Filed 3/30/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
AKIRA KOKUBU, B310220
Plaintiff, Cross-defendant and (Los Angeles County
Respondent, Super. Ct. No. 18STCV04896)
v.
TAKASHI SUDO et al.,
Defendants, Cross-defendants
and Respondents;
PARK ROLLING HILLS, LLC, et al.,
Defendants, Cross-
complainants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County. Daniel S. Murphy, Judge. Affirmed.
Baker, Burton & Lundy, Albro Lundy and Evan R. Koch,
for Defendants, Cross-complainants, Cross-defendants and
Appellants.
Chassman & Seelig, and Mark B. Chassman for Plaintiff,
Cross-defendant and Respondent.
Leago Law Group, and Gina A. Leago, for Defendants,
Cross-complainants, Cross-defendants and Respondents.
_________________________________
INTRODUCTION
This appeal arises out of a dispute between several
investors, whose best-laid plans to exploit a Japanese tax
incentive promoting wood frame construction has left them
fighting about their respective rights in a decades-old office
complex in Los Angeles County.
Appellants1 were some of the defendants below.
Respondents2 include three other defendants, plus the plaintiff
(Kokubu).
Appellants seek reversal of the trial court’s order denying
their motion to compel arbitration, which they filed more than
two years after the lawsuit began. The trial court denied the
motion on the basis that Appellants had waived their right to
arbitrate by unreasonably delaying their motion, taking actions
inconsistent with the right to arbitrate, and depriving
Respondents the benefits of arbitration. It also found that the
third-party arbitration exception applied, independently
warranting denial of the motion. Appellants contend, in relevant
part, that: (1) waiver may be found only where the non-movant is
prejudiced; (2) the type of prejudice Respondents suffered is
1 The appellants are Beach Front Properties, LLC (BFP);
Daniel J. Niemann, Inc.; NPI Beach Front Ventures, LLC; and
Park Rolling Hills LLC (collectively, Appellants). Appellants are
defendants, cross-complainants, and cross-defendants below.
2 The respondents are Akira Kokubu (Kokubu); Takashi
Sudo (Sudo); Tomoko Hamamoto (Hamamoto); and Japan
Investments LLC (JI) (collectively, Respondents). Kokubu is the
plaintiff and a cross-defendant below. Sudo, Hamamoto, and JI
are defendants, cross-complainants, and cross-defendants below.
2
inadequate as a matter of law; and (3) Appellants did not act
unreasonably or in a manner inconsistent with the right to
arbitrate in delaying their motion to compel. We disagree and
3
affirm.
BACKGROUND
Respondents (who the parties refer to as the “Japanese
Investors”) and two of the Appellants (who the parties refer to,
with certain of their affiliates, as the “US Investors”) purchased
the property in 2006.4 The purchase was financed, in part, by a
$4 million commercial loan secured by a deed of trust. The grant
deed reflected ownership by the Respondents, in the aggregate, of
99.01 percent, with Appellants holding the remaining 0.99
percent. A tenancy-in-common agreement (TIC 1) and master
lease agreement (MLA 1) entered into at closing afforded the
various owners proportionate economic interests that differed
from their respective record title shares. The differences between
their proportionate economic and title shares were the product of
the parties’ efforts to maximize the tax benefits to the Japanese
investors.
Two years after buying it, Appellants and Respondents
refinanced the property with a new $4 million loan from
JPMorgan Chase Bank, N.A. (JP Morgan). In connection with
3 Undesignated statutory references are to the Code of Civil
Procedure.
4 To avoid needless and confusing detail, we refer to these
groups simply as Appellants and Respondents. We do so even
when referring to fewer than all Appellants or Respondents or to
Appellants together with one or more of their affiliates, except
where further distinction is relevant to our analysis.
3
the refinance, Respondents contend that they and Appellants
entered into a new tenancy-in-common agreement (TIC 2) and a
new master lease agreement (MLA 2). Appellants contend that
their signatures on those documents are fraudulent.
