Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County, Michelle R. Rosenblatt, Judge, Los Angeles County Super. Ct. No. EC042522
Callahan, McCune & Willis, Robert W. Thompson and Laura J. Anson for Defendants and Appellants Superior Nissan of Mission Hills and Superior Automotive Group, LLC.
Swanson, Martin & Bell, Bruce S. Terlep; and Vanlochem & Chesney and Stephen L. Chesney for Defendant and Appellant Nissan Motor Acceptance Corporation.
Dumbeck & Dumbeck, Jason D. Dumbeck and Curtis M. King for Plaintiff and Respondent.
TURNER, P. J.
I. INTRODUCTION
Defendants, Superior Nissan of Mission Hills and Superior Automotive Group, LLC, appeal from an order denying a motion to compel arbitration of claims brought against them by plaintiff, Ernesto Radillo. Plaintiff’s claims arise from defendants’ alleged fraudulent conduct in selling a new Nissan. We conclude the order refusing to compel arbitration must be affirmed.
II. BACKGROUND
On March 15, 2006, plaintiff filed an action against defendants and the finance company, Nissan Motor Acceptance (“the finance company”). The complaint alleged that plaintiff, who does not speak English well, was assisted by a Spanish-speaking employee in purchasing the new vehicle. Plaintiff agreed to buy the Nissan on the condition that defendants pay off the balance of a trade-in. The complaint further alleged that: plaintiff did not understand that the purchase contract called for defendants to charge him $5,000 to pay off the loan balance owed on his trade-in; defendants had agreed to pay less than the balance plaintiff owed for the trade-in; and plaintiff later learned that the contract included thousands of dollars for products and services he either did not know that he purchased or did not want.
Thereafter, plaintiff returned to the dealership and asked for the trade-in back. Plaintiff wanted to pay the balance owed on his trade-in and have defendants remove the products and services he did not want or did not know were included in the sale. Defendants prepared a second written agreement rescinding the first contract. It was further alleged that: plaintiff paid defendants $14,500 to buy back his trade-in; defendants took the money, gave plaintiff back the trade-in, and printed a second contract; and the second contract stated that the trade-in and the unwanted products and services had been removed from the transaction. Plaintiff alleged that he believed the first contract had been rescinded. Plaintiff alleged the operative agreement was the second contract. However, defendants ignored the second contract. Rather defendants’ assigned the first contract to the finance company. The finance company repossessed plaintiff’s trade-in when he refused to pay for the purchase. The complaint contained claims for: “[f]raud/[c]oncealment” (first); violation of the Consumer Legal Remedies Act (Civ. Code, § 1750 et seq.) (second); rescission and restitution (third); and conversion (fourth).
Defendants answered the complaint on April 27, 2006. The answer contains 23 affirmative defenses but does not request arbitration. On May 1, 2006, the finance company answered the complaint and cross-complained against plaintiff for contract breach and asserted several common counts. The finance company did not raise the arbitration issue in responding to the complaint.
On December 20, 2006, plaintiff filed a motion for leave to file a first amended complaint on the ground that in the course of preparing for his deposition he reviewed defendants’ records and discovered his forged signature on a false credit application. In an unsworn portion of the points and authorities, it is asserted the false credit application falsely stated that plaintiff was employed in a management capacity with his employer and earned over $4,000 per month. In fact, plaintiff was employed “constructing trailers” and earned less than $2,000 per month. Plaintiff sought leave to add claims for misappropriation of identity (fifth) and violation of the Rosenthal Fair Debt Collection Practices Act (sixth). (Civ. Code, § 1788 et seq.)
On January 25, 2007, pursuant to Civil Code of Procedure sections 1280 et seq., defendants filed a motion to compel arbitration. The arbitration agreement states: “1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL. [¶] 2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARITRATIONS. [¶] 3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION. [¶] Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this clause, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arise out of or relate to your credit application, this Contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this Contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action. Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have arbitrate a class action. You may choose any one of the following arbitration organizations and its applicable rules: the American Arbitration Association . . ., the National Arbitration Forum . . ., or JAMS . . . . [¶] Arbitrators shall be attorneys or retired judges and shall be selected pursuant to the applicable rules. The arbitrator shall apply governing substantive law in making an award. The arbitration hearing shall be conducted in the federal district in which you reside. We will pay your filing, administration, service or case management fee and your arbitrator or hearing fee all up to a maximum of $1,500. Each party shall be responsible for its own attorney, expert and other fees, unless awarded by the arbitrator under applicable law. The arbitrator’s award shall be final and binding on all parties, except that the losing party may request a new arbitration under the rules of the arbitration organization by a three-arbitrator panel. Any arbitration under this Arbitration Clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state law concerning arbitration.”
