Court of Appeal Decision Underscores Importance Of Promptly Invoking Arbitration Rights Lest They Be Waived

On May 26, 2010, in Adolph v. Coastal Auto Sales, Inc., the California Court of Appeal affirmed the trial court's decision to deny the petition of a car dealer to compel arbitration in accordance with the terms of an arbitration agreement contained in a purchase agreement. The Court Appeal held that the trial court correctly denied the petition on the ground the car dealer waived its right to arbitrate by failing to promptly invoke its right to arbitration and by raising the arbitration agreement only after suffering a litigation setback in the pending litigation.

Although this decision does not involve an arbitration agreement between an employer and a current or former employee, we think the bases for the court's decision are equally applicable to employers and to employment arbitration agreements. Therefore, when a dispute giving rise to a lawsuit against an employer is subject to an arbitration agreement, the employer should consider at the outset of the lawsuit whether to invoke an applicable arbitration agreement and, if so, consider promptly invoking the arbitration agreement. Unreasonable delay or engaging in conduct in the litigation inconsistent with enforcing one's right to arbitrate may well result in a waiver of that right.

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