Defendants, CJ CGV America Holdings, Inc. (CJ CGV America), Joon Hwan Choi, Theodore Kim and Sang Heum Cho, appeal from an order
Plaintiffs filed their original complaint on July 9, 2012, against CJ CGV America, Mnet Media Corporation (Mnet); CJ Corporation; CJ E&M Corporation; Mi-Kyung Lee; Joon Hwan Choi; Mr. Kim; and Mr. Cho. On August 29, 2012, plaintiffs filed their first amended complaint. On September
According to the second amended complaint, plaintiffs are shareholders of ImaginAsian Entertainment, Incorporated (ImaginAsian). Mr. Chung and Mr. Hong are common shareholders and Augustine is one of the largest common shareholders. Plaintiffs are residents of New Jersey. ImaginAsian is a multimedia company operating as a broadcast television network in many markets in the United States, catering to Asian-American and South Asian-American culture and entertainment. ImaginAsian is a corporation existing under Delaware law.
Korean conglomerate CJ Corporation expressed an interest in investing in ImaginAsian. CJ CGV America and Mnet are affiliates of CJ Corporation. CJ CGV America is a corporation existing under California law. On August 14, 2009, plaintiffs, Mnet and CJ CGV America entered into a contract. The August 14, 2009 stock arrangement is entitled, "ImaginAsian Entertainment, Inc. Series A Preferred Stock Purchase Agreement" (purchase agreement). The stock purchase agreement contains the arbitration clause at issue in this appeal. Mnet and CJ CGV America received preferred stock. As a result, Mnet and CJ CGV America secured a slight majority interest in ImaginAsian. Plaintiffs became minority shareholders. Mnet and CJ CGV America secured the authority to select three of the five directors of ImaginAsian. Mr. Choi, who is a corporate officer, and Mr. Kim are two of the directors. Mr. Choi, Mr. Kim and Mr. Cho are residents of California. For a two-year period, Mnet and CJ CGV America were given the ability to make additional investments in ImaginAsian under certain terms and conditions which they exercised. Plaintiffs were offered the ability to purchase additional shares, but did not, further reducing their percentage ownership interest.
After this two-year period elapsed, Mnet and CJ CGV America indicated an intent to invest additional monies into ImaginAsian. But the offer was at a per share price below what plaintiffs believed was the actual value of ImaginAsian. Defendants' intended price would be set by ImaginAsian's directors' board, which CJ Corporation, Mnet and CJ CGV America controlled. ImaginAsian retained an unidentified valuation firm to assess its value. However, defendants sought to influence the valuation firm to make a low value that would favor them. The low valuation would be at the expense of plaintiffs and other common stock shareholders.
On November 9, 2012, 11 days after the second amended complaint was filed, defendants moved to require plaintiffs to furnish a bond pursuant to Corporations Code section 800. Defendants argued there was no reasonable possibility plaintiffs' lawsuit would benefit ImaginAsian or its shareholders. Defendants asserted without a new influx of funds, they were forced to take a $12 million loan. Defendants maintained they complied with the programming and licensing agreement (licensing agreement) regarding the amount of Korean language programming. Defendants requested that plaintiffs be required to post a $50,000 bond to cover the probable litigation expenses in the defense of the action. Defendants relied upon two declarations. The first declaration was executed by David I. Hurwitz, counsel for defendants. Mr. Hurwitz indicated he had been extensively involved in shareholder derivative litigation for over 20 years in various state and federal courts. Mr. Hurwitz indicated the fees which would be incurred by defendants "in connection with this action" would exceed $50,000. Mr. Hurwitz declared that defendants had successfully demurred to the first amended complaint and anticipated demurring to the second amended complaint as well.
