Judge Lynette Gridiron Winston, Case Number: 23PSCV01207, Date: 2023-10-16 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 23PSCV01207, Date: 2023-10-16 Tentative Ruling

Defendants Envision WC MB Auto, LLC and Federated Mutual Insurance Company’s Motion to Compel Arbitration

The Court GRANTS the motion to compel arbitration. This action is STAYED pending arbitration.

The Court will set a Status Conference re Arbitration at or following the hearing on this motion.

Defendants are ordered to give notice of the Court’s ruling within five calendar days of this order.

This is a car purchase dispute. On April 24, 2023, Plaintiff Ariana Escala (Plaintiff) filed this action against Defendants Envision WC MB Auto, LLC (Envision) and Federated Mutual Insurance Company (Federated Mutual) (collectively, Defendants) and Does 1 through 100, alleging causes of action for intentional misrepresentation, negligent misrepresentation, violation of Business and Professions Code § 17200, bond claim, violation of the Consumer Legal Remedies Act, and breach of implied warranty.

On September 6, 2023, Defendants filed the instant motion to compel arbitration. On September 21, 2023, Plaintiff opposed. On October 9, 2023, Defendants replied.

Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute. (Omar v. Ralphs Grocery Co. (2004)¿118 Cal.App.4th 955, 961.) A party moving to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court¿(1998) 62 Cal.App.4th 348, 356-357.) A party seeking to compel arbitration meets their initial burden of establishing the existence of a valid arbitration agreement by attaching a copy to the motion or petition to compel arbitration. (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (“FAA”), which governs all agreements to arbitrate in contracts involving interstate commerce. (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

DISCUSSION
FAA v CAA

“[T]he FAA's procedural provisions (9 U.S.C. §§ 3, 4, 10, 11) do not apply unless the contract contains a choice-of-law clause expressly incorporating them.” (Id. at 174, 110 Cal.Rptr.3d 180.) “[T]he question is not whether the parties adopted the CAA’s procedural provisions: The state's procedural statutes (§§ 1281.2, 1290.2) apply by default because Congress intended the comparable FAA sections (9 U.S.C. §§ 3, 4, 10, 11) to apply in federal court. The question, therefore, is whether the parties expressly incorporated the FAA’s procedural provisions into their agreements.” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345) [internal citations and quotation marks omitted].

“[P]revious cases have held that when an arbitration agreement provides that its ‘enforcement’ shall be governed by California law, the California Arbitration Act (CAA) governs a party's motion to compel arbitration. It follows that when an agreement provides that its ‘enforcement’ shall be governed by the FAA, the FAA governs a party's motion to compel arbitration.” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 346.)

Defendants move under both the FAA and the CAA to compel arbitration in this matter. While the Arbitration Agreement (as defined below) provides that it is governed by the FAA, (Economou Decl., Ex. 1, p. Motion, Ex. 1), that is insufficient to invoke the procedural provisions of the FAA. The Arbitration Agreement must specify that its enforcement is governed by the FAA. (See Victrola 89, supra, 46 Cal.App.5th at p. 346.) Defendants also have not cited to any evidence of the Sales Contract (as defined below) involving interstate commerce. (See 9 U.S.C. § 2, et seq.; Higgins, supra, 140 Cal.App.4th at p. 1247.)

“[T]he petitioner bears the burden of proving its existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) “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 [citation]—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.” (Ibid.) The moving party meets their initial burden of proving the existence of a valid arbitration agreement by attaching a copy to the motion. (Espejo, supra, 246 Cal.App.4th at p. 1060.)

Defendants have attached a copy of a Retail Installment Sales Contract (Sales Contract) for the subject vehicle to their motion. (Economou Decl., Ex. 1.)[1] It also contains an arbitration clause (Arbitration Agreement). (Id.) Accordingly, Defendants have met their initial burden. The burden now shifts to Plaintiff to challenge the validity of the Arbitration Agreement.

