Judge Kerry Bensinger, Case Number: 22STCV16058, Date: 2023-08-10 Tentative Ruling

On June 27, 2020, Plaintiff Lore sustained injuries in a motor vehicle collision.[1] Plaintiff Lore used the Lyft platform to arrange a ride with Defendant Luis Ceja Salcedo (Salcedo or Defendant Salcedo). Salcedo was the driver and Plaintiff was a passenger. Defendants Luciana Nunez and/or Lyft owned and entrusted the vehicle to Salcedo. The vehicle driven by Defendant Salcedo rear-ended a vehicle driven by Plaintiffs McDonald and Sissle. The McDonald and Sissle vehicle then rear-ended a third-party vehicle.

As relevant here, on May 27, 2022, Plaintiff sued Salcedo, Lyft, and Nunez for Motor Vehicle and General Negligence. Lyft answered the Complaint on October 31, 2022.

On June 16, 2023, Lyft filed this motion to compel arbitration and to stay the proceedings pending completion of arbitration.

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement.” (Code Civ. Proc. §1281.2, subds. (a), (b).) Under the Federal Arbitration Act, a court’s inquiry is limited to a determination of (1) whether a valid arbitration agreement exists and (2) whether the arbitration agreement covers the dispute. (9 U.S.C., § 4;¿Chiron Corp. v. Ortho Diagnostics Systems, Inc.¿(9th Cir. 2000) 207 F.3d 1126, 1130;¿Howsam¿v. Dean Witter Reynolds, Inc.¿(2002) 537 U.S. 79, 84;¿see¿Simula, Inc. v. Autoliv, Inc.¿(9th Cir. 1999) 175 F.3d 716 [if the finding is affirmative on both counts the FAA requires the Court to enforce the arbitration agreement in accordance with its terms].) If a clause delegating enforcement under the FAA exists, the court may only adjudicate the enforceability of the delegation clause itself; if found enforceable, questions regarding the enforceability of the underlying agreement as a whole is reserved for the arbitrator. (Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 72.) In order for a delegation clause to be enforceable, there must be a showing that the parties “clearly and mistakably agreed that an arbitrator, not a court, would decide the question of enforceability.” (Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425, 1442.) This showing is fulfilled if the arbitration agreement provides that its “enforcement” shall be governed by the FAA. (Victrola 89, LLC v. Jaman Props. 8 LLC (2020) 46 Cal.App.5th 337, 355-56.)

“If an application has been made to a court . . . for an order to arbitrate a controversy . . . the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until the application for an order to arbitrate is determined and, if arbitration of such controversy is ordered, until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code of Civ. Proc., § 1281.4.)

Here, the arbitration agreement expressly states that “the agreement to arbitrate (“Arbitration Agreement”) is governed by the Federal Arbitration Act”. (Motion, Ex. 5, ¶ 17(a).) Parties to an arbitration agreement may voluntarily elect to have the Federal Arbitration Act (“FAA”) govern enforcement of that agreement. (Victrola 89, supra, 46 Cal.App.5th at p. 355.) Here, the parties have so elected. Accordingly, the Court finds that the FAA applies.

Under both Title 9 section 2 of the United States Code (known as the FAA) and Title 9 of Part III of the California Code of Civil Procedure commencing at section 1281 (known as the California Arbitration Act, hereinafter “CAA”), arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ., Proc. § 1281.2.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and 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.) Once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement, and no evidence or authentication is required to find the arbitration agreement exists. (See Condee v. Longwood Mgt. Corp. (2001) 88 Cal.App.4th 215, 219.)

