Opinion
C089637
05-19-2020
DAVID HOLLIS, Individually and as Successor in Interest, etc., et al., Plaintiffs and Respondents, v. GLADDING RIDGE, INC., et al., Defendants and Appellants.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. SCV0040026)
Decedent Clifford Hollis was a resident at Gladding Ridge Assisted Living and Memory Care (Gladding Ridge), an assisted living facility. One night he fell while on his motorized scooter; the fall resulted in injuries that led to his death. His children brought claims against Gladding Ridge, Gladding Ridge's management company, Platinum Living Services, Inc. (Platinum Living Services), and the parent company of Gladding Ridge and Platinum Living Services, Golden Legacy, Inc. (Golden Legacy). The lawsuit alleged elder abuse and neglect on behalf of decedent, and wrongful death on behalf of decedent's children.
A year and nine months of litigation followed. During this time, the parties propounded and responded to multiple sets of written discovery, took multiple depositions, and participated in an unsuccessful mandatory settlement conference, among other proceedings. As the trial date approached, defendants then petitioned to compel arbitration based on an arbitration agreement decedent had signed before his admission to Gladding Ridge. Defendants captioned the hearing for the Thursday before the Monday trial date. The trial court denied defendants' petition, finding they had waived their right to arbitrate, citing their extensive participation in litigation and the plaintiffs' resulting involvement therein. The court also found defendants had failed to demonstrate the existence of an enforceable arbitration agreement.
Defendants appeal, asserting the trial court erred in denying their petition. We disagree and affirm.
FACTS AND PROCEEDINGS
Admission to Gladding Ridge
On July 14, 2016, decedent Clifford Hollis was admitted as a resident to Gladding Ridge. According to the plaintiffs' complaint, at the time of his admission to Gladding Ridge, decedent was 81 years old, blind in one eye, a smoker, and suffering from a cognitive impairment. He had trouble walking and traveled on a motorized scooter.
Power of Attorney and Arbitration Agreement
In 2014, before his admission to Gladding Ridge, decedent signed a durable power of attorney giving his son David the power to make all legal and financial decisions on his behalf, including the right to prosecute and defend all legal actions and to submit to arbitration.
Because decedent and certain of his children share a surname, we refer to those children by their first names.
On July 5 and 13, 2016, decedent and a Gladding Ridge representative executed an arbitration agreement (Agreement). The Agreement stated that the parties agreed to be bound by its terms, but execution of the Agreement was not a precondition to admission to Gladding Ridge and was not required to be signed.
Section 3.1 of the Agreement provided, "It is understood that any dispute arising out of the provision of services by [Gladding Ridge], the admission agreement, the validity, interpretation, construction, performance, and enforcement thereof, or which alleges negligence or wrongful death or is based on violations of the Elder and Depend[e]nt Adult Civil Protection Act, or the Unfair Competition Act, or which seeks an award of punitive damages or attorneys fees, will be determined by submission to a neutral arbitrator as provided by California law, and not by a lawsuit or resort to court process, except as California law provides for judicial review of arbitration proceedings. Both parties to this contract, by entering into it, are giving up their constitutional right to have any such dispute decided in a court of law before a jury, and instead are accepting the use of arbitration."
Section 3.3 of the Agreement provided in relevant part: "The Parties hereby acknowledge that arbitration is preferable to a judicial forum and that California law favors the enforcement of valid arbitration provisions. The arbitration shall be conducted by one or more neutral arbitrators as mutually agreed upon, to be determined when necessary and to be in accordance with discovery procedures set forth in the California Arbitration Act, California Code of Civil Procedure Section 1280 et seq. and the Federal Arbitration Act (FAA)."
Section 2.2 of the Agreement stated, "This Arbitration Agreement binds the parties hereto, including the heirs, representatives, executors, administrators, successors, and assigns of such parties."
Decedent's Accident
On November 8, 2016, at approximately 2:00 a.m., decedent went outside to smoke. While navigating a ramp his scooter tipped over, breaking his hip. He passed away shortly thereafter due to complications related to the injuries suffered in the accident.
Complaint
On September 11, 2017, plaintiffs David (individually and as the personal representative of decedent), Laura Delaney, and Gayla Harris, as children of decedent, filed a complaint against Gladding Ridge, Platinum Living Services, and Golden Legacy. The complaint alleged causes of action for elder abuse and neglect on behalf of decedent, by and through David, as his successor in interest, and for wrongful death on behalf of decedent's children.
