Whose Duty Is It to Initiate Arbitration? A California Appellate Court Weighs In

When courts compel arbitration, what happens next is sometimes taken for granted. Who is responsible for actually filing the arbitration demand? Is it the party who sought arbitration in court, or the party who would otherwise be the claimant under the arbitration clause? A recent California appellate decision sheds new light on this question, clarifying a procedural gap that can significantly affect how and when arbitration actually begins.

In Arzate v. ACE American Insurance Company, a California Court of Appeal addressed precisely this issue. The court concluded that when an arbitration agreement requires the plaintiff to initiate arbitration, it is indeed the plaintiff’s responsibility to take that step—even after the court has compelled arbitration. If the plaintiff fails to do so, the defendant cannot be deemed to have waived its right to arbitrate simply by waiting.

The case serves as a reminder that arbitration is not self-executing. Once litigation is stayed or dismissed in favor of arbitration, someone must take the affirmative step of starting the arbitration process. And the responsibility to do so usually rests with the party asserting the claim.

To read the case, click here.

The Case: Arzate v. ACE American Insurance Company

The case arose out of a wage-and-hour dispute. The plaintiffs had signed arbitration agreements with their employer that required claims to be resolved through binding arbitration. ACE American Insurance Company was named as a defendant, and after a motion to compel arbitration was granted, the trial court stayed the litigation proceedings.

However, neither side initiated the arbitration itself.

After a significant delay, the court attempted to lift the stay and proceed with the case. The plaintiffs argued that ACE had effectively waived its right to arbitrate by failing to initiate the arbitration, especially since ACE had been the party seeking arbitration in the first place.

The trial court agreed. It found that ACE had a duty to commence arbitration proceedings once the case was stayed. On appeal, however, the Court of Appeal reversed that decision.

The Holding: Initiation Duties Follow the Contract

The appellate court reviewed the language of the arbitration agreement and noted that it expressly stated the employee (i.e., the plaintiff) was to submit any claims to arbitration. The contract did not impose any obligation on the employer to file a demand on the plaintiff’s behalf.

Thus, the court held that ACE had not waived its right to arbitration by waiting. There was no breach of the arbitration agreement and no procedural default. ACE had complied with the agreement by seeking and obtaining a court order compelling arbitration. It was then up to the plaintiffs to take the next step and file the arbitration claim.

The court summarized its position clearly:

“ACE did not breach the arbitration agreements or waive its right to arbitration by failing to submit the plaintiffs’ claims for them.”

Key Takeaways for Litigators and In-House Counsel

This ruling offers valuable insights for anyone navigating arbitration in consumer or employment settings, particularly where plaintiffs and defendants have asymmetric procedural obligations. Several important lessons emerge:

1. Read the Agreement Closely

Arbitration clauses often include procedural guidance—who files, where to file, what rules apply. If the agreement assigns the obligation to initiate arbitration to one party, that provision will likely be enforced.

2. Motions to Compel Are Not Enough

Litigants who seek to compel arbitration should be clear about what happens next. Courts do not automatically trigger the arbitration process. The dispute must be filed with the designated arbitration provider, usually requiring a written demand, filing fee, and notice.

3. Plaintiffs Should Not Wait Passively

If the agreement requires the claimant to initiate arbitration, then failing to do so may result in unnecessary delays or even dismissal for failure to prosecute. Plaintiffs who secure a stay based on arbitration must be prepared to take the procedural steps necessary to advance their claims.

4. Waiver Is Not Easily Found

The court’s opinion reinforces that waiver of the right to arbitrate is not lightly inferred. Simply failing to file arbitration after a stay is issued—without more—will not be sufficient to establish waiver. Evidence of prejudice, delay, or inconsistent conduct is typically required.

Implications for Consumer Arbitration Agreements

Although Arzate arose in an employment context, the decision has implications for consumer cases as well. In consumer arbitration agreements, it is increasingly common for contracts to designate the consumer as the “claimant” and require them to initiate arbitration. This can be especially significant in mass arbitration settings, where dozens or hundreds of claims are filed simultaneously.

Defendants in these cases may be reluctant to initiate arbitration, particularly when fees scale with the number of claims. Consumers and their counsel, in turn, must be attentive to contract language and procedural rules to ensure that claims are initiated timely and in accordance with the agreement.

This decision also underscores the importance of clarity and consistency in drafting arbitration clauses. Businesses should consider whether initiation responsibilities are clearly assigned and whether internal processes align with those obligations.

A Practical Lesson for Counsel

Litigators and corporate counsel should take a proactive approach when an arbitration agreement is in play. Questions to ask include:

• Does the agreement specify who initiates arbitration?

• Has the proper party been informed of that obligation?

• Is there a deadline or tolling provision?

• Are all parties aligned on the provider and rules?

When possible, build a post-order checklist to confirm that the next procedural steps are taken promptly. This can help avoid unnecessary delays, judicial confusion, or claims of waiver.

Unlocking Solutions for Procedural Gaps in Arbitration

As courts continue to clarify the mechanics of arbitration enforcement, it becomes increasingly important to anticipate not just whether arbitration will be compelled—but what happens after. Knowing who bears the duty to initiate proceedings and acting accordingly can prevent disputes from stalling or being re-litigated in court.

At Nationwide ADR, experience in arbitration, mediation, and early procedural analysis helps parties avoid these pitfalls. Whether enforcing arbitration clauses, managing mass consumer filings, or conducting early neutral evaluation, the focus remains on Unlocking Solutions for Demanding Cases.

To learn more about procedural strategy in arbitration or schedule a consultation, visit NationwideADR.com.