Judge: Richard Y. Lee, Case: 30-2022-01244922, Date: 2022-08-25 Tentative Ruling
Defendant, Panda Motors, Inc. dba California Motors Direct (“Defendant”) moves for an order to compel Plaintiff, Francisco Javier Benitez (“Plaintiff”) to arbitrate this action before the American Arbitration Association (“AAA”), and stay this action until the motion to compel arbitration and arbitration proceeding are resolved. Defendant also moves for an award of $444.95 in costs incurred in appearing in this action as such costs were unnecessarily incurred.
Defendant contends that there is a mandatory arbitration clause in the Retail Installment Sale Contract (“RISC”) concerning Plaintiff’s purchase of a used 2013 Scion FR-S, VIN No. JF1ZNAA19D2726381 which the parties entered into on or about March 26, 2021 which encompasses the claims against Defendant in this action; that Plaintiff concurrently signed an Arbitration Addendum setting forth that an arbitration pursuant to the RISC shall be conducted by the AAA; that the Court need not address the threshold question of whether a valid and enforceable arbitration agreement exists between Plaintiff and Defendant because the parties expressly delegated this role to the arbitrator, but that a valid and enforceable arbitration agreement within the RISC exists; that the Court should grant the motion and stay the action; and that the Court should award Defendant $444.95 for having to bring this motion due to Plaintiff’s refusal to stipulate to arbitration.
Plaintiff contends that the Arbitration Provision is procedurally unconscionable as there is oppression and surprise as Plaintiff was presented with the RISC on a take-it-or-leave-it basis, its preprinted terms were not negotiable, the RISC was a single two-sided page, and the Arbitration Provision, which was printed on the back side, was not explained to Plaintiff. Plaintiff also contends that Plaintiff is Spanish speaking and the Arbitration Provision was not provided to him in Spanish as required per Civil Code section 1632(b). Plaintiff additionally contends that the Arbitration Provision is substantively unconscionable because (1) it limits Plaintiff’s right to the Federal Jurisdiction, instead of permitting arbitration in the State where the controversy arose; (2) the Arbitration Provision limits the applicable law to the Federal Arbitration Act; and (3) the selection of the arbitration entity is one-sided and prejudicial to Plaintiff’s right to have the claims arbitrated by an entity other than AAA. Plaintiff further contends that the action should not be stayed, and that the costs requested by Defendant are not warranted as they are not automatically awarded where the basis for opposing the enforcement of the arbitration is properly brought.
Under Code of Civil Procedure § 1281.2, the court may order a petitioner and respondent to arbitrate a controversy if the court determines that an agreement to arbitrate the controversy exists and “[o]n 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.” (Code Civ. Proc. § 1281.2.)
Code of Civil Procedure section 1281.4 states:
“If a court of competent jurisdiction, . . . , 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.”
While there is a policy in favor of arbitration and doubts are to be resolved in favor of arbitration, there is no public policy in favor of compelling persons to accept arbitration of controversies they have not agreed to arbitrate. (Mitri v. Arnel Management Co. (2007) 157 Cal. App. 4th at 1170; Greenspan v. LADT, LLC. (2010) 185 Cal. App. 4th 1413, 1437.) Any doubts on questions of arbitrability are resolved in favor of arbitration. (Coast Plaza Doctors Hosp. v. Blue Cross (2000) 83 Cal. App. 4th 677, 686.)
The Arbitration Provision and Addendum
Defendant contends that the Court need not address the threshold question of whether a valid and enforceable arbitration agreement exists between Plaintiff and Defendant because the parties expressly delegated this role to the arbitrator,” based on the part of the provision which provides that interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute shall be either party’s election be resolved by arbitration. (Motion, 6:10-16.)
Plaintiff does not address this argument. Instead, Plaintiff contends that the Arbitration Provision is procedurally and substantively unconscionable.
“ ‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. 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. If the party opposing the petition raises a defense to enforcement--either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation (see § 1281.2, subds. (a), (b))--that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’ ” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal. App. 4th 754, 761, quoting Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal. 4th 394, 413.)
