Judge: Michael E. Whitaker, Case: 22STCV34298, Date: 2023-03-24 Tentative Ruling

Case Number: 22STCV34298    Hearing Date: March 24, 2023    Dept: 32

PLEASE NOTE:   Parties are encouraged to meet and confer concerning this tentative ruling to determine if a resolution may be reached.  If the parties are unable to reach a resolution and a party intends to submit on this tentative ruling, the party must send an email to the Court at sscdept32@lacourt.org indicating that party’s intention to submit.  The email shall include the case number, date and time of the hearing, counsel’s contact information (if applicable), and the identity of the party submitting on this tentative ruling.  If the Court does not receive an email indicating the parties are submitting on this tentative ruling and there are no appearances at the hearing, the Court may place the motion off calendar or adopt the tentative ruling as the order of the Court.  If all parties do not submit on this tentative ruling, they should arrange to appear in-person or remotely (which is highly encouraged).  Further, after the Court has posted/issued a tentative ruling, the Court has the inherent authority to prohibit the withdrawal of the subject motion and adopt the tentative ruling as the order of the Court. 

TENTATIVE RULING

MOTION

Defendants Airbnb, Inc., Airbnb Payments, Inc., and Airbnb Travel, LLC (collectively, Petitioners) move to compel Plaintiff Tara Subkoff (Respondent) to arbitrate Respondent’s claims arising from injuries Respondent alleges she sustained when she fell on the stairs located at an accommodation Respondent booked through Petitioners’ platform.  Respondent opposes the motion.  Petitioners reply.

ANALYSIS

1.     MOTION TO COMPEL ARBITRATION – LEGAL STANDARDS

            “[T]he advantages of arbitration include a presumptively less costly, more expeditious manner of resolving disputes.  It follows a party to a valid arbitration agreement has a contractual right to have its dispute with another party to the contract resolved quickly and inexpensively.”  (Henry v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 99–100 [cleaned up].)  Thus, “on petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists.”  (Code Civ. Proc., § 1281.2; see also

EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1320 [the language in section 1281.2 compelling arbitration is mandatory].) The right to compel arbitration exists unless the court finds that the right has been waived by a party’s conduct, other grounds exist for revocation of the agreement, or where a pending court action arising out of the same transaction creates the possibility of conflicting rulings on a common issue of law or fact.  (Code Civ. Proc., § 1281.2, subds. (a)-(c).)    

            “On a petition to compel arbitration, the trial court must first determine whether an agreement to arbitrate the controversy exists.  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 party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the respondent's signature.”  (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543-544 [cleaned up].)  The party seeking to compel arbitration must also “plead and prove a prior demand for arbitration and a refusal to arbitrate under the agreement.”  (Mansouri v. Superior Court (2010) 181 Cal.App.4th 633, 640-641.) 

            And while the moving party on a motion to compel arbitration “bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, [a] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.  The trial court sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.”  (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842 [cleaned up]; see also Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [“The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability”].) 

2.     ENFORCEABLE ARBITRATION AGREEMENT

Petitioners neither allege, nor offer evidence showing, Respondent has improperly denied Petitioners’ demand for arbitration pursuant to Petitioners’ arbitration agreement with Respondent.  However, the opposing party’s refusal to arbitrate may be demonstrated by its filing of a lawsuit rather than commencing arbitration proceedings, as required by the parties’ agreement.  (See Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060 [moving party meets initial burden by showing agreement exists, and need only establish its validity on challenge by opponent].) 

            As to the existence of an enforceable arbitration agreement, Petitioners advance the declaration of Dan McDowell (McDowell), who is a Legal Investigations Associate for Airbnb, Inc. (Airbnb).  According to McDowell, at all times relevant to this litigation, Airbnb users, including Respondent, were required to agree to the then-current Terms of Service (among other agreements) before they could create an Airbnb account, list or book an accommodation via the Airbnb platform, or send messages via the Airbnb platform. (Declaration of Dan McDowell, ¶ 4.)   McDowell further states that when a user signed up for an Airbnb account, that user was required to press a button to affirmatively indicate their agreement to the Airbnb Terms of Service and, depending on the time of sign-up, certain other policies including Airbnb Payments’ Terms of Service.  (Declaration of Dan McDowell, ¶ 5.)  McDowell states that he has personally reviewed Airbnb’s records including its business records pertaining to Plaintiff’s account and confirmed that Plaintiff consented to multiple versions of Airbnb’s Terms of Service.  (Declaration of Dan McDowell, ¶¶ 8-9, Exhibits A and B.)  McDowell explains that on September 7, 2016 Plaintiff consented to the Terms of Service when she created her account, and consented to the Terms of Service two additional times: Version 7 on July 23, 2017 and Version 11 on November 28, 2020. (Declaration of Dan McDowell, ¶ 13, Exhibit E.)

            The first page of the Terms of Service Version 11 informed Respondent in bold typeface that “Section 23 of these Terms contains an arbitration agreement and class action waiver that apply to all claims brought against Airbnb in the United States. Please read them carefully.”  (Declaration of Dan McDowell, ¶ 15, Exhibit E.)  Section 23 states the following:

23.4 Agreement to Arbitrate. You and Airbnb mutually agree that any dispute, claim or controversy arising out of or relating to these Terms or the applicability, breach, termination, validity, enforcement or interpretation thereof, or any use of the Airbnb Platform, Host Services, or any Content (collectively, “Disputes”) will be settled by binding individual arbitration (the “Arbitration Agreement”). If there is a dispute about whether this Arbitration Agreement can be enforced or applies to our Dispute, you and Airbnb agree that the arbitrator will decide that issue.