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
Defendants argued that the lawsuit arose out of a vehicle purchase which was financed through the finance company. The vehicle sales contract contained the aforementioned arbitration clause, which governs the controversy in this case. Defendants further asserted that the arbitration agreement was enforceable because it was not unconscionable in that it complied with Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 103-113. Defendants contended compliance with Armendariz was established because: plaintiff was allowed to elect between three well-known and reputable arbitration providers all of which require neutral arbitrators, permit discovery, mandate the filing of written awards, and do not limit remedies; defendants agreed to pay fees and costs unique to arbitration; and the contract was mutual allowing either party to choose to elect arbitration. Defendants asserted that even the fraud in the inducement claim, which plaintiff relied on as a ground to rescind the contract had to be decided by an arbitrator under Buckeye Check Cashing v. Cardegna (2006) 546 U.S. 440, 448-449. Defendants sought an order compelling arbitration and staying the action.
Defendants filed a single declaration, that of Robert W. Thompson, in support of their motion to compel arbitration. Mr. Thompson declared that a written request was made to plaintiff’s counsel, Curtis King, to agree to arbitration in a letter dated January 4, 2007. As of January 23, 2007, Mr. King had not responded to Mr. Thompson’s letter.
Plaintiff opposed the motion to compel arbitration on the ground defendants waived any right to arbitration. Plaintiff’s attorney, Mr. King, declared that defendants had answered the complaint on April 27, 2006, but did not mention or request arbitration until January 2007. Mr. King stated that the parties had engaged in discovery and participated in mediation at defendants’ request all without an assertion of the right to arbitrate. According to Mr. King, “If the defendants had not waived the right to arbitration, I would have never allowed my client to agree to a private mediation.” The private mediation lasted five hours and cost plaintiff $900 for the mediator’s fee. Mr. King and an associate spent several hours preparing for the mediation and disclosed plaintiff’s legal theories and evidence concerning the defense. Mr. King would not have disclosed the information had he known that defendants would seek to compel arbitration. Mr. King also declared that after the mediation, defendants subpoenaed documents from numerous non-party witnesses and obtained “expert witness information” from plaintiff. Mr. King declared, “It is my understanding that . . . defendants would not be able to obtain this type of discovery in private arbitration.”
Attached to plaintiff’s opposition was a case management conference statement, which defendants dated August 14, 2006. Defendants demanded a jury trial in their August 14, 2006 case management conference statement. Also in the August 14, 2006 case management conference statement, defendants requested mediation of plaintiff’s claims. On August 29, 2006, at the case management conference, the trial court set a trial date of April 16, 2007. Further, the parties participated in mediation on December 14, 2006. During the time the action was pending in the trial court, the parties including defendants engaged in discovery.
Plaintiff argued defendants expressly waived the right to compel arbitration. Plaintiff argued: defendants “unequivocally” informed the trial court that they were unwilling to participate in binding arbitration; defendants informed the trial court it wanted mediation and a jury trial; he spent thousands of dollars on private mediation; and he disclosed his evidence and legal theories to defendants at the mediation. Plaintiff also argued any right to arbitrate was impliedly waived by: spending nine months litigating the case without mentioning arbitration; answering the complaint without asserting arbitration as an affirmative defense; using discovery methods; filing a case management conference statement which stated defendants were unwilling to participate in arbitration; asking for mediation and a jury trial; participating in mediation and learning his evidence and legal theories; demanding and obtaining detailed expert witness information from him; and serving numerous deposition subpoenas on non-party witnesses.
