Judge: Barbara M. Scheper, Case: 23STCV21344, Date: 2024-04-16 Tentative Ruling
Case Number: 23STCV21344 Hearing Date: April 16, 2024 Dept: 30
Dept. 30
Calendar No.
Bush
vs. American Honda Motor Co., Inc., Case No. 23STCV21344
Tentative
Ruling re: Defendant’s Motion to Compel
Arbitration
Defendant American Honda Motor Co. Inc. (“AHM”) moves to compel Plaintiff Ashley Bush
(Plaintiff) to binding arbitration and stay proceedings pending resolution of
the arbitration. The motion is granted.
“On petition of a party to an
arbitration agreement alleging the existence of a written agreement to
arbitrate a controversy and that a party thereto refuses to arbitrate such
controversy, the court shall order the petitioner and the respondent to arbitrate
the controversy if it determines that an agreement to arbitrate the controversy
exists, unless it determines that: (a) The right to compel arbitration has been
waived by the petitioner; or (b) Grounds exist for the revocation of the
agreement.” (Code Civ. Proc. §1281.2,
subds. (a), (b).)
A proceeding to compel
arbitration is in essence a suit in equity to compel specific performance of a
contract. (Freeman v. State Farm Mutual
Auto Insurance Co. (1975) 14 Cal.3d 473, 479.) Such enforcement may be
sought by a party to the arbitration agreement. (Code Civ. Proc., § 1280, subd.
(e)(1).)
The petition to compel arbitration functions as a motion
and is to be heard in the manner of a motion, i.e., the facts are to be proven
by affidavit or declaration and documentary evidence with oral testimony taken
only in the court’s discretion. (Code Civ. Proc., §1290.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th
394, 413–414.) The petition to compel must set forth the provisions of the
written agreement and the arbitration clause verbatim, or such provisions must
be attached and incorporated by reference. (Cal. Rules of Court, rule 3.1330;
see Condee, supra, 88 Cal.App.4th at 218.)
Once petitioners allege that an arbitration agreement
exists, the burden shifts to respondents to prove the falsity of the purported
agreement, and no evidence or authentication is required to find the
arbitration agreement exists. (See Condee,
supra, 88 Cal.App.4th at 219.)
However, if the existence of the agreement is challenged, “petitioner bears the
burden of proving [the arbitration agreement’s] existence by a preponderance of
the evidence.” (Rosenthal v. Great
Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413; see also Espejo v. Southern California Permanente
Medical Group (2016) 246 Cal.App.4th 1047, 1058–1060.)
Plaintiff’s Complaint asserts
five causes of action against AHM, for violation of subdivision (d) of Civil
Code section 1793.2,violation
of subdivision (b) of Civil Code section 1793.2,violation of subdivision (a)(3) of Civil Code
section 1793.2,breach
of the implied warranty of merchantability (Civ. Code, § 1791.1; § 1794; §
1795.5), and fraudulent inducement. Plaintiff’s claims arise from her alleged lease
of a defective 2017 Honda HR-V. (Comp. ¶ 6.) Plaintiff alleges that she received
various warranties in connection with the lease, and that AHM failed to conform
the vehicle to those warranties after numerous attempts to repair it. (Comp. ¶¶
7-15.)
In support of this motion to
compel arbitration, AHM produced a copy of the Closed-End Motor Vehicle Lease
Agreement- California (“Lease Agreement”) made between Plaintiff and the lessor,
Norm Reeves Honda Superstore, for the lease of the vehicle. (Lambert Decl.
¶ 2, Ex. 1.)
The Lease Agreement included the
following arbitration provisions:
On the front page where an initial
is required: “15. ARBITRATION. The parties agree that any unresolved
disputes shall be submitted to arbitration in accordance with the Arbitration
clause (Section 50). By initialing this Section, I am confirming that I have
read this Section and the Arbitration clause, including the method of opting
out of arbitration.” (Lease Agreement p.1.)
As referenced in paragraph 15
above, the Lease Agreement also includes a prominent arbitration provision in
Section 50 that begins with the following:
“50. ARBITRATION: PLEASE READ
THIS ARBITRATION PROVISION CAREFULLY TO UNDERSTAND YOUR RIGHTS. BY ELECTING
ARBITRATION, YOU AGREE THAT ANY CLAIM THAT YOU MAY HAVE IN THE FUTURE MUST BE
RESOLVED THROUGH BINDING ARBITRATION. YOU WAIVE THE RIGHT TO HAVE YOUR DISPUTE
HEARD IN COURT AND WAIVE THE RIGHT TO BRING CLASS CLAIMS. YOU UNDERSTAND THAT
DISCOVERY AND APPEAL RIGHTS ARE MORE LIMITED IN ARBITRATION. (Id.,
at p. 6, bold and capitalization in original.)
