TENTATIVE RULING

Defendants Bank of America, N.A. and Ramez Habib’s Motion for an Order Appointing a Judicial Referee and Staying Court Proceedings is DENIED.

Defendants Bank of America, N.A. and Ramez Habib to give notice.

REASONING

Defendants Bank of America, N.A. and Ramez Habib (“Defendants”) move the Court for an order appointing a judicial referee to hear and determine all issues in this action and to report and statement of decision. Defendants also move to stay all other court proceedings in this action until it has been resolved by the referee. Defendants argue that Plaintiff Sherman Law Group APC (“Plaintiff”)’s claims arise from transactions in Plaintiff’s corporate bank account at Bank of America, which is governed by a Deposit Agreement and Disclosures which provides that if a claim “relating to a business account is brought in a California state court, either you or we can seek to compel the other to have the Claim resolved by general reference to a judicial referee under California Code of Civil Procedure (C.C.P.) Section 638.” (Mot., Petry Decl. ¶ 8, Exs. B, C.) Plaintiff opposes the motion on the ground that Defendants have not proven that Plaintiff ever received the agreement, the agreement is a contract of adhesion, the agreement is unconscionable, and the agreement’s discussion of a judicial reference is not an agreement.

Under Code of Civil Procedure section 638, “[a] referee may be appointed upon the agreement of the parties filed with the clerk, or judge, or entered in the minutes, or upon the motion of a party to a written contract or lease that provides that any controversy arising therefrom shall be heard by a referee if the court finds a reference agreement exists between the parties: [¶] (a) To hear and determine any or all of the issues in an action or proceeding, whether of fact or of law, and to report a statement of decision. [¶] (b) To ascertain a fact necessary to enable the court to determine an action or proceeding.”

Judicial reference is described as follows:

In a judicial reference, a pending court action is sent to a referee for hearing, determination and a report back to the court. A general reference directs the referee to try all issues in the action. The hearing is conducted under the rules of evidence applicable to judicial proceedings. In a general reference, the referee prepares a statement of decision that stands as the decision of the court and is reviewable as if the court had rendered it. The primary effect of such a reference is to require trial by a referee and not by a court or jury.

(Treo @ Kettner Homeowners Association v. Superior Court (2008) 166 Cal.App.4th 1055, 1061.)

“A general reference may be had only with the consent of the parties.” (Ellsworth v. Ellsworth (1954) 42 Cal.2d 719, 722.) “[T]he court has no power to make an unconsented-to general reference, which conclusively decides all or part of a matter, because not only is such a general reference not authorized except by explicit agreement of the parties, but also, the California Constitution prevents delegation of judicial power except for the performance of ‘subordinate judicial duties,’” which does not include “[d]eciding a major legal issue in a case, which probably will determine liability.” (Aetna Life Insurance Co. v. Superior Court (1986) 182 Cal.App.3d 431, 435-436.)

Because “[a] judicially ordered reference to alternative dispute resolution pursuant to [Code of Civil Procedure] section 638 is a matter of contract between the parties” (Carr Business Enterprises, Inc. v. City of Chowchilla (2008) 166 Cal.App.4th 25, 28), the existence of a reference agreement is subject to the normal canons of contract interpretation. (See Badie v. Bank of America (1998) 67 Cal.App.4th 779, 800-801.) Appointment of a referee is discretionary, not mandatory. (See Code Civ. Proc., § 638 [“referee may be appointed”].) The Superior Court of Los Angeles County, Local Rules, rule 2.24(m), provides that “[a] written agreement for an order directing a reference is subject to the court’s approval, and the court may, in its discretion, refuse to approve the reference.”