On March 2, 2007, the finance company joined in defendants’ motion to compel arbitration. The finance company argued that it had not waived the right to arbitration. Further, the finance company asserted its deficiency balance and plaintiff’s claims were arbitrable. No declaration accompanied the finance company’s opposition.
On March 5, 2007, defendants filed a reply to plaintiff’s opposition. Relying on St. Agnes Medical Center v. Pacificare of California (2003) 31 Cal.4th 1187, 1203-1204, defendants argued that it had not waived the right to arbitrate because plaintiff’s first amended complaint was not filed until January 26, 2007. Defendants argued: the first amended complaint contained new theories of forgery and unfair debt collection practices against the finance company; the new allegations created a “significant unanticipated change” in the lawsuit; defendants did not know of the new allegations at the time it answered the complaint or filed the case management statement; defendants and the finance company were “blind-sided by learning of serious new allegations the day before the mediation” which prevented meaningful settlement discussions; and defendants and the finance company were prejudiced because the documents containing the alleged forged documents were produced early in the litigation. Defendants further argued that they did not gain an unfair advantage because: the exercise of discovery methods would have been permitted in arbitration; plaintiff obtained discovery responses; there is no time limit in the agreement for requesting arbitration; there was no unreasonable delay; and plaintiff delayed asserting new legal theories until nine months after filing suit. As noted, defendants presented no declarations in the reply to support these arguments.
The trial court ruled defendants had waived the right to arbitrate and denied the motion to compel arbitration. The trial court found: “1) Defendants acted inconsistently with their right to arbitrate by failing to plead it as an affirmative defense in their April 27, 2006 answer, by failing to show a willingness to submit the claim to private binding arbitration in paragraph 10 of their case management conference statement, by failing to state that they expect to file a motion to compel arbitration in [paragraph 16] of their case management conference statement, and by requesting a jury trial in paragraph 7 of their case management conference statement. 2) Defendants delayed [nine] months before invoking the right to arbitrate; 3) Defendants failed to provide any reasonable explanation for delaying nine months before seeking to invoke the arbitration clause in their own contract; 4) Defendants waited until three months before the June trial date to file their motion; and 5) Defendants’ significant delay misled and caused prejudice to the Plaintiff, who submitted to mediation on December [14,] 2006 at which Plaintiff incurred fees and costs and at which he disclosed legal theories and evidence that he would not have disclosed if he knew the Defendants would invoke their right to arbitrate. [¶] The mere fact that the Plaintiff filed an amended complaint does not affect Defendant’s conduct showing an implied waiver of arbitration.” Defendants and the finance company filed separate timely appeals. After filing its opening brief, the finance company settled with plaintiff which resulted in the dismissal of the appeal and its cross-complaint.
III. DISCUSSION
A. The California Waiver Rule
Defendants sought to compel arbitration pursuant to section 1280 et seq. In support of the motion, defendants then argued that under applicable state law principles set forth in St. Agnes Medical Center v. Pacificare of California, supra, 31 Cal.4th at pages 1203-1204, they had not waived their right to compel arbitration. Section 1281 provides: “A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” Under California law, the trial court has authority to compel arbitration pursuant to section 1281.2 which provides in part: “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] The right to compel arbitration has been waived by the petitioner . . . .” Waiver of the right to arbitrate is not lightly inferred because of federal and state law favoring arbitration provisions. (St. Agnes Med. Ctr. v. Pacificare of California, supra, 31 Cal.4th at p. 1195; Christensen v. Dewor Developments (1983) 33 Cal.3d 778, 782.) Thus, the claim under California law a party has waived the right to arbitration requires strict judicial scrutiny to determine whether the party asserting waiver has carried its burden of proof. (St. Agnes Med. Ctr. v. Pacificare of California, supra, 31 Cal.4th at p. 1195; Christensen v. Dewor Developments, supra, 33 Cal.3d at p. 782; Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 189.)