Arbitration is a method of
resolving a claim, dispute or controversy without filing a lawsuit. By agreeing
to arbitrate, the right to go to court is waived and instead claims, disputes
or controversies are submitted to binding arbitration. This provision sets
forth the terms and conditions of our agreement. YOU and HONDA agree and
acknowledge that this Lease affects interstate commerce and the Federal
Arbitration Act (“FAA”) applies. (Lambert Decl., ¶ 2, Exh. 1, p. 6.)
By signing the Arbitration Consent,
YOU elect to have disputes resolved by arbitration. YOU, HONDA,
or any involved third party may pursue a Claim. “Claim” means any dispute
between YOU, HONDA, or any involved third party relating to your
account, this Lease, or our relationship, including any application, the
Vehicle, its performance and any representations, omissions or warranties.” (Ibid.,
emphasis in original.)
AHM is a non-signatory to the Lease
Agreement between Plaintiff and Norm
Reeves Honda Superstore, and argues that it may enforce the arbitration
provision as a third-party beneficiary.
Third-party beneficiary
A contract, made
expressly for the benefit of a third person, may be enforced by him at any time
before the parties thereto rescind it. (Civ. Code, § 1559.) Under California
law, a third party may enforce a contract entered into between other parties
when (1)
the third party would in fact benefit from the contract, (2) a motivating
purpose of the contracting parties was to provide a benefit to the third party,
and (3) permitting a third party to bring its own breach of contract action
against a contracting party is consistent with the objectives of the contract
and the reasonable expectations of the contracting parties. (Goonewardene v.
ADP, LLC (2019) 6 Cal.5th 817, 830.) To satisfy the second element, “the
contracting parties must have a motivating purpose to benefit the third party,
and not simply knowledge that a benefit to the third party may follow from the
contract.” (Ibid.)
AHM argues that it is expressly an
intended third-party beneficiary to the Lease Agreement based on the
arbitration provision’s express mention of it. The arbitration provision states
“HONDA means Lessor, Dealer, Honda Lease Trust, American Honda Finance
Corporation (AHFC), American Honda Motor Co., Inc., Honda Finance Exchange,
Inc., Acura Financial Services (AFS), Honda Financial Services (HFS), HVT,
Inc., their parents, subsidiaries, predecessors, successors, assignees, and
officers, employees, representatives and agents. YOU means Lessee
and Co-Lessee to this Lease.” (Lambert Decl., ¶ 2, Exh. 1, Lease Agreement, p.
6). Further, the arbitration provision states “YOU, HONDA, or any third party
may pursue a Claim.” “Claim” is defined
as any dispute “relating to your account, this Lease, or our relationship
including any . . . warranties” which
would include AHM. (Lease Agreement p.1, ¶ 50.)
Plaintiff’s
argument that the Lease Agreement is not authenticated fails. Plaintiff’s
reliance on Rosenthal v. Great Western Fin. Securities Corp. (1996)
14 Cal.4th 394 and Engalla v. Permanente Medical
Group, Inc. (1997) 15 Cal.4th 951 is misplaced. Authentication and
foundation are not required unless the agreement is challenged. Plaintiff has not denied signing the
agreement and does not argue the falsity of the Lease Agreement.
Federal Arbitration Act Applies
“A
party seeking to enforce an arbitration agreement has the burden of showing FAA
preemption.” (Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th
676, 684.) California law provides that parties may expressly designate that
any arbitration proceeding should move forward under the FAA's procedural
provisions rather than under state procedural law. (Cronus Investments, Inc. v. Concierge
Services (2005) 35 Cal. 4th 376, 394). Otherwise, the FAA provides
for enforcement of arbitration provisions in any “‘contract evidencing a
transaction involving commerce.’ (9 USC § 2.)” (Allied-Bruce
Terminix Companies, Inc. v. Dobson¿(1995) 513 U.S. 265, 277.)
