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1 John G. Yslas (SBN 187324)
jyslas@wilshirelawfirm.com
2 Jeffrey C. Bils (SBN 301629)
jbils@wilshirelawfirm.com
3 Edward E. Kim (SBN 183022)
ekim@wilshirelawfirm.com
4 Aram Boyadjian (SBN 334009)
aboyadjian@wilshirelawfirm.com
5 Andrew Sandoval (SBN 346996)
andrew.sandoval@wilshirelawfirm.com
6 WILSHIRE LAW FIRM
3055 Wilshire Blvd., 12th Floor
7 Los Angeles, California 90010
Telephone: (213) 381-9988
8 Facsimile: (213) 381-9989
9 Attorneys for Plaintiff
10
SUPERIOR COURT OF THE STATE OF CALIFORNIA
11
FOR THE COUNTY OF SANTA BARBARA – SOUTH COUNTY (ANACAPA)
12
3055 Wilshire Blvd, 12th Floor
Los Angeles, CA 90010-1137
13
WILSHIRE LAW FIRM, PLC
CEDRIC A. BEATY and JORGE L. Case No. 22CV04265
ZARAGOZA VALDOVINOS, individually, and
14 on behalf of all others similarly situated, PAGA REPRESENTATIVE ACTION
15 Plaintiff, [Assigned for all purposes to:
Hon. Donna D. Geck, Dept. 4]
16
v.
PLAINTIFF’S OPPOSITION TO
17 DEFENDANTS’ MOTION
HOMER T. HAYWARD LUMBER CO., a
California corporation; UNITED STAFFING TO COMPEL PLAINTIFF CEDRIC A.
18 BEATY TO SUBMIT HIS CLAIMS TO
ASSOCIATES, LLC, a California limited
liability company; and DOES 1 through 10, ARBITRATION AND TO STAY OR IN
19 THE ALTERNATIVE, TO DISMISS
inclusive,
20
Defendants.
Date: May 24, 2024
21 Time: 10:00 a.m.
Dept.: 4
22
Complaint filed: October 28, 2022
23 Trial date: None set
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 TABLE OF CONTENTS
2 I. INTRODUCTION ............................................................................................................. 6
3 II. RELEVANT PROCEDURAL BACKGROUND .............................................................. 7
4 III. DEFENDANT WAIVED ARBITRATION THROUGH IMPROPER DELAY ................ 8
5 A. Delay in Enforcement of Arbitration Agreements Strongly Supports Waiver ............. 9
6 B. Other St. Agnes Factors Are Present Here .................................................................. 10
7 C. Prejudice Is Not a Factor for Waiver Under the FAA ................................................ 11
8 IV. DEFENDANTS FAIL TO DEMONSTRATE THAT THE FAA APPLIES .................... 12
9 A. California Law Bars Compelled Arbitration of Labor Code Claims .......................... 12
10 B. Defendants Did Not Show a Nexus Between Commerce and Plaintiff’s Duties........ 13
11 C. The Victrola 89 Case Is Inapposite ............................................................................. 15
12 V. THE DRA IS UNCONSCIONABLE AND SHOULD NOT BE ENFORCED ............... 16
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A.
Los Angeles, CA 90010-1137
13 Procedural Unconscionability ..................................................................................... 16
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14 B. Substantive Unconscionability .................................................................................... 17
15 C. The DRA Is Permeated with Unconscionability ......................................................... 19
16 VI. DEFENDANTS’ REQUEST FOR STAY IS UNWARRANTED ................................... 19
17 VII. CONCLUSION ............................................................................................................... 20
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 TABLE OF AUTHORITIES
2 CASES
3 Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal. App.4th 1443 .................................................9
4 Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104 ......................................................... 19
5 Ali v. Daylight Transport, LLC (2020) 59 Cal.App.5th 462 ......................................................... 19
6 Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 ........... 11, 16, 17
7 Augusta v. Keehn & Associates (2011) 193 Cal.App.4th 331 ........................................................9
8 Aviation Data, Inc. v. American Express Travel Related Services Co., Inc.
9 (2007) 152 Cal.App.4th 1522 .................................................................................................. 11
10 Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237 ................................................................... 16
11 Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713 ........................................ 19
12 Burton v. Cruise (2010) 190 Cal.App.4th 939 ...............................................................................8
3055 Wilshire Blvd, 12th Floor
Los Angeles, CA 90010-1137
13 Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc. (C.A.7 1995) 50 F.3d 388 ............... 11
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14 Carmax Auto Superstores LLC v. Hernandez (C.D. Cal. April 30, 2015) 94 F.Supp.3d 1078 ..... 14
15 Chamber of Commerce of the United States v. Bonta (9th Cir. 2022) 62 F.4th 473 ..................... 13
16 Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677 ............... 20
17 Danny’s Construction Co. v. Birdair, Inc. (W.D.N.Y. 2000) 136 F.Supp.2d 134 ........................ 11
18 Davis v. O'Melveny & Myers (9th Cir. 2007) 485 F.3d 1066 ....................................................... 19
19 Davis v. Sheikh Shoes, LLC (2022) 84 Cal.App.5th 956 ................................................................9
20 DePuy Synthes Sales, Inc. v. Howmedica Osteonics Corp. (2022) 28 F.4th 956 .......................... 16
21 Fuentes v. Empire Nissan, Inc. (2023) 90 Cal.App.5th 919 ......................................................... 16
22 Guess?, Inc. v. Sup. Ct. (Kirkland) (2000) 79 Cal.App.4th 553 .....................................................9
23 Guiliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276 ................................... 14
24 Hansber v. Ulta Beauty Cosmetics, LLC (E.D. Cal. 2022) 640 F.Supp.3d 947 ............................ 20
25 Hoover v. American Income Life Insurance Co. (2012) 206 Cal.App.4th 1193 ....................... 8, 14
26 Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F3d 1165 ................................................... 17
27 Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348 .............................................. 19
28 Kaneko Ford Design v. Citipark, Inc. (1988) 202 Cal.App.3d 1220 ..............................................9
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 Kokubu v. Sudo (2022) 76 Cal.App.5th 1074 ............................................................................... 12
2 Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676 ..................................... 14
3 Leenay v. Superior Court (2022) 81 Cal.App.5th 553 .............................................................. 7, 19
4 LGCY Power, LLC v. Sup.Ct. (Sewell) (2022) 75 Cal.App.5th 844 ............................................. 16
5 Magno v. The College Network, Inc. (2016) 1 Cal.App.5th 277 .................................................. 19
6 Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52 ............................................ 11
7 McGill v. Citibank, N.A. (2017) 2 Cal.5th 945 ............................................................................. 19
8 Morgan v. Sundance, Inc. (2022) 596 U.S. 411 ..................................................................... 11, 12
9 Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp. (1983) 460 U.S. 1 ............................ 11
10 Murrey v. Superior Ct. (2023) 87 Cal.App.5th 1223 .................................................................... 16
11 Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267 .............................................. 17
12 Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205 .................................................................. 17
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Los Angeles, CA 90010-1137
13 Perry v. Thomas (1987) 482 U.S. 483 .......................................................................................... 13
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14 Ramirez v. Charter Communications, Inc. (2022) 75 Cal.App.5th 365 ........................................ 19
