Judge: Anne Hwang, Case: 23STCV26681, Date: 2024-08-23 Tentative Ruling

Case Number: 23STCV26681    Hearing Date: August 23, 2024    Dept: 32

PLEASE NOTE:   Parties are encouraged to meet and confer concerning this tentative ruling to determine if a resolution may be reached.  If the parties are unable to reach a resolution and a party intends to submit on this tentative ruling, the party must send an email to the Court at sscdept32@lacourt.org indicating that party’s intention to submit.  The email shall include the case number, date and time of the hearing, counsel’s contact information (if applicable), and the identity of the party submitting on this tentative ruling.  If the Court does not receive an email indicating the parties are submitting on this tentative ruling and there are no appearances at the hearing, the Court may place the motion off calendar or adopt the tentative ruling as the order of the Court.  If all parties do not submit on this tentative ruling, they should arrange to appear in-person or remotely.  Further, after the Court has posted/issued a tentative ruling, the Court has the inherent authority to prohibit the withdrawal of the subject motion and adopt the tentative ruling as the order of the Court. 

TENTATIVE RULING

BACKGROUND

On October 31, 2023, Plaintiff Kenneth Schelich (“Plaintiff”) filed a complaint against Defendants Uber Technologies, Inc., Raiser, LLC, Hengrui Fu, and Does 1 to 60 for negligence. Plaintiff alleges that Hengrui Fu (“Fu”) was an Uber driver who accepted Plaintiff’s Uber ride request. When Fu arrived to pick up Plaintiff, he stopped in the middle of the street but refused to allow Plaintiff to enter until he put on a mask. During this time, an unknown vehicle struck Plaintiff. (Complaint, 5.) Plaintiff alleges that Uber Technologies, Inc. and Raiser, LLC negligently hired, trained, supervised, and retained Fu. (Id.)

Defendants Uber Technologies, Inc. and Raiser, LLC (“Uber”) now moves to compel arbitration and to stay the proceedings as to Uber, pending completion of arbitration. Defendant Fu has filed a Notice of Joinder, seeking to also compel arbitration.

Plaintiff opposes and Uber and Fu replies.

LEGAL STANDARD

The Federal Arbitration Act (FAA) governs a motion to compel arbitration when an agreement provides its ‘enforcement’ shall be governed by the FAA. (Victrola 89, LLC v. Jamon Properties 8 LLC (2020) 46 Cal.App.5th 337, 346.) “The FAA ‘declare[s] a national policy favoring arbitration’ of claims that parties contract to settle in that manner.’ [Citation.] Arbitration is a matter of contract, and ‘parties are generally free to structure their arbitration agreements as they see fit.’ [Citation.] However, under the FAA's savings clause, an arbitration agreement is not enforceable if a party establishes a state law contract defense, such as fraud, duress, unconscionability, or illegality.” (Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1006-07.)

Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.¿(9 U.S.C., § 4;¿Chiron Corp. v. Ortho Diagnostics Systems, Inc.¿(9th Cir. 2000) 207 F.3d 1126, 1130.) If the finding is affirmative on both counts, the FAA requires the Court to enforce the arbitration agreement in accordance with its terms. (Simula, Inc. v. Autoliv, Inc.¿(9th Cir. 1999) 175 F.3d 716, 719–720.) ¿

DISCUSSION

Uber moves to compel arbitration on the grounds that Plaintiff agreed to arbitrate by agreeing to its Terms of Service. The agreement reads in pertinent part:

“(a) Agreement to Binding Arbitration Between You and Uber.

Except as expressly provided below in Section 2(b), you and Uber agree that any dispute, claim or controversy in any way arising out of or relating to (i) these Terms and prior versions of these Terms, or the existence, breach, termination, enforcement, interpretation, scope, waiver, or validity thereof, (ii) your access to or use of the Services at any time, (iii) incidents or accidents resulting in personal injury that you allege occurred in connection with your use of the Services (including but not limited to, your use of the Uber Marketplace Platform or the driver version of the Uber App), regardless whether the dispute, claim or controversy occurred or accrued before or after the date you agreed to these Terms, and regardless whether you allege that the personal injury was experienced by you or anyone else; and (iv) your relationship with Uber, will be settled by binding individual arbitration between you and Uber, and not in a court of law. This Agreement survives after your relationship with Uber ends. …

