Judge Randolph M. Hammock, Case Number: 23STCV03429, Date: 2023-09-14 Tentative Ruling

Plaintiff Josh Donati alleges he purchased a 2010 Honda CR-V from dealer Defendant Shift Operations, LLC. Defendant Shift Operations, LLC, assigned the contract to Defendant Westlake Services. Defendant American Contractors Indemnity Company allegedly issued a bond to Defendant Shift Operations.

Plaintiff alleges the vehicle had mechanical problems and contained aftermarket parts from an undisclosed prior accident, among other things. Plaintiff brings causes of action for (1) Violations of the Consumers Legal Remedies Act, Civil Code § 1750, et seq., (2) Intentional Misrepresentation, (3) Negligent Misrepresentation, (4) Violation of the Song-Beverly Consumer

California has a strong public policy in favor of arbitration as an expeditious and cost-effective way of resolving disputes. The Federal Arbitration Act (“FAA”) also manifests a policy favoring arbitration. (Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708, 1713.) “Even so, parties can only be compelled to arbitrate when they have agreed to do so.” (Avila v. S. California Specialty Care, Inc. (2018) 20 Cal. App. 5th 835, 843.) “The party seeking to compel arbitration bears the burden of proving the existence of a valid arbitration agreement.” (Id.) An arbitration agreement is a contractual agreement. “General contract law principles include that ‘[t]he basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting. [Citations.] ... The words of a contract are to be understood in their ordinary and popular sense.” [Citations.] (Garcia v. Expert Staffing W., 73 Cal. App. 5th 408, 412–13.)

“[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). “In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.” (Weeks v. Crow (1980) 113 Cal.App.3d 350, 353). “Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.” (California Correctional Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198, 205).

“[A] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination.” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284).

“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. . . .” (CCP § 1281.4.)

On or about February 24, 2022, Plaintiff Josh Donati entered into a Retail Installment Sale Contract with Defendant Shift Operations, LLC, for the purchase of a 2010 Honda CR-V. (Chu Decl. ¶ 3, Exh. A; Compl. ¶ 9.) After purchase, Defendant assigned the Retail Installment Sale Contract to Defendant Westlake Services, LLC. (Compl. ¶ 10 [alleging “[a]fter the sale, Dealer assigned the Contract to Westlake, making Westlake a holder of the Contract.”].)

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship

Accordingly, the Agreement here, which covers “any claim or dispute” between Plaintiff and the selling dealer, covers the dispute here between Plaintiff and selling dealer. (See Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189 [noting that “arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question”].) Because the agreement expressly provides that provides that any arbitration “shall be governed by the Federal Arbitration Act,” the court will apply and consider the FAA where necessary. (See Davis v. Shiekh Shoes, LLC (2022) 84 Cal. App. 5th 956, 963 [finding the FAA applies “if it is so stated in the agreement.”].)

Moreover, because the agreement applies to the seller’s assigns, Defendant Westlake Services can also invoke the agreement. Defendant has therefore established the existence of an agreement to arbitrate by a preponderance of the evidence. (Giuliano, supra, 149 Cal.App.4th at 1284).

It is also noted that Plaintiff signed a second document with an arbitration provision when he purchased his vehicle. The “Buyer Acknowledgment As-Is No Warranty Sale” provides, in relevant part: “Except for small claims and claims to protect a party's intellectual property rights, all other disputes between the parties (including those related to use of the Shift platform or those arising before this Agreement) shall be resolved by binding arbitration.” (Chu Decl. ¶ 4, Exh. B, p. 4.) Thus, under this agreement, Plaintiff is also obligated to arbitrate his claims.

In opposition, Plaintiff states he is “willing to arbitrate his claims, but he would like to exercise his right to have a say in the arbitration forum, as provided in the Contract.” (Opp. 5: 10-12.) Therefore, Plaintiff does not dispute the existence of these arbitration agreements and does not dispute that they cover his claims here. The court addresses Plaintiff’s contention as to unenforceability or unconscionability in the section that follows.

Accordingly, this court finds the existence of an agreement to arbitrate by a preponderance of the evidence that applies to the dispute here. (See Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189 [noting that “arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question”].)

Defendant contends the proper forum is AAA, and “vehemently objects” to any other forum. (Mtn. 8: 26.) Plaintiff, on the other hand, contends the RISC “does not give Shift the right to unilaterally select the forum, or to compel arbitration in the forum it selects.” (Id. 5: 12-13.) Plaintiff contends that “[f]orcing” him to arbitrate with AAA is “unconscionable under California law.” (Opp. 5: 18-19.)

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. (Sanchez v. Valencia Holding Company, LLC (2015) 61 Cal.4th 899, 910.) Under California law, an arbitration agreement must be in some measure both procedurally and substantively unconscionable in order for the agreement to be unenforceable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114; De La Torre v. CashCall, Inc. (2018) 5 Cal.5th 966, 982.)

As to the forum, the arbitration provision in the RISC provides: “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.” (Chu Decl. ¶ 3, Exh. A, p. 7.)

The Buyer Acknowledgment also provides that any arbitration “shall be administered by the American Arbitration Association (‘AAA’) under the Consumer Arbitration Rules (‘AAA Rules’).” (Chu Decl. ¶ 3, Exh. A, p. 7.)

Plaintiff directs his argument to the provision in the RISC, which allows him to choose AAA “or any other organization to conduct the arbitration subject to [Defendant’s] approval.” He contends that interpreting this provision as effectively granting Defendant the unilateral right to choose the forum is unconscionable under California law.

This argument fails. While the arbitration provision does provide that Plaintiff may propose an arbitration service aside from AAA, Defendant has the final word on the matter. The arbitration provision makes clear that Plaintiff’s selection of an arbitration service provider is “subject to [Defendant’s] approval.” (Id.) Accordingly, Plaintiff can commence arbitration with AAA, or he can commence arbitration with any other organization, as long as Defendant approves.

Plaintiff’s suggestion that other arbitration services might be more “consumer friendly” is of no consequence. When Plaintiff signed his agreement to arbitrate, he agreed to use AAA or any other service “subject to [Defendant’s] approval.” This court interprets that provision to mean what it says: Plaintiff may offer alternative forums, but it is Defendant who has the last word.

Moreover, as Defendant correctly points out, the RISC used here is similar (if not identical) to the vast majority of RISCs used in the consumer vehicle context. This includes the arbitration provision therein. This court is unaware of any authority suggesting this language is unconscionable or otherwise unenforceable. The court is likewise unaware of any authority suggesting AAA is somehow an inadequate provider of arbitration services.

Therefore, Plaintiff has not demonstrated that the arbitration provision is substantively unconscionable. This defeats Plaintiff’s unconscionability argument, even if the court assumes that Plaintiff has established some degree of procedural unconscionability because the RISC is a contract of adhesion. (See Armendariz, supra, 24 Cal.4th at 114 [an arbitration agreement must be in some measure both procedurally and substantively unconscionable in order for the agreement to be unenforceable].)

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole