PETER QUACH,
S275121
IN THE SUPREME COURT OF CALIFORNIA
July 25, 2024
Second Appellate District, Division One B310458; Los Angeles County Superior Court 19STCV42445
Justice Groban authored the opinion of the Court, in which Chief Justice Guerrero and Justices Corrigan, Liu, Kruger, Jenkins, and Evans concurred.
QUACH v. CALIFORNIA COMMERCE CLUB, INC.
S275121
Opinion of the Court by
Private parties may agree to resolve their disputes in arbitration rather than in court. If a party to an arbitration agreement files a complaint in court raising a claim covered by the agreement, the defendant can file a motion asking the court to stay the lawsuit and send the dispute to arbitration. A defendant who instead litigates the case risks losing the contractual right to compel arbitration.
One way a contractual right may be lost is by waiver. Outside the arbitration context, a California court will find waiver when the party seeking to enforce a known contractual right has intentionally relinquished or abandoned that right. (Lynch v. California Coastal Com. (2017) 3 Cal.5th 470, 475 (Lynch).) In the arbitration context, however, our cases have added a requirement: to find waiver, we have required that the party seeking to avoid arbitration show prejudice. (See St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1203 (St. Agnes).) To explain our adoption of this additional, arbitration-specific requirement, we relied on a policy favoring arbitration over litigation as a form of dispute resolution. (Id. at p. 1204.)
Until recently, most federal appellate courts similarly applied an arbitration-specific rule that required a showing of prejudice to establish waiver. Our California rule is based upon these federal cases. In Morgan v. Sundance, Inc. (2022) 596 U.S. 411 (Morgan), the United States Supreme Court rejected this rule. Morgan clarified that the federal ” ‘policy favoring arbitration’ ” is about putting arbitration agreements on equal footing with other contracts, not about favoring arbitration. (Id. at p. 418.) Accordingly, the Supreme Court held that, under federal law, a court must apply the same rules that apply to any other contract when determining whether a party to an arbitration agreement has lost the right to enforce the agreement. (Ibid.)
Because our state-law arbitration-specific prejudice requirement is based upon the federal precedent that Morgan overruled, we now abrogate it. California policy, like federal policy, puts arbitration agreements on equal footing with other types of contracts. Accordingly, under California law, as under federal law, a court should apply the same principles that apply to other contracts to determine whether the party seeking to enforce an arbitration agreement has waived its right to do so. The Court of Appeal below applied an arbitration-specific prejudice requirement to overrule the trial court‘s order denying California Commerce Club‘s motion to compel arbitration. We now reverse.
Peter Quach filed this suit in 2018, after California Commerce Club (Commerce Club), which operated the casino where Quach had worked for almost 30 years, terminated his employment. Quach‘s complaint alleges claims for wrongful termination, age discrimination, retaliation, and harassment and demands a jury trial.
Before Quach filed his complaint, Commerce Club provided him with a copy of the signature page of a form arbitration agreement he had signed in 2015, while he was working at the casino. The agreement provided for binding arbitration of employment-related disputes.
Rather than filing a motion to compel arbitration, Commerce Club answered Quach‘s complaint and initiated discovery, propounding form interrogatories, special interrogatories, requests for admission, and a request for production of documents. In its answer, Commerce Club asserted as an “affirmative defense” that Quach “should be compelled to arbitrate” any claims he had agreed to arbitrate. However, Commerce Club‘s counsel did not raise the issue of arbitration with Quach‘s counsel or with the court in any other way. On the form Commerce Club submitted as its first case management conference statement, it requested a jury trial, did not check the box indicating it was willing to participate in “binding private arbitration,” and did not list a motion to compel arbitration in the space provided for listing motions it expected to file before trial, instead indicating that it only intended to file a “dispositive motion.” (See JCC form CM-110, July 1, 2011.)
