Supreme Court of California Justia
Docket No. S111323

St. Agnes v. Pacificare


Filed 12/18/03

IN THE SUPREME COURT OF CALIFORNIA

SAINT AGNES MEDICAL CENTER,
Plaintiff and Respondent,
S111323
v.
) Ct.App.
5
F039699
PACIFICARE OF CALIFORNIA et al.,
Fresno
County
Defendants and Appellants.
Super. Ct. No. 01CECG01243

This matter comes to us after the Court of Appeal reversed an order of the
trial court that denied the petition of defendant PacifiCare of California
(PacifiCare) to compel arbitration. The central issue is whether PacifiCare waived
its contractual right to arbitration pursuant to a clause contained in a health
services contract with plaintiff Saint Agnes Medical Center (Saint Agnes).
Relying on Bertero v. Superior Court (1963) 216 Cal.App.2d 213 (Bertero), the
trial court found that a waiver occurred when PacifiCare filed a separate lawsuit
that purported to repudiate the health services contract. The Court of Appeal
disagreed, finding Bertero unpersuasive in light of subsequent case law.
We agree that Bertero’s analysis is outdated and should be disapproved to
the extent it holds that a party’s repudiation of a contract categorically precludes it
from invoking an arbitration clause therein. We also find that the only reasonable
inference to be drawn from the undisputed facts here is that PacifiCare did not
waive its contractual right to arbitration and that therefore its petition to compel
1



arbitration should have been granted. We affirm the judgment of the Court of
Appeal.
FACTUAL AND PROCEDURAL BACKGROUND
In March 2001, PacifiCare filed a lawsuit in Los Angeles County Superior
Court against Saint Agnes and others to resolve disputes about the parties’
contractual rights and obligations under a health services agreement entered in
1994 (the 1994 HSA) and a second health services agreement entered in June 2000
(the June 2000 HSA).1 PacifiCare’s complaint alleges that the June 2000 HSA is
void ab initio due to a condition subsequent. Among other things, the complaint
seeks a judgment declaring the June 2000 HSA void ab initio and declaring its
rescission, and enforcement of the parties’ rights under the 1994 HSA as if the
June 2000 HSA never existed.
In April 2001, Saint Agnes responded by filing the instant action in Fresno
County against PacifiCare and others, seeking damages and other relief for
PacifiCare’s wrongful conduct in allegedly breaching the June 2000 HSA.
In June 2001, over PacifiCare’s objections, Saint Agnes prevailed on its
motion to transfer the venue of PacifiCare’s Los Angeles lawsuit to Fresno
County.2 Meanwhile, PacifiCare unsuccessfully moved to transfer the venue of
Saint Agnes’s Fresno action to Orange County.
As relevant here, the June 2000 HSA contains a clause providing that
“[a]ny controversy, dispute or claim arising out of the interpretation, performance

1
The parties also refer to a settlement agreement, an amendment to the 1994
HSA, and other instruments that may affect their contractual rights and
obligations.
2
For ease of reference, we will continue to refer to this separate action as the
Los Angeles action or the Los Angeles lawsuit.
2



or breach of this Agreement . . . shall be resolved by binding arbitration at the
request of either party.” The 1994 HSA contains no such clause.
On July 25, 2001, PacifiCare sent a letter to Saint Agnes requesting that
Saint Agnes voluntarily submit seven of the 11 causes of action in its Fresno
complaint to arbitration on the ground that they arose out of the interpretation,
performance or breach of the June 2000 HSA and therefore fell within the scope of
that contract’s arbitration clause. PacifiCare offered, on the same ground, to
arbitrate six of the 14 causes of action in its Los Angeles lawsuit. Saint Agnes
responded it could not agree to arbitration at that time.
On July 31, 2001, some four months after it initiated the Los Angeles
lawsuit, PacifiCare filed a petition to compel arbitration of portions of the Fresno
action and to stay proceedings. PacifiCare grounded its petition in the California
Arbitration Act (Code Civ. Proc., § 1280 et seq.; all further statutory references
are to this code unless otherwise indicated), the Federal Arbitration Act (9 U.S.C.
§ 1 et seq.) (the FAA), and the arbitration clause in the June 2000 HSA. Saint
Agnes opposed arbitration, contending that PacifiCare had waived its right to
invoke arbitration by expressly repudiating the June 2000 HSA and seeking its
judicial rescission on the ground it was void ab initio. Saint Agnes also claimed
that PacifiCare’s delay in seeking arbitration caused it to incur substantial legal
fees and costs with respect to both the Fresno and Los Angeles lawsuits.
The trial court denied the petition to compel arbitration, finding that
PacifiCare’s Los Angeles complaint “show[ed] a clear attempt . . . to repudiate the
June 2000 HSA” and that its filing of suit “was inconsistent with any intent to
invoke arbitration.” Because PacifiCare initiated the Los Angeles action before
seeking to compel arbitration, the trial court concluded that Saint Agnes could
seek relief in the courts, and that once it did so, PacifiCare “may not retract its
repudiation of the contract and insist on arbitration.”
3

The Court of Appeal reversed the trial court’s judgment and remanded with
directions to grant PacifiCare’s petition. Concluding that the record “does not
establish . . . as a matter of law [that] PacifiCare waived its right to compel
arbitration,” the appellate court held the trial court abused its discretion when it
failed to stay proceedings and order arbitration. We granted Saint Agnes’s
petition for review.
DISCUSSION
The Court of Appeal determined the record sufficiently establishes that the
June 2000 HSA involves interstate commerce and therefore falls within the
provisions of the FAA. (See 9 U.S.C. §§ 1, 2.) Saint Agnes does not dispute that
determination, and PacifiCare expressly agrees with it. Although the FAA
generally preempts any contrary state law regarding the enforceability of
arbitration agreements (Rosenthal v. Great Western Fin. Securities Corp. (1996)
14 Cal.4th 394, 405), the federal and state rules applicable in this case are very
similar.
As relevant here, the FAA provides: “A written provision in . . . a contract
evidencing a transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction, or the refusal to perform the
whole or any part thereof . . . shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation of any contract.”
(9 U.S.C. § 2.) A district court, upon being satisfied that the issue in controversy
is arbitrable, “shall on application of one of the parties stay the trial of the action
until such arbitration has been had in accordance with the terms of the agreement,
providing the applicant for the stay is not in default in proceeding with such
arbitration.” (9 U.S.C. § 3.)
In California, section 1281 similarly provides: “A written agreement to
submit to arbitration . . . a controversy thereafter arising is valid, enforceable and
4

