Judge Armen Tamzarian, Case Number: 22STCV28415, Date: 2023-09-12 Tentative Ruling

Judge: Armen Tamzarian, Case: 22STCV28415, Date: 2023-09-12 Tentative Ruling

Case Number: 22STCV28415 Hearing Date: September 12, 2023 Dept: 52

Defendant American Credit Acceptance, LLC’s Motion to Compel Arbitration

Defendant American Credit Acceptance, LLC (ACA) moves to compel arbitration of this action by plaintiff Gail Wiggan.

Consent to Arbitrate

Plaintiff argues she did not agree to arbitrate disputes with ACA. ACA establishes it has the right to enforce an arbitration agreement plaintiff entered with non-party CarMax Auto Superstore California, LLC. ACA may do so because CarMax assigned its contractual rights to ACA. “An assignee stands in the shoes of the assignor, taking his or her rights and remedies subject to any defenses the obligor has against the assignor prior to notice of the assignment.” (Creative Ventures, LLC v. Jim Ward & Associates (2011) 195 Cal.App.4th 1430, 1447, internal quotes omitted.)

ACA authenticated a copy of a retail installment sales contract between plaintiff and CarMax. (Grimstead Decl., ¶ 6, Ex. 1, p. 2.) The contract includes a provision stating, “If you or we choose arbitration, then arbitration shall be mandatory, and: [¶] any claim will be decided by arbitration and not in court or by a jury trial.” (Id., p. 4.) The arbitration provision defines “we,” “us,” and “our” to include “anyone to whom the Seller transfers its rights under the Contract.” (Ibid.)

The sales contract itself provides, “ASSIGNMENT [¶] Seller hereby sells, assigns and transfers to American Credit Acceptance (‘Assignee’) this Contract, all obligations of buyer and Co-Buyer hereunder, [and] all rights, powers, and privileges herein given to Seller.” (Grimstead Decl., Ex. 1, p. 2.) The contract’s provision that “we” may choose to arbitrate thus includes ACA as the seller’s assignee. Through this assignment, ACA acquired CarMax’s right to enforce the arbitration provision against plaintiff.

Delegation Clause

An arbitrator, not the court, must determine whether the agreement is enforceable considering plaintiff’s other arguments in opposition to this motion. “Parties to an arbitration agreement may agree to delegate to the arbitrator, instead of a court, questions regarding the enforceability of the agreement. [Citation.] They ‘can agree to arbitrate almost any dispute—even a dispute over whether the underlying dispute is subject to arbitration.’ ” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 241.) “There are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. [Citation.] Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.” (Id. at p. 242.)

The contract includes a clear and unmistakable delegation clause. It provides that the parties agree to arbitrate “[d]isputes about the validity, enforceability, arbitrability or scope of this Arbitration Provision.” (Grimstead Decl., Ex. 1, p. 4.) A consumer who enters this agreement would reasonably expect that this provision means the parties agree to delegate these gateway issues to the arbitrator instead of a court.

The delegation clause is not revocable under any state contract defense. Plaintiff argues the agreement is unconscionable. “If the party’s challenge is directed to the agreement as a whole—even if it applies equally to the delegation clause—the delegation clause is severed out and enforced; thus, the arbitrator, not the court, will determine whether the agreement is enforceable. In contrast, if the party is making a specific challenge to the delegation clause, the court must determine whether the delegation clause itself may be enforced (and can only delegate the general issue of enforceability to the arbitrator if it first determines the delegation clause is enforceable).” (Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1559–1560; accord Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 245.)

Plaintiff makes no specific challenge that this delegation clause is unconscionable. Even if she did, she does not show it is unconscionable. “Generally, the burden is on the party opposing arbitration to show an arbitration agreement is unconscionable.” (Saheli v. White Memorial Medical Center (2018) 21 Cal.App.5th 308, 330.) Unconscionability requires both procedural and substantive unconscionability using a sliding scale. (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 185.) “Procedural unconscionability focuses on the elements of oppression and surprise.” (Id. at p. 177.) “Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create overly harsh or one-sided results. (Ibid., internal quotes omitted.)

Plaintiff shows some procedural unconscionability. Procedural unconscionability occurs when the stronger party drafts the contract and presents it to the weaker party on a ‘take it or leave it basis.’ ” (Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 393, disapproved on other grounds by Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237.) “By itself, however, adhesion establishes only a ‘low’ degree of procedural unconscionability.” (Davis v. Kozak (2020) 53 Cal.App.5th 897, 907.)

Plaintiff does not show any substantive unconscionability as required. Plaintiff asserts the agreement is “an improvident bargain” with “gross unfairness” (Opp., p. 2) but does not explain why. She does not identify any unfair provision. The contract, including the delegation clause, is mutual and fair. Both plaintiff and the seller (and its assignees) agreed to be bound by the arbitration provision. Both sides also agreed to delegate gateway issues of enforceability to the arbitrator. The arbitration agreement applies equally and fairly to both sides of the transaction.

The parties agreed that an arbitrator, not the court, must decide the other questions plaintiff raises about the arbitration agreement’s enforceability and whether it applies to this dispute. The court therefore does not reach the merits of those arguments.

Dismissal

ACA moves to dismiss the action against it. Both the Federal Arbitration Act (9 U.S.C. § 3) and the California Arbitration Act (CCP § 1281.4) provide for staying an action pending arbitration. Neither provides for dismissing the action. Assuming the court has the power to dismiss the action against ACA (see Sparling v. Hoffman Const. Co., Inc. (9th Cir. 1988) 864 F.2d 635, 638), it exercises its discretion to stay the action instead.

Disposition

Defendant American Credit Acceptance, LLC’s motion to compel arbitration is granted. Plaintiff Gail Wiggan is ordered to arbitrate her claims against defendant American Credit Acceptance, LLC. The court hereby stays plaintiff’s action as against defendant American Credit Acceptance, LLC pending resolution of the arbitration proceeding. This order does not stay the action as to any other defendants.