Judge: Lee W. Tsao, Case: 23NWCV03700, Date: 2024-09-17 Tentative Ruling
Case Number: 23NWCV03700 Hearing Date: September 17, 2024 Dept: C
William Kent, et al. vs US
Developers, Inc., et al.
Case No.: 23NWCV03700
Hearing Date: September 17, 2024 @ 10:30 a.m
#6
Tentative Ruling
Defendant US Developers, Inc. dba Home Renew
360’s Motion to Compel Arbitration is GRANTED.
Proceedings against Defendant Shani Gradi are STAYED pending
arbitration.
Defendants to give notice.
Background
Plaintiffs, husband and wife, sue for damages under two
separate home improvement contracts. The
first contract contained an arbitration agreement, and the second one did
not. The issue presented here is whether
arbitration should be compelled under the first contract on the basis of
fraudulent inducement.
Plaintiff William Kent hired Defendant US Developers, Inc. dba
Home Renew 360 (“Home Renew 360”) to perform renovations to the home he owns
with his wife, Plaintiff Courtney Kent.
Shortly afterwards, William and Courtney hired Defendant Shani Gradi
(“Gradi”), an interior designer, to perform additional renovations to the home. The total cost of renovations exceeded $369,580.00. Plaintiffs contend that the work performed by
Defendants was substandard, that certain representations made by Defendants were
false, and that Plaintiffs, both seniors, were the victims of financial elder
abuse by Defendants.
William’s contract with Home Renew 360 contained an
arbitration agreement, whereas William and Courtney’s contract with Gradi did
not. Home Renew 360 initiated
arbitration under its contract with William, but William did not cooperate in
the process. Instead, William and
Courtney filed this lawsuit against Home Renew 360 and Gradi. The Complaint filed on November 15, 2023,
alleges breach of contract, negligent misrepresentation, and unfair business
practice. A First Amended Complaint
filed on January 30, 2024 adds causes of action for financial elder abuse and
fraudulent inducement. The FAC is the
subject of a motion to strike by Defendants scheduled for hearing on December
10, 2024.
In this motion, Defendants seek to compel William to
arbitrate his claims against Home Renew 360 based upon the arbitration clause
in their contract. Gradi will agree to
arbitrate the claims against him, but Plaintiffs will not. Alternatively, Gradi asks that proceedings
against him be stayed pending arbitration between William and Home Renew 360.
Legal
Standard
California
law incorporates many of the basic policy objectives contained in the Federal
Arbitration Act, including a presumption in favor of arbitrability. (See Engalla
v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.) Under
Code of Civil Procedure section 1281, a “written agreement to submit to
arbitration an existing controversy or a controversy thereafter arising is
valid, enforceable and irrevocable, save upon such grounds as exist for the
revocation of any contract.”
“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.
(c)
A party to the arbitration agreement is also a party to a pending court action
or special proceeding with a third party, arising out of the same transaction
or series of related transactions and there is a possibility of conflicting
rulings on a common issue of law or fact. . . .” (CCP §1281.2.)
The
right to arbitration depends upon contract; a petition to compel arbitration is
simply a suit in equity seeking specific performance of that contract. (Marcus
& Millichap Real Estate Inv. Brokerage Co. v. Hock Inv. Co. (1998) 68
Cal.App.4th 83, 88.) When presented with a petition to compel
arbitration, the trial court's first task is to determine whether the parties
have in fact agreed to arbitrate the dispute. (Id.)
‘[W]hen a petition to
compel arbitration is filed and accompanied by prima facie evidence of a
written agreement to arbitrate the controversy, the court itself must determine
whether the agreement exists and, if any defense to its enforcement is raised, whether
it is enforceable. Because the existence of the agreement is a statutory
prerequisite to granting the petition, the petitioner bears the burden of
proving its existence by a preponderance of the evidence. If the party
opposing the petition raises a defense to enforcement—either fraud in the
execution voiding the agreement, or a statutory defense of waiver or revocation
(see §1281.2(a), (b))—that party bears the burden of producing evidence of, and
proving by a preponderance of the evidence, any fact necessary to the defense.’”
(Rosenthal
v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) “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.” (Baker v. Italian Maple Holdings, LLC
(2017) 13 Cal.App.5th 1152, 1160.)