In addition, Mr. Hurwitz described the extensive discovery that had occurred since the filing of the complaint: "Defendants have had to respond to Plaintiffs' request for production of documents and electronically stored information, including more than sixty separate requests to CJ CGV alone, and are in the midst of document collection efforts, and CJ CGV has responded to Plaintiffs' First Set of Special Interrogatories." In addition, Mr. Hurwitz declared, "Plaintiffs have noticed the deposition of one of the individual defendants, Theodore Kim, and given the number of parties and issues, the cost of preparing for, taking and defending the depositions alone would exceed fifty thousand dollars." Finally, Mr. Hurwitz further described
The second declaration was filed by Sang Heum Cho, the chief operating officer of ImaginAsian. Much of the declaration relates to the merits of the litigation. However, one part of Mr. Cho's declaration relates to a separate agreement between the parties. Mr. Cho explained, "Concurrently with the Stock Purchase Agreement, ImaginAsian, entered into a Programming and Graphics License Agreement with Mnet for a total of 1,545 hours of Korean language programming to be delivered to ImaginAsian on a weekly basis over the license period." The licensing agreement, which contains no arbitration clause, was negotiated and signed by Augustine.
On January 2, 2013, plaintiffs filed their opposition. Plaintiffs argued increased Korean programming would negatively affect ImaginAsian's outside interests. ImaginAsian's outside interests had advocated programming made in the United States by Asian Americans. Plaintiffs asserted ImaginAsian's programming was 80 to 90 percent Korean programming. Increased Korean programming also negatively affected distribution because foreign language channels were not offered to as many subscribers. Plaintiffs contended defendants attempted to seize a larger ownership interest at an unfair price and wanted to enjoin any future offering. Plaintiffs filed three declarations discussing the litigation's merits totaling 28 pages plus 94 pages of written exhibits.
On January 8, 2013, defendants filed their reply. Defendants argued they had increased subscribers and revenue and invested considerable resources for Asian-American programming. Defendants asserted they never made the offering to any shareholders. On January 15, 2013, the trial court denied defendants' motion to require the posting of a bond. The trial court ruled insufficient evidence existed to require plaintiffs to furnish a bond.
On December 20, 2012, CJ CGV America filed a separate action against Augustine. CJ CGV America alleged fraud, negligent misrepresentation and breach of contract against Augustine. CJ CGV America alleged Augustine
On January 18, 2013, defendants filed a motion to compel arbitration. Defendants contended the arbitration clause in the purchase agreement signed by Augustine with CJ CGV America and Mnet applied. Defendants argued, "In opposing defendants' motion to require plaintiffs to furnish a bond as security for their derivative claims, plaintiffs made clear that they had essentially transformed their complaint from one of seeking an injunction against an offering to one seeking damages based on alleged diminution in the value resulting from defendants' having allegedly forced ImaginAsian to broadcast excessive Korean-language television programs." Defendants asserted a substantial part of the money in consideration for the purchase agreement was for more than 1,500 hours of Korean language programming in the licensing agreement. Defendants argued the licensing agreement was a material inducement for them to enter the purchase agreement.
The purchase agreement's arbitration clause is located at section 9.17: "Any claim or controversy arising out of or relating to this Agreement must be submitted and settled as set forth in this Section 9.17. If any party to this Agreement alleges that another party to this Agreement has breached any of the terms of the Agreement, then the party alleging breach will inform the other parties of such breach in writing. Upon receipt of such notice, the allegedly non-performing party will have 10 days to cure the alleged breach." In the event the dispute is not yet resolved, the dispute is to be submitted to nonbinding mediation in Los Angeles, California. If mediation does not resolve the dispute, section 9.17(c) states: "[T]he dispute will be submitted to binding arbitration in Los Angeles, California, before a sole arbitrator.... Except as provided by the Rules [and Procedures of the Judicial Arbitration & Mediation Services] and this Section 9.17, arbitration shall be the sole, exclusive, and final remedy for any dispute under this Agreement."
