Judge: Mark E. Windham, Case: 22STLC07239, Date: 2023-05-09 Tentative Ruling

Case Number: 22STLC07239    Hearing Date: May 9, 2023    Dept: 26

Vastagh v. Convergent Outsourcing, Inc., et al.
MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS

(CCP §§ 1281.2, et seq., 638)

TENTATIVE RULING:

Defendant T-Mobile USA, Inc.’s Motion to Compel Arbitration, joined by Defendant Convergent Outsourcing, Inc., is GRANTED.

THE ACTION IS STAYED PENDING ARBITRATION AND AN ORDER TO SHOW CAUSE RE STATUS OF ARBITRATION IS SET FOR SEPTEMBER 27, 2023 AT 9:30 AM IN DEPARTMENT 26 IN THE SPRING STREET COURTHOUSE.

ANALYSIS:

On November 1, 2022, Plaintiff Clara Vastagh (“Plaintiff”) filed this action for (1) violation of the Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code § 1788, et seq.; (2) violation of the Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq.; and (3) violation of Cal. Civ. Code § 1747.50, et seq. against Defendants T-Mobile, USA Inc. (“Defendant T-Mobile”) and Convergent Outcomes, Inc. (“Defendant COI”). Plaintiff filed a First Amended Complaint on November 23, 2022 alleging the same causes of action.

Defendant T-Mobile filed the instant Motion to Compel Arbitration on January 4, 2023. Defendant COI filed a joinder to the Motion on January 19, 2023. Plaintiff filed an opposition to Defendant COI’s joinder on March 14, 2023. Defendant COI replied on March 21, 2023 and Defendant T-Mobile replied on March 22, 2023. The Motion initially came for hearing on March 29, 2023 and was continued to May 9, 2023. Plaintiff filed a supplemental opposition on April 17, 2023.

Discussion

Existence of an Arbitration Agreement

It is undisputed that the parties’ agreement includes the following arbitration provision:

Dispute Resolution and Arbitration. YOU AND WE EACH AGREE THAT,

EXCEPT AS PROVIDED BELOW, ANY AND ALL CLAIMS OR DISPUTES IN ANY WAY RELATED TO OR CONCERNING THE AGREEMENT, OUR

PRIVACY POLICY, OUR SERVICES, DEVICES OR PRODUCTS, INCLUDING ANY BILLED DISPUTES, WILL BE RESOLVED BY BINDING ARBITRATION OR IN SMALL CLAIMS COURT. This includes any claims against other parties relating to Services or Devices provided or billed to you (such as our supplies, dealers, authorized retailers, or third party vendors) whenever you also assert claims against us in the same proceeding. You and we each also agree that the Agreement affects interstate commerce so that the Federal Arbitration Act and federal arbitration law, not state law, apply and govern the enforceability of this dispute resolution provision (despite the general choice of law provision set forth below).

(Motion, Van Decl., Exh. C, p. 6.) As previously noted, Plaintiff does not oppose Defendant T-Mobile’s Motion. (Opp., p. 1:13-14.) Plaintiff only opposes Defendant COI’s joinder in the request to compel arbitration. (Ibid.)

Regarding Defendant COI’s request to compel arbitration, the Court notes that the arbitration provision expressly provides for application of federal arbitration law. Plaintiff’s reliance on Estrada v. The Moore Law Group, APC (C.D. Cal., 2022) No. 222CV01594ODWAFMX, is instructive as to broader principals of federal arbitration law where a nonsignatory seeks to compel arbitration against a signatory. Specifically, it reiterates the rule that “ ‘a litigant who is not a party to an arbitration agreement may invoke arbitration under the FAA if the relevant state contract law allows the litigant to enforce the agreement.’ ” (Estrada v. The Moore Law Group, APC (C.D. Cal., July 11, 2022, No. 222CV01594ODWAFMX) 2022 WL 2666924, at *2 [citing Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122, 1128].) Therefore, California law controls whether Defendant COI may compel arbitration. The remainder of Estrada—applying state law to whether the nonsignatory party could compel arbitration—is inapplicable because that case was determined under South Dakota law regarding equitable estoppel. (Id. at *3.) In fact, the holding of Estrada does not rely on any California case law and does not control the outcome of this Motion.