Accordingly, “[t]he party asserting the FAA bears the burden to show it applies
by presenting evidence establishing the contract with the arbitration
provision has a substantial relationship to interstate commerce[.]” (Carbajal
v. CWPSC, Inc.¿(2016) 245. Cal.App.4th 227, 234,
[italics added].) Moreover, as noted above, California contract law
applies to the validity of the arbitration agreement. (Winter, supra, 166
Cal.App.4th at p. 947.)
Here, the arbitration agreement specifically invokes the
FAA. The arbitration provision states “YOU and HONDA agree and
acknowledge that this Lease affects interstate commerce and the Federal
Arbitration Act (“FAA”) applies. (Lease Agreement p.1, ¶ 50.) Accordingly,
the FAA applies and will preempt California law if in conflict.
Enforceability
“California courts analyze unconscionability as having a
procedural and a substantive element.” (Kinney v. United Healthcare
Services, Inc. (1999) 70 Cal.App.4th 1329.) “[B]oth elements must be
present before a contract or contract provision is rendered unenforceable on
grounds of unconscionability.” (Id.) The doctrine of
unconscionability refers to “an absence of meaningful choice on the part of one
of the parties together with contract terms which are unreasonably favorable to
the other party.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th
1109, 1133.) It consists of procedural and substantive components, “the former
focusing on oppression or surprise due to unequal bargaining power, the latter
on overly harsh or one-sided results.” (Ibid.) Although both components
of unconscionability must be present to invalidate an arbitration agreement,
they need not be present in the same degree. (Armendariz v. Found Health
Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114.) “Essentially a sliding
scale is invoked which disregards the regularity of the procedural process of
the contract formation, that creates the terms, in proportion to the greater
harshness or unreasonableness of the substantive terms themselves. [Citations.]
In other words, the more substantively unconscionable the contract term, the
less evidence of procedural unconscionability is required to come to the
conclusion that the term is unenforceable, and vice versa.” (Ibid.) “The
party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle
Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223,
247.)
“Procedural unconscionability concerns the manner in which
the contract was negotiated and the circumstances of the parties at that time.
It focuses on factors of oppression and surprise.” (Id.)
“Surprise differs from oppression. Surprise is when a prolix printed form
conceals the arbitration provision. [Citation.] Oppression, on the other hand,
occurs when there is a lack of negotiation and meaningful choice. [Citation.]
The presence of surprise or oppression requires higher scrutiny of the
contract.” (Torrecillas v. Fitness International, LLC¿(2020) 52
Cal.App.5th 485, 493.)
Plaintiff contends that the arbitration agreement is
procedurally unconscionable because the arbitration agreement is a contract of
adhesion.
“Adhesion contracts are form
contracts a party with superior bargaining power offers on a
take-it-or-leave-it basis.” (Torrecillas, supra, 52 Cal.App.5th at
p.493.) “Whether the agreement was or was not a contract of adhesion is
not the core question. Rather, from the standpoint of determining whether there
was procedural unconscionability, the core issues are surprise and oppression.”
(Ibid.) In the absence of “surprise or other sharp practices”,
Courts do not recognize that “adhesive” arbitration agreements establish a high
degree of procedural unconscionability. (Baltazar v. Forever 21 Inc.
(2016) 62 Cal.4th 1237, 1246.)
Here, Plaintiff’s arguments fail. The
fact that the arbitration agreement may have been presented on a take it or
leave it basis or that there is unequal bargaining power only establishes at
most a modest degree of procedural unconscionability. (Torrecillas,
supra, 52 Cal.App.5th at p.493; Baltazar v. Forever 21 Inc., supra,
62 Cal.4th at p.1246.) Here, there was an opt out clause next to the Lessee’s
initials. The Court finds that the arbitration agreement has at most a minimal
degree of procedural unconscionability.
“’Substantive unconscionability’
focuses on the terms of the agreement and whether those terms are ‘so one-sided
as to “shock the conscience.”’ (Kinney v.
United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1330
(citations omitted).) A contractual provision that is substantively
unconscionable may take various forms but may generally be described as
unfairly one-sided. (Ibid.) The
paramount consideration in assessing [substantive] unconscionability is
mutuality. (Ibid.) Substantive
unconscionability looks to overly harsh or one-sided results. (Armendariz, supra, 24 Cal.4th at p. 99.)
The Court finds that the agreement
is not substantively unconscionability. There is mutuality in the agreement
because either the Defendant or Plaintiff may seek arbitration. Further, the
Court is not persuaded that it is against any public policy to arbitrate claims
made under the Song-Beverly Act.