Judge: Cynthia A Freeland, Case: 37-2023-00024471-CU-CO-NC, Date: 2024-04-26 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - April 25, 2024

04/26/2024  01:30:00 PM  N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

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Civil - Unlimited  Contract - Other Motion Hearing (Civil) 37-2023-00024471-CU-CO-NC SAINZ V. ADGS AUTOMOTIVE GROUP, INC. [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion - Other, 02/02/2024

Defendants ADGS Automotive Group, Inc. dba Genesis of Escondido ('ADGS') and Ally Bank (collectively, 'Defendants')'s motion to compel arbitration and to stay or dismiss proceedings is granted.

Defendants' request for judicial notice is granted. See Cal. Evid. Code § 452(h).

On March 4, 2023, Plaintiffs Edward and Yanett Sainz (collectively, 'Plaintiffs') and ADGS entered into a Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision) (the 'RISC') under which Plaintiff agreed to purchase from ADGS a used 2013 Honda Pilot (VIN 5FNYF4H93DB014834) (the 'Vehicle'). See Forester Decl., Ex. A. ADGS subsequently assigned the RISC to Ally Bank. Ibid., ¶ 5. Page 1 of the RISC contains a provision entitled 'Agreement to Arbitrate', which states that 'b]y signing below, you agree that, pursuant to the Arbitration Provision on page 5 of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action. See the Arbitration Provision for additional information concerning the agreement to arbitrate.' See RISC, p. 1.

Page 5 of the RISC contains an Arbitration Provision that provides, in relevant part, that: Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, any allegation of waiver of rights under this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this Vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action. If federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Provision shall not apply to such claim or dispute . . . .

See Arbitration Provision. Any arbitration under the Arbitration Provision is governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.) (the 'FAA'). In relevant part, the FAA provides that: A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2.

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3097876 CASE NUMBER: CASE TITLE:  SAINZ V. ADGS AUTOMOTIVE GROUP, INC. [IMAGED]  37-2023-00024471-CU-CO-NC The court may resolve a motion to compel arbitration in summary proceedings. See Gamma Eta Chapter of Pi Kappa Alpha v. Helvey (2020) 44 Cal. App. 5th 1090, 1098. The court applies state contract law in determining Defendants' right to enforce the Arbitration Provision. See Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal. 4th 223, 236 ('In determining the rights of parties to enforce an arbitration agreement within the FAA's scope, courts apply state contract law while giving due regard to the federal policy favoring arbitration.'); Giuliano v. Inland Empire Personnel, Inc.

(2007) 149 Cal. App. 4th 1276, 1285 (generally applicable contract defenses may invalidate arbitration agreements provided they do not contravene § 2 of the FAA). A threshold determination in that regard is the existence of a valid arbitration agreement. See Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal. App. 4th 165, 172. Defendants bear the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence. Plaintiffs then bear the burden of proving by a preponderance of the evidence any facts necessary to preclude enforcement of the Arbitration Provision. See Lane v. Francis Capital Management LLC (2014) 224 Cal. App. 4th 676, 683.

The court finds that Defendants have satisfied their initial burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence. Defendants have provided a copy of the RISC signed by Plaintiffs and containing the Arbitration Provision. Nothing further is required to prove the Arbitration Provision's existence. See Condee v. Longwood Management Corp. (2001) 88 Cal. App. 4th 215, 218-219 ('For purposes of a petition to compel arbitration, it is not necessary to follow the normal procedures of document authentication . . . the court is only required to make a finding of the agreement's existence, not an evidentiary determination of its validity.'); Cal. R. Ct. 3.1330. Plaintiffs do not dispute that a valid arbitration agreement exists, which the court construes as Plaintiffs' concession of the motion's merits on that point. See San Diego Rules of Court, Rule 2.1.19.B.

