Judge: Michael E. Whitaker, Case: 23SMCV04211, Date: 2025-03-06 Tentative Ruling

Case Number: 23SMCV04211    Hearing Date: March 6, 2025    Dept: 207

TENTATIVE RULING

MOTION

This case arises from allegations that Defendants Equinox Holdings, Inc.; Equinox Fitness Beverly Hills, Inc.; and Equinox Fitness Santa Monica, Inc. (“Defendants”) discriminated against Plaintiffs Francesca Borchardt (“Francesca”); Gabriela Borchardt (“Gabriela”); and Veronica Borchardt (“Veronica”) (together, “Plaintiffs”) because of their disabilities.

On August 30, 2024, Plaintiffs originally filed suit.  On October 9, 2024, Plaintiffs filed a First Amended Complaint (“FAC”).  The operative FAC alleges six causes of action for (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) violation of the Unruh Civil Rights Act; (4) violation of Cal. Civ. Code, § 51.5; (5) violation of the California Disabled Persons Act; and (6) violation of the Tom Bane Civil Rights Act.

Default was entered against Defendants on November 18, 2024, but the Court set aside the defaults on January 13, 2025.

Defendants now move to compel Plaintiffs to arbitration.  Plaintiffs oppose the motion and Defendants 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 AGREEMENTS

Defendants advance the Declaration of Lawrence Rosen, Chief Legal Officer of Equinox Holdings, Inc., attached to which are copies of Membership Agreements Plaintiffs signed when signing up for gym memberships.  (Rosen Decl. ¶¶ 1, 4.)  Specifically, Francesca and Gabriela signed membership agreements in 2019, Veronica signed a membership agreement in 2021, and Francesca signed another membership agreement in 2023.  (Rosen Decl. ¶ 4;  Exs. A, B, C, & D.) 

The following language is at the very beginning of each Membership Agreement:

IMPORTANT TERMS

·       Please read this Agreement carefully, as it contains important information regarding your legal rights, including without limitation your RELEASE OF LIABILITY, ASSUMPTION OF RISK AND INDEMNITY (as detailed in Section 4 of this Agreement) and your agreement to MANDATORY ARBITRATION AND WAIVER OF CLASS RELIEF (as detailed in Section 7 of this Agreement).

Each Membership Agreement also contains the following arbitration provision:

7.2       Arbitration: You agree to submit any and all Disputes (as defined in Section 7.4) to binding arbitration pursuant to the Federal Arbitration Act (Title 9 of the United States Code), which will govern the interpretation and enforcement of this arbitration agreement (“Arbitration Agreement”).  Arbitration will be before either (1) JAMS (formerly known as Judicial Arbitration and Mediation Services), http://www.jamsadr.com, or (2) the American Arbitration Association (“AAA”), http://www.adr.org.  If you initiate arbitration, you may choose between these two arbitration forums; if Equinox initiates arbitration, it will have the choice as between these two arbitration forums. 

YOU AND EQUINOX AGREE THAT, EXCEPT AS PROVIDED IN SECTION 7.4, ANY AND ALL DISPUTES WHICH ARISE AFTER YOU ENTER INTO THIS AGREEMENT WILL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION RATHER THAN IN COURT BY A JUDGE OR JURY, IN ACCORDANCE WITH THIS ARBITRATION AGREEMENT.

[…]

7.4       Definition of “Dispute”: Subject to the following exclusions, “Dispute” means any dispute, claim, or controversy between you and Equinox regarding any aspect of your relationship with Equinox, whether based in contract, statute, regulation, ordinance, tort (including without limitation fraud, misrepresentation, fraudulent inducement, negligence, gross negligence or reckless behavior), or any other legal, statutory or equitable theory, and includes without limitation the validity, enforceability or scope of the Agreement (except for the scope, enforceability and interpretation of the Arbitration Agreement and Class Action Waiver).  However, “Dispute” will not include (1) personal injury claims for lost, stolen, or damaged property; (2) claims that all or part of the Class Action Waiver is invalid, unenforceable, unconscionable, void or voidable; and (3) any claim for public injunctive relief, i.e., injunctive relief that has the primary purpose and effect of prohibiting alleged unlawful acts that threaten future injury to the general public.  Such claims may be determined only by a court of competent jurisdiction and not by an arbitrator.

(Ibid.)  Thus, Defendants have demonstrated that signed arbitration agreements exist for all three Plaintiffs that cover the instant dispute.

            In opposition, Plaintiffs argue there was no mutual assent to arbitrate.  In support, they have produced the Declarations of Gabriela and Francesca, which each indicate as follows:

4. The representative specified that such Membership Agreements would commit us to monthly membership payments for the initial period of 12 months, in exchange for Equinox providing them services and unlimited access to their facilities. Additionally, the representative stated that the Membership Agreements contained specific details about what Defendants agreed to provide Plaintiffs, and it also incorporated Equinox policies. The topic of arbitration was never discussed.