Discussion
Existence of Arbitration Agreement
On June 19, 2021, Home Renew 360 entered into a home
improvement contract with Plaintiff William Kent. (Benhaim Decl., ¶2.) William
signed each signature line in the contract and initialed each designated area,
including the arbitration clause. (Id., ¶6.) The arbitration clause
includes the following language:
“ANY CONTROVERSY OR CLAIM
ARISING OUT OF OR RELATED TO THIS CONTRACT, OR THE BREACH THEREOF, SHALL BE
SETTLED BY BINDING ARBITRATION IN ACCORDANCE WITH THE CONSTRUCTION INDUSTRY
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION, AND JUDGMENT UPON
THE AWARD RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION THEREOF. …
NOTICE: BY INITIALING IN THE
SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS
INCLUDED IN THE `ARBITRATION OF DISPUTES' PROVISION DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU
MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY
INITIALING IN THE SPACE BELOW YOU ARE GIVING UP JUDICIAL RIGHTS TO DISCOVERY
AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE ` ARBITRATION
OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING
TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE
BUSINESS AND PROFESSIONS CODE OR OTHER APPLICABLE LAWS. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING
AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE
`ARBITRATION OF DISPUTES' PROVISION TO NEUTRAL ARBITRATION. (Benhaim Decl., ¶4,
Ex. A.)
“[D]efendants may meet their initial burden to show an
agreement to arbitrate by attaching a copy of the arbitration agreement
purportedly bearing the opposing party’s signature.” (Espejo v. Southern
California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060; see
also Bannister v. Marinidence Opco, LLC¿(2021) 64 Cal.App.5th 541 [“The
party seeking arbitration can meet its initial burden by attaching to the
petition a copy of the arbitration agreement purporting to bear the
respondent's signature.”].) Accordingly, Defendants have met their initial
burden by attaching the arbitration agreement bearing Plaintiff William Kent’s initials.
Enforceability of Arbitration Agreement
“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.” (Baker v. Italian Maple Holdings, LLC (2017) 13
Cal.App.5th 1152, 1160.)
Plaintiffs oppose the motion to compel arbitration on the
grounds that the contract was induced by fraud. Plaintiffs rely upon Engalla v. Permanente
Medical Group, Inc. (1997) 15 Cal.4th 951 for the proposition that
a “petition to compel arbitration is not to be granted when there are grounds
for rescinding the agreement.” (Id. at 973.) Fraud is one of the grounds
on which a contract can be rescinded. (Ibid.) Plaintiffs argue that William
entered into the contract with Home Renew 360 as a result of the aggressive
sales pitch and false representations made by Home Renew 360’s agent, Edan
Levy. Levy told William that “the
quality of his company’s work was superior and that he would personally
supervise all workers and subcontractors on [William’s] property.” (Kent Decl.,
¶2.) “[Levy] did not explain anything to me about the contract other than
telling me that they could not start the work without the signed contract. (Ibid.)
Plaintiffs’ reliance upon Engalla is misplaced. In Engalla, Plaintiffs were family
members and representatives of the estate of the decedent who was enrolled,
through his employer, in a health plan operated by Kaiser. Decedent initiated arbitration under the
health plan after he was diagnosed with a type of lung cancer. The decedent met with a series of delays in
the arbitration process and passed away before arbitration was completed. Plaintiffs filed suit, and Kaiser moved to
compel arbitration. In opposition to the
motion, Plaintiffs claimed that Kaiser’s self-administered arbitration system
was corrupt and biased, that Kaiser fraudulently misrepresented the
expeditiousness of its arbitration system, and that Kaiser engaged in a course
of dilatory conduct in order to postpone decedent’s arbitration hearing until
after his death. Importantly, the Court
in Engella stated, “In order to defeat a petition to compel arbitration,
the parties opposing a petition to compel must show that the asserted fraud
claim goes specifically to the making of the agreement to arbitrate,
rather than to the making of the contract in general.” (Id. at 973,
italics added, citing Rosenthal v. Great Western Fin. Services Corp.
(1986) 14 Cal.4th 394, 415.) Here, Plaintiffs argue that the contract
was induced by fraud. (See, e.g., Opposition, p. 4:24-25 (“the only
reason WILLIAM entered into the Construction Contract with HOME RENEW was based
on the aggressive sales pitch and representations of Edan Levy…”).) Plaintiffs
offer no evidence that Home Renew 360 fraudulently induced William to agree to
the arbitration clause in particular, as opposed to the contract in general. Unlike the plaintiffs in Engalla,
Plaintiffs in this case make no allegation that the arbitration process itself is
unfair. In fact, it is undisputed that
Plaintiffs did not participate in the arbitration process initiated by Home
Renew 360. The arbitration clause at
issue here is broad enough to include the claim of fraud in the inducement. (Ericksen,
Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983)
35 Cal. 3d 312.) Plaintiffs are not foreclosed from pursuing
their claim that the entire contract, including the arbitration clause, is
invalid due to fraudulent inducement.
However, the issue must be decided by the arbitrator, not this court. (Rosenthal
v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p.
423.)
Accordingly, the motion to compel Plaintiff William Kent to
arbitrate his claims against Home Renew 360 is GRANTED. To avoid inconsistent rulings, proceedings
against Defendant Shani Gradi are STAYED pending completion of
arbitration.