Plaintiff does not dispute the existence of the Arbitration Agreement, that she is a party to the Sales Contract, or that it covers the purchase of the subject vehicle. Instead, Plaintiff contends the motion should be denied because California law prohibits arbitration of claims for public injunctive relief, citing McGill v. Citibank, N.A. (2017) 2 Cal.5th 945 and Mejia v. DACM, Inc. (2020) 54 Cal.App.5th 961. For the reasons set forth below, the Court disagrees.

The Court notes that in McGill, the California Supreme Court held that the arbitration clause in that case which precluded the right to seek injunctive relief in any forum was invalid and unenforceable. (McGill, supra, 2 Cal.5th at p. 961 (“Thus, insofar as the arbitration provision here purports to waive McGill's right to request in any forum such public injunctive relief, it is invalid and unenforceable under California law.”).) No such language is found in the subject arbitration agreement. Thus, McGill does not provide a basis to deny the motion to compel arbitration.

Further, while the California Supreme Court held that claims for injunctive relief under the CLRA and UCL are inarbitrable, it also held that claims for restitution or disgorgement under the UCL, as well as other claims for damages, are arbitrable. (See Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 316, 320 (“We therefore conclude that each of Cruz's injunctive relief requests is inarbitrable.”; “We therefore conclude that Cruz's actions for restitution and/or disgorgement, whether brought as an individual or as a class action, are arbitrable. By the same logic, his common law claim for unjust enrichment, which is essentially an action for restitution is also arbitrable.”) Here, Plaintiff does seek injunctive relief under the CLRA (Compl. ¶ 82), which is not arbitrable. But Plaintiff also seeks restitution under the UCL (Compl., ¶57 and Prayer 3^rd Cause of Action ¶ 1) and damages under the CLRA (Compl., ¶78 and Prayer 5^th Cause of Action ¶¶ 1-3), as well as damages under her other claims, which are arbitrable.

This Court has discretion to stay proceedings on inarbitrable claims pending resolution of the arbitration. (Cruz, supra, 30 Cal.4th at p. 320 (“Finally, we note that when there is a severance of arbitrable from inarbitrable claims, the trial court has the discretion to stay proceedings on the inarbitrable claims pending resolution of the arbitration.”))

Moreover, although not raised by the parties in their respective briefs, the Court notes that the Arbitration Agreement provides that the question of arbitrability is to be determined by the arbitrator. Specifically, it states that, “[a]ny 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 or us… which arises out of or relates to your… purchase or condition of this vehicle… shall… be resolved by neutral, binding arbitration and not by a court action.” (Economou Decl., Ex. 1, italics added.) An arbitration clause that “clearly and unmistakably” empowers the arbitrator to decide issues of arbitrability is enforceable. (B.D. v. Blizzard Entertainment, Inc. (2022) 76 Cal.App.5th 931, 957.) “There are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. [Citation.] Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.’ [Citations.] The ‘clear and unmistakable’ test reflects a ‘heightened standard of proof’ that reverses the typical presumption in favor of the arbitration of disputes.’ [Citation.]” (Id., at p. 957, italics in original.)

Here, the Arbitration Agreement expressly provides that the arbitrator determines the arbitrability of any claims or disputes thereunder. (Economou Decl., Ex. 1.) The Court finds this language to be clear and unmistakable. Plaintiff also raised no unconscionability arguments with respect to the Arbitration Agreement, or the Sales Contract for that matter, even after Defendants’ moving papers addressed any potential unconscionability arguments. Plaintiff otherwise raised no defenses to enforcement of the Arbitration Agreement, such as fraud or duress. Thus, the arbitrator will determine which of Plaintiff’s claims are covered by the Arbitration Agreement.

Based on the foregoing, the Court GRANTS the motion to compel arbitration. The Court will further stay this action pending arbitration, and set a Status Conference re Arbitration.

The Court GRANTS the motion to compel arbitration. This action is STAYED pending arbitration.

The Court will set a Status Conference re Arbitration at or following the hearing on this motion.

Defendants are ordered to give notice of the Court's ruling within five calendar days of this order.

[1] Defendants’ moving papers reference a “Poling Declaration,” but no such declaration was submitted with the moving papers. (Motion, 4:20.) The Court presumes Defendants meant the Economou Declaration, which contains a copy of the Sales Contract.