(c) …Notwithstanding any choice of law or other provision in the Terms, the parties agree and acknowledge that this Arbitration Agreement evidences a transaction involving interstate commerce and that the Federal Arbitration Act, 9 U.S.C. § 1 et. Seq. (‘FAA’), will govern its interpretation and enforcement and proceedings pursuant thereto. It is the intent of the parties to be bound by the provisions of the FAA for all purposes, including, but not limited to, interpretation, implementation, enforcement, and administration of this Arbitration Agreement, and that the FAA and applicable arbitration provider’s rules shall preempt all state laws to the fullest extent permitted by law. …”

(Yu Decl. Exh. D, Jan. 17, 2023 Agreement at Section 2.)

First, the FAA governs the agreement according to the explicit terms. (Yu Dec. Ex. D, at Section 2.) Uber presents evidence that Plaintiff signed up for an Uber account on February 26, 2022. (Yu Decl. ¶ 8.) Plaintiff then agreed to Uber’s updated terms (the December 16, 2021 and January 17, 2023 agreements) on March 22, 2022 and April 9, 2023 respectively. (Id. ¶ 12.) Uber states that its records show that on those days, Plaintiff accessed his Uber app and was presented with an in-app blocking pop-up screen regarding the Terms, and clicked the checkbox and tapped the “Confirm” button. (Id.) Following his consent, Plaintiff continued to use the Uber app and access Uber’s services. (Id. ¶ 14.) The in-app blocking pop-up screen precluded use of the Uber app unless the user clicked the checkbox and clicked the large “Confirm” button. (Id. ¶ 10.)  

In opposition, Plaintiff presents no evidence disputing that he agreed to the subject Agreement.

Second, the agreement provides that all disputes and claims between Uber and Plaintiff involving any accidents resulting in personal injury will be resolved by binding arbitration. In opposition, Plaintiff argues the action did not arise out of his use of Uber’s “services” because he had not yet entered Fu’s vehicle when the accident occurred. (Opp., 7.) Instead, Plaintiff contends that Fu would not let him in until he had a mask. As Plaintiff was walking across the street to look for a mask, he was hit.

In reply, Uber contends this is a threshold issue that Plaintiff agreed to let the arbitrator decide in the Agreement’s Delegation Clause. Additionally, Uber points out that Plaintiff never objected to the delegation being unconscionable, and therefore Plaintiff’s claims are reserved for the arbitrator, and not the Court. The Court agrees for the reasons below.

3. Delegation Clause

The enforceability of an arbitration agreement is generally determined by the court. (See¿Aanderud¿v. Superior Court¿(2017) 13 Cal.App.5th 880, 891;¿Ajamian¿v. CantorCO2e, L.P.¿(2012) 203 Cal.App.4th 771, 781.) However, parties may agree to arbitrate gateway questions of arbitrability such as the enforceability of an arbitration agreement and whether claims are covered by the arbitration agreement. (See¿Rent-A-Center, West, Inc. v. Jackson¿(2010) 561 U.S. 63, 68-69;¿Aanderud, supra, 13 Cal.App.5th at 891-92;¿Ajamian, supra, 203 Cal.App.4th at 781.)¿ “To establish this exception, it must be shown by ‘clear and unmistakable’ evidence that the parties intended to delegate the issue to the arbitrator.” (Ajamian, supra, 203 Cal.App.4th at 781 (citing¿First Options of Chicago, Inc. v. Kaplan¿(1995) 514 U.S. 938, 944).)¿¿ 

¿¿ 

“‘There are two prerequisites for a delegation clause to be effective.’” (Aanderud, supra, 13 Cal.App.5th at 892 (quoting¿Tiri¿v. Lucky Changes, Inc.¿(2014) 226 Cal.App.4th 231, 242).)¿ “‘First, the language of the clause must be clear and unmistakable.’” (Id.) “‘Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.’” (Id.) However, under the FAA, “an argument that the arbitration agreement or the underlying contract is unenforceable is not sufficient to trigger the court's obligation to resolve contentions regarding the enforceability of a severable delegation clause.” (Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1108.) “Following Rent-A-Center, California courts have recognized that a court is the appropriate entity to resolve challenges to a delegation clause nested in an arbitration clause when a specific contract challenge is made to the delegation clause.” (Id. at 1109.)  