The dispute over whether the TIC 1 or TIC 2 was operative
arose in 2018 in connection with discussions over the sale or
refinancing of the property. Appellants maintained that the
TIC 1, which entitled them to 49.01 percent of any net sale
proceeds, continued to govern, whereas Respondents took the
position that the TIC 2 controlled, which would afford Appellants
just 0.99 percent of any net sale proceeds.
The economic interests remained unresolved as of the
scheduled maturity of the JP Morgan loan. As a result, the
Respondents and Appellants defaulted on the loan. JP Morgan
issued a notice of default in November 2018 and the Respondents
and Appellants failed to cure.
Immediately after the November 2018 default, Respondent
Kokubu (the original plaintiff) filed a complaint against
Appellants, the other Respondents, and JP Morgan for partition
by sale, thereby commencing the action below. Two months later,
Kokubu recorded a notice of lis pendens against the property.
In January 2019, Appellants filed a demurrer to Kokubu’s
complaint. Kokubu filed a first amended complaint in April
expanding on his allegations to support the sole partition count.
This prompted Appellants to withdraw their demurrer in April
and then answer in May. In their answer, Appellants asserted a
right to arbitration as an affirmative defense.
In June of 2019, the trustee under the JP Morgan deed of
trust noticed a foreclosure sale for the following month. Though
the urgency of the threatened sale prompted further discussions
4
between the two sides, they failed to reach an accord.
Just six days before the scheduled trustee’s sale,
Appellants filed a cross-complaint against Respondents for fraud,
breach of contract, concealment, constructive trust, and
injunctive relief. They also cross-complained against JP Morgan
only for injunctive relief to enjoin the foreclosure sale.
The same day as they filed their cross-complaint,
Appellants made a demand for arbitration on Respondents under
section 33 of the MLA 1. Appellants contend that they
simultaneously sought a stay of the proceedings to permit
arbitration. However, this assertion is not supported by the
record. Four days after filing their cross-complaint, Appellants
filed an ex parte application to enjoin the trustee’s sale for one-
hundred and fifty days, explaining that such postponement would
“permit the parties to resolve the underlying via arbitration.”
We find no indication in the record that Appellants sought to stay
the court proceedings en toto in order to permit arbitration.
The trial court declined to enjoin the trustee’s sale but
directed the trustee to hold any net proceeds in a blocked
account. The sale went forward on July 25, 2019, and Appellant
BFP purchased the property for a penny more than the amount
necessary to discharge JP Morgan’s lien.
When Respondents learned of the result of the trustee’s
sale, they demanded that Appellant BFP acknowledge their
rights in the property. BFP ignored them. On August 2, 2019,
Respondents sought an ex parte order prohibiting BFP from
transferring the property. However, by the time the matter was
heard, BFP had already transferred the property to an affiliate.
5
On August 6, 2019, Appellants filed a case management
statement in the trial court on mandatory form CM-110. Among
other things, they demanded a jury trial for their fraud cross-
claim, estimated that trial would take seven to ten days,
proposed discovery cutoff dates, and provided attorney
availability for trial. In section 10.c, where instructed to indicate
the ADR processes they were “willing to participate in” or “have
agreed to participate in,” Appellants checked “Mediation” and
“Settlement conference” but not “Binding private arbitration.”
Appellants did separately note that they had “demanded
arbitration pursuant to the terms of the [MLA 1].” Later that
day, however, Appellants withdrew their demand for arbitration
via email to counsel for the Respondents.
The following day, Respondents Sudo, Hamamoto, and JI
filed a cross-complaint against Appellants and certain of their
affiliates asserting claims including breach of fiduciary duty,
fraud, and breach of contract. Also, Sudo, Hamamoto, JI, and
certain non-parties filed, and then withdrew, a lis pendens
against the property, which Sudo and Hamamoto subsequently
refiled.
