Judge: Melvin D. Sandvig, Case: 16A00899, Date: 2022-08-10 Tentative Ruling
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Case Number: 16A00899 Hearing Date: August 10, 2022 Dept: F47
Dept. F47
Date: 8/10/22
Case #CHA16A00899
MOTION TO
COMPEL ARBITRATION
Motion filed on 3/25/22.
MOVING PARTY: Cross-Defendant Sunlan LDP, LLC
RESPONDING PARTY: Defendant Vivian Laditi
NOTICE: ok
RELIEF REQUESTED: An order
compelling Cross-Complainant Vivian Laditi to arbitration.
RULING: The motion is denied.
This action arises from a promissory note (Note) Vivian Laditi
(Laditi) entered with non-party CashCall, Inc. which contained an arbitration
provision. (Robert Decl., Ex.A). After Laditi’s default on the Note, Sunlan LDP,
LLC (Sunlan) purchased the Note from CashCall acquiring all right, title and
interest thereon. (Ross Decl. ¶¶1-5;
Robert Decl. ¶¶1-4).
On 1/19/16, Sunlan filed a limited civil collection action
against Laditi for breach of contract and common counts. On 12/6/16, default judgment was entered
against Laditi in the amount of $11,918.09.
(See 12/6/16 Default Judgment).
On 2/9/22, pursuant to Laditi’s motion, the default judgment was set aside
and vacated. (See 2/9/22 Minute
Order).
In addition to filing her Answer to the Complaint, on
2/9/22, Laditi filed a Cross-Complaint against Sunlan for (1) Breach of
Contract, (2) Violation of the Fair Debt Collection Practices Act and (3)
Violation of the Rosenthal Fair Debt Collection Act. On 2/22/22, Laditi filed a First Amended
Cross-Complaint asserting the same causes of action. On 2/23/22, Sunlan made a demand for arbitration
with regard to the First Amended Cross-Complaint which was rejected on
3/15/22. (Wootton Decl., Ex.A-C).
On 3/25/22, Sunlan filed and served the instant motion
seeking an order compelling Cross-Complainant Vivian Laditi to
arbitration. Laditi has opposed the
motion.
Sunlan’s Request for Judicial Notice is granted.
The arbitration provision provides, in relevant part:
ARBITRATION PROVISION
GOVERNING LAW. This Note
will be governed by the laws of the State of California except to the extent
governed by federal law. This Arbitration Provision is governed by the Federal
Arbitration Act, 9 U.S.C. Sections 1-16 ("FAA").
WAIVER OF JURY TRIAL AND
ARBITRATION PROVISION. Arbitration is a process in which persons with a
dispute: (a) waive their rights to file a lawsuit and proceed in court and to
have a jury trial to resolve their disputes; and (b) agree, instead, to submit
their disputes to a neutral third person (an "arbitrator") for a
decision. Each party to the dispute has an opportunity to present some evidence
to the arbitrator. Prearbitration discovery may be limited. Arbitration
proceedings are private and less formal than court trials. The arbitrator will issue
a final and binding decision resolving the dispute, which may be enforced as a
court judgment. A court rarely overturns an arbitrator's decision. We have a
policy of arbitrating all disputes with customers which cannot be resolved in a
small claims tribunal, including the scope and validity of this Arbitration
Provision and any right you may have to participate in an alleged class action.
