Opinion
A124869. A125660.
1-21-2010
CLEMENT CHANG, Plaintiff and Respondent, v. BANK OF AMERICA, N.A. et al., Defendants and Appellants.
Not to be Published in Official Reports
Respondent Clement Chang sued appellants Bank of America, N.A. (Bank of America), Banc of America Securities LLC (Banc of America Securities), Banc of America Investment Services, Inc. (BAIS) (collectively, "bank appellants") and Mark Gillelen, alleging that they had mismanaged his investments. In these consolidated appeals, appellants challenge the denial of their motion to compel arbitration of respondents claims. We affirm.
I.
FACTUAL AND PROCEDURAL
BACKGROUND
Respondent is an octogenarian who has been a patron of Bank of America and its subsidiary Banc of America Securities for nearly 40 years, according to his complaint. His complaint alleges that beginning in 2007, those bank entities (through appellant Gillelen, respondents investment advisor) began investing respondents money in three high-risk collateralized debt obligations, all of which either lost all or nearly all of their value within six months.
According to the bank appellants, respondent signed an "`Account Application and Agreement" on August 12, 1998 to open an account with BA Investment Services, Inc., described by the bank appellants as "the predecessor of BAIS." The agreement referred to an "Investment Account Agreement booklet" (hereinafter "original 1998 agreement"), which contained the following arbitration provision: "Any dispute with respect to my Account shall be subject to and governed by the following ARBITRATION AGREEMENT. [¶] To the extent permitted by law, any controversy arising out of or relating to my Account, my relationship with BAIS or this Investment Account Agreement or the breach thereof shall be submitted to arbitration conducted under the Constitution and Rules of the Board of Governors of the New York Stock Exchange (`NYSE) or the Code of Arbitration Procedure of the National Association of Securities Dealers (`NASD). . . ." The agreement explained that arbitration of all disputes would be final and binding on the parties, and that the parties were waiving their right to seek remedies in court, including the right to a jury trial. The agreement further provided that it may be amended from time to time by BAIS with written notice, and that it "shall inure to the benefit of BAISs successors and assigns, whether by merger, consolidation or otherwise . . . ." The agreement was to be governed by California law.
Bank of America merged with Nations Bank in 1999. A letter dated June 8, 1999, was mailed to all BAIS customers, including respondent. Enclosed was a new customer agreement, which amended the then-existing account agreements effective July 23, 1999. The new agreement (hereinafter "revised 1999 agreement") contained an arbitration provision, which provided in part: "You agree that all controversies that may arise between you and NFSC [defined as National Financial Services Corporation] or BAISI [defined as Banc of America Investment Services, Inc.] and each of their principals, subsidiaries, affiliates, successors, assigns, heirs, executors, administrators, officers, directors, employees, representatives, and agents, concerning any order or transaction, or the confirmation, performance or breach of this or any other agreement between the parties to this agreement, whether entered into before, on or after the date this brokerage account is opened, shall be determined by arbitration before a panel of independent arbitrators set up by either the New York Stock Exchange, Inc., National Association of Securities Dealers, Inc., or the Municipal Securities Rulemaking Board, as you may designate. . . ." The arbitration provision stated that Florida law would apply "in all respects," except that Massachusetts law would apply to "the margin agreement, if any." Appellants claim that this arbitration agreement governs respondents claims against them.
Respondent filed a complaint on August 25, 2008, alleging causes of action for: (1) violations of Corporations Code sections 25400 and 25500, (2) violations of Corporations Code sections 25401 and 25501, (3) fraud, deceit, and concealment, (4) breach of fiduciary duty, (5) unjust enrichment, (6) breach of the implied covenant of good faith and fair dealing, (7) conversion, (8) constructive fraud, (9) negligent misrepresentation, (10) abuse of dependent adults, and (11) violations of Business and Professions Code section 17200 et sequitur. It named as defendants appellants Bank of America, Banc of America Securities, and Gillelen.
Appellant Gillelen filed an answer on October 3, 2008. As his first affirmative defense, Gillelen alleged that "[t]he written customers agreements executed by [respondent] at various times throughout the course of his account(s) required that [respondent] and [appellants] arbitrate the controversy, which is at issue in this action. (Said agreements are in the custody and possession of the Bank of America defendants.)"
