Judge: Ronald F. Frank, Case: 23TRCV00596, Date: 2023-10-31 Tentative Ruling

Case Number: 23TRCV00596    Hearing Date: October 31, 2023    Dept: 8

Tentative Ruling 

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HEARING DATE:                 October 31, 2023¿ 

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CASE NUMBER:                  23TRCV00596

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CASE NAME:                        Joan Rita Dutton v. Stadco LA, LLC, et al.

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MOVING PARTY:                Defendant, Stadco LA, LLC

RESPONDING PARTY:       Plaintiff, Joan Rita Dutton

TRIAL DATE:                        Not Set.

MOTION:¿                              (1) Motion to Compel Arbitration 

Tentative Rulings:                  (1) The Court will give Plaintiff the option of submitting a further brief or further evidence given Defendant’s supplemental declaration at the Reply phase of briefing which provided evidence lacking in the original moving papers.  Without further briefing or evidence from Plaintiff, the tentative ruling is to ARGUE.  The Court finds the arbitration provision to be moderately procedurally unconscionable, but needs oral argument as to substantive unconscionability.  While the Plaintiff’s discovery rights would be curtailed in a AAA arbitration, Defendant has already propounded a first round of discovery to Plaintiff, and there was no arbitration defense in the Answer.  Also the Court could order each side to complete a first round of written discovery before ordering the case into AAA arbitration, thus remedying an element of claimed substantive unconscionability.  Would the defense so stipulate as a condition of ordering the case into arbitration early next year?

I. BACKGROUND¿ 

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A. Factual¿ 

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            On March 1, 2023, Plaintiff, Joan Rita Dutton (“Plaintiff”) filed a Complaint against Defendant, Stadco LA, LLC, dba Sofi Stadium, and DOES 1 through 100. The Complaint alleges causes of action for: (1) Negligence. Plaintiff’s action is based on an alleged slip-and-fall incident in the parking lot of SoFi stadium in which Plaintiff allegedly suffered personal injuries.

            Defendant Stadco now files a Motion to Compel Arbitration.

B. Procedural  

On October 6, 2023, Defendant filed a Motion to Compel Arbitration. On October 18, 2023, Plaintiff filed an opposition. On October 24, 2023, Defendant filed a reply brief along with a Supplemental Declaration of Mike Forrester. 

II. EVIDENTIARY OBJECTION

Plaintiff’s Evidentiary Objections to Defendant’s Evidence:

Sustain: none.

Overrule: 1-2

III. ANALYSIS ¿ 

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A.    Legal Standard

The Federal Arbitration Act (“FAA”) states that “[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.)

California law states that “[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 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….” (Code Civ. Proc, § 1281.2.) “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

Pursuant to Code of Civil Procedure §1281.2, generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2)¿the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting¿rulings on common issues. 

When seeking to compel arbitration, the initial burden lies with the moving party to demonstrate the existence of a valid arbitration agreement by preponderance of evidence.  (Ruiz v. Moss Bros. Auto Group (2014) 232 Cal.App.4th 836, 841-42; Gamboa v. Northeast Community Clinic (2021), 72 Cal.App.5th 158, 164-65.)  It is sufficient for the moving party to produce a copy of the arbitration agreement or set forth the agreement’s provisions.  (Gamboa, 72 Cal.App.5th at 165.)  The burden then shifts to the opposing party to prove by a preponderance of evidence any defense to enforcement of the contract or the arbitration clause.  (Ruiz, 232 Cal.App.4th at 842; Gamboa, 72 Cal.App.5th at 165.)  Subsequently, the moving party must establish with the preponderance of admissible evidence a valid arbitration agreement between the parties.  (Ibid.)  The trial court then weighs all the evidence submitted and uses its discretion to make a final determination.  (Ibid.)  “California law, ‘like [federal law], reflects a strong policy favoring arbitration agreements and requires close judicial scrutiny of waiver claims.’”  (Wagner Const. Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 31.) 

If the court orders arbitration, then the court shall stay the action until arbitration is completed.  (See Code Civ. Proc., § 1281.4.) 

B.     Discussion

As a preliminary matter, the Court understands Plaintiff’s position that Defendant failed to meet its initial burden of production because the Declaration of Mike Forrester lacks statements which would establish the Contract as admissible evidence. The Court notes that since the original motion papers were filed, Defendant has filed a supplemental declaration along with its Reply brief, which the Court considered in preparing its Tentative Ruling.  However, since the original moving papers lacked the supplemental declaration, the Court will give Plaintiff the option of submitting a supplemental brief or additional evidence for a continued hearing.   