On January 28, 2013, plaintiffs filed their opposition. Plaintiffs argued the claims asserted were not arbitrable because most of the defendants were not signatories. Further, plaintiffs asserted the claims did not arise out of or relate to the purchase agreement. Also, plaintiffs contended defendants waived their right to arbitration by filing a demurrer, bond motion, and separate action against Augustine over the span of six months. Even if certain claims were subject to arbitration, plaintiffs argued the court should deny the motion to
On February 1, 2013, defendants filed their reply. Defendants reiterated their arguments in their motion to compel arbitration. The hearing was held on February 7, 2013, at which the trial court denied defendants' motion to compel arbitration. Plaintiffs issued notice of the ruling on February 8, 2013. According to the settled statement on appeal, the trial court denied the motion for all the reasons set forth in plaintiffs' opposition. Plaintiffs issued notice of entry of judgment on February 13, 2013. Defendants subsequently appealed the order.
An order denying a motion to compel arbitration is appealable. (Code Civ. Proc., § 1294, subd. (a); Valentine Capital Asset Management, Inc. v. Agahi (2009) 174 Cal.App.4th 606, 612, fn. 5 [94 Cal.Rptr.3d 526].) There is no dispute concerning the language of the arbitration clause. We accordingly review de novo the applicability of the arbitration clause. (See Ronay Family Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 837 [157 Cal.Rptr.3d 680]; EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1320 [59 Cal.Rptr.3d 340].) We review the trial court's finding of arbitration waiver for substantial evidence. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196 [8 Cal.Rptr.3d 517, 82 P.3d 727] (St. Agnes) ["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."]; Engalla v. Permanente Medical Group, Inc., supra, 15 Cal.4th at p. 983; Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 319 [24 Cal.Rptr.2d 597, 862 P.2d 158].)
In St. Agnes, our Supreme Court adopted a multifactor test for determining whether a party has waived the right to arbitrate: "`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."'" (St. Agnes, supra, 31 Cal.4th at p. 1196, quoting Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 992 [72 Cal.Rptr.2d 43]; accord, Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 30-31 [58 Cal.Rptr.3d 434, 157 P.3d 1029]; Fisher v. A.G. Becker Paribas Inc. (1986) 791 F.2d 691, 694 ["A party seeking to prove waiver of a right to arbitration must demonstrate: (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts."].)
Here, plaintiffs argued defendants waived arbitration by failing to plead a right to arbitration as a basis for the demurrer (which by itself is insufficient to support a waiver finding); participating substantially in the discovery process; filing a case management statement declining to submit to voluntary binding arbitration; and CJ CGV America filing a separate lawsuit against Augustine for misrepresentations inducing it to sign the purchase agreement, rather than initiating arbitration. Further, plaintiffs argued defendants waived arbitration by filing a Corporations Code section 800 motion. If successful, the Corporations Code section 800 motion would have required plaintiffs to post a bond to cover potential costs incurred in the action. Also, plaintiffs argue the bond motion was supported by a declaration detailing the substantial law and motion and discovery proceedings that had occurred; used the word "action" to describe the forum where the potential litigation costs would be incurred; and described the anticipated summary judgment or adjudication motion. Plaintiffs argue they were required to file a lengthy opposition to the bond motion. And plaintiffs argue that much of their opposition consisted of declarations and evidence directly pertinent to the merits of their claims. Plaintiffs argue all of these factors taken together constitute substantial evidence defendants waived their right to compel arbitration.
Defendants argue that the arbitration agreement in our case is subject to the Federal Arbitration Act because it involves interstate commerce. (9 U.S.C. § 2 ["transaction involving commerce"]; Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265, 277 [130 L.Ed.2d 753, 115 S.Ct. 834] ["word `involving,' like `affecting,' signals an intent to exercise Congress' commerce power
Defendants contend under the Federal Arbitration Act the waiver issue should have been decided by an arbitrator and not the trial court. As noted, defendants rely on language appearing in Howsam, supra, 537 U.S. at page 84. The language in Howsam, supra, 537 U.S. at page 84 finds its basis in Moses H. Cone, supra, 460 U.S. at pages 24-25.