irrevocable, save upon such grounds as exist for the revocation of any contract.”
Section 1281.2 provides in relevant part: “On petition of a party to an arbitration
agreement alleging the existence of a written agreement to arbitrate a controversy
and that a party thereto refuses to arbitrate such controversy, the court shall order
the petitioner and the respondent to arbitrate the controversy if it determines that
an agreement to arbitrate the controversy exists, unless it determines that: [¶] (a)
The right to compel arbitration has been waived by the petitioner; or [¶] (b)
Grounds exist for the revocation of the agreement. . . .”
For purposes of this case, there is no dispute that authorized agents of Saint
Agnes and PacifiCare signed the June 2000 HSA on their behalf, and no dispute
that those entities, by signing that contract, agreed to its written terms, including
the arbitration clause.3 The principal question is whether or not PacifiCare waived
its contractual right to arbitration.4 We start by setting forth the rules governing
waiver of arbitration agreements and the appropriate standard of review.

3
We note that the arbitration clause in the June 2000 HSA states it applies to
disputes between Saint Agnes and Priority Health Services (another party to that
contract), and that PacifiCare alleges in the Los Angeles action that the June 2000
HSA was never effectively assigned to PacifiCare. We express no opinion as to
whether these circumstances might establish that PacifiCare failed to show it is a
party to the agreement to arbitrate. Although Saint Agnes raised this point in a
footnote in its reply brief and again at oral argument, it had not petitioned for
review of the issue in challenging the Court of Appeal’s judgment in favor of
PacifiCare. We reject the belated attempt to expand the scope of review at this
juncture.
4
As our decisions explain, the term “waiver” has a number of meanings in
statute and case law. (Engalla v. Permanente Medical Group, Inc. (1997) 15
Cal.4th 951, 982-983 (Engalla).) While “waiver” generally denotes the voluntary
relinquishment of a known right, it can also refer to the loss of a right as a result of
a party’s failure to perform an act it is required to perform, regardless of the
party’s intent to relinquish the right. (Engalla, supra, 15 Cal.4th at p. 983; Platt
Pacific, Inc. v. Andelson
(1993) 6 Cal.4th 307, 315.) In the arbitration context,

(footnote continued on next page)
5



As mentioned, the FAA permits a party to obtain a stay of judicial
proceedings pending arbitration unless such party is “in default” of that right. (9
U.S.C. § 3.) “ ‘Although this principle of “default” is akin to waiver, the
circumstances giving rise to a statutory default are limited and, in light of the
federal policy favoring arbitration, are not to be lightly inferred.’ ”
(Microstrategy, Inc. v. Lauricia (4th Cir. 2001) 268 F.3d 244, 249.) Accordingly,
a party who resists arbitration on the ground of waiver bears a heavy burden (id. at
p. 251; Walker v. J.C. Bradford & Co. (5th Cir. 1991) 938 F.2d 575, 577), and any
doubts regarding a waiver allegation should be resolved in favor of arbitration (see
Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 24-25).
Our state waiver rules are in accord. State law, like the FAA, reflects a
strong policy favoring arbitration agreements and requires close judicial scrutiny
of waiver claims. (Christensen v. Dewor Developments (1983) 33 Cal.3d 778,
782.) Although a court may deny a petition to compel arbitration on the ground of
waiver (§ 1281.2, subd. (a)), waivers are not to be lightly inferred and the party
seeking to establish a waiver bears a heavy burden of proof. (Christensen v.
Dewor Developments, supra, 33 Cal.3d at p. 782; see also Doers v. Golden Gate
Bridge etc. Dist. (1979) 23 Cal.3d 180, 189 (Doers).)
Both state and federal law emphasize that no single test delineates the
nature of the conduct that will constitute a waiver of arbitration. (E.g., Engalla,
supra, 15 Cal.4th at p. 983; Martinez v. Scott Specialty Gases, Inc. (2000) 83

(footnote continued from previous page)

“[t]he term ‘waiver’ has also been used as a shorthand statement for the
conclusion that a contractual right to arbitration has been lost.” (Platt Pacific, Inc.
v. Andelson
, supra, 6 Cal.4th at p. 315.)
6



Cal.App.4th 1236, 1249-1250; Adams v. Merrill Lynch Pierce Fenner & Smith
(10th Cir. 1989) 888 F.2d 696, 701; Burton-Dixie Corp. v. Timothy McCarthy
Construction Co. (5th Cir. 1971) 436 F.2d 405, 408; Brownyard v. Maryland
Casualty Co. (D.S.C. 1994) 868 F.Supp. 123, 126.) “ ‘In the past, California
courts have found a waiver of the right to demand arbitration in a variety of
contexts, ranging from situations in which the party seeking to compel arbitration
has previously taken steps inconsistent with an intent to invoke arbitration
[citations] to instances in which the petitioning party has unreasonably delayed in
undertaking the procedure. [Citations.] The decisions likewise hold that the “bad
faith” or “wilful misconduct” of a party may constitute a waiver and thus justify a
refusal to compel arbitration. [Citations.]’ ” (Engalla, supra, 15 Cal.4th at p. 983,
quoting Davis v. Blue Cross of Northern California (1979) 25 Cal.3d 418, 425-
426.)
In Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, the Court of
Appeal referred to the following factors: “In determining waiver, a court can
consider ‘(1) whether the party’s actions are inconsistent with the right to arbitrate;
(2) whether “the litigation machinery has been substantially invoked” and the
parties “were well into preparation of a lawsuit” before the party notified the
opposing party of an intent to arbitrate; (3) whether a party either requested
arbitration enforcement close to the trial date or delayed for a long period before
seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim
without asking for a stay of the proceedings; (5) “whether important intervening
steps [e.g., taking advantage of judicial discovery procedures not available in
arbitration] had taken place”; and (6) whether the delay “affected, misled, or
prejudiced” the opposing party.’ ” (Sobremonte v. Superior Court, supra, 61
Cal.App.4th at p. 992, quoting Peterson v. Shearson/American Exp., Inc. (10th
7