Defendant argues that Plaintiff, as a season ticket holder, entered into a contract with Defendant, relative to her season ticket status, which defines her as a “Licensee”. The License Agreement has a section for binding arbitration. Defendant contends that the License Agreement provides the following language:

“11. CHOICE OF LAW; MANDATORY AND BINDING ARBITRATION; NO CLASS OR REPRESENTATIVE ACTIONS OR ARBITRATIONS;LIMITATION ON TIME TO MAKE CLAIMS

“PLEASE READ THIS PROVISION CAREFULLY. THIS LICENSE AGREEMENT PROVIDES THAT ALL DISPUTES BETWEEN THE PARTIES WILL BE RESOLVED BY BINDING ARBITRATION. LICENSEE IS THUS GIVING UP LICENSEE’S RIGHTS TO GO TO COURT TO ASSERT OR DEFEND ITS RIGHTS UNDER THIS LICENSE AGREEMENT . . . . THE PARTIES’ RIGHTS WILL BE DETERMINED BY A NEUTRAL ARBITRATOR AND NOT A JUDGE OR JURY. THE PARTIES ARE ENTITLED TO A FAIR HEARING, BUT THE ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN RULES APPLICABLE IN COURT. THE ARBITRATOR’S DECISIONS ARE AS ENFORCEABLE AS ANY COURT ORDER AND ARE SUBJECT TO VERY LIMITED REVIEW BY A COURT.

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“b. Mandatory and Binding Arbitration. With respect to any and all disputes arising out of or relating to this License Agreement, no matter on what theory, including without limitation, . . . tort, . . . , 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; . . . LICENSEE ACKNOWLEDGES THAT LICENSEE IS GIVING UP THE RIGHT TO LITIGATE . . . ALL DISPUTES IN COURT BEFORE A JUDGE OR JURY, . . . Instead, to the maximum extent permitted by applicable law, all Claims will be resolved before a neutral arbitrator, whose decision will be final . . . . Any court with jurisdiction over the parties may enforce the arbitrator’s award.

“[A]ll Claims that cannot be settled through informal negotiation will be adjudicated exclusively through confidential binding arbitration in accordance with the then current Consumer Arbitration Rules of the American Arbitration Association (the “AAA”), or, in the event the AAA declines or is unable to administer the arbitration, by a nationally recognized arbitration forum reasonably selected by Fanfaire. AAA rules are available from the AAA, which can be contacted by mail at 725 South Figueroa, Suite 400, Los Angeles, California 90017, by telephone at (800) 778-7879, or through its website at www.adr.org. The arbitrator’s award shall be binding and may be entered as a judgment in a court of competent jurisdiction. Licensee agrees that the Stadium Company . . . may seek any interim or preliminary relief from a court of competent jurisdiction in Los Angeles County, California necessary to protect its rights or property pending the completion of arbitration.” [Emphasis added.] (Exhibit “1”, Sec. 11, Exhibit C, Page 15.)

            In opposition, Plaintiff concedes that she signed a licensing agreement which contained a mandatory arbitration clause, but argues that the incident did not arise out of the licensure, ticket purchase, ticket sales, seating, or anything else related to the Contract. Plaintiff argues this incident occurred during a soft-launch of the stadium and does not bring it within the scope of the contract. The Court does not understand Plaintiff’s argument as it appears that she was invited to a soft-launch event at the stadium BECAUSE she is a season ticket holder. Moreover, in Defendant’s reply brief, it confirms that the soft-launch was a season ticket holder event. As such, it appears that based on the agreement, this event would bind Plaintiff to mandatory arbitration. Thus, Defendant has met its initial burden of establishing an agreement to arbitrate. 

Unconscionability

Plaintiff next argues that the License Agreement is an adhesion contract and is procedurally unconscionable. “The procedural element of unconscionability focuses on whether the contract is one of adhesion. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113; Mercuro v. Superior Court, supra, 96 Cal.App.4th at p. 174.) Procedural unconscionability focuses on whether there is “oppression” arising from an inequality of bargaining power or “surprise” arising from buried terms in a complex printed form. (Armendariz, supra, 24 Cal.4th at p. 114; (2002) 96 Cal.App.4th 167, 174 (Mercuro)) The substantive element addresses the existence of overly harsh or one-sided terms. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071 [130 Cal.Rptr.2d 892, 63 P.3d 979]; Armendariz, supra, 24 Cal.4th at p. 114.) An agreement to arbitrate is unenforceable only if both the procedural and substantive elements are satisfied. (Armendariz, supra, 24 Cal.4th at p. 113; Mercuro, supra, 96 Cal.App.4th at p. 174.) However, Armendariz held, “[T]he 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, at p. 114; see also Kinney v. United HealthCare Services, Inc. (1999), 70 Cal.App.4th 1322, 1329.).” McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 87.)