(Declaration of Dan McDowell, ¶ 16, Exhibit E.). Petitioners have met their burden to establish the existence of an enforceable arbitration agreement.  Based upon the terms in the Terms of Service as agreed to by Respondent, the Court finds the arbitration agreement to be enforceable against Respondent. 

3.     UNCONSCIONABILITY

            “Unconscionability is ultimately a question of law for the court.”  (Flores v. Transamerica Homefirst, Inc. (2001) 93 Cal.App.4th 846, 851.)  “However, numerous factual issues may bear on that question.” (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 89.)  As such, Respondent must show two elements to establish her unconscionability defense: (1) procedural unconscionability, which focuses on the manner in which the contract was negotiated, and (2) substantive unconscionability, which concerns whether the contract’s terms are unreasonably one-sided. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113-115.)

Procedural unconscionability examines the “oppression that arises from unequal bargaining power and the surprise to the weaker party that results from hidden terms or the lack of informed choice.”  (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.)  Preprinted forms buried within a volume of documents offered on a “take or leave it basis” evince a high degree of procedural unconscionability.  (See Dougherty v. Roseville Heritage Partners (2020) 47 Cal.App.5th 93, 102-104.)  Most consumer contracts are adhesive and therefore present some procedural unconscionability. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915.)  “[A] finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided.”  (Ibid.)  

            Substantive unconscionability refers to agreement terms which are overly harsh, unduly oppressive, unreasonably unfavorable, or so one-sided as to shock the conscience – which, for practical purposes, all mean the same thing.  (Sanchez v. Valencia Holding Co., LLC, supra, 61 Cal.4th at p. 915.)   With regard to demonstrating substantive unconscionability, an “old-fashioned bad bargain” or a contract term which “merely gives one side a greater benefit” is insufficient.  (Id. at pp. 911-912.)  The test for substantive unconscionability is whether the terms impair the integrity of the bargaining process or otherwise contravene public policy, or the terms “attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law” or “negate the reasonable expectations of the nondrafting party.” (Sonic-Calabassas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145; see also Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 247 [“outside the reasonable expectation of the nondrafting party or is unduly oppressive”]; Dougherty v. Roseville Heritage Partners, supra, 47 Cal.App.5th at pp. 104-107 [arbitration agreement that curtailed plaintiffs’ ability to recover statutory remedies, such as punitive damages and attorney fees, and contained limitations on discovery that risked frustrating plaintiffs’ statutory elder abuse claims was substantively unconscionable].) 

Here, Respondent first argues enforcement of the arbitration agreement is problematic due to the fact there are multiple parties in the lawsuit, not all of them bound by the subject arbitration agreement.  Respondent attests that because she is seeking damages against multiple defendants for the same underlying accident, there may be conflicting rulings regarding percentages of culpability, and thus to enforce the arbitration agreement would be in violation of Code of Civil Procedure section 1281.2, subdivision (c).  In the alternative, Respondent requests the Court deny the Stay as to pending litigation between Respondent and Defendant Sharon Johnson.

Under Code of Civil Procedure section 1281.2, subdivision (c), “the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: . . . A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.”  When an agreement provides that its enforcement will be governed by the Federal Arbitration Act (FAA), the Court cannot look to Code of Civil Procedure section 1281.2, subdivision (c) to deny defendants’ motion to compel arbitration.  (Victrola 89, LLC v. Jaman Props. 8 LLC (2020) 46 Ca5th 337. 342-343.)  In such a case, the judge may consider whether to stay pending court proceedings under Code of Civil Procedure section 1281.2, subdivision (c) as to any other parties who are not subject to arbitration under the FAA until the arbitration proceeding is resolved to avoid conflicting rulings.  (Rodriguez v American Technols., Inc. (2006) 136 CA4th 1110, 1117, 39 CR3d 437.)

Here, as Petitioners note in their reply, the subject arbitration agreement is governed by the FAA.  As such, section 1281.2, subdivision (c) is inapplicable here for the purposes of denying Petitioners’ motion to enforce arbitration.  Further, the Court finds Respondent’s arguments regarding the arbitration agreement’s unconscionability and unenforceability to be inapposite in light of the arbitration agreement’s delegation clause.

Section 23.4 of the Terms of Service states: “If there is a dispute about whether this Arbitration Agreement can be enforced or applies to our Dispute, you and Airbnb agree that the arbitrator will decide that issue.”  (Declaration of Dan McDowell, ¶ 16, Exhibit E.)  Therefore, the Court finds the delegation clause of the arbitration agreement to be clear and unmistakable on the question of arbitrability.  To the extent that Respondent claims the arbitration agreement is unconscionable, substantively or procedurally, those claims need to be decided by the arbitrator through the binding arbitration process, and thus, this Court declines to rule on Respondent’s contentions.

CONCLUSION AND ORDER

Therefore, the Court grants Petitioners’ petition to compel arbitration and stays all proceedings before this Court pending completion of the arbitration between Respondent and Petitioners to avoid inconsistent rulings pursuant to Code of Civil Procedure section 1281.2, subdivision (c). 

Further, the Court vacates the Final Status Conference and Trial, and sets a Status Conference re Arbitration, or in the alternative, Trial Setting Conference, on September 29, 2023 at 8:30 A.M. in Department 32. 

Petitioners shall give notice of the Court’s ruling and file a proof of service of such.