We begin by analyzing the facts and language in Moses H. Cone, supra, 460 U.S. at pages 24-25. The dispute at issue was between a hospital, the plaintiff, and the defendant, a construction contractor. The construction contract contained an arbitration clause. (Id. at p. 5.) In Moses H. Cone, the hospital filed suit in state court. The high court described the state court action thusly: "[T]he Hospital filed an action on the morning of October 8 in the Superior Court of Guilford County, [North Carolina], naming Mercury and the Architect as defendants. The complaint alleged that Mercury's claim was without factual or legal basis and that it was barred by the statute of limitations. It alleged that Mercury had lost any right to arbitration under the contract due to waiver, laches, estoppel, and failure to make a timely demand for arbitration. The complaint also alleged various delinquencies on the part of the Architect. As relief, the Hospital sought a declaration that there was no right to arbitration; a stay of arbitration; a declaration that the Hospital bore no liability to Mercury; and a declaration that if the Hospital should be found liable in any respect to Mercury, it would be entitled to indemnity from the Architect. The complaint was served on Mercury on October 9." (Id. at p. 7.) The defendant immediately served an arbitration demand. After further skirmishing in the state court, the defendant filed a diversity action in federal court. The district court stayed the federal court suit pending resolution of the state court litigation as both suits involved issues of arbitrability. (Ibid.)
As noted, defendants rely on Howsam, supra, 537 U.S. at page 84. Howsam involves the timeliness of commencing arbitration proceedings before the National Association of Securities Dealers. The National Association of Securities Dealers by rule required a submission to arbitration occur within six years from the occurrence giving rise to the dispute. (Id. at p. 81.) The defendant, a brokerage house, upon receipt of the submission to arbitration, filed suit in federal court. The defendant contended the issue of whether the dispute was timely submitted to arbitration within the six-year limitation period was to be decided by the arbitrator, not a court. (Id. at p. 82.)
The United States Supreme Court drew a distinction between a "gateway" issue such as arbitrability and a dispute's merits. The high court described this distinction as follows: "Linguistically speaking, one might call any potentially dispositive gateway question a `question of arbitrability,' for its answer will determine whether the underlying controversy will proceed to arbitration on the merits. The Court's case law, however, makes clear that, for purposes of applying the interpretive rule, the phrase `question of arbitrability' has a far more limited scope. See [First Options of Chicago, Inc. v. Kaplan (1995)] 514 U.S. [938,] 942 [131 L.Ed.2d 985, 115 S.Ct. 1920]. The Court has found the phrase applicable in the kind of narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they had agreed that an arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate." (Howsam, supra, 537 U.S. at pp. 83-84.)
The high court continued: "Thus, a gateway dispute about whether the parties are bound by a given arbitration clause raises a `question of arbitrability' for a court to decide. See [First Options of Chicago, Inc. v. Kaplan, supra, 514 U.S.] at [pages] 943-946 (holding that a court should decide whether the arbitration contract bound parties who did not sign the agreement); John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 546-547 [11 L.Ed.2d 898, 84 S.Ct. 909] (1964) (holding that a court should decide whether an arbitration agreement survived a corporate merger and bound the resulting corporation).