From the time Appellants withdrew their arbitration
demand in August of 2019 until December of 2020, the litigation
proceeded without any outward indication that Appellants
intended to arbitrate. Indeed, when they filed their October 2019
case management statement, they maintained their jury trial
requests, discovery schedule proposals, and non-arbitration ADR
preferences from their August 2019 statement, but dropped any
reference to their demand to arbitrate. In the intervening
months, Appellants refined their pleadings, answered pleadings,
sought relief, opposed relief, responded to discovery, and served
6
(and sought to compel responses to) their own discovery demands.
Included in this litigation activity were three separate motions to
expunge the lis pendens against the property, the first of which
was filed on August 23, 2019, and the last of which was granted
(subject to a bond condition Appellants declined to fulfill) on June
24, 2020.
Shortly after the order on the lis pendens, in July 2020,
Respondent Kokubu filed a motion for summary adjudication
(MSA) of his fraudulent conveyance and partition counts and set
the hearing for November 2020. Appellants responded with
document requests and deposition notices for mid-August and
early September, specifying that the depositions would be taken
remotely. The day before the depositions were set to begin,
Appellants took them off calendar, explaining that they needed
in-person depositions (despite their earlier contrary position) and
expressed hope that they could be completed “at some point next
year.” Weeks after their depositions were originally scheduled to
have been completed, Appellants moved ex parte to continue the
hearing on the MSA, as well as the trial date, to permit in-person
depositions. The court granted the motion and moved the MSA
hearing to January 2021 and the trial to July 2021.
At the end of October, Appellants served new notices for
depositions in November and December 2020. Ultimately, the
first of these was scheduled to go forward on December 9, 2020.
However, on December 7, 2020, Appellants filed their motion to
compel arbitration and related motion to stay the proceedings.
The following day, Appellants again unilaterally took the
depositions off calendar the day before the first was set to go
forward.
7
On January 8, 2021, the trial court denied the motion to
compel arbitration. Its decision rested on two grounds. First, it
concluded that Appellants had waived the right to arbitration
pursuant to section 1281.2, subdivision (a). Second, it found that
the third-party litigation exception in subdivision (c) applied.
This appeal followed, resulting in a stay of the proceedings
below pursuant to section 916, subdivision (a). On appeal
Respondents requested expedited consideration pursuant to
section 1291.2 and the court’s inherent authority, which
Appellants opposed in part. We granted calendar preference.
DISCUSSION
I. Standard of Review
On appeal, a trial court’s order enjoys the presumption of
correctness. (Denham v. Superior Court (1970) 2 Cal.3d 557,
564.) Even if the record reflects that the trial court
misunderstood or misapplied the law in reaching its conclusion, it
will be affirmed if supported by any legal theory. (Rappleyea v.
Campbell (1994) 8 Cal.4th 975, 980–981.)
“ ‘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. [Citations.] “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.” ’ [Citation.]”
(Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59
Cal.4th 348, 375 (Iskanian).) When the substantial evidence test
applies, a court cannot draw inferences based on “mere
speculation or conjecture,” but only from evidence that is
“ ‘reasonable . . . , credible, and of solid value.’ ” (Kuhn v.
Department of General Services (1994) 22 Cal.App.4th 1627,
8
1633.) The appellate court may not reverse the trial court’s
finding of waiver unless the record as a matter of law compels
finding nonwaiver. (Burton v. Cruise (2010) 190 Cal.App.4th 939,
946 (Burton).)
II. Arbitrability of the Instant Dispute
The TIC 1 and MLA 1 each contain arbitration provisions,
but they are not the same. As the parties note, the provision in
TIC 1 covers only disputes relating to the exercise of a “Buy Sell
Option” whereas the disputes covered by the MLA 1 provision
reach claims between the “Lessors and the Lessee,” 5 which
“aris[e] under or in connection with” MLA 1. In asserting their
arbitration rights, Appellants do not claim that any “Buy Sell
Option” dispute is implicated. Respondents do not dispute that
Appellants had arbitration rights before waiving them, but assert
that such rights could only arise under the MLA 1 (and not under
the TIC 1). Appellants offer no rebuttal to this assertion. On this
basis, we accept that the MLA 1 contains the operative
arbitration provision which would extend to the underlying
dispute in the absence of a waiver.