15 Schmidt v. Macco Const. Co. (1953) 119 Cal.App.2d 717 ........................................................... 13
16 Seidman & Seidman v. Wolfson (1975) 50 Cal.App.3d 826 ......................................................... 20
17 Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695 ............................... 17
18 Singer v. Jefferies & Co. (1991) 78 N.Y.2d 76 ............................................................................ 11
19 Sobremonte v. Sup. Ct. (Bank of America) (1998) 61 Cal.App.4th 980.................................... 9, 20
20 Sovak v. Chugai Pharmaceutical Co (9th Cir. 2002) 280 F.3d 1266............................................ 11
21 St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187 .................... 8, 9, 10
22 Thomas v. Westlake ((2012) 204 Cal.App.4th 605 ....................................................................... 20
23 Victrola 89 LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337 .................................... 15
24 Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242 ................................................................... 16
25 Woolls v. Superior Court (2005) 127 Cal.App.4th 197 .......................................................... 14, 16
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 STATUTES
2 9 U.S.C. § 2 ............................................................................................................................. 7, 13
3 9 U.S.C. § 4, Federal Arbitration Act (FAA) ............................................................................... 11
4 9 U.S.C. § 401-402, Federal Arbitration Act (FAA) .................................................................... 18
5 Bus. & Prof. Code § 17200 et seq., Cal. Labor Code and Unfair Competition Law..................... 18
6 Cal. Code Civ. Proc. §§ 1280–1294.2, Cal. Arbitration Act (CAA)............................................. 20
7 Cal. Code Civ. Proc. § 1281.2 ...................................................................................................... 15
8 Cal. Code Civ. Proc. § 1281.2(c)(3) ............................................................................................. 20
9 Cal. Code Civ. Proc. § 1281.2, subd. (a) ........................................................................................8
10 Cal. Gov. Code §§12900-12996, California Fair Employment and Housing Act ......................... 13
11 Cal. Lab. Code § 229 ................................................................................................... 6, 12, 13, 16
12 Cal. Lab. Code § 432.6 ...................................................................................................... 6, 13, 16
3055 Wilshire Blvd, 12th Floor
Los Angeles, CA 90010-1137
13 Cal. Lab. Code § 432.6 (a) ........................................................................................................... 12
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14 Cal. Lab. Code § 925 ................................................................................................................... 16
15 Cal. Lab. Code § 2698 et seq., Private Attorneys General Act (“PAGA”) ............................... 7, 19
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 MEMORANDUM OF POINTS AND AUTHORITIES
2 I. INTRODUCTION
3 About 15 months after Plaintiffs Cedric A. Beaty and Jorge L. Zaragoza Valdovinos 1
4 commenced this Labor Code Private Attorneys General Act of 2004 (“PAGA”) representative action,
5 Defendants filed their Motion to Compel Arbitration, seeking to enforce a purported arbitration
6 agreement against Plaintiff Beaty (again, not as to Plaintiff Valdovinos since there is no purported
7 agreement as to him)2 which Defendants have known of since before this litigation began. 3 The
8 Motion should be denied in its entirety for the following reasons:
9 First, by delaying filing and service of the Motion for well over a year since Plaintiffs began
10 this action, Defendants have effectively waived their right to enforce the arbitration agreement.
11 Defendants have failed to explain why Defendants delayed so long in seeking enforcement of the
12 Dispute Resolution Agreement (“DRA”), i.e., why they declined to bring the Motion earlier, despite
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Los Angeles, CA 90010-1137
13 having been aware of the DRA prior to Plaintiffs filing and serving the complaint. Defendants also
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14 fail to explain why they abused the litigation system by continuing to delay filing this Motion while
15 refusing to respond to Plaintiffs’ written discovery — and even forcing Plaintiffs to file motions to
16 compel discovery on the pretext that the parties were bound by the DRA.
17 Second, the wage-and-hour claims alleged here are not subject to compelled arbitration,
18 because California Labor Code section 229 expressly states that “actions to enforce the provisions
19 of this article for the collection of due and unpaid wages claimed by an individual may be maintained
20 without regard to the existence of any private agreement to arbitrate.” (See also, Labor Code § 432.6.)
21 Although the Federal Arbitration Act (“FAA”) may preempt these statutes in some instances, here,
22 Defendants have failed to meet their burden to show the FAA governs, because Motion and
23 supporting papers wholly lack any evidentiary showing that the employment relationship (and hence,
24 the arbitration agreement) between Plaintiff and Defendants “evidence[es] a transaction involving
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1
Defendants do not allege Plaintiff Valdovinos is a signatory to the DRA and he is not a subject
26 of this Motion.
27 2
Dispute Resolution Agreement, attached as Exhibit A to the Declaration of Shawnte Priest.
3
28 Priest Decl., ¶¶ 5-6.
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 [interstate] commerce” pursuant to 9 U.S.C. §2.4
2 Third, the DRA is permeated with unconscionability, through multiple substantively
3 unconscionable terms such as unilateral obligation to arbitrate claims, inclusion of claims that are
4 immune from forced arbitration as a matter of law, and illegal waiver of rights to bring representative
5 claims under PAGA (Cal. Lab. Code § 2698, et seq.) , such that striking the entire DRA is warranted.
6 Fourth, Defendants’ request for a stay is wholly unwarranted under relevant law. Plaintiff
7 Valdovinos — who it is undisputed has no arbitration agreement — is fully capable of prosecuting
8 this action in the unlikely event Plaintiff Beaty’s claims are ordered to arbitration, and is entitled to
9 do so, as he is not a party to the DRA and not a party to any arbitration proceedings that may (but
10 should not) arise from that agreement. (See e.g., Leenay v. Superior Court (2022) 81 Cal.App.5th
11 553, 570.) The Court’s power to impose a stay following an order compelling individual arbitration
12 is discretionary, and Defendants have not offered any evidence or argument demonstrating why the
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Los Angeles, CA 90010-1137
13 Court should exercise discretion in this case, especially given Plaintiff Valdovinos can readily
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14 continue prosecution of this action.
15 II. RELEVANT PROCEDURAL BACKGROUND
16 Defendants assert Plaintiff Beaty (only) executed a purported arbitration agreement on the
17 date his employment with Defendants commenced (September 26, 2017). [Motion at 8:5-19; Priest
18 Decl., ¶¶ 5-6.] Accordingly, Defendants were aware of the existence of this agreement prior to
19 initiation of this lawsuit on October 28, 2022. Subsequently:
20 On October 28, 2022, Plaintiffs filed their putative class action complaint in the Santa
21 Barbara County Superior Court, coinciding with the filing of this PAGA action on the
22 same date. (Santa Barbara Superior Court Case No. 22CV04265.)
23 On February 13, 2023, Defendants filed their General Denial, and expressly referenced
24 the purported arbitration agreement in their Thirty-Seventh Affirmative Defense.
