Judge Michael P. Linfield, Case 22STCV05509 2022-10-19 Tentative Ruling

Judge: Michael P. Linfield, Case: 22STCV05509, Date: 2022-10-19 Tentative Ruling

Moving Party: Defendants Elisha Kamornick; EK Healthcare Consulting, LLC; Max Health Inc.; and CLHF Homes, LLC

Resp. Party: Plaintiffs Fenton Villa, Inc.; Home of Compassion No. 2, Inc.; Family Circle CLHF, Inc.; Valley Living Center, Inc.; Potter Care LLC; Pure Heart Congregate Living Facility, Inc.; Healthy Life Congregate Care; Valley View Congregate Living Facility; Corbin Congregate Home, Inc.; Royal Haven LLC; AGLB, Inc.; and Rancho Maria CLHF, LLC

Defendants’ Petition to Compel Arbitration is GRANTED. Defendants’ Demurrer is DISMISSED as MOOT.

This motion presents the following issue: can two sophisticated businesspeople – neither of whom were coerced or pressured to agree to arbitrate – agree to resolve their dispute through a Jewish religious arbitration in front of a Beit Din? The answer is ‘yes.’ There is nothing impermissible about two sophisticated people agreeing to opt-out of State-sanctioned litigation. Assuming no coercion, two equals can agree to resolve their dispute by arm-wrestling, by playing a game of chess, by flipping a coin, by going to their tribal elder . . . or through arbitration conducted by a Beit Din.

On July 14, 2022, Plaintiffs filed their Second Amended Complaint (SAC). The SAC has 53 causes of action. It was filed on behalf of an individual Plaintiff and his 12 corporations against an individual Defendant and his three corporations.

On August 10, 2022, Defendants filed their Petition to Compel Arbitration (“Petition”). Defendants pray in their Petition that the dispute be resolved by arbitration in a Jewish court of law and that this case be stayed. Defendants concurrently filed their Demurrer and Declarations in support of their filings.

On August 25, 2022, Plaintiffs filed their Opposition to the Petition to Compel Arbitration (“Opposition”). Plaintiffs concurrently filed their Compendium of Exhibits in Support of their Opposition.

On September 7, 2022, Defendants filed their Reply in Support of their Petition to Compel Arbitration (“Reply”). Defendants concurrently filed their Evidentiary Objections and Declarations in support of their Reply.

On September 9, 2022, Plaintiffs filed their Evidentiary Objections to Defendants’ Declarations in support of their Reply.

On September 14, 2022, the Court heard these matters. The Court continued the hearing to October 5, 2022. The Court also allowed the parties to file supplemental briefs regarding the Petition to Compel Arbitration.

On September 26, 2022, the parties submitted their respective Supplemental Briefs.

On October 3, 2022, the Court continued the hearing to October 19, 2022 pursuant to the parties’ Joint Stipulation to Continue Case.

Objection
1		OVERRULED
2		OVERRULED
3	SUSTAINED
4		OVERRULED
5	SUSTAINED
6		OVERRULED
7		OVERRULED
8		OVERRULED
9		OVERRULED

Objection
1		OVERRULED
2		OVERRULED
3		OVERRULED
4		OVERRULED
5		OVERRULED
6		OVERRULED
7		OVERRULED
8		OVERRULED
9		OVERRULED
10		OVERRULED
11		OVERRULED
12		OVERRULED
13	SUSTAINED
14		OVERRULED
15	SUSTAINED
16		OVERRULED
17		OVERRULED
18		OVERRULED
19		OVERRULED
20		OVERRULED
21	SUSTAINED
22		OVERRULED
23		OVERRULED

“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.)

“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, unless it determines that:

(c) “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. . . .

“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4, rest of statute omitted for brevity.)

“Under both federal and state law, arbitration agreements are valid and enforceable, unless they are revocable for reasons under state law that would render any contract revocable.” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239, citations omitted.)

