Judge Michael D. Washington, Case Number: 37-2023-00050758-CL-MC-NC, Date: 2024-05-24 Tentative Ruling

Judge: Michael D. Washington, Case: 37-2023-00050758-CL-MC-NC, Date: 2024-05-24 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - May 23, 2024

05/24/2024 10:00:00 AM N-31 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Michael D Washington

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Civil - Limited Misc Complaints - Other Motion Hearing (Civil) 37-2023-00050758-CL-MC-NC FAVOR VS THE BANK OF MISSOURI [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion - Other, 03/28/2024

Defendant The Bank of Missouri's ('Defendant') motion to compel arbitration and to stay proceedings pending arbitration (ROA # 14) is granted.

Factual Background On May 13, 2022, Defendant issued a Vive credit card to Plaintiff Sonia Favor ('Plaintiff') for the purchase of a Tempur-Pedic mattress and related products at a MattressFirm retailer in San Diego County. (Barker Decl., ¶¶ 5-7.) In conjunction with the purchase of these products, Plaintiff executed a MattressFirm invoice wherein she acknowledged receipt of and agreed to be bound by the Terms and Conditions of the Vive Cardholder Agreement. (Barker Decl., ¶ 6.) Plaintiff provides no evidence to dispute she executed the subject invoice.

Included in the Terms and Conditions is an arbitration agreement. (See Barker Decl., Ex. B, § 26.) The scope of the arbitration agreement is broad as the parties agree '[Plaintiff] and [Defendant] must arbitrate any dispute or claim between [Plaintiff] or any other used of [Plaintiff's] account, and [Defendant]...' (Barker Decl., Ex. B, § 26.A.i.) The arbitration agreement allows for the initiator of the arbitration to commence and select an arbitration administrator from either AAA or JAMS. (Barker Decl., Ex. B, § 26.C.i.) Thereafter, the arbitration administrator will appoint an arbitrator who will apply the same law and legal principles, consistent with the Federal Arbitration Act ('FAA'), that would apply in court. (Barker Decl., Ex. B, § 26.C.iii.) The arbitration is contracted to take place 'by phone or any a reasonably convenient location.' (Barker Decl., Ex. B, § 26.C.iv.) Additionally, Defendant agrees to pay arbitration costs, as well as Plaintiff's legal fees and costs, to the extent Plaintiff prevails on claims she asserts against Defendant. (Barker Decl., Ex. B, § 26.C.iv.) The arbitration agreement is governed by the FAA. (Barker Decl., Ex. B, § 26.D.) To the extent state law is relevant, the arbitration agreement calls for Missouri law to apply. (Barker Decl., Ex. B, § 26.D.) Included in the arbitration agreement is an opt-out provision which allows consumers to reject or opt-out of arbitration by sending notice within 60 days after the opening of an account. (Barker Decl., Ex. B, § 26.G.) If elected, an opt-out notice 'must include your name, address and account number, and must be mailed to Vive Financial, Legal Department, P.O. Box 708670, Sandy, UT 84070.' (Barker Decl., Ex. B, § 26.G.) The opt-out provision concludes by stating, '[t]his is the only way you can reject this section.' Calendar No.: Event ID: TENTATIVE RULINGS

3108934 CASE NUMBER: CASE TITLE: FAVOR VS THE BANK OF MISSOURI [IMAGED] 37-2023-00050758-CL-MC-NC (Barker Decl., Ex. B, § 26.G.) While Plaintiff argues enforcement of the arbitration agreement would be unconscionable (see Opposition, p. 3:21-4:20), there appears to be no dispute that, at the time Plaintiff accepted the subject Terms and Services, she took no affirmative steps to attempt to opt out of the arbitration provision.