Cir. 1988) 849 F.2d 464, 467-468.) We agree these factors are relevant and
properly considered in assessing waiver claims.
Generally, the determination of waiver is a question of fact, and the trial
court’s finding, if supported by sufficient evidence, is binding on the appellate
court. (Platt Pacific, Inc. v. Andelson, supra, 6 Cal.4th at p. 319; see also Engalla,
supra, 15 Cal.4th at p. 983.) “When, however, the facts are undisputed and only
one inference may reasonably be drawn, the issue is one of law and the reviewing
court is not bound by the trial court’s ruling.” (Platt Pacific, Inc. v. Andelson,
supra, 6 Cal.4th at p. 319.) In the case before us, the essential facts are not
disputed.
As reflected by its order, the trial court’s waiver finding was based on the
circumstances that (1) by seeking declaratory relief that the June 2000 HSA is
void ab initio, “PacifiCare essentially contends and asserts that [the contract] is
invalid and unenforceable” and (2) although PacifiCare did not initiate the Fresno
action, it initiated the Los Angeles lawsuit and at no time sought to invoke the
contractual right to arbitration before doing so.
Saint Agnes agrees that a waiver occurred, observing that PacifiCare’s
“total repudiation” of the June 2000 HSA, its initiation of the Los Angeles action,
and its attempts to force litigation in the judicial venues it preferred, all amounted
to conduct inconsistent with a right to arbitrate. Saint Agnes also contends the
Court of Appeal erred when it reversed the trial court’s order on the ground that
Saint Agnes had not established prejudice resulting from PacifiCare’s delay in
seeking to compel arbitration.
We address these matters below.
8

A. PacifiCare’s Challenge to the Validity of the June 2000 HSA
The trial court’s order states: “PacifiCare essentially contends and asserts
that the [June 2000] HSA is invalid and unenforceable.” PacifiCare acknowledges
that it seeks to have the June 2000 HSA declared void ab initio and to have the
parties’ rights under the 1994 HSA enforced as if the later contract never existed.
Under the authority of Bertero, supra, 216 Cal.App.2d 213, the trial court
ruled that PacifiCare waived its arbitration rights by repudiating the very contract
from which those rights originated. Bertero, apparently, has never been
disapproved or criticized by any subsequent decision or secondary authority.
In Bertero, an employee and his employer signed a written employment
contract and a written modification of that contract, both of which contained an
arbitration clause. Although they adhered to the contractual terms for several
years, the employer eventually sent the employee a letter claiming the modified
contract was invalid and unenforceable. The employee sued to enforce the
contract and the employer sought to compel arbitration. (Bertero, supra, 216
Cal.App.2d at pp. 214-216.)
Relying on Corbin on Contracts and decisions from other states, Bertero
held that the employer’s repudiation of the entire employment contract deprived it
of any right to rely on any provision of the contract, including its arbitration
clause: “[T]o say in . . . a letter that the contract is ‘invalid and unenforceable’
could mean only that it created no rights or duties which either party could stand
upon.” (Bertero, supra, 216 Cal.App.2d at p. 220.) Bertero rejected the argument
that the letter meant that the employee’s asserted right to contract benefits was
invalid but that the employer’s right to arbitration was not invalid, remarking, “No
more precise and emphatic language could have been chosen to notify Bertero that
the company was declaring its independence without qualification or reservation.
[¶] . . . [¶] . . . When National said ‘the agreement’ was not enforceable, it was
9

saying that the portion relating to arbitration was not enforceable.” (Id. at pp. 220-
221.) “Thus it is not because National has repudiated its promise to pay Bertero’s
salary, but because it has repudiated its promise to arbitrate, that Bertero was
justified in resorting to the courts.” (Id. at p. 221.)
Although Bertero appears to support a waiver finding here, significant
developments in the law have occurred since 1963 when that case was decided.
Both federal and California law now hold that, in the absence of a specific attack
on an arbitration agreement, such agreement generally must be enforced even if
one party asserts the invalidity of the contract that contains it.
Significantly, a few years after Bertero the United States Supreme Court
decided Prima Paint v. Flood & Conklin (1967) 388 U.S. 395 (Prima Paint). That
decision recognized the principle that “except where the parties otherwise
intend—arbitration clauses as a matter of federal law are ‘separable’ from the
contracts in which they are embedded, and that where no claim is made that fraud
was directed to the arbitration clause itself, a broad arbitration clause will be held
to encompass arbitration of the claim that the contract itself was induced by
fraud.” (Prima Paint, supra, 388 U.S. at p. 402, quoting and thereafter adopting
the view of the Second Circuit Court of Appeals.) In concluding that federal
courts may consider a claim of fraud in the inducement of an arbitration clause
itself, but not a claim of fraud in the inducement of the contract generally, the high
court sought to “honor the plain meaning of [the FAA]” and “also the
unmistakably clear congressional purpose that the arbitration procedure, when
selected by the parties to a contract, be speedy and not subject to delay and
obstruction in the courts.” (Prima Paint, supra, 388 U.S. at p. 404.)
The logic of Prima Paint has led many courts, including this one, to hold
that contractual arbitration clauses generally must be enforced where one of the
parties seeks rescission of the entire contract on the basis that it allegedly was
10