In St. Agnes Med. Ctr. v. Pacificare of California, supra, 31 Cal.4th at page 1195, footnote 4, the Supreme Court explained: “[T]he term ‘waiver’ has a number of meanings in statute and case law. [Citation.] While ‘waiver’ generally denotes the voluntary relinquishment of a known right, it can also refer to the loss of a right as a result of a party’s failure to perform an act it is required to perform, regardless of the party’s intent to relinquish the right. [Citations.] In the arbitration context, ‘[t]he term “waiver” has also been used as a shorthand statement for the conclusion that a contractual right to arbitration has been lost.’ [Citation.]” In deciding whether there is a waiver of the right to arbitration, St. Agnes applied the following factors: “‘In determining waiver, a court can consider “(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.) In California, the determination a party has waived the right to compel arbitration is generally a factual question to be resolved by the trial court, which is reviewed for substantial evidence. (St. Agnes Med. Ctr. v. Pacificare of California, supra, 31 Cal.4th at p. 1196; Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 983; Platt Pacific, Inc. Andelson (1993) 6 Cal.4th 307, 319.) However, when the facts are undisputed and the only issues are legal, the appellate court is not bound by the trial judge’s ruling. (St. Agnes Med. Ctr. v. Pacificare of California, supra, 31 Cal.4th at p. 1196; Platt Pacific, Inc. v. Andelson, supra, 6 Cal.4th at p. 319.)
Applying the foregoing analysis, the trial court did not err in finding waiver had occurred under the California Arbitration Act. In this case, plaintiff filed a lawsuit for fraud, consumer remedies, rescission and restitution, and conversion on March 15, 2006. Defendants answered the complaint on April 27, 2006, and raised 23 affirmative defenses, none of which adverted to arbitration. On May 1, 2006, the finance company answered the complaint and cross-complained against plaintiff. The finance company did not seek arbitration of the claims raised in the complaint or the cross-complaint. Thus, no defendant asserted as an affirmative defense that the matter should be submitted to arbitration. On August 14, 2006, defendants executed a case management conference statement which demanded a jury trial. Defendants also requested meditation. The parties participated in mediation on December 14, 2006. During the time the action was pending in superior court, the parties, including defendants, used discovery methods applicable to civil litigation. On December 20, 2006, plaintiff filed a motion for leave to file a first amended complaint. The first amended complaint raised issues of whether plaintiff’s name had been forged on documents which were used to finance the purchase of the Nissan. On January 25, 2007, defendants for the first time demanded arbitration of the claims. Based on this evidence, the trial court found that defendants had waived the right to compel arbitration. No error occurred when defendant’s motion to compel arbitration was denied.
B. Defendant’s Waiver Claim Under The United States Arbitration Act
For the first time on appeal, defendants claims that the waiver issue must be decided with reference to the United States Arbitration Act whereon provides, “Any arbitration under this Arbitration Clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state law concerning arbitration.” Under federal law, an arbitration provision “shall be valid, irrevocable, and enforceable” unless neutral state law concerning contracts prohibits enforcement of the right to arbitrate. (9 U.S.C. § 2; Perry v. Thomas (1987) 482 U.S. 483, 492, fn. 9; Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 98.) The purpose and effect of the federal law is to encourage the arbitration of civil disputes outside the judicial forum. (9 U.S.C. § 1; Gilmer v. Interstate/Johnson Lane Corporation (1991) 500 U.S. 20, 25; Moses H. Cone Hospital v. Mercury Const. Corp. (1983) 460 U.S. 1, 24.) There is a liberal policy in favor arbitration agreements under federal and state law. (Gilmer v. Interstate/Johnson Lane Corporation, supra, 500 U.S. at p. 25; § 1281.2; Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 97; Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) The United States Supreme Court has held that under the United States Arbitration Act: “‘[A]ny doubts concerning the scope of arbitral issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay or a like defense to arbitrability.’ [Citation.]” (Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth (1985) 473 U.S. 614, 626, citing Moses H. Cone Memorial Hospital v. Mercury Constr. Co., supra, 460 U.S. at pp. 24-25.)