5. Defendants then showed us their computer screen and quickly scrolled through the Membership Agreements, and then told us to provide our signatures on an electric signature pad in agreement. We had no opportunity to read, discuss, negotiate, or modify the contract terms.

6. After we signed, the representative stated that they would email us signed copies of our Membership Agreements, however, they never did. I was never provided with a copy of my signed Membership Agreement and its contractual terms.

(Gabriela Decl. ¶¶ 4-6; Francesca Decl. ¶¶ 4-6.)  Further, Plaintiffs contend the arbitration agreements Defendants have attached to the Motion to Compel Arbitration are forgeries:

8. First and foremost, I am certain that I did not sign the Exhibit A agreement or the Exhibit D agreement. My true personal signature is drastically different then the signatures on the agreements. Defendants and their counsel are perjuring themselves when they assert otherwise; they have absolutely no evidence to support their claims.

[…]

12. Another fact that proves the forgery and fabrication, is that I never signed anything pertaining to Defendants in 2023. In 2023, the events alleged in the complaint had already taken place. Considering the nature of the allegations, the last thing I would have done was willingly enter into another contract with Defendants.

(Francesca Decl. ¶¶ 8, 12.)  Plaintiffs point out that the following inconsistencies:

·       The effective date listed on Exhibit A is 05/30/2019, whereas the effective date listed on Exhibit D is 05/31/2019. 

·       Exhibit A lists the monthly dues as $300, whereas Exhibit D lists the monthly membership dues as $330. 

·       The “Initial Period End Date” listed on Exhibit D is 05/31/2020—3 years before the date it was purportedly signed.

·       The MasterCard number is the same on both Exhibit A and B, but the Name on Account is “Francesca Borchardt” for Exhibit A and “Gabriela Borchardt” for Exhibit B.

In reply, Defendants reiterate that Exhibits A, B, C, and D are true and correct copies of Membership Agreements obtained from Defendants’ corporate record, and advance the Declaration of Mike Vilanova (“Vilanova”).  Vilanova explains the purported inconsistencies as follows:

a. Exhibit A contains an "effective date" of May 30, 2019 because that is the date she initially signed up as a member. The "start date" in Exhibit A was May 31, 2019 because Francesca began to use her membership the following day after she signed up. Equinox required Francesca to sign a subsequent Membership Agreement (Exhibit D) on November 5, 2023 because she changed her payment method to a different credit card. By that time, Francesca had already completed her initial twelve-month membership obligation ("Initial Period End Date: 05/31/2020"). Therefore, to avoid imposing a further "twelve (12) month obligation period" upon Francesca for only changing her payment method, Equinox manually entered the "effective" and "start" dates of her 2019 enrollment. In other words, the dates were kept the same between the 2019 (Exhibit A) and the 2023 (Exhibit D) Membership Agreements, so Francesca's 12-month obligation would not reset and require her to maintain her membership until November 5, 2024. I believe the difference between the effective dates of 05/30/2019 (Exhibit A) and 05/31/2019 (Exhibit D), which Francesca highlights, is just a scrivener's error.

b. The $300 membership due in Exhibit A was the monthly rate at the time Francesca initially signed up, on May 30, 2019. Membership dues are gradually increased over time. Exhibit B reflects a $330 membership due because that was the then-current monthly rate for Francesca's account, after the increases during her preceding four and a half years of membership.

(Vilanova Decl. ¶ 6.)

            Taken together, the Court finds Defendants’ explanations as to Plaintiffs’ purported inconsistencies to be credible.  As such, based on the evidence presented, the Court finds that Plaintiffs signed the agreements with the arbitration provisions as attached as Exhibits A, B, C, and D. 

            Moreover, Plaintiffs knew that by signing the electronic pad, they were agreeing to the terms of an agreement with Defendants, and those agreements contained bold, underlined, capitalized language at the very beginning indicating that Plaintiffs are agreeing to binding arbitration in section 7.  As such, the evidence demonstrates that Plaintiffs were adequately on notice of the arbitration provisions to which they agreed.

            Plaintiffs also argue that Defendants failed to plead and prove a prior demand for arbitration and a refusal to arbitrate under the agreements.  (Mansouri v. Superior Court (2010) 181 Cal.App.4th 633, 641-642.) 

