Kokubu v. Sudo
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The Court of Appeal affirmed the trial court's order denying appellants' motion to compel arbitration, which they filed more than two years after the lawsuit began. This case arose from a dispute between investors who sought to exploit a Japanese tax incentive promoting wood frame construction.
The court accepted that the master lease agreement (MLA1) contains the operative arbitration provision which would extend to the underlying dispute in the absence of a waiver. The court concluded that the framework for determining when a party has waived its contractual right to arbitrate is firmly established. The court declined appellants' request to declare new rules for, and place new limits on, when a party may be found to have waived its contractual rights to arbitrate. The court found that substantial evidence supports the trial court's finding of waiver under the St. Agnes factors. In this case, appellants took actions inconsistent with the right to arbitrate; appellants substantially invoked the litigation machinery and respondents had substantially invested in the lawsuit when arbitration was invoked; appellants delayed for a long period before seeking a stay; appellants filed a cross-complaint without pursuing a stay; appellants took advantage of judicial discovery procedures not available in arbitration; and appellants' conduct prejudiced respondents.
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