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Thursday, July 1, 2010

Court of Appeal Issues Another Arbitration Waiver Decision

Zamora v. Lehman (June 29, 2010) --- Cal.App.4th --- presents a unique set of facts and the question of when one waives his or her right to compel arbitration. The Court stated the facts as follows:
A trustee in bankruptcy filed this action against three former officers of a defunct company, alleging breach of fiduciary duty. Two of the officers engaged in discovery; the third attempted to settle the action as to himself only. Four months before trial, defendants remembered that their employment agreements contained an arbitration provision. They moved to compel arbitration. In opposition, the trustee argued defendants had waived the right to arbitrate by delay in bringing the motions and by engaging in discovery not available under the arbitration provision.
Slip op. at 1. The Court held that the first two officers, who delayed in bringing their petition to compel arbitration and engaged in discovery, waived their right to arbitration because their arbitration agreement did not allow for discovery. It did not matter that they had forgotten about their right to arbitrate because waiver of one's right to arbitrate does not require knowing relinquishment of that right. Slip op. at 10-12. The third officer, who had attempted to settle his case and had not engaged in discovery, did not waive his right to compel arbitration. Slip op at 12-13.

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