GUESS?, INC. v. Superior Court

A defendant answered a complaint but did not allege a right to arbitrate as an affirmative defense, then participated in the discovery process without claiming a right to arbitrate. Three months later, the defendant moved to compel arbitration. The plaintiff cried foul, pointing out that the defendant had known about the arbitration provision at the time this case was filed and served. The trial court said there was no waiver and compelled arbitration. We conclude otherwise on the theory that, in litigation as in life, you can’t have your cake and eat it too.

Facts

Between 1992 and 1994, Guess?, Inc. and Pour le bebe, Inc. (PLB) entered into four license agreements. Guess gave PLB the right to manufacture and sell baby clothes and other items using Guess’s trademarks. PLB agreed to pay royalties to Guess. All.four license agreements had mandatory arbitration provisions.

In 1998, PLB retained Kirkland Messina LLC (an investment banking firm) to “assist PLB in the financial turnaround of PLB, in obtaining financing, and in negotiating the sale of PLB.” Kirkland, in turn, asked Guess to forgive PLB’s obligation to pay royalties that were then due under the license…