III. The Framework for Determining When a Party Has
Waived Its Contractual Right to Arbitrate Is Firmly
Established
At the core of this appeal is a request by Appellants that we
declare new rules for, and place new limits on, when a party may
be found to have waived its contractual rights to arbitrate.
Though they vacillate between describing the law in descriptive
and normative terms, Appellants tacitly concede that they are
5 The “Lessors and Lessees” include Appellants and
Respondents.
9
advocating for a novel interpretation of California law that would
revive their arbitration rights as a matter of law. Specifically,
they ask that we “clarify the case law” to permit a finding of
waiver only where (1) “the party seeking arbitration
unreasonably delays in seeking to compel it by motion or
petition,” and (ii) “the party opposing arbitration has been
prejudiced by moving [sic] party’s actions or delay.” Appellants
ask us to further “clarify” that, “[i]n this context prejudice
specifically requires either ‘judicial litigation of the merits of
arbitrable issues’ or a substantial alteration in the party’s
litigation position.”
We must disagree with Appellants that their proposed
“clarifications” represent “a fair and constrained reading of the
case law.” Standards that have been repeatedly reaffirmed by
our Supreme Court give trial courts considerable flexibility to
determine when waiver occurs. We have no authority to deviate
from these rules. (Auto Equity Sales, Inc. v. Superior Court
(1962) 57 Cal.2d 450, 455.) As explained in St. Agnes Medical
Center v. PacifiCare of California (2003) 31 Cal.4th 1187
(St. Agnes), “no single test delineates the nature of the conduct
that will constitute a waiver of arbitration.” (Id. at p. 1195.)
Rather, given the “ ‘ “variety of contexts” ’ ” in which waiver may
be found (id. at p. 1196), the following six factors (the St. Agnes
factors) are relevant to determining whether waiver has occurred:
“ ‘ “(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
10
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.” ’ ” (St. Agnes, supra,
31 Cal.4th at p. 1196; see also Wagner Construction
Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19,
30-31 [same]; Iskanian, supra, 59 Cal.4th at p. 375
[same].)
To the extent Appellants ask us to pronounce that the
St. Agnes factors have collapsed into or must turn upon a single
“prejudice” factor, we decline to do so. Courts have made clear
that no one factor is predominant. (Burton, supra, 190
Cal.App.4th at pp. 944–945.) But it is fair to say that virtually
every case that has found there to be a waiver of arbitration has
cited to the existence of “prejudice” as one of the factors present.
St. Agnes referred to prejudice as a “critical” factor under
California law, and subsequent cases have found that “although
prejudice has been held to be ‘critical’ in determining waiver, we
also note the Supreme Court has cautioned courts to examine
each case in context: ‘no single test delineates the nature of the
conduct that will constitute a waiver of arbitration.’ [Citation].”
(Fleming Distribution Co. v. Younan (2020) 49 Cal.App.5th 73, 84
(Younan); see also Law Offices of Dixon R. Howell v. Valley (2005)
129 Cal.App.4th 1076, 1097 [“While no single [St. Agnes] factor is
determinative, it is nonetheless true that ‘[i]n California, whether
or not litigation results in prejudice is also critical in waiver
determinations. [Citations.]’ ”].) We have previously reached a
similar conclusion in the context of a federal arbitration.
11
(Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th
651, 654–655.)
We disagree with Appellants’ argument that a more
circumscribed test for when waiver occurs would necessarily
promote California’s policy favoring arbitration. Arbitration is
favored because it allows parties to elect “a speedy and relatively
inexpensive means of dispute resolution” (Ericksen, Arbuthnot,
McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35
Cal.3d 312, 322), and provides some relief for crowded court
dockets (Zakarian v. Bekov (2002) 98 Cal.App.4th 316, 325).
