Roberts v. El Cajon Motors: Defendant's Chindarah Pick-Off Was "Inconsistent with Intent To Arbitrate" and Supported Trial Court's Order Denying Petition to Compel Arbitration

Roberts v. El Cajon Motors, Inc. (11/8/11) 200 Cal.App.4th 832, is not an employment case, but it is another battle in the Arbitration Wars, with an interesting Chindarah v. Pick-Up Stix twist.  

Plaintiff filed a putative class action against Defendant for violation of the Automobile Sales Finance Act (Civ. Code § 2981 et seq.; ASFA), the Consumers Legal Remedies Act (id., § 1750 et seq.) and the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.; UCL).  Defendant answered the complaint, and the parties exchanged discovery requests.  Defendant also solicited and received releases from a number of putative class members.  

The trial court denied Defendant's petition to compel arbitration, finding that Defendant waived the right to compel arbitration and that the arbitration agreement was unconscionable.  Defendant appealed, and the Court of Appeal affirmed.  

The Court first held that Defendant had waived its right to compel arbitration because its conduct was inconsistent with its intent to arbitrate and such conduct prejudiced Plaintiff.  Plaintiff conducted discovery related to the putative class and if arbitration were ordered "much, if not all, of this discovery likely would be rendered useless" in light of the arbitration agreement's class action waiver language.  200 Cal.App.4th at 845.  Plaintiff would not have propounded this discovery if Defendant had moved promptly to compel arbitration, rather than waiting to do so five months after filing its answer.  Id. at 846.  

The Court also found that Defendant's solicitation of releases from putative class members was inconsistent with its right to arbitrate.  

El Cajon argues its conduct in identifying and contacting putative class members and seeking to resolve their claims was "completely outside the litigation system" and thus does not support waiver. We disagree.   

Instead, the record shows El Cajon offered the putative class members $50 to settle their claims in this lawsuit in order to mitigate their damages in this lawsuit. What's more, El Cajon conditioned settlement on the putative class members' release of their claims against El Cajon stemming from this lawsuit, a settlement it undoubtedly would enforce, if necessary, in this lawsuit. The record also shows about 30 putative class members accepted the settlement and ostensibly released their claims against El Cajon in this lawsuit.  

Id. at 847.

This is a quirky case that I do not expect to have particularly broad application. I do not understand the Defendant's delay in seeking to compel arbitration, nor do I understand the Court's reasoning. I agree with the Court that the Chindarah pick-off was not "completely outside the litigation system," but that is not the test for waiver. The test is whether the party's conduct was "inconsistent with an intent to invoke arbitration." The Court does not seem to have analyzed this case under the proper standard.

The opinion is available here.