In the next paragraph of Howsam, the high court identified other gateway issues which an arbitrator decides. The high court explained the phrase "question of arbitrability" is inapplicable in circumstances where parties would likely expect that an arbitrator would decide the gateway matter. For example, a dispute's procedural question which bears "`on its final disposition'" is presumptively for resolution by an arbitrator. (Howsam, supra, 537 U.S. at p. 84.) As an example of an issue reserved for the arbitrator, the high court cited John Wiley & Sons, Inc. v. Livingston, supra, 376 U.S. at page 557 (John Wiley). (Howsam, supra, 537 U.S. at p. 84.) John Wiley held an arbitrator should decide whether the first two steps of a grievance procedure, which were prerequisites to arbitration, had been completed. (John Wiley, supra, 376 U.S. at pp. 556-558.) In Howsam, after discussing the holding in John Wiley, the high court stated: "So, too, the presumption is that the arbitrator should decide `allegations] of waiver, delay, or a like defense to arbitrability.' Moses H. Cone Memorial Hospital, supra, at 24-25. Indeed, the Revised Uniform Arbitration Act of 2000 (RUAA), seeking to `incorporate the holdings of the vast majority of state courts and the law that has developed under the [Federal Arbitration Act],' states that an `arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled.' RUAA § 6(c), and comment 2, 7 U. L. A. 12-13 (Supp. 2002). And the comments add that `in the absence of an agreement to the contrary, issues of substantive arbitrability ... are for a court to decide and issues of procedural arbitrability, i. e., whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, are for the arbitrators to decide.' Id., § 6, comment 2, 7 U. L. A., at 13 (emphasis added)." (Howsam, supra, 537 U.S. at pp. 84-85.) Defendants rely on the foregoing authority to support their contention an arbitrator must decide whether they waived the right to arbitrate.
We are unpersuaded that Howsam, supra, 537 U.S. at page 84 required the arbitrator to decide the issue of waiver by litigation conduct in this case. To begin with, the application of Moses H. Cone and Howsam to our case is highly problematic. Neither case addresses our issue — engaging in litigation for such a duration and manner as to waive the right to later seek to arbitrate. Moses H. Cone, supra, 460 U.S. at pages 13-26 involves the Colorado River weighing process in the context of an abstention dispute. While doing so, the high court used the "waiver, delay, or a like defense to arbitrability language" in a generalized discussion of federal issues raised by that case. We detailed that general discussion in footnote 2, ante. As noted, footnote 31 of Moses H. Cone, supra, 460 U.S. at page 25 lists examples of the application of waiver issues. One of those cases, Germany v. River Terminal Railway Co., supra, 477 F.2d at page 547 involved a district and appellate court deciding an issue of waiver by litigation conduct issue. Howsam involved a classic statute of limitations issue — whether the arbitration submission was initiated within a six-year statute of limitations. (Howsam, supra, 537 U.S. at p. 81.) Neither case involves whether the right to arbitrate is waived by participation in litigation. Thus, Moses H. Cone and Howsam are not controlling authority given the issue in our case — waiver of the right to arbitrate based upon prejudicial participation in litigation.
Second, three of the circuit courts have examined the context of the `"waiver, delay, or a like defense"' language in Howsam, supra, 537 U.S. at page 84. The three courts have noted the context in Howsam, supra, 537 U.S. at page 84 did not relate to waiver by litigation conduct. As noted, Howsam involved whether a six-year National Association of Securities Dealers time limit for commencing an arbitration had been violated. (Id. at pp. 82, 85.) The Third Circuit panel explained: "Properly considered within the context of the entire opinion, however, we believe it becomes clear that the Court was referring only to waiver, delay, or like defenses arising from non-compliance with contractual conditions precedent to arbitration, such as the [National Association of Securities Dealers] time limit rule at issue in that case, and not to claims of waiver based on active litigation in court." (Ehleiter, supra, 482 F.3d at p. 219; see JPD, Inc. v. Chronimed Holdings, Inc., supra, 539 F.3d at pp. 393-394.)