The breadth of circumstances in which waiver may be found
encourages a party with the right to force arbitration to assert it
promptly. Time, expense, and scarce judicial resources are all
preserved by such an incentive, in furtherance of the interests
underlying the policy favoring arbitration. Appellants’ proposed
test that would preclude waiver as a matter of law even with
respect to a case like this one, that has remained in court for
years before arbitration is sought, is counter to this policy.
Likewise, we do not share Appellants’ concerns that the
flexibility of the St. Agnes analysis affords trial courts too much
discretion in determining whether waiver has occurred. Trial
courts are uniquely positioned to evaluate the conduct of litigants
before them within the broader context of a case. Given that the
St. Agnes factors are largely concerned with such conduct, the
deference we give to the trial courts’ factual determinations is
especially warranted in the context of alleged arbitration waiver.
We now turn to whether the record below supports the trial
court’s finding of waiver.
12
IV. The St. Agnes Analysis
For the reasons that follow, we find substantial evidence
supports the trial court’s finding of waiver under the St. Agnes
factors.
A. Appellants Took Actions Inconsistent With the
Right to Arbitrate
Substantial evidence supports the trial court’s conclusion
that Appellants acted in a manner that was inconsistent with an
intent to arbitrate. Appellants were sued in November 2018 but
did not demand arbitration until July 19, 2019. At the same time
as they made their initial demand, Appellants filed a cross-
complaint without seeking a stay of the case. Shortly thereafter,
following the trustee’s sale, they withdrew their arbitration
demand and removed reference to the right to arbitration in
subsequent case management statements. Until filing their
motion to compel in December 2020, Appellants proceeded in the
same manner as a party without any right to arbitrate,
participating in case management conferences, filing motions,
seeking ex parte relief, and seeking and participating in
discovery.
Appellants’ efforts to reconcile their conduct with a sincere
and continuous intent to arbitrate are unavailing. They say they
withdrew their July 2019 arbitration demand following the
trustee’s sale “simply [to] reflect[] th[e] reality [that] there was
nothing to arbitrate because there was no longer any valid
outstanding claim.” This assertion is contrary to the record.
No claims were dismissed as a result of the foreclosure. Indeed,
Respondent Kokubu’s partition claim currently remains pending
in the trial court, as do most of Appellants’ claims asserted the
day they made their arbitration demand. These are among the
13
same claims that Appellants now seek to arbitrate.
Further, Appellants say they wanted to remain before the
trial court solely to expunge the lis pendens because of
uncertainty over whether they could accomplish expungement
through arbitration. However, this cannot be squared with either
Appellants’ demand for arbitration in July 2019 while the
Kokubu lis pendens had been on record for more than six months,
or with Appellants’ five-month delay in seeking to compel
arbitration after their lis pendens motion was resolved.
Moreover, Appellants’ contention that they secretly
intended to avail themselves of rights unique to the court before
seeking to compel arbitration violates the adage that “ ‘[t]he
courtroom may not be used as a convenient vestibule to the
arbitration hall so as to allow a party to create his own unique
structure combining litigation and arbitration.’ ” (Christensen v.
Dewor Developments (1983) 33 Cal.3d 778, 784 (Christensen).)
Courts routinely find such behavior inconsistent with the right to
arbitrate. (See, e.g., Sprunk v. Prisma LLC (2017) 14
Cal.App.5th 785, 798 [“An attempt to gain a strategic advantage
through litigation in court before seeking to compel arbitration is
a paradigm of conduct that is inconsistent with the right to
arbitrate”].)
Had Appellants wished to avoid claims of waiver after
litigating expungement they should have made their intentions
known instead of withdrawing their arbitration demand in
writing and thereafter going silent on the topic (including in case
management statements where disclosure of the right is
mandatory). Section 1298.5 provides that a person does not
waive their right to arbitrate by filing a lis pendens in court so
long as they simultaneously seek to stay the action pending
14
arbitration. While this provision did not directly apply to
Appellants in seeking expungement of a lis pendens, it does
demonstrate they could have easily disclosed to the trial court
and counsel an ongoing intent to arbitrate notwithstanding their
apparent acquiescence to the judicial forum.