THEREFORE, YOU ACKNOWLEDGE AND AGREE AS FOLLOWS:
For purposes of this Waiver of Jury
Trial and Arbitration Provision, the words "dispute" and
"disputes" are given the broadest possible meaning and include,
without limitation (a) all claims, disputes, or controversies arising from or
relating directly or indirectly to the signing of this Arbitration Provision,
the validity and scope of this Arbitration Provision and any claim or attempt
to set aside this Arbitration Provision; (b) all federal or state law claims,
disputes or controversies, arising from or relating directly or indirectly to
the Loan Agreement, the information you gave us before entering into this
Agreement, including the customer information application, and/or any past
agreement or agreements between you and us; (c) all counterclaims, cross-claims
and third-party claims; (d) all common law claims, based upon contract, tort,
fraud, or other intentional torts; (e) all claims based upon a violation of any
state or federal constitution, statute or regulation; (f) all claims asserted
by us against you, including claims for money damages to collect any sum we
claim you owe us; (g) all claims asserted by you individually against us and/or
any of our employees, agents, directors, officers, shareholders, governors,
managers, members, parent company or affiliated entities (hereinafter
collectively referred to as "related third parties"), including
claims for money damages and/or equitable or injunctive relief; (h) all claims
asserted on your behalf by another person;….
* *
*
1. You acknowledge and agree that
by entering into this Arbitration Provision:
(a) YOU ARE GIVING UP YOUR RIGHT
TO HAVE A TRIAL BY JURY TO RESOLVE ANY DISPUTE ALLEGED AGAINST US OR RELATED
THIRD PARTIES;
(b) YOU ARE GIVING UP YOUR RIGHT
TO HAVE A COURT, OTHER THAN A SMALL CLAIMS TRIBUNAL, RESOLVE ANY DISPUTE
ALLEGED AGAINST US OR RELATED THIRD PARTIES; and
* *
*
3. Any party to a dispute,
including related third parties, may send the other party written notice by
certified mail return receipt requested of their intent to arbitrate and
setting forth the subject of the dispute along with the relief requested, even
if a lawsuit has been filed. Regardless of who demands arbitration, you shall
have the right to select any of the following arbitration organizations to
administer the arbitration: the American Arbitration Association (1-800-778-7879)
http://www.adr.org or JAMS (1-800-352-5267) http://www.jamsadr.com. The parties
may also agree to select an arbitrator who resides within your federal judicial
district who is an attorney, retired judge, or arbitrator registered and in
good standing with an arbitration association, and arbitrate in accordance with
such arbitrator's rules. The party receiving notice of arbitration will respond
in writing by certified mail return receipt requested within twenty (20) days.
If you demand arbitration, you must inform us in your demand of the arbitration
organization you have selected or whether you desire to select a local
arbitrator. If related third parties or we demand arbitration, you must notify
us within twenty (20) days in writing by certified mail return receipt
requested of your decision to select an arbitration organization. If you fail
to notify us, then we have the right to select an arbitration organization. The
parties to such dispute will be governed by the rules and procedures of such
arbitration organization applicable to consumer disputes, to the extent those
rules and procedures do not contradict the express terms of this Arbitration
Provision, including the limitations on the arbitrator below. You may obtain a
copy of the rules and procedures by contacting the arbitration organization
listed above.
4. Regardless of who demands
arbitration, at your request we will pay your portion of the arbitration
expenses, including the filing, administrative, hearing and arbitrator's fees
("Arbitration Fees")….
5.
All parties, including related third parties, shall retain the right to
seek adjudication in a small claims tribunal in the county of your residence
for disputes within the scope of tribunal’s jurisdiction. Any dispute, which cannot be adjudicated
within the jurisdiction of a small claims tribunal shall be resolved by binding
arbitration.
6.
This Arbitration Provision is made pursuant to a transaction involving
interstate commerce and shall be governed by the FAA….
(See Robert Decl., Ex.A,
pp.3-5).
Laditi is not arguing that a valid arbitration agreement
does not exist or that it is otherwise unenforceable. Rather, Laditi’s refusal to arbitrate is
based on her claim that Sunlan has waived its right to arbitrate by litigation
conduct. This Court agrees.
Contrary to Sunlan’s assertion, whether it waived its
right to arbitrate is not a “gateway issue” to be decided by the
arbitrator. The arbitration provision at
issue is governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16
(FAA). (Robert Decl., Ex.A, pp.3, 5). Therefore, the Court must apply federal law
in deciding whether Sunlan waived its right to compel arbitration.
