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A party who is bound by an arbitration agreement and attempts to resolve a dispute in court does not waive the right to arbitration, a California state court held.
In Zamani v. St. John Knits Inc., No. G035818, 2006 WL 2261621 (Cal. App. Aug. 8, 2006), Zamani signed an employment agreement with St. John that included an arbitration agreement. After Zamani was terminated, he brought claims against St. John in court.
St. John moved for summary judgment, arguing that Zamani waived his right to arbitrate by attempting to bring the action in court and openly refusing to arbitrate in court. Essentially, St. John argued that Zamani, who allegedly refused to arbitrate, was prevented from bringing his dispute in the judicial forum because of the arbitration clause, and the arbitral forum because he first attempted to bring the action in court, thus waiving his right to arbitrate disputes.
Unlike other jurisdictions, in California, a party’s waiver of the right to proceed in arbitration occurs only when “the merits of the dispute have been litigated by the parties.” Quoting Doers v. Golden Gate Bridge etc. Dist., 23 Cal.3d 180, 186 (Cal. 1979). Simply filing a complaint does not waive the right to arbitrate, the Court held.
The Court first noted that “every party who opposes a motion or petition to arbitrate, is – in effect – ‘refusing’ to arbitrate in open court,” and refused to find that Zamani had waived his right to arbitrate by unsuccessfully bringing a claim which opposed arbitration.
Second, the Court pointed out that Zamani’s attempt to bring the action in court did not waive the right to both forums, but simply gave St. John a choice of forum – St. John could litigate the dispute in court or seek an order compelling arbitration. Zamani did not, by bringing a court action, waive his right to both forums.
Finally, in remanding the case, the Court suggested that St. John’s attempt to use the parties’ arbitration agreement to avoid resolution of the dispute altogether might constitute bad faith and directed the trial court to consider that issue.
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