Wells Fargo Bank, N.A. v. Agak CA2/6 ( 2021 )

Filed 4/12/21 Wells Fargo Bank, N.A. v. Agak CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
WELLS FARGO BANK, N.A., 2d Civ. No. B300635
(Super. Ct. No. 56-2017-
Plaintiff. Cross-defendant, 00500587-CU-CL-VTA)
and Appellant, (Ventura County)
v.
GEORGE W. AGAK,
Defendant, Cross-
complainant, and Respondent.
This is an appeal from an order denying a petition to
compel arbitration. The trial court denied the petition on the
ground that petitioner waived any right it may have had to
arbitrate. We affirm.
FACTS
In August 2017, Wells Fargo Bank, N.A. (Wells Fargo)
brought an action against George W. Agak to collect $17,000 in
credit card debt. Wells Fargo’s complaint alleged breach of
contract and common counts.
Attached as an exhibit to the complaint is Wells Fargo’s
alleged credit card customer agreement. The agreement contains
a dispute resolution clause. The clause provides that a dispute
between the bank and its customer shall be resolved by
arbitration. The clause continues, “The foregoing
notwithstanding, the Bank shall not initiate an arbitration to
collect a consumer debt, but reserves the right to arbitrate all
other disputes . . . . A ‘Dispute’ is any unresolved disagreement
between [the customer] and the Bank. It includes any
disagreement relating in any way to the Card or related
services . . . .” The agreement prohibits any dispute as a
representative or member of a class.
Agak answered Wells Fargo’s complaint by general denial,
and raised as affirmative defenses: ambiguity in the amount at
issue; breach of contract; fraud, deceit, and misrepresentation;
illegal conduct; violation of public policy; and “Lack of jurisdiction
– Defendant has a right to arbitrate these claims.”
Wells Fargo Case Management Statement
In August 2018, Wells Fargo filed a case management
statement. Wells Fargo stated that the case will be ready for
trial within 12 months of the filing of the complaint. Wells Fargo
did not request referral to arbitration.
Discovery
Wells Fargo propounded requests for admissions, form
interrogatories, inspection demands, and special interrogatories.
Agak also propounded form interrogatories and inspection
demands.
In September 2018, Agak’s response to Wells Fargo’s
interrogatories stated that Wells Fargo had charged Agak illegal
2.
“credit defense” fees. Agak claims Wells Fargo charged the fees
without his consent in violation of the credit card agreement.
Motion for Leave to File Cross-Complaint
In October 2018, Agak filed a motion for leave to file a
cross-complaint alleging causes of action for breach of contract,
fraud, unfair competition, failure to correct a billing error in
violation of Civil Code section 1747.50, and declaratory relief.
The cross-complaint alleges Wells Fargo charged Agak an illegal
and unauthorized “credit defense” fee.
Second Case Management Statement
In November 2018, Wells Fargo filed another case
management statement. Like the first statement, Wells Fargo
represented to the court that it was a limited civil case, and
asked for a one-day court trial. Wells Fargo did not request
arbitration.
Motion to File Cross-Complaint Granted
In December 2018, the trial court granted Agak’s motion to
file his cross-complaint. Wells Fargo did not oppose. Wells Fargo
answered the cross-complaint. The answer alleged 16 affirmative
defenses, but the right to arbitrate was not alleged.
Case Management Conferences
The trial court conducted case management conferences in
December 2018 and January 2019. Wells Fargo did not raise the
issue of arbitration.
Amended Cross-Complaint
In February 2019, Agak sought leave to amend the cross-
complaint. The amendment would turn Agak’s existing cross-
complaint, alleging Wells Fargo illegally imposed a “credit
defense” fee, into a class action.
3.
While the motion was pending, the trial court conducted
another case management conference. Wells Fargo did not
request arbitration.
Wells Fargo did not oppose the motion to amend the cross-
complaint. The trial court granted the motion.
Removal to Federal Court
In March 2019, Wells Fargo removed the matter to federal
court. The district court sua sponte ordered the case remanded to
state court. The court ordered Wells Fargo to show cause why it
should not be sanctioned for improperly removing the case.
On remand, Wells Fargo filed its answer to Agak’s
amended cross-complaint. The answer included as affirmative
defenses that Wells Fargo has the right to arbitrate, and that
Agak has waived the right to bring a class action.
Motion to Compel Arbitration
In May 2019, Wells Fargo petitioned to compel arbitration.
The petition was based on the arbitration provision contained in
the consumer credit card customer agreement. The alleged
agreement was attached to the petition as exhibit A. Wells
Fargo’s counsel attempted to authenticate the agreement to
arbitrate by declaring: “Attached hereto as Exhibit A is a true
and correct copy of the Consumer Credit Card Customer
Agreement governing the terms of a credit card account
Defendant and Cross-Claimant George W. Agak (‘Agak’) had with
Wells Fargo.” (Boldface omitted.)
Agak opposed the petition on the ground that Wells Fargo
waived any right it may have had to arbitration by its extensive
participation in the lawsuit.
4.
Ruling
The trial court sustained Agak’s objections to both Wells
Fargo’s original affidavit and the affidavit in its reply papers.
