84 Cal.App.5th 956
Cal. Ct. App.2022Background
- Davis signed a mandatory arbitration agreement as a condition of hire at Shiekh Shoes; she resigned after three months alleging pervasive sexual harassment and related FEHA and tort claims.
- Davis sued on March 25, 2019; Shiekh was served in May 2019 and answered in July 2019 asserting arbitration as an affirmative defense.
- Over the following 17 months Shiekh participated in case management, requested a jury trial, engaged in discovery responses and supplements, and agreed to trial continuances; it was unrepresented for part of that time.
- Shiekh moved to compel arbitration on October 5, 2020 (about 17 months after service), arguing its prior litigation activity was minimal or excusable.
- The trial court denied the motion, finding waiver under the multi-factor Peterson/St. Agnes test (including prejudice); on appeal the court applied the FAA, considered the Supreme Court’s intervening Morgan v. Sundance decision, and affirmed denial based on the defendant’s inconsistent conduct and delay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the FAA govern the waiver inquiry? | The FAA governs because the arbitration agreement invoked it. | Agreed FAA applies (agreement references FAA). | FAA controls; federal law governs waiver. |
| Did Shiekh waive its contractual right to arbitrate by litigation conduct and delay? | Davis: Shiekh waited ~17 months, invoked litigation machinery, participated in discovery and trial scheduling, and misled Davis—so waiver. | Shiekh: Delay was excusable (lack of counsel, COVID, co-defendant was primary target); participation was minimal/de minimis. | Waiver affirmed: substantial evidence supports that Shiekh acted inconsistently with an intent to arbitrate (lengthy delay, discovery, trial requests/stipulations). |
| Is a showing of prejudice required to find waiver under the FAA? | Prejudice is a relevant factor (per pre-Morgan California test), but FAA controls. | Shiekh relied on pre-Morgan authority that considered prejudice; argued lack of prejudice here. | Supreme Court in Morgan prohibits conditioning waiver on prejudice; waiver inquiry focuses on the holder’s conduct. Even without prejudice finding, substantial evidence supports waiver here. |
| Standard of appellate review for waiver findings? | Davis: factual inference disputes require substantial-evidence review. | Shiekh: facts undisputed, so de novo review. | Substantial-evidence standard applies because conflicting inferences from undisputed facts; appellate court must draw inferences supporting the trial court. |
Key Cases Cited
- Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022) (FAA waiver cannot be conditioned on a showing of prejudice; focus on party conduct)
- St. Agnes Medical Ctr. v. PacifiCare of Cal., 31 Cal.4th 1187 (2003) (California adopted multi‑factor Peterson waiver test)
- Peterson v. Shearson/American Express, Inc., 849 F.2d 464 (10th Cir. 1988) (articulated multi‑factor test for arbitration waiver)
- Britton v. Co‑op Banking Group, 916 F.2d 1405 (9th Cir. 1990) (certain pretrial acts may be consistent with later arbitration)
- Cabinetree of Wisconsin v. Kraftmaid Cabinetry, 50 F.3d 388 (7th Cir. 1995) (delay and active litigation can support waiver)