25 On March 3, 2023, Plaintiffs propounded their First Set of Form Interrogatories–General,
26
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Defendants attempt no showing of interstate commerce activities at all as to defendant Homer
27
T. Hayward Lumber Co. and make a wholly insufficient showing as to defendant United Staffing
28 Associates, LLC.
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 First Set of Requests for Admission, First Set of Requests for Production, and First Set of
2 Special interrogatories upon Defendants.
3 On April 4, 2023, Defendants served written responses to Plaintiffs’ first set of discovery,
4 without substantive responses and only asserting the improper objection that the DRA
5 voids any discovery outside of arbitration.
6 On September 19, 2023, the parties mediated unsuccessfully with respected neutral Steve
7 Cerveris.
8 On December 29, 2023, Plaintiffs filed their discovery motions in both this action and in
9 the related Class case.
10 On March 5, 2024, Defendants filed the Motion.
11 On March 18, 2024, Defendants filed their opposition to Plaintiffs’ discovery motions.
12 III. DEFENDANT WAIVED ARBITRATION THROUGH IMPROPER DELAY
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Los Angeles, CA 90010-1137
13 When a party moves to compel arbitration, “the court shall order the [moving party] and the
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14 respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy
15 exists, unless it determines that ... [t]he right to compel arbitration has been waived by the [moving
16 party].” (Civ. Proc. Code, § 1281.2, subd. (a).) Accordingly, a party may be said to have “waived”
17 its right to arbitrate by an untimely demand, even without intending to give up the remedy. In this
18 context, waiver is more like a forfeiture arising from the nonperformance of a required act. (Burton
19 v. Cruise (2010) 190 Cal.App.4th 939, 944.)
20 The California Supreme Court has held that “no single test delineates the nature of the
21 conduct that will constitute a waiver of arbitration.” (St. Agnes Medical Center v. PacifiCare of
22 California (2003) 31 Cal.4th 1187, 1195) “[T]he court views the litigation as a whole in determining
23 whether the [moving party’s] conduct is inconsistent with a desire to arbitrate. [Citation.]” (Hoover
24 v. American Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1204.) St. Agnes recognized the following
25 factors as among those relevant to determining waiver:
26 (1) Whether a party’s actions are inconsistent with the right to arbitrate.
27 (2) Whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were
28 well into preparation of a lawsuit’ before the party notified the opposing party of an intent
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 to arbitrate.
2 (3) Whether a party either requested arbitration enforcement close to the trial date or delayed
3 for a long period before seeking a stay.
4 (4) Whether important intervening steps such as the conduct of discovery had taken place.
5 (5) Whether the delay ‘affected, misled, or prejudiced’ the opposing party.
6 (St. Agnes, 31 Cal.4th at 1196.)
7 A. Delay in Enforcement of Arbitration Agreements Strongly Supports Waiver
8 Most applicable here is the factor of delay. Courts repeatedly have held that a party waives
9 the right to arbitration by unreasonable delay in bringing a motion to compel arbitration. (Sobremonte
10 v. Sup. Ct. (Bank of America) (1998) 61 Cal.App.4th 980, 991; Guess?, Inc. v. Sup. Ct. (Kirkland)
11 (2000) 79 Cal.App.4th 553, 556 (less than 4-month delay); Augusta v. Keehn & Associates (2011)
12 193 Cal.App.4th 331, 338-339 (waiver with 6 1/2 month delay); Adolph v. Coastal Auto Sales, Inc.
3055 Wilshire Blvd, 12th Floor
Los Angeles, CA 90010-1137
13 (2010) 184 Cal. App.4th 1443, 1449, 1451-52 (six- month delay); Kaneko Ford Design v. Citipark,
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14 Inc. (1988) 202 Cal.App.3d 1220, 1228-29 (5 1/2 month delay).)
15 The justification for the delay is key to the analysis. As courts have found, the absence of a
16 reasonable explanation for delay is a significant factor weighing in favor of finding waiver. (Davis
17 v. Sheikh Shoes, LLC (2022) 84 Cal.App.5th 956, 969.)
18 As described in detail above, Defendants egregiously engaged in delay before bringing this
19 Motion. The Motion was made 13 months after Defendants filed an Answer referencing a purported
20 arbitration agreement, and expressly informed the Court of their intent to pursue private binding
21 arbitration pursuant to an agreement between Plaintiff and Defendants. Defendants fail to offer any
22 credible reason for this delay.
23 Defendants attempt to obliquely address the issue of delay through their reference to
24 mediation. [Motion at 9:25-10:5.] But from Defendants’ own factual statement in the Motion, the
25 following is apparent:
26 The parties did not enter into a stipulation or other formalized agreement that Defendants
27 would not move to compel arbitration pending mediation.
28 Defendants did not advise the Court of their intent to prioritize mediation ahead of
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 arbitration, as prophylactic clarification for their delay.
2 Defendants fail to provide any evidence through the Motion that Plaintiffs agreed to, or
3 otherwise countenanced, Defendants delay in bringing the Motion.
4 Conversely, Defendants’ litigation conduct is marked by an awareness of the DRA,
5 willingness to use the specter of the DRA tactically in litigation, and wholly unexplained delay in
6 enforcing the DRA. In fact, Defendants improperly and pretextually objected to Plaintiffs’ written
7 discovery one year ahead of the Motion on the basis of the DRA.
8 From the very outset of this case, Defendants had the awareness, opportunity, and capacity
9 to bring this Motion on a timely basis but elected not to do so, without any reasonable justification,
10 despite emphasizing the existence of an arbitration agreement in their Court filings.
11 Moreover, Defendants’ conduct, particularly their use of the DRA as a means to evade their
12 discovery obligations and further delay and draw out this litigation, demonstrates that Defendants
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13 have acted inconsistently by using their purported right to arbitration instead to obtain delay in this
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14 action. Defendants have used their purported contractual right to make a motion to compel
15 arbitration as a weapon to delay Plaintiffs in the prosecution of their case and thus in their resolution
16 to Plaintiffs’ individual claims, as well as class claims brought by Plaintiffs. This is an interference
17 with the litigation process, specifically of the Delay Reduction Act. Defendants’ failure to move
18 promptly to compel arbitration is a misuse of the arbitration provision that the Defendants have
19 secured from their new hires. It permits the Defendants to secure a collateral benefit — delay and
20 expense — from the contractual arbitration provision. All of this strongly supports waiver.
21 B. Other St. Agnes Factors Are Present Here
22 Other factors that the St. Agnes Court identified as relevant to the waiver analysis also are
23 met here. Defendants’ Motion was filed after the Case Management Conference when Defendants
24 explicitly stated their intent to pursue private binding mediation, and after Plaintiffs had propounded
25 a first round of written discovery, to which Defendants formally responded, such that the “litigation
26 machinery has been invoked.” Moreover, active participation in litigation, including specifically
27 discovery, serve to satisfy the catch-all factor that Defendants have generally acted in a manner
28 inconsistent with a right to arbitrate.
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
1 C. Prejudice Is Not a Factor for Waiver Under the FAA
2 One last St. Agnes factor that warrants discussion is prejudice to the party against whom the
3 motion to compel arbitration is brought. The United States Supreme Court’s opinion in Morgan v.