“The issue of who should decide arbitrability turns on what the parties agreed in their contract. [Citation.]” (Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th 547, 551.) Parties to an arbitration agreement may agree to delegate to the arbitrator, instead of a court, questions regarding the enforceability of the agreement. (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 241.) The court may consider the validity of the delegation clause. (Id. at p. 241, fn. 4.) For a delegation clause to be effective two pre-requisites must be met: (1) the language of the clause must be clear and unmistakable, and (2) the delegation must not be revocable under state contract defenses such as such as fraud, duress, or unconscionability. (Id. at p. 242.) The party seeking to enforce a delegation clause must show that it is clear and unmistakable; silence or ambiguity is insufficient. (Ibid.)
“Ordinary rules of contract interpretation apply to [arbitration clauses.].” (Maggio v. Winward Capital Management Co. (2000) 80 Cal.App.4th 1210, 1214-1215.) “The fundamental goal of contractual interpretation is to give effect of the mutual intention of the parties. (Civil Code § 1636.) If contractual language is clear and explicit, it governs. (Civil Code § 1638.)” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) “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 [citations.]” (Weeks v. Crow (1980) 113 Cal.App.3d 350, 353.)
Here, on or about March 26, 2021, Plaintiff and Defendant entered into a Retail Installment Sale Contract (“RISC”) concerning Plaintiff’s purchase of a used 2013 Scion FR-S, VIN No. JF1ZNAA19D2726381. (Declaration of Masam Aslanpour (“Aslanpour Decl.”), ¶ 2; Ex. 1.) On that same date, Plaintiff also signed an Addendum. (Aslanpour Decl., ¶ 2; Ex. 2.)
The RISC identifies the “Buyer” as “Francisco Javier Benitez,” who is Plaintiff. (Ex. 1 to Aslanpour Decl., RISC at p. 1.) The “Seller-Creditor” is identified as “California Motors Direct,” who is moving defendant.
The bottom right on page 1 of the RISC contains a section stating the following:
“Agreement to Arbitrate: By signing below you agree that, pursuant to the Arbitration Provision on page 5 of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action. See the Arbitration Provision for additional information concerning the agreement to arbitrate.”
(Ex. 1 to Aslanpour Decl., RISC at p. 1.)
Underneath this statement is the Buyer’s signature. (Ibid.)
Page 5 of the RISC consists of the “Arbitration Provision,” wherein the following is in all bold and all caps:
“ARBITRATION PROVISION
PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL RIGHTS
1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.
2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.
3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.”
(Ex. 1 to Aslanpour Decl., RISC at p. 5.)
The Arbitration Provision then states as follows, in part:
“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 (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action . . . . Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action. You may choose the American Arbitration Association, . . . , or any other organization to conduct the arbitration subject to our approval. You may get a copy of the rules of an arbitration organization or visiting its website.”
(Ex. 1 to Aslanpour Decl., RISC at p. 5, emphasis added.)
Defendant also submits an “Addendum to Retail Installment Sales Contract – Arbitration Venue” (the “Addendum”) signed by Plaintiff and Defendant which states, in relevant part:
“Buyer/Co-Buyer and Seller, as defined in the accompanying Retail Installment Sales Contract ("RISC”) executed in connection with Buyer's/Co-Buyer's purchase of the vehicle referenced above [2013 Scion FR-S, with last six digits of VIN number being D2726381], reaffirm their agreement stated in the RISC that should a dispute arise between Buyer/Co-Buyer and Seller and/or Seller's assignee, Buyer/Co-Buyer, Seller and Seller's assignee agree to resolve that dispute in binding arbitration, and further agree that the arbitration will be conducted by the American Arbitration Association (“AAA”) utilizing AAA's Consumer Arbitration Rules, amended and effective September 1, 2014, (“Consumer Rules"). This Addendum is meant to supplement the Arbitration Provision found in the RISC.”
(Ex. 2 to Aslanpour Decl., Addendum.)
The Addendum was signed on April 1, 2021. (Ex. 2 to Aslanpour Decl., Addendum.)