“When a party to an arbitration agreement challenges the agreement as unenforceable, we decide the issue based on the same state law standards that apply to contracts generally. The . . . Federal Arbitration Act, creates a presumption in favor of arbitrability and permits courts to refuse to enforce agreements to arbitrate only ‘upon such grounds as exist at law or in equity for the revocation of any contract’ (9 U.S.C. § 2). Similarly, title 9 of the Code of Civil Procedure (§ 1280 et seq.) expresses a strong public policy favoring the enforcement of valid agreements to arbitrate.” (Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495, 502, citations omitted.)

“Reasons that would render any contract revocable under state law include fraud, duress, and unconscionability.” (Tiri, supra, at 239, citations omitted.)

“The party seeking to compel arbitration bears the burden of proving by a preponderance of the evidence the existence of an arbitration agreement. The party opposing the petition bears the burden of establishing a defense to the agreement's enforcement by a preponderance of the evidence. In determining whether there is a duty to arbitrate, the trial court must, at least to some extent, examine and construe the agreement.” (Id.)

“In general, it is left to an arbitrator to construe the meaning and extent of the arbitration agreement between the parties. However, it is for the courts to decide questions of arbitrability, which include whether the parties are bound by a given arbitration clause, or whether it is unenforceable as unconscionable. (Indep. Ass’n of Mailbox Ctr. Owners, Inc. v. Super. Ct. (2005) 133 Cal.App.4th 396, 406, citations omitted.)

“Although threshold questions of arbitrability are ordinarily for courts to decide in the first instance under the FAA, the ‘[p]arties to an arbitration agreement may agree to delegate to the arbitrator, instead of a court, questions regarding the enforceability of the agreement.’” (Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 239, quoting Tiri, supra, at 241.)

“For a delegation clause to be effective, two prerequisites must be satisfied. First, the language of the clause must be clear and unmistakable. (Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 69, fn. 1.) The required clear and unmistakable expression is a ‘heightened standard’ . . . . Thus, ‘[u]nless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.’” (Pinela, supra, at 239–40, quoting Rent-A-Center, supra, at 69, fn. 1, and quoting AT&T Techs. v. Commc’ns Workers (1986) 475 U.S. 643, 649, other citations omitted.)

“Second, the delegation must not be revocable under state contract defenses to enforcement. Among these defenses is unconscionability.” (Pinela, supra, at 240, citation omitted.)

“When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally . . . should apply ordinary state-law principles that govern the formation of contracts.” (Aanderud v. Super. Ct. (2017) 13 Cal.App.5th 880, 890, quoting First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944, internal quotation marks omitted.)

Defendants argue that the question of arbitrability (i.e., whether the arbitration agreement is enforceable) should be delegated to the arbitrator instead of the Court. (Pet., p. 6.) Defendant points the Court to the arbitration agreement, which, among other things, states:

Any dispute, claim or controversy arising out of or relating to this agreement or to the breach, termination, enforecemnt [sic], interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration.

Plaintiff does not make any specific arguments about arbitrability. Rather, Plaintiff makes other arguments, among them that the arbitration agreement is procedurally and substantively unconscionable and that Defendants waived the right to compel arbitration. (Opposition, pp. 8–10, 11–12.)

Defendants reiterate their argument on Reply that arbitrability should be decided by the arbitrator. (Reply, pp. 1–2.)

The Court agrees with Defendants’ argument. The arbitration agreement here meets the two-prong test for arbitrability. As to the first prong, the language that requires arbitrability to be decided by the arbitrator and not the Court is sufficiently clear and unmistakable to meet the heightened standard. As to the second prong, the Court does not find that there is any procedural or substantive unconscionability as these arbitration agreements were made by knowledgeable individuals, neither of whom was forced to accept the contracts. Further the selection of law (Orthodox Jewish Law) and the arbitration forum (a Beit Din) do not appear to favor one party over another.

