Judge: Christian R. Gullon, Case: 23PSCV01202, Date: 2024-03-26 Tentative Ruling

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Case Number: 23PSCV01202    Hearing Date: March 26, 2024    Dept: O

Tentative Ruling

FULTON BOOKS, INC.’S MOTION TO COMPEL ARBITRATION is GRANTED.

Background

This is a contractual fraud case. Plaintiff Mary Louise James-Agee alleges the following against Defendants FULTON BOOKS, EBAY, WALMART, BARNES AND NOBLE, AMAZON, and GOOGLE[1]: In 2019, Plaintiff entered into a contract with Defendant Fulton Books to publish her book. Despite being told her books haven’t sold, she claims they have and thus is entitled to royalties.

On July 11, 2023, Plaintiff filed a first amended complaint (FAC).

On August 17, 2023, Plaintiff filed a second amended complaint (SAC) asserting the following causes of action (COA):

1.     Breach of Contract

2.     Fraud & Deceit

3.     Negligent Misrepresentation

4.     Negligence 

On September 18, 2023, Fulton Books filed its answer.

On November 17, 2023, Amazon was dismissed without prejudice (per stipulation).

On January 17, 2024, the court conducted a CMC wherein the minute order notes that there was no appearance by Defendant Ebay. (OSC Re: Failure to Appear set for 3/26/24.)

On February 13, 2024, Plaintiff filed a dismissal of Barnes and Nobles.  

On February 29, 2024, Fulton Books filed the instant motion to compel arbitration.

On March 11, 2024, Plaintiff filed her opposition.

On March 19, 2024, Fulton Books filed its reply in support of its motion.

Legal Standard

Fulton Books (hereinafter “Defendant”) brings forth this motion pursuant to Code of Civil Procedure section 1281.2.

In turn, the statute provides that a petition to compel arbitration must allege both (1) a “written agreement to arbitrate” the controversy, and (2) that a party to that agreement “refuses to arbitrate” the controversy. (Code Civ. Proc., § 1281.2.)

In answering the first prong, “[d]oubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration.” (United Transp. Union v. Southern Cal. Rapid Transit Dist. (1992) 7 Cal.App.4th 804, 808); see also Lamps Plus, Inc. v. Varela (2019) 587 U.S. __ [139 S.Ct. 1407, 1418] [“ambiguities about the scope of an arbitration agreement must be resolved in favor of arbitration.”]; Motion p. 9, quoting Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1131 (9th Cir. 2000) [“little doubt that the dispute [was] subject to arbitration” where agreement covered “[a]ny dispute, controversy or claims”].) Thus, “only the most forceful evidence” (AT&T Technologies, Inc. v. Communications Workers of Amer., 475 U.S. 643, 650 (1986) can overcome said principles.  

In answering the second prong, once the defendant moves to compel arbitration of a claim within the scope of the written arbitration clause, the burden shifts to the opposing party to put the making of that agreement in issue. (See Perry v. Thomas, 482 U.S. 483, 492 (1987); see also Motion p. 8, quoting Cable Connection, Inc. v. DIRECTV, Inc., 44 Cal. 4th 1334, 1343 (2008) [“The CAA, like the FAA, provides that arbitration agreements are ‘valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.’”].) The general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) This does not mean, however, that a state court may apply rules that derive their meaning from the fact that an agreement to arbitrate is at issue. (Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 649; see also AT&T Mobility v. Concepcion (2011) 563 U.S. 333, 344 (Concepcion) [Generally applicable contract defenses, such as fraud, duress, or unconscionability provide grounds for invalidating an arbitration agreement if they are enforced evenhandedly and do not “interfere[ ] with fundamental attributes of arbitration.”].)

Ultimately, the FAA preempts a state rule that “singles out arbitration agreements for disfavored treatment.” (Kindred Nursing Centers L.P. v. Clark (2017) 581 U.S. 246, 248.) The United States Supreme Court has repeatedly emphasized this point in that state laws which interfere with fundamental attributes of arbitration are inconsistent with and thus preempted by the FAA. (See e.g., DIRECTV, Inc. v. Imburgia (2015) 577 U.S. 47, 53 [“Supremacy Clause forbids state courts to dissociate themselves from federal law because of disagreement with its content or a refusal to recognize the superior authority of its source. . . . The Federal Arbitration Act is a law of the United States, and [AT&T Mobility v. Concepcion (2011) 563 U.S. 333] is an authoritative interpretation of that Act. Consequently, the judges of every State must follow it.”], emphasis added.)

Discussion

The agreement[2] contains a written arbitration provision,[3] which provides in relevant part: “Any dispute, controversy, or claim between Publisher and Author regarding this Agreement will be submitted to mandatory and binding arbitration under the terms of the rules of the American Arbitration Association as then in effect.” The Arbitration Agreement provides that “[a]ny issue concerning the applicability, interpretation, or enforceability of these procedures, including any contention that all or parts of the procedures are invalid or unenforceable, will be governed by the Federal Arbitration Act.” (See 3/21/24 Barnhart Decl., Ex. A, p. 8 of 11 of PDF.)

