Sprunk v. Prisma LLC

Filed 8/23/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
MARIA ELENA SPRUNK et al., B268755
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BC471171)
v.
PRISMA LLC,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County. Jane L. Johnson, Judge. Affirmed.
Markun Zusman Freniere & Compton and Daria Dub
Carlson for Defendant and Appellant.
Knapp, Petersen & Clarke, André E. Jardini, Gwen
Freeman and K. L. Myles for Plaintiff and Respondent.
___________________________________
The primary issue presented in this appeal is whether a
defendant in a putative class action can waive its right to compel
arbitration against absent class members by deciding not to seek
arbitration against the named plaintiff. In deciding that issue,
we must also consider the scope of the “futility” rule, which
excuses a party in some circumstances from seeking to enforce an
arbitration right when the state of the law at the time would
make the effort futile.
We agree with the trial court that, under the circumstances
of this case, defendant and appellant Prisma LLC, doing business
as Plan B Club (Plan B) waived its right to seek arbitration by
filing and then withdrawing a motion to compel arbitration
against the named plaintiff, Maria Elena Sprunk, and then
waiting until after a class had been certified to seek arbitration
against class members. We therefore affirm the trial court’s
denial of Plan B’s motion to compel arbitration.
BACKGROUND
Sprunk is the named plaintiff in a wage and hour class
action that the trial court certified on April 24, 2015. Plan B
owns and operates a bar and restaurant in Los Angeles in which
exotic (i.e., bikini-clad) dancers perform. Sprunk and the other
class members are dancers who performed at Plan B.
Sprunk alleges that the dancers were misclassified as
independent contractors rather than employees, and that they
were consequently denied various benefits that the law requires
for employees, such as minimum wages, meal periods, and
reimbursement of expenses. Sprunk also alleges that Plan B
misappropriated tips.
2
Sprunk and all other class members signed contracts
containing an arbitration clause. There were two versions of the
arbitration clause. One version, which was in effect prior to July
2011, did not specifically address class arbitration.1 The other
version, which Plan B claimed was in effect beginning in July
2011, contained an express waiver.2 Sprunk signed the first
version of the agreement.
1. Proceedings in the Trial Court
Sprunk filed her complaint on October 7, 2011. On
November 28, 2011, Plan B sent an arbitration demand. Plan B’s
demand letter stated that “new case law has issued which
permits demanding and requiring arbitration of individual claims
despite class allegations,” citing AT&T Mobility LLC v.
Concepcion (2011) 563 U.S. 333 (Concepcion) and Stolt-Nielsen
1 This category of arbitration agreement stated in its
entirety: “Arbitration: Any dispute, statutory, contractual or
tort, arising out of this Contract or Entertainer’s performances,
the relationship between the parties, or any other dispute
between the parties, shall be decided by binding Arbitration,
pursuant to the Federal Arbitration Act, and shall be before a
neutral arbitrator agreed upon by the parties who shall be
permitted to award any relief available in a Court. Any award
may be entered in any court having jurisdiction.”
2 That category of arbitration agreement was identical to
the prior version, but added language stating: “There is no right
to class arbitration, and Entertainer must arbitrate individually.
The Arbitrator shall have no power to consolidate claims of
others or proceed as a class or representative action.” It also
added the sentence, “Employer shall pay any costs of arbitration
required by applicable law.”
3
S. A. v. AnimalFeeds Int’l Corp. (2010) 559 U.S. 662 (Stolt-
Nielsen).
The parties filed a joint initial status report on
December 30, 2011, in which Plan B stated that it “wishes to file
a motion to compel arbitration at the earliest available
opportunity.” Sprunk stated that she intended to oppose the
arbitration motion, but agreed that Plan B’s “contemplated
motion to compel arbitration is an issue that should be resolved
before discovery on the merits, or discovery with respect to class
certification issues, is commenced.”
On January 25, 2012, Plan B filed a “Petition to Compel
Individual Arbitration and Stay Superior Court Proceedings.”
The petition sought arbitration of Sprunk’s individual claims
only.
Sprunk filed an opposition to the petition on February 15,
2012, in which she argued, among other things, that the
“extremely broad” arbitration clause that Sprunk signed
permitted arbitration of class claims. For that reason, Sprunk
claimed that the court must decide “whether or not to order
arbitration of all individual and class claims,” or alternatively
should deny Plan B’s motion on the ground that it sought to limit
the arbitration only to individual claims. Sprunk also argued
that, to the extent the arbitration agreement is “construed as a
class action waiver,” Plan B could not compel arbitration because
such a waiver would interfere with the right of employees to
engage in collective action under federal law. In support of that
argument Sprunk cited a January 3, 2012 decision by the
National Labor Relations Board (Board). (D. R. Horton, Inc.
(2012) 357 NLRB 2277 (Horton I), revd. in part sub nom. D.R.
Horton, Inc. v. N.L.R.B. (5th Cir. 2013) 737 F.3d 344 (Horton II).)
4
On September 6, 2012, Plan B filed a notice withdrawing
its motion for arbitration. Plan B filed an answer the same day.
The answer included several affirmative defenses based upon the
arbitration agreements. Plan B also filed a cross-complaint,
which it amended on November 14, 2002.
The cross-complaint named Sprunk and 500 fictional “Roe”
cross-defendants, whom Plan B described as “professional
entertainers who performed under contract as exotic dancers” at
Plan B’s premises during the class period. Plan B alleged that it
was entitled to a “setoff” in the form of the dance fees that the
cross-defendants earned in the event that the cross-defendants
were adjudicated to be employees. Plan B based the allegation on
a provision in the cross-defendants’ contracts stating that “[i]f
Plan B were an ‘employer’ all dance fees would be its sole
property,” and that Plan B would pay the cross-defendants only
“the legal minimum wage and any other benefits required by
law.”
On December 19, 2012, Sprunk filed a demurrer and a
motion to strike in response to the cross-complaint. Before those
motions could be heard, Plan B dismissed the cross-complaint
without prejudice.
The parties proceeded with discovery. Sprunk served
interrogatories and deposed four Plan B witnesses. Plan B
served a document request on Sprunk and took her deposition.
Plan B responded to Sprunk’s interrogatories on February 20,
2013, again identifying the arbitration agreements as an
affirmative defense.
Sprunk filed her class certification motion on
September 19, 2014. In opposing class certification, Plan B
argued that a class action was not superior to other forms of
5
litigation because the class members had signed arbitration
agreements. Citing several federal district court decisions, Plan
B asserted that it “could not have previously moved for individual
arbitration of the claims of the unnamed class members” because
the putative class members were not parties to the action prior to
the time the court certified the class. In her reply, Sprunk
argued that Plan B had waived the right to arbitrate by actively
litigating the case.
