Opinion
Introduction
Dеfendants and appellants Continental Airlines, Inc., and Nathaniel Griffin appeal (Code Civ. Proc., § 1294, subd. (a)) from an order denying their motion to compel arbitration of plaintiff and respondent Alsenia Davis’s complaint for sexual harassment in employment brought under the California Fair Employment and Housing Act (FEHA, Gov. Code, §§ 12900 and 12940 et seq.) with additional contract and tort causes of action. According to the complaint, plaintiff, a female skycap, was sexually harassed verbally and physically by defendant Griffin, a male skycap in a supervisory position.
Defendants contend plаintiff must resolve her dispute by means of the steps in a company “appeal procedure” specified in an employee handbook. The trial court denied defendants’ motion to compel arbitration, on the alternative grounds that (1) the employee handbook does not set forth a mandatory agreed procedure as an alternative to court litigation, and (2) defendants waived any right to compel arbitration, by unreasonably delaying their motion until after obtaining extensive discovery from plaintiff. We affirm the order on the ground defendants have waived аny right to compel arbitration. We need not decide, therefore, whether the employee handbook sets forth a binding agreement to arbitrate.
Factual and Procedural Background
According to the complaint, defendant Griffin was a “lead” skycap in a supervisory position over plaintiff, and over a period of several years he *208 subjected plaintiff to escalating sexual harassment, from verbal remarks about his sexual desire for her, to handwritten notes, to physically rubbing against her buttocks and grabbing her breast. Plaintiff alleged that defendant Continental failed to take effective action to control Griffin’s conduct despite plaintiff’s complaints, and that plaintiff suffered retaliation from Griffin and other skycaps for having complained.
Plaintiff filed her complaint on January 24, 1995, and served it on defendants in March 1995 (on Griffin March 14 and on Continental March 24). Following a stipulated extension of time to answer, defendants answered the complaint on May 30, 1995. Although each defendant’s answer alleged, among other affirmative defenses, that plaintiff’s action was barred for her failure to have pursued “binding internal grievance procedures” (Continental’s answer) or “contractual rеquirements that plaintiff submit her dispute to arbitration” (Griffin’s answer), defendants did not promptly demand arbitration. Not until November 22, 1995, did defendants move to stay the action (Code Civ. Proc., § 1281.4) pending determination of their forthcoming motion to compel arbitration, which they did not file until January 3, 1996, following plaintiff’s December 4, 1995, stipulation for a stay.
Prior to seeking a stay or petitioning to compel arbitration, defendants served plaintiff with a discovery demand for, and obtained by August 1, 1995, documents in 86 categories totaling 1,600 pages and took plaintiff’s videotaped deposition for 2 days on August 15 and 16, 1995, which produced a 410-page deposition transcript. Plaintiff also agreed in the December 4, 1995, stipulation to respond to defendant Griffin’s interrogatories by December 8, 1995. Griffin responded to plaintiff’s interrogatories and request for documents in August 1995. The December 4, 1995, stipulation permitted plaintiff to take the deposition of Jesse Saenzpardo (whose relevance as a witness is not clear from the record) no later than January 30, 1996.
In their motion to compel “arbitration” filed January 3, 1996, defendants contended plaintiff was required to resolve her dispute in the manner specified in an employee handbook. 1 According to defendants, the employee handbook sets forth a procedure for resolving “disagreements regarding the proper application of Company policy or disciplinary action,” which plaintiff had agreed to follow by virtue of her signed employment application which included her agreement to “comply with all rules and regulations of Continental Air Lines, Inc., [and] to acquaint myself with Company policy and abide thereby.” The “Appeal Procedure” section of the manual contains an *209 introduction which states, “Continental is fully committed to its open door policy. Employees at all levels are urged to discuss problems or disagreements regarding the proper application of Company policy or disciplinary action with their supervisor. [¶] . . . Should this discussion fail to resolve the issue, employees are encouraged, but not required, to bring it to the attention of the next level of supervision. If the issue is not resolved in this process employees may appeal using Continental’s Non-Management Appeal Procedure.” There follows a description of a threе-step appeal procedure. Step 1 is initiated by a written request from the employee to the department director and employee relations manager within 10 days. A hearing manager is appointed to hear the matter within 15 days at an informal hearing and to issue a written decision within 10 days after the hearing. Step 2 is initiated by a written request from the employee to the regional vice-president and employee relations manager within 10 days after receipt of the results of the step 1 hearing. A “divisional board,” which consists of “two employees appointed by the Company and two selected from a list supplied by the employee council,” conducts an informal hearing and issues a written decision within 10 days after the hearing which “is final and binding on all parties.” Step 3 is available only if the step 2 board fails to reach a majority decision or fails to conduct a hearing within 60 days of the employee’s request and the employee is dissatisfied with the delay. In step 3 “Employee Relations will submit a list of three outside arbitrators. The employee will choose the arbitrator to hear the appeal.” “The decision of the arbitrator is final and binding.” In describing “employee preparation and presentation,” the manual states, “Employees must submit appeals as specified in the Appeal Step 1 and Step 2 Procedures detailed above. Employees must comply with the specified time limits.”
