Judge: Mark A. Young, Case: 23SMCV04076, Date: 2024-05-06 Tentative Ruling
Case Number: 23SMCV04076 Hearing Date: May 6, 2024 Dept: M
CASE NAME: Berokhim, v. Whirlpool
Corp., et al.
CASE NO.: 23SMCV04076
MOTION: Petition/Motion
to Compel Arbitration
HEARING DATE: 5/7/2024
Legal
Standard
Under California and federal law,
public policy favors arbitration as an efficient and less expensive means of
resolving private disputes. (Moncharsh
v. Heily & Blase (1992)
3 Cal.4th 1, 8-9; AT&T Mobility
LLC v. Concepcion (2011) 563 U.S. 333, 339.) Accordingly, whether an
agreement is governed by the California Arbitration Act (“CAA”) or the Federal
Arbitration Act (“FAA”), courts resolve doubts about an arbitration agreement’s
scope in favor of arbitration. (Moncharsh, supra, 3 Cal.4th at 9;
Comedy Club, Inc. v. Improv West
Assocs. (9th Cir. 2009) 553 F.3d 1277, 1284; see also Engalla v. Permanente Med. Grp., Inc.
(1997) 15 Cal.4th 951, 971-972 [“California law incorporates many of the basic
policy objectives contained in the Federal Arbitration Act, including a
presumption in favor of arbitrability [citation] and a requirement that an
arbitration agreement must be enforced on the basis of state law standards that
apply to contracts in general”].) “[U]nder both the FAA and California law,
‘arbitration agreements are valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.’ ” (Higgins v. Superior Crout (2006) 140 Cal.App.4th 1238, 1247.)
“Code of
Civil Procedure section 1281.2 requires a trial court to grant a petition to
compel arbitration if the court determines that an agreement to arbitrate the
controversy exists.” (Avery v.
Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59,
quotations omitted.) Accordingly, “when presented with a petition to compel
arbitration, the court’s first task is to determine whether the parties have in
fact agreed to arbitrate the dispute.” (Ibid.) A petition to compel arbitration is in essence a suit in equity
to compel specific performance of a contract. (Id. at 71.) As with any other specific performance claim, “a
party seeking to enforce an arbitration agreement must show the agreement’s
terms are sufficiently definite to enable the court to know what it is to
enforce.” (Ibid. [internal citations omitted].) “Only
the valid and binding agreement of the parties, including all material terms
well-defined and clearly expressed, may be ordered specifically performed.” (Ibid.) An arbitration agreement “must be so interpreted as to give
effect to the mutual intention of the parties as it existed at the time of
contracting, so far as the same is ascertainable and lawful.” (Civ. Code, §
1636.) The language of the contract governs its interpretation if it is clear
and explicit. (Civ. Code, § 1368.) If uncertainty exists, “the language of a
contract should be interpreted most strongly against the party who caused the
uncertainty to exist.” (Civ. Code, § 1654.)
The party
seeking to compel arbitration bears the burden of proving the existence of a
valid arbitration agreement by the preponderance of the evidence. (Engalla v. Permanente Medical Group, Inc.
(1997) 15 Cal.4th 951, 972.) It would then be plaintiff’s burden, in opposing
the motion, to prove by a preponderance of the evidence any fact necessary to her
opposition. (See Ibid.) “In these
summary proceedings, the trial court sits as a trier of fact, weighing all the
affidavits, declarations, and other documentary evidence, as well as oral
testimony received at the court’s discretion, to reach a final determination.” (Ibid.)
EVIDENTIARY ISSUES
Plaintiff’s request for judicial notice is GRANTED.
Analysis
Defendant eBay Inc. moves to compel
Plaintiff Shahram Berokhim’s complaint to arbitration. Plaintiff opposes the
motion. Defendant Transform SR LLC joins in the opposition to the motion.
Valid Arbitration Agreement
As with any contract, mutual assent
or consent is necessary for the formation of a valid arbitration agreement.