The trial court granted class certification in a written order
filed on April 24, 2015. The court rejected Plan B’s arbitration
argument. The court found that Plan B’s delay in seeking
arbitration—during which it took advantage of “the court’s
processes”—meant that Plan B had “waived its right to arbitrate
at least as to Plaintiff’s claims.”
Following the court’s ruling, the parties filed a joint status
conference report in which Plan B stated that it intended to file a
motion to compel individual arbitration “of the claims of Plaintiff
and the Class Members.” The court set a date for the motion to
compel arbitration.
2. Plan B’s Motion to Compel Arbitration Against Class
Members
On August 12, 2015, Plan B filed two separate motions to
compel arbitration directed to the class members who signed the
two different versions of the arbitration agreement. In the
motions Plan B again argued that it had not waived the right to
compel arbitration against the unnamed class members because
they were not parties until a class had been certified.
Plan B also argued that withdrawing its original motion to
compel arbitration against Sprunk did not cause an unreasonable
delay. Plan B claimed that it withdrew that motion because it
6
feared that, under the state of the law at the time, the court
might order classwide arbitration, which Plan B did not want.
Plan B argued that it “had no certainty” that the court would
order only individual arbitration because the law at the time
made class arbitration possible even if an arbitration agreement
contained a class action waiver. In particular, Plan B relied on
the holding in Gentry v. Superior Court (2007) 42 Cal.4th 443(Gentry) that a class arbitration waiver in an employment
arbitration agreement is invalid if class arbitration would provide
a significantly more effective means of vindicating the
unwaivable rights of employees than individual arbitration. (42
Cal.4th at p. 450.) Plan B claimed that Gentry’s status was
uncertain until our Supreme Court decided Iskanian v. CLS
Transportation Los Angeles LLC (2014) 59 Cal.4th 348(Iskanian).3
Sprunk opposed the motions on several grounds, including:
(1) Plan B had waived its right to arbitrate; (2) the arbitration
agreements were unconscionable; and (3) Plan B failed to provide
sufficient evidence that the class members actually signed
arbitration agreements.
The trial court heard the motions on October 15, 2015. The
court rejected the argument that the arbitration agreements were
3 In Iskanian, the court held that Concepcion abrogated the
basis for the holding in Gentry. In Concepcion, the United States
Supreme Court held that section 2 of the Federal Arbitration Act
(the FAA, 9 U.S.C. § 1 et seq.) preempted “California’s rule
classifying most collective-arbitration waivers in consumer
contracts as unconscionable,” overruling our Supreme Court’s
decision in Discover Bank v. Superior Court (2005) 36 Cal.4th 148(Discover Bank). (Concepcion, supra, 563 U.S. at pp. 340, 352.)
We discuss the chronology of these decisions in more detail below.
7
unconscionable. However, the court ruled that Plan B had
waived its right to compel arbitration based upon its delay in
seeking arbitration of Sprunk’s individual claims. The court
concluded that the delay was both unreasonable and prejudicial.
The trial court considered and rejected Plan B’s
justifications for its delay in moving to compel arbitration. The
court agreed with Plan B that, prior to certification, Plan B could
not have compelled absent class members to arbitrate. However,
the court concluded that Plan B had unreasonably delayed in
seeking arbitration of Sprunk’s claims. The court noted that Plan
B “could have gone through with [its] motion with Ms. Sprunk”
but instead “made a strategic decision” that it “didn’t want to
take the risk” of classwide arbitration. Even though Sprunk
herself had signed only one form of the arbitration agreement,
Plan B could have brought a motion directed to that version and
“ended the case” if the trial court had ruled in its favor, without
the need to brief and decide the class certification motion.
The trial court rejected Plan B’s argument that the state of
the law at the time it moved to compel arbitration against
Sprunk would have made the motion “futile.” The court observed
that “[t]he law wasn’t clearly against” Plan B, and concluded that
Plan B simply decided it “didn’t want to take the risk” of
classwide arbitration. The court also found that Plan B delayed
unreasonably in moving to compel arbitration even after the
decision in Iskanian, which was filed in June 2014. (Iskanian,
supra, 59 Cal.4th 348.)
The court found that the plaintiffs would be prejudiced by
the four-year delay in adjudicating their claims if the court were
to now order arbitration. The court also expressed concern that
the plaintiffs might be reluctant to “come forward” to arbitrate
8
their claims individually due to “[t]he kind of business that they
are in.”
The court denied Plan B’s motion in a written order filed on
November 6, 2015.
DISCUSSION
1. Plan B Provided Sufficient Evidence of the
Arbitration Agreements
Sprunk initially argues that it is unnecessary to consider
the trial court’s waiver finding because Plan B did not provide
adequate evidence to show that individual class members had
actually signed arbitration agreements. Plan B supported its
motions to compel arbitration with examples of the two different
versions of the arbitration provision attached as exhibits to the
declaration of Plan B’s general manager, Frank Grundel. The
pre-July 2011 version was signed by Sprunk; the copy of the later
version was unsigned. On reply, Grundel submitted a
supplemental declaration stating that “[e]ach and every Class
Member signed one or more forms of the Entertainer Contracts
attached to my original Declaration.”
Sprunk argues that this evidence was insufficient to
establish that the class members were actually parties to an
arbitration agreement. Sprunk claims that “nothing excuses the
failure to attach signed copies to prove the right to arbitrate as to
each class member.”
We reject the argument. Under the California Rules of
Court, rule 3.1330, a party petitioning to compel arbitration must
state “the provisions of the written agreement and the paragraph
that provides for arbitration.” “The provisions must be stated
verbatim or a copy must be physically or electronically attached
to the petition and incorporated by reference.” (Ibid., italics
9
added.) Thus, under this rule, unless there is a dispute over
authenticity, it is sufficient for a party moving to compel
arbitration to recite the terms of the governing provision. (See
Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th
215, 219 (Condee) [holding that rule 371, the predecessor to rule
3.1330, “does not require the petitioner to introduce the
agreement into evidence or provide the court with anything more
than a copy or recitation of its terms”].) The Grundel
declarations met this requirement by providing the two different
versions of the arbitration provision and stating that all class
members signed at least one of those versions.
Sprunk’s reliance on Ruiz v. Moss Bros. Auto Group, Inc.
(2014) 232 Cal.App.4th 836 (Ruiz) is misplaced. In that case,
there was a dispute about whether the plaintiff had actually
signed an employment agreement. The defendant provided
conclusory declarations that the plaintiff, Ruiz, had
“electronically signed” the agreement. (Id. at p. 840.) Ruiz
testified that he could not recall signing an arbitration provision.