induced by fraud, mistake, or duress, or where an alleged breach of a warranty or
other promise justifies the aggrieved party in putting an end to the contract. (E.g.,
Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983)
35 Cal.3d 312, 319, 322-323 [fraudulent inducement claim is subject to
arbitration]; Large v. Conseco Finance Servicing Corp. (1st Cir. 2002) 292 F.3d
49, 53 [mere assertion of statutory right of rescission does not undo obligation to
take rescission claim to arbitration]; Burden v. Check Into Cash of Kentucky, LLC
(6th Cir. 2001) 267 F.3d 483, 489-490 [claim of illegality]; Coleman v. Prudential
Bache Securities, Inc. (11th Cir. 1986) 802 F.2d 1350, 1352 [claims of fraudulent
inducement and coercion]; Mesa Operating Ltd. Partnership v. Louisiana
Intrastate Gas Corp. (5th Cir. 1986) 797 F.2d 238, 244 [claim of illegality]; see
also Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 415,
fn. 8.)
As we explained, the central rationale of Prima Paint was that an
arbitration clause is separable from other portions of a contract, such that fraud in
the inducement relating to other contractual terms does not render an arbitration
clause unenforceable, even when such fraud might justify rescission of the
contract as a whole. (Rosenthal v. Great Western Fin. Securities Corp., supra, 14
Cal.4th at p. 416.) “By entering into the arbitration agreement, the parties
established their intent that disputes coming within the agreement’s scope be
determined by an arbitrator rather than a court; this contractual intent must be
respected even with regard to claims of fraud in the inducement of the contract
generally.” (Ibid.) In light of Prima Paint and its progeny, we disapprove Bertero
v. Superior Court, supra, 216 Cal.App.2d 213, to the extent it holds that a party’s
assertion of the invalidity of an entire contract categorically waives that party’s
right to arbitrate pursuant to a provision in that contract.
11

Here, the June 2000 HSA names PacifiCare and Saint Agnes as contracting
parties and reflects the signatures of both parties’ agents. Neither party challenges
its assent to the June 2000 HSA; nor does either specifically challenge the
arbitration clause contained therein. Indeed, PacifiCare filed a declaration
claiming it had performed its obligations according to the terms of the June 2000
HSA prior to notifying Saint Agnes and others in March 2001 that it considered
the contract terminated due to a condition subsequent. Consequently, the record
makes reasonably clear PacifiCare’s position that it could properly view the June
2000 HSA as terminated or void due to an event transpiring after its effective date.
On this record, Prima Paint’s recognition of the separable nature of arbitration
agreements compels us to conclude that the arbitration clause in the June 2000
HSA is sufficient to require arbitration of Saint Agnes’s claims relating to that
contract.
Seizing on PacifiCare’s allegations in the Los Angeles lawsuit that the June
2000 HSA is void ab initio and PacifiCare’s concession that it seeks damages for
breach of the 1994 HSA as if the later contract never existed, Saint Agnes argues
this situation falls within an exception to the Prima Paint line of cases.
Specifically, Saint Agnes points to authorities holding or recognizing that because
arbitration is a matter of contract, a party cannot be required to submit to
arbitration any dispute that it did not agree to so submit. (E.g., Rosenthal v. Great
Western Fin. Securities Corp., supra, 14 Cal.4th 394; Banner Entertainment, Inc.
v. Superior Court (1998) 62 Cal.App.4th 348; Sandvik AB v. Advent International
Corp. (3d Cir. 2000) 220 F.3d 99; Three Valleys Municipal Water District v. E.F.
Hutton & Co., Inc. (9th Cir. 1991) 925 F.2d 1136.) In those cases, the issue was
not whether the underlying contract was merely voidable, but rather whether any
contract had ever existed. (Rosenthal v. Great Western Fin. Securities Corp.,
supra, 14 Cal.4th at pp. 416-417 [parties opposing arbitration claimed contracts
12

were void for fraud in their execution or inception]; Banner Entertainment, Inc. v.
Superior Court, supra, 62 Cal.App.4th at pp. 358-361 [while evidence showed
plaintiff’s oral agreement to specified dealings with defendant, it failed to show
any agreement, oral or otherwise, to arbitrate]; Sandvik AB v. Advent International
Corp., supra, 220 F.3d at p. 100 [party moving for arbitration alleged that
individual who signed agreement on its behalf lacked authority to do so]; Three
Valleys Municipal Water District v. E.F. Hutton & Co., Inc., supra, 925 F.2d at p.
1138 [party resisting arbitration claimed contract was invalid because
unauthorized individual signed it].)
The decisions Saint Agnes cites have a logical rationale: If a party can
show that it did not know it was signing a contract, or that it did not enter into a
contract at all, both the contract and its arbitration clause are void for lack of
mutual assent. (See Rosenthal v. Great Western Fin. Securities Corp., supra, 14
Cal.4th at pp. 416-417; Banner Entertainment, Inc. v. Superior Court, supra, 62
Cal.App.4th at pp. 358-359; Sandvik AB v. Advent International Corp., supra, 220
F.3d at pp. 106-108; Three Valleys Municipal Water District v. E.F. Hutton & Co.,
Inc., supra, 925 F.2d at pp. 1140-1141.) But that rationale has no application here
because, notwithstanding PacifiCare’s use of certain legal terminology, neither
PacifiCare nor Saint Agnes denies its knowing and voluntary agreement to the
June 2000 HSA and the terms it contained. Moreover, PacifiCare’s petition to
compel arbitration reflects its apparent position that it considered itself bound to
perform under the June 2000 HSA at least until March 2001, when it notified Saint
Agnes that the contract was terminated. Accordingly, this is not a case where
mutual assent to the subject contract and its terms was lacking.
In sum, we conclude that PacifiCare’s legal challenge to the validity of the
June 2000 HSA is not inconsistent with an intent to invoke arbitration pursuant to
13