Appellants Bank of America and Banc of America Securities answered the complaint on October 14, 2008. They alleged as their second affirmative defense that each cause of action was subject to arbitration, and that "[b]y filing this Answer, these [appellants] do not waive their right to arbitration of each purported cause of action asserted against them."
Over the next five months, the parties engaged in discovery and motion practice. On October 31, 2008, respondent served requests for production of documents, special interrogatories, and requests for admission on appellants Bank of America and Banc of America Securities. On November 18, 2008, respondent served a notice of deposition of the person most knowledgeable (Code Civ. Proc., § 2025.230) on various topics on Bank of America and Banc of America Securities. A deposition of a Bank of America employee (both in his individual and representative capacity) apparently took place in New York over two days in January and February 2009. Bank of America provided a written response to the request for production of documents, along with more than 3,000 pages of responsive documents; no arbitration agreement was included in the production of documents. Bank of America and Banc of America Securities also provided written responses to respondents set of special interrogatories. Although no discovery requests from the bank appellants appear in the record, it is clear that the bank appellants served discovery requests on respondent.
All statutory references are to the Code of Civil Procedure unless otherwise indicated.
In November 2008, respondent filed a motion for trial preference and to set a trial date. Respondent submitted evidence, which Bank of America and Banc of America Securities did not dispute, that he suffers a chronic kidney disease and a chronic asthmatic condition. According to the courts register of actions, the trial court denied respondents motion for trial preference, but set a trial date of August 3, 2009.
On January 15, 2009, respondent amended his complaint to add appellant BAIS as a Doe defendant.
On January 16, 2009, Bank of America and Banc of America Securities filed a motion to stay or dismiss claims asserted by respondent that related to his investment in a certain collateralized debt obligation, arguing that respondent had agreed (as to that investment) to submit to jurisdiction in New York. Respondent opposed the motion. On February 10, 2009, Bank of America and Banc of America Securities notified the trial court that they did not intend to proceed with the motion, and requested that the motion be taken off calendar.
The next day, on February 11, the bank appellants counsel informed counsel for appellant Gillelen and respondent that BAIS had located the original 1998 agreement, and stated that the dispute between the parties was governed by the arbitration provision in that agreement. The following week, counsel forwarded the revised 1999 agreement, and stated that the parties were in fact bound by the arbitration provision in that agreement. Respondent declined to arbitrate.
The parties agreed not to produce discovery responses pending the resolution of any petition to compel arbitration brought by appellants. Notwithstanding that agreement, respondent served (unspecified) discovery responses on the bank appellants on March 5, 2009.
On March 10, 2009, all three bank appellants filed a petition to compel arbitration and for an order staying the action pending arbitration. BAIS filed the petition in lieu of filing an answer to the complaint. (§ 1281.7.) Appellant Gillelen filed a "Statement of Non-Opposition and Joinder" in the bank appellants petition, but did not file a separate petition or supporting memorandum of points and authorities.
Respondent opposed the petition, arguing that appellants had waived their right to arbitrate the dispute, that the arbitration clause in the revised 1999 agreement clause was procedurally and substantively unconscionable, and that his claims against Bank of America and Banc of America Securities were outside the scope of the original 1998 agreement with BAIS. He further argued that even if the trial court concluded that his claims against BAIS and Gillelen were arbitrable under the original 1998 agreement, it should exercise its discretion to deny the petition to compel arbitration in order to avoid conflicting rulings on common issues of law or fact. (§ 1281.2, subd. (c).)
At the hearing on appellants petition, the trial court indicated that it intended to deny the petition. It provided two grounds for its ruling. First, the revised 1999 agreement changed the governing law from California to Florida law. Second, the court noted that Bank of Americas conduct "could be construed as a waiver."
Although it is not entirely clear from the trial courts comments, it appears that the court agreed with respondent that the arbitration clause in the revised 1999 agreement was unconscionable.