(Ibid.) The appellate court found sufficient evidence supporting
the trial court’s finding in favor of the plaintiff in the
authentication dispute. The court distinguished Condee, supra,
88 Cal.App.4th 215, explaining that the court in that case held
“that a petitioner is not required to authenticate an opposing
party’s signature on an arbitration agreement as a preliminary
matter in moving for arbitration or in the event that authenticity
of the signature is not challenged.” (Ruiz, 232 Cal.App.4th at
p. 846.)
Here, Sprunk did not challenge the truth of Plan B’s claim
that each class member signed an arbitration provision; she
merely contested the sufficiency of Plan B’s preliminary
10
evidentiary showing. Moreover, here, unlike in Ruiz, the trial
court implicitly rejected Sprunk’s authentication argument by
considering the merits of Plan B’s motion. The trial court’s ruling
was supported by sufficient evidence.
Sprunk also argues that the trial court should not have
considered Grundel’s statement that each class member signed
one or the other versions of the arbitration agreement because
the statement was submitted for the first time in his reply
declaration. Sprunk objected to that declaration below on the
ground that it included new evidence, and the trial court
overruled the objection. The declaration responded to argument
in Sprunk’s opposition concerning the alleged lack of evidence
“that any unnamed class member signed an arbitration
agreement.” The decision to consider the declaration was within
the court’s discretion. (Alliant Ins. Services, Inc. v. Gaddy (2008)
159 Cal.App.4th 1292, 1307–1308.)
We therefore proceed to consider Plan B’s challenges to the
trial court’s finding that Plan B waived its arbitration right.
2. Sufficient Evidence Supports the Trial Court’s
Waiver Finding
A. Standard of review
Whether a party has waived the right to compel arbitration
is generally a question of fact. A trial court’s finding of waiver is
therefore reviewed under the substantial evidence standard
unless “ ‘the facts are undisputed and only one inference may
reasonably be drawn,’ ” in which case “ ‘the reviewing court is not
bound by the trial court’s ruling.’ ” (St. Agnes Medical Center v.
PacifiCare of California (2003) 31 Cal.4th 1187, 1196 (St. Agnes),
quoting Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 319.)
11
While the parties here do not disagree over the relevant
litigation events, they have very different positions concerning
the inferences that should be drawn from those events. In
particular, they disagree about the reasons for Plan B’s delay in
seeking to compel arbitration and whether Plan B’s conduct was
inconsistent with an intent to arbitrate. Because the trial court
could reasonably draw different inferences from the undisputed
events, we apply the substantial evidence standard in reviewing
the court’s findings on these issues. (Bower v. Inter-Con Security
Systems, Inc. (2014) 232 Cal.App.4th 1035, 1043 (Bower)
[substantial evidence standard applied where “different
inferences may be drawn depending upon the weight to be
afforded to certain facts”].) Under that standard, the trial court’s
finding of waiver is binding on this court if “supported by
sufficient evidence.” (Engalla v. Permanente Medical Group, Inc.
(1997) 15 Cal.4th 951, 983 (Engalla).)
Plan B also raises a legal issue concerning the status of
absent class members. Plan B argues that the trial court erred in
considering Plan B’s delay in moving to compel arbitration before
the court decided class certification because the unnamed class
members were not parties until a class was certified. Because
this argument raises an issue of law concerning the time period
that the trial court could properly consider in analyzing waiver,
we review it de novo. (Sky Sports, Inc. v. Superior Court (2011)
201 Cal.App.4th 1363, 1367 (Sky Sports) [applying the de novo
standard to the issue whether a defendant “waived its right to
compel arbitration because it did not bring the motion before
certification of a class that included parties to the arbitration
agreement”].)
12
In reviewing the trial court’s ruling, we also keep in mind
the “strong policy favoring arbitration agreements” found in both
the FAA and state law. (St. Agnes, supra, 31 Cal.4th at p. 1195.)
In light of that policy, “waivers are not to be lightly inferred and
the party seeking to establish a waiver bears a heavy burden of
proof.” (Ibid.)
B. Factors relevant to waiver
Code of Civil Procedure section 1281.2 provides that, upon
petition by a party to an arbitration agreement, a court shall
order arbitration “if it determines that an agreement exists,”
unless it determines that “(a) [t]he right to compel arbitration
has been waived by the petitioner; or [¶] (b) [g]rounds exist for
the revocation of the agreement.” Although “no single test
delineates the nature of the conduct that will constitute a waiver
of arbitration,” our Supreme Court has identified various factors
that are “relevant and properly considered in assessing waiver
claims.” (St. Agnes, supra, 31 Cal.4th at pp. 1195–1196.) Those
factors, first articulated in Sobremonte v. Superior Court (1998)
61 Cal.App.4th 980, 992 (Sobremonte), are: “ ‘ “(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 intervening steps [e.g.,
taking advantage of judicial discovery procedures not available in
arbitration] had taken place’; and (6) whether the delay ‘affected,
13
misled, or prejudiced’ the opposing party.” ’ ” (St. Agnes, 31
Cal.4th at p. 1196; Sobremonte, 61 Cal.App.4th at p. 992.)
The trial court repeatedly returned to the theme of Plan B’s
delay in discussing the specific St. Agnes factors. In doing so, the
trial court correctly recognized that the issue of delay is
dispositive here. Therefore, before analyzing the specific St.
Agnes factors, we first consider the circumstances of, and Plan B’s
claimed justification for, the nearly four-year delay between the
filing of this action and Plan B’s motions to compel arbitration.
C. Substantial evidence supports the trial court’s
finding that Plan B delayed filing its motions to
compel arbitration so that it could obtain a
strategic advantage
The trial court found that Plan B could have asserted its
right to arbitrate against Sprunk, but made a strategic decision
to delay doing so. Such conduct fits comfortably within the legal
concept of waiver. As the court explained in St. Agnes, “While
‘waiver’ generally denotes the voluntary relinquishment of a
known right, it can also refer to the loss of a right as a result of a
party’s failure to perform an act it is required to perform,
regardless of the party’s intent to relinquish the right.” (St.
Agnes, supra, 31 Cal.4th at p. 1195, fn. 4.) In the context of an
arbitration right, waiver can result from “ ‘ “[unreasonable delay]
in undertaking the procedure.” ’ ” (Id. at p. 1196; see Engalla,
supra, 15 Cal.4th at p. 984 [“the evidence of Kaiser’s course of
delay, . . . which was arguably unreasonable or undertaken in
bad faith, may provide sufficient grounds for a trier of fact to
conclude that Kaiser has in fact waived its arbitration
agreement”].)
14
Plan B does not dispute that unreasonable delay can cause
waiver, but argues that it did not delay at all in seeking
arbitration against the persons who were actually the subject of
its motions. Plan B claims that it could not have moved for, or
even demanded, arbitration from the unnamed class members
until a class had been certified. Plan B therefore “assumes that
had it brought motions to compel individual arbitration of the
claims of the unnamed Class Members prior to certification, the
Court would have denied the motions on the basis that the Court
had no jurisdiction over them because they were not yet, and
might never be if the class was not certified, parties to the
litigation.”
