Areli Gastelum v. Medical Referral Network International dba ESP Personnel, et al.

(Spring Street Courthouse: Dept. 11) August 24, 2026 DEPARTMENT 11 LAW AND MOTION RULINGS

Tentative Ruling Re: Motion for Leave to Amend Answer Date: 8/24/26 Time: 11:00 am Moving Party: California Rehabilitation Institute, LLC ("CRI") Opposing Party: Areli Gastelum ("Plaintiff") Department: 11 Judge: Bruce G. Iwasaki ________________________________________________________________________

Plaintiff's evidentiary objections are overruled. CRI's motion for leave to amend answer is granted.

BACKGROUND

Plaintiff is a traveling nurse. Medical Referral Network International dba ESP Personnel ("ESP") is a staffing agency. ESP placed Plaintiff to work at CRI. The operative complaint ("FAC") alleges that ESP and CRI subjected Plaintiff and other current and former employees to numerous wage-and-hour violations. Plaintiff admits that her action is intended to be an extension of a federal case called Romero v. CRI. In Romero, the district court certified a class consisting of CRI's direct employees. Plaintiff's action is brought on behalf of all staffing-agency employees who were provided to CRI. She claims the staffing agencies and CRI jointly employed the staffing-agency employees.

On March 20, 2026, Judge David S. Cunninghamm III, now retired, heard Plaintiff's motion for class certification. As to ESP, he denied the motion in full. (See 3/20/26 Minute Order, pp. 1-2.) As to CRI, he denied the motion in part, continued the hearing in part, and ordered supplemental briefing. (See id. at pp. 2-3.) [1]

On May 21, 2026, CRI filed a motion for leave to amend its answer to add an arbitration-related affirmative defense. On June 1, 2026, the Court vacated the continued hearing on the certification motion, reasoning that the motion for leave to amend should be heard first. (See 6/1/26 Minute Order, p. 1.)

Here, the Court considers the motion for leave to amend.

DISCUSSION

Arguments

CRI

CRI contends: * California's "liberal policy of allowing amendments" supports granting the motion. (Motion, p. 8, bolding and capitalizing deleted; see also id. at p. 9.) * CRI "did not waive an affirmative defense based on the arbitration agreements." (Id. at p. 9, bolding and capitalizing deleted; see also id. at pp. 10-12 [arguing that (1) "any delay in bringing the motion to compel arbitration until the class was certified to include parties to the arbitration agreement cannot constitute a waiver by the company[,]" (2) prior to preparing the opposition to class certification, CRI "was not aware of the extent that putative staffed class members signed arbitration agreements with their respective staffing agencies[,]" and (3) Sierra Pacific Industries Wage and Hour Cases (2025) 116 Cal.App.5th 1038 (" Sierra Pacific ") and Avery v. TEKsystems, Inc. (9th Cir. 2026) 165 F.4th 1219 are distinguishable].) * CRI "can enforce the arbitration agreements between staffing agencies and putative class members." (Id. at p. 12, bolding and capitalizing deleted [claiming CRI can enforce the agreements as a third-party beneficiary and under the doctrine of equitable estoppel]; see also id. at p. 13.) * Plaintiff will not suffer prejudice. (See id. at pp. 13-15.)

Plaintiff

The opposition brief is not posted on eCourt. It appears that Plaintiff failed to file it. Notably, Plaintiff served the opposition on Case Anywhere. While service on Case Anywhere is not a substitute for e-filing on eCourt, the Court did read the brief. Plaintiff asserts: * CRI waived the arbitration defense. (See Opposition, pp. 9-11; see also id. at pp. 2-8.) * "CRI treated ESP employees as putative class members, which is the same waiver conduct condemned in Sierra Pacific." (Id. at p. 11, bolding and capitalizing deleted; see also id. at p. 12.) * "CRI's motion is prejudicial because Plaintiff litigated class notice, discovery, and certification without timely disclosure of the arbitration defense." (Id. at p. 13, bolding and capitalizing deleted.) * "CRI's motion reflects bad faith and dilatory motive" in that "it seeks to revive arbitration only after the Court excluded the agreements as to CRI." (Id. at p. 14, bolding and capitalizing deleted.) * "The proposed amendment is also futile because the Court has already ruled CRI cannot rely on them to oppose certification." (Ibid., bolding and capitalizing deleted.)

