Arbitration Waiver After Discovery in a Sexual Harassment Case: Mitchell v. Lilac Solutions
The Court of Appeal held that an employer waived its right to arbitrate by filing a cross-complaint and pursuing extensive court discovery for three months before moving to compel arbitration. The employer’s argument that a sexual harassment claim forced it to delay was rejected.
- An employer can waive a signed arbitration agreement by how it litigates. After Quach v. California Commerce Club (2024), the question is the employer’s own conduct and intent, and the employee does not have to show harm or prejudice.
- Pleading “we have a right to arbitrate” in an answer or cross-complaint is not enough. The court quoted the rule that a mere announcement of the right to arbitrate does not preserve it; the employer has to act consistently with arbitrating.
- A cross-complaint for affirmative relief, filed without asking to stay the case, plus a broad discovery campaign over three months, supported a waiver finding under the clear-and-convincing standard.
- The timing mattered. The motion to compel came five days after the employees filed an anti-SLAPP motion, which the court said reasonably looked like a litigation countermove.
- The employer’s “EFAA quandary” excuse failed. If it genuinely needed discovery to test the sexual harassment claim before seeking arbitration, it could have asked the court to pause or sequence the case with discovery focused on that claim. Its actual discovery went well beyond that.
- A trial court order that does not cite Quach will still be upheld if the court applied the right principles. Appellate courts presume the judge knew the law.
What Happened
Michael Mitchell, Khiry Crawford, Tyler Echevarria, and Anthony McCune worked for Lilac Solutions, a company that makes technology used in lithium extraction. Each had signed an arbitration agreement on accepting employment. In December 2024 they sued Lilac and five managers in Alameda County Superior Court, alleging exposure to harmful chemicals, wrongful termination, gender and disability discrimination, and sexual harassment. The complaint pleaded thirteen causes of action, five of them under the Fair Employment and Housing Act, and demanded a jury.
Lilac’s answers listed a right to arbitrate as an affirmative defense. But Lilac did not move to compel arbitration. It filed a cross-complaint, then an amended cross-complaint, for trade secret violations. It served extensive discovery on the employees and on third parties and filed a series of procedural motions. On March 13, 2025, the employees filed an anti-SLAPP motion to strike the amended cross-complaint. Five days later, Lilac moved to compel arbitration.
The trial court denied the motion, finding that Lilac had waived its right to arbitrate. Lilac appealed. The Court of Appeal affirmed in a published opinion. (After the order on appeal, the parties stipulated in the trial court to dismiss the individual managers and several claims; the Court of Appeal held those later dismissals had no bearing on whether the order was correct when made.)
Waiver After Quach: The Employer’s Conduct Is What Counts
For two decades California courts decided arbitration waiver under a six-factor test from St. Agnes Medical Center v. PacifiCare of California (2003), which required the employee to show prejudice from the employer’s delay. In Quach v. California Commerce Club, Inc. (2024), the California Supreme Court dropped the prejudice requirement. Waiver is now decided like waiver of any other contract right: the party opposing arbitration must prove by clear and convincing evidence that the other side knew of its right to arbitrate and intentionally relinquished or abandoned it. The inquiry focuses only on the waiving party’s words and conduct.
Lilac argued that the trial court had applied the old test because its order cited pre-Quach cases and never mentioned the clear-and-convincing standard. The Court of Appeal disagreed. The parties had discussed Quach at length at the hearing, the order never mentioned prejudice, and the factors the trial court relied on were ones that remain valid after Quach. Appellate courts presume a trial judge knows and follows the law unless the record shows otherwise.
Because the trial court applied the correct principles, the appeal was reviewed for substantial evidence, not decided fresh. The Court of Appeal still had to be satisfied that the evidence was strong enough to meet the clear-and-convincing standard, and it was.
Three Months of Litigation Was Enough
The court focused on three points. First, Lilac’s conduct was inconsistent with a right to arbitrate. It filed claims of its own seeking affirmative relief without asking to stay the case, and it pursued extensive first-party and third-party discovery. The court acknowledged that a defendant may feel obliged to file a compulsory cross-complaint, but held the problem was the whole pattern of conduct, not the pleadings alone.
Second, Lilac had substantially invoked the litigation machinery before it sought arbitration. The court compared the case to Quach itself, where the employer answered, took discovery, asked for a jury trial, and posted jury fees. Lilac did somewhat less, but the court called the difference a matter of degree.
Third, Lilac used court discovery tools on a large scale. Lilac argued that recent amendments make arbitration discovery the same as court discovery. The court said that did not matter. The point was not whether arbitration offered the same tools, but that Lilac chose to use the court’s.
The “EFAA Quandary” Argument
The federal EFAA lets an employee who alleges sexual harassment or sexual assault choose court over arbitration, and several California decisions hold that one covered claim keeps the entire case out of arbitration. Lilac argued this put it in a bind. It believed the harassment claim was weak, but it could not win a motion to compel until it had discovery to challenge that claim. Waiting, it said, was the responsible thing to do, and penalizing it would force defendants to file doomed motions the moment they are served.
The Court of Appeal assumed, without deciding, that the EFAA applied to the case. It still rejected the argument, because the record did not fit it. Lilac’s discovery went far beyond the harassment claim. It never filed or announced a motion aimed at that claim. And it moved to compel arbitration right after the anti-SLAPP motion, not at any point connected to the harassment claim. The court also pointed out that Lilac had options. It could have asked the court to pause or sequence the case and allow only discovery focused on the harassment allegations. Nothing stopped it from doing that.
The court was careful to say it was not accusing Lilac of bad faith. Parties look for better forums all the time. The problem was Lilac’s change of course after engaging in significant litigation in court.
The Bottom Line
An employer cannot use the courtroom when it suits it and then retreat to arbitration when it does not. Here the employer filed a cross-complaint, served 12 sets of discovery and 11 subpoenas, and moved to compel arbitration only after the employees filed an anti-SLAPP motion. That conduct was clear and convincing evidence that it had given up the right to arbitrate. The case stays in court.
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