Judge: Mark A. Young, Case: 24SMCV05672, Date: 2025-05-23 Tentative Ruling

Case Number: 24SMCV05672    Hearing Date: May 23, 2025    Dept: M

CASE NAME:             Daneshrad v. American Home Shield Corp., et al. 

CASE NO.:                   24SMCV05672

MOTION:                     Petition/Motion to Compel Arbitration 

HEARING DATE:   5/23/2025

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.) 

ANALYSIS 

Defendants American Home Shield Corporation and American Home Shield of California, Inc. move to compel Plaintiff Ryan Daneshrad’s claims to arbitration.

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.”].) 

The undisputed record demonstrates that Plaintiff’s claims are subject to an arbitration agreement. Plaintiff’s claims arise from a home warranty provided by Defendants. The Complaint alleges Defendants provide home warranty services, ensuring repair or replacement of items in the event of damage. (Compl., ¶ 15.) Plaintiff was insured by Defendants AHS for home warranty coverage of his residence under Plan Number 647266488, which included coverage for his air conditioning system. (Compl., ¶ 16.)

Defendants submit a copy of the subject home warranty plan. (Eley Decl., Ex. A.) The plan contains a mandatory arbitration provision. In a bolded section titled “MANDATORY ARBITRATION; CLASS ACTION WAIVER; LIMITATION OF LIABILITY”, the Plan provides:

PLEASE READ THIS SECTION CAREFULLY AS IT AFFECTS YOUR LEGAL RIGHTS AND GOVERNS HOW YOU AND WE CAN BRING CLAIMS AGAINST EACH OTHER. THIS SECTION WILL, WITH LIMITED EXCEPTION, REQUIRE YOU AND US TO SUBMIT CLAIMS AGAINST EACH OTHER TO BINDING AND FINAL ARBITRATION ON AN INDIVIDUAL BASIS.

Any dispute or claim relating in any way to this Plan Agreement will be resolved by binding arbitration, rather than in court. There is no judge or jury in arbitration, and court review of an arbitration award is limited. However, an arbitrator can award on an individual basis the same damages and relief as a court (including injunctive and declaratory relief or statutory damages) and must follow the terms of this Plan Agreement as a court would. In addition, the Federal Arbitration Act and federal arbitration law applies to this Plan Agreement.

The arbitration will be conducted by the American Arbitration Association (“AAA”) under its rules, including the AAA’s Supplementary Procedures for Consumer-Related Disputes (the “AAA’s Rules”). The AAA’s Rules are available at www.adr.org or by calling 1-800-778-7879. Payment of all filing, administration and arbitrator fees will be governed by the AAA’s Rules. We will reimburse those fees for claims totaling less than $10,000 unless the arbitrator determines the claims are frivolous. Likewise, we will not seek attorneys’ fees and costs in arbitration unless the arbitrator determines the claims are frivolous. You may choose to have the arbitration conducted by telephone, based on written submissions, in person in the state where you live, or at another mutually agreed location.

You and we each agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class action lawsuit, class-wide arbitration, or any other consolidated or representative action. If for any reason a claim proceeds in court rather than in arbitration, you and we each waive any right to a jury trial.

YOU ACKNOWLEDGE AND AGREE THAT YOU AND WE ARE EACH WAIVING THE RIGHT TO PARTICIPATE AS A PLAINTIFF, CLASS REPRESENTATIVE, OR CLASS MEMBER IN ANY PURPORTED CLASS ACTION LAWSUIT, CLASS-WIDE ARBITRATION, OR ANY OTHER CONSOLIDATED OR REPRESENTATIVE ACTION.

(Id., Ex. A, § 16(B), emphasis added.)

Defendants demonstrate that this action arises from this Plan Agreement. This includes the claims for fraud and a “bad faith” breach of contract. Such claims are within the scope of the arbitration agreement, which includes “Any” dispute or claim “relating in any way” to the Plan Agreement. According to the complaint, Defendants allegedly represented to Plaintiff that the air conditioning system did not need replacement under the Plan Agreement, and that such a representation was false. (Compl., ¶¶ 64-65.)

Defendants therefore meet their burden of proof to show the existence of an agreement to arbitrate Plaintiff’s claims. Plaintiff therefore has the burden of demonstrating a defense to the Plan Agreement’s arbitration provisions.

Delegation

Defendant contends that the AAA rules contain a delegation clause, but fails to provide evidence of the clause. Defendant asserts that the 2014 AAA Rules contained a delegation rule. Defendants do not provide a supporting declaration or request judicial notice of such rules. Thus, Defendant has not shown a “clear and unmistakable” delegation clause. (First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944–945.)