Here, the Delegation Clause states in relevant part:

“Only an arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute arising out of or relating to the interpretation, applicability, enforceability, or formation of this Arbitration Agreement … . An arbitrator shall also have exclusive authority to resolve all threshold arbitrability issues, including issues relating to whether these Terms are applicable, unconscionable, or illusory and any defense to arbitration, including without limitation waiver, delay, laches, or estoppel.”

(Yu Decl. Ex. D, Section 2(a)(4).)

The language of the agreement indicates the validity of the Arbitration Agreement is subject to determination by an arbitrator.  Therefore, the issue of whether Plaintiff’s action arose out of the “services” as described in the Agreement is reserved for the arbitrator, as well as Plaintiff’s claims of unconscionability and waiver. Plaintiff discusses no contrary authority regarding the application of the delegation clause in opposition. (See Opp., 8-9.) Because Plaintiff objects only to the Agreement and not the delegation clause specifically, the Court will not decide those issues. (See Nielsen Contracting, Inc., supra, 22 Cal.App.5th at 1108-1109 [discussing the holding in Rent-A-Car].)

            To the extent Plaintiff argues the Agreement is unenforceable because it was agreed to after the incident, Plaintiff provides no authority in support. On the contrary, arbitration agreements may be applied retroactively to events that occurred before the agreement was executed. (See Salgado v. Carrows Restaurants, Inc. (2019) 33 Cal.App.5th 356, 361-62; Yu Decl. Exh. D, Jan. 17, 2023 Agreement at Section 2 [“regardless whether the dispute, claim or controversy occurred or accrued before or after the date you agreed to these Terms”].)

Defendant Hengrui Fu’s Request to Compel Arbitration

Next, the Court will address Fu’s Notice of Joinder to also compel arbitration. Plaintiff’s opposition does not address Fu’s joinder.

“There are circumstances in which nonsignatories to an agreement containing an arbitration clause can be compelled to arbitrate under that agreement. As one authority has stated, there are six theories by which a nonsignatory may be bound to arbitrate: (a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or alter ego; (e) estoppel; and (f) third-party beneficiary. These exceptions to the general rule that one must be a party to an arbitration agreement to invoke it or be bound by it generally are based on the existence of a relationship between the nonsignatory and the signatory, such as principal and agent or employer and employee, where a sufficient identity of interest exists between them.” (Jenks v. DLA Piper Rudnick Gray Cary US LLP (2015) 243 Cal.App.4th 1, 9-10 [internal quotations and citations omitted, emphasis added].)

1.     Agency Exception

The agency “exception applies, and a defendant may enforce the arbitration agreement, ‘when a plaintiff alleges a defendant acted as an agent of a party to an arbitration agreement....’ [Citation.]” (Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 788 [citing Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614].)

Here, Plaintiff’s complaint alleges that Uber employed Fu, and that Fu was the agent and employee of the other defendants. (Complaint, 4.) Moreover, the complaint alleges that Uber negligently hired, trained, supervised, and retained Fu. (Id. at 5.) As a result, it alleges further facts of an agency/employee relationship between Uber and Fu.

As an alleged agent to the parties to the arbitration agreement, Fu is entitled to compel arbitration of Plaintiff’s claims against him. (See Thomas, supra, 204 Cal.App.4th at 614-15 [“[A]s the cases cited above hold, a plaintiff's allegations of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement.”].)

            As a result, the Court declines to address Fu’s alternative theory to compel arbitration under equitable estoppel.

CONCLUSION AND ORDER

Therefore, Defendants Uber Technologies, Inc. and Raiser, LLC’s motion to compel arbitration and stay all judicial proceedings against Uber pending the completion of arbitration is GRANTED. Furthermore, Defendant Hengrui Fu’s Notice of Joinder to Compel Arbitration is GRANTED.

The Court sets the matter for an Order to Show Cause Re Dismissal due to Completion of Arbitration Proceedings for February 24, 2025 at 8:30 a.m. in Department 32 of the Spring Street Courthouse.

Defendants shall provide notice of the Court’s ruling and file a proof of service of such.