Along with Plan B, we may assume (without deciding) that
a motion to compel arbitration against unnamed class members
would have been premature until a class was certified. However,
that is not the end of our inquiry. Sprunk was a party, and Plan
B could have moved to compel arbitration against her. Indeed, it
did so, and then decided to withdraw the motion. Thus, the
critical issue is whether the trial court could consider Plan B’s
delay in moving to compel arbitration against Sprunk in
determining whether Plan B waived its right to arbitrate against
the unnamed class members, who ultimately did become parties
and for whom Sprunk serves as the class representative. We
conclude that, in the circumstances of this case, the trial court
could properly do so.
i. The trial court properly considered Plan
B’s delay in moving to compel arbitration
against Sprunk
In considering the significance of Plan B’s conduct, the trial
court was not required to ignore the practical realities of the
15
litigation. Sprunk was a signatory to an arbitration agreement.
Thus, as the trial court recognized, Plan B had the procedural
mechanism available to compel arbitration in a manner that, if
successful, would as a practical matter have resolved the judicial
proceedings with respect to the class.
Had Plan B forced Sprunk to individual arbitration, it
likely would have ended the judicial action. While a different
named plaintiff could conceivably have filed a new action, all
class members were subject to an arbitration provision. If
Sprunk had been forced to arbitrate, given the court’s ruling it is
unlikely that any other plaintiff would attempt to litigate in
court.4 And, were someone to make the attempt, it is even less
likely that the result would be different in light of the principle of
stare decisis.
Plan B correctly points out that unnamed class members
would not technically have been bound by the trial court’s rulings
prior to certification. However, this fact does not affect the
waiver analysis. By moving to compel arbitration against
Sprunk, Plan B could have effectively settled the question
whether the claims in this action should be adjudicated in a court
4 The difference between the two forms of the arbitration
provision that the class members signed is immaterial to this
analysis. The difference concerned whether the provision
contained an explicit class arbitration waiver. The version that
Sprunk signed did not include such an explicit waiver. Thus, if
Plan B had succeeded in compelling individual arbitration
against Sprunk, any potential class action plaintiff who had
signed the other version of the arbitration agreement would have
had an even weaker case to avoid individual arbitration.
16
or through arbitration, at least with respect to the form of the
agreement that Sprunk signed.5
Instead, as the trial court observed, there is good reason to
suspect that Plan B made a strategic decision to delay its motion
to compel arbitration to give itself another opportunity to win the
case by defeating a class. Plan B’s stated reason for withdrawing
its motion to compel arbitration against Sprunk was concern
that, based upon the current state of the law, Plan B might be
compelled to participate in class arbitration. Yet Plan B waited
over a year to file its motions to compel arbitration after the
Supreme Court decision that Plan B concedes settled the law in
California on class arbitration waivers. Our Supreme Court
issued its decision in Iskanian on June 23, 2014. Plan B did not
5 This proviso is necessary because, as the trial court
recognized, there is one scenario in which Plan B might have had
a second chance to seek arbitration of some claims following class
certification. If the trial court had denied a motion to arbitrate
against Sprunk individually based upon the absence of an
express class arbitration waiver in her agreement, Plan B might
later have been able to file another motion to arbitrate against
class members who had signed the other version of the
agreement once the class had been certified. But that
hypothetical possibility does not change the fact that a motion to
arbitrate against Sprunk would likely have determined whether
the claims at issue in this case should be arbitrated, probably for
all class members, but at least for those class members who
signed the same version of the agreement as Sprunk. Moreover,
Plan B does not claim that it declined to seek arbitration against
Sprunk because it only wanted to arbitrate against persons who
signed the other version of the agreement. It could not credibly
do so, as it ultimately filed motions below seeking arbitration
against class members under both versions of the agreement.
17
file its motions to compel arbitration until August 12, 2015, over
a year after that decision and after the trial court had issued its
order certifying the class on April 24, 2015.
Based upon this sequence of events, the trial court
explained its conclusion: “So, I think, the defendants rolled the
dice again thinking, maybe, the class wouldn’t be certified. I
don’t know. But that was quite a delay between the time
Iskanian came down and the time defendants said we wanted to
file our motion. So, I think, the actions were inconsistent with
the right to arbitrate.”
An attempt to gain a strategic advantage through litigation
in court before seeking to compel arbitration is a paradigm of
conduct that is inconsistent with the right to arbitrate. For
example, Bower was a putative wage and hour class action in
which the defendant engaged in discovery and attempted to settle
the case on a classwide basis when the class was a modest size.
(Bower, supra, 232 Cal.App.4th at pp. 1038–1040.) When the
plaintiff sought an amendment that would have expanded the
class, the defendant (Inter-Con) moved to compel arbitration.
The trial court found waiver, and the appellate court affirmed,
concluding that Inter-Con’s decision to delay seeking arbitration
“appears to have been tactical.” (Id. at pp. 1045, 1049). Based
upon Inter-Con’s litigation conduct, “[o]ne can infer that Inter-
Con chose to conduct discovery, delay arbitration, and seek a
classwide settlement because it saw an advantage in pursuing
that course of action in the judicial forum.” (Id. at p. 1049.) Such
conduct provided substantial evidence to support the finding that
“Inter-Con’s actions were inconsistent with a right to arbitrate.”
(Id. at p. 1045.)
18
The court in Oregel v. PacPizza, LLC (2015) 237
Cal.App.4th 342 (Oregel) also relied upon a defendant’s strategic
decision in finding waiver. The defendant, PacPizza, engaged in
discovery and delayed moving to compel arbitration until after
the plaintiff had filed his motion for class certification. (Id. at pp.
346–348.) The trial court found waiver on a number of grounds,
including that PacPizza made the strategic decision to seek
arbitration after seeing the plaintiff’s class certification motion.
(Id. at pp. 350–351.)
The appellate court affirmed, rejecting PacPizza’s
explanation that it delayed filing a motion to compel arbitration
until Iskanian had clarified the law on class arbitration. In
analysis that is equally appropriate here, the court concluded
that PacPizza’s decision not to move to compel arbitration until
after the plaintiff had filed his class certification motion was
consistent with a strategic decision rather than a bona fide desire
to await clarification of the law: “[I]f PacPizza had truly believed
the arbitration agreement was unenforceable prior to Iskanian,
as it would have us believe, the looming issue of class
certification would not have made any difference: Either the
state of the law supported enforcement of the agreement or it did
not. Instead, the record suggests that PacPizza believed it could
keep open the option of arbitrating the dispute while it conducted
discovery, but when it appeared the class was going to be
certified, it asserted its purported right to arbitrate to preempt
certification.” (Oregel, supra, 237 Cal.App.4th at pp. 358–359.)