As previously noted, under California law, the general rule is that waiver questions are for the court rather than the arbitrator to decide. (§ 1281.2, subd. (a); Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 28, citing Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 483; Boys Club of San Fernando Valley, Inc. v. Fidelity & Deposit Co. of Maryland (1992) 6 Cal.App.4th 1266, 1274.) When the United States Arbitration Act controls, the waiver issue must be decided by the arbitrator unless it is based on conduct related to the judicial process. Under these circumstances, the waiver issue is decided by the court. (See Thorup v. Dean Witter Reynolds, Inc. (1986) 180 Cal.App.3d 228, 234; see also Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961-964, citing Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 84.) Here, the parties dispute whether the trial court properly denied the petition to compel arbitration on the ground defendants’ litigation conduct resulted in waiver of the right to arbitrate. As such, no parties claim the issue was improperly resolved by the trial court rather than the arbitrator. Instead, defendants claim that reference to waiver standards under the applicable United States Arbitration Act requires that the order be reversed.
The United States Arbitration Act does not utilize the term “waiver” in analyzing the consequences of a party’s participation in litigation that results in the loss of the right to arbitrate but permits a stay of judicial proceedings unless a party is “in default.” (9 U.S.C. § 3; St. Agnes Medical Center v. Pacificare of California, supra, 31 Cal.4th p. 1195; see also Aviation Data Inc. v. Am. Express Travel Related Serv. Co. (2007)152 Cal.App.4th 1522, 1537, fn. 10.) However, the California Supreme Court explained: the “default” principle is akin to the “waiver” of the right to arbitrate; but that the circumstances of a statutory default are limited; and under the federal policy favoring arbitration a default is not lightly to be inferred. (St. Agnes Medical Center v. Pacificare of California, supra, 31 Cal.4th at p. 1195, quoting Microstrategy, Inc. v. Lauricia (4th Cir. 2001) 268 F.3d 244, 249.) Nevertheless St. Agnes Medical Center v. Pacificare of California, supra, 31 Cal.4th at page 1195 concluded that our state “waiver” principles are in accord with the federal “default” rules. (St. Agnes Medical Center v. Pacificare of California, supra, 31 Cal.4th p. 1195; see also Aviation Data Inc. v. Am. Express Travel Related Serv. Co., supra, 152 Cal.App.4th at p. 1536.) This is because our state waiver rules, like federal principles, reflect a strong public policy in favor of arbitration agreements and require close judicial scrutiny before a forfeiture of the right to arbitrate is found. (St. Agnes Med. Ctr. v. Pacificare of California, supra, 31 Cal.4th at p. 1195; Christensen v. Dewor Developments, supra, 33 Cal.3d at p. 782.)
To prove waiver of the right to arbitrate under federal law, plaintiff was required to establish: defendants had knowledge of an existing right to compel arbitration; defendants acted inconsistently with its existing right to compel arbitration; and he was prejudiced from defendants’ inconsistent acts. (United Computer Systems, Inc. v. AT & T Corp. (9th Cir. 2002) 298 F.3d 756, 765; Hoffman Const. Co. v. Active Erectors (9th Cir. 1992) 969 F.2d 796, 798-799; accord Lewallen v. Green Tree Servicing, L.L.C. (8th Cir. 2007) 487 F.3d 1085, 1090.) Under federal law, like state law, deference is given to the trial court’s factual findings but any legal issues are independently reviewed. (Lewallen v. Green Tree Servicing, L.L.C., supra, 487 F.3d at p. 1090; In re Tyco Intern. Ltd. Securities (1st Cir. 2005) 422 F.3d 41, 44; Subway Equipment Leasing Corp. v. Forte (5th Cir. 1999) 169 F.3d 324, 326; see also Aviation Data Inc. v. Am. Express Travel Related Serv. Co., supra, 152 Cal.App.4th at p. 1536.)
As noted, three factors are evaluated under federal law in determining whether a waiver of the right to arbitrate has occurred: defendants had a known right to compel arbitration; defendants acted inconsistently with the right; and plaintiff was prejudiced by the inconsistent acts. (United Computer Systems, Inc. v. AT & T Corp., supra, 298 F.3d at p. 765; Lewallen v. Green Tree Servicing, L.L.C., supra, 487 F.3d at p. 1090.) With respect to the first factor, defendants were aware of their right to arbitrate. As the trial court pointed out, the arbitration clause was in defendants’ own contract. As to the second factor, defendants acted inconsistently with the exercise of the right to arbitrate as demonstrated by the foregoing evidence of lengthy and comprehensive participation in the litigation. As to the third factor, plaintiff has been prejudiced because: during the mediation, there is uncontradicted evidence plaintiff revealed his theories and evidence; through the expert witness disclosure process, the evidence shows that plaintiff made disclosures that would not be made in arbitration; and plaintiff expended time and money in the mediation process.