The court determined by the parties’ actions there was no
agreement to arbitrate.
The trial court also found that Wells Fargo waived its right
to arbitration by its participation in the litigation. The court
stated: “[T]he court also notes that waiver applies. Here, it is
apparent that Plaintiff knew of the right to compel arbitration by
virtue of the fact that it possessed the alleged arbitration
agreement at issue and filed this motion. It is also apparent that
Plaintiff acted inconsistent with that existing right, by filing this
lawsuit in State Court, failing to allege a right to arbitration in
its pleadings, failing to mention its right to compel arbitration in
its case management statements, filing a motion for removal,
participating in discovery, participating in four case management
conferences without mentioning arbitration, generally
participating in the litigation for nearly 2 years, and filing two
discovery motions.”
The trial court did not consider whether the arbitration
agreement is unconscionable.
DISCUSSION
I
Standard of Review
The trial court’s ruling on the admissibility of evidence is
reviewed for an abuse of discretion. (Christ v. Schwartz (2016) 2
Cal.App.5th 440, 446-447.) The trial court’s ruling on waiver of
the right to arbitrate is reviewed for substantial evidence.
(Burton v. Cruise (2010) 190 Cal.App.4th 939, 945-946.)
5.
II
Waiver of Arbitration
The trial court found that Wells Fargo waived its right to
compel arbitration by its participation in the litigation.
Code of Civil Procedure section 1281.2, subdivision (a)
provides: “On petition of a party to an arbitration agreement
alleging the existence of a written agreement to arbitrate a
controversy and that a party to the agreement refuses to
arbitrate that controversy, the court shall order the petitioner
and the respondent to arbitrate the controversy if it determines
that an agreement to arbitrate the controversy exists, unless it
determines that: [¶] (a) The right to compel arbitration has been
waived by the petitioner . . . .”
A determination of waiver is a question of fact, and we will
affirm the trial court’s finding if supported by substantial
evidence. (St. Agnes Medical Center v. PacifiCare of California
(2003) 31 Cal.4th 1187, 1196 (St. Agnes).) Where, however, the
evidence is undisputed and only one reasonable inference may be
drawn, the question is one of law. (Ibid.)
The court may consider the following factors in determining
whether there has been a waiver: (1) whether the party’s actions
are inconsistent with the right to arbitrate; (2) whether the
parties are well into preparation for the lawsuit before a party
notified the opposing party of the intent to invoke arbitration; (3)
whether a party delayed for a long period before seeking a stay;
(4) whether a party seeking arbitration filed a counterclaim
before seeking a stay; (5) whether important intervening steps
such as discovery procedures not available in arbitration had
taken place; and (6) whether the delay affected, misled, or
prejudiced the opposing party. (St. Agnes, supra, 31 Cal.4th at
6.
p. 1196.) Although the trial court may consider these factors, no
single test determines the nature of the conduct that constitutes
a waiver of arbitration. (Id. at p. 1195.)
Wells Fargo contends the trial court erred in considering its
actions prior to December 18, 2018. That is the date Agak filed
his cross-complaint alleging Wells Fargo unlawfully imposed an
unauthorized “credit defense” fee, the dispute that Wells Fargo
now claims is subject to arbitration.
But Wells Fargo had notice of the dispute that it now
claims is arbitrable at least as early as October 2018, when Agak
made a motion to file his cross-complaint. Wells Fargo did not
respond with a petition to compel arbitration. Nor did it oppose
Agak’s motion. Instead, it allowed the motion to be granted
unopposed, and answered the cross-complaint without raising
arbitration as a defense. Thereafter, Wells Fargo participated in
case management conferences without mentioning arbitration.
In February 2019, when Agak sought leave to amend his
cross-complaint to convert it to a class action, Wells Fargo still
did not petition to compel arbitration. Instead, it participated in
another case management conference, and allowed the motion to
be granted unopposed.
Wells Fargo responded to the amended cross-complaint by
removing the case to federal court, thus, showing its intent not to
arbitrate.
It was not until May 2019, seven months after Agak
motioned for leave to file his cross-complaint, that Wells Fargo
petitioned to compel arbitration.
St. Agnes points out that a waiver of arbitration is not to be
lightly inferred, and a party seeking to establish a waiver bears a
heavy burden of proof. (St. Agnes, supra, 31 Cal.4th at p. 1195.)
7.
Agak carried that burden here. Applying the applicable factors
listed by our Supreme Court in St. Agnes, the trial court could
reasonably conclude that Wells Fargo waived the right to
arbitrate. The court could reasonably conclude that Wells
Fargo’s actions were inconsistent with the right to arbitrate; that
the parties were well into preparation for the lawsuit; that Wells
Fargo delayed for a long period before invoking the right to
arbitrate; that important intervening steps, such as case
management conferences, had taken place; and that the delay
prejudiced Agak by making him spend time and money on the
court action. (Id. at p. 1196.)
Wells Fargo argues it did nothing more than what was
necessary to avoid default. But it could have avoided default by
bringing a motion to compel arbitration in response to Agak’s
motion for leave to file a cross-complaint. Instead, Wells Fargo
continued to litigate the matter in court.