4 Sundance, Inc. (2022) 596 U.S. 411 eliminated a showing of prejudice as a prerequisite for waiver
5 of arbitration in cases governed by the Federal Arbitration Act (“FAA”) and federal law. Courts have
6 recognized that where the FAA applies, whether a party has waived a right to arbitrate is a matter of
7 federal, not state, law. (See Aviation Data, Inc. v. American Express Travel Related Services Co., Inc.
8 (2007) 152 Cal.App.4th 1522, 1535–1536, 62 Cal.Rptr.3d 396 [noting that “waiver of the right to
9 compel arbitration is not viewed as a question of substantive contract law” and that “ ‘it is federal
10 law, not state, that governs the inquiry into whether a party has waived its right to arbitration’ ”],
11 citing Sovak v. Chugai Pharmaceutical Co (9th Cir. 2002) 280 F.3d 1266, 1270 [citing Mastrobuono
12 v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 60, 115 S.Ct. 1212, 131 L.Ed.2d 76]; Danny’s
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13 Construction Co. v. Birdair, Inc. (W.D.N.Y. 2000) 136 F.Supp.2d 134, 142; Singer v. Jefferies & Co.
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14 (1991) 78 N.Y.2d 76, 84, 571 N.Y.S.2d 680, 575 N.E.2d 98.)
15 To be clear, as discussed at length below, Plaintiffs vigorously dispute the FAA governs the
16 DRA, but if the Court should determine otherwise, under the federal standard, delay need not result
17 in prejudice to the other party for waiver to be made. The U.S. Supreme Court unambiguously
18 decided this issue in Morgan:
19 To decide whether a waiver has occurred, the court focuses on the actions of the
person who held the right; the court seldom considers the effects of those actions on
20
the opposing party. That analysis applies to the waiver of a contractual right, as of any
21 other. As Judge Colloton noted in dissent below, a contractual waiver “normally is
effective” without proof of “detrimental reliance.” 992 F.3d at 716; see Cabinetree of
22 Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 390 (C.A.7 1995) (Posner,
C. J., for the Court). So, in demanding that kind of proof before finding the waiver of
23 an arbitration right, the Eighth Circuit applies a rule found nowhere else—consider it
24 a bespoke rule of waiver for arbitration… But the FAA’s “policy favoring arbitration”
does not authorize federal courts to invent special, arbitration-preferring procedural
25 rules. Moses H. Cone, 460 U.S. at 24, 103 S.Ct. 927… And indeed, the text of the
FAA makes clear that courts are not to create arbitration-specific procedural rules like
26 the one we address here. Section 6 of the FAA provides that any application under the
statute—including an application to stay litigation or compel arbitration— “shall be
27 made and heard in the manner provided by law for the making and hearing of
28 motions” (unless the statute says otherwise). A directive to a federal court to treat
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
arbitration applications “in the manner provided by law” for all other motions is
1 simply a command to apply the usual federal procedural rules, including any rules
2 relating to a motion's timeliness. Or put conversely, it is a bar on using custom-made
rules, to tilt the playing field in favor of (or against) arbitration. As explained above,
3 the usual federal rule of waiver does not include a prejudice requirement. So, Section
6 instructs that prejudice is not a condition of finding that a party, by litigating too
4 long, waived its right to stay litigation or compel arbitration under the FAA.
5 (Morgan, 596 U.S. at 417-419 (emphasis added).)
6 Accordingly, the proper focus is Defendants’ delay in enforcing the DRA, and whether this
7 delay evidences a motive contrary to an intent or desire to arbitrate, regardless of whether Defendants
8 inflicted actual prejudice upon Plaintiff. But even under California law, the delay in this case resulted
9 in prejudice. In Kokubu v. Sudo (2022) 76 Cal.App.5th 1074, the court found:
10 [A] petitioning party’s conduct in stretching out the litigation process itself may cause
11 prejudice by depriving the other party of the advantages of arbitration as an
“expedient, efficient and cost-effective method to resolve disputes.” [Citation.]
12 Arbitration loses much, if not all, of its value if undue time and money is lost in the
litigation process preceding a last-minute petition to compel.
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13
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(Id. at 1090-1091.)
14
Absent a reasonable justification for Defendants’ delay, or a showing that Defendants were
15
substantively hindered from promptly moving to enforce the DRA, the only reasonable conclusion
16
is that Defendants sought to use the pendency of arbitration to string out the litigation process until
17
such time of Defendants’ tactical choosing. Such conduct is inherently prejudicial. Judicial
18
deference to arbitration is in recognition of the speed, efficiency, and cost-effectiveness purportedly
19
offered by arbitration as compared to civil litigation. The Motion should be denied due to waiver.
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IV. DEFENDANTS FAIL TO DEMONSTRATE THAT THE FAA APPLIES
21
A. California Law Bars Compelled Arbitration of Labor Code Claims
22
Labor Code section 229 prohibits mandatory arbitration of wage claims. Section 229 states
23
in relevant part: “Actions to enforce the provisions of this article for the collection of due and unpaid
24
wages claimed by an individual may be maintained without regard to the existence of any private
25
agreement to arbitrate.” (Emphasis added.) Similarly, Labor Code section 432.6 (a) states in
26
pertinent part:
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A person shall not, as a condition of employment, continued employment, or the
28 receipt of any employment-related benefit, require any applicant for employment or
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PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION
any employee to waive any right, forum, or procedure for a violation of any provision
1 of the California Fair Employment and Housing Act Government Code §§12900-
12996 (Part 2.8 (commencing with Section 12900) of Division 3 of Title 2 of the
2 Government Code) or this code, including the right to file and pursue a civil action….
3 This is a PAGA lawsuit solely addressing wage-and-hour violations by Defendants (failure
4 to pay all wages, noncompliant meal and rest periods, deficient earnings statements, etc.), brought
5 under the Labor Code, and therefore it falls squarely within the provisions of both sections 229 and
6 432.6. As such, arbitration is barred.