Finally, the trial court properly considered Appellants’
discovery activities in considering whether their actions were
inconsistent with a right to arbitrate. Appellants’ arguments
that they gained nothing from these activities do not change the
fact that they were inconsistent with an intent to arbitrate. The
MLA 1’s arbitration provision denies them any right to discovery
outside of “the exchange of any exhibits that the Parties propose
to use at the arbitration hearing.” By seeking to obtain
information prohibited to them in arbitration, Appellants’
conduct was consistent with seeking to resolve their disputes in
the trial court and not in arbitration. (See, e.g., Adolph v.
Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443, 1451
(Adolph) [defendant’s actions found inconsistent with right to
arbitrate where it “filed two demurrers, accepted and contested
discovery request[s], engaged in efforts to schedule discovery,
omitted to mark or assert arbitration in its case management
statement”].)
B. Appellants Substantially Invoked the Litigation
Machinery and Respondents Had Substantially
Invested in the Lawsuit When Arbitration Was
Invoked
The trial court identified substantial evidence that
Appellants substantially invoked the litigation machinery and
that Respondents had substantially invested in the lawsuit by
the time Appellants finally sought to compel arbitration in
15
December 2020. The court noted that Appellants variously
(1) filed a cross-complaint seeking affirmative relief from the
court; (2) filed ten motions, including five discovery motions, and
five ex parte applications; (3) propounded discovery on the
Japanese Investors; (4) noticed depositions; and (5) obtained
relief with respect to the lis pendens. Though the discovery
activities did not yield information to Appellants, they did force
Respondents to incur substantial costs in responding and
preparing for depositions. Likewise, Respondent Kokubu
prepared and filed a motion for summary adjudication. He did so
11 months after Appellants withdrew their initial demand to
arbitrate—a time when Kokubu would have been justified in
believing the matter would proceed in court rather than in
arbitration. All in all, the trial court found that the Japanese
Investors had collectively incurred more than $300,000 in legal
fees litigating their cases in state court as opposed to the arbitral
forum.
C. Appellants Delayed for a Long Period Before
Seeking a Stay
The trial court found that Appellants delayed for a long
period before seeking a stay in order to arbitrate. They brought
their arbitration and related motion for stay more than two years
after Kokubu filed his lawsuit; sixteen months after withdrawing
their initial arbitration demand; and five months after the trial
court resolved their lis pendens expungement motion.
Citations in the parties’ briefs reflect that how long is “too
long” differs according to the circumstances. While we disagree
with Respondents’ suggestion that the length of a delay alone can
render it unreasonable as a matter of law, the delay is often
accompanied by costs incurred, changes in strategic advantage,
16
use of disputed property, consumption of the time of parties and
counsel, and other impacts that warrant careful consideration of
the length of the delay and any justifications for it. This is not a
case where there was delay unaccompanied by litigation activity
by the parties. The over $300,000 in legal fees incurred by
Respondents alone reflects the substantial investment in the
court process during the lengthy delay in invoking arbitration.
And not just delay, but explicit waiver of arbitration by
Appellants.
In Burton, supra, the court discussed the differing
approaches to analyzing the impact of delay taken in Sobremonte
v. Superior Court (1998) 61 Cal.App.4th 980 (Sobremonte) and
Groom v. Health Net (2000) 82 Cal.App.4th 1189 (Groom).
We agree with Burton that Sobremonte correctly recognized that
substantial delay can create prejudice by depriving the parties of
speedy and inexpensive dispute resolution, and that Groom
improperly downplayed this factor. (Burton, supra, 190
Cal.App.4th at pp. 947–949.)
