Judge Katherine Chilton, Case 22STLC03872 2022-10-31 Tentative Ruling

Judge: Katherine Chilton, Case: 22STLC03872, Date: 2022-10-31 Tentative Ruling

Case Number: 22STLC03872 Hearing Date: October 31, 2022 Dept: 25

PROCEEDINGS: MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS

MOVING PARTY: Plaintiff Victor Arreola

RESP. PARTY: None

MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS

(CCP §§ 1281.2)

TENTATIVE RULING:

Plaintiff Victor Arreola’s Motion to Compel Arbitration and Stay Proceedings is CONTINUED TO DECEMBER 7, 2022 at 10:00 a.m. in Department 25 at the SPRING STREET COURTHOUSE. Plaintiff is ordered to personally serve the Notice of the Continued Hearing on Defendants at least 16 court days before the next scheduled hearing and file proof with the court. Failure to do so may result in the Motion being placed off calendar or denied.

SERVICE:

[X] Proof of Service Timely Filed (CRC, rule 3.1300) OK

[X] Correct Address (CCP §§ 1013, 1013a) OK

[X] 16/21 Court Days Lapsed (CCP §§ 12c, 1005(b)) OK

OPPOSITION: None filed as of October 24, 2022. [ ] Late [X] None

REPLY: None filed as of October 24, 2022. [ ] Late [X] None

ANALYSIS:

I. Background

On June 9, 2022, Plaintiff Victor Arreola (“Plaintiff”) filed an action against Defendants Cerritos Ford, Inc., dba Norm Reeves Ford Superstore/Norm Reeves Lincoln (“Cerritos Ford”), Capital One, National Association, Successor in Interest to Capital One Auto Finance, Inc. a surrendered corporation (“Capital One”), and Hudson Insurance Company (“Hudson”) (collectively “Defendants”) for (1) violation of Consumers Legal Remedies Act, Civil Code § 1750 et seq., (2) violation of California Business and Professions Code § 17200, et seq., Unlawful Acts or Practices, (3) claim against Surety, and (4) violation of Code of Civil Procedure §§ 1281.97 and 1281.99. The action arose out of an alleged Retail Installment Sales Contract for a purchase of a vehicle sold by Defendant Cerritos Ford and financed by Defendant Capital One. (See Compl.)

On July 11, 2022, Plaintiff filed the instant Motion to Compel Arbitration (the “Motion”), requesting an order to compel Defendants Cerritos Ford and Capital One to arbitrate the controversy with the American Arbitration Association (“AAA”) or in the alternative, JAMS, and for the Court to stay the proceedings pending results of the arbitration. No opposition was filed.

On August 12, 2022, Defendant Hudson filed an Answer.

On September 15, 2022, the Court continued the hearing on the Motion and ordered Plaintiff to file additional authority on whether the Court can order Defendants to arbitration prior to their appearance in the action. (9-15-22 Minute Order.)

On September 21, Plaintiff filed Proof of Service of Notice of Continued Hearing on the Motion. (9-21-22 Notice.)

II. Legal Standard

Pursuant to Code of Civil Procedure §1281.2, generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2) the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting¿rulings on common issues.

When seeking to compel arbitration, the initial burden lies with the moving party to demonstrate the existence of a valid arbitration agreement by prepondernace of evidence. (Ruiz v. Moss Bros. Auto Group (2014) 232 Cal.App.4th 836, 841-42; Gamboa v. Northeast Community Clinic (2021), 72 Cal.App.5th 158, 164-65.) It is sufficient for the moving party to produce a copy of the arbitration agreement or set forth the agreement’s provisions. (Gamboa, 72 Cal.App.5th at 165.) The burden then shifts to the opposing party to prove by a preponderance of evidence any defense to enforcement of the contract or the arbitration clause. (Ruiz, 232 Cal.App.4th at 842; Gamboa, 72 Cal.App.5th at 165.) Subsequently, the moving party must establish with the preponderance of admissible evidence a valid arbitration agreement between the parties. (Ibid.) The trial court then weighs all the evidence submitted and uses its discretion to make a final determination. (Ibid.) “California law, ‘like [federal law], reflects a strong policy favoring arbitration agreements and requires close judicial scrutiny of waiver claims.’” (Wagner Const. Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 31.)

If the court orders arbitration, then the court shall stay the action until arbitration is completed. (See Code Civ. Proc., § 1281.4.)

III. Discussion

Plaintiff Arreola brings the instant Motion seeking to compel Defendants Cerritos Ford and Capital One to submit to arbitration based on a written retail installment sales contract between Plaintiff, on the one hand, and Defendants, on the other hand. (Sadr Decl. ¶ 5; Exs. 2-3.) Plaintiff argues that the Retail Installment Sales Agreement (“Contract”) has an arbitration provision and sets out the language of the provision:

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of 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 decision… You may choose the American Arbitration Association, 1633 Broadway, Floor 10, New York, NY 10019 (www.adr.org); or any other organization to conduct the arbitration subject to our approval.

(Mot. p. 3; Sadr Decl. ¶ 5; Ex. 2.) Plaintiff argues that “[t]he Contract governs the terms and conditions of the parties’ transaction” and “the right to compel arbitration has not been waived.” (Mot. pp. 3-5.)