The burden thus shifts to Plaintiffs to prove by a preponderance of the evidence any facts necessary to preclude enforcement of the Arbitration Provision. The court finds that Plaintiffs have not met their burden. Plaintiffs' sole argument is that Defendants waived their right to pursue arbitration. The court respectfully disagrees. As the California Supreme Court has explained: State law, like the FAA, reflects a strong policy favoring arbitration agreements and requires close judicial scrutiny of waiver claims. (Christensen v. Dewor Developments (1983) 33 Cal.3d 778, 782, 191 Cal.Rptr. 8, 661 P.2d 1088.) Although a court may deny a petition to compel arbitration on the ground of waiver (§ 1281.2, subd. (a)), waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof. (Christensen v. Dewor Developments, supra, 33 Cal.3d at p. 782, 191 Cal.Rptr.8, 661 P.2d 1088; see also Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 189, 151 Cal.Rptr. 837, 588 P.2d 1261 (Doers).) Saint Agnes Medical Center v. PacifiCare of California (2003) 31 Cal. 4th 1187, 1195. In determining whether a party has waived its right to arbitration, courts consider, among other things, the following factors: (1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether 'the litigation machinery has been substantially invoked' and the parties 'were well into preparation of a lawsuit' before the party notified the opposing party of an intent to arbitrate; (3) the proximity in time between the request for arbitration and the trial date; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) 'whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place'; and (6) whether the delay 'affected, misled, or prejudiced' the opposing party. Ibid., at 1196 (citing Sobremonte v. Sup. Ct.) (1998) 61 Cal. App. 4th 980. Against this backdrop, the court must conclude that Plaintiffs have not satisfied the heavy burden of demonstrating a waiver.

More specifically, Plaintiffs filed the operative pleading on June 8, 2023. See ROA No. 1. Contrary to Plaintiffs' assertion, Defendants did not wait until February 1, 2024 to express interest in arbitration.

Indeed, Ally Bank and ADGS filed Answers to the Complaint on July 27 and August 8, 2023, respectively, wherein each raised as an affirmative defense an entitlement to seek arbitration pursuant to the Arbitration Provision in the RISC. See ROA Nos. 10, 11.

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3097876 CASE NUMBER: CASE TITLE:  SAINZ V. ADGS AUTOMOTIVE GROUP, INC. [IMAGED]  37-2023-00024471-CU-CO-NC Moreover, the evidence shows that on August 31 and September 5, 2023, Plaintiffs served ADGS and Ally, respectively, with Form Interrogatories (Set One), Special Interrogatories (Set One), and Requests for Production (Set One). Ally Bank and ADGS served verified responses to Plaintiffs' discovery requests on October 23 and November 16, 2023, respectively. See Yang Reply Decl., ¶ 2. On November 21, 2023, Defendants' counsel made a global settlement offer, which offer Plaintiffs' counsel rejected. Ibid., ¶ 3. On December 2, 2023, Plaintiffs' counsel sent Defendants' counsel a meet and confer email regarding further discovery responses. Ibid., ¶ 4, Ex. A. On December 12, 2023, Defendants' counsel responded by agreeing to provide supplemental responses to some discovery requests, standing on objections as to other requests, and requesting an extension of time to provide responses to January 5, 2024. Ibid., ¶ 5, Ex. B. Plaintiffs' counsel responded with a further meet a confer email on December 13, 2023. Ibid., ¶ 6, Ex. C. That same day, Plaintiffs' counsel sent ADGS and Ally Bank separate offers to compromise under California Code of Civil Procedure § 998, both of which were rejected. Ibid., ¶ 7. On December 14, 2023, the court entered a protective order regarding the exchange of confidential information in this matter. See ROA No. 13. On January 2, 2024, Plaintiffs filed and served motions to compel ADGS to provide further responses and documents responsive to Plaintiffs' Special Interrogatories and Requests for Production, both of which presently are set for hearing on May 17, 2024. See ROA Nos. 14, 18. On February 1, 2024, Defendants' counsel asked Plaintiffs' counsel to stipulate to the matter being submitted to arbitration, which request Plaintiffs' counsel rejected. See Yang Decl., ¶ 3. Defendants filed and served the pending motion the next day. See ROA No. 24.