that contract. Contrary to Saint Agnes’s contentions, PacifiCare’s repudiation as
such does not amount to a waiver of its contractual arbitration rights.
B. PacifiCare’s Initiation of the Los Angeles Lawsuit
Doers, supra, 23 Cal.3d 180, held that the mere filing of a lawsuit does not
waive contractual arbitration rights. (Doers, at pp. 185-188; see also Kalai v.
Gray (2003) 109 Cal.App.4th 768, 774; Johnson v. Siegel (2000) 84 Cal.App.4th
1087, 1099; accord, Merrill Lynch, Pierce, Fenner & Smith v. Lecopulos (2d Cir.
1977) 553 F.2d 842, 845; Chatham Shipping Co. v. Fertex Steamship Corp. (2d
Cir. 1965) 352 F.2d 291, 293; Realco Enterprises, Inc. v. Merrill Lynch, Pierce,
Fenner & Smith (S.D.Ga. 1990) 738 F.Supp. 515, 518-519, and cases cited
therein.) Although Doers phrased the issue as one of “waiver,” we more recently
characterized the critical issue there as “whether a party’s filing of a lawsuit in the
face of an agreement to arbitrate was conduct so inconsistent with the exercise of
the right to arbitration as to constitute an abandonment of that right.” (Platt
Pacific, Inc. v. Andelson, supra, 6 Cal.4th at p. 318.)
In finding that the filing of a lawsuit, without more, does not result in a
waiver (and is not so inconsistent with the exercise of the right to arbitration as to
constitute an abandonment of that right), Doers disapproved several Court of
Appeal decisions that had misinterpreted other precedents holding only that waiver
occurs when the parties have litigated the merits of the arbitrable dispute. (Doers,
supra, 23 Cal.3d at pp. 185-188.) Doers reiterated the rule that a waiver generally
does not occur where the arbitrable issues have not been litigated to judgment.
(Id. at p. 188.)
Here, PacifiCare did not initiate the instant Fresno action, in which it seeks
to compel arbitration. PacifiCare did, however, initiate the Los Angeles action to
have the June 2000 HSA declared void ab initio and to enforce its rights under the
14

1994 HSA, a contract that contains no arbitration clause and that allegedly governs
the parties’ rights and obligations if the June 2000 HSA were to be found
unenforceable. Significantly, Saint Agnes’s arbitrable causes of action have not
been litigated to judgment or judicially addressed on their merits. Consistent with
Doers, we conclude that PacifiCare’s mere filing of the Los Angeles action did not
constitute a waiver of its right under the June 2000 HSA to seek arbitration in this
Fresno action. (Accord, American Recovery Corp. v. Computerized Thermal
Imaging, Inc. (4th Cir. 1996) 96 F.3d 88, 95-96; Lawrence v. Comprehensive
Business Services Co. (5th Cir. 1987) 833 F.2d 1159, 1164-1165; cf. Christensen
v. Dewor Developments, supra, 33 Cal.3d at pp. 783-784 [waiver found where
plaintiff knew of existence of arbitration clause and arbitrability of its claims, but
filed suit without first demanding arbitration and pursued litigation through several
demurrers for admitted purpose of obtaining verified pleadings from defendants
that would reveal their legal theories, resulting in lost evidence].)
Charles J. Rounds Co. v. Joint Council of Teamsters No. 42 (1971) 4
Cal.3d 888 (Charles J. Rounds) does not compel us to hold otherwise. In that
case, the trial court had dismissed a plaintiff employer’s contract action against a
defendant union on the ground that the dispute at issue was covered by an
arbitration clause in the agreement. As relevant here, the issue presented was
whether “the relief granted was proper in this case—dismissal of the action—or
whether a stay of judicial proceedings pending arbitration should have been
granted.” (Charles J. Rounds, supra, 4 Cal.3d at p. 894.) We upheld the
dismissal, observing that the only matter in dispute came within the scope of the
arbitration clause, that the plaintiff had never attempted to pursue its arbitration
remedy despite the defendant’s efforts to obtain arbitration, and that because the
plaintiff sought relief that traditionally was within an arbitrator’s power to award,
15

dismissal of the action, rather than a mere stay of proceedings, was proper. (Id. at
p. 899.)
Saint Agnes appears to read Charles J. Rounds as precluding any party who
“repudiates” arbitration by filing a lawsuit from ever enforcing its contractual
arbitration rights. In particular, Saint Agnes relies on a passage in Charles J.
Rounds stating that “where the only issue litigated is covered by the arbitration
clause, and where plaintiff has not first pursued or attempted to pursue his
arbitration remedy, it should be held that . . . plaintiff has impliedly waived his
right to arbitrate.” (Charles J. Rounds Co., supra, 4 Cal.3d at p. 899.)
Preliminarily we observe that, to the extent the foregoing passage can be
read to suggest that a party may waive its right to arbitration merely by filing a
lawsuit without first requesting arbitration, our holding to the contrary in Doers,
supra, 23 Cal.3d 180, controls. (See Kalai v. Gray, supra, 109 Cal.App.4th at p.
774.) But Charles J. Rounds held only that dismissing the judicial action there, as
opposed to staying it, was appropriate because the sole issue in dispute was
properly subject to arbitration. Viewed in context, Charles J. Rounds provides no
support for denying arbitration of arbitrable claims in an action where, as here, the
party seeking arbitration did not file the lawsuit in which arbitration is sought, but
had initiated a separate lawsuit containing nonarbitrable causes of action.5 (See
Charles J. Rounds, supra, 4 Cal.3d at pp. 898-899.)
Nor can Saint Agnes credibly claim that PacifiCare waived its contractual
right to arbitration by unequivocally refusing to arbitrate. (See Local 659,

5
As indicated earlier, PacifiCare’s nonarbitrable causes of action seek
damages and/or other relief against Saint Agnes and other parties arising out of the
1994 HSA and other instruments having no arbitration clause but potentially
affecting the parties’ rights and obligations if the June 2000 HSA is not enforced.
16



I.A.T.S.E. v. Color Corp. Amer. (1956) 47 Cal.2d 189 [waiver and repudiation
found where plaintiff refused defendant’s repeated demands to comply with a
contractual arbitration clause].) As the record discloses, Saint Agnes never
requested arbitration of the Fresno and the Los Angeles actions; Saint Agnes, in
fact, rebuffed PacifiCare’s informal request and offer to arbitrate before the instant
petition to compel arbitration was filed.
C. Prejudice from Participating in Litigation
More than two decades ago, we observed that “[u]nder federal law, it is
clear that the mere filing of a lawsuit does not waive contractual arbitration rights.
The presence or absence of prejudice from the litigation of the dispute is the
determinative issue under federal law.” (Doers, supra, 23 Cal.3d at p. 188, fn.
omitted, relying on Merrill Lynch, Pierce, Fenner & Smith v. Lecopulos, supra,
553 F.2d at p. 845; Demsey & Associates v. S.S. Sea Star (2d Cir. 1972) 461 F.2d
1009, 1018; Chatham Shipping Co. v. Fertex Steamship Corp., supra, 352 F.2d at
p. 293.) Our review of more recent federal authorities discloses that this rule
remains largely intact.6

