Reported / Citable
Background
Four former Lilac Solutions employees sued the lithium-extraction technology company and several managers for wrongful termination, discrimination, sexual harassment, and alleged exposure to harmful chemicals. Although the employees had signed arbitration agreements, the defendants answered the complaint, asserted claims of their own, and pursued extensive discovery in court.
The defendants did not move to compel arbitration until more than three months into the case, after the employees filed an anti-SLAPP motion—California’s special procedure for striking claims based on protected speech or petitioning. The trial court found that the defendants had waived, meaning intentionally given up, their contractual arbitration rights through conduct showing a choice to litigate. The defendants argued that the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act complicated their timing because the pleaded harassment claim could not be forced into arbitration.
The Court’s Holding
The First District affirmed. Applying the California Supreme Court’s 2024 decision in Quach v. California Commerce Club, Inc., the court concluded that the record supplied clear and convincing evidence that the defendants intentionally abandoned arbitration. Their extensive merits discovery, participation in pleading practice, and other efforts to advance the court case supported the trial court’s inference that they had selected a judicial forum before changing course.
The court rejected the argument that the trial judge necessarily applied outdated law merely because the order cited pre-Quach cases and did not expressly identify the clear-and-convincing standard. Appellate courts presume a trial court knows and applies governing law absent an affirmative indication otherwise, and the factual record met the heightened standard.
The federal sexual-harassment arbitration statute did not excuse the delay. Even if the defendants initially faced uncertainty over which claims could be arbitrated, the scope and timing of their discovery did not track an effort to test or narrow the harassment claim. The court found it reasonable to view the eventual arbitration motion—filed after the anti-SLAPP motion—as a change of forum rather than a motion brought as soon as it had a realistic chance of success.
Key Takeaways
- California arbitration waiver now turns on ordinary waiver principles, proven by clear and convincing evidence; a showing of prejudice to the opposing party is not required.
- Answering, litigating the merits, and taking substantial discovery before seeking arbitration can objectively demonstrate intentional abandonment of the right.
- A party confronting claims covered by the federal sexual-assault and sexual-harassment arbitration law should promptly develop and document a coherent strategy for any remaining arbitrable claims.
- A trial court need not cite the newest controlling decision or recite the burden of proof if the record and ruling are consistent with the governing standard.
- Moving to arbitrate only after an unfavorable litigation development creates substantial waiver risk.
Why It Matters
Employers and other contracting parties cannot safely treat arbitration as a reserve forum while testing the court process. Counsel should assess arbitrability at the outset, limit litigation activity that is inconsistent with arbitration, and move promptly once a motion has a sound legal basis. Written reservations alone may not overcome objectively inconsistent litigation conduct.
The decision is especially useful in mixed employment cases containing sexual-harassment claims alongside other causes of action. The federal statute may complicate the motion, but it does not provide a blanket justification for broad court discovery followed by a late effort to compel arbitration.