Under the California Arbitration Act, a party may waive its contractual right to compel arbitration. The California Supreme Court held in Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562 (Quach) that such waiver occurs if it is shown by clear and convincing evidence that a party has “intentionally relinquished or abandoned” its known right to compel arbitration.
Plaintiffs and defendants were business partners who executed agreements stating they would arbitrate future disputes. But when a dispute arose, plaintiffs filed a complaint that did not mention arbitration, sought preliminary injunctive relief, opposed a demurrer, propounded hundreds of discovery requests, demanded a jury trial, and posted jury fees. It was not until defendants filed a cross-complaint more than six months after litigation commenced that plaintiffs filed a motion to compel arbitration. The trial court denied the motion, ruling plaintiffs had waived their right to compel arbitration by “substantially and vigorously litigating” in the court for months.
The Court of Appeal affirmed. The court noted that Quach held intentional relinquishment or abandonment of the right to arbitrate may be (1) express or (2) implied by conduct “so inconsistent with an intent to enforce the contractual right” to arbitrate. The court held plaintiffs’ engaging in months of litigation without ever mentioning arbitration indicated waiver. The court added that the unexplained delay in seeking to arbitrate “constitutes powerful evidence of the relinquishment and abandonment of the right to arbitrate.” The court rejected plaintiffs’ argument that it must determine whether each action by itself demonstrates waiver, holding the question of waiver takes into account the totality of the conduct. The court also noted that Quach did not “set the floor for the conduct constituting waiver” and that the waiver inquiry is fact-specific.
