Topics: Arbitration Agreements, Court Decisions
The California Court of Appeal, Second Appellate District recently issued a clarifying decision in Michelle Arzate, et al. v. ACE American Insurance Company, addressing which party is responsible for initiating arbitration following a court order granting employer’s motion to compel arbitration. For employers, the decision offers essential guidance on structuring arbitration agreements to avoid ambiguity and potential disputes.
Key Case Details
The plaintiffs, employees of ACE American Insurance Company, filed a class action lawsuit alleging various wage and hour violations. ACE moved to compel arbitration based on an arbitration agreement (“Agreement”) between the parties. The trial court granted this motion and stayed the case pending arbitration. However, neither party initiated arbitration within the 30-day period specified in the Agreement, prompting the plaintiffs to request that the stay be lifted. The trial court ruled that ACE’s failure to initiate arbitration waived its right to arbitrate. On appeal, the California Court of Appeal reversed that decision, holding that the responsibility to initiate arbitration rested with the plaintiffs—the party asserting employment-related claims—rather than with ACE, the party requesting arbitration.
The Court of Appeal’s Reasoning
The Court of Appeal focused on the language of two documents:
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