Judge: Daniel M. Crowley, Case: 21STCV27019, Date: 2022-12-13 Tentative Ruling

Case Number: 21STCV27019    Hearing Date: December 13, 2022    Dept: 28

Defendants Rasier, LLC, Rasier-CA, LLC and Uber Technologies, Inc.’s Motion to Compel Arbitration

Having considered the moving, opposing, and reply papers, the Court rules as follows. 

BACKGROUND

On July 22, 2021, Plaintiffs Yejin Jo (“Jo”), Jiyoon Kim (“Kim”) and Da Jung Park (“Park”) filed this action against Defendants Vahik Vartan (“Vartan”), Uber Technologies, Inc. (“Uber”), Rasier, LLC (“Rasier”) and Rasier-CA, LLC (“Rasier-CA”) for motor vehicle negligence and general negligence.

On September 17, 2021, Vartan filed an answer and a Cross-Complaint against Cross-Defendant Juliana Sua (“Sua”) for implied indemnity, comparative contribution, equitable indemnity and declaratory relief.

On December 17, 2021, Uber, Rasier and Rasier-CA filed answers.

On December 17, 2021, Rasier filed a Cross-Complaint against Cross-Defendant Sua for equitable indemnity, total indemnity, apportion and contribution and declaratory relief.

On March 9, 2022, Rasier-CA filed a Cross-Complaint against Cross-Defendant Sua for equitable indemnity, total indemnity, apportion and contribution and declaratory relief.

On March 9, 2022, Uber filed a Cross-Complaint against Cross-Defendant Sua for equitable indemnity, total indemnity, apportion and contribution and declaratory relief.

On June 22, 2022, Sua filed answers to all Cross-Complaints.

On November 15, 2022, Uber, Rasier and Rasier-CA (“Moving Defendants”) filed a Motion to Compel Arbitration to be heard on December 13, 2022. On November 30, 2022, Plaintiffs filed an opposition.

Trial is currently set for January 19, 2023.

PARTY’S REQUESTS

Moving Defendants request the Court compel arbitration.

Plaintiffs request the Court deny the motion.

LEGAL STANDARD

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.) The Court shall grant the petition unless the petitioner waived the right to compel arbitration, or other grounds exist for rescission of the agreement. (Id.) 

California Code of Civil Procedure § 1290.4, subdivision (b) requires a petition to compel arbitration under § 1281.2 to be served on the parties as provided in their arbitration agreement or, if no method was agreed to, in the same manner required for service of summons, if the party to be served has not previously appeared in the proceeding and has not previously been served in accordance with this subdivision. (Miranda v. 21st Century Ins. Co. (2004) 117 Cal.App.4th 913, 928.)

Waiver of the right to arbitrate is assessed through a number of factors, including: (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) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (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. (St. Agnes Medical Center v. PacificCare of California (2003) 41 Cal. 4th 1187, 1196.)

So long as an arbitration agreement is clear and explicit in meaning, an arbitration agreement can encompass incidents or claims that occurred or accrued prior to the agreement. (Salgado v. Carrows Restaurants, Inc. (2019) 33 Cal.App.5th 356, 356, 360-361.) 

Under California law, an arbitration agreement must be in some measure both procedurally and substantively unconscionable in order for the agreement to be unenforceable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.) “But they need not be present in the same degree. . . . [T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Id.) 

Procedural unconscionability focuses on two factors: oppression and surprise. (A & M Produce Co. v.  FMC Corp. (1982) 135 Cal.App.3d 437, 486.) Oppression is an “inequality of bargaining power which results in no real negotiation and ‘an absence of meaningful choice.’” (Id.) Surprise involves the extent to which the agreed upon terms are hidden away “by the party seeking to enforce the disputed terms.” (Id.)

Substantive unconscionability does not have a precise definition, but generally a contract is found to be “substantively suspect if it reallocates the risks of the bargain in an objectively unreasonable or unexpected manner.” (Id. at 487.) 

California case law establishes two categories of cases that bind non-signatories to arbitrate their claims: (1) those where a benefit was conferred to the non-signatory as a result of the contract, thereby making the non-signatory a third party beneficiary of the arbitration agreement, and (2) those where the non-signatory was bound to arbitrate because a preexisting relationship existed between the non-signatory and one of the parties to the arbitration agreement, making it equitable to compel the non-signatory to arbitrate. (County of Contra Costa v. Kaiser Found. Health Plan, Inc. (1996) 47 Cal.App.4th 237, 242.)

