Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of the Los Angeles County No. BC363730, Irving S. Feffer, Judge. .
Law Offices of Rodney T. Lewin; Rodney T. Lewin and R. Stephen Duke for Defendant and Appellant.
The Marks Law Firm, Inc.; Scott A. Marks and Lindsay Joachim for Plaintiffs and Respondents.
TURNER, P. J.
I. INTRODUCTION
Defendants, Diva Real Estate Group, Inc. and Catherine Kamran, appeal from an order denying a motion to compel arbitration of a complaint for negligence and misrepresentation filed by plaintiffs, Rodney Mesriani and Katayoun Omrani. The order denying the motion to compel was based on substantial evidence defendants had waived their right to compel arbitration. Thus, we affirm.
II. BACKGROUND
Plaintiffs filed suit on December 21, 2006 for damages suffered in January 2005 when a hillside behind their home collapsed. Defendants were plaintiffs’ former real estate broker and agent. The complaint alleges: defendants concealed or failed to disclose their knowledge regarding the risk of future slope failure from a hillside; the hillside was to the rear of plaintiffs’ home which they purchased in 2002; in the summer of 2006, plaintiffs learned that as early as 1999, defendants were aware of the high risk of future slope failure; and Ms. Kamran was involved in a prior sale of the property in which the high risk factor was revealed. In addition to the real estate broker and agent, plaintiffs also named as co-defendants, Ebrahim Simantob and L.A. Private Eyes, on the theory they negligently prepared a geological report of the property which failed to disclose the highly foreseeable risk of slope failure. Neither of these co-defendants are parties to this appeal.
The summons and complaint were served on defendants on January 18, 2007. Defendants answered the complaint on March 21, 2007. Although the answer contains 27 affirmative defenses, there is no reference to a right to arbitrate. Also on March 21, 2007, defendants filed a cross-complaint against plaintiffs. The cross-complaint named several additional parties as cross-defendants which had not been named in plaintiffs’ complaint. The cross-complaint made no reference to any arbitration agreement.
On September 27, 2007, defendants filed a motion to compel arbitration and stay the present action. The motion was made on the ground the purchase agreement signed by plaintiffs contained an arbitration clause. Paragraph 17 of the purchase agreement is a dispute resolution provision. It provides as follows: “A. MEDIATION: Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action. Paragraphs 17B(2) and (3) below apply whether or not the Arbitration provision is initialed. Mediation fees, if any, shall be divided equally among the parties involved. If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action. THIS MEDIATION PROVISION APPLIES WHETHER OR NOT THE ARBITRATION PROVISION IS INITIALED. [¶] B. ARBITRATION OF DISPUTES: (1) Buyer and Seller agree that any dispute or claim in Law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration, including and subject to paragraphs 17B(2) and (3) below. The arbitrator shall be a retired judge or justice, an attorney with at least 5 years of residential real estate Law experience, unless the parties mutually agree to a different arbitrator, who shall render an award in accordance with substantive California Law. In all other respects, the arbitration shall be conducted in accordance with Part III, Title 9 of the California Code of Civil Procedure. Judgment upon the award of the arbitrator(s) may be entered in any court having jurisdiction. The parties shall have the right to discovery in accordance with Code of Civil Procedure [section] 1283.05. . . . [¶] (3) BROKERS: Buyer and Seller agree to mediate and arbitrate disputes or claims involving either or both Brokers, provided either or both Brokers shall have agreed to such meditation or arbitration prior to, or within a reasonable time after, the dispute or claim is presented to Brokers. Any election by either or both Brokers to participate in mediation or arbitration shall not result in Brokers being deemed parties to the Agreement. [¶] ‘NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION DECIDED BY NEUTRAL ARBITATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL, BY INTIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE “ARBITATION OF DISPUTES” PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.’” (Original emphasis.)
In support of their arbitration motion, defendants explained that they had initiated discovery to ascertain the nature of the claims including requests for and production of documents. Defendants had also unsuccessfully attempted to schedule plaintiffs’ depositions. Defendants argued that the petition should be granted because: the request was made within a reasonable time; none of the depositions had been taken; no trial date had been set; and public policy favored arbitration of the matter in this case. In anticipation of plaintiffs’ waiver claim, defendants asserted that plaintiffs would not be able to establish either laches or prejudice. According to defendants, their conduct of initiating discovery, filing motions or pleadings, or the length of time it took to seek arbitration did not constitute waiver. According to defendants’ papers, no depositions had been completed. According to defendants, any delay was caused by plaintiffs’ actions in postponing or aborting the noticed depositions. But, the only evidence provided by defendants was the declaration of their counsel which adverted to the arbitration agreement and Mr. Mesriani’s aborted September 18, 2007 deposition. Mr. Mesriani’s deposition was terminated when he indicated he was ill and had taken drugs which could potentially affect his recollection.
Plaintiffs opposed defendants’ motion to compel arbitration on the ground of waiver. Plaintiffs argued defendants waived the right to arbitrate by: actively engaging in litigation for almost a year; filing a cross-complaint against plaintiffs and six third parties who were not parties to the arbitration agreement; and engaging in the discovery process. The opposition, which was supported by a declaration, relied on the following as evidence of waiver of the right to arbitrate: on February 13, 2007, defendants served a production demand which contained 70 separate production requests; on February 13, 2007, defendants noticed Mr. Mesriani’s deposition; the deposition notice directed Mr. Mesriani to produce 70 categories of documents; on April 18, 2007, defendants filed a case management statement which related they were interested in participating in mediation; the box indicating defendants were willing to participate in binding “private arbitration” was not checked; Mr. Mesriani’s deposition began on September 18, 2007; on an unspecified date, a document entitled notice of resuming deposition was served indicating it would commence again on November 7, 2007 and continue until the next day; on an unspecified date, defendants renoticed Ms. Omrani’s deposition and scheduled it for November 15, 2007; on October 11, 2007, the trial court ordered the parties to engage in a “meaningful meet and confer” regarding pending motions to compel Mr. Mesriani’s deposition and arbitration.
Plaintiffs argued that they were prejudiced by defendants’ conduct because the matter had been litigated in court for 10 months. Plaintiffs asserted that they disclosed significant amounts of information such as: witness names, other potential defendants, damages, and expert reports in the discovery generated by the court action. Plaintiff did not support this latter assertion as to the amount of disclosure with any admissible evidence.
Defendants replied that the arbitration agreement conferred the same discovery rights which could have been provided before the arbitrator. Defendants contended that the litigation machinery had not been substantially invoked because: there were only a few status conference appearances; neither defendants nor any other party had until recently filed any motions; none of the parties had taken or completed any depositions; and plaintiffs failed to prove prejudice. Defendants thus asserted that the cumulative effect of all of their actions did not amount to waiver. This was because mere participation in litigation and use of discovery devices without prejudice does not compel a waiver finding. Defendants reiterated that there was no trial date set and the no depositions had been completed.
The hearing on the motion to compel arbitration took place on October 29, 2007. The trial court denied defendants’ motion to compel arbitration. The trial court found: defendants had waived their right to compel arbitration; too much time had passed in litigating the matter; and granting the motion would improperly allow defendants to “change horses in midstream . . . .” The trial court found that the defendants had: engaged in litigation; engaged in discovery; filed a motion; filed a default request; and filed a cross-complaint. The trial court further concluded that the defendants did not establish they asserted the right “‘to arbitration prior to, or within a reasonable time after’” the litigation began which was required by the arbitration clause. On November 26, 2007, defendants filed a notice of appeal from the order denying the motion to compel arbitration.