6
(E.g., Creative Solutions Group, Inc. v. Pentzer Corp. (1st Cir. 2001) 252
F.3d 28, 32; American Recovery Corp. v. Computerized Thermal Imaging, Inc.,
supra, 96 F.3d at pp. 95-96; Walker v. J.C. Bradford & Co., supra, 938 F.2d at p.
577; Fisher v. A.G. Becker Paribas Inc. (9th Cir. 1986) 791 F.2d 691, 694; Rush v.
Oppenheimer & Co.
(2d Cir. 1985) 779 F.2d 885, 887; Tenneco Resins, Inc. v.
Davy Int’l, AG
(5th Cir. 1985) 770 F.2d 416, 420-422; Creative
Telecommunications, Inc. v. Breeden
(D. Hawaii 1999) 120 F.Supp.2d 1225,
1232; Realco Enterprises, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
supra, 738 F.Supp. at p. 518; cf. Cabinetree of Wisconsin, Inc. v. Kraftmaid
Cabinetry, Inc.
(7th Cir. 1995) 50 F.3d 388, 390 [admittedly taking “the minority
position” in holding that prejudice is not required to find waiver of right to
arbitrate].)
17



In California, whether or not litigation results in prejudice also is critical in
waiver determinations. (Keating v. Superior Court (1982) 31 Cal.3d 584, 605,
disapproved on other grounds, Southland Corp. v. Keating (1983) 465 U.S. 1;
Doers, supra, 23 Cal.3d at pp. 188-189; Davis v. Continental Airlines, Inc. (1997)
59 Cal.App.4th 205, 212.) That is, while “ ‘[w]aiver does not occur by mere
participation in litigation’ ” if there has been no judicial litigation of the merits of
arbitrable issues, “ ‘ “waiver could occur prior to a judgment on the merits if
prejudice could be demonstrated.” ’ ” (Christensen v. Dewor Developments,
supra, 33 Cal.3d at p. 782).
Because merely participating in litigation, by itself, does not result in a
waiver, courts will not find prejudice where the party opposing arbitration shows
only that it incurred court costs and legal expenses. (See Groom v. Health Net
(2000) 82 Cal.App.4th 1189, 1197 [mere expense of responding to motions or
other preliminary pleadings filed in court is not the type of prejudice that bars a
later petition to compel arbitration]; accord, Crysen/Montenay Energy Co. v. Shell
Oil Co. (2d Cir. 2000) 226 F.3d 160, 163.)
Rather, courts assess prejudice with the recognition that California’s
arbitration statutes reflect “ ‘a strong public policy in favor of arbitration as a
speedy and relatively inexpensive means of dispute resolution’ ” and are intended
“ ‘to encourage persons who wish to avoid delays incident to a civil action to
obtain an adjustment of their differences by a tribunal of their own choosing.’ ”
(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) Prejudice typically is found
only where the petitioning party’s conduct has substantially undermined this
important public policy or substantially impaired the other side’s ability to take
advantage of the benefits and efficiencies of arbitration.
For example, courts have found prejudice where the petitioning party used
the judicial discovery processes to gain information about the other side’s case that
18

could not have been gained in arbitration (e.g., Berman v. Health Net (2000) 80
Cal.App.4th 1359, 1366; Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th
553, 558; Davis v. Continental Airlines, Inc., supra, 59 Cal.App.4th at p. 215);
where a party unduly delayed and waited until the eve of trial to seek arbitration
(e.g., Sobremonte v. Superior Court, supra, 61 Cal.App.4th at pp. 995-996); or
where the lengthy nature of the delays associated with the petitioning party’s
attempts to litigate resulted in lost evidence (e.g., Christensen v. Dewor
Developments, supra, 33 Cal.3d at p. 784).
The record in this case does not reflect that the parties have litigated the
merits or the substance of Saint Agnes’s arbitrable claims, or that any discovery of
those claims has occurred. Nor is there any indication that PacifiCare used the
Los Angeles and Fresno actions to gain information about Saint Agnes’s case that
otherwise would be unavailable in arbitration.7 Finally, there appears no claim
that PacifiCare’s actions have impaired Saint Agnes’s ability to have the arbitrable
disputes in this action resolved fairly through arbitration.
Saint Agnes, however, claims it has been prejudiced because it incurred
substantial costs and expenses in opposing PacifiCare’s motion to change venue in
this action, as well as PacifiCare’s unsuccessful attempt to block a venue change
to Fresno in its Los Angeles action.8 This claim is not well taken.

7
With regard to discovery, we note that the June 2000 HSA reflects the
parties’ agreement that “[c]ivil discovery for use in such arbitration may be
conducted in accordance with the provisions of California law, and the
arbitrator(s) selected shall have the power to enforce the rights, remedies, duties,
liabilities and obligations of discovery by the imposition of the same terms,
conditions and penalties as can be imposed in like circumstances in a civil action
by a court of competent jurisdiction of the State of California.”
8
Although Saint Agnes submitted two declarations generally referring to the
“substantial” and “significant” legal fees and costs it incurred, the declarations