As for appellants waiver of their right to arbitrate, the court repeatedly questioned the bank appellants counsel why it took so long to bring a petition to compel arbitration. Counsel for the bank appellants said "it took longer than we expected" to locate the relevant agreements, which were 10 years old. He explained that the relevant agreements were not located in respondents file, which contained documents specific to his account, but were "housed in a completely different location." Although the trial court said that there was no suggestion that the relevant agreements had been withheld in bad faith, it noted that "[i]t would be much different if you were standing here in November as opposed to April," and that its decision might have been different had appellants filed the same petition six months earlier. The court observed, "You would think that your clients, if [arbitration] is raised as a defense, would make it a priority to locate these Agreements and to do so expeditiously. And that hasnt occurred." The bank appellants counsel stated, "I can represent to the Court, without disclosing confidential attorney-client communications, that this was the highest priority for my clients. It absolutely was."
The trial court denied the petition to compel arbitration. Its written order denying the petition states that the petition was denied "for the reasons stated by the Court on the record at the hearing on the petition." These timely appeals followed.
The bank appellants appealed in case No. A124869. This court granted respondents motion to expedite briefing and for calendar preference on June 22, 2009, and the case was fully briefed on November 2, 2009. Appellant Gillelen separately appealed in case No. A125660; however, the record was not prepared in that case, and no briefs were filed. Instead, Gillelen filed "joinders" in the opening and reply briefs filed by the bank appellants in case No. A124869, even though he was not a party to that appeal at the time he filed joinders. (Cf. Cal. Rules of Court, rule 8.200(a)(5) [a party to an appeal may join in an appellate brief].) After providing the parties with an opportunity to object and having received no objection, this court on December 1, 2009, ordered the two cases consolidated for purposes of record preparation, briefing, oral argument and decision.
II.
DISCUSSION
The bank appellants argue that the trial court erred in denying their motion to compel arbitration. Appellant Gillelen joins their briefs on appeal (Cal. Rules of Court, rule 8.200(a)(5)) without further argument. Section 1281.2 provides in relevant part: "On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] (a) The right to compel arbitration has been waived by the petitioner[.]"
It is unclear whether the trial court found that a valid agreement to arbitrate the parties controversy existed (§ 1281.2), and the parties dispute this issue on appeal. The bank appellants first argue that there "can be no real dispute" that the claims asserted in respondents lawsuit "fall squarely within the scope of the [1999] arbitration provision that [respondent] agreed to." They later acknowledge, however, that Bank of America and Banc of America Securities were not signatories to the relevant arbitration agreements, but argue that they are nonetheless entitled to arbitrate respondents claims against those entities because the arbitration clause in the revised 1999 agreement governs disputes with BAIS "`and each of [its] principals, subsidiaries, affiliates, successors, assigns, heirs, executors, administrators, officers, directors, employees, representatives, and agents[.]" Respondent argues that the original 1998 agreement contains the "operative arbitration clause," and that the clause does not cover disputes with Bank of America and Banc of America Securities, because it covers only controversies arising out of his "`relationship with BAIS or this Investment Account Agreement," not his relationship with the other two bank entities. We need not decide whether there existed a valid arbitration agreement governing this dispute if we conclude, as the trial court did, that appellants waived their right to compel arbitration under any agreement they may have once had with respondent (§ 1281.2, subd. (a)).
State law "reflects a strong policy favoring arbitration agreements and requires close judicial scrutiny of waiver claims. [Citation.] Although a court may deny a petition to compel arbitration on the ground of waiver [citation], waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof." (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195 (St. Agnes Medical Center).) "[A]ny doubts regarding a waiver allegation should be resolved in favor of arbitration [citation]." (Ibid.)
"Generally, the determination of waiver is a question of fact, and the trial courts finding, if supported by sufficient evidence, is binding on the appellate court. [Citations.] `When, however, the facts are undisputed and only one inference may reasonably be drawn, the issue is one of law and the reviewing court is not bound by the trial courts ruling. [Citation.]" (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1196.) "Although the burden of proof is heavy on the party seeking to establish waiver, which should not lightly be inferred in light of public policy favoring arbitration, a determination by a trial court that the right to compel arbitration has been waived ordinarily involves a question of fact, which is binding on the appellate court if supported by substantial evidence. The appellate court may not reverse the trial courts finding of waiver unless the record as a matter of law compels finding nonwaiver." (Davis v. Continental Airlines, Inc. (1997) 59 Cal.App.4th 205, 211.) The essential facts here are not disputed. However, "[i]f more than one reasonable inference may be drawn from undisputed facts, the substantial evidence rule requires indulging the inferences favorable to the trial courts judgment." (Ibid.) We may therefore reverse only if we conclude that the undisputed facts support the single reasonable inference that appellants did not waive their right to arbitrate. (St. Agnes Medical Center, supra, at p. 1196.)