Procedural Unconscionability

            Plaintiffs argue that the License Agreement is unenforceable because it is an adhesion contract and procedurally unconscionable. Plaintiff notes that when she entered into the contract, she had no bargaining power in negotiating the terms and conditions on the contract. Plaintiff notes that she was presented with a single document unilaterally drafted and created by Defendant and its lawyers and provided to her through DocuSign for her electronic signature, on a take-it -or-leave-it basis. She asserts she was not provided with the option to enter into the Contract with the exception of the arbitration provision.

            The Court notes that a contract of adhesion typically denotes a standardized contract imposed and drafted by the party of superior bargaining strength which relegates to the subscribing party only the opportunity to adhere to the contract or reject it. (Armendariz, supra, 24 Cal.4th at 113.)¿ The adhesive nature of a contract is one factor that the courts may consider in determining the degree of procedural unconscionability.¿ (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 84 fn.4.)¿¿ Further, procedural unconscionability “focuses on two factors: ‘oppression’ and ‘surprise.’ ‘Oppression’ arises from an inequality of bargaining power which results in no real negotiation and ‘an absence of meaningful choice.’ ‘Surprise’ involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.”¿ (Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 484.)¿¿Here, Plaintiff does not claim that she was surprised by this arbitration provision, only that she had no other options. Defendant points out that Plaintiff could have chosen not to sign the License Agreement, and gone through other methods of securing tickets, such as purchasing single day tickets, or purchasing on a resale site.

            Here, because the contract was one of adhesion, the Court accepts that the Agreement is procedurally unconscionable to a moderate degree because Defendant was the party of superior bargaining strength and drafted the Agreement while Plaintiff risked not becoming a season ticket holder sans signing the Agreements. Thus, the Court finds the arbitration agreement to be moderately unconscionable in a procedural sense.  

Substantive Unconscionability

            Next, Plaintiff argues that the Contract was substantively unconscionable because she argues that arbitration provision was buried within the Contract and was not a stand-alone document offered to Plaintiff to accept or reject. She argues that the arbitration provisions require AAA as the arbitrator with no alternative and therefore are substantively unconscionable. An arbitration agreement is generally enforceable, if it (1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require the parties to pay unreasonable costs and fees as a condition of access to an arbitration forum. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102.)

            Plaintiffs argue that by requiring Plaintiff to submit any and all disputes solely through AAA under its Consumer Arbitration Rules, Defendant improperly takes advantage of Plaintiffs and impairs the integrity of the bargaining process. As noted by Plaintiff, under the AAA Rules,  parties have severely limited discovery, and eliminates the opportunity for any depositions. (See AAA Rules, R-22.) Further, beyond a very ambiguous description of the exchange of information (i.e.., “specific documents and other information”), the AAA rules state: “No other exchange of information beyond what is provided for in section (a) above is contemplated under these rules, unless an arbitrator determines further information exchange is needed to provide for a fundamentally fair process.” Lastly, Plaintiff argues that although the arbitration provision includes a link to www.adr.org, it provides no other guidance regarding how to search for the rules, or any information regarding how the rules are applied, how these rules differ from a civil forum, whether there are other rules, etc.. Based on this, Plaintiff concludes that the provision is substantively unconscionable.

An agreement is substantively unconscionable if it imposes terms that are “overly harsh,” “unduly oppressive,” “unreasonably favorable,” or “so one-sided as to ‘shock the conscience.’”¿ (Sanchez v. Valencia Holding Co., LLC¿(2015) 61 Cal.4th 899, 910-911¿(Sanchez).)¿ “All of¿these formulations point to the central idea that unconscionability doctrine is concerned not with ‘a simple old-fashioned bad bargain’ [citation], but with terms that are ‘unreasonably favorable to the more powerful party.’ [Citation.]”¿ (Id. at p. 911.)¿ “These include ‘terms that impair the integrity of the bargaining process or otherwise contravene the public interest or public policy; terms (usually of an adhesion or boilerplate nature) that attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law, fine-print terms, or provisions that seek to negate the reasonable expectations of the¿nondrafting¿party, or unreasonably and unexpectedly harsh terms having to do with price or other central aspects of the transaction.’ ”¿ (Id. at p. 911.)