(footnote continued on next page)
19



Although we have found no California or United States Supreme Court
decisions on point, other courts that have addressed this issue hold that a
petitioning party does not waive its arbitration rights merely by seeking to change
judicial venue of an action prior to requesting arbitration. (E.g., American Heart
Disease Prevention Foundation, Inc. v. Hughey (4th Cir. Feb. 4, 1997, No. 96-
1199) 1997 WL 42714, p. *5; Thompson v. Skipper Real Estate Co. (Ala. 1999)
729 So.2d 287, 292-293; but see R.W. Roberts Construction Co., Inc. v. Masters &
Co., Inc. (Fla.Dist.Ct.App. 1981) 403 So.2d 1114, 1115 [upholding trial court’s
waiver finding without addressing the matter of prejudice].) In so holding, those
courts reason that a party is not required to litigate the issue of arbitration in an
improper or inconvenient venue, and that a party’s position on venue does not
necessarily reflect a position on arbitrability. We agree with that reasoning, and
find it consistent with California and federal case law holding that a waiver
determination requires the consideration of all circumstances, including the
absence or presence of prejudice.
Under the foregoing authorities, PacifiCare did not waive or otherwise
forfeit its contractual arbitration rights by seeking to transfer venue of the Fresno
action or by opposing a venue change of the Los Angeles action. Although
PacifiCare did not prevail on its venue positions, there has been no finding that it
acted wrongly in asserting them. Moreover, both the Los Angeles and Fresno
lawsuits involve nonarbitrable causes of action that belong in court; this

(footnote continued from previous page)

provided no details as to specific dollar amounts or time spent on the venue
matters. Other documents in the record, however, indicate that Saint Agnes
incurred at least $4,460 on venue-related matters in the Los Angeles action.
20



circumstance further reinforces the conclusion that PacifiCare’s efforts to secure a
particular judicial venue for each action are not so inconsistent with the exercise of
the right to arbitration as to constitute a waiver of that right.
Because PacifiCare’s venue-related efforts do not support an inference of
waiver, it follows logically that the costs and expenses Saint Agnes incurred in
responding to such efforts likewise do not support a finding of waiver or prejudice.
(See Becker v. DPC Acquisition Corp. (S.D.N.Y. May 30, 2002, No. 00—Civ.
1035) 2002 WL 1144066, p. *13.)9

9
Saint Agnes additionally makes an estoppel claim based on the same facts
that predicate its claim of waiver. We reject this claim. As explained above,
PacifiCare may properly invoke the arbitration clause while simultaneously
contending the June 2000 HSA is not enforceable. Moreover, we cannot say that
PacifiCare should be estopped from asserting its arbitration rights based on its
filing of the Los Angeles lawsuit and its venue efforts in the two actions because,
among other things, both actions contain nonarbitrable claims.
21



CONCLUSION AND DISPOSITION
When the facts are undisputed and only one inference may reasonably be
drawn, the issue of waiver is one of law and the reviewing court is not bound by
the trial court’s ruling. (Platt Pacific, Inc. v. Andelson, supra, 6 Cal.4th at p. 319.)
Here, the only reasonable inference we can draw from the record and its
undisputed facts is that PacifiCare did not waive its contractual right to arbitration
under the June 2000 HSA.
The judgment of the Court of Appeal is affirmed.

BAXTER, J.
WE CONCUR:

GEORGE, C.J.
KENNARD, J.
WERDEGAR, J.
CHIN, J.
BROWN, J.
MORENO, J.
22



See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Saint Agnes Medical Center v. PacifiCare of California
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted

XXX 102 Cal.App.4th 647
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S111323
Date Filed: December 18, 2003
__________________________________________________________________________________

Court:

Superior
County: Fresno
Judge: Stephen Joseph Kane

__________________________________________________________________________________

Attorneys for Appellant:

K & R Law Group, Konowiecki & Rank, Peter Roan, Karen S. Fishman, Cameron H. Faber, Samuel J.
Woo; Greines, Martin, Stein & Richland, Timothy T. Coates and Peter O. Israel for Defendants and
Appellants.

Epstein Becker & Green, William A. Helvestine, Michael T. Horan and Elizabeth Arenson for California
Association of Health Plans as Amicus Curiae on behalf of Defendants and Appellants.

__________________________________________________________________________________

Attorneys for Respondent:

Manatt, Phelps & Phillips, Craig J. De Recat, John F. Libby, Seth A. Gold, Jeffrey J. Maurer, Joanna S.
McCallum, Terri D. Keville and Barry S. Landsberg for Plaintiff and Respondent.

Haight, Brown & Bonesteel, Roy G. Weatherup, J. Alan Warfield; Marschak, Shulman, Hodges & Bastian,
Ronald S. Hodges, J. Ronald Ignatuk and Michael S. Kelly for Alfonso G. De Grezia and Malynda A.
De Grezia as Amici Curiae on behalf of Plaintiff and Respondent.


23

Counsel who argued in Supreme Court (not intended for publication with opinion):

Peter O. Israel
Greines, Martin, Stein & Richland
5700 Wilshire Boulevard, Suite 375
Los Angeles, CA 90036
(310) 859-7811

Barry S. Landsberg
Manatt, Phelps & Phillips
11355 Olympic Boulevard
Los Angeles, CA 90064
(31) 312-4000

24


Opinion Information
Date:Docket Number:
Thu, 12/18/2003S111323

Parties
1Saint Agnes Medical Center (Plaintiff and Respondent)
Represented by Barry S. Landsberg
Manatt Phelps & Phillips, LLP
11355 W Olympic Blvd
Los Angeles, CA

2Pacificare Of California (Defendant and Appellant)
Represented by Cameron H. Faber
Parker, Milliken, Clark, O'Hara & Sa Elian
350 S Grand Ave #2100
Los Angeles, CA

3Pacificare Of California (Defendant and Appellant)
Represented by Peter O. Israel
Greines, Martin, Stein, Etal
5700 Wilshire Blvd., Suite 375
Los Angeles, CA

4Pacificare Of California (Defendant and Appellant)
Represented by Karen Susan Fishman
Attorney at Law
350 South Grand Avenue, #2100
Los Angeles, CA

5Pacificare Of California (Defendant and Appellant)
Represented by Peter Michael Roan
Konowiecki & Rank
350 S Grand Avenue, Suite 2100
Los Angeles, CA

6Secure Horizons Usa, Inc. (Defendant and Appellant)
Represented by Timothy T. Coates
Greines, Martin, Stein & Richland LLP
5700 Wilshire Blvd #375
Los Angeles, CA

