Judge Michael P. Linfield, Case Number: 23STCV10739, Date: 2023-10-31 Tentative Ruling

Judge: Michael P. Linfield, Case: 23STCV10739, Date: 2023-10-31 Tentative Ruling

Case Number: 23STCV10739 Hearing Date: October 31, 2023 Dept: 34

SUBJECT: Motion to Compel Arbitration

Moving Party: Defendant Vio’s Auto Sales Inc.

Resp. Party: Plaintiff Dakota R. Alvarez

Plaintiff indicated in its opposition that it was not opposed to arbitration before JAMS. However, at the hearing, the parties were not able to agree upon an arbitral forum or other details of the arbitration.

Because at least two of the terms of the arbitration agreement are unconscionable – and because there is judicial economy in litigating all three defendants together – the Court DENIES the motion to compel arbitration.

PRELIMINARY COMMENTS:

The Court is concerned with a lack of civility shown by Defense counsel when meeting-and-conferring with Plaintiff’s counsel.

Defense counsel, in his email to Plaintiff’s counsel, states:

“My client does not approve JAMS. The contract calls for AAA, not JAMS. . . . . I’ve heard every argument possible, and even some impossible ones, in opposition to motions to compel arbitration with AAA. Out of hundreds of motions to compel with this exact same arbitration provision, I lost exactly one, which was immediately appealed for de novo review pursuant to Code Civ. Proc. Sec. 1294(a). If you force a motion to compel, it will be granted, as the one yesterday was in Ramadan v. PCH Motors. Just ask Brianna. The definition of insanity is doing the same thing over and over and expecting a different result. I don’t relish unnecessary law and motion work, but JAMS is absolutely a non-starter.” (Olives Declaration, Exh. 2.)

This mocking language is unnecessary. “Counsel should at all times be civil and courteous in communicating with adversaries, whether in writing or orally.” (Los Angeles Superior Court, Local Rules, Appendix 3.A: “Guidelines for Civility in Litigation,” §D(1).)

“The timbre of our time has become unfortunately aggressive and disrespectful. Language addressed to opposing counsel and courts has lurched off the path of discourse and into the ditch of abuse. This isn’t who we are.” (In re Mahoney (2021) 65 Cal.App.5th 376.)

“The absence of civility displayed by some practitioners heightens stress and debases the legal profession. Those attorneys who allow their personal animosity for an opposing counsel or an opposing party to infect a case damage their reputations and blemish the dignity of the profession they have taken an oath to uphold.” (Crawford v. JPMorgan Chase Bank, N.A. (2015) 242 Cal.App.4th 1265, 1266.)

The Court suggest that counsel take their oath of civility more seriously in the future.

BACKGROUND:

This action arises from a contract for purchase of a vehicle on April 29, 2022. Plaintiff alleges that the Defendant sold her a vehicle that had various defects. Plaintiff alleges misrepresentation and concealment and violations of statutory and common law provisions relating to the purchase of the vehicle.

ANALYSIS:

I. Motion to Compel Arbitration

A. Request for Judicial Notice

Defendant requests that the Court take judicial notice of a tentative ruling in Department 53, Superior Court of California, County of Sacramento, Case No. 34-2023-00337281-CU-CO-GDS, Brian Clark v. Golden State Auto.

The Court denies this request to take judicial notice. First, a tentative ruling is not a ruling at all. “A tentative ruling is just that, tentative. A trial court’s tentative ruling is not binding on the court; the court’s final order supersedes the tentative ruling.” (Magno v. The College Network, Inc. (2016) 1 Cal.App.5th 277, 285, fn. 2 [cleaned up].)

Secondly, a trial court ruling has no persuasive value and cannot be cited. “A written trial court ruling in another case has no precedential value.” (Budrow v. Dave & Buster’s of California (2009) 171 Cal.App.4th 875, 885; Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 761; In re Molz (2005) 127 Cal.App.4th 836, 845; Santa Ana Medical Hospital Center v. Belshé (1997) 56 Cal.App.4th 819, 831.) Further, “an opinion of a California Court of Appeal or superior court appellate division that is not certified for publication or ordered published must not be cited or relied on by a court or a party in any other action.” (California Rules of Court, Rule 8.115.)