In support of their motion defendants contended the employee handbook sets forth a binding procedure for arbitration of disputes. They contended plaintiff was bound by it because of her signed employment application and her receipt of the handbook, and because on two рrior occasions plaintiff had herself invoked the procedures to protest disciplinary letters in her personnel file and sexual harassment by another employee. As evidence, defendants relied both upon (1) the declaration of field human resource manager Donna Towle based upon personal knowledge of company procedures, company files, and documents obtained from plaintiff and (2) statements in plaintiff’s deposition acknowledging her signature on the employment application, her receipt of a copy of the handbook, and her prior two invocations of the procedure.
In opposition to the motion, plaintiff argued (1) defendants waived the right to compel arbitration by their conduct after the filing of plaintiff’s *210 complaint, (2) plaintiff never explicitly waived her right to a jury trial, (3) the handbook procedure is not mandatory, and (4) public policy prohibits subjecting plaintiff’s statutory causes of action to mandatory arbitration. Plaintiff relied on her attorney’s declaration concerning the extensive discovery defendants conducted before they filed a motion to comрel arbitration and on plaintiff’s declaration that she did not use the appeal procedure in this case because she did not think she was required to do so.
In reply, defendants argued (1) they did not waive the right to compel arbitration, because they timely raised it as an affirmative defense in their answers to the complaint and their subsequent conduct did not waive it, (2) an express waiver of jury trial was not essential to plaintiff’s agreement to arbitrate, (3) the appeal procedure should properly be interpreted to require binding arbitration despite its introductory lаnguage suggesting voluntariness and its use of the word “may” in reference to appeal, and (4) the FEHA does not prohibit an agreement to arbitrate claims arising under it.
The motion was argued at a hearing held February 14, 1996. After submission of the matter the court denied defendants’ motion. The court’s minute order states, “the Court finds that based upon the facts submitted and understood by the Court, plaintiff had no mandatory obligation to utilize Continental’s appeal procedure. Furthermore, the Court finds that defendants by their untimely assertion, other than by an affirmative defense, of any claimed right to arbitration havе waived it.”
The court’s oral remarks at the hearing suggest its reasoning. First, the court believed that the language of the manual would not suggest to a layperson such as plaintiff that the procedure was mandatory. Second, the court was very disturbed by defendants’ behavior of waiting for many months to bring their motion. Although defendants set up an affirmative defense in their answers filed in May 1995, they sat on that defense and conducted discovery before bringing their motion months later. The court hinted it believed defendants’ tactics were “dilatory.” Continental’s attorney responded by claiming that the discovery he conducted “ascertained such things as the plaintiff being familiar with the procedure, using the procedure, having received the procedure.” He argued that discovery is allowable in a “special proceeding” (Code Civ. Proc., § 2016, subd. (b)(1)), that a petition to compel arbitration is a special proceeding
(Lachkar
v.
Lachkar
(1986)
Discussion
A right to compel arbitration may be waived. Under Code of Civil Procedure section 1281.2, subdivision (a), the trial court may deny a petition to compel arbitration if it finds the moving party has waived the right.
The applicable standard of review is summarized in
Christensen
v.