7 Defendants will likely assert federal preemption of sections 229 and 432.6 under Perry v.
8 Thomas (1987) 482 U.S. 483 and Chamber of Commerce of the United States v. Bonta (9th Cir. 2022)
9 62 F.4th 473, respectively. However, as Bonta makes clear, preemption is only a result of conflict
10 between the FAA and the California statutes, such that preemption only occurs when the FAA applies:
11 “Because all provisions of [Labor Code section 432.6] work together to burden the formation of
12 arbitration agreements, we conclude that the FAA preempts [Labor Code section 432.6] as a whole
3055 Wilshire Blvd, 12th Floor
Los Angeles, CA 90010-1137
13 to the extent it applies to arbitration agreements.” (Id. at 490 (emphasis added).) Likewise, Perry
WILSHIRE LAW FIRM, PLC
14 states that under the Supremacy Clause, the provision of the FAA governing enforcement of
15 arbitration agree
Preview
1 John G. Yslas (SBN 187324) jyslas@wilshirelawfirm.com 2 Jeffrey C. Bils (SBN 301629) jbils@wilshirelawfirm.com 3 Edward E. Kim (SBN 183022) ekim@wilshirelawfirm.com 4 Aram Boyadjian (SBN 334009) aboyadjian@wilshirelawfirm.com 5 Andrew Sandoval (SBN 346996) andrew.sandoval@wilshirelawfirm.com 6 WILSHIRE LAW FIRM 3055 Wilshire Blvd., 12th Floor 7 Los Angeles, California 90010 Telephone: (213) 381-9988 8 Facsimile: (213) 381-9989 9 Attorneys for Plaintiff 10 SUPERIOR COURT OF THE STATE OF CALIFORNIA 11 FOR THE COUNTY OF SANTA BARBARA – SOUTH COUNTY (ANACAPA) 12 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 WILSHIRE LAW FIRM, PLC CEDRIC A. BEATY and JORGE L. Case No. 22CV04265 ZARAGOZA VALDOVINOS, individually, and 14 on behalf of all others similarly situated, PAGA REPRESENTATIVE ACTION 15 Plaintiff, [Assigned for all purposes to: Hon. Donna D. Geck, Dept. 4] 16 v. PLAINTIFF’S OPPOSITION TO 17 DEFENDANTS’ MOTION HOMER T. HAYWARD LUMBER CO., a California corporation; UNITED STAFFING TO COMPEL PLAINTIFF CEDRIC A. 18 BEATY TO SUBMIT HIS CLAIMS TO ASSOCIATES, LLC, a California limited liability company; and DOES 1 through 10, ARBITRATION AND TO STAY OR IN 19 THE ALTERNATIVE, TO DISMISS inclusive, 20 Defendants. Date: May 24, 2024 21 Time: 10:00 a.m. Dept.: 4 22 Complaint filed: October 28, 2022 23 Trial date: None set 24 25 26 27 28 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 TABLE OF CONTENTS 2 I. INTRODUCTION ............................................................................................................. 6 3 II. RELEVANT PROCEDURAL BACKGROUND .............................................................. 7 4 III. DEFENDANT WAIVED ARBITRATION THROUGH IMPROPER DELAY ................ 8 5 A. Delay in Enforcement of Arbitration Agreements Strongly Supports Waiver ............. 9 6 B. Other St. Agnes Factors Are Present Here .................................................................. 10 7 C. Prejudice Is Not a Factor for Waiver Under the FAA ................................................ 11 8 IV. DEFENDANTS FAIL TO DEMONSTRATE THAT THE FAA APPLIES .................... 12 9 A. California Law Bars Compelled Arbitration of Labor Code Claims .......................... 12 10 B. Defendants Did Not Show a Nexus Between Commerce and Plaintiff’s Duties........ 13 11 C. The Victrola 89 Case Is Inapposite ............................................................................. 15 12 V. THE DRA IS UNCONSCIONABLE AND SHOULD NOT BE ENFORCED ............... 16 3055 Wilshire Blvd, 12th Floor A. Los Angeles, CA 90010-1137 13 Procedural Unconscionability ..................................................................................... 16 WILSHIRE LAW FIRM, PLC 14 B. Substantive Unconscionability .................................................................................... 17 15 C. The DRA Is Permeated with Unconscionability ......................................................... 19 16 VI. DEFENDANTS’ REQUEST FOR STAY IS UNWARRANTED ................................... 19 17 VII. CONCLUSION ............................................................................................................... 20 18 19 20 21 22 23 24 25 26 27 28 2 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 TABLE OF AUTHORITIES 2 CASES 3 Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal. App.4th 1443 .................................................9 4 Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104 ......................................................... 19 5 Ali v. Daylight Transport, LLC (2020) 59 Cal.App.5th 462 ......................................................... 19 6 Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 ........... 11, 16, 17 7 Augusta v. Keehn & Associates (2011) 193 Cal.App.4th 331 ........................................................9 8 Aviation Data, Inc. v. American Express Travel Related Services Co., Inc. 9 (2007) 152 Cal.App.4th 1522 .................................................................................................. 11 10 Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237 ................................................................... 16 11 Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713 ........................................ 19 12 Burton v. Cruise (2010) 190 Cal.App.4th 939 ...............................................................................8 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc. (C.A.7 1995) 50 F.3d 388 ............... 11 WILSHIRE LAW FIRM, PLC 14 Carmax Auto Superstores LLC v. Hernandez (C.D. Cal. April 30, 2015) 94 F.Supp.3d 1078 ..... 14 15 Chamber of Commerce of the United States v. Bonta (9th Cir. 2022) 62 F.4th 473 ..................... 13 16 Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677 ............... 20 17 Danny’s Construction Co. v. Birdair, Inc. (W.D.N.Y. 2000) 136 F.Supp.2d 134 ........................ 11 18 Davis v. O'Melveny & Myers (9th Cir. 2007) 485 F.3d 1066 ....................................................... 19 19 Davis v. Sheikh Shoes, LLC (2022) 84 Cal.App.5th 956 ................................................................9 20 DePuy Synthes Sales, Inc. v. Howmedica Osteonics Corp. (2022) 28 F.4th 956 .......................... 16 21 Fuentes v. Empire Nissan, Inc. (2023) 90 Cal.App.5th 919 ......................................................... 16 22 Guess?, Inc. v. Sup. Ct. (Kirkland) (2000) 79 Cal.App.4th 553 .....................................................9 23 Guiliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276 ................................... 14 24 Hansber v. Ulta Beauty Cosmetics, LLC (E.D. Cal. 2022) 640 F.Supp.3d 947 ............................ 20 25 Hoover v. American Income Life Insurance Co. (2012) 206 Cal.App.4th 1193 ....................... 8, 14 26 Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F3d 1165 ................................................... 17 27 Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348 .............................................. 19 28 Kaneko Ford Design v. Citipark, Inc. (1988) 202 Cal.App.3d 1220 ..............................................9 3 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 Kokubu v. Sudo (2022) 76 Cal.App.5th 1074 ............................................................................... 12 2 Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676 ..................................... 14 3 Leenay v. Superior Court (2022) 81 Cal.App.5th 553 .............................................................. 7, 19 4 LGCY Power, LLC v. Sup.Ct. (Sewell) (2022) 75 Cal.App.5th 844 ............................................. 16 5 Magno v. The College Network, Inc. (2016) 1 Cal.App.5th 277 .................................................. 19 6 Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52 ............................................ 11 7 McGill v. Citibank, N.A. (2017) 2 Cal.5th 945 ............................................................................. 19 8 Morgan v. Sundance, Inc. (2022) 596 U.S. 411 ..................................................................... 11, 12 9 Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp. (1983) 460 U.S. 1 ............................ 11 10 Murrey v. Superior Ct. (2023) 87 Cal.App.5th 1223 .................................................................... 16 11 Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267 .............................................. 17 12 Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205 .................................................................. 17 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 Perry v. Thomas (1987) 482 U.S. 483 .......................................................................................... 13 WILSHIRE LAW FIRM, PLC 14 Ramirez v. Charter Communications, Inc. (2022) 75 Cal.App.5th 365 ........................................ 19 15 Schmidt v. Macco Const. Co. (1953) 119 Cal.App.2d 717 ........................................................... 13 16 Seidman & Seidman v. Wolfson (1975) 50 Cal.App.3d 826 ......................................................... 20 17 Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695 ............................... 17 18 Singer v. Jefferies & Co. (1991) 78 N.Y.2d 76 ............................................................................ 11 19 Sobremonte v. Sup. Ct. (Bank of America) (1998) 61 Cal.App.4th 980.................................... 9, 20 20 Sovak v. Chugai Pharmaceutical Co (9th Cir. 2002) 280 F.3d 1266............................................ 11 21 St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187 .................... 8, 9, 10 22 Thomas v. Westlake ((2012) 204 Cal.App.4th 605 ....................................................................... 20 23 Victrola 89 LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337 .................................... 15 24 Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242 ................................................................... 16 25 Woolls v. Superior Court (2005) 127 Cal.App.4th 197 .......................................................... 14, 16 26 27 28 4 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 STATUTES 2 9 U.S.C. § 2 ............................................................................................................................. 7, 13 3 9 U.S.C. § 4, Federal Arbitration Act (FAA) ............................................................................... 11 4 9 U.S.C. § 401-402, Federal Arbitration Act (FAA) .................................................................... 18 5 Bus. & Prof. Code § 17200 et seq., Cal. Labor Code and Unfair Competition Law..................... 18 6 Cal. Code Civ. Proc. §§ 1280–1294.2, Cal. Arbitration Act (CAA)............................................. 20 7 Cal. Code Civ. Proc. § 1281.2 ...................................................................................................... 15 8 Cal. Code Civ. Proc. § 1281.2(c)(3) ............................................................................................. 20 9 Cal. Code Civ. Proc. § 1281.2, subd. (a) ........................................................................................8 10 Cal. Gov. Code §§12900-12996, California Fair Employment and Housing Act ......................... 13 11 Cal. Lab. Code § 229 ................................................................................................... 6, 12, 13, 16 12 Cal. Lab. Code § 432.6 ...................................................................................................... 6, 13, 16 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 Cal. Lab. Code § 432.6 (a) ........................................................................................................... 12 WILSHIRE LAW FIRM, PLC 14 Cal. Lab. Code § 925 ................................................................................................................... 16 15 Cal. Lab. Code § 2698 et seq., Private Attorneys General Act (“PAGA”) ............................... 7, 19 16 17 18 19 20 21 22 23 24 25 26 27 28 5 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 MEMORANDUM OF POINTS AND AUTHORITIES 2 I. INTRODUCTION 3 About 15 months after Plaintiffs Cedric A. Beaty and Jorge L. Zaragoza Valdovinos 1 4 commenced this Labor Code Private Attorneys General Act of 2004 (“PAGA”) representative action, 5 Defendants filed their Motion to Compel Arbitration, seeking to enforce a purported arbitration 6 agreement against Plaintiff Beaty (again, not as to Plaintiff Valdovinos since there is no purported 7 agreement as to him)2 which Defendants have known of since before this litigation began. 3 The 8 Motion should be denied in its entirety for the following reasons: 9 First, by delaying filing and service of the Motion for well over a year since Plaintiffs began 10 this action, Defendants have effectively waived their right to enforce the arbitration agreement. 11 Defendants have failed to explain why Defendants delayed so long in seeking enforcement of the 12 Dispute Resolution Agreement (“DRA”), i.e., why they declined to bring the Motion earlier, despite 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 having been aware of the DRA prior to Plaintiffs filing and serving the complaint. Defendants also WILSHIRE LAW FIRM, PLC 14 fail to explain why they abused the litigation system by continuing to delay filing this Motion while 15 refusing to respond to Plaintiffs’ written discovery — and even forcing Plaintiffs to file motions to 16 compel discovery on the pretext that the parties were bound by the DRA. 17 Second, the wage-and-hour claims alleged here are not subject to compelled arbitration, 18 because California Labor Code section 229 expressly states that “actions to enforce the provisions 19 of this article for the collection of due and unpaid wages claimed by an individual may be maintained 20 without regard to the existence of any private agreement to arbitrate.” (See also, Labor Code § 432.6.) 21 Although the Federal Arbitration Act (“FAA”) may preempt these statutes in some instances, here, 22 Defendants have failed to meet their burden to show the FAA governs, because Motion and 23 supporting papers wholly lack any evidentiary showing that the employment relationship (and hence, 24 the arbitration agreement) between Plaintiff and Defendants “evidence[es] a transaction involving 25 1 Defendants do not allege Plaintiff Valdovinos is a signatory to the DRA and he is not a subject 26 of this Motion. 27 2 Dispute Resolution Agreement, attached as Exhibit A to the Declaration of Shawnte Priest. 3 28 Priest Decl., ¶¶ 5-6. 6 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 [interstate] commerce” pursuant to 9 U.S.C. §2.4 2 Third, the DRA is permeated with unconscionability, through multiple substantively 3 unconscionable terms such as unilateral obligation to arbitrate claims, inclusion of claims that are 4 immune from forced arbitration as a matter of law, and illegal waiver of rights to bring representative 5 claims under PAGA (Cal. Lab. Code § 2698, et seq.) , such that striking the entire DRA is warranted. 6 Fourth, Defendants’ request for a stay is wholly unwarranted under relevant law. Plaintiff 7 Valdovinos — who it is undisputed has no arbitration agreement — is fully capable of prosecuting 8 this action in the unlikely event Plaintiff Beaty’s claims are ordered to arbitration, and is entitled to 9 do so, as he is not a party to the DRA and not a party to any arbitration proceedings that may (but 10 should not) arise from that agreement. (See e.g., Leenay v. Superior Court (2022) 81 Cal.App.5th 11 553, 570.) The Court’s power to impose a stay following an order compelling individual arbitration 12 is discretionary, and Defendants have not offered any evidence or argument demonstrating why the 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 Court should exercise discretion in this case, especially given Plaintiff Valdovinos can readily WILSHIRE LAW FIRM, PLC 14 continue prosecution of this action. 15 II. RELEVANT PROCEDURAL BACKGROUND 16 Defendants assert Plaintiff Beaty (only) executed a purported arbitration agreement on the 17 date his employment with Defendants commenced (September 26, 2017). [Motion at 8:5-19; Priest 18 Decl., ¶¶ 5-6.] Accordingly, Defendants were aware of the existence of this agreement prior to 19 initiation of this lawsuit on October 28, 2022. Subsequently: 20 On October 28, 2022, Plaintiffs filed their putative class action complaint in the Santa 21 Barbara County Superior Court, coinciding with the filing of this PAGA action on the 22 same date. (Santa Barbara Superior Court Case No. 22CV04265.) 23 On February 13, 2023, Defendants filed their General Denial, and expressly referenced 24 the purported arbitration agreement in their Thirty-Seventh Affirmative Defense. 25 On March 3, 2023, Plaintiffs propounded their First Set of Form Interrogatories–General, 26 4 Defendants attempt no showing of interstate commerce activities at all as to defendant Homer 27 T. Hayward Lumber Co. and make a wholly insufficient showing as to defendant United Staffing 28 Associates, LLC. 7 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 First Set of Requests for Admission, First Set of Requests for Production, and First Set of 2 Special interrogatories upon Defendants. 3 On April 4, 2023, Defendants served written responses to Plaintiffs’ first set of discovery, 4 without substantive responses and only asserting the improper objection that the DRA 5 voids any discovery outside of arbitration. 6 On September 19, 2023, the parties mediated unsuccessfully with respected neutral Steve 7 Cerveris. 8 On December 29, 2023, Plaintiffs filed their discovery motions in both this action and in 9 the related Class case. 10 On March 5, 2024, Defendants filed the Motion. 11 On March 18, 2024, Defendants filed their opposition to Plaintiffs’ discovery motions. 12 III. DEFENDANT WAIVED ARBITRATION THROUGH IMPROPER DELAY 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 When a party moves to compel arbitration, “the court shall order the [moving party] and the WILSHIRE LAW FIRM, PLC 14 respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy 15 exists, unless it determines that ... [t]he right to compel arbitration has been waived by the [moving 16 party].” (Civ. Proc. Code, § 1281.2, subd. (a).) Accordingly, a party may be said to have “waived” 17 its right to arbitrate by an untimely demand, even without intending to give up the remedy. In this 18 context, waiver is more like a forfeiture arising from the nonperformance of a required act. (Burton 19 v. Cruise (2010) 190 Cal.App.4th 939, 944.) 20 The California Supreme Court has held that “no single test delineates the nature of the 21 conduct that will constitute a waiver of arbitration.” (St. Agnes Medical Center v. PacifiCare of 22 California (2003) 31 Cal.4th 1187, 1195) “[T]he court views the litigation as a whole in determining 23 whether the [moving party’s] conduct is inconsistent with a desire to arbitrate. [Citation.]” (Hoover 24 v. American Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1204.) St. Agnes recognized the following 25 factors as among those relevant to determining waiver: 26 (1) Whether a party’s actions are inconsistent with the right to arbitrate. 27 (2) Whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were 28 well into preparation of a lawsuit’ before the party notified the opposing party of an intent 8 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 to arbitrate. 2 (3) Whether a party either requested arbitration enforcement close to the trial date or delayed 3 for a long period before seeking a stay. 4 (4) Whether important intervening steps such as the conduct of discovery had taken place. 5 (5) Whether the delay ‘affected, misled, or prejudiced’ the opposing party. 6 (St. Agnes, 31 Cal.4th at 1196.) 7 A. Delay in Enforcement of Arbitration Agreements Strongly Supports Waiver 8 Most applicable here is the factor of delay. Courts repeatedly have held that a party waives 9 the right to arbitration by unreasonable delay in bringing a motion to compel arbitration. (Sobremonte 10 v. Sup. Ct. (Bank of America) (1998) 61 Cal.App.4th 980, 991; Guess?, Inc. v. Sup. Ct. (Kirkland) 11 (2000) 79 Cal.App.4th 553, 556 (less than 4-month delay); Augusta v. Keehn & Associates (2011) 12 193 Cal.App.4th 331, 338-339 (waiver with 6 1/2 month delay); Adolph v. Coastal Auto Sales, Inc. 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 (2010) 184 Cal. App.4th 1443, 1449, 1451-52 (six- month delay); Kaneko Ford Design v. Citipark, WILSHIRE LAW FIRM, PLC 14 Inc. (1988) 202 Cal.App.3d 1220, 1228-29 (5 1/2 month delay).) 15 The justification for the delay is key to the analysis. As courts have found, the absence of a 16 reasonable explanation for delay is a significant factor weighing in favor of finding waiver. (Davis 17 v. Sheikh Shoes, LLC (2022) 84 Cal.App.5th 956, 969.) 18 As described in detail above, Defendants egregiously engaged in delay before bringing this 19 Motion. The Motion was made 13 months after Defendants filed an Answer referencing a purported 20 arbitration agreement, and expressly informed the Court of their intent to pursue private binding 21 arbitration pursuant to an agreement between Plaintiff and Defendants. Defendants fail to offer any 22 credible reason for this delay. 23 Defendants attempt to obliquely address the issue of delay through their reference to 24 mediation. [Motion at 9:25-10:5.] But from Defendants’ own factual statement in the Motion, the 25 following is apparent: 26 The parties did not enter into a stipulation or other formalized agreement that Defendants 27 would not move to compel arbitration pending mediation. 28 Defendants did not advise the Court of their intent to prioritize mediation ahead of 9 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 arbitration, as prophylactic clarification for their delay. 2 Defendants fail to provide any evidence through the Motion that Plaintiffs agreed to, or 3 otherwise countenanced, Defendants delay in bringing the Motion. 4 Conversely, Defendants’ litigation conduct is marked by an awareness of the DRA, 5 willingness to use the specter of the DRA tactically in litigation, and wholly unexplained delay in 6 enforcing the DRA. In fact, Defendants improperly and pretextually objected to Plaintiffs’ written 7 discovery one year ahead of the Motion on the basis of the DRA. 8 From the very outset of this case, Defendants had the awareness, opportunity, and capacity 9 to bring this Motion on a timely basis but elected not to do so, without any reasonable justification, 10 despite emphasizing the existence of an arbitration agreement in their Court filings. 11 Moreover, Defendants’ conduct, particularly their use of the DRA as a means to evade their 12 discovery obligations and further delay and draw out this litigation, demonstrates that Defendants 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 have acted inconsistently by using their purported right to arbitration instead to obtain delay in this WILSHIRE LAW FIRM, PLC 14 action. Defendants have used their purported contractual right to make a motion to compel 15 arbitration as a weapon to delay Plaintiffs in the prosecution of their case and thus in their resolution 16 to Plaintiffs’ individual claims, as well as class claims brought by Plaintiffs. This is an interference 17 with the litigation process, specifically of the Delay Reduction Act. Defendants’ failure to move 18 promptly to compel arbitration is a misuse of the arbitration provision that the Defendants have 19 secured from their new hires. It permits the Defendants to secure a collateral benefit — delay and 20 expense — from the contractual arbitration provision. All of this strongly supports waiver. 