Litigate first, arbitrate later? You may have waived arbitration
In Quach v. California Commerce Club, the California Supreme Court held that a party who acts inconsistently with arbitration can lose the right to arbitrate, whether or not the other side was harmed.
Reviewed by Laurence S. Bezinover · Published
What changed
California courts used to require a party claiming waiver of arbitration to show it was prejudiced by the delay. In Quach, the California Supreme Court unanimously dropped that requirement, following the U.S. Supreme Court's 2022 decision in Morgan v. Sundance. Waiver now turns on the waiving party's own conduct: whether, by clear and convincing evidence, it knew of its right to arbitrate and acted inconsistently with it.
In the case itself, the employer waited about 13 months to move to compel arbitration while it demanded a jury and took part in discovery, including a deposition. That was enough to waive the right.
Who it affects
Every business with arbitration clauses in employment, customer, vendor, or partnership agreements, and anyone sued by a business that has one.
Questions to raise with counsel
- When a lawsuit arrives, how quickly do we need to decide whether to arbitrate and move to compel?
- Which steps, such as a jury demand, merits discovery, or trial setting, could waive our right to arbitrate if taken first?
- Can we find our signed arbitration agreements quickly when we need them?
This briefing is general information about California law, not legal advice for your situation. Reading it does not create an attorney-client relationship.