Plaintiff’s counsel states that on or around November 19, 2021, counsel sent Defendants a Notice of Violation of the Consumer Legal Remedies Act and Demand for Arbitration. (Sadr Decl. ¶ 3; Ex. 1.) Defendants did not agree to the arbitration. (Ibid. at ¶ 4.) On or around February 22, 2022, counsel filed for arbitration with the American Arbitration Association (“AAA”), which accepted arbitration of the dispute on March 25, 2022, and requested payment of arbitration fees from Defendants. (Ibid. at ¶¶ 8-9; Ex. 4.) However, Defendants did not make the payments and the AAA closed the case. (Ibid. at ¶ 10-11; Exs. 5-6.)

Plaintiff argues that he has a right to pick the arbitration forum pursuant to the arbitration provision of the Contract, which states “You may choose the American Arbitration Association, 1633 Broadway, Floor 10, New York, NY 10019 (www.adr.org); or any other organization to conduct the arbitration subject to our approval.” (Mot. pp. 5-6; Sadr Decl. ¶ 5; Ex. 2.) “Plaintiff hereby chooses AAA as the arbitration forum for this matter,” or in the alternative JAMS. (Mot. p. 6.)

Finally, Plaintiff argues that the Contract requires Defendant Capital One, as “the finance company that financed the sale of the vehicle to Plaintiff” to be subject to the arbitration provision. (Mot. pp. 6-7.) The Contract states that “ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURUSANT HERETO OR WITH THE PROCESS HEREOF.” (Ibid. at p. 7; Sadr Decl. ¶ 5; Ex. 2.)

On September 15, 2022, the Court found that there was no dispute regarding the existence of an arbitration agreement as Plaintiff had attached a copy of the Contract and set out the language in the Motion. Defendants have not opposed the Motion on any grounds.

However, the Court noted that neither Defendant Cerritos Ford nor Defendant Capital One had filed an answer or appeared in the case. (9-15-22 Minute Order.) Thus, the Court ordered Plaintiff to file additional authority on whether the Court can order Defendants to arbitration prior to their appearance in this action. (Ibid.)

On September 21, 2022, Plaintiff filed Proof of Service of Notice of Continued Hearing on the Motion but did not file any additional briefing regarding the Court’s authority to compel arbitration in the instant case.

According to Code of Civil Procedure § 1290.2, petitions and motions to compel arbitration are heard in the same manner and upon notice provided by law, except notice for a hearing on a petition must be given no less than 10 days before the hearing. Code of Civil Procedure § 1290.4 prescribes the manner in which a copy of the petition and written notice must be served on the opposing party:

(a) A copy of the petition and a written notice of the time and place of the hearing thereof and any other papers upon which the petition is based shall be served in the manner provided in the arbitration agreement for the service of such petition and notice.

(b) If the arbitration agreement does not provide the manner in which such service shall be made and the person upon whom service is to be made has not previously appeared in the proceeding and has not previously been served in accordance with this subdivision:

(1) Service within this State shall be made in the manner provided by law for the service of summons in an action.

(2) Service outside this State shall be made by mailing the copy of the petition and notice and other papers by registered or certified mail. Personal service is the equivalent of such service by mail. Proof of service by mail shall be made by affidavit showing such mailing together with the return receipt of the United States Post Office bearing the signature of the person on whom service was made. Notwithstanding any other provision of this title, if service is made in the manner provided in this paragraph, the petition may not be heard until at least 30 days after the date of such service.

(c) If the arbitration agreement does not provide the manner in which such service shall be made and the person on whom service is to be made has previously appeared in the proceeding or has previously been served in accordance with subdivision (b) of this section, service shall be made in the manner provided in Chapter 5 (commencing with Section 1010) of Title 14 of Part 2 of this code.

Here, the arbitration provision of the agreement does not prescribe the manner of service. (Sadr Decl. ¶ 5; Ex. 2.) Furthermore, Defendants have not yet appeared in the case. Since Defendants were being served within the State, service of the Motion to Compel should have been made “in the manner provided by law for the service of summons in an action.” (Code of Civ. Proc. § 1290.4(b)(1).) Section 416.10 indicates that “[a] summons may be served on a corporation by delivering a copy of the summons and the complaint by” personally serving it on the agent for service of process, the president, chief executive office, or other statutorily permitted individual. (Code of Civ. Proc. § 416.10.)

On July 22, 2022, Plaintiff filed Proofs of Service indicating that Defendants Capital One and Cerritos Ford had been served by personal delivery of the moving papers to individuals authorized to accept service of process. However, the Notice of Continued Hearing has been served on the Defendants by mail, even though Defendants Capital One and Cerritos Ford have not yet appeared in the case. (9-21-22 Notice.) Given that the Court acquires jurisdiction over a party through the proper service of a notice of motion, the Court does not have jurisdiction to compel the parties to arbitration unless they are properly served with the Notice of Continued Hearing. (See Frey & Horgan Corp. v. Superior Court of San Francisco (1936) 5 Cal. 2d 401, 403 (“It has been well said that a notice may be properly designated as "process" when it is given by authority of law for the purpose of acquiring jurisdiction of a defendant.”)

The Court continues the hearing to allow Plaintiff additional time to personally serve Defendants with the Notice of the Continued Hearing and file proof with the Court.

IV. Conclusion & Order

For the reasons discussed above,

Moving party is ordered to give notice.