Petition to Compel Arbitration
On May 20, 2019, defendants filed a petition to compel arbitration and captioned the hearing date as May 30. The motion asserted decedent knowingly executed a valid arbitration agreement and that the Agreement bound plaintiffs to submit their causes of action to arbitration.
In support of their motion, defendants attached an excerpt from the deposition of decedent's daughter Michelle. In the deposition transcript, Michelle testified that, while decedent signed the paperwork, "he couldn't see or hardly write and couldn't understand a lot of the stuff he was reading, so I would translate it for him." He would sign the paperwork after she told him what it said. She testified that decedent had been diagnosed with dementia before he was admitted to Gladding Ridge.
Defendants also included the unsigned declaration of the executive director of Gladding Ridge, Martin Nichols. The declaration stated that decedent signed the Agreement.
Plaintiffs opposed defendants' petition to compel arbitration. Plaintiffs argued (1) defendants waived any right to pursue arbitration, (2) the Agreement was unenforceable because decedent lacked capacity to sign the Agreement, (3) the Agreement was unenforceable because David had durable power of attorney at the time the Agreement was signed, (4) decedent's children did not agree to arbitrate their wrongful death claim, and (5) the Agreement did not apply to Platinum Living Services or Golden Legacy.
In support of their opposition, plaintiffs submitted a declaration from their attorney, Travis Siegel. The declaration stated in part that, at the time of decedent's admission to Gladding Ridge, he was an 81-year old man with a cognitive impairment "per Gladding Ridge's records" and that he suffered from dementia at the time of his fall.
Siegel also recounted the litigation proceedings that took place after plaintiffs filed their complaint: (1) the parties propounded and responded to multiple sets of written discovery, including pretrial discovery; (2) multiple motions to compel depositions and written discovery responses were filed and ruled upon; (3) the parties completed 16 depositions; (4) defendants filed and the trial court denied a motion for judgment on the pleadings; (5) the parties exchanged expert witnesses and were scheduled to complete most of the experts' depositions during the week of May 20; and (6) the parties participated in an unsuccessful mandatory settlement conference. Siegel also stated the civil trial conference was scheduled for May 24, before the hearing date, and trial was scheduled for June 3, four days--and only two business days--before trial.
Court Ruling
On May 30, 2019, the trial court denied defendants' motion to compel arbitration. The court held defendants failed to show by a preponderance of the evidence that a valid arbitration agreement existed. The court relied on a deposition excerpt of Michelle, who stated decedent had been diagnosed with dementia before being admitted to Gladding Ridge, which called into question defendant's capacity to enter into an arbitration agreement.
The trial court also concluded defendants' actions demonstrated they waived their right to arbitrate. The court concluded, "Defendants have participated significantly in the current litigation, filing their answer over a year ago . . . . Since then, they have participated in discovery and been the subject of discovery motions. The parties are now literally on the eve of trial with plaintiffs expending considerable time and expense. To allow arbitration at this juncture would unduly prejudice the plaintiffs, who would more likely than not experience further delay in resolving the litigation if arbitration was ordered at this point."
Defendants timely filed the instant appeal on the same day the trial court denied their petition.
DISCUSSION
Defendants contend the trial court erred when it denied their petition to compel arbitration. They contend the Agreement was valid and enforceable, they did not waive their right to enforce the Agreement, and the court lacked jurisdiction to choose not to enforce the Agreement because of the existence of third party claims that were potentially not subject to arbitration. We conclude substantial evidence supports the trial court's finding that defendants waived their right to enforce the Agreement. Therefore, we affirm the trial court's order, and we do not reach the issue of the validity of the Agreement.
A. Legal Background
California law strongly favors arbitration, and a trial court shall order arbitration if it determines that an agreement to arbitrate a controversy exists unless "(a) The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for rescission of the agreement." (Code Civ. Proc., § 1281.2; Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 706.) "A strong public policy favors the arbitration of disputes, and doubts should be resolved in favor of deferring to arbitration proceedings. [Citations.]" (Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1282.)
Federal law also strongly favors arbitration. "Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration." (Southland Corp. v. Keating (1984) 465 U.S. 1, 10.)