Procedural History On November 13, 2023, Plaintiff filed a Complaint alleging two causes of action against Defendant under the California Rosenthal Fair Debt Collection Practices Act. (Complaint, ROA # 1.) On or about December 11, 2023, Defendant was served with the Complaint. (ROA # 8.) On January 19, 2024, Defendant filed an Answer to the Complaint. (ROA # 10.) Included, both in the general denial and affirmative defenses, Defendant noted the existence of a contractual agreement to arbitrate. On March 28, 2024, Defendant filed the subject motion to compel arbitration. (ROA # 14.) Based on the foregoing, the Court finds Defendant's motion timely and without unreasonable delay.

Discussion The plain text of the arbitration agreement states it is governed by the FAA. The FAA provides that a 'contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction...shall be valid, irrevocable, and enforceable.' (9 U.S.C. § 2.) In analyzing whether to compel arbitration, a court may not review the underlying merits of the subject claim. Instead, the Court is limited to evaluating the following: (1) whether the contract containing the arbitration agreement evidences a transaction involving interstate commerce; (2) whether there exists a valid agreement to arbitration; and (3) whether the dispute(s) fall within the scope of the agreement to arbitrate. (Republic of Nicaragua v. Standard Fruit Co. (9th Cir. 1991) 937 F.2d 469, 475 (Standard Fruit).) Transaction Involving Interstate Commerce As noted above, the FAA applies to 'contract[s] evidencing a transaction involving commerce.' (9 U.S.C.

§ 2.) '[T]he phrase 'involving commerce' in the FAA is the functional equivalent of the term 'affecting commerce,' which is a term that ordinarily signals the broadest permissible exercise of Congress's commerce clause power.' (Shepard v. Edward Mackay Enterprises, Inc. (2007) 148 Cal.App.4th 1092, 1097.) The party asserting FAA preemption has the burden to present evidence establishing a contract 'affecting' interstate commerce. (See Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238.) The Court finds Defendant has met its burden of establishing the Terms and Conditions of the subject Cardholder Agreement, and the corresponding arbitration agreement, involve interstate commerce. The contract entered into between the parties involves financing for the purchase of consumer products between citizens of different states. While Plaintiff is a California citizen, Defendant has submitted undisputed evidence it is a financial institution with its principal place of business located in Perryville, Missouri. (See Barker Decl., ¶ 4.) The Court finds the foregoing sufficient to meet the interstate commerce requirement under 9 U.S.C. § 2.

Existence of an Agreement to Arbitrate In determining whether an agreement to arbitrate exists, 'courts 'apply ordinary state-law principles that govern the formation of contracts.'' (International Brotherhood of Teamsters v. NASA Services, Inc. (9th Cir. 2020) 957 F.3d 1038, 1042.) Under California law, the party moving to compel arbitration bears the initial burden of proving, by a preponderance of the evidence, an agreement to arbitrate exists. (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.) Here, the Court finds Defendant has provided evidence sufficient to meet its burden of an agreement to arbitrate based on the language of the Terms and Conditions of the subject Cardholder Agreement. (See Barker Decl., Ex. B, § 26.) Further, Plaintiff fails to put forward any evidence or argument in dispute of Calendar No.: Event ID: TENTATIVE RULINGS

3108934 CASE NUMBER: CASE TITLE: FAVOR VS THE BANK OF MISSOURI [IMAGED] 37-2023-00050758-CL-MC-NC the existence of an agreement to arbitrate. Instead, she opposes arbitration solely on the grounds of unconscionability.

Scope of Agreement to Arbitrate In addition to the foregoing, Defendant must demonstrate the arbitration agreement encompasses the dispute at issue. (Standard Fruit, supra, 937 F.2d at p. 475.) As noted previously, the scope of the arbitration agreement is extremely broad and meant to cover 'any dispute or claim between [Plaintiff] or any other used of [Plaintiff's] account, and [Defendant]...' [Emphasis added.] (Barker Decl., Ex. B, § 26.A.i.) There is no limitation as to the types of claims the parties intended to limit to arbitration.