(Civ. Code, §§ 1550, 1565.) “Consent is not mutual, unless the parties all
agree upon the same thing in the same sense.” (Civ. Code, § 1580.) The moving
party bears the initial burden of showing the existence of an agreement to
arbitrate by a preponderance of the evidence. (Mitri v. Arnel Mgmt. Co. (2007) 157 Cal.App.4th 1164, 1169
[“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.”].)
Under the Uniform Electronic
Transactions Act, an electronic signature “is attributable to a person if it
was the act of the person. The act of the person may be shown in any manner,
including a showing of the efficacy of any security procedure applied to
determine the person to which the electronic record or electronic signature was
attributable.” (Civ. Code, § 1633.9(a).) The effect of such electronic
signature “is determined from the context and surrounding circumstances at the
time of its creation, execution, or adoption, including the parties’
agreement.” (Civ. Code, § 1633.9(b); see Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th
836, 844-845 [declaration seeking to authenticate the plaintiff’s electronic
signature on an arbitration agreement was deemed insufficient where the
declarant “summarily asserted” plaintiff electronically signed the agreement
and “did not explain how she arrived at that conclusion or inferred [plaintiff]
was the person who electronically signed the agreement” or that the electronic
signature was “the act” of the plaintiff]; Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1062 [“declaration
offered the critical factual connection that the declarations in Ruiz
lacked,” by detailing “security precautions regarding transmission and use of
an applicant’s unique username and password, as well as the steps an applicant
would have to take to place his or her name on the signature line” of the
agreement].)
The instant complaint arises from
the purchase of a refrigerator and replacement water filter via eBay, a Kenmore
Elite 10657703700 side-by-side refrigerator and Kenmore Refrigerator Water
Filter. Plaintiff alleges that Defendants distributed, sold, or supplied the
Water Filter. (Compl., ¶ 14.) Defendants negligently manufactured, designed,
assembled, etc., the replacement water filter, such that it was in a defective
condition and unsafe for the use and purpose for which it was intended.
(Compl., ¶ 17.) On September 3, 2021, while Plaintiff was using the
refrigerator, the replacement water filter, or some other mechanism of the
refrigerator, failed, flooding Plaintiff’s house with massive amounts of water,
causing damage to the house, its carpet, its wood flooring, its closets, the
content of the closets, and other parts of the house. (Id., ¶ 19.) Plaintiff
alleges claims of negligence, breach of implied warranties, strict products
liability, and fraud.
eBay asserts that Plaintiff signed
an arbitration agreement covering such claims. eBay’s records show that an eBay
account registered with the user ID “zanolifashion” purchased a “1 Pack 9083
Kenmore 469083 Replacement Refrigerator Water Filter 9020 9030 9953” on April
2, 2020, from a third-party seller that posted this item for sale on eBay’s
online marketplace. (Conlin Decl. ¶ 6, Ex. 2.) Plaintiff is associated with the
purchasing company Zanoli Inc. (Id. ¶ 6, Ex. 3.) All transactions between
buyers and sellers on www.ebay.com are subject to eBay’s User Agreement.
(Conlin Decl. ¶ 7.) In purchasing the alleged replacement water filter from a
third-party seller on April 2, 2020, Plaintiff agreed to the User Agreement by
clicking on the “Confirm and pay” button that conspicuously appeared just below
the statement, “By placing your order, you agree to eBay’s User Agreement and
Privacy Notice,” where the term “User Agreement” was hyperlinked to the actual
agreement. (Id.) The User Agreement in effect on April 2, 2020, contained the
following arbitration provision:
You and eBay each agree that any
and all disputes or claims that have arisen, or may arise, between you and eBay
(including any disputes or claims between you and a third-party agent of eBay)
that relate in any way to or arise out of this or previous versions of the User
Agreement, your use of or access to the Services, the actions of eBay or its
agents, or any products or services sold, offered, or purchased through the
Services shall be resolved exclusively through final and binding arbitration,
rather than in court. . . . The Federal Arbitration Act governs the
interpretation and enforcement of this Agreement to Arbitrate.