As for whether the claims fall under the arbitration agreement, the arbitration provision employs broad language to render any and all claims or differences subject to arbitration. The complaint on its face demonstrates that Plaintiff’s claims arise out of and relate to the agreement because each of Plaintiff’s four causes of action asserted against Fulton Books are contract-based claims, founded on Defendant’s alleged conduct as related to the agreement.

For example, Plaintiff’s 1^st COA for breach of contract alleges that Fulton Books has failed to provide an adequate accounting of the publication and sales of Plaintiff’s book (i.e., publication and distribution); failed to provide royalty payments due to Plaintiff due on Plaintiff’s book (i.e., publication and distribution); and marketed Plaintiff’s book without her consent (i.e., publication and distribution).

Similarly, the 2^nd, 3^rd, and 4^th COAs for fraud/deceit, negligent misrepresentation, and negligence, respectively, which incorporate the breach of contract claims, are all predicated upon the alleged conduct and obligation of Fulton Books as related to the agreement to publish and distribute Plaintiff’s works.

Therefore, Defendant has met its burden to show that the parties entered into a contract that contains an arbitration provision covering the claims at issue.

To the extent an opposition is filed, it is remiss in articulating what legal grounds Plaintiff relies upon in attempting to invalidate the arbitration provision and fails to provide a legal analysis or authority to support whatever cognizable contract defense Plaintiff is attempting to put forth.

1.     Unconscionability

The California Supreme Court has stated the following regarding the general principles of unconscionability.

 A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. Under this standard, the unconscionability doctrine has both a procedural and a substantive element. The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. Substantive unconscionability pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided. Both procedural and substantive unconscionability must be shown for the defense to be established, but they need not be present in the same degree. Instead, they are evaluated on ‘a sliding scale.’ [T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable. Conversely, the more deceptive or coercive the bargaining tactics employed, the less substantive unfairness is required … The ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in view of all relevant circumstances, that a court should withhold enforcement. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125-126, internal citations omitted, emphasis added.)

In short, unconscionability has both a procedural and substantive element, and the party asserting the defense bears the burden of proving both by a preponderance of the evidence. (Pinnacle Museum Towers Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 246-247.)

In determining procedural unconscionability, the “pertinent question is whether circumstances of the contract's formation created such oppression or surprise that closer scrutiny of its overall fairness is required. Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125-126, internal citations omitted, italics original). To determine the presence of such circumstances, there are five considerations to examine: “(1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party's review of the proposed contract was aided by an attorney.” (Id. at pp. 126-128.)

Plaintiff states that the arbitration clause is unenforceable “because it is adhesive.” (Opp. p. 3:25-26.)[5]

“The term ‘adhesion contract’ refers to standardized contract forms offered to consumers of goods and services on essentially a ‘take it or leave it’ basis without affording the consumer a realistic opportunity to bargain and under such conditions that the consumer cannot obtain the desired product or services except by acquiescing in the form contract.” (Victoria v. Superior Court (1985) 40 Cal.3d 734, 743.) Effectively, an adhesion contract is one wherein the parties do not bargain nor enjoy equal bargaining strength. (Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 710-711; see also Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245 [“An adhesive contract is standardized, generally on a preprinted form, and offered by the party with superior bargaining power ‘on a take-it-or-leave-it basis.’”.].)

A contract that is adhesive in nature “is sufficient to establish some degree of procedural unconscionability.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915, emphasis and underline added.)

However, aside from the adhesive nature of the contract, the court finds no other indications of procedural unconscionability. (See Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1248 [““Absent any evidence, we cannot just assume there was procedural unconscionability.”].)

If anything, Plaintiff’s declaration undermines a finding of procedural unconscionability because despite her contention that she was “ever given an opportunity to modify any of the terms of the contract, at any time” (Agee Decl., p. 3), Plaintiff had the right to “cancel” the agreement “for any reason within three (3) days of Author’s signature hereto.” (Reply p. 4.) Plaintiff has set forth no evidence that she was “lied to, placed under duress, or otherwise manipulated into signing the arbitration provision.” (Reply p. 5.)

What is more, the arbitration provision is not “hidden on a back-page of a document, in fine-print, or buried amongst pages and pages of non-negotiated forms.” (Reply p. 4:14-18.) Instead, the arbitration provision—found on a mere 4-page document that is largely dedicated to the scope of the agreement and less filled with legalese—is the last paragraph, right above the signature line, in its own paragraph, in the same type and size font as the rest of the contract language. Thus, as Plaintiff had the opportunity to review and consider the arbitration provision (i.e., a meaningful choice), there is no evidence of surprise or oppression.

To the extent that Plaintiff argues that she was not advised of the arbitration agreement, this argument fails on two fronts.

First, “simply because a provision within a contract of adhesion is not read or understood by the nondrafting party does not justify a refusal to enforce it.” (Reply p. 4, quoting Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 88.) Second, a drafting party “[is] under no obligation to highlight the arbitration clause of its contract, nor [is] it required to specifically call that clause to [the nondrafting party’s] attention.” (Reply p. 4, quoting Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 911.)

