Failing to assert something doesn’t always waive your right to do so later, but there are limitations. In the arbitration context, if you don’t compel arbitration up front, you risk losing your right to it entirety. In the recent case of Spracher v. Paul M. Zagaris, Inc. (1st Appellate Dist. Case No. A152941, September 17, 2019), the defendants saw this firsthand when the court denied their attempt to later take advantage of arbitration that was not asserted in the beginning of the case.
In Spracher, the parties litigated in superior court for nearly two years before the defendants tried to compel arbitration. The trial court denied the motion, and the court of appeals affirmed this decision. The court cited to the California Arbitration Act, and specifically, Section 1281.2. This provision reads that “the court shall order [arbitration] …, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner…”
While no single test determines what constitutes a “waiver of arbitration,” the California Supreme Court has identified a few factors to consider, including whether the parties act inconsistent with the right to arbitration, whether “litigation machinery has been substantially invoked” and the parties were “well into preparation of a lawsuit” before notifying the other party of an intent to arbitration, whether the request is made close to a trial date, whether a counterclaim was filed without seeking a stay of the court case, and other related considerations. (See St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195-1196.) The court even noted that unreasonable delay alone can constitute a waiver.
Applying these factors, the court of appeal found the trial court got it right. There had been extensive discovery, motion practice, and case management, and the twenty-one-month delay in asserting arbitration was unreasonable.
If you find yourself in litigation or arbitration, it is best to closely review your contracts at issue and determine strategically how to proceed. If you intend to take advantage of one forum over another, you should at least be doing so deliberately and with a plan.
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Parker Taylor Law Group represents businesses and individuals in Sacramento and throughout California. We are well equipped to help you with your litigation, arbitration, and business law needs.