The court concluded that this strategic decision “should not be
rewarded.” (Id. at p. 359.)
Similarly, here there is substantial evidence to support the
conclusion that Plan B’s delay in moving to compel arbitration
19
until after a ruling on class certification was a strategic decision
to attempt to win the case by defeating the class before seeking to
arbitrate. Such a strategic use of the judicial forum is
inconsistent with an arbitration right and supports a waiver
finding.
Plan B cites Sky Sports and Lee v. Southern California
University for Professional Studies (2007) 148 Cal.App.4th 782for the proposition that it is premature to bring a motion to
compel arbitration against unnamed class members until the
class has been certified. But neither of those cases involved a
situation where a named plaintiff in a putative class action had
agreed to arbitrate. Because the named plaintiffs in those cases
had not signed arbitration agreements, the courts concluded that
they could not be compelled to arbitrate, even though the
putative class included persons who had signed such agreements.
(Sky Sports, supra, 201 Cal.App.4th at pp. 1367–1369; Lee, at
pp. 786–788.) The courts in those cases had no reason to consider
whether a defendant who decides for strategic reasons not to
pursue arbitration against a named plaintiff who did sign an
arbitration agreement could waive its right to arbitrate against
the class.
Plan B also cites several federal district court cases for the
proposition that unnamed class members are not parties until a
class has been certified. (TFT-LCD (Flat Panel) Antitrust
Litigation (N.D.Cal., May 9, 2011) 2011 U.S. Dist. LEXIS 55033(TFT-LCD); Saleh v. Titan Corp. (S.D.Cal. 2004) 353 F.Supp.2d
1087, 1091 (Saleh); Laguna v. Coverall North America (S.D.Cal.
July 26, 2011) 2011 U.S. Dist. LEXIS 81105 (Laguna); Mora v.
Harley-Davidson Credit Corp. (E.D.Cal. April 9, 2012) 2012 U.S.
Dist. LEXIS 49636 (Mora).) Those cases are not controlling, and
20
in any event do not purport to describe a general rule that would
require reversal here.
In TFT-LCD, supra, 2011 U.S. Dist. LEXIS 55033, the only
one of these cases that dealt with delay in moving to compel
arbitration against a named plaintiff, the court found the issue of
waiver “extremely close,” and characterized the defendants’ delay
as conduct that “evinces either previous indifference to the
arbitration clauses they now seek to assert or, possibly, a
strategic decision to delay their enforcement.” (Id. at p. *28.)
The case was a complex, multi-defendant antitrust class action in
which, unlike here, not all class members (and apparently not
even all named plaintiffs) had signed arbitration agreements.
(Id. at pp. **22–23.) Thus, unlike here, a motion to compel
arbitration earlier in the case presumably could not have been
dispositive. The district court’s discretionary decision not to find
waiver based upon these facts does not support a general rule
that would preclude the trial court’s waiver finding here.6
6 Saleh did not involve an arbitration provision; it held that
putative class members are not parties to a class action for
purposes of enjoining them from proceeding with a separate
federal action under the “ ‘first-to-file’ ” rule. (Saleh, supra, 353
F.Supp.2d at pp. 1090–1092.) Laguna did not involve an issue of
waiver, but simply observed in the course of denying a discovery
motion that a motion to compel arbitration against absent class
members would be premature prior to certification. (Laguna,
supra, 2011 U.S. Dist. LEXIS 81105 at p. *8.) In Mora, the court
did not find that the defendant had delayed seeking arbitration
against the named plaintiff or even that the named plaintiff was
a party to an arbitration agreement. Indeed, from the court’s
summary of facts it appears that the named plaintiff was not.
(Mora, supra, 2012 U.S. Dist. LEXIS 49636 at pp. **4, 36, 46–47.)
21
Thus, the abstract question of whether absent class
members are parties to a class action prior to certification is not
decisive here. The trial court could properly consider Plan B’s
delay in seeking arbitration against Sprunk when deciding
whether it had waived its right to compel arbitration against
unnamed class members following certification.
For the reasons discussed below, the trial court also
properly concluded that Plan B’s stated reasons for delaying a
motion to compel against Sprunk were not sufficient to avoid
waiver.
ii. Plan B’s asserted reason for withdrawing
its motion to compel against Sprunk does
not justify its decision to litigate in court
rather than arbitrate
Plan B argues that its withdrawal of its motion to compel
arbitration against Sprunk and its subsequent participation in
the litigation should not be considered in a waiver analysis
because it acted reasonably based upon the state of the law on
class arbitration at the time. Specifically, Plan B claims that it
reasonably withdrew its motion to compel arbitration against
Sprunk because “it believed individual arbitration was foreclosed
under then current law.” Before considering the merits of this
argument, it is helpful to recap briefly the state of the law prior
to our Supreme Court’s decision in Iskanian.
In 2005, the court held in Discover Bank, supra, 36 Cal.4th
148, that class arbitration waivers were unconscionable and
unenforceable under California law when included in consumer
contracts of adhesion, where “it is alleged that the party with the
superior bargaining power has carried out a scheme to
deliberately cheat large numbers of consumers out of individually
22
small sums of money.” (Id. at pp. 162–163.) The court
subsequently held in Gentry, supra, 42 Cal.4th 443, that class
action waivers in employment arbitration agreements might be
unenforceable on the ground that they “undermine the
vindication of the employees’ unwaivable statutory rights.” (Id.
at p. 450.) The court directed trial courts to consider various
factors to determine whether “a class arbitration is likely to be a
significantly more effective practical means of vindicating the
rights of the affected employees than individual litigation or
arbitration” and whether “the disallowance of the class action
will likely lead to a less comprehensive enforcement of overtime
laws for the employees alleged to be affected by the employer’s
violations.” (Id. at p. 463.) If so, then the class arbitration
waiver should not be enforced. (Ibid.)
In April 2011, the United States Supreme Court
invalidated Discovery Bank in its ruling in Concepcion.
(Concepcion, supra, 563 U.S. 333.) The court held that requiring
the availability of classwide arbitration “interferes with
fundamental attributes of arbitration and thus creates a scheme
inconsistent with the FAA.” (Id. at p. 344.) The court concluded
that the FAA therefore preempted “California’s Discovery Bank
rule.” (Id. at p. 352.)
In 2012, the Board issued its decision in Horton I, supra,
357 NLRB 2277. The Board decided that the National Labor
Relations Act (49 Stat. 449, 29 U.S.C. § 151 et seq. (NLRA))
generally prohibits contracts that require employees to waive
their right to participate in class proceedings to resolve wage
claims. The Board concluded that such contracts amount to an
unfair labor practice under the NLRA because they interfere with
the right of employees to engage in concerted activity. (Horton I,
23
at p. 2280.) The Board also found that the NLRA did not conflict
with the FAA in invalidating such waivers. (Id. at pp. 2285–
2288.)