Moreover, Wells Fargo did more than what was necessary
to avoid default. It removed the case to federal court. Wells
Fargo cites St. Agnes, supra, 31 Cal.4th at page 1205 for the
proposition that a party does not waive arbitration by removing
to federal court or otherwise attempting to change venue. What
St. Agnes actually says is that a party does not waive arbitration
rights “merely” by seeking to change venue, but a waiver
determination requires a consideration of all the circumstances.
(Ibid.) Here the trial court did not find waiver merely because
Wells Fargo removed the case to federal court. The court
considered all the circumstances, including that the federal court
sua sponte remanded the case to state court on the ground that
the removal was obviously improper, resulting in an order to
show cause regarding sanctions.
8.
In view of our decision, we need not discuss the other issues
raised by Wells Fargo.
The dissent acknowledges that Wells Fargo did not request
arbitration until May 19 after participating in numerous court
hearings. The dissent ignores that in Agak’s answer to the
complaint he raised arbitration. Yet Wells Fargo continued with
the litigation. The dissent also confuses the abuse of discretion
standard with substantial evidence. But assuming the applicable
standard of review is abuse of discretion, the dissent apparently
believes the trial judge’s ruling was arbitrary, capricious, and
beyond the bounds of reason. Otherwise, the dissent is
improperly assuming the role of the trial judge.
The judgment (order) is affirmed. Costs are awarded to
Agak.
NOT TO BE PUBLISHED.
GILBERT, P. J.
I concur:
PERREN, J.
9.
TANGEMAN, J., dissenting:
I respectfully dissent. The record in this case does not
support a waiver for the following reasons.
The credit card customer agreement between the parties
provides that “the Bank shall not initiate an arbitration to collect
a consumer debt.”1 Accordingly, Wells Fargo was legally
prohibited from compelling arbitration prior to the date that
Agak’s cross-complaint was filed. That date was December 18,
2018.
Wells Fargo filed its motion to compel on May 14, 2019.
Our task is to determine whether the trial court abused its
discretion when it determined that Wells Fargo, by its conduct
and/or omissions, waived its right to arbitrate during this period
of less than five months.
During this five-month period, no trial date was pending,
no demurrers or motions to strike were filed or pending, no
discovery was initiated or responded to by Wells Fargo, and no
litigation of the merits occurred. During this same period, Wells
Fargo asserted its right to arbitrate no less than five times: first,
on February 22 in its case management statement; second, in its
statement of non-opposition to Agak’s motion for leave to file an
amended cross-complaint on March 4; third, as the basis for its
removal to federal court (to arbitrate class action allegations
pursuant to the FAA), in March; fourth, in a formal written
demand to Agak on April 8; and fifth, when it asserted its right to
arbitrate as an affirmative defense to the operative pleading, i.e.,
the amended cross-complaint, on April 22.
1This specific language was held enforceable in Quiroz v.
Cavalry SPV I, LLC (C.D.Cal. 2016) 217 F.Supp. 1130, 1138.
The majority finds waiver because it “starts the clock”
before December 18, thus penalizing Wells Fargo for not taking
actions it was legally barred from taking. It compounds that
error by ignoring the numerous and repeated assertions by Wells
Fargo of its right to arbitrate in February, March (two times),
and April (two times).
The majority acknowledges that waiver shall not be lightly
inferred, that waiver cannot be inferred by removal to federal
court, and that Agak “bears a heavy burden of proof.” (St. Agnes
Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187,
1195.) In St. Agnes, our Supreme Court set forth six factors to
consider in determining whether a waiver occurred. All six
factors militate against a waiver finding: (1) Wells Fargo
undertook no actions during the relevant period inconsistent with
its desire to arbitrate the cross-complaint; (2) Wells Fargo
asserted its arbitration right on numerous occasions including in
its answer to the operative cross-complaint; (3) there was no
lengthy delay after the right arose (December 18) and before
Wells Fargo first asserted its arbitration right (February 22); (4)
Wells Fargo filed no counterclaim to the cross-complaint; (5) no
discovery or litigation of the merits occurred in the relevant
period; and (6) Agak has shown no prejudice he incurred between
December 18 and February 22.
On this record, I would conclude that the trial court abused
its discretion when it found waiver based on Wells Fargo’s filing
of the initial complaint (as was required by contract), failing to
mention its right to arbitrate in its case management statements
(it did so on February 22), removing the case to federal court
(which does not operate as a waiver), participating in discovery
(it did not do so during the relevant time period), participating in
11.
litigation “for nearly 2 years,” and filing two discovery motions (it
filed no such motions in the relevant time period).
NOT TO BE PUBLISHED.
TANGEMAN, J.
12.
Kevin G. DeNoce, Judge
Superior Court County of Ventura
______________________________
Faegre Drinker Biddle & Reath, Angela J. Morales, Alan J.
Lazarus and Amanda Semaan, for Plaintiff, Cross-defendant, and
Appellant.
Mardirossian & Associates, Inc., Garo Mardirossian and
Adam Feit for Defendant, Cross-complainant, and Respondent.