California law provides for the general rule that a nonsignatory cannot invoke an arbitration agreement against a signatory, however, that rule is subject to several exceptions. (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614.) One exception is that “plaintiff’s allegations of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement.” (Id. at 614-615 [citing e.g., Dryer v. Los Angeles Rams (1985) 40 Cal.3d 406, 418; RN Solution, Inc. v. Catholic Healthcare West (2008) 165 Cal.App.4th 1511, 1520; 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1210].) Here, Plaintiff alleges the following:

[A]t all relevant times, each and every Defendant was acting as an agent and/or employee of each of the other Defendants and was acting within the course and scope of said agency and/or employment with the full knowledge and consent of each of the other Defendants. Plaintiff is informed and believes that each of the acts and/or omissions complained of herein was made known to, and ratified by, each of the other Defendants.

(FAC, ¶8.) These agency allegations are akin to those in Thomas. (Thomas, supra, 204 Cal.App.4th at 614.) Additionally, although Defendant COI is alleged to be a distinct entity from Defendant T-Mobile in the First Amended Complaint, they are collectively alleged to be “Defendant.” (Id. at ¶1.) This comports with the later allegations of wrongdoing that refer predominately to “Defendant” without distinguishing whether Defendant T-Mobile, Defendant COI, or both, committed the acts that allegedly violate the debt collection statutes. (See id. at ¶¶23-39.) Although Plaintiff’s opposition argues that the causes of action are separately alleged—that the first cause of action is only against Defendant COI and the second and third causes of action are only alleged against Defendant T-Mobile—this cannot be discerned from the allegations in the First Amended Complaint. (See FAC, ¶¶40-55.) Plaintiff is bound by their judicial admissions regarding agency between Defendant COI and T-Mobile. (See Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 766.)

Plaintiff’s supplemental brief argues that what it calls the “superficial” agency allegations cannot support an exception to the rule that nonsignatories cannot compel a signatory to arbitration. Yet none of the cases to which the supplemental brief cites address the agency exception set forth above. Instead, Plaintiff relies on cases that invoke a different exception to the rule: the inextricably intertwined claims rule. (See with JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1241.) The brief also incorrectly contends that the exception based on inextricably intertwined claims is the only exception to the general rule barring nonsignatories from compelling signatories to arbitration. (See Supp. Opp., p. 1:21-23.) The Court of Appeals, however, has noted that inextricably intertwined claims is but one exception to the general rule. (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237 [“One pertinent exception is based on the doctrine of equitable estoppel.”].)

Therefore, Defendant COI may invoke the benefit of the arbitration agreement despite being a nonsignatory.

Defenses to Enforcement of Arbitration Agreement

Finally, Plaintiff argues that the enforcing the arbitration provision on behalf of Defendant COI would render the provision unconscionable. In California, state law controls regarding unconscionability. (See Carlson v. Home Team Pest Defense, Inc. (2015) 239 Cal.App.4th 619, 638.) Unconscionability has procedural and substantive factors, which are evaluated on a sliding scale. (Id. at 630.) Procedural unconscionability arises from oppression and surprise; substantive unconscionability arises from terms that create overly harsh or one-sided results. (Id. at 631, 634.)

Plaintiff has not demonstrated that the arbitration agreement is procedurally unconscionable by the single fact that it was presented in a contract or adhesion, i.e., a contract presented by a stronger party to a weaker party on a take-it-or-leave-it basis. (See id. at 631.)  “[T]he fact that the arbitration agreement is an adhesion contract does not render it automatically unenforceable” because Plaintiff makes no showing of surprise. Plaintiff’s argument that Defendant COI is not specifically mentioned does not rise to the level of surprise where the arbitration provision mentions claims against third-party vendors and Plaintiff themselves alleged an agency relationship between Defendants. Nor has Plaintiff shown that the arbitration provision is substantively unconscionable because it is lopsided. Plaintiff argues that the provision allows Defendant COI to pick and choose whether to arbitrate the claim or bring an action in small claims court, yet this option is also available to Plaintiff. The arbitration provision does not limit access to small claims court to Defendants. (See Motion, Van Decl., Exh. C, p. 6.) Furthermore, Plaintiff was given the opportunity to opt out of the arbitration provision within 30 days. (Ibid.)

The arbitration provision has not been shown to be either procedurally or substantively unconscionable.

Conclusion

Therefore, Defendant T-Mobile USA, Inc.’s Motion to Compel Arbitration, joined by Defendant Convergent Outsourcing, Inc., is GRANTED.

THE ACTION IS STAYED PENDING ARBITRATION AND AN ORDER TO SHOW CAUSE RE STATUS OF ARBITRATION IS SET FOR SEPTEMBER 27, 2023 AT 9:30 AM IN DEPARTMENT 26 IN THE SPRING STREET COURTHOUSE.

Moving party to give notice.