Given the above uncontradicted authority, the Court would like to hear from defense counsel why they requested that the Court take judicial notice of a tentative ruling from a trial court in another county.

B. Legal Standard

A written agreement in which the parties agree to arbitration is valid, enforceable and irrevocable unless there is a contract defense. (C.C.P. § 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 thereto refuses to arbitrate such 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: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement.”¿¿(C.C.P. § 1281.2.)

¿ “[T]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence.”¿¿(Giuliano v. Inland Empire Personnel, Inc.¿(2007) 149 Cal.App.4th 1276, 1284.)¿¿“To determine whether a contractual arbitration clause requires arbitration of a particular controversy, the controversy is first identified and the issue is whether that controversy is within the scope of the contractual arbitration clause.”¿(Titolo¿v. Cano¿(2007) 157 Cal.App.4th 310, 316.)¿¿

¿¿ There is strong public policy in favor of both arbitration of disputes and resolving any doubts concerning the scope of arbitrable disputes in favor of arbitration.¿(Moncharsh¿v.¿Heily¿&¿Blase¿(1992) 3 Cal.4th 1, 9.) Arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question.¿¿(Vianna¿v. Doctors’ Management Co.¿(1994) 27 Cal.App.4th 1186, 1189.)¿

C. Discussion

Defendant moves to compel arbitration pursuant to an arbitration agreement in the parties’ Retail Installment Sale Contract (“RISC”). Plaintiff does not dispute that there was an arbitration agreement and does not oppose resolving this dispute through arbitration; however, Plaintiff does oppose being forced to arbitrate with the AAA. Plaintiff argues that forcing Plaintiff to arbitrate with AAA would be unconscionable.

1. Validity of the Agreement

Defendant contends, and it is undisputed, that Plaintiff signed the RISC on or about April 29, 2022 for Plaintiff’s purchase of a used 2013 Jeep Wrangler. The RISC includes a clause which requires the parties to submit to arbitration, stating:

“Agreement to Arbitrate: By signing below, you agree that, pursuant to the Arbitration Provision on the reverse side of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action.” (Bucur Decl., Ex. 1.)

The Arbitration Provision of the RISC specifies that:

“You may choose the American Arbitration Association, 1633 Broadway, 10th Floor, New York, New York 10019 (www.adr.org), or any other organization to conduct the arbitration subject to our approval.” (Bucur Decl., Ex. 2.)

The plain language of the arbitration provision provides that either party may choose to have any dispute submitted to arbitration. The RISC also expressly states that AAA is the only pre-approved forum for arbitration but allows a party to choose “any other organization . . . subject to” Defendant’s approval.

There is no dispute that a valid written arbitration agreement exists between the parties.

2. Unconscionability

Plaintiff does not claim that the arbitration provision itself is unconscionable. However, Plaintiff argues that being forced to arbitrate with the AAA, as opposed to JAMS, is unconscionable.

a. Legal Standard

“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. But they need not be present in the same degree. 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 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.)

“Both procedural and substantive unconscionability must be shown for the defense to be established, but they need not be present in the same degree. Instead, they are evaluated on ‘a sliding scale.’ The more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to’ conclude that the term is unenforceable. Conversely, the more deceptive or coercive the bargaining tactics employed, the less substantive unfairness is required.” (Mills v. Facility Solutions Group, LLC (2022) 84 Cal.App.5th 1035, 1050 [cleaned up], citing OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111.)

b. The Arbitration Provision is Procedural Unconscionability

First, Plaintiff argues that this contract is a contract of adhesion because Plaintiff did not have any meaningful opportunity to negotiate or exercise any control over the RISC provision.

Plaintiff is correct. This is a contract of adhesion. Defendant does not argue to the contrary. (See Motion to Compel.) The Court finds that this arbitration provision is procedurally unconscionable.

c. The Arbitration Provision is Substantive Unconscionability

i. The Lack of Discovery under AAA is Substantively Unconscionabile

Plaintiff argues that Defendant’s refusal to arbitrate in any forum other than AAA causes the Arbitration Provision to be oppressive and substantively unconscionable.