III. DISCUSSION
Code of Civil Procedure section 1281 provides, “A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” Under California law, the trial court has authority to compel arbitration pursuant to section 1281.2 which provides in 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: . . . [¶] The right to compel arbitration has been waived by the petitioner. . . .” (Emphasis added.)
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
Section 1281.2, subdivision (a) allows a court to deny a petition to compel arbitration on the ground of waiver. But waiver of the right to arbitrate is not lightly inferred because of federal and state law favoring arbitration provisions. (St. Agnes Med. Ctr. v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195; Christensen v. Dewor Developments (1983) 33 Cal.3d 778, 782.) Thus, a waiver claim under California law requires strict judicial scrutiny to determine whether the party asserting waiver has carried its burden of proof. (St. Agnes Med. Ctr. v. PacifiCare of California, supra, 31 Cal.4th at p. 1195; Christensen v. Dewor Developments, supra, 33 Cal.3d at p. 782; Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 189.)
In St. Agnes Med. Ctr. v. PacifiCare of California, supra, 31 Cal.4th at page 1195, footnote 4 the Supreme Court explained: “[T]he term ‘waiver’ has a number of meanings in statute and case law. [Citation.] 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. [Citations.] In the arbitration context, ‘[t]he term “waiver” has also been used as a shorthand statement for the conclusion that a contractual right to arbitration has been lost.’ [Citation.]” In deciding whether there is a waiver of the right to arbitration, our Supreme Court has identified the following factors: “‘In determining waiver, a court can consider “(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested 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.”’” (Id. at p. 1196 quoting Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 992; accord Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 30-31.)
The general rule is that waiver questions are for the court rather than the arbitrator to decide. (§ 1281.2, subd. (a); Wagner Construction Co v. Pacific Mechanical Corp., supra, 41 Cal.4th at p. 28 citing Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 483; Boys Club of San Fernando Valley, Inc. v. Fidelity & Deposit Co. of Maryland (1992) 6 Cal.App.4th 1266, 1274.) The trial court’s determination is reviewed for substantial evidence. (St. Agnes Med. Ctr. v. Pacificare of California, supra, 31 Cal.4th at p. 1196; Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 983; Platt Pacific, Inc. Andelson (1993) 6 Cal.4th 307, 319.) However, when the facts are undisputed and the only issues are legal, the appellate court is not bound by the trial court’s ruling. (St. Agnes Med. Ctr. v. Pacificare of California, supra, 31 Cal.4th at p. 1196; Platt Pacific, Inc. v. Andelson, supra, 6 Cal.4th at p. 319.)
Here, the trial court found that defendants failed to demand arbitration within a reasonable time after the action was filed. The trial court found, among other things, defendants had engaged in litigation for too long a period of time. The trial court also found that defendants had: utilized discovery devices; filed a cross-complaint; and requested entry of default against a cross-defendant. Substantial evidence supports the finding arbitration was not demanded within a reasonable time such as to constitute waiver: defendants answered the complaint on March 21, 2007 but waited until September 27, 2007 to seek to compel arbitration; defendants’ answer contained 27 affirmative defenses none of which included an arbitration demand; defendants cross-complained against six cross-defendants none of whom signed the arbitration agreement; defendants sought the entry of a default judgment as to a cross-defendant; defendants noticed and renoticed depositions; defendants filed a motion to compel Mr. Mesrani to resume his deposition; in April 2007, defendants filed a case management conference statement which did not demand arbitration; and the case management conference statement indicated defendants would be ready for trial in 12 months. The trial court’s waiver finding is supported by substantial evidence and must be affirmed. (St. Agnes Med. Ctr. v. PacifiCare of California, supra, 31 Cal.4th at p. 1196; Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 982.)
IV. DISPOSITION
The order denying the motion to compel arbitration is affirmed. Plaintiffs, Rodney Mesriani and Katayoun Omrani, are awarded their costs on appeal from defendants, Diva Real Estate Group and Catherine Kamran.
We concur: ARMSTRONG, J., MOSK, J.