Nonetheless, a party may waive its right to arbitration under certain circumstances, even in the presence of a valid arbitration agreement. "The law on waiver of the right to arbitration is 'well defined.' [Citation.] Because '[a]rbitration is strongly favored,' courts must 'closely scrutinize any claims of waiver.' [Citation.] A 'party seeking to establish waiver' bears a heavy burden of proof. [Citation.] '[T]here is no "single test" in establishing waiver.' [Citation.]" (Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443, 1450 (Adolph).)
Claims of waiver are evaluated on a case by case basis. Our Supreme Court has referred to the following factors as relevant and properly considered in assessing waiver claims: " ' "(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." ' [Citation.]" (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196 (St. Agnes).)
Whether, as here, the parties had commenced litigation prior to assertion of the right to arbitrate is not necessarily determinative of prejudice. " 'Waiver does not occur by mere participation in litigation . . . .' [Citation.] ' "[A]s an abstract exercise in logic it may appear that it is inconsistent for a party to participate in a lawsuit for breach of a contract, and later to ask the court to stay that litigation pending arbitration. Yet the law is clear that such participation, standing alone, does not constitute a waiver [citations], for there is an overriding federal policy favoring arbitration. . . . [M]ere delay in seeking a stay of the proceedings without some resultant prejudice to a party [citation], cannot carry the day." ' [Citation.]" (Adolph, supra, 184 Cal.App.4th at p. 1450.)
" '[P]rejudice typically is found only where 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. [¶] For example, courts have found prejudice where the petitioning party used the judicial discovery processes to gain information about the other side's case that could not have been gained in arbitration [citations]; where a party unduly delayed and waited until the eve of trial to seek arbitration [citation]; or where the lengthy nature of the delays associated with the petitioning party's attempts to litigate resulted in lost evidence [Citation.]" (Adolph, supra, 184 Cal.App.4th at p. 1451.)
"We apply the substantial evidence standard of review to the court's finding defendant waived its right to arbitrate. [Citation.] The court's determination of this factual issue, ' "if supported by substantial evidence, is binding on an appellate court." ' [Citation.] Only ' "in cases where the record before the trial court establishes a lack of waiver as a matter of law, [may] the appellate court . . . reverse a finding of waiver made by the trial court." ' [Citation.]" (Adolph, supra, 184 Cal.App.4th at pp. 1449-1450.)
Our Supreme Court has explained, "the 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.]" (St. Agnes, supra, 31 Cal.4th at p. 1195, fn. 4.)
B. Analysis
Here, there is substantial evidence supporting the trial court's finding of waiver. Defendants actively litigated this case for more than a year and nine months before seeking to compel arbitration on the eve of trial. During that time, defendants filed an answer to the complaint, propounded and responded to multiple sets of written discovery, litigated motions to compel depositions, took and defended depositions, moved for judgment on the pleadings, and "exchanged expert witnesses." In a case management statement filed in January 2018, defendants stated they were seeking a jury trial and declined to check a box indicating their willingness to participate in arbitration. These activities were all inconsistent with invoking the right to arbitrate, and defendants' notice of their intent to arbitrate occurred well after the "litigation machinery ha[d] been substantially invoked." (St. Agnes, supra, 31 Cal.4th at p. 1196.) Defendants' petition for arbitration could hardly have been closer to the trial date; they identified the hearing date on the motion as the Thursday before trial was set to begin on Monday. Defendants took advantage of essentially the entire pretrial litigation process, including a mandatory settlement conference, before, at nearly the last possible moment, they invoked their right to arbitration. We can scarcely imagine a clearer case of waiver than the case before us.
Defendants argue that merely participating in litigation does not result in a waiver and that prejudice cannot be found simply by virtue of the party opposing arbitration incurring legal fees and expenses before arbitration is sought. In support of their proposition, defendants rely on Groom v. Health Net (2000) 82 Cal.App.4th 1189, 1197 (Groom) and In re Crysen/Montenay Energy Co. (2d Cir. 2000) 226 F.3d 160, 163 (Crysen/Montenay). Although defendants' point is valid, the facts here show more than "mere participation," and the cases on which defendants rely are distinguishable.
In Groom, supra, 82 Cal.App.4th at page 1197, the appellate court found no waiver of the right to arbitrate "simply from the time and expense of opposing [the petitioning party's] demurrers and drafting amended pleadings." According to the court in Groom, "[p]rejudice in the context of waiver of the right to compel arbitration normally means some impairment of the other party's ability to participate in arbitration." (Ibid.)