(Conlin Decl. Ex. 4 § 18.B.) While Section 18.B.5 provides
an “Opt-Out Procedure” for rejecting the arbitration agreement, eBay never
received an opt-out notice from Plaintiff’s account. (Id. ¶ 8.)
eBay provides sufficient evidence
to show that the electronic signature is attributable to Plaintiff. Acceptance
of the eBay User Agreement is mandatory for all eBay account holders and for
all users who wish to purchase items from third-party sellers on the eBay online
marketplace. (Id., ¶ 4.) In order to create an account on eBay’s website, a
potential user must first register an account and agree to comply with the
terms of the eBay User Agreement, the eBay Privacy Policy, and the other
policies posted on the eBay.com website. (Id.)
Plaintiff does not dispute that to
make the purchase he would have had to agree to the above terms. Instead, Plaintiff
argues that there was no meeting of the minds as to the arbitration clause because
the arbitration clause was placed in the agreement inconspicuously and Plaintiff’s
attention was never called to that provision. Plaintiff specifically contends he
had no knowledge that an arbitration clause was included as part of the User
Agreement. However, Plaintiff submits no evidence in support of his lack of knowledge
or whether his attention was ever called to the provision. Plaintiff submits no
declaration which would be necessary to establish such facts. Moreover, as will
be discussed, there is apparently little to no degree of procedural
unconscionability. As such, Plaintiff’s contentions are without merit.
Accordingly, there is no reasonable
dispute that Plaintiff and eBay agreed to the above arbitration terms, and that
Plaintiff’s claims fall under the scope of the arbitration provision. Therefore,
Plaintiff has the burden to demonstrate a defense to the arbitration agreement.
FAA Applies to the Agreement and CCP Section 1281.2 is
Preempted
Plaintiff argues that the Court
should not enforce the arbitration agreement because of the third-party
litigation exception under Code of Civil Procedure section 1281.2(c).
Code of Civil Procedure section 1281.2 provides:
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] 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.
[…]
If the
court determines that a party to the arbitration is also a party to litigation
in a pending court action or special proceeding with a third party as set forth
under subdivision (c), the court (1) may refuse to enforce the arbitration
agreement and may order intervention or joinder of all parties in a single
action or special proceeding; (2) may order intervention or joinder as to all
or only certain issues; (3) may order arbitration among the parties who have
agreed to arbitration and stay the pending court action or special proceeding
pending the outcome of the arbitration proceeding; or (4) may stay arbitration
pending the outcome of the court action or special proceeding.
In other words, courts may refuse arbitration where
a party to the arbitration agreement is involved in litigation with a third
party, if the litigation arises out of the same transaction or series of
transactions as the arbitration; and there is a possibility of conflicting rulings
on common issues of law or fact. To avoid inconsistent results and the
possibility that each defendant will seek to escape liability by blaming the
other, the court can refuse to compel arbitration and order all parties joined
in a single action. (See Mercury Ins. Group v. Superior Court (1998)19
Cal.4th 332, 339–340; Prudential Property & Cas. Ins. Co. v. Superior
Court (1995) 36 Cal.App.4th 275, 279.) In such cases, the parties to the
arbitration agreement are forced to litigate a dispute that they had agreed to
arbitrate. (Mercury, supra, 19 Cal.4th at 347–350.) The right to
arbitration, created by agreement, is not absolute: “it may have to yield if
there is an issue of law or fact common to the arbitration and a pending action
or proceeding with a third party and there is a possibility of conflicting
rulings thereon.” (Id. at 348.)
