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CA: Duty to Invoke Arb Clause, or Risk Waiver

Augusta v. Keehn & Assoc., 193 Cal.App.4th 331 (March 4, 2011). 

Facts: August sued his former attorney, Keehn, for legal malpractice in December, 2008. The parties’ contract included a provision for binding arbitration, but Augusta did not invoke it until six-seven months after the filing of his Complaint. 

Issue: Did Augusta waive his right to arbitration? 

Ruling: Yes. 

Augusta attempted to argue that Keehn led him to believe the arbitration would occur without any action on his part, but the Court held it was up to Augusta to protect his own rights in the malpractice action. 

Further, the Court placed a great deal of significance on the fact that Augusta had prejudiced Keehn by obtaining discovery from him and then refusing to reciprocate after invoking the binding arbitration provision which did not allow for formal discovery: 

The vice involved here, whether characterized as `unreasonable delay,’ `bad faith misconduct,’ `gamesmanship’ or `unilateral discovery’ . . . is that defendants used the discovery processes of the court to gain information about plaintiff’s case which defendants could not have gained in arbitration. After obtaining discovery from plaintiff by court processes, defendants then belatedly sought to change the game to arbitration, where plaintiff would not have equivalent discovery rights. . . . Here, the trial court could reasonably find the discovery conducted was not equivalent for both sides and would work an unfair advantage for defendants if arbitration were ordered. These facts support the trial court’s finding of waiver.

Accordingly, the Court held that Augusta had waived his right to binding arbitration and must proceed with the litigation. 

Lesson: Clients and lawyers should raise any binding arbitration clause in a timely manner and certainly before either party undertakes formal discovery to avoid waiver. 


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Posted in: California