At the case management conference, the court set a trial date. Thereafter, both sides posted jury fees and continued to engage in discovery. Commerce Club responded to Quach‘s initial discovery requests and propounded a second set of special interrogatories. In response to a discovery request, Commerce Club again provided Quach a copy of the signed signature page of his arbitration agreement. Although trial court proceedings were delayed due to the COVID-19 pandemic, Commerce Club continued to actively participate in discovery, engaging in meet and confer over discovery disputes and taking Quach‘s deposition by videoconference for a full day.
Then — 13 months after Quach filed his lawsuit — Commerce Club filed a motion to compel arbitration under the Federal Arbitration Act,
Quach opposed the motion, arguing that Commerce Club had waived its contractual right to compel arbitration. He pointed out that Commerce Club had provided him a copy of the signed signature page of his arbitration agreement before he even filed his lawsuit and that the first page of the two-page agreement contained boilerplate language that was the same in all the arbitration agreements Commerce Club had its employees sign in 2015. Quach argued that Commerce Club‘s delay was prejudicial because Quach had spent significant time and money on the litigation and had lost the advantage of arbitration as a way to obtain an expedited resolution of the dispute.
The trial court denied Commerce Club‘s motion. It found that Commerce Club “knew of its right to compel arbitration” and instead of moving to compel arbitration, propounded a “large amount” of written discovery, spent “significant” time meeting and conferring “over many months,” and took Quach‘s deposition, demonstrating “a position inconsistent [with the intent] to arbitrate” and causing “prejudice.”
Commerce Club appealed and a divided Court of Appeal reversed. (Quach v. California Commerce Club, Inc. (2022) 78 Cal.App.5th 470 (Quach).) The majority held that Commerce Club did not waive its right to compel arbitration, concluding that the trial court‘s finding that Quach had shown prejudice was not supported by substantial evidence. (Quach, at p. 478; id. at p. 484, citing St. Agnes, supra, 31 Cal.4th at p. 1203.) The dissenting justice would have deferred to the trial court‘s prejudice finding and concluded that Commerce Club had waived its right to compel arbitration. (Quach, at pp. 487-488 (conc. & dis. opn. of Crandall, J.).)
Two weeks after the Court of Appeal published its decision, the United States Supreme Court issued Morgan, supra, 596 U.S. 411, holding that federal law does not require a showing of prejudice to establish waiver of the right to arbitrate. (Id. at pp. 413-414.) We granted review to reexamine our California prejudice rule in light of Morgan.
At the time the Court of Appeal issued its decision in this case, the framework for determining whether a party had “waived” its right to compel arbitration by engaging in litigation-related conduct was well settled in California. (
or the CAA apply in these proceedings, our determination of whether Commerce Club has lost its right to compel arbitration as a result of its litigation-related conduct is governed by generally applicable state law contract principles. As we will explain, these principles do not require a showing of prejudice to establish waiver. Applying the generally applicable law of waiver, we conclude that Commerce Club waived its right to compel arbitration.
We described our framework for deciding waiver questions and our reasons for adopting that framework two decades ago in our decision in St. Agnes, supra, 31 Cal.4th 1187. We began by observing that “[s]tate law, like the FAA, reflects a strong policy favoring arbitration agreements. . . .” (Id. at p. 1195.) While acknowledging that both the FAA and our state-law analogue, the CAA, allow a court to deny a petition to compel arbitration based on waiver, we emphasized that “the party seeking to establish a waiver bears a heavy burden of proof” and “any doubts regarding a waiver allegation should be resolved in favor of arbitration.” (Ibid.) Noting that California courts had found waiver of the right to compel arbitration in ” ‘a variety of contexts,’ ” we concluded there was no “single test” for determining whether a party had waived its right to arbitrate. (Id. at pp. 1195–1196.) Nevertheless, we listed the following factors for courts to consider in making waiver determinations:
” ‘(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 and adopting the language of Peterson v. Shearson/American Exp., Inc. (10th Cir. 1988) 849 F.2d 464, 467-468.)