However, opposing parties cannot avail themselves of the
exception to arbitration set forth in Code of Civil Procedure section 1281.2(c)
when the agreement is governed by the Federal Arbitration Act (“FAA”). The FAA
contains no provision analogous to section 1281.2(c), and therefore that
subdivision cannot be applied to deny the enforcement of arbitration clauses
governed by the FAA. (Gloster v. Sonic Automotive, Inc.¿(2014) 226
Cal.App.4th 438, 446.)
Here, the agreement is governed by
the FAA. Arbitration agreements included
in contracts evidencing a transaction involving interstate commerce “shall be
valid, irrevocable, and enforceable, save upon grounds as exist at law or in
equity for the revocation of any contract.” (9 U.S.C. § 2.) Interstate commerce is defined as
“commerce among several states” and required for the application of the FAA. (9
USC § 1.) The question of whether federal law governs an arbitration agreement
is a question of law involving the interpretation of statutes and the contract
with no extrinsic evidence. (Rodriguez
v. Am. Techs., Inc. (2006) 136 Cal.App.4th 110, 117.) “In accordance with choice-of-law principles,
the parties may limit the trial court’s authority to stay or deny arbitration
under the CAA by adopting the more restrictive procedural provisions of the
FAA.” (Valencia v. Smyth (2010)
185 Cal.App.4th 153, 157.)
To
give effect to the intent of Congress in enacting the FAA, courts broadly
construe the term “involving commerce.” (Allied-Bruce Terminix Cos. v.
Dobson (1995) 513 U.S. 265, 268.) The FAA applies to arbitration agreements
if the economic activity at issue, when considered in the aggregate, bears on
interstate commerce in a substantial way, even if the particular conduct of the
parties does not itself affect interstate commerce. (Citizens Bank v.
Alafabco, Inc. (2003) 539 U.S In deciding FAA coverage, “[the court] must
broadly construe the phrase ‘evidencing a transaction involving commerce,’
because the FAA ‘embodies Congress’ intent to provide for the enforcement of
arbitration agreements within the full reach of the Commerce Clause…’ In
determining whether the… agreement involved interstate commerce, the parties’
subjective intent is not the determining factor.” (Giuliano v. Inland Empire
Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1286 [referencing 9 U.S.C. §
2]; see, e.g., Khalatian v. Prime Time Shuttle, Inc. (2015) 327
Cal.App.4th 651, 657-658 [arbitration agreement regarding plaintiff’s
employment driving shuttles only in California involved interstate commerce
because “the passengers using the employer’s service often traveled from other
states[ ] [and] passengers purchased package deals on the Internet which
included hotel accommodations, airfare, and vouchers for free airport transportation
which the customers used to board the employer’s airport shuttles”] .)
First, the agreement expressly states
that the FAA applies. (Conlin Decl. Ex. 4 § 18.B.) Thus, the parties gave their
clear intent for the FAA to apply. Second, Defendants demonstrate that their
services generally and the specific agreement here affects interstate commerce
under the broad definition provided by caselaw. eBay operates an online
marketplace at www.ebay.com where third-party users the world over may purchase
items from other eBay users and list items they wish to sell at prices set by
the third-party sellers. (Conlin Decl., ¶ 3.) Notably, the subject transaction
also involved interstate commerce. The subject Refrigerator and Water Filter was
allegedly manufactured and sold by several out of state entities. Plaintiff, a
Californian user, purchased the items from a seller registered with an
out-of-state address. (Conlin Decl., ¶ 6.) Therefore, the transaction at issue
involves interstate commerce. Accordingly, the FAA applies, and the CAA cannot
override the FAA’s mandate that this case be sent to arbitration.
Procedural Unconscionability
Plaintiff argues
that the agreement is unconscionable. The doctrine of unconscionability refers
to “an absence of meaningful choice on the part of one of the parties together
with contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas
A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of
procedural and substantive components, “the former focusing on oppression or
surprise due to unequal bargaining power, the latter on overly harsh or
one-sided results.” (Ibid.) Although both components of
unconscionability must be present to invalidate an arbitration agreement, they
need not be present in the same degree. (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24
Cal.4th 83, 114.) “Essentially a sliding scale is invoked which disregards the
regularity of the procedural process of the contract formation, that creates
the terms, in proportion to the greater harshness or unreasonableness of the
substantive terms themselves.
