McGUINESS, P. J. —
Defendant Inter-Con Security Systems, Inc. (Inter-Con), appeals from an order denying its petition to compel arbitration of a putative wage and hour class action filed by plaintiff Brian Bower. Inter-Con contends the trial court erred in finding that it waived its right to compel arbitration by engaging in litigation conduct inconsistent with the right to demand arbitration. Inter-Con further argues that Bower's claims should be arbitrated and that the arbitration should be limited in scope to Bower's individual claims in light of a waiver of class claims contained in the parties'
Bower was employed by Inter-Con as an armed security officer from April 2007 until he was terminated in May 2011. He executed an initial arbitration agreement at the commencement of his employment in which he agreed to submit all disputes with Inter-Con to arbitration. Claims for compensation and wages were expressly covered by the agreement. In May 2008, Bower executed a second arbitration agreement (hereafter arbitration agreement) with Inter-Con that superseded the first agreement. The second arbitration agreement was similar in most respects to the first agreement except that it also contained a clause in which Bower agreed not to assert claims against Inter-Con on behalf of a class or in a representative capacity. It also specified that the parties agreed to arbitrate claims for breaks and rest periods.
Bower filed the lawsuit that gives rise to this appeal in August 2011. The lawsuit was filed as a putative class action and included causes of action against Inter-Con for (1) failure to provide meal and rest periods, (2) unlawful failure to pay wages, (3) failure to provide accurate itemized wage statements, (4) failure to pay wages upon termination, (5) unfair business practices under the unfair competition act (Bus. & Prof. Code, § 17200 et seq.), and (6) a representative action under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.). Bower defined the putative class as "[a]ll persons who are and/or were employed as non exempt Armed Security Guards by Inter-Con Security Systems, Inc. within the State of California between August 2, 2007 and the present." (Italics omitted.)
Instead of filing a petition to compel arbitration, Inter-Con filed an answer to the complaint in October 2011. As an affirmative defense, Inter-Con asserted that Bower's claims were subject to arbitration.
Before Inter-Con had even filed its answer, Bower had already propounded discovery in early October 2011, including special interrogatories, document production requests, and form interrogatories. On December 5, 2011, Inter-Con served formal responses to Bower's discovery. Inter-Con objected to the discovery requests on the ground the arbitration agreement required Bower to pursue his claims in arbitration and prohibited him from seeking relief on behalf of a class or in a representative capacity. Inter-Con agreed to provide responses and documents only as to Bower in his individual capacity and generally refused to provide information relating to other persons in the
On the same date Inter-Con responded to Bower's discovery, it also propounded its own discovery on Bower. The discovery sought by Inter-Con consisted in part of 102 document requests. Although the majority of the document requests related to Bower's individual claims, a substantial number — 46, according to Bower — sought documents pertaining to the entire putative class of armed security guards.
Within weeks of Bower's receipt of Inter-Con's discovery responses, the parties agreed to informally stay discovery in order to pursue classwide settlement discussions. Inter-Con replaced its counsel in February 2012 but continued with efforts to settle the case.
Settlement discussions fell through by the beginning of May 2012. On May 16, 2012, following the conclusion of settlement discussions, Bower served responses to Inter-Con's document requests. The responses consisted largely of objections. Bower agreed to produce documents in response to seven of the requests. Although Bower claimed to have prepared 139 pages of documents for production, no such documents were actually served on Inter-Con.
On May 21, 2012, Bower filed a motion for leave to file a first amended complaint for the purpose of alleging a broader class of employees and additional theories of liability. Among other things, the expanded class definition sought to include unarmed security guards as well as armed security guards. In response, Inter-Con asked Bower to stay the action until it could file a petition to compel arbitration, but Bower refused.
At around the same time Bower was seeking to amend the complaint, Bower sought to meet and confer with Inter-Con regarding its purportedly deficient discovery responses. According to Bower, Inter-Con responded by claiming that Bower's time to move to compel further responses had already passed, notwithstanding the parties' informal agreement to stay discovery during settlement discussions. On June 1, 2012, Bower moved to compel further responses to his discovery requests.
Three days after Bower filed his motion to compel, on June 4, 2012, Inter-Con filed a petition to compel arbitration. At the same time, Inter-Con filed an ex parte application to stay the action pending the outcome of its arbitration petition. The court granted the stay on June 6, 2012.