Therefore, absent adequate evidence, Plaintiff had sufficient notice of the forum clause before signing the agreement.

Even with an adhesion contract, “a finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided.” (Concepcion, supra, 563 U.S. at p. 340, emphasis added.)

Plaintiff’s “primary objection” is that it seeks jurisdiction in the State of Pennsylvania, which is where Fulton’s offices are located.[6] Specifically, Plaintiff states the following relevant statements in her declaration:

I was born on December 20, 1940. I am now 83 years old. I have various medical conditions, that cause me to be confined to a wheelchair or a walker with a seat. Travel is very difficult for me, even under the best circumstances. I am retired, with a fixed-income from Social Security. I can not afford to travel to Pennsylvania to resolve my dispute with Fulton Books, even if I was physically able to make the trip, which I'm not. I cannot afford to retain counsel in the State of Pennsylvania. I do not want to appear remotely in my case. I want to be there in person. I do not have a computer, and am not able to appear remotely. If Fulton Books wants to appear remotely, from Pennsylvania, I have no objection to the proceeding being conducted in California, where I can participate in person, and where Fulton Books participates remotely from wherever they would like. (James-Agee Decl., p. 2, emphasis added.)

While the court is mindful and cognizant of Plaintiff’s age and medical conditions (though she does not specifically list her illnesses), Plaintiff has not established that Pennsylvania is an unreasonable forum.

As explained in Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491 (Smith), which Defendant relies upon, the California State Supreme Court stated the following:

The party's burden on a motion to enforce a mandatory forum selection clause is to demonstrate that the contractually selected forum would be unavailable or unable to accomplish substantial justice or that no rational basis exists for the choice of forum. [internal citation omitted]. Neither inconvenience nor the additional expense of litigating in the selected forum are factors to be considered. [internal citation omitted.] However, a forum selection clause will not be enforced if to do so would bring about a result contrary to the public policy of this state. (emphasis and underline added.)

Thus, according to the Smith court, “forum selection clauses are valid and may be given effect, in the court's discretion and in the absence of a showing that enforcement of such a clause would be unreasonable.” (Id. at p. 496.) In Smith, the parties were two corporations (petitioner a California corporation and real party in interest a Pennsylvania corporation) who entered into a contract regarding insurance policies. (Id. at pp. 493-494.) “The contract included a reciprocal forum selection clause whereunder Smith agreed to bring all actions arising out of the agency agreement only in Philadelphia, and Assurance in turn agreed to bring all such actions only in Los Angeles.” (Id. at p. 494.) Despite the clause, Smith filed an action in Los Angeles and the defendant moved for dismissal on the basis of the forum selection clause. In finding that the trial court did not abuse its discretion in finding that Pennsylvania was the proper forum, the court reasoned that “both Smith and Assurance reasonably can be held to have contemplated in negotiating their agreement the additional expense and inconvenience attendant on the litigation of their respective claims in a distant forum; such matters are inherent in a reciprocal clause of this type.” (Id. at 496, emphasis added.)

Here, while the case is distinguishable because (i) only Defendant is a corporation (i.e., both are not sophisticated parties); (ii) there is no evidence that parties engaged in negotiations; and (iii) this agreement does not include a reciprocal clause, the ultimate facts between the cases are similar in that there is no showing of unreasonableness.

As further clarified by the court in Intershop Communications v. Superior Court (2002) 104 Cal.App.4th 191 (Intershop) (another cased cited by Defendant), when the forum selection clause plainly says the selected forum, then a plaintiff has full notice that she is agreeing to said selected forum as the place of trial, even though he may have chosen not to read the four-page contract.

Here, similarly, the Arbitration Provision plainly identifies the selected forum such that Plaintiff had full notice that she was agreeing to have her claims arbitrated in Pennsylvania.

Furthermore, relying upon Carnival Cruise Lines, Inc. v. Shute (1991) 499 U.S. 585 (Carnival), Defendant, who, by the nature of its work, is engaged in an industry that could subject it to litigation in several different fora, then Defendant has an interest in arbitrating the matter in the state where its offices are located.

To the extent that Plaintiff objects as to Pennsylvania as the forum because it is difficult for her to travel there, she does not need to travel as she can participate remotely from California, which would also alleviate any concerns with hiring new counsel licensed in Pennsylvania.

To the extent that Plaintiff argues that she cannot participate remotely because she does not have a laptop, there are resources to temporarily use an electronic device (e.g., her attorney’s laptop; laptop in a public library, a phone, etc.).

To the extent that Plaintiff argues she does not want to participate remotely such that Defendant should be subject to the conditions of her preference, the court’s accommodation of that request would be unreasonable. 

Conclusion

Based on the foregoing, abiding by the well-established rule that forum selection clauses are valid and may be given effect in the court's discretion and in the absence of a showing that enforcement of such a clause would be unreasonable, and here, there is no showing of unreasonableness by Plaintiff participating remotely, the motion is GRANTED.