It is certainly true that “the party seeking to compel arbitration ha[s] the responsibility to timely seek relief either to compel arbitration or dispose of the lawsuit, before the parties and the court have wasted valuable resources on ordinary litigation.” (Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 446 [cleaned up].) In this case, Defendants filed their Petition to Compel Arbitration less than one month after Plaintiffs filed their operative Second Amended Complaint. Defendants have not waived their contractual right to compel arbitration.

“The answer to ‘the question “who has the primary power to decide arbitrability” turns upon what the parties agreed about that matter.’” (Nelson v. Dual Diagnosis Treatment Center (2022) 77 Cal.App.5th 643, 654, quoting First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 943.) In this case, the parties agreed that the arbitrator would decide. Accordingly, pursuant to the parties’ arbitration clause, the Court submits the question of arbitrability to the arbitrators.

However, even if the Court were to decide the question of arbitrability it would conclude that the arbitration agreement signed by both parties is binding.

For completeness’ sake, and in the event that the Court of Appeal were to find that this Court should determine the issue of arbitrability, the Court, as indicated below, finds that the arbitration agreement signed by the parties requires arbitration of this dispute.

Plaintiffs’ SAC references a Master Acquisition and Management Agreement (“MAMA”) between the parties, along with other Management Agreements; each contains the following Arbitration Provision. (SAC, Exs. 1-10.)

“Governing Law; Dispute Resolution; Waiver of Jury Trial. ALL PARTIES WAIVE TRIAL BY JURY IN RESPECT OF ANY CLAIM, COUNTERCLAIM, ACTION, OR CAUSE OF ACTION RELATING TO OR ARISING OUT OF THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY ALL PARTIES AND ALL PARTIES HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL INDUCEMNET FOR THE PARTIES ENTERING INTO THIS AGREEMENT. ALL PARTIES ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. ALL PARTIES FURTHER REPRESENT AND WARRANT THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER AND THIS AGREEMENT WITH COUNSEL OR HAVE ELECTED NOT TO DO SO IN THEIR SOLE AND ABSOLUTE DISCRETION. ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR TO THE BREACH, TERMINATION, ENFORCEMENT, INTERPRETATION OR VALIDITY THEREOF, INCLUDING THE DETERMINATION OF THE SCOPE OR APPLICABILITY OF THIS AGREEMENT TO ARBITRATE, SHALL BE DETERMINED BY ARBITRATION. NO PARTY SHALL RESORT TO ANY COURT OR AUTHORITY FOR THE RESOLUTION OF ANY DISPUTE OTHER THAN A COURT OF JEWISH LAW THAT RULES IN ACCORDANCE WITH ORTHODOX JEWISH LAW (THE "ARBITRATOR"). THE PROCESS OF THE ARBITRATOR SHALL BE AN ALTERNATIVE DISPUTE RESOLUTION MECHANISM WITH RESPECT TO ANY AND EACH DISPUTE AND ALL PARTIES WAIVE ANY RIGHT TO A JURY TRIAL OR ANY USE OF ANY COURT OR AUTHORITY OTHER THAN THE ARBITRATOR. THE RULING OF THE ARBITRATOR WITH RESPECT TO ANY AND EACH DISPUTE SHALL BE BINDING UPON ALL PARTIES AND SHALL NOT BE APPEALABLE. NOTWITHSTANDING THE PROVISIONS OF THIS AGREEMENT THAT REQUIRE ANY AND BACH [sic] DISPUTE TO BE RESOLVED BY THE ARBITRATOR, THE DECISION OF THE ARBITRATOR MAY BE ENFORCED IN SECULAR COURT AS THE RULING OF BINDING ARBITRATION. THE ABOVE HAS BEEN VALIDATED THROUGH "KINYAN SUDDE ACCORDING TO THE TENENTS OF OUR RABBINIC SAGES OF BLESSED MEMORY.” (SAC, Ex. 1 [misspellings in original].)