Analysis

"An answer should contain whatever affirmative defenses (sometimes referred to as 'new matter') and/or denials that are necessary to controvert the material allegations of the complaint." (Weil & Brown, Cal. Practice Guide: Civ. Procedure Before Trial (The Rutter Group June 2024 Update) P. 6:385.) "Its function is to put the case 'at issue' as to all important matters alleged in the complaint that defendant does not want to admit." (Ibid.) "As with other pleadings, the court may grant leave to amend an answer[.]" (Id. at P. 6:610.1.)

Leave to amend can be granted "at any stage of the action" (id. at P. 6:636) and is "directed to the sound discretion of the judge." (Id. at P. 6:637.) The judge's discretion should "usually be exercised liberally to permit" the amendment. (Id. at P. 6:638, emphasis in original.) Indeed, "[c]ourts usually display great liberality in allowing amendments to answers because 'a defendant denied leave to amend is permanently deprived of a defense.'" (Id. at P. 6:643; see also Howard v. County of San Diego (2010) 184 Cal.App.4 th 1422, 1428 [instructing that "[t]he policy favoring amendment is so strong that it is a rare case in which denial of leave to amend can be justified"].)

The calculus is straightforward. "If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend[.]" (Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530.) If "the refusal also results in a party being deprived of the right to assert . . . a meritorious defense, it is not only error but an abuse of discretion." (Ibid.)

Given these rules, the Court agrees with CRI for at least four reasons. One, California's amendment policy is very liberal. (See Howard, supra, 184 Cal.App.4 th at 1428.) Two, without the amendment, CRI will be "deprived of a defense." (Weil & Brown, supra, at P. 6:643.) Three, the case is still at the certification stage, certification remains undecided, and there is no trial date set. Four, Plaintiff will be free to demur to the amended answer, file a motion to strike, conduct discovery, and/or file a motion for summary adjudication, so the prejudice, if any, will be minimal. These factors weigh in favor of granting the motion.

Plaintiff's waiver argument is unavailing. First, "under the Federal Arbitration Act [('FAA')], a failure to plead arbitration as an affirmative defense is insufficient 'by itself' to constitute waiver[.]" (Guess”, Inc. v. Superior Court (2000) 79 Cal.App.4 th 553, 558; see also Racek Decl., Ex. C [attaching exemplar ESP arbitration agreement; the agreement states that (1) the agreement is between "Employee" and "ESP or any of its officers, employees, directors, agents, affiliates, clients, or representatives[,]" and (2) "this Agreement shall be enforceable under and subject to the Federal Arbitration Act, 9 U.S.C. Sections 1, et seq."], emphasis added.)

Second, the Court's understanding is that Plaintiff did not sign an arbitration agreement, and, since, currently, they are not parties, CRI is unable to move to compel arbitration against the putative members. (See Sky Sports, Inc. v. Superior Court (2011) 201 Cal.App.4 th 1363, 1368-1369 [finding no waiver for failure to move to compel arbitration against putative member prior to certification].)

Third, Sierra Pacific is distinguishable because, there, the waiver determination was made post-certification, and, during class discovery, the defendant "refus[ed] to produce arbitration agreements signed by putative class members, despite being ordered to do so." (Sierra Pacific, supra, 116 Cal.App.5 th at 1043; see also id. at 1053-1061.) [2]

Fourth, CRI's counsel declares under penalty of perjury that CRI learned about the existence of the ESP arbitration agreements "[t]hrough discovery in this action and in preparation to oppose the motion for class certification[.]" (Racek Decl., P. 5; see also id. at P. 8 [discussing arbitration agreements from other unnamed staffing agencies]; Motion, p. 11.)

On balance, the Court finds that these factors do not suffice to establish waiver. (See Sierra Pacific, supra, 116 Cal.App.5 th at 1053 [requiring clear and convincing evidence showing that (1) the defendant "had actual or constructive knowledge of its right to" compel arbitration, and (2) the defendant's "conduct was so inconsistent with an intent to enforce that right as to lead a reasonable factfinder to conclude" that the defendant "had abandoned it"].) Consequently, the motion for leave to amend is granted.

[1] Judge Cunningham heard additional motions. He denied Plaintiff's motion to strike ESP's answer, he granted Plaintiff's motion to exclude arbitration agreements pertaining to CRI, and he denied Plaintiff's motion to exclude settlement releases pertaining to CRI. (See id. at pp. 1-2.)

[2] CRI discusses the Avery case in the moving brief. Plaintiff does not rely on Avery.