The Board’s rulings on these issues were subsequently
reversed by the Fifth Circuit in December 2013. (See Horton II,
supra, 737 F.3d 344.) The Fifth Circuit concluded that
“[r]equiring a class mechanism is an actual impediment to
arbitration and violates the FAA,” and that neither the NLRA
itself nor any inference from an inherent conflict between the
FAA and the NLRA demonstrated any congressional command
against application of the FAA. (Id. at p. 360.)7
Our Supreme Court’s decision in Iskanian considered this
history in the context of a wage and hour class action that
involved an arbitration agreement containing an express class
7 Federal circuits are split on this issue, and the issue is
currently before the United States Supreme Court. (See NLRB v.
Alt. Entm’t, Inc. (6th Cir. 2017) 858 F.3d 393, 405 [“Mandatory
arbitration provisions that permit only individual arbitration of
employment-related claims are illegal pursuant to the NLRA and
unenforceable pursuant to the FAA’s savings clause”]; Morris v.
Ernst & Young, LLP (9th Cir. 2016) 834 F.3d 975, 985–986, cert.
granted Jan. 13, 2017, ___ U.S. ___ [137 S.Ct. 809] [arbitration
provisions that mandate individual arbitration of employment-
related claims violate the NLRA and fall within the FAA’s saving
clause]; Lewis v. Epic Sys. Corp. (7th Cir. 2016) 823 F.3d 1147,
1160, cert. granted Jan. 13, 2017, ___ U.S. ___ [137 S.Ct. 809]
[same]; Cellular Sales of Mo., LLC v. NLRB (8th Cir. 2016) 824
F.3d 772, 776 [arbitration provisions that mandate individual
arbitration of employment-related claims do not violate the
NLRA]; Murphy Oil, USA, Inc. v. NLRB (5th Cir. 2013) 737 F.3d
344, cert. granted Jan. 13, 2017, ___ U.S. ___ [137 S.Ct. 809]
[upholding the Fifth Circuit’s prior ruling in Horton II].)
24
action waiver. The court decided several issues relevant to the
enforceability of class action waivers. First, the court confirmed
that Concepcion invalidated Gentry. The court explained that,
under the holding in Concepcion, the FAA preempts states from
“mandating or promoting procedures incompatible with
arbitration,” and that “[t]he Gentry rule runs afoul of this . . .
principle.” (Iskanian, supra, 59 Cal.4th at p. 366.) The court also
rejected the holding in Horton I, agreeing with the Fifth Circuit’s
ruling that the Board’s decision was inconsistent with the FAA
and was not justified by any “ ‘ “contrary congressional
command” ’ ” in the NLRA. (Iskanian, at p. 373.)
The final entry in this chronology is the United States
Supreme Court’s decision in Stolt-Nielsen. In that case, decided
in 2010, the court held that, under the FAA, no party may be
compelled to participate in class arbitration “unless there is a
contractual basis for concluding that the party agreed to do so.”
(Stolt-Nielsen, supra, 559 U.S. at p. 684.) The case did not
involve a class action waiver; rather, the contract at issue was
silent on the issue of class arbitration.8 The court concluded that
an agreement for class arbitration could not be inferred from the
contract “because class-action arbitration changes the nature of
arbitration to such a degree that it cannot be presumed the
parties consented to it by simply agreeing to submit their
disputes to an arbitrator.” (Id. at p. 685.)
8 The parties in that case stipulated that the contract’s
silence meant that there was “ ‘no agreement’ ” on the issue of
class arbitration. (Stolt-Nielsen, supra, 559 U.S. at p. 687,
fn. 10.)
25
In light of this history, Plan B’s argument that its delay in
seeking arbitration against Sprunk was reasonable based upon
the state of the law is unpersuasive for several reasons.
a. Plan B delayed unreasonably even
after the decision in Iskanian
Plan B claims that the opinion in Iskanian changed the
legal landscape. However, as discussed above, that argument
does not explain Plan B’s delay of over a year in moving to compel
arbitration after the Supreme Court decided that case. Plan B
attempts to justify its delay by reiterating its argument that a
motion to compel arbitration against unnamed class members
would have been premature prior to certification. But that has
nothing to do with the state of the law on class arbitration. There
was nothing precluding Plan B from moving to compel individual
arbitration against Sprunk as soon as Iskanian was decided, even
if Plan B had reasonably believed prior to that decision that such
a motion would have been futile. (Oregel, supra, 237 Cal.App.4th
at pp. 358–359.)
b. Plan B’s motion would not have been
“futile” before Iskanian
Plan B claims that the law on class arbitration waivers was
unsettled until the court’s decision in Iskanian confirmed that
Concepcion had overruled Gentry, and that the Board’s ruling in
Horton I would not be followed in California. However, while
uncertainty remained, there was ample reason to conclude that
Plan B could not comfortably rely on the decisions in Gentry or
Horton I to excuse the failure to seek individual arbitration. In
particular, a prudent litigant who was intent on avoiding an
implication of waiver would not have taken such a risk.
26
Several Court of Appeal decisions prior to the Supreme
Court’s opinion in Iskanian suggested that Concepcion had
invalidated Gentry and declined to follow Horton I. In Nelsen v.
Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115(Nelsen), the court affirmed the trial court’s order enforcing an
agreement for individual arbitration in an employment class
action, rejecting the plaintiff’s argument that individual
arbitration violated public policy. The court declined to follow
Horton I. (Nelson, at p. 1133.) With respect to Gentry, the court
observed that the “continuing vitality” of that case “has been
called into serious question” by Concepcion. (Id. at p. 1131.)
Citing the Court of Appeal opinion in Iskanian, the court noted
that “[o]ne California appellate court and a number of federal
district courts have found Concepcion applies equally to Gentry
and the FAA therefore precludes California courts from ordering
classwide arbitration of wage and hour claims unless the parties
have agreed to it.” (Nelsen, at pp. 1131–1132.)
The court in Nelsen did not reach the issue of Gentry’s
continued viability, but the reason it did not do so would also
have supported Plan B’s motion to compel against Sprunk. The
court noted that Gentry did not establish a “categorical rule
applicable to the enforcement of class arbitration waivers in all
wage and hour cases.” (Nelsen, supra, 207 Cal.App.4th at
p. 1132.) Rather, to show that a waiver is invalid, a plaintiff was
required to prove the presence of a number of case-specific factors
demonstrating that individual arbitration would not be
adequate.9 Because the plaintiff had not made such a showing in
9The factors were that: “(1) potential individual recoveries
are small; (2) there is a risk of employer retaliation; (3) absent
class members are unaware of their rights; and (4) as a practical
27
Nelsen, the court concluded that Gentry was not applicable even
if it was still good law.
