                                                                           FILED
                           NOT FOR PUBLICATION                              JUL 16 2013

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S. COURT OF APPEALS



                            FOR THE NINTH CIRCUIT


JOSEPH BIERNACKI; RHEALYN                        No. 11-17495
HOLLAND; MARISIA FARMER,
                                                 D.C. No. 3:08-cv-01190-SI
              Plaintiffs - Appellants,

  v.                                             MEMORANDUM*

SERVICE CORPORATION
INTERNATIONAL; SCI FUNERAL
AND CEMETERY PURCHASING
COOPERATIVE, INC.; SCI WESTERN
MARKET SUPPORT CENTER, L.P.,
AKA SCI WESTERN MARKET
SUPPORT CENTER, INC.; JANE D.
JONES; THOMAS RYAN; GWEN
PETTEWAY; CURTIS BRIGGS,

              Defendants - Appellees.


                    Appeal from the United States District Court
                      for the Northern District of California
                      Susan Illston, District Judge, Presiding

                        Argued and Submitted June 10, 2013
                             San Francisco, California




        *
          This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: RIPPLE,** FERNANDEZ, and CALLAHAN, Circuit Judges.

      Plaintiffs, current and former employees of Service Corporation

International, appeal the district court’s denial of their motion to compel individual

arbitration of their wage and hour claims.1 The district court determined that by

filing a putative class action and seeking to compel arbitration after class

certification was denied, the plaintiffs had waived their rights to compel individual

arbitration. Because the defendants have failed to establish that they suffered

prejudice from the plaintiffs’ litigation, we reverse the judgment of the district

court.2

      We review de novo a district court’s determination that a party waived his

right to arbitrate, Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 693 (9th Cir.

1986), and its denial of a motion to compel arbitration, Smallwood v. Allied Van

Lines, Inc., 660 F.3d 1115, 1120 (9th Cir. 2011). Whether the plaintiffs waived

their rights to compel individual arbitration is governed by state law. Cox v. Ocean

View Hotel Corp., 533 F.3d 1114, 1124 (9th Cir. 2008). The defendants bear the

burden of establishing waiver. Under California law, they “must demonstrate (1)

          **
         The Honorable Kenneth F. Ripple, Senior Circuit Judge for the U.S.
Court of Appeals for the Seventh Circuit, sitting by designation.
      1
           The district court’s jurisdiction was based on 28 U.S.C. § 1332.
      2
           Our jurisdiction is based on 9 U.S.C. § 16(a)(1)(C).
                                            2
[the plaintiffs’] knowledge of an existing right to compel arbitration; (2) acts

inconsistent with that existing right; and (3) prejudice to [the defendants] resulting

from such inconsistent acts.” Britton v. Co-op Banking Grp., 916 F.2d 1405, 1412

(9th Cir. 1990).

      To satisfy the prejudice requirement, the defendants offer only that they

were prejudiced because the plaintiffs resorted to litigation. The district court

erroneously determined this to be sufficient, finding that the defendants “met their

burden to show that they were prejudiced by the time and expense of litigating this

case for the past three years.” Bryant v. Serv. Corp. Int’l, 801 F. Supp. 2d 898, 907

(N.D. Cal. 2011). However, under California law, “courts will not find prejudice

where the party opposing arbitration shows only that it incurred court costs and

legal expenses,” “[b]ecause merely participating in litigation, by itself, does not

result in a waiver.” St. Agnes Med. Ctr. v. PacifiCare of Cal., 31 Cal. 4th 1187,

1203, 8 Cal. Rptr. 3d 517, 530, 82 P.3d 727, 738 (Cal. 2003). Rather, sufficient

prejudice “typically is found only where the petitioning party’s conduct has

substantially undermined th[e] important public policy [of favoring arbitration] or

substantially impaired the other side’s ability to take advantage of the benefits and

efficiencies of arbitration.” Id. at 1204.




                                             3
      The defendants have made no such showing here. On the record before us,

we can find no evidence that the defendants suffered any detriment beyond having

to litigate issues related to class certification, nor have the defendants pointed to

any. Therefore, because the defendants have not established that they suffered any

prejudice from the plaintiffs’ decision to file a putative class action and to compel

individual arbitration after class certification was denied, we must reverse the

district court’s finding of waiver and its denial of the plaintiffs’ motion to compel

individual arbitration.

      REVERSED.




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