DISCUSSION

Compel Arbitration

On or around November 29, 2016, and March 16, 2017, Plaintiffs, Jo and Kim, registered as riders through the Uber App. (Declaration of Ryan Buoscio ¶ 7; Ex. B.) As part of this registration process, Plaintiffs, Jo and Kim, agreed to be bound by Uber’s terms, access to which was prominently displayed during the registration process. (Declaration of Ryan Buoscio ¶¶ 9-10; Ex. B.) While signing up for accounts, Plaintiffs, Jo and Kim, were prompted with the following notice: By continuing, I confirm I have read and agree to the Terms & Conditions and Privacy Policy.” (Ex. G.) It contained clearly hyperlinks to the Terms of Use and Privacy Notice in the pop-up. (Id.) Plaintiffs clicked the checkbox, expressly consenting to the Terms of Use. (Buoscio Decl. ¶ 10.) These terms of use clearly required Plaintiffs to resolve any applicable claims they may have against Moving Defendants on an individual basis in arbitration and that both Plaintiffs and Moving Defendants waived their right to trial by jury. Applicable claims included “any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof or the use of the Service or Application...” (Ex. B.)

Plaintiffs alleges they was injured in a motor vehicle accident on August 11, 2019, while riding in a vehicle obtained through Uber when the driver allegedly rear ended another vehicle. This would constitute an incident or accident resulting in injury that occurred in connection with Plaintiffs’ use of the service. Plaintiffs did not file their lawsuit until after Plaintiff, Jo and Kim,  agreed to the Terms of Use.  As the Terms of Use are clear in that it encompasses incidents that occurred prior to the date Plaintiff signed the agreement, the arbitration agreement as to previously occurring incidents is binding. Plaintiff must submit to arbitration. Plaintiff has refused to do so in submitting both the complaint and an opposition to this motion. 

On the other hand, Park was a non-signatory to the agreement, and instead was travelling as a passenger. As a non-signatory, Park is not bound by the agreement to arbitrate.  Arbitration is a matter of contract and therefore, ordinarily, someone not a party to the arbitration agreement cannot be compelled to arbitrate.  McArthur v. McArthur (2014) 224 CA4th 651, 653, 658-659.  Defendants argue that Park should be bound, nonetheless as a third-party beneficiary.  But third parties do not become “third-party beneficiaries” just because a contract benefits them. A contract must be “made expressly” for the third party's benefit. The test is “whether an intent to benefit a third person appears from the terms of the contract.” (Jensen v. U-Haul Co. of Calif. (2017) 18 CA5th 295, 301-302 (internal quotes omitted).)  A third-party beneficiary is someone who may enforce a contract because the contract is made expressly for his benefit. (Matthau v. Superior Court (2007) 151 Cal.App.4th 593, 598, 602.)  The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract.  (Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 962, 967.)  Here, Uber’s contract contains no indicia of any intent to benefit Mr. Park or others in his position.  The Court finds that he is not a third-party beneficiary of the contract.

Nor did Vartan sign the Arbitration Agreement.  Moving parties indicate that Vartan has settled with the plaintiffs (Reply, p. 3, l. 4), but there is no indication in the Court’s file so indicating.[1]  Accordingly, Plaintiffs cannot be compelled to arbitrate their claim against Vartan.

Accordingly, there are two plaintiffs, Jo and Kim, who have agreed to arbitrate with Uber, and one who has not (Park).  In addition, all three plaintiffs have sued Vartan; there is no arbitration agreement between them.  Under these circumstances, Code of Civil Procedure section 1281.2 applies.  Section 1281.2 allows the trial court to deny a motion to compel arbitration whenever a party to the arbitration agreement is also party to litigation with a third party that (1) arises out of the same transaction or series of related transactions, and (2) presents a possibility of conflicting rulings on a common issue of law or fact.  (Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 486.)  The Court find that Jo and Kim’s action and Park’s action, as well as all three plaintiffs’ action against Vartan all arise out of the same accident and that there is possibility of conflicting results if the Jo and Kim action is arbitrated and the Park action tried. 

Therefore, the Court denies Defendants’ motion pursuant to Code of Civil Procedure section 1281.2.

CONCLUSION

Defendants Rasier, LLC, Rasier-CA, LLC and Uber Technologies, Inc.’s Motion to Compel Arbitration is DENIED.

            Moving party is ordered to give notice of this ruling.

Moving Party is ordered to file the proof of service of this ruling with the Court within five days.

The parties are directed to the header of this tentative ruling for further instructions.