21 B. Other St. Agnes Factors Are Present Here 22 Other factors that the St. Agnes Court identified as relevant to the waiver analysis also are 23 met here. Defendants’ Motion was filed after the Case Management Conference when Defendants 24 explicitly stated their intent to pursue private binding mediation, and after Plaintiffs had propounded 25 a first round of written discovery, to which Defendants formally responded, such that the “litigation 26 machinery has been invoked.” Moreover, active participation in litigation, including specifically 27 discovery, serve to satisfy the catch-all factor that Defendants have generally acted in a manner 28 inconsistent with a right to arbitrate. 10 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION 1 C. Prejudice Is Not a Factor for Waiver Under the FAA 2 One last St. Agnes factor that warrants discussion is prejudice to the party against whom the 3 motion to compel arbitration is brought. The United States Supreme Court’s opinion in Morgan v. 4 Sundance, Inc. (2022) 596 U.S. 411 eliminated a showing of prejudice as a prerequisite for waiver 5 of arbitration in cases governed by the Federal Arbitration Act (“FAA”) and federal law. Courts have 6 recognized that where the FAA applies, whether a party has waived a right to arbitrate is a matter of 7 federal, not state, law. (See Aviation Data, Inc. v. American Express Travel Related Services Co., Inc. 8 (2007) 152 Cal.App.4th 1522, 1535–1536, 62 Cal.Rptr.3d 396 [noting that “waiver of the right to 9 compel arbitration is not viewed as a question of substantive contract law” and that “ ‘it is federal 10 law, not state, that governs the inquiry into whether a party has waived its right to arbitration’ ”], 11 citing Sovak v. Chugai Pharmaceutical Co (9th Cir. 2002) 280 F.3d 1266, 1270 [citing Mastrobuono 12 v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 60, 115 S.Ct. 1212, 131 L.Ed.2d 76]; Danny’s 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 Construction Co. v. Birdair, Inc. (W.D.N.Y. 2000) 136 F.Supp.2d 134, 142; Singer v. Jefferies & Co. WILSHIRE LAW FIRM, PLC 14 (1991) 78 N.Y.2d 76, 84, 571 N.Y.S.2d 680, 575 N.E.2d 98.) 15 To be clear, as discussed at length below, Plaintiffs vigorously dispute the FAA governs the 16 DRA, but if the Court should determine otherwise, under the federal standard, delay need not result 17 in prejudice to the other party for waiver to be made. The U.S. Supreme Court unambiguously 18 decided this issue in Morgan: 19 To decide whether a waiver has occurred, the court focuses on the actions of the person who held the right; the court seldom considers the effects of those actions on 20 the opposing party. That analysis applies to the waiver of a contractual right, as of any 21 other. As Judge Colloton noted in dissent below, a contractual waiver “normally is effective” without proof of “detrimental reliance.” 992 F.3d at 716; see Cabinetree of 22 Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 390 (C.A.7 1995) (Posner, C. J., for the Court). So, in demanding that kind of proof before finding the waiver of 23 an arbitration right, the Eighth Circuit applies a rule found nowhere else—consider it 24 a bespoke rule of waiver for arbitration… But the FAA’s “policy favoring arbitration” does not authorize federal courts to invent special, arbitration-preferring procedural 25 rules. Moses H. Cone, 460 U.S. at 24, 103 S.Ct. 927… And indeed, the text of the FAA makes clear that courts are not to create arbitration-specific procedural rules like 26 the one we address here. Section 6 of the FAA provides that any application under the statute—including an application to stay litigation or compel arbitration— “shall be 27 made and heard in the manner provided by law for the making and hearing of 28 motions” (unless the statute says otherwise). A directive to a federal court to treat 11 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION arbitration applications “in the manner provided by law” for all other motions is 1 simply a command to apply the usual federal procedural rules, including any rules 2 relating to a motion's timeliness. Or put conversely, it is a bar on using custom-made rules, to tilt the playing field in favor of (or against) arbitration. As explained above, 3 the usual federal rule of waiver does not include a prejudice requirement. So, Section 6 instructs that prejudice is not a condition of finding that a party, by litigating too 4 long, waived its right to stay litigation or compel arbitration under the FAA. 5 (Morgan, 596 U.S. at 417-419 (emphasis added).) 6 Accordingly, the proper focus is Defendants’ delay in enforcing the DRA, and whether this 7 delay evidences a motive contrary to an intent or desire to arbitrate, regardless of whether Defendants 8 inflicted actual prejudice upon Plaintiff. But even under California law, the delay in this case resulted 9 in prejudice. In Kokubu v. Sudo (2022) 76 Cal.App.5th 1074, the court found: 10 [A] petitioning party’s conduct in stretching out the litigation process itself may cause 11 prejudice by depriving the other party of the advantages of arbitration as an “expedient, efficient and cost-effective method to resolve disputes.” [Citation.] 12 Arbitration loses much, if not all, of its value if undue time and money is lost in the litigation process preceding a last-minute petition to compel. 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 WILSHIRE LAW FIRM, PLC (Id. at 1090-1091.) 14 Absent a reasonable justification for Defendants’ delay, or a showing that Defendants were 15 substantively hindered from promptly moving to enforce the DRA, the only reasonable conclusion 16 is that Defendants sought to use the pendency of arbitration to string out the litigation process until 17 such time of Defendants’ tactical choosing. Such conduct is inherently prejudicial. Judicial 18 deference to arbitration is in recognition of the speed, efficiency, and cost-effectiveness purportedly 19 offered by arbitration as compared to civil litigation. The Motion should be denied due to waiver. 20 IV. DEFENDANTS FAIL TO DEMONSTRATE THAT THE FAA APPLIES 21 A. California Law Bars Compelled Arbitration of Labor Code Claims 22 Labor Code section 229 prohibits mandatory arbitration of wage claims. Section 229 states 23 in relevant part: “Actions to enforce the provisions of this article for the collection of due and unpaid 24 wages claimed by an individual may be maintained without regard to the existence of any private 25 agreement to arbitrate.” (Emphasis added.) Similarly, Labor Code section 432.6 (a) states in 26 pertinent part: 27 A person shall not, as a condition of employment, continued employment, or the 28 receipt of any employment-related benefit, require any applicant for employment or 12 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO STAY AND COMPEL ARBITRATION any employee to waive any right, forum, or procedure for a violation of any provision 1 of the California Fair Employment and Housing Act Government Code §§12900- 12996 (Part 2.8 (commencing with Section 12900) of Division 3 of Title 2 of the 2 Government Code) or this code, including the right to file and pursue a civil action…. 3 This is a PAGA lawsuit solely addressing wage-and-hour violations by Defendants (failure 4 to pay all wages, noncompliant meal and rest periods, deficient earnings statements, etc.), brought 5 under the Labor Code, and therefore it falls squarely within the provisions of both sections 229 and 6 432.6. As such, arbitration is barred. 7 Defendants will likely assert federal preemption of sections 229 and 432.6 under Perry v. 8 Thomas (1987) 482 U.S. 483 and Chamber of Commerce of the United States v. Bonta (9th Cir. 2022) 9 62 F.4th 473, respectively. However, as Bonta makes clear, preemption is only a result of conflict 10 between the FAA and the California statutes, such that preemption only occurs when the FAA applies: 11 “Because all provisions of [Labor Code section 432.6] work together to burden the formation of 12 arbitration agreements, we conclude that the FAA preempts [Labor Code section 432.6] as a whole 3055 Wilshire Blvd, 12th Floor Los Angeles, CA 90010-1137 13 to the extent it applies to arbitration agreements.” (Id. at 490 (emphasis added).) Likewise, Perry WILSHIRE LAW FIRM, PLC 14 states that under the Supremacy Clause, the provision of the FAA governing enforcement of 15 arbitration agree