Unconscionability Despite Defendant meeting its burden in demonstrating the existence of an arbitration agreement encompassing Plaintiff's claim(s), Plaintiff argues the agreement to arbitrate is unconscionable and therefore invalid. In making and opposing this unconscionability argument, the parties rely almost exclusively on California law. However, as noted above, both the arbitration agreement and the Cardholder Agreement are governed by Missouri law (when not governed by federal law). Neither party ventures to make a showing that the laws of Missouri and California materially differ as to unconscionability. As a result of neither party making such a showing, the Court applies California law.

Under California law, unconscionability has both a procedural and substantive element. Both elements must be present for a court to refuse to enforce a contract, but they are evaluated on a 'sliding scale' and 'need not be present in the same degree.' (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.) The more substantively oppressive the contract term, the less procedural unconscionability is required to conclude that the term in unconscionable, and vice versa.

(Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 689.) Procedural Unconscionability Procedural unconscionability requires 'oppression' or 'surprise.' (Lane, supra, 224 Cal.App.4th at p. 689.) 'Oppression occurs where a contract involves a lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form.' (Ibid.) 'Surprise' covers 'a variety of deceptive practices and tactics, including hiding a clause in a mass of fine print or phrasing a clause in language that is incomprehensible to a layperson.' (Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205, 216.) Procedural unconscionability can exist where a stronger party drafts the contract and presents it to the weaker party on a take-it-or-leave-it basis. While an adhesion contract is not automatically unenforceable as unconscionable if the contractual terms fall 'outside the reasonable expectations of the weaker party' it may be unenforceable. (See Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 179.) Plaintiff argues there was a high degree of procedural unconscionability with the arbitration agreement because it: (a) required Plaintiff to accept all terms of the agreement without negotiation, revision, or explanation; and (b) was provided on a pre-printed form to an unsophisticated consumer. In making these arguments, Plaintiff disregards the 60-day opt-out provision explicitly contained (and bolded) in the arbitration agreement. Therein, consumers such as Plaintiff are afforded the opportunity to opt out by mailing notice to a provided address within 60 days.

In reviewing this provision and the other evidence proffered by Defendant in support of this motion (Plaintiff provides no evidence in opposition to this motion – just argument), the Court finds the 60-day opt-out provision clearly and unambiguously communicates how a contracting party, such as Plaintiff, can exercise his/her right to reject contractual arbitration. As a result, no degree of procedural unconscionability exists.

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3108934 CASE NUMBER: CASE TITLE: FAVOR VS THE BANK OF MISSOURI [IMAGED] 37-2023-00050758-CL-MC-NC As Plaintiff has failed to meet her burden of establishing any procedural unconscionability, the Court is not required to rule and abstains from discussing whether the subject arbitration agreement is substantively unconscionable. (See Circuit City Stores, Inc. v. Ahmed (9th Cir. 2002) 283 F.3d 1198, 1200.) Request for Stay Where a valid arbitration agreement requires a dispute to be submitted to binding arbitration, the Court shall stay the action 'until such arbitration has been had in accordance with the terms of the agreement.' (9 USC § 3.) As mandated by the FAA, and in lieu of an outright dismissal of Plaintiff's Complaint, the Court hereby stays the subject action pending completion of arbitration.

Ruling In sum, Defendant's motion to compel arbitration is granted. The Court finds: (a) there exists a valid agreement to arbitrate; (b) that the subject dispute falls within the scope of the agreement to arbitrate; and (c) that the arbitration agreement involves a transaction involving interstate commerce. Additionally, the Court finds the arbitration agreement lacks any procedural unconscionability and is thus valid.

This matter is hereby stayed pending resolution of the arbitration. An OSC re: dismissal for failure to complete arbitration is set for May 23, 2025, at 10:30 a.m.

To the extent Plaintiff wishes to recategorize her claim as a small claims case (and thus prevent this claim from being compelled to arbitration), the Court will entertain such a request at the time of hearing.

Unless the ruling(s) above indicate that an appearance is necessary, parties who wish to submit, who are satisfied with the above tentative ruling(s), and/or who do not otherwise wish to argue the motion(s) are encouraged to give notice to the Court and each other of their intention not to appear.

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