Court of Appeal clarifies the “abandonment” standard for arbitration waiver under Quach: Sierra Pacific Industries Wage and Hour Cases

In Sierra Pacific Industries Wage and Hour Cases (2025) 116 Cal.App.5th 1038, the Court of Appeal (Third Appellate District) held that an employer may waive its right to compel arbitration through conduct inconsistent with an intent to arbitrate—even before those rights become technically enforceable—and that a discovery sanctions order is generally unappealable.

Plaintiff filed a putative class action alleging wage and hour violations. While Defendant raised arbitration as an affirmative defense in its answer to the first amended complaint, it omitted the defense in its answer to the second. During discovery, the trial court ordered Defendant to produce arbitration agreements for potential class members. Defendant refused for years, citing privacy concerns, and notably failed to seek a protective order to address those concerns. Instead, Defendant participated in extensive class discovery and litigation, repeatedly implying that the employees in question were part of the putative class. Following class certification, Defendant finally produced numerous signed arbitration agreements and moved to compel arbitration. Plaintiffs opposed, arguing waiver. The trial court denied the motion to compel and issued evidentiary and issue sanctions against Defendant, finding its “conduct and the totality of the circumstances” constituted a waiver.

The Court of Appeal affirmed the denial of the motion and the sanctions order. Applying the California Supreme Court’s recent decision in Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, the court noted that the focus of a waiver analysis has shifted from the old multi-factor St. Agnes test to whether a defendant’s conduct was so inconsistent with an intent to enforce the arbitration right that a reasonable factfinder could conclude the right had been abandoned. The court rejected Defendant’s argument that it could not have waived its rights because they were not yet enforceable (pre-certification), citing Hill v. Xerox Business Services, LLC (9th Cir. 2023) 59 F.4th 457 for the principle that arbitration rights can be waived before they are technically ripe for enforcement. By withholding the agreements while actively litigating the class claims, Defendant acted inconsistently with its right to arbitrate. Regarding the sanctions order, the court held it was unappealable. It rejected Defendant’s attempt to characterize the sanctions as part of the order denying the petition to compel arbitration. Because no statute specifically authorizes an interlocutory appeal of a discovery sanctions order of this nature, the court lacked jurisdiction to review that portion of the trial court’s ruling. 

Full opinion

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