Similarly, in Kinecta Alternative Financial Solutions, Inc.
v. Superior Court (2012) 205 Cal.App.4th 506 (Kinecta),
disapproved on another ground in Sandquist v. Lebo Automotive,
Inc. (2016) 1 Cal.5th 233, 260, footnote 9, the court questioned
the continued viability of Gentry, but held that it did not apply to
that case in any event because the plaintiff failed to provide
evidence showing the presence of the specific Gentry factors. (Id.
at pp. 516–517.) And in Truly Nolen of America v. Superior Court
(2012) 208 Cal.App.4th 487 (Truly Nolen), the court also
questioned Gentry in light of Concepcion before concluding that
stare decisis required it to follow Gentry. (Id. at pp. 506–507.)
Nevertheless, as in Nelsen and Kinecta, the court held that
Gentry did not invalidate the arbitration agreement in that case
because the plaintiff had failed to present individualized evidence
establishing the Gentry factors. (Id. at p. 510.) The court also
declined to follow Horton I. (Id. at pp. 514–515.)
Here, in opposing Plan B’s initial motion to compel, Sprunk
did not provide any evidence showing the presence of the specific
Gentry factors. Sprunk did not even argue that Gentry required
class arbitration; she cited that case only for the proposition that,
if arbitration were ordered, it must include certain procedural
safeguards. Plan B did not withdraw its original motion to
compel until September 6, 2012, after the Court of Appeal
decisions in Nelsen, Kinecta, and Truly Nolen. Thus, even if the
trial court in this case had decided that Gentry remained good
matter, only a class action can effectively compel employer
overtime law compliance.” (Nelsen, supra, 207 Cal.App.4th at
p. 1132.)
28
law, Plan B had ample authority to argue that Gentry did not
apply to its motion.
In summary, well prior to our Supreme Court’s decision in
Iskanian, the state of the law on class arbitration in California
was that (1) the continued viability of Gentry was in serious
question following Concepcion, (2) even under Gentry, a class
plaintiff resisting individual arbitration had to make a specific
factual showing that only a class action could adequately protect
unwaivable statutory rights (a showing that Sprunk did not
make), (3) the Fifth Circuit had reversed Horton I, and (4) several
California Courts of Appeal had rejected Horton I. While the
outcome was not free from doubt, given this authority one could
not reasonably describe Plan B’s prospects of compelling
individual arbitration prior to Iskanian as “futile.”
That conclusion dooms Plan B’s argument that it
reasonably delayed moving to compel arbitration against Sprunk
because of the state of the law. As the trial court correctly
observed here, Plan B was not entitled to litigate indefinitely in
court so long as there was some risk that it might lose a motion to
compel individual arbitration. Plan B could reasonably make a
strategic decision that it did not want to assume the risk that the
trial court might order class arbitration. But risk is not the same
as futility.
In Iskanian, the court held that the defendant’s conduct in
initially filing, and then withdrawing, a motion to compel
arbitration in a wage and hour class action did not amount to
waiver because the state of the law at the time the defendant
(CLS) withdrew the motion would have made the motion futile.
(Iskanian, supra, 59 Cal.4th at pp. 374–378.) CLS had filed the
motion before our Supreme Court decided Gentry, and the trial
29
court granted it. (Id. at p. 375.) However, while the case was in
the appellate court, the Supreme Court issued its opinion in
Gentry, and CLS withdrew its motion. (Ibid.) When the United
States Supreme Court subsequently decided Concepcion, CLS
quickly filed a renewed motion to compel arbitration and to
dismiss the class (which had been certified in the interim). (Ibid.)
The court held that CLS’s delay was reasonable in light of
the state of the law and did not support waiver. (Iskanian, supra,
59 Cal.4th at pp. 376–378.) The court concluded that “futility as
grounds for delaying arbitration is implicit in the general waiver
principles we have endorsed.” (Id. at p. 376.) Significantly, the
court described the “futility” doctrine using language as strong as
the label suggests: “The fact that a party initially successfully
moved to compel arbitration and abandoned that motion only
after a change in the law made the motion highly unlikely to
succeed weighs in favor of finding that the party has not waived
its right to arbitrate.” (Ibid., italics added.) In later discussing
the issue of prejudice, the court similarly explained: “Where, as
here, a party promptly initiates arbitration and then abandons
arbitration because it is resisted by the opposing party and
foreclosed by existing law, the mere fact that the parties then
proceed to engage in various forms of pretrial litigation does not
compel the conclusion that the party has waived its right to
arbitrate when a later change in the law permits arbitration.”
(Id. at pp. 377–378, italics added.)
It is significant that the defendant in Iskanian did what
Plan B claims it reasonably decided not to do here, i.e., move to
compel arbitration once the United States Supreme Court had
decided Concepcion. In its initial arbitration demand letter to
Sprunk in 2011, Plan B cited Concepcion in identifying “new case
30
law” that permits individual arbitration “despite class
allegations.” While Plan B perhaps later reassessed the risk that
its interpretation of Concepcion was wrong, that risk was based
on lingering uncertainty, not on existing law that “foreclosed” its
motion to compel. (Iskanian, supra, 59 Cal.4th at pp. 377–378.)
In any event, regardless of the ultimate impact of Concepcion,
Plan B had ample reason to believe that neither Gentry nor
Horton I would affect the enforceability of its arbitration
agreements in light of the existing case law and the lack of
evidence from Sprunk concerning the Gentry factors.
c. Iskanian was irrelevant to whether
the arbitration agreement that
Sprunk signed contemplated class
arbitration
A large part of the risk of class arbitration that existed at
the time Plan B withdrew its motion to compel was not affected
by the subsequent ruling in Iskanian. Much of the argument
concerning class arbitration in the briefing on Plan B’s motion
dealt with the question whether the version of the arbitration
provision in Sprunk’s employment agreement—which did not
address class arbitration—could be interpreted to include an
agreement to arbitrate on a class basis. The answer to that
question was controlled by the United States Supreme Court
decision in Stolt-Nielsen, which was decided in 2010. Plan B does
not claim that Iskanian had any effect on the interpretation of
Stolt-Nielsen.
Indeed, in opposing Plan B’s motion to compel Sprunk
argued that Concepcion was not even relevant because it
concerned the enforceability of an express class action waiver,
which Sprunk’s agreement did not have. Whatever the ultimate
31
merits of that argument,10 it underscores that the major issue
concerning class arbitration raised by Plan B’s motion—that is,
whether the agreement itself permitted class arbitration—was
not affected by the subsequent legal developments that Plan B
claims changed the legal landscape and ultimately made its
motion viable.