Plaintiff Feingold and Defendant Elisha Kamornick signed each of the Management Agreements and the Master Acquisition and Management Agreement, along with the Addendums to the MAMA.

Defendants move the Court to compel the parties to arbitrate. In support of their argument, Defendants point the Court to multiple exhibits in the SAC that include the arbitration clause at issue and the signatures of Plaintiff Yaakov Feingold and Defendant Elisha Kamornick. (Pet., p. 5 (listing SAC Exs. 1, 2, 3, 4, 6, and 7).)

Plaintiffs argue that there is no valid agreement to submit the matter to arbitration. Plaintiff primarily couches this argument “with respect to the claims by [Plaintiffs] Home of Compassion, Valley Living, and Healthy Life”, although Plaintiffs also argue that the remaining arbitration provisions “clearly state that California law applies in connection with those agreements.” (Opposition, p. 7:24 - p. 8:6.)

The Court finds that there is an arbitration agreement and that the relevant parties, which includes Plaintiff Yaakov Feingold and Defendant Elisha Kamornick, have signed the arbitration agreement. While a limited number of other parties may not have signed the arbitration agreement, the Court has not been persuaded why the Management Agreement (and other agreements) do not control all the parties in this litigation. (SAC, Ex. 2.)

The Court concludes as a matter of law that Defendants have met their burden of proving the existence of an arbitration agreement. (Tiri, supra, at 239.)

“There are three steps in reviewing the validity of arbitration agreements.” (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 711.)

“In deciding whether an agreement to arbitrate is enforceable, the first step in the analysis is to determine whether the agreement implicates public or private rights. Identifying the nature of the claims at issue is critical, because different enforceability standards apply to different types of claims.” (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 651–52.)

“After assessing the nature of the plaintiff’s claims, the next step is to apply the appropriate test. Where the plaintiff’s claims arise from unwaivable public rights, whether statutory or nonstatutory, the arbitration agreement must satisfy the minimum requirements set forth in Armendariz. Assuming it satisfies the Armendariz requirements, an agreement to arbitrate public claims also must be conscionable.

“Where the plaintiff asserts private rights rather than (or in addition to) unwaivable public rights, the agreement to arbitrate those claims is tested only against conscionability standards.” (Id. at 652, citations omitted.)

“If the court determines that the arbitration agreement contains provisions that are unenforceable – either because they violate public policy or because they are unconscionable – it then undertakes the third and final step in the analysis: assessing severability. A court need not void an arbitration agreement in its entirety if the objectionable terms can be severed or restricted. The ‘overarching’ question in such cases is whether severance serves the interests of justice. (Id., quoting Armendariz v. Found. Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 124.)

Plaintiffs argue that the arbitration agreement is procedurally and substantively unconscionable. Although Plaintiffs cite Armendariz, they do not argue that this arbitration agreement must meet the minimum requirements that Armendariz and its progeny place on arbitration agreements involving public rights.

In Boghos, a case that involved cost-shifting provision in an arbitration clause, our Supreme Court discussed its prior rulings in Armendariz and Little. (Boghos, supra, at 506–08, citing Armendariz, supra, at 83 and Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064.) After discussing how those cases involved certain unwaivable claims (FEHA claims and wrongful discharge claims, respectively), the Court declined to extend that line of cases to torts or contract claims that are neither tethered to an unwaivable statutory right nor seeking enforcement of a public policy articulated in a statute. (Id.)

“To extend Armendariz to the arbitration of claims not carefully tethered to statutory or constitutional provisions would seem an arbitrary refusal to enforce section 1284.2, a legislative act, and thus raise concerns about judicial policymaking similar to those that led us to require a statutory or constitutional basis for Tameny claims. (Id. at 508, citation omitted.)

