Judge: John J. Kralik, Case: 23BBCV01744, Date: 2024-02-02 Tentative Ruling

Case Number: 23BBCV01744    Hearing Date: February 2, 2024    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

BACKGROUND

A.    Allegations

Plaintiff Edgar Blanco (“Plaintiff”) alleges that he purchased a 2019 Ford Mustang from dealer/Defendant Knight Sunrise Hollywood, LLC (“Knight”) on February 28, 2023.  He alleges that holder/Defendant JP Morgan Chase Bank, National Association (“Chase”) accepted assignment of Plaintiff’s contract from Knight.  Plaintiff alleges that at the time of purchase, the vehicle had 24,445 miles on the odometer, he had been assured that the vehicle had not been involved in any prior collisions, and Knight reassured him that the vehicle was in good condition.  Plaintiff alleges that at the time of sale, the vehicle was covered under Ford Motor Company’s powertrain warranty.  Plaintiff alleges he signed the contract and purchased the vehicle.  He alleges that on March 2, 2023, the Check Engine Light came on, he brought the vehicle in on March 3, 2023, and the vehicle was returned to him on March 14, 2023.  Plaintiff then took the vehicle to Caliber Collision in Santa Monica for an inspection and was informed that there had been prior impacts to multiple panels and that the vehicle had multiple mechanical issues.  Plaintiff alleges he would not have purchased the vehicle had he been told about the mechanical issues and prior accident damage. 

            The complaint, filed July 31, 2023, alleges causes of action for: (1) violation of the Consumers Legal Remedies Act; (2) intentional misrepresentation; (3) concealment; (4) negligent misrepresentation; (5) breach of the implied warranty of merchantability; (6) violation of the Unfair Competition Law; and (7) violation of Vehicle Code, § 11711.   

B.     Motion on Calendar

On October 10, 2023, Knight filed a motion to compel arbitration.

On January 22, 2024, Plaintiff filed an opposition brief.

On January 26, 2024, Knight filed a reply brief.  

DISCUSSION

            Knight moves to compel Plaintiff to arbitrate his claims and for a stay of the action. 

            Knight relies on the written Retail Installment Sale Contract (“RISC”), which includes a boxed section entitled, “ARBITRATION PROVISION.”  (Mot., Ex. A [RISC].)  The Arbitration Provision states in relevant part:

1. Either you or we may choose to have any dispute between you and us decided by arbitration and not in court or by jury trial.

…

3. Discovery and rights to appeal in arbitration are generally more limited than in a lawsuit….

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, the Arbitration Provision shall not apply to such claim or dispute.  …

(RISC at Arbitration Provision.)  The Arbitration Provision states that arbitration shall be conducted by a single arbitrator, shall be conducted by the American Arbitration Association or National Arbitration and Mediation (or any mutually agreeable arbitration organization), the qualifications of the arbitrator, the location of the arbitration hearing, payment of fees, and the application of the FAA.  (Id.) 

            In opposition, Plaintiff argues that he does not oppose resolving this dispute through arbitration or a stay in the action, but opposes being ordered to arbitration with the AAA because: (1) arbitrating with the AAA would be unconscionable under California law because AAA does not provide him with an adequate opportunity to conduct discovery; (2) Plaintiff was not informed he could lose the right to conduct discovery when entering the RISC with the dealer; and (3) the Arbitration Provision allows the dealer or Plaintiff the right to choose any of the 2 arbitration forums or allows the parties to mutually agree on an alternative forum.  (Opp. at pp 0-1.)  Plaintiff argues that the only way to prove his claims against Knight for fraud is to obtain discovery and have witnesses testify under oath.  He argues that if Knight agrees only to AAA, then he will be deprived of any meaningful choice and the right to select an arbitration forum under the RISC is illusory.  Thus, Plaintiff requests that the Court honor Plaintiff’s right to choose an arbitration forum or requests that the Court appoint an arbitrator other than AAA under CCP § 1281.6. 

            In reply, Knight argues that it will not agree to conduct the arbitration by JAMS (as suggested by Plaintiff) and, thus, argues that the Court should grant the motion to compel arbitration and order the parties to use AAA pursuant to the terms of the RISC.  Knight argues that the RISC is self-executing and the RISC calls for AAA.

            The RISC states: “You or we may choose the American Arbitration Association (www.adr.org) or National Arbitration and Mediation (www.namadr.com) as the arbitration organization to conduct the arbitration.  If you and we agree, you or we may choose a different arbitration organization.  You may get a copy of the rules of an arbitration organization by contacting the organization or visiting its website.”  (RISC at Arbitration Provision.)

            The RISC provides that the arbitration may be conducted by AAA or NAM, or if the parties agree, a separate arbitration organization.  The Court inquires if the parties are amenable to using NAM as the preferred arbitration service.   The Court disagrees with the assessment that AAA rules prevent discovery of relevant information. Although discovery is limited in light of the remedy involved, some discovery is available in the discretion of the arbitrator. In addition, arbitrators have the right to issue subpoenas. Nevertheless, the Plaintiff seems to have a contractual right to choose NAM over AAA.

CONCLUSION AND ORDER

Defendant Knight Sunrise Hollywood, LLC’s motion to compel arbitration is granted.  The remainder of the action as alleged against Defendant JPMorgan Chase Bank, National Association shall be stayed pending the outcome of the arbitration.

The parties are ordered to attend the hearing to discuss whether a mutually agreeable arbitrator can be chosen.  The Court will inquire if the parties are amenable to using National Arbitration and Mediation as the preferred arbitration service, why Plaintiff is opposed to using American Arbitration Association (the alternatively agreed upon service in the contract), and why Defendant is opposed to mutually agreeing to the use of JAMS. 

The Court sets a Status Conference re: Status of Arbitration for August 7, 2024 at 8:30 a.m.

Defendant shall provide notice of this order.

DATED: February 2, 2024                                                     ___________________________

                                                                                          John J. Kralik

                                                                                          Judge of the Superior Court