[Citations.] In other words, the more substantively unconscionable 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 party resisting arbitration bears the burden of proving
unconscionability.” (Pinnacle
Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2012) 55
Cal.4th 223, 247.)
As to procedural unconscionability,
Plaintiff asserts that the clause is placed in the agreement inconspicuously
and Plaintiff’s attention was never called to that provision. Plaintiff
contends that eBay never advised or informed Plaintiff that an arbitration
clause was included as part of the User Agreement. Plaintiff points out that to know that there
is an “Agreement to Arbitrate,” a user would have to go to Page 12 of the
separate “User Agreement.” Plaintiff contends that this is hidden, because
there are 20 different categories in the Agreement, and subsection 18 is merely
entitled “Legal Disputes.” Further, Plaintiff claims that the Agreement is
nothing more than a pre-printed, standardized contract created solely by eBay
and imposed on Plaintiff, without any opportunity for discussion or
negotiation. Plaintiff also claims that there is further unconscionability
because of a clear inequality in bargaining power between the parties.
The record does show that eBay
proffered the Agreement on a “take-it-or-leave-it” basis. eBay admits that all users
must agree to the User Agreement to make a purchase on eBay’s marketplace. However,
courts do
not recognize that the “adhesive” arbitration agreements establish a high
degree of procedural unconscionability absent “surprise or other sharp
practices.” (Baltazar v. Forever 21 Inc. (2016) 62 Cal.4th 1237, 1246; Nguyen
v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248;
[the fact that an arbitration agreement is presented as a “take-it-or-leave-it”
contract of adhesion in the employment context, alone only establishes a modest
degree of procedural unconscionability].) Case law is clear that
even in an employment context, this provides relatively little procedural
unconscionability. (Ibid.) In this consumer transaction, Plaintiff
necessarily had more options to purchase a refrigerator or replacement part
outside of eBay. Thus, much less procedural unconscionability is present than
in other employment related cases.
Further, Defendant demonstrates that the
terms were conspicuous. In the first section at the top of the User Agreement,
the “Introduction” informed users, in bold text, “Please be advised that this
User Agreement contains provisions that govern how claims you and we have
against each other are resolved,” and that it “contains an Agreement to
Arbitrate” with a hyperlink (in underlined blue font) to the arbitration provision.
(Conlin Decl., Ex. 4.) It is further undisputed that eBay gave notice to
Plaintiff that “By placing your order, you agree to eBay’s User Agreement,”
which was made available via a blue hyperlink immediately above the “Confirm
and pay” button. Plaintiff could have easily clicked on the hyperlinked User
Agreement for review before completing his purchase. If Plaintiff chose to do
so, Plaintiff would have seen the bolded language notifying users of the
“Agreement to Arbitrate” under “Legal Disputes, Section B,” which also
contained a link to that section. This is a far cry from hiding
the arbitration clause deep in the prolix of fine print. (See Pinella v. Westmont Corp.
(2016) 3 Cal.App.5th 205, 215-217 [holding surprise includes “hiding a clause
in a mass of fine print or phrasing a clause in language that is
incomprehensible to a layperson…”].) Defendant also shows that Plaintiff had a
right to opt out of the agreement but did not do so. (Conlin Decl., ¶ 8, Ex. 4
§ 18.B.5.)