Under federal law, there are two categories of “gateway
issues” on motions to compel arbitration with the first being decided by the
court and the second being decided by the arbitrator. See Martin (9th Cir.
2016) 829 F.3d 1118, 1122-1123. The
first category of gateway issues is a question of arbitrability – i.e., whether
the parties are bound by the arbitration provision or whether it applies to a
particular type of controversy. Id. The second category of gateway issues
involves procedural issues – i.e., whether a party met the arbitral forum’s
statute of limitations for filing a case.
Whether a party has waived the right to compel arbitration by its
litigation conduct is part of the first category to be decided by the court
unless the parties clearly and unmistakably provide otherwise. Id. at 1122-1124; See also Cox
(9th Cir. 2008) 533 F.3d 1114, 1117, 1120; Jurosky (S.D. Cal.
2020) 441 F.Supp.3d 963, 975-976; Hong (2013) 222 CA4th 240, 257-258.
Here, Sunlan has failed to overcome the presumption that
the gateway issue of whether it waived its right to arbitration is to be
decided by the Court. As such, this
Court will determine the issue of whether Sunlan waived its right to
arbitration in this matter.
A party seeking to prove the right to compel arbitration
has been waived must show: (1) knowledge of an existing right to compel
arbitration and (2) intentional acts inconsistent with that existing right. See Fisher (9th Cir.
1986) 791 F.2d 691, 694. The Fisher
opinion set forth a third requirement to establish waiver: prejudice to the
person opposing arbitration from such inconsistent acts. Id.
However, the United States Supreme Court has recently held that the
Federal Arbitration Act does not allow courts to create a special rule, i.e.,
prejudice, when considering the waiver argument. See Morgan (2022) 142 S.Ct.
1708, 1713-1714.
Sunlan stands in the shoes of CashCall, which entered the
Note with Laditi. (See Robert
Decl., Ex.A, p.5, number 7). Therefore, Sunlan
had knowledge of its right to arbitrate its claims when it filed the limited
collection action. Additionally, once
Laditi made her cross-claims against Sunlan, Sunlan moved to compel the
arbitration of those claims further establishing its knowledge of its right to
arbitrate.
The filing of the limited collection action and
proceeding to default judgment (which has now been set aside) was an
intentional act by Sunlan inconsistent with its right to arbitrate. The only court action allowed by the
arbitration provision is a small claims action, not a limited civil
action. (Robert Decl., Ex.A, p.4, number
1.(b)). The Court finds the language in
the arbitration provision which states that the parties may demand arbitration
“even if a lawsuit has been filed” is intended to apply to a party against whom
a lawsuit has been filed. (Id. at
p.4, number 3). To interpret otherwise
would essentially render the requirement to arbitrate meaningless.
Finally, the Court notes that the motion indicates that
Sunlan is making the motion as “Cross-Defendant,” not Plaintiff and
Cross-Defendant, against “Cross-Complainant,” not against Defendant and
Cross-Complainant. (See Motion,
p.1:6, p.1:15, p.2:3-5). Further, the
declaration of attorney Wootton filed in support of the motion indicates that
she demanded arbitration regarding the First Amended Cross-Complaint/ Laditi’s
cross-claims. (Wootton Decl. ¶¶2, 6
Ex.A). Sunlan never specifically states
that it is seeking to arbitrate its claims against Laditi. Presumably, Sunlan intended to seek to compel
the arbitration of both its claims against Laditi and Laditi’s
cross-claims. However, the relief sought
is not clearly set forth in the notice of motion. See CRC 3.1110(a). If Sunlan is seeking to only compel the
arbitration of Laditi’s cross-claims and have its claims resolved in this
Court, Sunlan cannot have it both ways.
Regardless, as set forth above, the Court finds that Sunlan waived its
right to compel arbitration of either its claims against Laditi or Laditi’s
cross-claims.