            Plaintiff bases her substantive unconscionability argument on a number of factors. First, she argues that the Contract was buried within the Contract and was not a stand-alone document. The Court notes that the Arbitration provision was on page 15-17 of 18 pages. As such, simply because the provision was at the end of the contract does not mean that it was hidden. The Arbitration provision fell at the end of the contract, was the exact same font and size as the rest of the contract, and required Plaintiff to provide her separate signature at the end of the provision. The Court believes this is more of a procedural unconscionability argument than a substantive one.   

            Next, Plaintiff argues that the provision seeks to significantly eliminate Plaintiff’s litigation rights. Plaintiff gives the following examples: Paragraph 9 contains an “assumption of risk” and “indemnification” provision releasing Defendant from all liability including “personal injury…occurring in or around the stadium (including the parking lots) and “excepting only…gross negligence.”  She also asserts the Contract cuts Plaintiff’s statute of limitations in half from two years to one year, in paragraph 11(d) when noting “licensee permanently and irrevocable waives the right to bring any claim in any forum unless licensee provides Fanfair with written notice of the events or facts”. Although the Court concedes that Courts have held that an arbitration clause can shorten the amount of time an individual has to bring a claim (or bring notice of a claim such as in this case), those Courts have conditioned this allowance on still allowing for a reasonable amount of time to pass. “While parties to an arbitration agreement may agree to shorten the applicable limitations period for bringing an action, a shortened period must be reasonable. A contractual period of limitation is reasonable if the plaintiff has sufficient opportunity to investigate and file an action, the time is not so short as to work a practical abrogation of the right of action, and the action is not barred before the loss or damage can be ascertained.” (Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713, 731.)

            For oral argument, the Court needs to hear from both sides whether the one-year limitations period will completely deprive Plaintiff of a remedy or whether the suit would be timely even if the license agreement provisions were enforced.  Also for oral argument, the Court invites argument as to whether California law would apply an assumption of risk defense regardless of the provisions of the license agreement given that SoFi Stadium hosts sporting events and California law employes an assumption of risk defense to participation in sporting events. 

            Lastly, Plaintiff asserts that arbitration is required for claims she brings against Defendant, but not the other way around. In reply, Defendant asserts that the arbitration agreement is mutual. Plaintiff also notes that it requires her to pay arbitration fees, fails to specify discovery rights, and allows Defendant, but not Plaintiff to seek injunctive relief at any time. In its reply brief, Defendant notes arbitration fees are not unconscionable under Armendariz. The Court agrees so long as such arbitration fees are comparable to those in court. As to the discovery issue, the arbitration clause notes it is governed by AAA rules and identifies how to obtain such rules by providing their website. Finally, Defendant argues under the arbitration provision, either party may seek preliminary injunctive relief.

Defendant Did Not Waive Right to Arbitration

            Plaintiff argues the Defendant waived its right to compel arbitration by engaging in conduct inconsistent with an intent to arbitrate. “‘In determining waiver, a court can consider “(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the ‘litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place’; and (6) whether the delay ‘affected, misled, or prejudiced’ the opposing party.” ’  [Citation.]”  (St. Agnes Med. Ctr. v. PacifiCare of Cal. (2003) 31 Cal.4th 1187, 1196 (St. Agnes).)  Recently, the United States Supreme Court resolved a circuit split and “held that under the FAA, courts may not ‘condition a waiver of the right to arbitrate on a showing of prejudice.’”  (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 965 (Davis), quoting Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708, 1713 (Morgan).)  Accordingly, the St. Agnes factors “‘minus the prejudice requirement’ are unaffected by Morgan and remain proper considerations in the waiver inquiry.”  (Davis, supra, 84 Cal.App.5th at p. 966.) 

            Here, Plaintiff notes Defendant filed an answer and propounded written discovery on Plaintiff, including Form Interrogatories, and Request for Production of Documents. Plaintiff also asserts Defendant waited to file its petition to compel arbitration while commencing written discovery, thereby demonstrating intent to waive any right to arbitration. Here, the Court notes that Defendant’s answer does not even include an affirmative defense for binding arbitration. Further, engaging in discovery indicates that Defendant did not intend to bring this case to arbitration. The Court will allow oral argument as to the prejudice faced by Plaintiff before deciding whether Defendant waived its right to arbitrate.