Judge: Richard Y. Lee, Case: 30-2022-01271862, Date: 2022-11-17 Tentative Ruling

Defendants StadCo LA, LLC; LA Rams Tenant, LLC; Fanfaire, Inc.; and Andre Laws (“Defendants”) move to compel Plaintiff Dwight Manley (“Plaintiff”) to arbitrate the claims raised in this action and for an order staying this action pending the resolution of arbitration.  Defendants contend that the contract agreements underlying Plaintiff’s Complaint include valid and enforceable arbitration provisions, the scope of which encompass the parties’ dispute.

Authority

A party to an arbitration agreement may seek a court order compelling the parties to arbitrate a dispute covered by the agreement.  (Code Civ. Proc., § 1281.2.)  “The trial court may resolve motions to compel arbitration in summary proceedings, in which ‘[t]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and 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.’”  (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 683.)

Arbitration Provision

Section 8 of the Los Angeles Rams Fanfaire Membership Agreement reads, in pertinent part:

“THIS MEMBERSHIP AGREEMENT PROVIDES THAT ALL DISPUTES BETWEEN THE PARTIES WILL BE RESOLVED BY BINDING ARBITRATION.  MEMBER IS THUS GIVING UP MEMBER’S RIGHTS TO GO TO COURT TO ASSERT OR DEFEND ITS RIGHTS UNDER THIS MEMBERSHIP AGREEMENT (EXCEPT FOR MATTERS THAT MAY BE TAKEN TO SMALL CLAIMS COURT).  THE PARTIES’ RIGHTS WILL BE DETERMINED BY A NEUTRAL ARBITRATOR AND NOT A JUDGE OR JURY. [¶] [¶] With respect to any and all disputes arising out of or relating to this Membership Agreement, no matter on what theory, including without limitation, contract, tort, statutory or regulatory, or common law, and including regarding the applicability or validity of this arbitration provision (collectively, “Claims”), the parties agree to negotiate in good faith to achieve a mutually satisfactory resolution.  If the parties do not resolve any dispute by informal negotiation, any other effort to resolve the dispute will be conducted exclusively by binding arbitration as described in this Section 8[.]”

(Declaration of Mark C. Holscher, Ex. 1, at pp. 9-10.)

Similarly, Section 11 of the Los Angeles Rams Stadium Seat License Agreement reads, in pertinent part:

“THIS LICENSE AGREEMENT PROVIDES THAT ALL DISPUTES BETWEEN THE PARTIES WILL BE RESOLVED BY BINDING ARBITRATION. LICENSEE IS THUS GIVING UP O GO TO COURT TO ASSERT OR DEFEND ITS RIGHTS UNDER THIS LICENSE AGREEMENT (EXCEPT FOR MATTERS THAT MAY BE TAKEN TO SMALL CLAIMS COURT). THE PARTIES’ RIGHTS WILL BE DETERMINED BY A NEUTRAL ARBITRATOR AND NOT A JUDGE OR JURY. [¶] [¶] With respect to any and all disputes arising out of or relating to this License Agreement, no matter on what theory, including without limitation, contract, tort, statutory or regulatory, or common law, and including regarding the applicability or validity of this arbitration provision (collectively, “Claims”), the parties agree to negotiate in good faith to achieve a mutually satisfactory resolution.  If the parties do not resolve any dispute by informal negotiation, any other effort to resolve the dispute will be conducted exclusively by binding arbitration as described in this Section 11[.]””

(Id., Ex. 1.)

Enforceability

StadCo, Rams, and Fanfaire were signatories to the Agreements.  Defendants contend that Laws may enforce the arbitration provisions as an agent of a signatory, which Plaintiff does not dispute.  Plaintiff also does not dispute Defendants’ contention that the scope of the arbitration provisions, if they are enforceable, is broad enough to encompass the causes of action alleged in his Complaint.

In his Opposition, Plaintiff raises only one argument against enforcement of the arbitration provisions.  Plaintiff argues the arbitration provisions cannot be enforced because this is a case of fraud in the inception, not fraud in the inducement. 