Plaintiff argues that AAA does not guarantee a right to conduct discovery which Plaintiff claims is essential to proving her claims. In AAA arbitration, there is no right to conduct discovery because discovery requests are balanced against AAA’s requirement that arbitrations are conducted efficiently. (Plaintiff’s Ex. 6, rule 22(a).) Under AAA’s rules:

“If any party asks . . . keeping in mind that arbitration must remain a fast and economical process, the arbitrator may direct 1) specific documents and other information to be shared between the consumer and business, and 2) that the consumer and business identify the witnesses, if any, they plan to have testify at the hearing.” (Id.)

In other words, if the Court were to uphold the arbitration agreement and the parties were to use AAA, Plaintiff is not guaranteed discovery; discovery would be at the sole discretion of the arbitrator.

Courts have an obligation “to ensure that private arbitration systems resolve disputes not only with speed and economy but also with fairness.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 115.) Plaintiff argues that if Plaintiff were not permitted to obtain discovery, Plaintiff’s chances of establishing misrepresentation and concealment would be significantly impaired. Plaintiff is correct, and it would not comport with fairness or due process to require Plaintiff to prove her case absent discovery.

The evidence before the Court shows that Defendant is not willing to arbitrate before JAMS; in fact, it appears that Defendant is only willing to arbitrate before AAA. According to Defendant, “[m]y client does not approve JAMS. The contract calls for AAA, not JAMS.” (See Olives Decl. ¶ 2 and Exs. 2-3.)

The Court also notes that the Arbitration Provision allows Defendant to reject any arbitration forum proposed by Plaintiff, but conversely does not allow Plaintiff to reject arbitration before AAA or before any other forum suggested by Defendant. As indicated above, the arbitration agreement provides:

In other words, Defendant can veto any arbitration forum; plaintiff cannot.

A contract is unconscionable if there is “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243.)

The Court finds that arbitration before AAA makes the arbitration contract substantively unconscionable.

ii. Defendant’s Limiting their payment of Arbitral Fees to $5,000 is Substantively Unconscionable

The arbitration agreement states that Defendant “will pay your filing, administration, service or case management fee and your arbitrator or hearing fee all up to a maximum of $5,000, unless the law or the rules of the chosen arbitration organization require us to pay more.” (Bucor Declaration, Exh. 2.)

This clause is also substantively unconscionable to the extent that it would require the consumer to pay arbitration fees. “[I]t is substantively unconscionable to require a consumer to give up the right to utilize the judicial system, while imposing arbitral forum fees that are prohibitively high.” (Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 205, 218, quoting Gutierrez v. AutoWest, Inc. (2003) 114 Cal.App.4^th 77, 90.)

3. Breach of the Implied Covenant of Good Faith and Fair Dealing

Since the Court finds the arbitration both procedurally and substantively unconscionable, it need not reach Plaintiff’s contention that Defendant’s refusal to agree to a non-AAA arbitration forum is a breach of the implied covenant of good faith and fair dealing.

4. Scope of the Motion

This motion to compel arbitration is only brought on behalf of Vio’s Auto Sales, Inc., one of the three defendants in this case. In particular, Defendant Mechanics Bank (which is named as a defendant in causes of action numbers 1-11) and The Guarantee Company (which is named as a defendant in cause of action number 12) are not parties to this motion to compel. (See Complaint; see Motion to Compel.) At oral argument, all three defendants were represented by the same defense attorney.

The Court believes it makes no sense to allow Plaintiff to pursue litigation against two defendants if she is arbitrating against the third defendant; conversely, the Court is concerned about depriving Plaintiff of the opportunity to pursue litigation against the two defendants with which she has not signed an arbitration agreement simply because she is required to arbitrate against a third defendant.

D. Conclusion

The arbitration agreement is procedurally unconscionable. Further, at least two of the terms of the arbitration agreement are substantively unconscionable. Further, there is judicial economy in litigating all three defendants together.

The Court DENIES the motion to compel arbitration.