Third, Howsam, supra, 537 U.S. at pages 84-85 relied upon language in the Revised Uniform Arbitration Act of 2000 which we have previously
Fourth, the circuit courts viewed the judicial branch as better qualified to decide the waiver by litigation conduct question; i.e., judges have greater expertise at the identification of prearbitration abuses. The Third Circuit panel, synthesizing the discussion of the First Circuit, noted: "[T]he Marie court observed that the trial judge, having been directly involved in the entire course of the legal proceedings, is better positioned to determine whether the belated request for arbitration is a thinly veiled attempt to forum shop. [Citation.]" (Ehleiter, supra, 482 F.3d at p. 218, citing Marie v. Allied Home Mortgage Corp., supra, 402 F.3d at p. 13; accord, Grigsby & Associates, Inc. v. M Securities Investment, supra, 664 F.3d at p. 1354; JPD, Inc. v. Chronimed Holdings, Inc., supra, 539 F.3d at p. 394.) Fifth, the circuit courts spoke of the inefficiency of having an arbitrator decide arbitration has been waived only then to return it to a district court for trial. (JPD, Inc. v. Chronimed Holdings, Inc., supra, 539 F.3d at p. 394; Marie v. Allied Home Mortgage Corp., supra, 402 F.3d at pp. 13-14.)
Seventh, several of the circuit panels relied upon the language in title 9 United States Code section 3
We are satisfied the foregoing analysis correctly delineates why the "`waiver, delay, or a like defense'" language in Howsam, supra, 537 U.S. at page 84 does not apply here. The Supreme Courts of Colorado, Nebraska, Texas and Alabama have likewise concluded that Howsam, supra, 537 U.S. at page 84 does not apply in the litigation by conduct waiver context. (Radil v. National Union Fire Insurance Co. (Colo. 2010) 233 P.3d 688, 693-695; Good Samaritan Coffee Co. v. LaRue Distributing, Inc. (2008) 275 Neb. 674 [748 N.W.2d 367, 373-374]; Perry Homes v. Cull (Tex. 2008) 258 S.W.3d 580, 588-589; Ocwen Loan Servicing, LLC v. Washington (Ala. 2006) 939 So.2d 6, 11-14.) Other courts are likewise in accord. (In re Toyota Motor Corp. (C.D.Cal. 2012) 838 F.Supp.2d 967, 974-975; Parler v. KFC Corp. (D.Minn. 2008) 529 F.Supp.2d 1009, 1014; Delmarva Power & Light Co. v. U.S. (Fed.Cl. 2007) 79 Fed.Cl. 205, 211-212; Boateng v. General Dynamics Corp. (D.Mass. 2007) 473 F.Supp.2d 241, 250-251; County of Hawai'i v. Unidev, LLC (2012) 128 Haw. 378 [289 P.3d 1014, 1038]; Ford Motor Credit Co. v. Cornfield (2009) 395 Ill.App.3d 896 [918 N.E.2d 1140, 1154-1155, 335 Ill.Dec. 327].)
The parties could have placed language in their agreement requiring the arbitrator to determine the waiver issue under all circumstances. (See Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. ___, ___ [177 L.Ed.2d 403, 130 S.Ct. 2772, 2779] [where arbitration provision states that arbitrator will determine "enforceability" of agreement, arbitrator, not court, decides whether entire agreement is unconscionable]; Quilloin v. Tenet Healthsystem Philadelphia, Inc. (E.D.Pa. 2011) 763 F.Supp.2d 707, 722-723.) They did not. Accordingly, the trial court correctly decided the waiver by litigation conduct issue here.
The Eighth Circuit, in a single case, has taken the position since Howsam was decided, that the waiver by litigation conduct issue is to be decided by an arbitrator, not a judge. (National American Ins. Co. v. Transamerica Occidental Life Ins. Co. (8th Cir. 2003) 328 F.3d 462, 466 (Transamerica).) The Eighth Circuit decision arose in connection with a motion to replace an arbitrator pursuant to title 9 United States Code section 5.
In this context, different from our own, the Eighth Circuit panel explained: "Finally, Transamerica contends that [the plaintiff] has waived the right to arbitrate because [the plaintiff] pursued litigation in the Oklahoma courts on reinsurance contracts to which Transamerica is a party. However, the United States Supreme Court has recently reiterated [in Howsam] that `the presumption is that the arbitrator should decide "allegation[s] of waiver, delay, or a like defense to arbitrability.'" [Citation.] Therefore, once the panel is reconstituted with the arbitrator appointed by district court, the issue of waiver may be presented for the panel's consideration." (Transamerica, supra, 328 F.3d at p. 466.)