It is clear that Plaintiff’s corporate bank account at Bank of America is governed by a Deposit Agreement and Disclosures providing that if a claim “relating to a business account is brought in a California state court, either you or we can seek to compel the other to have the Claim resolved by general reference to a judicial referee under California Code of Civil Procedure (C.C.P.) Section 638.” (Mot., Petry Decl. ¶ 8, Exs. B, C.) Bank of America’s representative states that Plaintiff opened the account on February 3, 2014, and Bank of America’s policies and procedures require a party opening an account to enter into a deposit agreement with the customer signing a document called a “Signature Card,” which acknowledges and accepts the terms of the deposit agreement. (Mot., Petry Decl. ¶ 7, Ex. A.) Plaintiff signed the agreement through its president and secretary Richard Lloyd Sherman. (Ibid.) The Signature Card states:

By signing below, I/we acknowledge and agree that this account is and shall be governed by the terms and conditions set forth in the following documents, as amended from time to time: 1) of this account is a deposit account, the Deposit Agreement and Disclosures, the Business Schedule of Fees; and 2) if this account is a Line of Credit, the applicable Line of Credit Agreement and Disclosures. Furthermore, I/we acknowledge the receipt of these documents.

(Mot., Petry Decl. ¶ 7, Ex. A.)

“An essential element of any contract is the consent of the parties, or mutual assent. Further, the consent of the parties to a contract must be communicated by each party to the other. Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.” (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 173, citations omitted (Serafin).) Here, by Richard Lloyd Sherman’s signing of the Signature Card, Plaintiff demonstrated an assent to the terms set forth of the Deposit Agreement and Disclosures and the Business Schedule of Fees, even if Defendants have not provided evidence of Plaintiff’s receipt of those documents, as they were readily available to Plaintiff.

However, even though it appears Defendants assented to the agreement and its term which required reference to a judicial referee, notably absent from the Signature Card is any signature by a Bank of America representative. In fact, the Signature Card includes only one signature, that of Richard Lloyd Sherman on behalf of Plaintiff. The agreement defines “we,” “us,” and “our” to mean Bank of America, but there is no indicated that Plaintiff agreed to submit any claims against Bank of America’s agents or employees to a judicial referee. Here, Plaintiff has brought claims against Defendant Ramez Habib, and he is not a party to the judicial reference agreement, nor does the judicial reference clause itself mention parties other than the account owner and Bank of America. While the definition of “claim” in the agreement is said to include any claim “against the employees or agents of the other” (Mot., Petry Decl. ¶ 8, Exs. B, C), this is not stated within the judicial reference clause itself, nor was Habib a party to the agreement or a signatory to the same. Thus, the Court must conclude that the judicial reference agreement was procedurally unconscionable because there was both oppression and surprise. “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.” The agreement to submit claims against Habib was not readily apparent from the terms of the judicial reference provision, as it refers only to Plaintiff as the account owner and Bank of America; it is only stated elsewhere that claims against an employee would fall within the purview of this clause. A contract of adhesion is “a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” (Davis v. Kozak (2020) 53 Cal.App.5th 897, 906.) There is no basis to conclude that Plaintiff was given a meaningful opportunity to discuss the judicial reference clause or reject it, particularly because it was contained within two lengthy agreements which were provided separately from the document signed by Plaintiff. Thus, for these reasons, the Court finds that the judicial reference provision is both procedurally and substantively unconscionable as to Habib, as there was no demonstrated assent to send claims against an employee to a judicial referee when employees were not mentioned within the provision itself, the reference to claims against employees was contained elsewhere within the agreement, and Plaintiff had no meaningful opportunity to reject the agreement.

If the Court were send this case to be heard before a judicial referee only as to Bank of America, the Court would be faced with the potential for inconsistent outcomes, as there is no basis to conclude that Plaintiff agreed to submit its claims against Habib to a judicial referee. Splitting this action between the superior court and a judicial referee would duplicate efforts and increase costs where the claims against Defendants Bank of America and Habib are intertwined. (See Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 393 [describing goal of avoiding “conflicting rulings on common issues of fact and law amongst interrelated parties” as to arbitration].) Accordingly, Defendants Bank of America, N.A. and Ramez Habib’s Motion for an Order Appointing a Judicial Referee and Staying Court Proceedings is DENIED.