“With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court. (See Condee, supra, 88 Cal.App.4th at 218; see also Cal. Rules of Court, rule 3.1330 [“A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference”].) Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges. [Citation]” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Here, Lyft has met its initial burden of showing that an arbitration agreement exists between the parties. On November 19, 2019, Plaintiff accepted Lyft’s updated Terms of Service (“TOS”). (Motion, Ex. 1, Sniegowski Decl., ¶ 12c.) The TOS was updated on August 26, 2019. As found in Lyft’s August 2019 Terms, the arbitration provision states in pertinent part:

Except as expressly provided below, ALL DISPUTES AND CLAIMS BETWEEN US (EACH A “CLAIM” AND COLLECTIVELY, “CLAIMS”) SHALL BE EXCLUSIVELY RESOLVED BY BINDING ARBITRATION SOLELY BETWEEN YOU AND LYFT. These Claims include, but are not limited to, any dispute, claim or controversy, whether based on past, present, or future events, arising out of or relating to: … the Lyft Platform … background checks performed by or on Lyft’s behalf, … unfair competition, … fraud, defamation … claims arising under federal or state consumer protection laws; … and all other federal and state statutory and common law claims.”

Here, Plaintiff suffered an injury on June 27, 2020 arising out of her use of the Lyft platform. Consequently, this arbitration agreement would encompass Plaintiff’s injury.

Plaintiff does not dispute having assented to the August 2019 TOS or deny the existence of the arbitration agreement. Rather, Plaintiff argues that the arbitration agreement is not valid because Plaintiff did not have reasonable notice of the TOS. However, Plaintiff’s argument, which is unsupported by any citation to authority or evidence, fails to address the uncontested fact that Plaintiff assented to the TOS (and by extension, the arbitration agreement) on three occasions. Nor does she dispute having used the Lyft platform to request the ride at issue. (Motion, Ex. 2.) Plaintiff essentially seeks to be relieved of assenting to the TOS because she did not read the TOS, or at least the arbitration agreement.

Based on the foregoing, the Court finds that Lyft has proven the existence of the arbitration agreement.

Plaintiff argues that Lyft waived the right to arbitrate by (1) unreasonably delaying in pursuing arbitration, and (2) engaging in litigation.

The Court finds that Lyft did not waive its right to arbitrate. “To decide whether a waiver has occurred, the court focuses on the actions of the person who held the right.” (Morgan v. Sundance (2022) 142 S.Ct. 1708, 1713.) “Courts have recognized that where the FAA applies, whether a party has waived a right to arbitrate is a matter of federal, not state, law. [Citation.]” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 963.)

In St. Agnes v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196, the California Supreme Court adopted a multi-factor test from the Tenth Circuit opinion in Peterson v. Shearson/American Express, Inc. (10th Cir. 1988) 849 F.2d 464 wherein a court may consider: (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.¿ (Peterson, supra, 849 F.2d at pp. 467-68; St. Agnes, at p. 1196.) ¿¿However, following the U.S. Supreme Court’s decision in Morgan, courts may no longer condition a determination of waiver on prejudice.¿ (See Morgan, supra, at p. 1713.)¿ The remaining Peterson factors are proper considerations in the waiver inquiry.¿ (Davis, supra, at p. 963.)¿

Here, the sum of Lyft’s conduct fails to demonstrate a waiver of the arbitration right. First, Lyft did not unreasonably delay. Courts have held that waiver is not found even when a fourteen-month period separates the filing of the original complaint and the filing of the motion to compel.¿ (See, e.g., Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th 651-52.) Here, only eleven months separate the filing of the Complaint and Lyft’s motion to compel. Indeed, even less time has passed between the filing of Lyft’s Answer and this motion.

Second, Lyft has not invoked the litigation machinery. Since the filing of its Answer on October 31, 2022, Lyft has not resorted to court intervention save for the filing of this motion to compel arbitration. Plaintiff points out that Lyft has engaged in discovery. Engaging in discovery is certainly participating in the litigation. However, mere participation in the litigation is insufficient, standing alone, to establish waiver. (St. Agnes, supra, 31 Cal.4th at p. 1203.) There must also be some judicial litigation of the merits of arbitrable issues. (Ibid.) Here, Plaintiff makes no showing that Lyft has pursued judicial litigation of the merits of arbitrable issues. In sum, Lyft has acted consistently with its right to arbitrate.