Dewor Developments
(1983)
There is no single test for waiver of the right to compel arbitration, but waiver may be found where the party seeking arbitration has (1) previously taken steps inconsistent with an intent to invoke arbitration, (2) unreasonably delayed in seeking arbitration, or (3) acted in bad faith or with
*212
willful misconduct.
(Christensen
v.
Dewor Developments, supra,
Christensen
is highly instructive because it involves the use of discovery in court proceedings to obtain an unfair advantage relevant to arbitration. There the plaintiffs filed a complaint on a construction contract which contained an arbitration clause. They litigated that complaint through a demurrer and filing of a first amended complaint, for the express purpose of using the court proceedings to “ ‘obtain from the defendants an answer and affirmative defenses so that [plaintiffs] could have some feel for what the Defendants’ pоsition would be at arbitration ....’” (
Christensen
was cited and followed in
Kaneko Ford Design
v.
Citipark, Inc.
(1988)
Christensen differs from the instant case in several facts (there it was the plaintiffs who were held to have waived arbitration, here it is *213 defendants; there the plaintiffs brazenly admitted their intent to use the court proceedings to gain discovery not obtainable in arbitration, here defendants denied it but were disbelieved by the trial court), but Christensen's rаtionale persuasively supports the trial court’s finding of waiver. Although defendants here raised the arbitration/grievance issue, among many others, in their answers to plaintiff’s complaint, they did nothing to bring about arbitration for approximately six months. In the meantime they used court discovery procedures to obtain 1,600 pages of documents from plaintiff in 86 categories and to take plaintiff’s 2-day, 410-page videotaped deposition. The trial court could reasonably infer from these facts that defendants unreasonably delayed their motion to compel arbitration in order to take advantage of court discovery procedures to learn plaintiff’s strategies, evidence, and witnesses and to pin plaintiff down to a particular version of the facts. Continental’s counsel’s characterization of the discovery was contradicted by plaintiff’s counsel. (See fn. 2, post.) The conflicting inferences were for the trial court to resolve, and the record amply supports the trial court’s implied rejection of defense counsel’s claim.
Defense counsel claimed that “much” of the discovery “was designed to prove [plaintiff’s] agreement to arbitrate,” such as the facts that plaintiff admitted signing her employment application, admitted receiving a copy of the employee handbook, and admitted having invoked the company appeal procedure on prior occasions. Defense counsel argued such limited discovery could have been permitted in a special proceeding to compel arbitration (Code Civ. Proc., § 2016, subd. (b)(1)) and therefore the court should not hold it against defendants that they sought such information before moving to compel arbitration.
The triаl court was entitled to reject this claim. First, having been informed that defendants obtained 1,600 pages of documents from plaintiff and took plaintiff’s videotaped deposition for 2 days, producing a 410-page transcript, the court could disbelieve that the defendants’ discovery was narrowly relevant to a special proceeding to compel arbitration, as distinguished from the broad-ranging discovery typically undertaken in court litigation and not available in arbitration. Second, from the nature of the information alleged in support of the belated motion to compel arbitration, the court could infer that the extensive discovery undertaken was not necessary for this asserted limited purpose. Evidence of plaintiff’s employment application, plaintiff’s presumed receipt of the handbook pursuant to standard company procedure, and plaintiff’s prior written invocations of the appeal procedure were all presumably available to defendants from company *214 records, without discovery from plaintiff, as impliedly revealed by defendants’ reliance in their motion on the declaration оf field human resource manager Donna Towle. Finally, the parties have stipulated to inclusion of the entire deposition transcript in the record on appeal, and that transcript confirms, as claimed by plaintiff’s counsel in the trial court hearing, that only a very small portion of the deposition was devoted to discovery of evidence limited to the issue of the right to compel arbitration. 2 The deposition covered typical broad-ranging issues such as plaintiff’s attitude toward vulgar remarks and how she handled them, the details of defendant Griffin’s alleged sexual harаssment of plaintiff, details of alleged sexual harassment by other employees, the extent to which Griffin was a supervisor of plaintiff, and economic and emotional distress damages. The record amply supports the trial court’s implied rejection of defendants’ implication that they conducted limited discovery of the type which might have been permissible in a special proceeding to compel arbitration.