Although no single test determines whether a partys conduct constitutes waiver of the right to arbitrate, the following factors are relevant in assessing a waiver claim: "`"(1) whether the partys 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, misled, or prejudiced the opposing party." [Citations.]" (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1196, quoting Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 992.) Whether the party opposing arbitration was prejudiced by a delay in seeking arbitration is "critical" when determining whether there has been a waiver. (St. Agnes, supra, at p. 1203; see also Keating v. Superior Court (1982) 31 Cal.3d 584, 605, disapproved on other grounds, Southland Corp. v. Keating (1984) 465 U.S. 1, 11.) "A partys mere participation in a lawsuit is insufficient to preclude it from later enforcing its right to contractual arbitration. [Citations.] At the other end of the continuum, it is not essential that the litigation be reduced to judgment in order to find that a party has waived its right to contractual arbitration." (Law Offices of Dixon R. Howell v. Valley (2005) 129 Cal.App.4th 1076, 1097.)
Applying the forgoing principles, we separately consider whether each appellant waived the right to arbitrate respondents claims.
A. Bank of America and Banc of America Securities
According to the trial courts register of actions, Bank of America and Banc of America Securities were served with respondents complaint on September 3, 2008. These appellants filed their petition to compel arbitration more than six months later, on March 10, 2009. We agree with the trial court that this case is analogous to Sobremonte v. Superior Court, supra, 61 Cal.App.4th 980. In Sobremonte, defendant bank asserted as one of 25 affirmative defenses in its answer that the parties dispute was governed by an arbitration agreement, but it waited until 10 months after service of the complaint to file a motion to compel arbitration. (Id. at pp. 986, 989, 993.) The court focused on three of the six relevant factors cited above (delay, conduct inconsistent with arbitration, and prejudice) supporting a finding that the bank waived its right to arbitrate as a matter of law, and we find those factors equally applicable here. (Id. at pp. 992-998.)
The Sobremonte court first stressed that a "`demand for arbitration must not be unreasonably delayed. When an arbitration agreement does not specify the time within which arbitration must be demanded, a reasonable time is allowed; a party who does not demand arbitration within a reasonable time is deemed to have waived the right to arbitration." (Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 992, quoting Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, 1043; see also Law Offices of Dixon R. Howell v. Valley, supra, 129 Cal.App.4th at pp. 1100-1101 ["`normally desirable that [a litigant wishing to assert arbitration rights] do so promptly, if [the party] intends to do so at all"]; Johnson v. Siegel (2000) 84 Cal.App.4th 1087, 1099.) What constitutes a reasonable time to demand arbitration is a question of fact, depending on "`the situation of the parties, the nature of the transaction, and the facts of the particular case." (Spear, supra, at p. 1043.) We agree with the trial court that waiting six months to assert the right to compel arbitration under the circumstances of this case was not reasonable.
Whether a party provides a reasonable explanation for its delay in seeking arbitration may be considered when determining whether there has been a waiver. (Law Offices of Dixon R. Howell v. Valley, supra, 129 Cal.App.4th at pp. 1100-1101, 1103 [waiver of arbitration rights where party knew of right to arbitrate and offered legally insufficient reason for delay]; Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 557 [reversing a finding of no waiver where party failed to offer any explanation for waiting three months to demand arbitration where it knew about arbitration provisions before lawsuit was filed].) Here, the bank appellants counsel candidly acknowledged that the only reason the bank appellants delayed in bringing their motion was because it took a long time to locate the applicable agreement, a reason the trial court found to be unreasonable: "[T]hey [the bank appellants] are going to have to change the method of their filing system. Because if it takes this long for them to find an Agreement significant enough where the choice of law is impacted along with other substantial rights of their clients and customers, that is not okay." Considering the advanced age of respondent, the condition of his health, and the fact that it took several months to locate an arbitration agreement that Bank of America and Banc of America Securities suspected existed when they first answered respondents complaint, substantial evidence supports the reasonable inference that they failed to assert their right to compel arbitration in a timely manner. (Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 992.)