One exception to enforcement of an arbitration provision applies where the party opposing arbitration demonstrates that there was fraud in the execution.  (See Jones v. Adams Financial Services (1999) 71 Cal.App.4th 831, 835, internal citation omitted [“Where ‘the fraud goes to the inception or execution of the agreement, so that the promisor is deceived as to the nature of his act, and actually does not know what he is signing, or does not intend to enter into a contract at all, mutual assent is lacking, and [the contract] is void.... [C]laims of fraud in the execution of the entire agreement are not arbitrable under either state or federal law.’”].)  Thus, in Jones, an elderly, legally blind woman, with dementia, did not assent to a mandatory arbitration clause in a deed of trust and promissory note, where the woman was tricked into signing the documents by agents who told her she was signing papers to find out the payoff on her current mortgage; and the woman was alone with the agents and did not have her magnifying glass with her to read the documents, so they guided her hand on where to sign.

Hotels Nevada v. L.A. Pac. Ctr., Inc., (2006) 144 Cal.App.4th 754, 763–764 states:

“California law distinguishes between fraud in the ‘inducement’ of a contract and fraud in the ‘execution’ or ‘inception’ of a contract.  [Citation.]  The more usual case of fraud in the inducement occurs when ‘ “the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.  In order to escape from its obligations the aggrieved party must rescind, by prompt notice and offer to restore the consideration received, if any. [Citations.]” [Citations.]’ ” (Ford v. Shearson Lehman American Express, Inc. (1986) 180 Cal.App.3d 1011, 1028, 225 Cal.Rptr. 895.)  Fraud in the execution, on the other hand, occurs when ‘ “the promisor is deceived as to the nature of his act, and actually does not know what he is signing, or does not intend to enter into a contract at all, mutual assent is lacking, and it is void. In such a case it may be disregarded without the necessity of rescission. [Citation.]” [Citation.]’ ”

Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 416 confirms that “claims of fraud in the execution of the entire agreement are not arbitrable under either state or federal law.”  However, this doctrine does not apply where the party claiming fraud had a reasonable opportunity to discover the real terms of the contract and failed to do so.  (Id., at p. 423.)  “If a party, with such reasonable opportunity, fails to learn the nature of the document he or she signs, such ‘negligence’ precludes a finding the contract is void for fraud in the execution.”  (Ibid.)

Plaintiff states that Laws told him that if he purchased Stadium Seal Licenses (“SSLs”), there would be an online marketplace where he could sell the SSLs, potentially at a profit.  (Declaration of Dwight Manley, ¶ 3.)  Laws also told him that he would own the licenses “outright” after ten years and could pass them down to a family member.  (Id., ¶ 4.)  In reliance on Laws’ representations, Plaintiff executed a Fanfaire Agreement and SSL Agreement for four SSLs using his mobile telephone.  (Id., ¶ 5.)  On April 15, 2021, Plaintiff executed another Fanfaire Agreement and SSL Agreement for two additional licenses.  (Id., ¶ 5.)  Plaintiff states that he was receiving the agreements on his cell phone, a fact of which Laws was aware, such that Plaintiff was not in a position to carefully review the documents.  (Id., ¶ 16.)

Plaintiff has not shown that he was deceived as to the nature of his act—signing the Agreements—or that he did not intend to contract at all.  Plaintiff knew he was signing contracts with Defendants and has not shown that he was denied a reasonable opportunity to read the terms of those contracts.  That Plaintiff failed to read the terms and instead relied on Laws’ alleged representations of what the contracts said does not establish fraud in the inception.  It is “well-established law” that an arbitration clause within a contract “may be binding on a party even if the party never actually read the clause.”  (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

In light of the above, the Court finds that this is not a case of fraud in the inducement and the arbitration provisions are enforceable.  (St. Agnes Med. Ctr. v. PacifiCare of California (2003) 31 Cal.4th 1187, 1199.)  Accordingly, the Court GRANTS Defendants’ Motion to Compel Arbitration.  The Court STAYS the action pending arbitration.  (Code Civ. Proc., § 1281.4.)  The Court sets an ADR Review hearing for May 18, 2023 at 1:30 p.m.

Moving parties to give notice.