the court “was not
negligent in holding the belief.” (LAOSD Asbestos Cases (2018)
28 Cal.App.5th 862, 884, fn. 12; Associated Creditors’ Agency v.
Davis (1975) 13 Cal.3d 374, 399-400; Kelley v. R.F. Jones Co.
(1969) 272 Cal.App.2d 113, 120-121; Saks v. Charity Mission
Baptist Church (2001) 90 Cal.App.4th 1116, 1137-1138.) None of
the cases the estate cites for the proposition that an estate cannot
be a “party” hold that an estate cannot retain counsel to act on its
behalf. To the contrary, both statutes and case law indicate that
16
an “estate” may function as a placeholder party of sorts as long as
the proper representative for the estate is appointed prior to the
entry of judgment, which certainly happened here. (E.g., Prob.
Code, § 552; Blue Ridge Ins. Co. v. Stanewich (9th Cir. 1998) 142
F.3d 1145, 1150; accord, Maggiora v. Palo Alto Inn, Inc. (1967)
249 Cal.App.2d 706, 711-713 [noting that counsel may sometimes
act legitimately on behalf of a receivership even prior to approval
of a receiver]; cf. Sacks v. FSR Brokerage, Inc. (1992) 7
Cal.App.4th 950, 956-957 [“judgment cannot be rendered for or
against a decedent . . . until the representative has been made a
party by substitution”], italics added.) Thus, the trial court
reasonably believed that the estate’s attorney had the ostensible
authority to act on the estate’s behalf.
We have come across no case directly on point with the
facts of this case. But the general principles set forth above
support the trial court’s finding of waiver. So does the policy
underlying the doctrine of waiver. Waiver fundamentally rests
on notions of estoppel—namely, that a party cannot act one way
for a period of time and then “do a 180” and act inconsistently.
(McConnell v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1980)
105 Cal.App.3d 946, 951.) To allow a party to do so is to allow
that party to ‘“trifle with the courts.”’ (Rogers, supra, 141
Cal.App.3d at p. 853; Estate of Prindle (2009) 173 Cal.App.4th
119, 132.) Yet that is precisely what the estate aims to do with
its motion to compel arbitration: For nearly two years, it fully
engaged in the litigation process in court and, in June 2021, for
the first time sought to hit the “reset button” by starting the
entire case all over again in an arbitral forum. The trial court did
not abuse its discretion in refusing to allow such a maneuver.
(Accord, Satterfield v. Garmire (1967) 65 Cal.2d 638, 645
17
[“‘Equity does not wait upon precedent which exactly squares
with the facts in controversy, but will assert itself in those
situations where right and justice would be defeated but for its
intervention.’”].)
2. Improper analysis of circumstances bearing on
waiver
Max’s estate alternatively argues that, even if its conduct
can constitute a waiver legally, its conduct in this case did not
constitute a waiver factually.
The estate’s arguments in this regard boil down to two
points.
First, the estate argues that our multi-factor analysis of
waiver should only look to the estate’s conduct after Lubov’s
substitution into plaintiff’s case as personal representative in
April 2021; as noted above, we reject this argument.
Second, the estate argues that several of the circumstances
relevant to waiver cut in its favor—chiefly, that (1) this case was
nowhere near the trial date, so the third factor (“whether [the]
party . . . requested arbitration . . . close to the trial date”) and
the sixth factor (“whether the delay [in requesting arbitration]
‘affected, misled, or prejudiced’ the opposing party”) were not
satisfied, and (2) delay in requesting arbitration (the third factor)
only counsels in favor of a finding of waiver when the delay is
“unjustified” or “unreasonable” (Iskanian, supra, 59 Cal.4th at
pp. 375, 377), and here it was not unjustified.
Neither argument is persuasive.
To begin, the nearness of trial is not dispositive of this case
factually or legally. Factually, the main reason the case was
nowhere near trial after almost two years is because defendants
resolutely and consistently refused to comply with their discovery
18
obligations, necessitating motions to compel and warranting
monetary sanctions against some, including the LLC and Lubov.
Giving dispositive weight to the temporal distance from trial
would reward defendants for their delay tactics, which would set
up some mighty perverse incentives. Legally, the closeness of
trial is not dispositive because the third factor looks to closeness
to trial or “delay[] for a long period before seeking a stay.” (St.
Agnes, supra, 31 Cal.4th at p. 1195.) It is also not dispositive to
the sixth, prejudice factor. Contrary to what the estate suggests,
what matters to the prejudice inquiry is whether the estate’s
conduct “deprive[d plaintiff] of the advantages of arbitration as
an ‘expedient, efficient and cost-effective method to resolve
disputes.’” (Burtoon v. Cruise (2010) 190 Cal.App.4th 939, 948;
St. Agnes, at pp. 1205-1206; Gloster v. Sonic Automotive, Inc.
(2014) 226 Cal.App.4th 438, 450; Hoover v. American Income Life
Ins. Co. (2012) 206 Cal.App.4th 1193, 1205.) The estate’s motion
to compel arbitration would deprive plaintiff of the advantages of
arbitration as an expedited, efficient, and cost-effective method of
resolving disputes because the net effect of granting the estate’s
motion would be, as noted above, to hit the reset button entirely
and require the parties to relitigate all of the discovery and
preliminary injunction methods anew. This would be
inexpedient, inefficient, and cost prohibitive.
Further, the delay in this case was unjustified and
unreasonable. Even if the estate’s opposition to plaintiff’s
motions may not be enough by itself to render the resulting delay
unjustified or unreasonable, the trial court’s subsequent orders
compelling further discovery—and, indeed, issuing sanctions
against several defendants—is evidence that the delay was
unjustified and unreasonable. Further, the estate has provided
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no compelling reason why it sat around for nearly two years
pretending to be fine with being a litigant in court before, upon
retaining new counsel, coming up with a novel theory for jumping
directly to “GO” and starting over.
DISPOSITION
The order denying the motion to compel arbitration is
affirmed. Plaintiff is entitled to its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
______________________, J.
HOFFSTADT
We concur:
_________________________, P. J.
LUI
_________________________, J.
CHAVEZ
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