After listing these factors, we went on to hold that the party opposing arbitration must show prejudice. (St. Agnes, supra, 31 Cal.4th at p. 1203.) We characterized ” ‘[t]he presence or absence of prejudice’ ” resulting from the litigation of an arbitrable dispute as ” ‘the determinative issue under federal law.’ ” (Ibid.) We observed that, with a few exceptions, federal courts had long held that ” ‘the mere filing of a lawsuit does not waive contractual arbitration rights’ ” and that the party resisting arbitration must demonstrate ” ‘prejudice from the litigation of the dispute.’ ” (Ibid.; see id. at fn. 6.) In support of this observation, we cited our 1979 decision in Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180 (Doers), which cited and relied on earlier federal decisions. (St. Agnes, at p. 1203.)
arbitration statutes reflect ’ “a strong public policy in favor of arbitration” ’ over litigation because arbitration is ’ “relatively inexpensive” ’ and allows parties to ’ “avoid delays incident to a civil action” ’ and obtain a ’ “speedy . . . resolution.” ’ (Id. at p. 1204.) We noted that courts generally did not find prejudice unless “the petitioning party‘s conduct has substantially undermined this important public policy or substantially impaired the other side‘s ability to take advantage of the benefits and efficiencies of arbitration.” (Ibid.) As examples of an adequate showing of prejudice, we cited to cases in which the parties had litigated the merits of arbitrable claims, substantial discovery related to such claims had occurred, the petition to compel arbitration was filed on “the eve of trial,” the movant had used discovery “to gain information about the other side‘s case that could not have been gained in arbitration,” or evidence was lost as a result of delay “associated with the petitioning party‘s attempts to litigate.” (Ibid.) We emphasized that “courts will not find prejudice where the party opposing arbitration shows only that it incurred court costs and legal expenses” resulting from participating in the litigation of an arbitrable dispute. (Id. at p. 1203; see Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 377 [“substantial expense and delay” is not sufficient to show prejudice unless “caused by the unreasonable or unjustified conduct of the party seeking arbitration“].)
We observed in St. Agnes, supra, 31 Cal.4th 1187 that “[s]tate law, like the FAA, reflects a strong policy favoring arbitration agreements and requires close judicial scrutiny of waiver claims” (id. at p. 1195) and that prejudice was “critical” to waiver determinations in California, as it was under the FAA (id. at p. 1203). Based on this reasoning, Court of Appeal
decisions have applied St. Agnes‘s framework regardless of whether the arbitration agreement at issue was governed by the procedural rules of the FAA or the CAA. (Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035, 1041–1042 (Bower).) Thus, in ruling on waiver questions, California courts have, for decades, been applying a framework grounded in a “strong policy favoring arbitration” over litigation, under which they hold parties seeking to establish waiver to a “heavy burden of proof,” requiring a showing of prejudice beyond the loss of time and expenses normally associated with litigating a dispute and resolving any doubts “in favor of arbitration.” (St. Agnes, at p. 1195; see id. at p. 1204; see also Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 444.) And they have done so regardless of whether the procedural rules of the FAA or the CAA apply to the case. (Lewis at p. 444; Bower, at pp. 1041–1042.)
B. The United States Supreme Court Has Rejected Any Federal Arbitration-Specific Rule of Waiver
The United States Supreme Court‘s decision in Morgan, supra, 596 U.S. 411 renders the St. Agnes framework inapplicable in cases governed by the FAA‘s procedural rules. In Morgan, the Supreme Court addressed whether a court may create federal procedural rules — such as the rule conditioning waiver of the right to arbitrate on prejudice — “based on the FAA‘s ‘policy favoring arbitration.’ ” (Morgan, supra, 596 U.S. at p. 419.) The court observed that “[o]utside the arbitration context, a federal court assessing waiver does not generally ask about prejudice” to the party resisting enforcement of a contractual right. (Id. at p. 417.) Instead, it focuses on the actions of the person seeking enforcement, seldom considering “the effects of those actions on the opposing party.”