The court provided further explanation for its ruling at the hearing on the petition. The court surmised that Inter-Con declined to compel arbitration at the outset as a "tactical decision because the class at that point was relatively modest, and now it looks like the plaintiff wants to expand the class dramatically." Fundamentally, the court focused on the fact that Inter-Con propounded and responded to class discovery, which was inconsistent with Inter-Con's position that the case should be arbitrated on an individual basis only. In response to Inter-Con's claim that Bower suffered no prejudice as a result of Inter-Con's actions, the court cited case law standing for the proposition that a plaintiff may suffer prejudice when the defendant's actions substantially impair the plaintiff's ability to take advantage of the benefits and cost savings afforded by arbitration. The court observed that any waiver of arbitration only applied to the original complaint and not to any amended complaint that might substantially increase the size of the putative class.
Inter-Con timely appealed from the order denying its petition to compel arbitration.
At the outset, we consider the parties' contentions concerning whether the arbitration agreement is governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA). Inter-Con contends the FAA governs our interpretation, whereas Bower argues that California law should be applied in interpreting the arbitration agreement.
Inter-Con argues that de novo review is required here because the underlying facts are uncontroverted. Although the parties do not seem to dispute the timeline of events, we do not agree that de novo review is required. Independent review is appropriate only when the facts permit just one reasonable inference. (St. Agnes Medical Center, supra, 31 Cal.4th at p. 1196.) Here, the facts do not ineluctably lead to one conclusion on the issue of waiver. Some facts tend to show that Inter-Con acted consistently with its right to demand arbitration, while other facts reveal that Inter-Con did not act in a manner consistent with enforcing the arbitration agreement. Under the circumstances, where different inferences may be drawn depending upon the weight to be afforded to certain facts, we review the trial court's ruling under the more deferential substantial evidence standard of review.
In order to prove a waiver of the right to arbitrate, Bower was required to demonstrate that Inter-Con was (1) aware of its right to compel arbitration, (2) acted inconsistently with that right, and (3) prejudiced Bower as a result. (Hoover, supra, 206 Cal.App.4th at p. 1203.) There is substantial evidence to support each of these elements of waiver, as we explain.
It is beyond dispute that Inter-Con was aware of its right to compel arbitration from the outset. Inter-Con asserted its right to arbitrate under the arbitration agreement in its answer to the complaint and in its responses to Bower's discovery.
Furthermore, Inter-Con acted inconsistently with the right to compel arbitration primarily by propounding classwide discovery. It is and has been Inter-Con's position that this case must be arbitrated on an individual basis
Inter-Con contends its conduct was not inconsistent with the right to arbitrate, pointing out that the arbitration agreement permitted reasonable discovery under the Federal Rules of Civil Procedure (28 U.S.C.). While it may be true that the arbitration agreement allowed the parties to conduct discovery, there is nothing in the arbitration agreement to suggest the parties had any right to discovery of matters beyond the scope of the arbitration. Plainly, if the arbitration were limited to Bower's individual claims, Inter-Con would have no right to conduct classwide discovery in the arbitration. In the trial court, Inter-Con claimed it is not uncommon in wage and hour cases to seek information regarding other individuals with similar claims, and Inter-Con therefore claimed seeking classwide discovery was not inconsistent with the right to arbitrate. We will simply reiterate the trial court's response to Inter-Con's claim: "Come on. Of course it is." Discovery concerning individuals who may support a plaintiff's factual claims is distinct from classwide discovery.
Relying on Zamora v. Lehman (2010) 186 Cal.App.4th 1 [111 Cal.Rptr.3d 335], Inter-Con contends the "paltry" amount of discovery obtained does not support a conclusion that it took unfair advantage of judicial discovery. As an initial matter, we emphasize that the focus should be on what Inter-Con sought and not necessarily on what it obtained, at least for purposes of assessing whether Inter-Con acted inconsistently with the right to arbitrate. Moreover, the case relied upon by Inter-Con is distinguishable. There, the party who sought arbitration had participated in discovery only to the extent of questioning a deposition witness for two hours, and that was after other parties had refused a request to excuse the party from the deposition with the understanding that the party could question the witness later if settlement efforts failed. (Id. at p. 20.) The court concluded the de minimis discovery did not constitute an effort to take advantage of judicial discovery when it was initiated by others and was conducted only after reasonable attempts to avoid
In addition to the classwide discovery propounded by Inter-Con, its conduct in general was inconsistent with arbitration of an individual claim. As the trial court suggested, one can infer from Inter-Con's actions that it made a tactical decision to resolve the matter on a classwide basis in the judicial forum when the size of the class was modest. Although Inter-Con carefully sought to preserve its right to arbitrate in its answer and in its responses to discovery, it provided classwide information when the response served its interests and furthered efforts to settle class claims — namely, responding that the class size was limited to 29 individuals.