But there is substantial evidence of prejudice to plaintiffs here. As our Supreme Court explained in St. Agnes, supra, 31 Cal.4th at page 1204, "courts assess prejudice with the recognition that California's arbitration statutes reflect ' "a strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution" ' and are intended ' "to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of their differences by a tribunal of their own choosing." ' [Citation.] Prejudice typically is found only where 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."
The court in St. Agnes continued, "For example, courts have found prejudice where the petitioning party used the judicial discovery processes to gain information about the other side's case that could not have been gained in arbitration [citation]; where a party unduly delayed and waited until the eve of trial to seek arbitration [citation]; or where the lengthy nature of the delays associated with the petitioning party's attempts to litigate resulted in lost evidence [citation]" (St. Agnes, supra, 31 Cal.4th at p. 1204.)
St. Agnes stands for the proposition that a lengthy delay in asserting defendants' right to arbitration and waiting until the eve of trial to seek arbitration is contrary to the public policy in favor of arbitration and can support a finding of waiver. Defendants' conduct here--waiting until the very last possible moment to move to compel arbitration--substantially undermined the purpose of arbitration as a speedy and cost-effective way to resolve disputes.
Moreover, the court in Groom, supra, 82 Cal.App.4th at page 1196 observed: "Several recent cases have concluded that prejudice can be established when the party seeking arbitration used judicial discovery procedures not available in arbitration to obtain discovery of the opposing party's strategies, evidence, theories, or defenses. [Citations.]" Here, the parties propounded and responded to multiple sets of written discovery, and the parties took 16 depositions. While defendants contend plaintiffs "failed to establish that they would not have had to perform the same or substantially similar work if the case had been ordered to arbitration at an earlier stage," we are skeptical that any arbitration proceedings would have entailed "the same or substantially similar work" as litigating a civil lawsuit until the eve of trial. Indeed, the stated benefit of arbitration is a speedy and relatively inexpensive means of dispute resolution intended to encourage persons who wish to resolve their differences while avoiding delays incident to civil action. (St. Agnes, supra, 31 Cal.4th at p. 1204.) Thus, even in applying the standard set forth in Groom, there is substantial evidence supporting the trial court's finding that plaintiffs suffered prejudice.
In Crysen/Montenay, supra, 226 F.3d at page 163, the Second Circuit Court of Appeals quoted extensively from its opinion in PPG Industries, Inc. v. Webster Auto Parts Inc. (2d Cir. 1997) 128 F.3d 103, 107 to 108, in which the court concluded that a party that engaged in discovery and filed a substantive motion prior to filing a petition to compel arbitration had waived its contractual right to arbitrate. The court considered " 'such factors as (1) the time elapsed from commencement of litigation to the request for arbitration, (2) the amount of litigation (including any substantive motions and discovery), and (3) proof of prejudice. There is no bright line rule, however, for determining when a party has waived the right to arbitration: the determination of waiver depends on the particular facts of each case.' " (Crysen/Montenay, at p. 163, quoting PPG Industries, at pp. 107-108.)
In Crysen/Montenay the court found no waiver because, although the parties litigated the case for eight years, the party seeking to compel arbitration had initially moved to compel arbitration shortly after commencement of litigation. (Crysen/Montenay, supra, 226 F.3d at p. 163.) The party seeking to compel arbitration did not file an interlocutory appeal, and it renewed the motion much later in the litigation process. (Ibid.) Here, defendants made no such motion early in the litigation. Rather, they waited until the eve of trial to move to compel arbitration. Crysen/Montenay is inapposite. Thus substantial evidence supports the trial court's finding of waiver.
Defendants also argue plaintiffs failed to meet their burden of establishing that the decedent lacked capacity to enter into the arbitration agreement, and that the existence of David's durable power of attorney did not render the arbitration agreement void. But because we hold that defendants waived their right to arbitration, we do not reach these issues.
DISPOSITION
The order denying the petition to compel arbitration is affirmed. Plaintiffs shall recover costs on appeal. (Cal. Rules of Court, rule 8.278.)
/s/_________
Duarte, J. We concur: /s/_________
Blease, Acting P. J. /s/_________
Krause, J.