(Ibid.) Until Morgan, most federal appellate courts, like California state courts, had addressed delayed requests to compel arbitration by applying “a rule of waiver specific to the arbitration context” derived from “the FAA‘s ‘policy favoring arbitration.’ ” (Id. at pp. 413-414.) As under the California rule, a party could “waive its arbitration right by litigating only when its conduct ha[d] prejudiced the other side.” (Id. at p. 414.)
Morgan explained that this arbitration-specific prejudice rule originated with the “decades-old” decision in Carcich v. Rederi A/B Nordie (2d Cir. 1968) 389 F.2d 692, 696 (Carcich), which grounded the rule in what the Second Circuit characterized as ” ‘an overriding federal policy favoring arbitration.’ ” (Morgan, supra, 596 U.S. at p. 417.) The Supreme Court observed that Carcich‘s “rule and reasoning spread” over the years, until most federal circuit courts had adopted a prejudice requirement for establishing waiver, relying on a policy favoring arbitration over litigation. (Morgan, at p. 418.)
Concluding that the FAA does not authorize federal courts to create arbitration-specific procedural rules, the Supreme Court rejected this additional prejudice requirement. (Morgan, supra, 596 U.S. at p. 419.) The court explained: “[T]he FAA‘s ‘policy favoring arbitration’ does not authorize federal courts to invent special, arbitration-preferring procedural rules.” (Id. at p. 418.) Instead, that phrase originated as an acknowledgement that the FAA had, in effect, ” ‘overrule[d] the judiciary‘s longstanding refusal to enforce agreements to arbitrate,’ ” placing arbitration agreements on ” ‘the same footing as other contracts.’ ” (Ibid.) The Court observed that “[t]he federal policy is about treating arbitration contracts like all others, not about fostering arbitration.” (Ibid.)
The Supreme Court remanded Morgan to the Court of Appeals to apply the generally applicable federal law of waiver — which it noted “does not include a prejudice requirement” — or another generally applicable procedural framework the Court of Appeals may find appropriate. (Morgan, supra, 596 U.S. at p. 419.) The court reserved the questions of what “role state law might play in resolving when a party‘s litigation conduct results in the loss of a contractual right to arbitrate” and “whether to understand that inquiry as involving rules of waiver, forfeiture, estoppel, laches, or procedural timeliness.” (Id. at p. 416.)
C. There is No Basis for an Arbitration-Specific Prejudice Requirement in California Law
Morgan directly governs only cases in which the FAA‘s procedural rules apply; in those cases, it requires California courts to apply generally applicable contract law when determining whether a party to an arbitration agreement has lost the right to compel arbitration by litigating an arbitrable dispute. (Morgan, supra, 596 U.S. at p. 419.) However, arbitration-related proceedings in California courts are governed by the CAA‘s procedural rules unless their application is preempted or the parties have expressly agreed that the FAA‘s procedural rules apply. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 408-409 (Rosenthal); Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 394 (Cronus).) While Morgan made clear that when the proceedings are governed by the FAA‘s procedural rules, it is inappropriate to apply a different standard of waiver than applies in other contractual contexts, it left open the question whether a court may properly apply an arbitration-specific standard when state procedural law governs the proceedings. (Id. at pp. 416, 419.) We now consider whether courts may apply an arbitration-specific prejudice requirement in cases governed by the CAA‘s procedural rules.
Commerce Club argues that since Morgan does not require any change to our analysis of when a party has lost the right to compel arbitration under the CAA‘s procedural rules, we should adhere to St. Agnes and
(Moradi-Shalal v. Fireman‘s Fund Ins. Companies (1988) 46 Cal.3d 287, 296 (Moradi-Shalal).)