7Secure Horizons Usa, Inc. (Defendant and Appellant)
Represented by Peter O. Israel
Greines, Martin, Stein, Etal
5700 Wilshire Blvd., Suite 375
Los Angeles, CA

8Secure Horizons Usa, Inc. (Defendant and Appellant)
Represented by Peter Michael Roan
Konowiecki & Rank
Konowiecki & Rank
633 W 5th St #3500
Los Angeles, CA

9California Association Of Health Plans (Amicus curiae)
Represented by Michael Horan
Epstein Becker & Green
2 Embarcadero Ctr #1600
San Francisco, CA

10Degrezia, Alfonso G. (Amicus curiae)
Represented by Roy G. Weatherup
Haight Brown et al LLP
6080 Center Dr #800
Los Angeles, CA

11Degrezia, Alfonso G. (Amicus curiae)
Represented by Ronald Scott Hodges
Marshack Shulman et al LLP
26632 Towne Centre Dr #300
Foothill Ranch, CA

12Degrezia, Malynd A. (Amicus curiae)

Disposition
Dec 18 2003Opinion: Affirmed

Dockets
Nov 8 2002Petition for review filed
  respondent Saint Agnes Medical Center
Nov 14 2002Received Court of Appeal record
  2-doghouses
Dec 2 2002Answer to petition for review filed
  appellant PACIFICCARE OF CALIFORNIA and SECUREHORIZONS USA.,
Dec 11 2002Time extended to grant or deny review
  The time for granting or denying review in the above-entitled matter is hereby extended to and including 2/5/2003, or the date upon which review is either granted or denied.
Dec 17 2002Received letter from:
  Barry S. Landsberg, counsel for respondent (St. Agnes Medical Center) dated 12/16/2002, regarding 12/6/2002 letter by counsel for appellant Pacificare, and amicus letter dated 12/5/02.
Jan 22 2003Letter sent to:
  to all parties enclosing a copy of the order and the Certification of Interested Entities and Persons" form.
Jan 22 2003Received letter from:
  Manatt et al dated 1/21/2003, [Respondent St. Agnes Medical Center]
Jan 22 2003Petition for Review Granted (civil case)
  Votes: George, CJ., Kennard, Baxter, Werdegar, Chin, Brown and Moreno, JJ.
Feb 5 2003Certification of interested entities or persons filed
  aplnt, Pacificate of Calif.,; SecureHorizons, usa
Feb 6 2003Certification of interested entities or persons filed
  by Joanna S. McCallum, Manatt Phelps & Phillips, LLP, counsel for Saint Agnes Medical Center (Plaintiff and Respondent)
Feb 21 2003Opening brief on the merits filed
  respondent, Saint Agnes Medical Center
Mar 24 2003Answer brief on the merits filed
  appellant, Pacificare of California; SecureHorizons
Apr 10 2003Application filed to:
  Barry S. Landsberg [Appellant Saint Agnes Medical Center] dated 4/9/2003, requesting calendar precedence for oral argument.
Apr 10 2003Reply brief filed (case fully briefed)
  by counsel for respondent Saint Agnes Medical Center
May 12 2003Received application to file amicus curiae brief; with brief
  by Calif. Association of Health Plans in support of aplts. Plus one volume of exhibits.
May 14 2003Order filed
  Plaintiff and respondent Saint Agnes Medical Center's motion, under Code of Civil Procedure section 1291.2, for "calendar preference" (see Cal. Rules of Court, rule 19) is granted, as consistent with (1) attention to matters entitled to greater preference by law and (2) application of those provisions of the Internal Operating Practices and Prodedures of the California Supreme Court that may necessarily affect scheduling of the case for oral argument (see Supreme Ct. Intern. Operating Practices & Procedures, sections V, VI).
May 16 2003Permission to file amicus curiae brief granted
  by Calif Association of Health Plans in support of aplts. An answer may be served & filed w/in 20 days.
May 16 2003Amicus Curiae Brief filed by:
  California Association of Health Plans in support of aplts. With one vol of exhibits
Jun 6 2003Response to amicus curiae brief filed
  Respondent Saint Agnes Medical Center to Brief of Amicus Curiae California Association of Health Plans (40k/FedExp)
Jul 2 2003Received application to file amicus curiae brief; with brief
  (Late application) by Alfonso G. De Grezia and Malynda A. De Grezia in support of respondent
Jul 9 2003Permission to file amicus curiae brief granted
  The application of Alfonso G De Grezia and Malynda A. Degrezia for permission to file an amicus curiae brief in support of respondent is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Jul 9 2003Amicus Curiae Brief filed by:
  Alfonso G. De Grezia and Malynda A. De Grezia in support of respondent.
Jul 28 2003Response to amicus curiae brief filed
  counsel for appellants' Pacificare of California, Inc. et al., to a/c brief of The De Griezia Parties'
Jul 30 2003Response to amicus curiae brief filed
  by Respondent (Saint Agnes) to Amicus Brief of Alfonso G. and Malynda A. De Grezia (40k)
Oct 1 2003Case ordered on calendar
  Wednesday, November 5, 2003 @ 9 AM (Sacramento)
Oct 24 2003Supplemental brief filed
  by resp Saint Agnes Medical Center re new authority
Nov 5 2003Cause argued and submitted
 
Dec 18 2003Opinion filed: Judgment affirmed in full
  Court of Appeal Judgment. Opinion by Baxter, J. -- Joined by George, C. J., Kennard, Werdegar, Chin, Brown, Moreno, JJ
Jan 21 2004Remittitur issued (civil case)
 
Jan 28 2004Received:
  Receipt for remittitur from Fifth District, signed for by Lisa Prosser, Deputy Clerk.

Briefs
Feb 21 2003Opening brief on the merits filed
 
Mar 24 2003Answer brief on the merits filed
 
Apr 10 2003Reply brief filed (case fully briefed)
 
May 16 2003Amicus Curiae Brief filed by:
 
Jun 6 2003Response to amicus curiae brief filed
 
Jul 9 2003Amicus Curiae Brief filed by:
 
Jul 28 2003Response to amicus curiae brief filed
 
Jul 30 2003Response to amicus curiae brief filed
 
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website