Consistent with their counsels representations to the trial court, the bank appellants claim on appeal they "undertook a review of voluminous business records to find the applicable agreement," that the search was conducted with "urgency and thoroughness," and that the relevant customer agreements were not kept in respondents files. We note, however, that a review of the record reveals that the only evidence of what steps were taken to locate the relevant arbitration agreements is the statement in a declaration by the bank appellants outside counsel that the bank appellants "were required to search through voluminous records dating back over 10 years to locate the relevant agreement." It is unclear how "voluminous" the relevant records were, whether multiple locations had to be searched, or how many people were devoted to this task. Other declarations submitted to the trial court stated that the relevant documents were maintained "in the ordinary course of business," but made no mention of what specific steps were taken to locate the agreements.
We also agree that the conduct of Bank of America and Banc of America Securities in the months prior to filing their petition to compel arbitration was "inconsistent with an intent to arbitrate." (Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 993.) Although Bank of America and Banc of America Securities raised arbitration in their answer, "`mere assertion of this affirmative defense, without more, does not preclude a finding that subsequent conduct may cause a waiver of that right." (Ibid., quoting Davis v. Continental Airlines, Inc., supra, 59 Cal.App.4th at p. 217.) We recognize that the parties did not engage in extensive discovery or motion practice (cf. Guess?, Inc. v. Superior Court, supra, 79 Cal.App.4th at p. 558 [party took "full advantage" of discovery procedures]), and there is no suggestion that appellants engaged in any dilatory practices to gain an unfair tactical advantage (cf. Davis v. Continental Airlines, Inc., supra, 59 Cal.App.4th at p. 215 [party used discovery to gain information that could not have been obtained in arbitration]). Nevertheless, the fact remains that Bank of America and Banc of America Securities litigated this case for several months without raising arbitration as a defense, despite opportunities to do so (such as when they opposed respondents motion for trial preference and to set a trial date). (Sobremonte, supra, at p. 994.) Although at one point they argued that a portion of the parties dispute was subject to resolution in New York, they withdrew that motion around the time that counsel for the bank appellants notified the other parties that the relevant arbitration agreement had been located.
The parties vigorously dispute the significance of respondents production of discovery responses after appellants notified him that they intended to compel arbitration. The bank appellants claim that the parties agreed to stay discovery pending their petition to compel, that respondent breached that agreement by unilaterally serving discovery responses, and that the production of discovery responses was an attempt to "manufacture prejudice." Respondent claims that there was no agreement to stay discovery, that he produced discovery responses because appellants delayed filing their petition to compel arbitration for one month, and that the deadline for filing any motion for summary judgment was approaching. Because the discovery responses are not in the record, we are unable to evaluate respondents claim that they revealed his "strategies and defenses." Even assuming that respondents discovery responses were immaterial, substantial evidence nonetheless supports the inference that Bank of America and Banc of America Securities unreasonably delayed in filing their petition.