Plaintiff asserts that eBay failed
to attach or otherwise provide the procedural rules governing the arbitration. Plaintiff cites
no authority that a failure to attach arbitration rules, by itself,
creates significant procedural unconscionability. For example, an employer’s
failure to attach the arbitration rules to an arbitration agreement only requires
courts to scrutinize the substantive unconscionability of terms that were
“artfully hidden” but does not otherwise add to the procedural
unconscionability of the agreement. (E.g., Baltazar, supra, 62 Cal.4th
at 1246; Nguyen, supra, 4 Cal.App.5th at 248-249; see Fitz v. NCR
Corp.¿(2004) 118 Cal.App.4th 702 [agreement's incorporation of American
Arbitration Association (AAA) rules failed to relieve effect of unlawful
discovery provisions]; see also Zullo v. Superior Court¿(2011) 197
Cal.App.4th 477, 485 [failure to attach the rules “adds a bit” on
unconscionability because it required the party to make an independent inquiry
to find the applicable rules in order to fully understand what she was about to
sign]; Harper v. Ultimo¿(2003) 113 Cal.App.4th 1402 [remedy-limiting
Better Business Bureau arbitration rules were not attached to the contract].) Plaintiff
does not point to any such terms, artfully hidden or otherwise.
On this record, the Court finds
little surprise or oppression. Plaintiff voluntarily e-signed the agreement
with notice that the agreement would be subject to the User Agreement. The User
Agreement fairly and conspicuously brought the arbitration agreement to
Plaintiff’s attention. Thus, no oppression or surprise can be found here.
Since Plaintiff did have a right to
refuse and did have an option to withdraw from the arbitration
agreement, the Court cannot find significant procedural unconscionability.
Plaintiff would have to show a high degree of substantive unconscionability for
the Court to deny the motion.
Substantive Unconscionability
As to substantive
unconscionability, an agreement is substantively unconscionable if it
imposes terms that are “overly harsh,” “unduly oppressive,” “unreasonably
favorable,” or “so one-sided as to ‘shock the conscience.’ ” (Sanchez
v. Valencia Holding Co., LLC (2015)
61 Cal.4th 899, 910-911.) “All of these formulations point to the central idea
that unconscionability 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.]” (Id. at 911.) “These include ‘terms that
impair the integrity of the bargaining process or otherwise contravene the
public interest or public policy; terms (usually of an adhesion or boilerplate
nature) that attempt to alter in an impermissible manner fundamental duties
otherwise imposed by the law, fine-print terms, or provisions that seek to
negate the reasonable expectations of the nondrafting party, or unreasonably
and unexpectedly harsh terms having to do with price or other central aspects of
the transaction.’ ” (Ibid.)
Plaintiff does not cite any
language within the arbitration agreement which could be considered “overly
harsh,” “unduly oppressive,” “unreasonably favorable,” or “so one-sided as to
shock the conscience.” Plaintiff does not, for example, show any terms which
would severely curtail discovery, require unreasonable pre-arbitration dispute
resolution processes or other harsh terms.
Plaintiff only argues that the
agreement is substantively unconscionable because Defendants are repeat players
with AAA. Plaintiff cites no authority which shows that simply because a
corporate defendant repeated use of the same arbitration agency would create
substantive unconscionability. Plaintiff also does not evidence the implied
assertion that eBay, in fact, uses AAA in all cases such that there is
presently a repeat player effect. Plaintiff cites “statistical evidence”
presented in Armendariz. Plaintiff does not show that such
“evidence” has any applicability to the instant dispute between Plaintiff, eBay
and/or AAA. To the contrary, the AAA rules provide that the parties must select
a neutral arbitrator from a national roster of arbitrators. (RJN Exs. A-B.)
Accordingly,
the Court finds no substantive unconscionability.
Conclusion
Defendant eBay meets its burden to
demonstrate the existence of an arbitration agreement between the parties that
covers Plaintiff’s claims. Plaintiff, in turn, fails to demonstrate that the
agreement is unconscionable. Defendant’s motion is therefore GRANTED and the
Court orders Plaintiff’s claims to arbitration, as discussed above. The action against
eBay only is STAYED pending the completion of the arbitration. (CCP § 1281.4.)