Given its implied finding that defendants engaged in extensive discovery from plaintiff before moving to compel arbitration, the trial court could properly find defendants waived arbitration. Defendants contend that even if they did obtain discovery, plaintiff has not shown “prejudice” and therefore defendants cannot be found to have waived arbitration. Defendants contend it is not enough that plaintiff has suffered certain court costs or legal expenses; rather, plaintiff must show either that defendants actually “litigated” the case before moving to compel arbitration, or that plaintiff has suffered a specific type of prejudice affecting plaintiff’s ability to arbitrate, for example faded recollectiоn of witnesses due to defendants’ delay. (See
Thorup
v.
Dean Witter Reynolds, Inc.
(1986)
There is more prejudice in the present case than plaintiff’s mere incurring of court costs or legal expenses. The vice involved here, whether characterized as “unreasonable delay,” “bad faith miscоnduct,” “gamesmanship” or “unilateral discovery” (all are words mentioned in Christensen) is that defendants used the discovery processes of the court to gain information about plaintiff’s case which defendants could not have gained in arbitration. After obtaining discovery from plaintiff by court processes, defendants then belatedly sought to change the game to arbitration, where plaintiff would not have equivalent discovery rights.
(Brock
v.
Kaiser Foundation Hospitals, supra,
Defendants claim that because they raised the arbitration/grievance issue as an affirmative defense in their answers, they cannot possibly be held to *216 have waived arbitration, no matter what their conduct subsequent to filing their answers. This argument is not persuasive and is not supported by the authorities defendants cite.
Primarily defendants rely on
Charles J. Rounds Co.
v.
Joint Council of Teamsters No. 42
(1971)
*217
Rounds
itself, and
International Assn, of Bridge etc. Workers
v.
Superior Court
(1978)
The instant case, however, is type 3. Although defendants pleaded an affirmative defense in their answers, defendants subsequently elected their
Rounds
remedy when they moved to stay the action and to compel arbitration. Plaintiff’s opposition to defendants’ motion squarely raised for the trial court the issue whether defendants waived the right to compel arbitration based on the extensive discovery defendants conducted before bringing their motion. The fact that defendants had pleaded an affirmative defense in their answers became, at that point, merely one factor for the trial court to consider. (E.g.,
Gunderson
v.
Superior Court
(1975)
Here, defendants answered the complaint in May 1995, but did not move until November 1995 to stay the action in order to compel arbitration. In the meantime defendants engaged in discovery. The extent, significance, and consequences of this discovery were disputed, but reasonable inferences support the trial court’s conclusion that plaintiff suffered prejudice from defendants’ delay in seeking arbitration and that defendants therefore waived the right to compel arbitration.
Because we conclude substantial evidеnce supports the trial court’s finding that defendants waived the right to diligently compel arbitration, even assuming that defendants had such a right, we need not consider whether plaintiff was actually required to use the company appeal procedure or whether public policy precludes requiring plaintiff to arbitrate a statutory claim for sexual harassment under the FEHA.
*218 Disposition
The order denying defendants’ motion to compel arbitration is affirmed.
Hastings, J., and Baron, J., concurred.
A petition for a rehearing was denied December 12,1997, and appellants’ petition for review by the Supreme Court was denied February 18, 1998.
Notes
The prayer for relief in this motion sought an order that plaintiff submit all her claims “for resolution pursuant to the terms of the Appeal Procedure” in the employee handbook.
Plaintiff’s counsel told the trial court, “. . . it was a two-day deposition. The time spent on the issues relative to whether she had—she had received an—a grievance procedure took [a] maximum [of] one hour. It’s clear that the reasons the deposition were [sic] taken was that they were hoping they could get enough to file a summary judgment motion. They didn’t. When they figured out they couldn’t file a summary judgment motion, then they turned to the alternative of going back to the other procedure. If they had started with the arbitration procedures under the . . . Code of Civil Procedure, they might have been able to take depositions. They would have been able to take depositions but only to that limited issue of whether she understood the—or whether she received the grievance procedure. They couldn’t have gone into everything else they went into.”
If, however, the plaintiff has attempted to exhaust its arbitration remedy or plaintiff’s complaint raises some issues not susceptible to arbitration, the defendant may not merely assert failure to arbitrate as an affirmative defense but must seek a stay and demand arbitration.
(Rounds, supra,