            In Reply, Defendants have provided the Declaration of Lee A. Sherman, which provides as follows:

3. On September 13, 2024, I had multiple email exchanges with Plaintiffs to coordinate a telephone call to discuss the case. We agreed to speak at 4:00 p.m. Consequently, on September 13, 2024 at about 4:00 p.m., I called Plaintiffs at the telephone number they provided ((310) 729- 6997) and spoke with them about their lawsuit. During that call, I specifically requested Plaintiffs stipulate to submit their claims to binding arbitration in accordance with the binding arbitration agreements within their Equinox Membership Agreements. Francesca indicated that Plaintiffs had read the arbitration provisions and opined that "They only pertain to contract claims." I then informed Plaintiffs that the arbitration agreement did apply to their claims, which included contract claims. Plaintiffs then proceeded to shout at me, stating that they "refused" to stipulate to arbitration.

4. Attached hereto as Exhibit E is a true and correct copy of an email chain between me and Plaintiffs on October 7, 2024. Notably, Francesca's email confirms that our telephone conversation took place on September 13, 2024. I indicated that “…our motion to compel binding arbitration will be timely filed” because I had previously requested arbitration during our earlier telephone conversation and Plaintiffs had refused.”

(Sherman Decl. ¶¶ 3-4.)  Therefore, based on the evidence presented, the Court finds Plaintiffs’ contention to be unfounded.

However, the Court does not generally consider evidence submitted in connection with a reply, as it deprives the other party of a fair opportunity to respond.  (San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal.App.4th 308, 316 [“due process requires a party be fully advised of the issues to be addressed and be given adequate notice of what facts it must rebut in order to prevail”]; see also Wall Street Network Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171.) 

Notwithstanding, it is not an abuse of discretion to consider evidence offered on reply so long as the opposing party has notice and an opportunity to respond to the new material.  (Plenger v. Alza Corp. (1992) 11 Cal.App.4th 349, 362, fn. 8.)   As such, the Court continues the hearing to permit Plaintiffs to file a Sur-Reply, responding to the evidence offered in connection with the Reply.

a.      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 the 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 (hereafter, Armendariz).)

            “The prevailing view is that 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. 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.  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.”  (Armendariz, supra, 24 Cal.4th at p. 114 [cleaned up].) 

                                                              i.     PROCEDURAL UNCONSCIONABILITY

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” evidence a high degree of procedural unconscionability.  (See Dougherty v. Roseville Heritage Partners (2020) 47 Cal.App.5th 93, 102-104 (hereafter, Dougherty).)  Most consumer contracts are adhesive and therefore present some procedural unconscionability. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915, (hereafter, Sanchez).)  “[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.) 

Plaintiffs argue the agreements were presented to them on a “take-it-or-leave-it” basis.  “The term [contract of adhesion] signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.”  (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 243.)   “[U]nconscionability has both a ‘procedural’ and a ‘substantive’ element, the former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.”  (Ibid.) 

“The prevailing view is that [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.”  (Tiri v. Lucky Chances, Inc., supra, 226 Cal.App.4th. at pp. 243-244.)

Here, the agreements were presented to Plaintiffs on a take-it-or-leave-it basis, and thus, the agreements constitute contracts of adhesion.  However, the level of oppression in a contract for a gym membership is not as great as an employment contract, for example.  (Tiri v. Lucky Chances, Inc., supra, 226 Cal.App.4th. at p. 245.) 

Thus, although the agreement is adhesive, Plaintiff has only established a minimal degree of procedural unconscionability.  (See Murphy v. Twitter, Inc. (2021) 60 Cal.App.5th 12, 37–38.)

                                                            ii.     SUBSTANTIVE UNCONSCIONABILITY

            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, 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, 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, although Plaintiffs argue generally that the arbitration agreements are unconscionable, they do not present any argument as to substantive unconscionability, instead indicating, “Plaintiffs are not going to expand further on this argument[.]” 

            As such, Plaintiffs have not provided the Court with any evidence or argument that the agreements are substantively unconscionable.  Without establishing substantive unconscionability, Plaintiffs’ unconscionability argument fails.

CONCLUSION

            Therefore, the Court finds no substantive unconscionability. 

Regarding whether an agreement to arbitrate exists, based on the evidence offered in connection with the Reply, the Court is inclined to find Plaintiffs entered binding, enforceable agreements to arbitrate that cover the present disputes. 

However, in the interest of protecting Plaintiffs’ due process rights, the Court continues the hearing to May 5, 2025 at 8:30 a.m. in Department 207 to give Plaintiffs an opportunity to submit an optional sur-reply, not exceeding five (5) pages, on or before April 21, 2025, responding to the new evidence Defendants submitted in connection with the Reply brief only. The Court will not consider any additional arguments regarding unconscionability or any other issues beyond addressing the additional evidence Defendants submitted with the Reply.

            Further, on the Court’s own motion, the Court will continue the Case Management Conference from March 6, 2025 to May 5, 2025 at 8:30 A.M. in Department 207. 

            Defendant shall provide notice of the Court’s orders and file the notice with a proof of service forthwith.

DATED:  March 6, 2024                                                        ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court