Based on the foregoing, the court finds that Defendants have not engaged in conduct that is inconsistent with the right to arbitrate. Plaintiffs have not demonstrated that the 'litigation machinery has been substantially invoked', nor have Plaintiffs established that Defendants took any steps that would be inconsistent with procedures not available to the parties in arbitration. There is no evidence that Defendants propounded discovery in this matter or did more than merely respond to Plaintiffs' discovery requests (which included meet and confer efforts as well as entering into a protective order). California courts have found that 'mere participation in litigation and discovery without prejudice does not compel a finding of waiver.' Oregel v. PacPizza, LLC (2015) 237 Cal. App. 4th 342, 359-360. Toward that end, Plaintiffs have not shown that Defendants' conduct 'substantially undermined [the] important public policy [of arbitration as a speedy and relatively inexpensive means of dispute resolution] or substantially impaired [Plaintiffs'] ability to take advantage of the benefits and efficiencies of arbitration' simply by responding to Plaintiffs' discovery efforts. Ibid., at 360. Plaintiffs cite no authority for the proposition that entering into a protective order waives a right to compel arbitration, and the court, in this instance, would not find such a waiver because: (1) the parties entered into the protective order without engaging in any litigation, and (2) the protective order does not impose any limits on the scope of discovery and applies equally to all parties, i.e., it does not give Defendants an advantage over Plaintiffs.

To the extent Plaintiffs argue that the parties' exchange of settlement offers substantially invoked the litigation machinery, the court respectfully disagrees. Courts have found that ongoing settlement discussions and de minimis participation in discovery are not inconsistent with the right to arbitrate. See Zamora v. Lehman (2010) 186 Cal. App. 4th 1.

Plaintiffs' contention that Defendants' conduct prejudiced them is unavailing for two reasons. First, and notably, waiver of a right to compel arbitration under the FAA does not include a prejudice requirement.

See Desert Regional Medical Center, Inc. v. Miller (2022) 87 Cal. App. 5th 295, 322 ('[t]o decide whether a waiver has occurred, the court focuses on the actions of the person who held the right; the court seldom considers the effects of those actions on the opposing party.') (quoting Morgan v. Sundance, Inc., 142 S.Ct. 1708, 1713 (2022)). Second, even if the court could consider prejudice to Plaintiffs, the only identified prejudice is that Plaintiffs incurred attorneys' fees and costs in propounding discovery, filing their motions to compel, and engaging in settlement negotiations, which are all activities available in an arbitration proceeding. 'Because of the strong policy favoring arbitration, prejudice typically is found only where the petitioning party has unreasonably delayed seeking arbitration or substantially impaired an opponent's ability to use the benefits and efficiencies of arbitration. [Citations.] Prejudice is not found where the party opposing arbitration shows only that it incurred court costs and legal expenses in responding to an opponent's pleadings and motions. [Citation.] Prejudice sufficient for waiver will be Calendar No.: Event ID:  TENTATIVE RULINGS

3097876 CASE NUMBER: CASE TITLE:  SAINZ V. ADGS AUTOMOTIVE GROUP, INC. [IMAGED]  37-2023-00024471-CU-CO-NC found where instead of seeking to compel arbitration, a party proceeds with extensive discovery that is unavailable in arbitration proceedings.' Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal. App. 4th 1035, 1042. Plaintiffs make no such showing.

Finally, there is not a close proximity in time between Defendants' request for arbitration and the trial in this matter. Defendants filed the pending motion on February 2, 2024. A trial date has not been set as of the date of this ruling.

In light of the foregoing, the court Defendants' motion to compel arbitration. This action is stayed pending the outcome of the arbitration hearing. See 9 U.S.C. § 3.

This is the tentative ruling for the hearing at 1:30 p.m. on Friday, April 26, 2024. If no party appears at the hearing, this tentative ruling will become the order of the court as of April 26, 2024. If the parties are satisfied with the court's tentative ruling or do not otherwise wish to argue the motion, they are encouraged to give notice to the court and each other of their intention not to appear, though this notice is not required.

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