Finally, we turn to the issue of prejudice, which presents a closer question than the first two prongs of the analysis. Inter-Con argues that Bower has
As the court explained in Hoover, supra, 206 Cal.App.4th at page 1205, "prejudice typically is found only where the petitioning party has unreasonably delayed seeking arbitration or substantially impaired an opponent's ability to use the benefits and efficiencies of arbitration. [Citations.] Prejudice is not found where the party opposing arbitration shows only that it incurred court costs and legal expenses in responding to an opponent's pleadings and motions. [Citation.] Prejudice sufficient for waiver will be found where instead of seeking to compel arbitration, a party proceeds with extensive discovery that is unavailable in arbitration proceedings." (Italics added.)
After the appeal was fully briefed, Inter-Con brought to this court's attention a recent case in which the appellate court reversed a waiver finding, Gloster v. Sonic Automotive, Inc. (2014) 226 Cal.App.4th 438 [171 Cal.Rptr.3d 648]. The case does not aid Inter-Con. There, the plaintiff filed an employment-related lawsuit against his former employer and others. (Id. at p. 441.) The plaintiff filed discovery and the defendants had responded to some of the discovery requests. However, the defendants had not served any discovery or made any motion or petition other than the petition to compel arbitration. (Id. at p. 444.) The claim of prejudice was based solely on legal expenses that were largely the result of the plaintiff's own efforts at discovery and his response to another party's demurrer, as well as the "increased anxiety he suffered as a result of the litigation." (Id. at p. 450.) Not surprisingly, the appellate court concluded the plaintiff had not suffered any cognizable prejudice as a result of the delay in seeking arbitration. (Ibid.) In this case, by contrast, Bower incurred expenses attributable to Inter-Con's discovery and its decision to pursue classwide resolution of the dispute. As a result of Inter-Con's actions, he devoted time and energy to activities that had no bearing on an arbitration of his individual claims.
Another case decided after briefing was complete in this appeal is the California Supreme Court's decision in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 [173 Cal.Rptr.3d 289, 327 P.3d 129] (Iskanian). At oral argument on appeal, counsel for Inter-Con argued that the waiver analysis in Iskanian supports its position. We disagree.
In Iskanian, a defendant filed a timely petition to compel arbitration in response to a putative wage and hour class action complaint. (Iskanian, supra, 59 Cal.4th at p. 375.) After the trial court granted the petition and the matter was on appeal, the California Supreme Court issued Gentry v. Superior Court (2007) 42 Cal.4th 443 [64 Cal.Rptr.3d 773, 165 P.3d 556] (Gentry), which restricted the enforceability of class waivers. (Iskanian, supra, at p. 375.) The Court of Appeal remanded the matter for reconsideration in light of Gentry. Instead of further litigating its petition to compel arbitration, the defendant withdrew the petition and proceeded to litigate the claim and resist efforts to certify a class. Shortly after the United States Supreme Court filed its decision in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ [179 L.Ed.2d 742, 131 S.Ct. 1740], which called Gentry into question, the defendant successfully renewed its petition to compel arbitration. (Iskanian, supra, at p. 375.) The plaintiff argued that the defendant had waived its right to compel arbitration by engaging in class litigation. The defendant asserted futility as a justification for the delay, arguing that it renewed its motion to
In light of our duty to defer to the trial court's factual findings, we cannot say as a matter of law that Bower suffered no cognizable prejudice. We must therefore affirm the trial court's finding on the issue.
The order denying the petition to compel arbitration is affirmed. Bower shall recover his costs on appeal.
Pollak, J., and Siggins, J., concurred.
In any event, our decision does not turn on the content of the parties' settlement communications. Wholly apart from any representations made in the course of settlement discussions, Inter-Con's actions permitted an inference that it was not focused exclusively on Bower's individual claim. Among other things, it was apparent from the parties' efforts to stay discovery that the purpose of the stay was to pursue resolution of class issues. Further, even if we disregard efforts to reach a classwide settlement, Inter-Con engaged in conduct inconsistent with the right to compel arbitration of an individual claim.