Although the scope of an arbitration clause is generally a question for judicial determination, the parties may, by clear and unmistakable agreement, elect to have the arbitrator, rather than the court, decide which grievances are arbitrable. (AT & T Technologies v. Communications Workers (1986) 475 U.S. 643, 649.) Where the parties clearly and unmistakably incorporate rules that have a delegation clause, the parties clearly evidence their intention to accord the arbitrator the authority to determine issues of arbitrability. (Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1123.) In this scenario, any issues concerning the scope of the arbitration clause should be determined by the arbitrator in the arbitration proceeding. (Ibid.; see Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th 547, 557 [incorporation of AAA rules with delegation clause]; Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1559-60 [courts have separately enforced an enforceable delegation clause and enforceability of the arbitration agreement as a whole has no bearing on whether the delegation clause is enforceable].)

Unconscionability 

Plaintiff raises an unconscionability defense. 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.)

Procedural Unconscionability

As to procedural unconscionability, Plaintiff asserts that the home warranty policy “was never provided to [him] prior to purchase and was never signed.” (Daneshrad Decl., ¶ 3.)

However, Plaintiff does not deny the validity of the contract itself. In fact, Plaintiff’s claims are dependent on the submitted home warranty policy. (Id., ¶¶4-7, 11 Ex. A.) Plaintiff was apparently aware of this arbitration agreement and asserted a right to arbitrate under the agreement prior to bringing this suit. (Id., ¶¶8-9.) The record here is materially distinct from Plaintiff’s cited case of Bruni v. Didion (2008) 160 Cal.App.4th 1272. In Bruni, the arbitration provisions were roughly one full page in a 30–page booklet of single-spaced, 10–point type print and were not distinguished from rest of booklet by bolding or capitalization. The booklet was buried in a voluminous stack of purchase and sale documents and the clause did not provide any information regarding their scope or effect. The clause in Bruni also purported to cover claims not arising out of the warranty, including all disputes related to the home and sale. That is not the case here.

Plaintiff otherwise points to no significant procedural issues. A failure to attach specific rules of an arbitration organization, by itself, creates little procedural unconscionability. (See 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].) In contrast, courts have recognized that failure to attach the arbitration rules to an arbitration agreement only requires the trial court to scrutinize the substantive unconscionability of terms that were “artfully hidden” but does not otherwise add to the procedural unconscionability of the agreement. (Baltazar v. Forever 21 Inc. (2016) 62 Cal.4th 1237, 1246; Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 248.) Plaintiff does not assert that there are “artfully” hidden terms identified.

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 substantively unconscionable aspects of the Agreement. Plaintiff claims that the Agreement lacks mutuality, without citation to any specific terms. Instead, Plaintiff only re-asserts his claims of procedural unconscionability.

In summary, there is little procedural unconscionability, and no substantive unconscionability. Therefore, the Agreement is not unconscionable.

 Waiver

Plaintiff contends that Defendant waived its right to arbitrate. “Whether a party to an arbitration agreement has waived the right to arbitrate is a question of fact, and a trial court’s determination on that matter will not be disturbed on appeal if supported by substantial evidence. . . . Since arbitration is a strongly favored means of resolving disputes, courts must ‘closely scrutinize any claims of waiver.’” (Sobremonte v. Superior Court (1998) 61 Cal. App. 4th 980, 991 [citations omitted].) “No single test delineates the nature of the conduct that will constitute a waiver of arbitration.” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal. 4th 1187, 1195.) “In determining waiver, a court can 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.” (Sobremonte, supra, 61 Cal. App. 4th at 992, citation omitted.)

Defendants have not acted inconsistently with their rights under the Plan Agreement. Plaintiff only argues that Defendants “ignored” his arbitration demands, but not that Defendants failed to pay arbitration fees within 30 days after initiation of arbitration. (CCP § 1281.97.) Plaintiff could have initiated arbitration under the Plan Agreement. Furthermore, Defendant has not substantially invoked litigation machinery or delay in bringing this motion. Defendant’s first action in this case was to file the instant motion demanding arbitration. Plaintiff does not demonstrate any delay or resulting prejudice. Thus, there is no claim for waiver.

Conclusion 

Defendants meet their 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. Defendants’ motion is therefore GRANTED. The Court orders Plaintiff’s claims to arbitration, as discussed above. The entire action is STAYED pending the completion of the arbitration. (CCP § 1281.4.)