We have found reconsideration of our precedent to be warranted when a development in the law indicates “an earlier decision was unsound, or has become ripe for reconsideration.” (Moradi-Shalal, 46 Cal.3d at p. 297.) Morgan, supra, 596 U.S. 411 is such a development. (See People v. Anderson (1987) 43 Cal.3d 1104, 1139–1141 [reexamining decision interpreting California statute in light of intervening United States Supreme Court decision clarifying federal law].) While Morgan is not binding when the CAA‘s procedural rules apply, our state-law arbitration-specific prejudice rule is based on the federal appellate authority that Morgan disapproved. Rather than approaching the question whether the CAA requires a showing of prejudice to establish waiver as a matter of statutory interpretation, we simply adopted the federal rule that the United States Supreme Court has now rejected. As we will explain, Morgan‘s reasoning about the policy underpinnings of the federal arbitration-specific rule of waiver applies with equal force in the context of the CAA. Accordingly, a reexamination of our court-created arbitration-specific rule of waiver is warranted.
When interpreting any statute, our goal is to determine the Legislature‘s intent and give effect to the statute‘s purpose. (Brennon B. v. Superior Court (2022) 13 Cal.5th 662, 673.) We begin with the language of the relevant provision, considering it in its statutory context. (Ibid.) We usually interpret the words of a statute in accordance with their ordinary meaning, though if a word has a well-established legal meaning, we assume the Legislature intended to use it in that sense. (Arnett v. Dal Cielo (1996) 14 Cal.4th 4, 19 (Arnett);
language is unclear, we may look to legislative history and public policy as aids in determining how best to give effect to Legislative intent. (Brennon B. at p. 673.)
This reading finds support in
Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.) Citing cases interpreting
Indeed, outside of the waiver context, we have interpreted this language in
applied generally applicable state law in the context of cases involving issues of fraud in the execution and fraud in the inducement. (See Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 973–974; Rosenthal, supra, 14 Cal.4th at p. 419.) The approach we have taken in these other contexts is consistent with the Supreme Court‘s observation in Morgan that the policy “favoring” arbitration is not one of promoting arbitration over litigation, but instead of ensuring that arbitration agreements are not disfavored, i.e., that they are treated like other contracts. (Morgan, supra, 596 U.S. at p. 418Morgan, we bring our law concerning waiver determinations in line with our law related to other questions of arbitrability.
Perhaps recognizing that the CAA provides no textual basis for applying an arbitration-specific rule of prejudice, Commerce Club seeks to distinguish Morgan by arguing that California law, as reflected in St. Agnes, is different from federal law because California law embraces a policy favoring arbitration over litigation. Commerce Club suggests that whatever the federal policy might be, California‘s “policy favoring arbitration” supports imposition of an arbitration-specific prejudice requirement. But an examination of the legislative history reveals that California policy, like federal policy, is fundamentally about making arbitration agreements ” ‘as enforceable as other contracts, but not more so.’ ” (Morgan, supra, 596 U.S. at p. 418.)
The United States Supreme Court observed in Morgan that, when understood in historical context, the policy favoring arbitration is “merely an acknowledgment of the FAA‘s commitment to overrule the judiciary‘s longstanding refusal to enforce agreements to arbitrate and to place such agreements upon the same footing as other contracts.” (Morgan, supra, 596 U.S. at p. 418.) We similarly have observed that the FAA “was intended ‘to overcome an anachronistic judicial hostility to agreements to arbitrate, which American courts had borrowed from English common law.’ ” (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1343.)
The
apparent that the state policy ” ‘favoring’ ” arbitration, like the federal policy, “is about treating arbitration contracts like all others, not about fostering arbitration.” (Morgan, supra, 596 U.S. at p. 418.)
Nothing in the legislative history of
answers in
Our decision in St. Agnes did not examine the language of the
In Doers, we granted review to resolve a conflict between Court of Appeal decisions over whether the mere filing of a lawsuit by a party who had agreed to arbitrate a claim constituted a waiver of the right to arbitrate. (Doers, supra, 23 Cal.3d at pp. 182-183.) We held that a party does not waive the right to arbitrate when it engages in litigation that does not reach the merits of a dispute, but in a footnote said: “We do not preclude the possibility that a waiver could occur prior to a judgment on the merits if prejudice could be demonstrated.” (Id. at p. 188, fn. 3.) As support for our holding, we relied on federal cases, observing that “[u]nder federal law, it is clear that the mere filing of a lawsuit does not waive contractual arbitration rights. The presence or absence of prejudice from the litigation of the dispute is the determinative issue under federal law.” (Id. at p. 188.) Citing Carcich — the Second Circuit decision that Morgan, supra, 596 U.S. at page 417, identified as the origin of the federal arbitration-specific prejudice requirement — we observed that the analogy between California law and federal law was “significant inasmuch as the basis for the federal rule is the important national policy favoring arbitration.” (Doers at p. 189.) We reasoned that in resolving the conflict over whether the filing of a lawsuit constituted a waiver of the right to compel arbitration, we should pick the result that “comport[ed] with the ‘strong public policy’ favoring arbitration.” (Ibid.)