Thus, we conclude that Plan B’s delay in bringing its
motion to compel was not excused either by the lack of a certified
class or by the state of the law.
d. The St. Agnes factors support the
trial court’s waiver finding
The circumstances of Plan B’s delay in seeking arbitration
against Sprunk support the trial court’s waiver finding under the
factors that our Supreme Court identified in St. Agnes. (St.
Agnes, supra, 31 Cal.4th at p. 1196.) Having concluded that Plan
B’s delay cannot reasonably be explained either by the state of
the law or the lack of a certified class, the period of the unexcused
10 There is conflicting authority on whether Concepcion and
Iskanian are relevant to employment arbitration agreements that
do not contain a class action waiver. In Oregel, the court rejected
the defendant’s argument that a motion to compel arbitration
would have been futile before Iskanian because the arbitration
agreement at issue did not contain a waiver. The court concluded
that the line of cases on which the defendant relied (i.e., Discover
Bank, Gentry, Concepcion, and Iskanian) involved the
enforceability of class action waivers and therefore was not
relevant. (Oregel, supra, 237 Cal.App.4th at pp. 357–358.) In
contrast, in Nelsen, which also concerned an arbitration
agreement without an express waiver, the court held that
“Gentry’s application should not turn on whether an arbitration
agreement bars class arbitration expressly or only impliedly.”
(Nelsen, supra, 207 Cal.App.4th at p. 1127.)
32
delay—nearly four years between the date that Sprunk filed her
complaint on October 7, 2011, and the date that Plan B moved to
compel arbitration on August 12, 2015—is far longer than in
many cases finding waiver. (See, e.g., Oregel, supra, 237
Cal.App.4th at p. 359 [17 months’ delay]; Bower, supra, 232
Cal.App.4th at pp. 1039–1040 [nine months’ delay]; Sobremonte,
supra, 61 Cal.App.4th at pp. 993–994 [10 months’ delay]; Lewis v.
Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 446
[nearly five months’ delay].) Thus, the facts support the third St.
Agnes factor of a delay for a long period before seeking a stay.
(St. Agnes, supra, 31 Cal.4th at p. 1196.)
Litigation events during the long delay also support the
first and fifth factors, conduct inconsistent with the right to
arbitrate and important intervening steps. (St. Agnes, supra,31 Cal.4th at p. 1196.) As discussed above, Plan B’s strategic
decision to delay until after class certification was inconsistent
with an intent to arbitrate. In addition, while Plan B argues that
it did not initiate much discovery during the delay, the class
certification motion itself was a significant litigation event. The
motion discussed Sprunk’s factual and legal theories and
disclosed her positions and evidence on disputed issues. (See
Oregel, supra, 237 Cal.App.4th at p. 358 [PacPizza waited to
move for arbitration until the plaintiff had filed his class
certification motion, “taking the opportunity to examine his
motion and supporting evidence”].)
Plan B argues that the second St. Agnes factor—whether
the litigation machinery has been substantially invoked before
the party notified the opposing party of an intent to arbitrate (St.
Agnes, supra, 31 Cal.4th at p. 1196)—does not apply here because
it repeatedly notified Sprunk and the trial court of its intent to
33
arbitrate, including in its affirmative defenses, discovery
responses, and its opposition to class certification. The trial court
in fact noted that arbitration “was always on the table.”
However, as the trial court also observed, there is a difference
between stating an intent and actually following through with
asserting a right. That Plan B asserted arbitration as a defense
was “merely one factor for the court to consider.” (Sobremonte,
supra, 61 Cal.App.4th at p. 993.) Identifying the arbitration
right as an affirmative defense in pleadings “does not preclude a
finding that subsequent conduct may cause a waiver of that
right.” (Ibid., citing Davis v. Continental Airlines, Inc. (1997)
59 Cal.App.4th 205, 217.)
The fourth St. Agnes factor asks whether the defendant
filed a counterclaim without asking for a stay. (St. Agnes, supra,31 Cal.4th at p. 1196.) Plan B did file a counterclaim. However,
it does not appear that the trial court attached much weight to
that event, and neither do we. Plan B filed the counterclaim
against Sprunk and various fictional Roe defendants, but it did
not attempt to amend the counterclaim to substitute particular
class members for the fictional defendants and it later dismissed
the counterclaim. Thus, Plan B did not obtain any litigation
advantage from its claim.
This leaves the sixth St. Agnes factor, prejudice, which is
“critical in waiver determinations.” (St. Agnes, supra, 31 Cal.4th
at p. 1203.) The trial court appeared to find prejudice in part
from the likelihood that, because of the nature of Plan B’s
business, individual plaintiffs would be reluctant to press
arbitration claims. As Plan B points out, this concern would be
present no matter when it asserted its arbitration right, and
34
therefore does not show prejudice from its delay. We therefore do
not give it any weight in assessing prejudice.
However, the trial court also found that Plan B’s four-year
delay in asserting its arbitration right was inconsistent with the
principle that arbitration “is supposed to be quick.” The court
concluded that, if it granted the motion to compel, “it’s going to be
quite a while before these plaintiffs get their claims heard.”
While “merely participating in litigation” does not cause a
waiver (see St. Agnes, supra, 31 Cal.4th at p. 1203), in Iskanian
our Supreme Court cited a number of cases in which courts had
interpreted St. Agnes to “allow consideration of the expenditure
of time and money in determining prejudice where the delay is
unreasonable.” (Iskanian, supra, 59 Cal.4th at p. 377; see Oregel,
supra, 237 Cal.App.4th at p. 361 [noting that in Iskanian “the
Supreme Court endorsed the line of cases that have interpreted
St. Agnes to allow consideration of the expenditure of time and
money in determining prejudice where the delay was
unreasonable or unjustified”].) The court quoted Burton v. Cruise
(2010) 190 Cal.App.4th 939 for its conclusion that “ ‘a petitioning
party’s conduct in stretching out the litigation process itself may
cause prejudice by depriving the other party of the advantages of
arbitration as an “expedient, efficient and cost-effective method
to resolve disputes.” ’ ” (Iskanian, at p. 377, quoting Burton, at
p. 948.)
Here, the four-year delay resulted in Sprunk conducting
class-related discovery and preparing and arguing an extensive
class certification motion that never would have been necessary if
individual arbitration had been ordered earlier in the case.
Because Plan B’s delay was unreasonable, we conclude that the
35
trial court’s finding of prejudice is supported by sufficient
evidence.11
DISPOSITION
The trial court’s order denying the motions to compel
arbitration is affirmed. Sprunk is entitled to her costs on appeal.
CERTIFIED FOR PUBLICATION.
LUI, J.
We concur:
CHANEY, Acting P. J.
JOHNSON, J.
11 Because we affirm the trial court’s waiver finding, there
is no need to consider Sprunk’s argument that the arbitration
provisions were unconscionable.
36