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Newirth v. Aegis Senior Communities, LLC

United States Court of Appeals, Ninth Circuit

July 24, 2019

June Newirth, by and through her Guardian ad Litem, Frederick J. Newirth, on her own behalf and on behalf of others similarly situated; Elizabeth Barber; Andrew Bardin; Thomas Bardin, as successors-in-interest to the Estate of Margaret Pierce; on their own behalves and on behalf of others similarly situated, Plaintiffs-Appellees,
v.
Aegis Senior Communities, LLC, DBA Aegis Living, Defendant-Appellant.

          Argued and Submitted May 14, 2019 San Francisco, California

          Appeal from the United States District Court No. 4:16-cv-03991-JSW for the Northern District of California Jeffrey S. White, District Judge, Presiding

          Lann G. McIntyre (argued), Lewis Brisbois Bisgaard & Smith LLP, San Diego, California; Leona Lam Reddy, Katherine C. Den Bleyker, and Jeffrey S. Ranen, Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, California; for Defendant-Appellant.

          Sarah Colby (argued) and Guy B. Wallace, Schneider Wallace Cottrell Konecky Wotkyns LLP, Emeryville, California; Christopher J. Healey, Dentons U.S. LLP, San Diego, California; George Kawamoto and Kathryn A. Stebner, Stebner and Associates, San Francisco, California; Michael D. Thamer, Law Offices of Michael D. Thamer, Callahan, California; W. Timothy Needham, Janssen Malloy LLP, Eureka, California; Robert S. Arns, The Arns Law Firm, San Francisco, California; Kirsten M. Fish, Neeham Kepner & Fish LLP, San Jose, California; for Plaintiffs-Appellees.

          Before: J. Clifford Wallace and Sandra S. Ikuta, Circuit Judges, and Donald W. Molloy, [*] District Judge.

         SUMMARY [**]

         Arbitration

         The panel affirmed the district court's order denying Aegis Senior Communities, LLC's motion to compel arbitration in a class action alleging that Aegis engaged in a scheme to defraud seniors.

         The panel applied a federal law standard for determining whether the arbitration agreement was waived. Under federal law, a party seeking to prove that the right to compel arbitration has been waived must carry the burden of demonstrating: (1) knowledge of an existing right to compel arbitration; (2) intentional acts inconsistent with that existing right; and (3) prejudice to the person opposing arbitration from such inconsistent acts. Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986).

         The panel held that because Aegis knew of its right to compel arbitration, but made an intentional decision not to compel arbitration in order to take advantage of the judicial forum, and because the plaintiffs were prejudiced by incurring costs in defending against Aegis's motion to dismiss plaintiffs' complaint, the district court did not err in concluding that Aegis waived its right to arbitrate.

          OPINION

          IKUTA, CIRCUIT JUDGE

         Aegis Senior Communities, LLC, appeals from the district court's order denying its motion to compel arbitration. Because Aegis knew of its right to compel arbitration, but made an intentional decision not to compel arbitration in order to take advantage of the judicial forum, and because the plaintiffs incurred costs as a direct result, the district court did not err in concluding that Aegis waived its right to arbitrate. Therefore, we affirm.

         I

         June Newirth, Margaret Pierce, and Barbara Feinberg were residents of three different senior living communities, all operated by Aegis Senior Communities, LLC (Aegis).[1]Each of them (through a representative holding a valid power of attorney) entered into an agreement with Aegis which included an arbitration provision. The provision stated "that any legal claim or civil action arising out of or relating to care or services provided" by Aegis "will be determined by submission to arbitration as provided in accordance with California law."

         Notwithstanding her arbitration agreement, Newirth filed a class action complaint against Aegis in California state court in April 2016, alleging that Aegis engaged in a scheme to defraud seniors by falsely representing that staffing levels would be determined by the overall needs of the residents, when in fact staffing was based on budget considerations.[2]Aegis removed the complaint to district court in July 2016, and filed a motion to compel arbitration as well as a motion to dismiss a week later.

         Instead of pursuing these motions, however, Aegis and Newirth filed a stipulated agreement a week later. Pursuant to the stipulation, Newirth filed a second amended complaint in August 2016, adding additional plaintiffs.[3] For its part, Aegis withdrew its motion to compel arbitration and its motion to dismiss. In September 2016, it filed a new motion to dismiss the second amended complaint, in which it made no mention of arbitration or the arbitration agreements. The following day, the parties filed an agreement stating they were attempting mediation of their dispute.[4]

         Over the next 11 months, while the second motion to dismiss was pending, the parties actively engaged in the discovery process. The parties participated in a discovery conference, entered into a court-approved stipulation regarding the production of documents and electronic records, and submitted a proposed joint conference report that included a proposed schedule for discovery, class certification briefing and hearing dates, and a date for trial. In December 2016, the parties served their initial disclosures. In the early stages of discovery, Aegis disclosed a copy of ...


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