It thus appears that the stringent standards to which we have held a party seeking to establish waiver — and, in particular, the prejudice requirement — are based on a now-abrogated federal rule that we had adopted in
While practical concerns do not dictate our answer to what is, at core, a question of statutory interpretation, it seems worth noting that preserving the arbitration-specific prejudice requirement for cases governed by the
D. Under Generally Applicable Law, No Showing of Prejudice is Required to Establish Waiver of a Contractual Right
In reversing the trial court‘s order denying Commerce Club‘s motion to compel arbitration, the Court of Appeal applied St. Agnes‘s arbitration-specific prejudice rule, which we have now abrogated. Relying on St. Agnes, supra, 31 Cal.4th 1187 at page 1195, the court emphasized that “[i]n light of the policy in favor of arbitration, ‘waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof.‘” (Quach, supra, 78 Cal.App.5th at p. 477.) Accordingly, the court observed that “‘merely participating in litigation, by itself, does not result in a waiver,‘” and “‘courts will not find prejudice where the party opposing arbitration shows only that it incurred court costs and legal expenses.‘” (Id. at p. 479.) Based on this language from St. Agnes, the Court of Appeal concluded that Quach had not met his burden of proof. (See Quach at p. 479 [“Quach has not met St. Agnes‘s test.“].) It reasoned that Quach had shown only that “the parties participated in litigation,” and had “not shown any prejudice apart from the expenditure of time and money on litigation.” (Ibid.)
Having abrogated the arbitration-specific rule of waiver that the Court of Appeal applied, we now must determine what generally applicable state contract law principle to apply in its place. In Morgan, the Supreme Court indicated that various defenses may be implicated when a party opposes arbitration based on the other party‘s litigation conduct, including “waiver, forfeiture, estoppel, laches, or procedural timeliness.” (Morgan, supra, 596 U.S. at p. 416; see id. at p. 419.) Similarly, under California law, a party may, as a result of its litigation conduct, lose its right to compel arbitration on various grounds. (See, e.g., Ross v. Blanchard (1967) 251 Cal.App.2d 739, 742 [estoppel]; Chase v. Blue Cross of California (1996) 42 Cal.App.4th 1142, 1151 [forfeiture]; Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 30 [timeliness]; 30 Cal.Jur. 3d (2024) Estoppel and Waiver, § 30 [distinguishing waiver from other defenses].) In ruling on a motion to compel arbitration, a court should separately evaluate
Among the factors we identified as relevant to a “waiver” determination in St. Agnes are some that are relevant to other defenses, such as forfeiture, estoppel, laches or timeliness, but not to waiver. (See St. Agnes, supra, 31 Cal.4th at p. 1196 [listing factors relevant to “waiver” analysis].) Courts should not apply the St. Agnes factors as a single multifactor test for determining whether the right to compel arbitration has been lost through litigation. (See, e.g., Wagner, at p. 31 [characterizing St. Agnes factors as a multifactor test]; Burton v. Cruise (2010) 190 Cal.App.4th 939, 944 [same]; Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 962 [describing trial court‘s application of St. Agnes factors as multifactor test].) Instead, a court should be careful to consider only those factors that are relevant to the specific state-law defense the party resisting arbitration has raised.