The Court of Appeal subsequently considered Boghos as it concerned the arbitration of hate crime laws. The Court of Appeal concluded that “hate crimes laws constitute unwaivable statutory rights” and that arbitration agreements regarding them must meet the minimum requirements listed in Armendariz. (D.C. v. Harvard-Westlake School (2009) 176 Cal.App.4th 836, 860, 864.) The Court of Appeal ruled similarly in the context of consumer protection statutes, finding that they fell under the ambit of Armendariz. (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 94–95.) This approach has been approved by our Supreme Court. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 919.)

The facts at hand closely resemble those in Boghos as opposed to those in Harvard-Westlake School or Gutierrez. The causes of action in this case are for breach of fiduciary duty, breach of contract, accounting, conversion, and intentional interference with economic prospective advantage. There is no indication that any of these are issues involving unwaivable statutory rights or items that involve public policy concerns.

The Court concludes that the minimum requirements in the Armendariz/Little line of cases do not apply to the arbitration agreement at hand. The Court will thus only consider whether standard contract defenses, such as unconscionability, apply here.

“Agreements to arbitrate may be invalidated if they are found to be unconscionable.” (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 713, citations omitted.)

“Unconscionability consists of both procedural and substantive elements. The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. Substantive unconscionability pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided. (Pinnacle Museum Tower Ass’n v. Pinnacle Mkt. Dev. (US), LLC (2012) 55 Cal.4th 223, 246, citations omitted.)

“‘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, at 114, italics in original [cleaned up].)

“The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle at 247, citation omitted.)

“Moreover, courts are required to determine the unconscionability of the contract ‘at the time it was made.’” (Sanchez, supra, at 920, quoting Civ. Code § 1670.5.)

“Unconscionability is ultimately a question of law.” (Patterson v. ITT Consumer Fin. Corp. (1993) 14 Cal.App.4th 1659, 1663, citation omitted.)

Plaintiffs argue that the arbitration agreement is procedurally and substantively unconscionable. Defendants argue that it is not.

The Court briefly discussed unconscionability above and found that the arbitration agreement is neither procedurally nor substantively unconscionable. The Court shall expand on its reasoning.

First there is no procedural unconscionability. Plaintiffs do not argue that these were contracts of adhesion or that there was unequal bargaining power between the parties at the time the contract was formed. Plaintiffs do argue that “the Management Agreements do not attach procedural or substantive rules of ‘Orthodox Jewish Law’ that purportedly govern the arbitration of a dispute between the parties” and that “it would be impossible to determine what would be the specific Jewish Court of Law to bring the action, who pays for expenses, whether an evidentiary hearing occurs, or whether there is a right to discovery. . . .” (Opposition, p. 9.)

The Court considers this argument to be that there would be “surprise” sufficient for the contract to be procedurally unconscionable. (Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1409 (“Adhesion is not a prerequisite for unconscionability.”) Yet the Court does not find any “surprise” here. Not attaching the procedural or substantive rules of Jewish law (e.g., the rules of the specific Beit Din, or the Torah, respectively) to the arbitration agreement is akin to not attaching the procedural or substantive rules of secular law (e.g., the Code of Civil Procedure, or the Civil Code, respectively) to a Complaint. Whether it is a religious or secular system, procedural and substantive rules can be too complex for a lay person to understand, and so the fact that the parties consulted with their attorneys (as is stated in the signed arbitration agreements and is undisputed by the parties) prior to signing the agreements is sufficient to determine that the parties were not surprised in even a minimal sense. These parties are generally knowledgeable businesspeople, and they are specifically knowledgeable as they are people who practice Orthodox Judaism. The Court does not find that there is any procedural unconscionability here.

Further, there is no substantive unconscionability. These is nothing in the contract that appears to be harsh or one-sided as to any of the parties. Moreover, the Court of Appeal has previously affirmed submitting a case to a Beit Din, which signals to this Court that there is nothing inherently substantively unconscionable about parties agreeing to arbitrate in front of a religious tribunal. (See Dial 800 v. Fesbinder (2004) 118 Cal.App.4th 32, 46–48, 50 (“[S]ection 1286 does not, by its express terms, limit the court’s power in any manner to confirm an arbitration award from a foreign country, even by a religious tribunal. . . . . Finally, the fact three rabbis are the arbitrators and the decision will no doubt be based on principals [sic] of Jewish law does not bar its enforceability in California secular courts.”)