“The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 247 (Pinnacle).) “[U]nconscionability has both a ‘procedural’ and a ‘substantive’ element, the former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, citations omitted.) These elements are evaluated on a “sliding scale”: “the 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.” (Ibid.) The unconscionability defense requires a showing of both procedural and substantive unconscionability. (Ibid.)

“A procedural unconscionability analysis ‘begins with an inquiry into whether the contract is one of adhesion.’” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (OTO); accord, Armendariz v. Foundation Health Psychcare Services, Inc. (2000)¿24 Cal.4th 83, 113.) 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.” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245; see OTO, at p. 68; Armendariz, at p. 113.) The pertinent question, then, is whether circumstances of the contract’s formation created such oppression or surprise that closer scrutiny of its overall fairness is required. (See¿Baltazar,¿at pp. 1245-1246;¿Farrar v. Direct Commerce, Inc.¿(2017) 9 Cal.App.5th 1257, 1267-1268.) “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.” (Pinnacle, supra, 55 Cal.4th at p. 247; see¿De La Torre v. CashCall, Inc.¿(2018) 5 Cal.5th 966, 983 [cleaned up].)

“Substantive unconscionability examines the fairness of a contract’s terms. . . . [The] ‘doctrine is concerned not with “a simple old-fashioned bad bargain” [citation], but with terms that are “unreasonably favorable to the more powerful party.’” [Citation.] Unconscionable terms “‘impair the integrity of the bargaining process or otherwise contravene the public interest or public policy’” or attempt to impermissibly alter fundamental legal duties.” (OTO, supra, 8 Cal.5th at p. 130; accord, Baltazar, supra, 62 Cal.4th at pp. 1244-1245; Lange v. Monster Energy Co. (2020) 46 Cal.App.5th 436, 448.)

Plaintiff argues that the arbitration agreement is procedurally and substantively unconscionable because Plaintiff cannot be expected to appreciate the legal implications of agreeing to arbitrate her claims given that her highest level of education is high school. Plaintiff further argues that it is unconscionable to expect users of the Lyft platform to read the TOS when it spans 43 pages. And last, Plaintiff charges that the TOS is one-sided and presented in a “take it or leave it” manner. These arguments fail.

First, a failure to read the TOS is no defense. A “cardinal rule of contract law is that a party’s failure to read a contract, or to carefully read a contract, before signing it is no defense to the contract’s enforcement.” (Desert Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th 866, 872.) “[O]ne who assents to a contract is bound by its provisions and cannot complain of unfamiliarity with the language of the instrument.” (Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 710.) Here, it is undisputed that Plaintiff assented to the terms of the TOS on more than one occasion.

Second, Plaintiff’s argument that the TOS is one-sided and presented in a “take it or leave it” manner is not well taken. Plaintiff’s attempt to point to the power imbalance between Lyft and Plaintiff ignores that this is not, for example, an employment situation where an employment offer is conditioned on agreeing to arbitrate claims against an employer. Plaintiff, here, has a choice to use or not use the Lyft platform. The risk of coercion in this context is minimal. At least Plaintiff has not presented evidence to the contrary. Rather, the uncontroverted evidence shows that Plaintiff chose to use the Lyft platform many times over.

In sum, Plaintiff fails to show how the TOS and its presentation to Plaintiff is so unconscionable as to preclude enforcement of the arbitration agreement.

The Court will hear from the parties regarding whether to stay the state case or proceed in both forums simultaneously.

Parties who intend to submit on this tentative must send an email to the Court at SSCDEPT27@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.

[1] Plaintiff Lore sued Defendants Lyft, Inc., Salcedo, Luciana Nunez and Does 1-50, Case No. 22STCV17653, on May 27, 2022. The related case Wayne McDonald and Kimberly Sissle v. Salcedo, Nunez and Lyft, Case No. 22STCV16058, was filed on May 13, 2022. McDonald v. Salcedo, Case No. 22STCV16058, is the lead case. The cases were consolidated on May 8, 2023.