Additionally, the prejudice assessment includes a consideration as to whether the petitioning party’s conduct has substantially impaired or undermined the strong public policies in favor of arbitration such as whether the delay has adversely affected the other side’s ability to take of advantage of the benefits and efficiencies of the arbitral forum. (Lewallen v. Green Tree Servicing, L.L.C., supra, 487 F.3d at p. 1094; see also St. Agnes Med. Ctr. v. Pacificare of California, supra, 31 Cal.4th at p. 1204, citing Moncharsh v. Heily & Blase, supra, 3 Ca.4th at p. 9.) Here, the benefit was lost because expense, delay, and duplication have deprived the parties of the opportunity main purpose of the arbitration provision which is efficient and low-cost resolution of the dispute. Under the circumstances, the trial court correctly ruled that defendants had waived the right to compel arbitration of this controversy.
IV. DISPOSITION
The order denying the petition to compel arbitration is affirmed. Plaintiff, Ernesto Radillo is awarded his costs on appeal from defendants, Superior Nissan of Mission Hills and Superior Automotive Group.
I concur: KRIEGLER, J.
MOSK, J., Concurring
I concur.
The parties below cited state law on the waiver of arbitration issue, although the arbitration clause submitted specifically provided for the application of the Federal Arbitration Act. (9 U.S.C. § 1, et seq.) The trial court did not specify the applicable law. We may apply the correct law even if not specifically cited below. (See 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 407, p. 459.)
Federal law, rather than state law, governs the waiver issue. (Aviation Data, Inc. v. American Express Travel Related Services Co., Inc. (2007) 152 Cal.App.4th 1522, 1535 (Aviation) [“Therefore, ‘it is federal law, not state, that governs the inquiry into whether a party has waived its right to arbitration’”].) It appears that the federal and state laws on waiver of arbitration are comparable. Under federal law there is a “‘heavy burden of proof,’ and ‘any doubts as to waiver are resolved in favor of arbitration.’” (Id. at pp. 1537-1538.) The same standard applies under state law. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195 (St. Agnes).)
The standard of review has been viewed as a procedural matter subject to state law principles. (Schlessinger v. Holland America (2004) 120 Cal.App.4th 552, 558, fn. 3.) It has been said that the state and federal standards of review on the question of waiver of arbitration do not “materially differ.” (Aviation, supra, 152 Cal.App.4th at p. 1536.)
“Generally, the determination of waiver is a question of fact, and the trial court’s finding, if supported by sufficient evidence, is binding on the appellate court. [Citation.] ‘When, however, the facts are undisputed and only one inference may reasonably be drawn, the issue is one of law and the reviewing court is not bound by the trial court’s ruling.’” (St. Agnes, supra, 31 Cal.4th at p. 1196.) This statement may not be consistent with the statement in Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 983 that “the question of waiver is one of fact, and an appellate court’s function is to review a trial court’s findings regarding waiver to determine whether these are supported by substantial evidence.” The two statements can be reconciled if one views the reference that “only one inference may reasonably be drawn” (St. Agnes, supra, 31 Cal.4th at p. 1196) to be the equivalent of “as a matter of law.” So, the substantial evidence test should apply unless there is no disputed issue of fact underlying the waiver determination, and the facts are such that only one conclusion or inference follows as a matter of law.
In the instant case, there is at least a factual dispute over prejudice. I do not believe that only one inference can be derived from the facts. Thus, I believe the substantial evidence test is applicable. There is substantial evidence in support of the trial court’s determination of waiver. Defendants make some meritorious arguments, but under the appropriate standard of review, I would uphold the trial court determination, notwithstanding that there is no express indication that the trial court was “aware of the strong federal policy favoring enforcement of arbitration agreements and the concomitant limitations on waiver . . . .” (Aviation, supra, 152 Cal.App.4th at p. 1538.) As noted, California has similar policies. (St. Agnes, supra, 31 Cal.4th at p. 1195.)