We conclude that there was substantial evidence that respondent was prejudiced by the delay in filing a petition to compel arbitration. (Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 995.) "[C]ourts assess prejudice with the recognition that Californias arbitration statues reflect `"a strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution" and are intended `"to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of their differences by a tribunal of their own choosing." [Citation.] Prejudice typically is found only where the petitioning partys conduct has substantially undermined this important public policy or substantially impaired the other sides ability to take advantage of the benefits and efficiencies of arbitration." (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1204, italics added.) Here, delaying for several months bringing their petition to compel arbitration undermined the public policy in favor of arbitration providing "an inexpensive and speedy method of resolving" the parties dispute. (Law Offices of Dixon R. Howell v. Valley, supra, 129 Cal.App.4th at p. 1103.) "Arbitration is an expedient, efficient and cost-effective method to resolve disputes. If we consider the amount of time and money [respondent has] already spent in the judicial system, any benefits [he] may have achieved from arbitration have been lost." (Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 996.) The fact that respondent is an elderly man with health issues makes him particularly vulnerable to prejudice when there is a delay in proceedings, preventing a speedy resolution of the matter. Although this is not a situation where the bank appellants filed their petition to compel arbitration on the eve of trial, it is beyond dispute that the parties engaged in some discovery and motion practice, that the bank appellants waited more than six months to file their petition to compel arbitration, and that the petition was filed fewer than five months before the scheduled trial date. Respondents counsel no doubt spent time and incurred expenses in the litigation, further supporting a finding of prejudice. The trial court recognized the effort necessarily spent on discovery, telling Gillelens counsel that "you are down-playing the paper discovery. Because we see motions to compel answers to interrogatories and requests for further responses to request[s] for admissions here every day upon which cases can turn." The trial court also emphasized the significant delay in filing the petition, going so far as to say that the bank appellants should change their filing system so that they could more readily access relevant arbitration agreements. To conclude that the only reasonable inference to be drawn here is that respondent suffered no prejudice would be to ignore the prejudice that a litigant suffers when a partys record-keeping system causes delay in pursuing arbitration.
Groom v. Health Net (2000) 82 Cal.App.4th 1189, relied upon heavily by the bank appellants, does not dictate a contrary result. In that case, defendants demurred to plaintiffs original complaint, as well as to three amended complaints filed thereafter. (Id. at pp. 1191-1193.) They also served discovery requests during the demurrer process, but plaintiff did not respond to them and defendants did not seek to compel her to do so. (Id. at p. 1192.) Defendants did not seek to compel arbitration until after the trial court ruled on the demurrer to the third amended complaint, more than 11 months after they were served with the original complaint. (Id. at p. 1193.) The Groom court reversed the trial courts denial of defendants petition to compel arbitration, concluding that the demurrer activity in the case did not amount to litigation on the merits, and that plaintiff had not demonstrated the requisite prejudice to establish waiver of the right to arbitrate. (Id. at p. 1195, 1199.) "`[W]aiver does not occur by mere participation in litigation. [Citation.] Prejudice in the context of waiver of the right to compel arbitration normally means some impairment of the other partys ability to participate in arbitration," such as by engaging in discovery that that reveals the details of plaintiffs case before seeking to compel arbitration. (Id. at p. 1197.) The Groom court stressed that, unlike here, the demurrer process clarified that arbitration was appropriate: "It is obvious from the complaints that [plaintiff] wanted a jury trial, and it may reasonably be inferred her complaints were artfully drafted for the purpose of avoiding arbitration. The demurrer process forced [plaintiff] to clarify the nature of her claims and the parties against whom those claims were made, and to reveal the existence of the arbitration agreement. This is not prejudice to [plaintiff], it is a result that she could have avoided by more clear pleading in the first instance." (Id. at pp. 1196-1197.) Here, appellants did not demur to respondents complaint, and they do not otherwise claim that the complaint did not make clear that his claims were subject to arbitration. More to the point, appellants proceeded in a manner that was inconsistent with arbitration, and presented no valid reason they did not raise the right to arbitrate sooner.
In short, when we consider the relevant factors and the inferences favorable to the trial courts order (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1196; Davis v. Continental Airlines, Inc., supra, 59 Cal.App.4th at p. 211), we cannot conclude that the record before the trial court compelled a finding of nonwaiver by Bank of America and Banc of America Securities as a matter of law.
B. BAIS
We next consider whether BAIS likewise waived its right to arbitrate. BAIS was substituted as a Doe defendant on January 15, 2009. The petition to compel arbitration, which was filed jointly by all three bank appellants, was BAISs first responsive pleading, in lieu of filing a formal answer. (§ 1281.7.) The bank appellants argue that BAIS could not have waived its right to arbitration, because its first participation in this case was the filing of the petition to compel arbitration.
The bank appellants argument would be much stronger were BAIS a wholly separate entity, represented by separate counsel, with no notice of respondents allegations of wrongdoing before it was added as a party. In fact, all bank appellants share the same counsel, and Bank of America and Banc of America Securities represented in their discovery responses before BAIS was added as a party that BAIS was a subsidiary of Bank of America. Bank of America also represented in its responses to requests for production of documents that it would produce documents responsive to respondents requests that were in the "possession, custody or control" of BAIS, an indication that BAIS had notice of respondents claims and had access to the relevant arbitration agreement.