Plaintiffs argue “that information regarding this area of law is not easily accessible” and that Defendants’ attorney, Dan Katz, “represented both parties from the inception regarding the execution of the management agreements” but “refuses to withdraw due to conflicts of interest despite numerous demands and pending State Bar complaints.” (Opposition, pp. 9–10.)

As to the information being difficult to access, the Court does not find that it is either harsh or one-sided. Just as secular attorneys may use research tools to assist them with their practice, religious attorneys may use similar research tools to assist their practice. Further, as it relates to the representation of Counsel Katz, that is not an issue of substantive unconscionability at the time of the contract formation. The arbitrator, or the State Bar, can handle any current issues with the parties’ respective counsel.

The Court understands that “[a] forum that would prevent a person of limited means from filing and proceeding with a meritorious claim is inferior to our court system.” (Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205, 213, fn. 4.) But Plaintiffs have not presented any evidence that using a Beit Din would financially prevent either party from pursuing arbitration.

Given that the Court has not found either procedural or substantive unconscionability (or other contract defenses, such as duress or fraud), the Court concludes as a matter of law that Plaintiffs have not met their burden here and that the arbitration agreement must stand.

“Civil Code section 1670.5 permits a court to determine that only a portion of a contract is unconscionable and to delete or amend that portion to make the remainder of the contract enforceable: ‘[T]he 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.’” (Fitz, supra, at 714, quoting Civ. Code, § 1670.5, subd. (a).)

The Court has not found any unconscionability in the arbitration agreement. Therefore, the Court does not consider severance here.

6. Even if Armendariz were to Apply, the Court would still Uphold the Arbitration Agreement

The Court concluded above that since these contracts did not pertain to unwaivable rights, Armendariz did not apply. (See §II(B)(3), supra.) However, even if Armendariz applied, the Court would still enforce the arbitration agreements.

“Unconscionability 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. 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. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, [cleaned up]; accord, Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1288–1289; Sanchez v. Valencia Holding Co., LLC (2011) 201 Cal.App.4th 74, 87-88.)

In this case, there is simply no procedural unconscionability. Both Plaintiff and Defendant are sophisticated businesspeople. Both are Orthodox Jews. There was no oppression or surprise accompanying the arbitration provision. Either party could have renegotiated the provision or walked-away from the deal if they so chose.

Since there was no procedural unconscionability, the two parties were free to choose any manner of dispute resolution they wished. They could have chosen playing darts, playing a game of chess, rock-paper-scissors, trial by jury, or any other way of resolving their dispute. They chose to use a Beit Din to resolve their dispute. They are entitled to do so. That is because “sophisticated parties should be allowed to strike their own bargains and knowingly and voluntarily contract in a manner in which certain risks are eliminated and, concomitantly, rights are relinquished.” (Wind Dancer Production Group v. Walt Disney Pictures (2017) 10 Cal.App.5th 56, 75, quoting Brisbane Lodging, L.P. v. Webcor Builders, Inc. (2013) 216 Cal.App.4th 1249, 1261.)

Armendariz requires both procedural and substantive unconscionability. Finding no procedural unconscionability, this Court – even under Armendariz – must enforce the arbitration agreement.

The Court GRANTS Defendants’ Petition to Compel Arbitration. This matter is STAYED pending the conclusion of arbitration.

The Court has granted Defendants’ Petition to Compel Arbitration and stayed this matter. Defendants’ Demurrer is now no longer properly before the Court. Any pleadings, motions, or other requests for relief must now be submitted to the arbitrator pursuant to the arbitration agreement.