Stephen Hofer is a licensed attorney who founded Aerlex Law Group (the Group), which specializes in aviation law. In 2008, Hofer was the sole partner of the Group and hired Vicky Boladian as a part-time contract attorney. Hofer and Boladian dispute whether their professional relationship became a romantic relationship between 2011 and 2017.
In 2013, Hofer and Boladian formed Aerlex Tax Services, LLC (the tax LLC), which would provide “tax-related services” to the Group’s clients and “others within the aviation industry.” Hofer had a 55 percent equity interest in the tax LLC; Boladian, a 45 percent interest. In 2017 and 2018, Hofer and Boladian had a falling out, which resulted in litigation. In September 2020, they agreed to settle the pending litigation by executing three agreements: 1) Settlement Agreement, 2) Amended and Restated Operating Agreement for the tax LLC and 3) Amended and Restated Buy-Sell Agreement of the tax LLC. These agreements contained provisions to arbitrate disputes.
In March 2023, Boladian asked Hofer to change the business form of the tax LLC to an LLP to avoid the potential of having a limited liability company engaged in the unauthorized practice of law. In August 2023, Hofer and Boladian dissolved the tax LLC and shifted its assets to Aerlex Tax Services, LLP (the tax LLP)—with the same 55/45 percent split of ownership. Two weeks later, Boladian formed the Boladian Aviation Law Group, APC (BALG). She then withdrew from the tax LLP, removing what she represented to be 45 percent of the physical office furniture and nearly all of the tax LLP’s clients.
On September 19, 2023, Hofer sent Boladian a letter exploring a possible settlement before “commencing formal litigation” and asserting his “free[dom] to seek a judicial resolution” of their disputes. The parties discussed mediation, but could not agree on a mediator.
On October 16, 2023, Hofer, the Group, the tax LLC and the tax LLP (collectively, the Hofer plaintiffs) filed a lawsuit against Boladian and BALG. The Hofer plaintiffs alleged 13 causes of action and sought compensatory damages, injunctive and equitable relief, treble damages, punitive damages, and attorney fees. Although Hofer had, prior to filing the complaint, “agree[d] to file in arbitration” if Boladian consented to BALG participating in arbitration, the Hofer plaintiffs in the complaint nowhere mentioned arbitration under any of the three agreements and did not pray for an order compelling arbitration.
On October 31, 2023, the Hofer plaintiffs applied ex parte for a temporary restraining order (TRO) seeking to prevent Boladian and BALG from performing any work for the clients of the tax LLP or the Group, from using any of the tax LLP’s employees, and from removing or using any tangible property or data taken from the tax LLP. Nowhere in the application did they mention arbitration under any of the agreements. The trial court denied the application
On November 16, 2023, the Hofer plaintiffs moved for a preliminary injunction, trying to remedy the defects with their earlier TRO application. Once again, the Hofer plaintiffs argued their lawsuit had merit and nowhere mentioned arbitration.
In the midst of these motions, the Hofer plaintiffs inquired whether Boladian and BALG would “be seeking to move this case into arbitration”; counsel responded that they had “no plans” to do so and this communication shed no light on the Hofer plaintiffs’ intent to do so.
On December 8, 2024 (while the Hofer plaintiffs’ motion for a preliminary injunction was still pending), Boladian and BALG demurred to nine of the 13 causes of action. On January 29, 2024, the Hofer plaintiffs propounded a total of 734 discovery requests to Boladian and BALG. The Hofer plaintiffs also subpoenaed a number of third- party witnesses for depositions in February 2024. They also noticed the deposition of Boladian for March 2024.
In anticipation of the case management conference, the Hofer plaintiffs on March 14, 2024, filed a case management statement. In some respects, the Hofer plaintiffs’ case management statement acknowledged the possibility arbitrating the dispute. The Hofer plaintiffs also posted their jury fees.
On April 23, 2024, Boladian filed a cross-complaint against Hofer and the Group, alleging five causes of action. On April 26, 2024—more than six months after filing their complaint and more than four months after the denial of the preliminary injunction, but just three days after the filing of the cross-complaint – the Hofer plaintiffs filed a motion to compel arbitration, invoking the arbitration clauses in the settlement agreement, amended operating agreement, and amended buy-sell agreement.
The trial court denied the motion to arbitrate ruling that the Hofer plaintiffs had waived their right to compel arbitration. Applying the waiver standard articulated in St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, the court found “that [the Hofer plaintiffs] waived the right to arbitrate by filing suit in this court and substantially and vigorously litigating it for over seven months,” concluding that this conduct was “fundamentally incompatible with the expediency, efficiency, and cost- effectiveness associated with utilizing arbitration” and that this conduct “prejudiced” Boladian and BALG.
The Court of Appeal affirmed the trial court’s order in the published case of Hofer v. Boladian CA2/5 – B339542 (May 2025).
Under the California Arbitration Act (Code Civ. Proc., § 1280 et seq.) (the Act), a party with a contractual “right to compel arbitration” of a dispute may “waive[]” that right. (§ 1281.2, subd. (a).) In Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562 (Quach), – decided a month after the trial court’s ruling – the Supreme Court overruled the arbitration-specific definition of waiver embraced in St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187 (St. Agnes) in favor of the “generally applicable” definition of waiver. (Quach, at p. 578.)
St. Agnes’s arbitration-specific definition of waiver called upon trial courts to evaluate six different factors – namely, “‘“(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place’; and (6) whether the delay ‘affected, misled or prejudiced’ the opposing party.”’” (Id. at p. 1196.)
“Quach applies retroactively to this direct appeal.” Quach held that a waiver occurs under the Act if, by clear and convincing evidence, it is shown that a party has “intentionally relinquished or abandoned” its known right to compel arbitration. (Id. at pp. 569, 584.)
“In this case, the litigants seeking to compel arbitration initiated this lawsuit by filing a complaint in court and, while in the judicial forum, sought two forms of preliminary injunctive relief, opposed a demurrer, propounded more than 700 discovery requests, demanded a jury trial in their case management conference statement and represented they would be litigating substantive motions, and posted jury fees. It was not until the opposing party filed a cross-complaint that the litigants filed the motion to compel arbitration – more than six months into the litigation in court.”
The litigants’ conduct in this case constitute a waiver under Quach.