The trial court referred to the discovery responses when it questioned the bank appellants counsel about BAIS, asking, "Are you saying that Bank of America is not going to share any of this discovery that they have received with Banc of America Securities, Inc. or BAIS?" Counsel represented that the responses "provide[d] virtually very little in the way of substantive responses," something the trial court assumed was "a matter of opinion."
Had Bank of America and Banc of America Securities promptly located the relevant agreements and petitioned within a reasonable time to compel arbitration, respondent presumably could have added BAIS as a party in arbitration. Instead, Bank of America and Banc of America Securities engaged in litigation in the trial court until the relevant customer agreements were located. Again, when we consider the relevant factors and the inferences favorable to the trial courts order, we do not find nonwaiver as a matter of law as to BAIS.
C. Gillelen
Finally, we turn to whether appellant Gillelen also waived his right to arbitrate. Gillelen simply joined the bank appellants petition in the trial court, with no additional written submission. His counsel argued at the hearing on the petition that Gillelen had served discovery but had done little work on the case, that respondent was not prejudiced, and that Gillelen was disadvantaged by the fact that he did not have a copy of any arbitration agreements when the litigation began. However, Gillelen raises none of these issues on appeal, instead simply joining in the bank appellants briefs.
No discovery propounded by Gillelen appears in the record. The bank appellants claim that Gillelen served "a small number of document requests that were modeled after the mandatory disclosures provided for under the FINRA arbitration rules." It is unclear whether respondent produced any responsive documents.
Gillelen is seldom mentioned in the parties briefs. The bank appellants note that Gillelen asserted the right to arbitration as an affirmative defense; however, this is insufficient, standing alone, to preclude a finding that later conduct waived the right to arbitrate. (Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 993; Davis v. Continental Airlines, supra, 59 Cal.App.4th at p. 216.)
The bank appellants also contend that all appellants (including Gillelen) are covered by the revised 1999 agreement, which covers BAIS and each of its "employees." Gillelen was alleged to be an employee of Bank of America. Even if Gillelen were covered by the revised 1999 agreement, however, he would not be entitled to arbitrate the dispute if he waived his right to do so, which the trial court suggested was the case. None of the parties addresses whether appellant Gillelen waived his right to arbitrate, even though he was arguably differently situated than the bank appellants.
Respondent argues, as he did below, that because Bank of America and Banc of America Securities had no right to arbitrate, the trial court had discretion under section 1281.2, subdivision (c) to refuse to enforce any arbitration agreement as to all appellants. Although this is arguably an alternative ground upon which we may affirm, there is no indication from the record that the trial court was exercising its discretion under section 1281.2, subdivision (c).
"It is a fundamental rule of appellate review that the [order] appealed from is presumed correct and `"`all intendments and presumptions are indulged in favor of its correctness." [Citation.] [Citation.] An appellant must provide an argument and legal authority to support his contentions. This burden requires more than a mere assertion that the [order] is wrong. `Issues do not have a life of their own: If they are not raised or supported by argument or citation to authority, [they are] . . . waived. [Citation.] It is not our place to construct theories or arguments to undermine the [order] and defeat the presumption of correctness. When an appellant fails to raise a point, . . . we treat the point as waived. [Citation.]" (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852, fn. omitted.) As with any appeal, we presume the trial courts order regarding a petition to compel arbitration is correct, and it is appellants responsibility to show reversible error. (Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 991.) Because the record does not as a matter of law compel a finding of nonwaiver as to Gillelen (Davis v. Continental Airlines, Inc., supra, 59 Cal.App.4th at p. 211), especially considering counsels acknowledgement that Gillelen served discovery, we affirm the trial courts order as to Gillelen as well.
In light of our conclusion regarding waiver of the right to arbitrate, we need not consider the parties arguments over whether the arbitration clause in the revised 1999 agreement was unconscionable.
III.
DISPOSITION
The order denying appellants motion to compel arbitration is affirmed. Respondent shall recover his costs on appeal.
We concur:
Reardon, Acting P.J.
Rivera, J.