The Third Circuit declined to follow the Eighth Circuit's foregoing analysis in Transamerica, supra, 328 F.3d at page 466. (Ehleiter, supra, 482 F.3d at pp. 219-221.) The Third Circuit panel identified two reasons. First, the waiver conduct in Transamerica was unclear. On one hand, the language cited in the immediately preceding paragraph refers to conduct in the Oklahoma courts. However, in the district court, Transamerica argued the waiver occurred because of participation in a prior arbitration. (Transamerica, supra, 328 F.3d at pp. 463-464.) The Third Circuit panel explained: "Although the Eighth Circuit described Transamerica's waiver argument ... as being based on [the plaintiff's] pursuit of `litigation in the Oklahoma courts,' on three different occasions, ... the court described Transamerica's waiver argument as being based exclusively on [the plaintiff's] participation in a prior arbitration proceeding involving the underlying dispute between the parties, which perhaps suggests that any prior court action brought by [the plaintiff] had been referred to, and resolved in, arbitration. To the extent that
Second, in terms of the Eighth Circuit's analysis concerning waiver by litigation conduct, the Third Circuit held: "To the extent that Transamerica may be fairly read as involving a claim of waiver based on litigation conduct, we believe the result reached by the Eighth Circuit can be explained by the rather unique procedural circumstances of that case. In a typical waiver case, such as the one before us, a party opposing arbitration urges the trial court to deny a motion made under Section 3 or Section 4 of the [Federal Arbitration Act] on the ground that his opponent waived its right to arbitrate by actively participating in the underlying proceedings before that court. As noted above, considerations of comparative expertise and judicial economy, among others, dictate that a waiver defense raised in this context be decided by the court, rather than being referred to an arbitrator with no prior involvement with the case." (Ehleiter, supra, 482 F.3d at p. 220, fn. omitted.) The Third Circuit panel concluded the arbitrators were in a better position to determine the waiver dispute which involved conduct in the arbitral forum. (Id. at pp. 221-222.)
Based on the foregoing, we conclude that the Eighth Circuit analysis in Transamerica, supra, 328 F.3d at page 466 should be limited to its unique facts. Our procedural scenario is entirely different and we decline to be bound by Transamerica in the context of our case. We express no opinion concerning the merits of the holding in Transamerica given its unique procedural scenario. And the Third Circuit and the Texas Supreme Court note that the Eighth Circuit has consistently upheld district court orders deciding waiver by litigation conduct issues since Transamerica was decided. (Ehleiter, supra, 482 F.3d at p. 220, fn. 11; Perry Homes v. Cull, supra, 258 S.W.3d at p. 589, fn. 34; e.g., Erdman Co. v. Phoenix Land & Acquisition, LLC (8th Cir. 2011) 650 F.3d 1115, 1118-1119; Hooper v. Advance America, Cash Advance Centers of Missouri (8th Cir. 2009) 589 F.3d 917, 920-923; Southeastern Stud & Components, Inc. v. American Eagle Design (8th Cir. 2009) 588 F.3d 963, 968-969; Lewallen v. Green Tree Servicing, L.L.C. (8th Cir. 2007) 487 F.3d 1085, 1090-1094; Kelly v. Golden (8th Cir. 2003) 352 F.3d 344, 348-350.)
The order denying the motion to compel arbitration is affirmed. Plaintiffs, Augustine Hong, Michael Hong and Nae Young Chung, are awarded their appeal costs from defendants, CJ CGV America Holdings, Inc., Joon Hwan Choi, Theodore Kim, and Sang Heum Cho.
Mosk, J., and Kumar, J.,