Judge: Melissa R. Mccormick, Case: "Huitron v. Pro MotorCars, Inc.", Date: 2022-12-08 Tentative Ruling

Defendant Pro Motorcars, Inc.’s Motion to Compel Arbitration

Defendant Pro Motorcars, Inc. moves to compel arbitration of plaintiffs Gissel Nancy Huitron and Jorge Luis Vaca’s complaint.  For the following reasons, defendant’s motion is granted in part and denied in part.

The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract.  Little v. Pullman (2013) 219 Cal.App.4th 558, 565.  The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.  Id.  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.  Id.

Plaintiffs’ complaint alleges nine causes of action against defendant arising out of plaintiffs’ purchase of a previously owned 2013 Mercedes-Benz C250 vehicle.  (The caption page of plaintiffs’ complaint reflects ten causes of action, but the complaint alleges nine causes of action.)  Defendant argues plaintiffs’ claims are subject to an arbitration provision made part of a Retail Installment Sales Contract (RISC) plaintiffs signed when purchasing the vehicle.

Plaintiffs do not dispute they signed an arbitration agreement in connection with the vehicle purchase.  Indeed, plaintiffs state they agreed to defendant’s request to arbitrate and selected JAMS as the arbitration provider, but defendants insisted AAA serve as the arbitration provider.  The arbitration agreement states:  “Arbitration will be conducted by and under the rules of the American Arbitration Association (AAA) (www.adr.org), or any other arbitration organization you choose, subject to our approval.  You may obtain AAA rules by visiting the website.”  Plaintiffs argue defendant’s insistence on AAA as the arbitration provider and refusal to agree to JAMS demonstrate the arbitration agreement is both procedurally and substantively unconscionable and should not be enforced.

A court can refuse to enforce an unconscionable provision in a contract.  Civ. Code § 1670.5.  “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.”  Civ. Code §1670.5(a); Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 122.  “If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced.  If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate.”  Id. at 124.

Unconscionability has both a procedural element and a substantive element.  Armendariz, 24 Cal.4th at 114.  The procedural elements focuses on “oppression” or “surprise” due to unequal bargaining power; the substantive elements focuses on “overly harsh” or “one-sided” results.  Id.  Procedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability, but they need not be present in the same degree.  Id.  “‘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.’”  Id.  “In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.”  Id.

“‘The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power.’”  Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 83.  “Oppression arises from an inequality of bargaining power, when one party has no real power to negotiate or a meaningful choice.  Surprise occurs when the allegedly unconscionable provision is hidden.”  Id. at 84.

“‘Substantive unconscionability pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided.  [Citations.]  A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be “so one-sided as to ‘shock the conscience.’”’”  Carmona, 226 Cal.App.4th at 85.  The paramount consideration in assessing substantive conscionability is mutuality.  Id.

Defendant’s refusal to agree to JAMS does not render the arbitration agreement unconscionable.  Plaintiffs agreed in the arbitration agreement that the arbitration “will be conducted by and under the rules of the American Arbitration Association (AAA),” unless plaintiffs chose another arbitration organization to which defendant agreed.  Moreover, plaintiffs have not presented any evidence demonstrating AAA is not a neutral arbitral forum or cannot provide a neutral arbitrator.

Plaintiffs also argue the arbitration agreement is unconscionable because the agreement directs signatories to the AAA website to review the AAA rules rather than setting forth “the relevant rules of procedure” in the agreement.  “Failure to provide the applicable arbitration rules is [a] factor that supports procedural unconscionability.”  Carmona, 226 Cal.App.4th at 84; see also Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 244-45.  “The level of oppression is increased when . . . the employer not only fails to provide a copy of the governing rules, but also fails to clearly identify which rules will govern so the employee could locate and review them.”  Id. at 245.

Here, the arbitration agreement states signatories “may obtain AAA rules by visiting the website,” and provides AAA’s website address.  Thus, while the agreement does not specify which set of AAA rules applies, the agreement provides the website address where all AAA rules can be located.  Plaintiffs argue providing the AAA home page address is insufficient because a consumer must navigate through links on AAA’s website to locate the consumer arbitration rules.  Plaintiffs provide no evidence demonstrating the AAA website is difficult to navigate or the rules cannot be located on the AAA website.  The court finds a limited amount of procedural unconscionability resulting from the absence of the rules’ text from the arbitration agreement and the failure to specify in the agreement which set of AAA rules applies.

Plaintiffs argue the arbitration agreement is unconscionable because it is a contract of adhesion.  The adhesive nature of a contract is sufficient to establish some degree of procedural unconscionability.  Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915.  Here, however, the fact plaintiffs had a right to opt out of the agreement tempers this procedural unconscionability.  See Arbitration Agreement (“You may opt out of this Arbitration Agreement by doing so in writing to the address shown below and sent by registered mail, postmarked no less than 10 days from the date you sign this Agreement.”) (bold in original). 

Plaintiffs argue their CLRA cause of action and “related causes of action” are not arbitrable.  Under the Broughton-Cruz rule, established by Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, and Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, “‘[a]greements to arbitrate claims for public injunctive relief under the CLRA, the UCL, or the false advertising law are not enforceable in California.’”  Clifford v. Quest Software Inc. (2019) 38 Cal.App.5th 745, 751; see also People v. Maplebear Inc. (2022) 81 Cal.App.5th 923, 939 (“[t]he Broughton-Cruz rule . . . precludes arbitration of injunctive relief claims that benefit the public and requires arbitration of claims seeking restitution and injunctive relief which primarily benefits the individual plaintiff”).

Plaintiffs’ first cause of action for violation of the CLRA, second cause of action for violation of the UCL (Business & Professions Code § 17200 et seq.), and third cause of action for violation of the false advertising law (Business & Professions Code § 17500 et seq.) seek, inter alia, injunctive relief applicable to all consumers who have purchased, or will purchase, vehicles from defendants.  See Complaint ¶¶ 54, 61-66, 76-79.  While plaintiffs’ CLRA, UCL, and false advertising causes of action seek relief that would benefit plaintiffs, those causes of action also seek relief that would benefit the public and they do not seek relief that would primarily benefit the individual plaintiffs.  Plaintiffs’ first, second and third causes of action are therefore not arbitrable. 

In sum, defendant’s motion to compel arbitration of plaintiffs’ fourth cause of action for violation of Vehicle Code section 11713, fifth cause of action for declaratory relief, sixth cause of action for fraud and concealment, seventh cause of action for negligent misrepresentation, eighth cause of action for negligence, and ninth cause of action for violation of the Motor Vehicle Information and Cost Savings Act is granted.  Defendant’s motion to compel arbitration of plaintiffs’ first cause of action for violation of the CLRA, second cause of action for violation of the UCL (Business & Professions Code § 17200 et seq.), and third cause of action for violation of the false advertising law (Business & Professions Code § 17500 et seq.) is denied. 

Defendant’s request for an award of costs is denied.

This action is stayed pending completion of the arbitration.  An ADR Review hearing is scheduled for June 8, 2023 at 9:00 a.m. in Department C13.

Defendant to give notice.