Quach raised the defense of “waiver” to Commerce Club‘s motion to compel arbitration. Because we conclude the trial court‘s ruling that Commerce Club waived its right to compel arbitration was correct under the generally applicable law of waiver, we need not consider whether any other generally applicable state contract law defense applies.
To establish waiver under generally applicable contract law, the party opposing enforcement of a contractual agreement must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it. (Lynch, supra, 3 Cal.5th at p. 475; see Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31 (Waller) [burden is on party claiming waiver “‘to prove it by clear and convincing evidence‘“]; 30 Cal.Jur. 3d, supra, Estoppel and Waiver, § 38.) Under the clear and convincing evidence standard, the proponent of a fact must show that it is “highly probable” the fact is true. (Conservatorship of O.B. (2020) 9 Cal.5th 989, 995 (O.B.).) The waiving party‘s knowledge of the right may be “actual or constructive.” (Outboard Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30, 41.) Its intentional relinquishment or abandonment of the right may be proved by evidence of words expressing an intent to relinquish the right or of conduct that is so inconsistent with an intent to enforce the contractual right as to lead a reasonable factfinder to conclude that the party had abandoned it. (Lynch, supra, 3 Cal.5th at p. 475.)
To establish waiver, there is no requirement that the party opposing enforcement of the contractual right demonstrate prejudice or otherwise show harm resulting from the waiving party‘s conduct. (Lynch, at p. 475; see City of Hollister v. Monterey Ins. Co. (2008) 165 Cal.App.4th 455, 487 [Waiver does not require “any demonstration that the other party was caused by the waiver to expose himself to any harm“].)
E. Applying the Generally Applicable Law of Waiver, We Conclude Commerce Club Has Lost Its Right to Compel Arbitration
In ruling on Commerce Club‘s motion to compel arbitration, the trial court did not have the benefit of Morgan or of our decision today, so in considering Quach‘s waiver defense, it did not apply the generally applicable law of waiver. We do so now, reviewing de novo the undisputed record of the trial court proceedings and asking whether Quach has established by clear and convincing evidence that Commerce Club knew of its contractual right to compel arbitration and intentionally relinquished or abandoned that right. (See D‘Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 18-19 [we may uphold the trial court‘s ruling if correct under the law].)6
The record of Commerce Club‘s words and conduct also demonstrates by clear and convincing evidence its intentional abandonment of the right to arbitrate. Indeed, on this record, Commerce Club‘s position, if accepted, would surely create undue delay and gamesmanship going forward. Rather than moving to compel arbitration at the outset of the case, Commerce Club answered the complaint and propounded discovery requests, suggesting it did not intend to seek arbitration. Although Commerce Club asserted in its answer that Quach should be compelled to arbitrate, its counsel did not otherwise raise the issue with Quach‘s counsel or with the court. Instead, it affirmatively indicated its preference for a jury trial and actively pursued discovery. On Commerce Club‘s initial case management conference statement, filed about three months after Quach filed his complaint, Commerce Club requested a jury trial, left the check box for indicating it was “willing to participate” in arbitration blank, and represented that the only motion it
This conclusion is not undermined by Commerce Club‘s assertions that it did not move to compel arbitration on the “eve of trial,” that the discovery it conducted was “minimal,” that it did not gain information about his case that it could not have gotten in arbitration, and that Quach has not litigated the merits of his claims. (See St. Agnes, supra, 31 Cal.4th at p. 1204.) The record in this case shows that, being fully aware of its right to compel arbitration, Commerce Club chose not to do so for 13 months, affirmatively indicated its intent to pursue a jury trial rather than arbitration, and actively engaged in discovery — words and conduct markedly inconsistent with an intent to arbitrate. Accordingly, we conclude Commerce Club waived its right to arbitrate the dispute. (Lynch, supra, 3 Cal.5th at p. 475.)
CONCLUSION
We reverse the judgment of the Court of Appeal and remand for further proceedings consistent with our decision.
GROBAN, J.
We Concur:
GUERRERO, C. J.
CORRIGAN, J.
LIU, J.
KRUGER, J.
JENKINS, J.
EVANS, J.