Based on the foregoing, the delegation clause is clear and unmistakable. The language of the arbitration provision in the RISC which provides that the interpretation and scope of the Arbitration Provision, and the arbitrability of Plaintiff’s claims against Defendant are to be resolved by arbitration, indicates an intend to delegate such issues, including the question of arbitrability, to an arbitrator, and is clear and unmistakable evidence that the parties intended to arbitrate arbitrability. Plaintiff concedes that arbitrability of the claims is to be determined by the arbitrator by failing to make any argument against the delegation clause. The failure to challenge a contention in a brief results in the concession of that argument. (DuPont Merck Pharmaceutical Co. v. Sup. Ct. (2000) 78 Cal.App.4th 562, 566 [“By failing to argue the contrary, plaintiffs concede this issue”].)
In addition, the express language of the Addendum provides that the parties agree that the arbitration will be conducted by the AAA.
The Court must next determine if the delegation clause is revocable as being unconscionable.
Unconscionability has a procedural and a substantive element: the procedural element focuses on the existence of oppression or surprise and the substantive element focuses on overly harsh or one-sided results. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114; Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1281.) An agreement must be both procedurally and substantively unconscionable to permit the court to refuse to enforce the agreement or a given clause as unconscionable. (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1533.) “The party opposing arbitration has the burden of proving unconscionability. [Citation.]” (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 895.) “When determining whether a delegation clause is unconscionable, any claim of unconscionability must be specific to the delegation clause. [Citation.]” (Ibid.)
Here, Plaintiff makes no argument against the validity of the delegation clause, and does not argue that the delegation clause in unconscionable. Plaintiff generally asserts that the Arbitration Provision is procedurally unconscionable and the Arbitration Provision and Addendum are substantively unconscionable. To the extent that such arguments may be applied to the delegation clause, Plaintiff submits no evidence in support of the assertions that the Arbitration Provision is procedurally unconscionable due to oppression and surprise in that Plaintiff was presented with the RISC on a take-it-or-leave-it basis, its preprinted terms were not negotiable, the RISC was a single two-sided page, and the Arbitration Provision, which was printed on the back side, was not explained to Plaintiff. Nor is there any evidence submitted to support the assertion that Plaintiff is Spanish speaking and the RISC was not presented to him in Spanish. Consequently, Plaintiff fails to meet his burden of producing evidence and proving by a preponderance of the evidence any fact necessary to support that the Arbitration Provision is procedurally unconscionable.
In turn, the Court need not, and does not, address substantive unconscionability.
Based on the foregoing, the Court GRANTS the motion and stays the action pending the arbitrator’s determination of the scope of the Arbitration Provision, and the arbitrability of Plaintiff’s claims against Defendant.
Reimbursement of Costs
Defendant contends that it has unnecessarily incurred costs due to Plaintiff’s bad faith refusal to arbitrate this action and requests reimbursement of costs in the amount of $444.95 under Code of Civil Procedure sections 1293 and 1293.2.
The right to recover costs is purely statutory, and, in the absence of an authorizing statute, no costs can be recovered by either party. (Baker-Hoey v. Lockheed Martin Corp. (2003) 111 Cal.App.4th 592, 597.)
Code of Civil Procedure sections 1293 does not address costs, and Code of Civil Procedure section 1293.2 involves petitions to compel arbitration. A final determination of the rights of the parties is required for costs under Code of Civil Procedure section 1293.2. (Green v. Mt. Diablo Hospital Dist. (1989) 207 Cal.App.3d 63, 76-77 [holding that hospital district's request for costs and attorney fees was premature where the trial court had not reached the merits of the case as an award of costs under Code of Civil Procedure section 1293.2 only encompasses actions that have reached a final determination].) Award of costs pursuant to Code of Civil Procedure section 1293.2, including attorney fees when authorized by contract, is mandatory. (Marcus & Millichap Real Estate Investment Brokerage Co. v. Woodman Investment Group (2005) 129 Cal.App.4th 508, 513 [finding trial court properly awarded attorney fees and costs pursuant to Code of Civil Procedures section 1293.2 because the judicial proceeding was final for the purposes of an award of costs and fees.].)
Here, there has been no final determination of the rights of the parties. As such, Defendant’s request for costs under Code of Civil Procedure section 1293.2 is premature and DENIED.
Defendant to give notice.