Appellants argue that they “delayed bringing the
arbitration motion so that they could get the lis pendens
expunged.” But as Respondents point out, Appellants could not
explain to the trial court why they waited approximately two
years to file a motion to compel arbitration. During that time,
they engaged in court litigation that went far beyond the narrow
issue of lis pendens expungement. They made no effort to
actively invoke arbitration proceedings while seeking limited
17
6
resolution of the lis pendens issue.
Moreover, the lis pendens litigation was resolved in June
2020 but Appellants held their motion to compel until that
December. Appellants concede that the intervening five-month
delay “is not attributable to the motions to expunge” but assert it
“can be and is explained, in large part, by the COVID-19
pandemic and the resultant uncertainties faced by the Court and
all parties and counsel.” This argument is not supported by the
record. Appellants’ argument in their reply in the trial court
about why they delayed for five months references no declaration
or other evidence. Indeed, the asserted factual basis in the reply
(delay due to COVID-19) was different than the factual basis
asserted at oral argument (time needed to make a business
decision of whether to post bond).
Between the date the trial court granted the expungement
motion and the date Appellants filed their motion to compel
arbitration, Appellants were active participants in the litigation
and readily imposed on the trial court and Respondents when it
served their interests. They variously gave written discovery
responses, served discovery requests, served deposition notices,
moved to quash a subpoena, moved ex parte to continue the trial
date, moved ex parte to continue Respondent Kokubu’s MSA,
engaged in extensive meet and confer activities, and filed motions
to compel discovery responses. With this context, the suggestion
that COVID precluded filing their arbitration motion promptly
after resolution of the lis pendens issue lacks evidentiary
6 The trial court commented, “I have cases—it’s not
uncommon for people to come in on a lis pendens and also for me
to make an order for arbitration. I mean, that’s not unusual.”
18
support.
Finally, Appellants seek to shift the blame for their delay
on Respondents. It is true that a party subject to an arbitration
agreement who files in a judicial forum, or actively litigates in
that forum, bears some responsibility for delays attending the
court litigation process. However, a defendant who silently
acquiesces to the judicial forum notwithstanding its contractual
right to compel arbitration quickly comes to share that
responsibility. There is a range of reasons that a plaintiff may
choose the judicial forum, including innocent mistake, a
meritorious argument that the arbitration agreement does not
apply, and bad faith. There are also valid and/or tactical reasons
a defendant may conclude that the litigation forum is preferable
to arbitration in a given case. Appellants clearly made such a
tactical decision when they withdrew their arbitration request.
A defendant who opposes proceeding in a judicial forum should do
so promptly so that the time and resources of the parties and the
court are not wasted. (See Christensen, supra, 33 Cal.3d at
p. 782 [“The defendant may seek a stay, or dismissal, of the
action [subject to an arbitration right] [citation], and it is
normally desirable that he do so promptly if he intends to do so at
all . . .”].) A defendant that fails to act promptly does so at its
own peril. If we were to adopt Appellants’ reasoning, delay would
cease to be a factor in considering a defendant’s motion to compel
arbitration.
The trial court did not err in finding Appellants
unreasonably delayed demanding arbitration.
19
D. Appellants Filed a Cross-Complaint Without
Pursuing a Stay
Appellants filed a cross-complaint on July 19, 2019, and
demanded arbitration the same day. Contrary to their
assertions, however, they did not seek a stay of the proceedings.
They sought a stay only of the trustee’s sale—a stay that they
contended would give them time to arbitrate—but stopped short
of asking the court to stay the case and leave the parties to their
chosen arbitral forum. Moreover, Appellants dropped their
demand for arbitration shortly after the trustee’s sale went
forward (and just 18 days after making the demand), but most of
the claims in their cross-complaint remain pending to this day.
In the absence of an actual motion to stay, the trial court
properly relied on the fact that Appellants filed a cross-complaint
in denying their motion to compel arbitration.
E. Appellants Took Advantage of Judicial Discovery
Procedures Not Available in Arbitration
Appellants served extensive discovery requests and noticed
depositions. These discovery tools were not available in
arbitration under the terms of the MLA 1. Appellants urge that
they received no information from Respondents through discovery
such that their efforts to obtain discovery should not weigh
against them in seeking to compel arbitration.7 Nevertheless,
7 We acknowledge some cases indicate that a movant’s
unsuccessful discovery attempts alone do not result in prejudice
to the non-movant for the purposes of the waiver analysis. (See,
e.g., Groom, supra, 82 Cal.App.4th at p. 1196.) We do not read
these cases as precluding consideration of such discovery efforts
in connection with the other St. Agnes factors. We also note that
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Appellants forced responses from Respondents to which
Appellants would not have been entitled in arbitration.
Moreover, “even discovery responses totally devoid of substantive
content . . . can reveal volumes about the strength and weakness
of a party’s case.” (Berman v. Health Net (2000) 80 Cal.App.4th
1359, 1367, fn. omitted.)
We cannot conclude that the record lacks evidence that
Appellants took advantage of judicial discovery procedures
unavailable in arbitration. The trial court was therefore entitled
to rely on the fact that Appellants sought extensive discovery in
denying their motion to compel arbitration.
F. Appellants’ Conduct Prejudiced Respondents
Appellants urge us to limit prejudice to situations where
the opposing party has (i) provided information in compliance
with civil discovery obligations that do not apply in arbitration;
or (ii) “alter[ed] its litigation posture in a fundamentally
inalterable or otherwise sticky [sic] way . . . .” Cases do not
support such a limitation.
In Burton, the court explained that “a petitioning party’s
conduct in stretching out the litigation process itself may cause
prejudice by depriving the other party of the advantages of
arbitration as an ‘expedient, efficient and cost-effective method to
resolve disputes.’ [Citation.] Arbitration loses much, if not all, of
there can be a wide spectrum of facts that may be described as
“unsuccessful” discovery, from a single request for a deposition to
dozens of motions to compel discovery. (Cf. Adolph, supra, 184
Cal.App.4th at pp. 1448-1449, 1451 [unsuccessful discovery
efforts by movant supported finding of waiver].) We believe the
trial court was in the best position to weigh the relative impact of
the discovery that was propounded.
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its value if undue time and money is lost in the litigation process
preceding a last-minute petition to compel.” (Burton, supra, 190
Cal.App.4th at p. 948.) The Supreme Court has acknowledged
Burton and declined to disclaim its analysis. (Iskanian, supra, 59
Cal.4th at p. 377.) We will not disclaim it here as the trial court
determined that Appellants’ delay was unreasonable and
unjustified. (Ibid.)
Relying on Burton and other aligned decisions, the trial
court concluded that Appellants had prejudiced respondents by
unreasonably delaying their arbitration demand. In the two
years that Appellants held their demand, Respondents incurred
more than $300,000 in costs. By holding their demand, they also
delayed resolution of the case relative to when it might have
concluded had they promptly exercised their right to compel
arbitration. The trial court observed that Appellants’ delay in
moving to compel arbitration, among other things, “enabled
[Appellants] to retain possession and control of the Property for a
longer period of time . . . .” Appellants characterize this as
improperly prejudging the merits of the case. However, other
courts have considered delayed recovery of a claimed, but
disputed, entitlement as contributing to prejudice resulting from
a delayed arbitration demand. (See, e.g., Younan, supra, 49
Cal.App.5th at p. 83.)
CONCLUSION
We find that the record supports the trial court’s conclusion
that Appellants waived their right to arbitration. We therefore
need not consider whether the trial court erred in finding that the
third-party litigation exception also justified its ruling.
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DISPOSITION
The order is affirmed. Respondents are entitled to their
costs on appeal.
CERTIFIED FOR PUBLICATION
*
HARUTUNIAN, J.
We concur:
GRIMES, Acting P. J.
STRATTON, J.
* Judge of the San Diego Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
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