Judge: Ronald F. Frank, Case: 23TRCV01860, Date: 2024-04-09 Tentative Ruling
Case Number: 23TRCV01860 Hearing Date: April 9, 2024 Dept: 8
Tentative Ruling¿
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HEARING DATE: April 9, 2024
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CASE NUMBER: 23TRCV01860
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CASE NAME: Jason Robert Meader
v. American Honda Motor Co., Inc., et al.
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MOVING PARTY: (1) Defendant,
American Honda Motor Co., Inc.
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RESPONDING PARTY: (1) Plaintiff, Jason Robert Meader
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TRIAL DATE: Not
Set.
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MOTION:¿ (1) Motion to Compel Arbitration
Tentative Rulings: (1) ARGUE the waiver defense
to enforcement of the arbitration agreement.
The Court would otherwise grant the motion under the third-party
beneficiary exception, but AHM should have filed this motion within weeks of
receiving plaintiff’s August 2023 discovery responses.
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I. BACKGROUND¿¿
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A. Factual¿¿
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On June 9, 2023, Plaintiff,
Jason Robert Meader (“Plaintiff”) filed a Complaint against Defendants,
American Honda Motor Co., Inc, and DOES 1 through 10. The Complaint alleges
causes of action for: ” (1) Violation of Civil Code § 1793.2(d); (2) Violation
of Civil Code § 1793.2(b); (3) Violation of Civil Code § 1793.2(a)(3); and (4)
Breach of the Implied Warranty of Merchantability – Civil Code §§ 1791.1, 1794;
1795.5.
The Complaint is based on a
December 16, 2019 purchase by Plaintiff of a new 2019 Honda CR-V with
corresponding identification number VIN: 2HKRW5H39KH421433
(hereafter "Vehicle") from Norm Reeves Honda Superstore. Plaintiff
further notes that the causes of action contained in his complaint arise out of
warranty and repair obligations of Honda. (Complaint, ¶ 10.) Plaintiff contends
that the defects and nonconformities to warranty manifested themselves within
the applicable express warranty period, and include, but are not limited to:
engine defects, transmission defects, electrical defects, and other defects
and/or nonconformities. (Complaint, ¶ 11.)
Defendant, American Honda Motor Co., Inc. (“AHM”) now
files a Motion to Compel Binding Arbitration.
B. Procedural¿¿
¿
On February 22, 2024, AHM filed a Motion to Compel
Arbitration. On March 26, 2024, Plaintiff filed an opposition. On April 2, 2024,
AHM filed a reply brief.
II. REQUEST FOR JUDICIAL
NOTICE
With
the opposition papers, Plaintiff has requested this Court take judicial notice
of the following documents:
1. Ford
Motor Warranty Cases (Cal. Ct. App. Apr. 4, 2023) 89 Cal.App.5th 1324 (“Ochoa
v. Ford”), review granted, (Exhibit A.)
2. Rosanna
Montemayor et al. v. Ford Motor Company, 92 Cal.App.5th 958 (Cal. Ct. App.
June 26, 2023) (“Montemayor”), review granted. (Exhibit B.)
3. Kielar
v. The Superior Court of Placer County, 94 Cal.App. 5th 614 (Cal. Ct. App.
August 16, 2023) (“Kielar”), review granted, (Exhibit C.)
4. California
Court of Appeal, Third Appellate District’s August 28, 2023 Response to
Petition for Writ of Mandate in Campos et al. v. The Superior Court of Butte
County, No. C098848. (Exhibit D.)
5. California
Court of Appeal, Third Appellate District’s August 28, 2023 Response to
Petition for Writ of Mandate in Ortiz et al. v. The Superior Court of
Sacramento County, No. C099135. (Exhibit E.)
6. Yeh
v. Superior Ct. of Contra Costa Cnty., 95 Cal.App.5th 264 (Cal. Ct. App.
Sept. 6, 2023) (“Yeh”), review granted. (Exhibit F.)
The Court GRANTS this request and takes judicial notice of the
above documents.
III. ANALYSIS
A.
Legal Standard
The purpose
of the Federal Arbitration Act (“FAA”) is “to move the parties in an arbitrable
dispute out of court and into arbitration as quickly and easily as possible.”¿
(Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp. (1983) 460 U.S.
1, 23.)¿ California Code of Civil Procedure, Section 1281 provides that
“[a] written agreement to submit to arbitration an existing controversy or a
controversy thereafter arising is valid, enforceable, and irrevocable, save
upon such grounds as exist for the revocation of any contract.”¿ “California
law, like federal law, favors enforcement of valid arbitration agreements.”¿ (Armendariz
v. Foundation Health Psychcare Services,
Inc. (2000) 24 Cal.4th 83, 97.)¿ “On 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” unless grounds exist not to compel arbitration.¿
(Code Civ. Proc. § 1281.2.) The Song-Beverly Act also favors
arbitration of Lemon Law disputes with a series of “carrot and stick”
provisions that immunize a warrantors from a species of civil penalty if they
have a certified lemon arbitration program in place.
There
has been a proliferation of motions by vehicle manufacturers to move lemon law
cases out of the court system and into arbitration forums. Most of those motions, exemplified by the
appellate decisions identified in Plaintiff’s request for judicial notice, are
ones the manufacturers have brought based on their authorized dealers’ lease or
purchase contract documents that contain arbitration provisions between the plaintiffs
and the leasing or selling dealers as signatories to the arbitration agreement. In those cases, the manufacturers must rely
on one of the judicially recognized exceptions to the general rule that
non-signatories to the arbitration agreement cannot enforce an agreement the
manufacturer did not sign nor even be mentioned as an expressly intended third-party
beneficiary. Here, the analysis is
somewhat different because, while AHM is a nonsignatory to the plaintiff’s agreement
to arbitrate disputes with the selling or leasing Honda dealer, AHM is
expressly named in that arbitration agreement.
B.
Discussion
a. Existence of Arbitration Agreement
Here, the parties agree that there was a written
agreement, the Lease Agreement, that included an arbitration agreement.
However, as noted in Plaintiff’s opposition, Plaintiff argues that AHM has
waived any alleged right to arbitration, that the agreement is between
Plaintiff and the dealership, not AHM, and that the agreement is unconscionable.
The portions of the arbitration agreement in the Lease Agreement
state, in pertinent part, as follows:
By Signing
below YOU acknowledge YOU HAVE read both
sides of this lease and received a completely filled in copy of this Lease
before signing
52. ARBITRATION:
PLEASE READ THIS ARBITRATION
PROVISION CAREFULLY TO UNDERSTAND YOUR RIGHTS. BY ELECTING ARBITRATION, YOU
AGREE THAT ANY CLAIM THAT YOU MAY HAVE IN THE FUTURE MUST BE RESOLVED THROUGH
BINDING ARBITRATION. YOU WAIVE THE RIGHT TO HAVE YOUR DISPUTE HEARD IN COURT
AND WAIVE THE RIGHT TO BRING CLASS CLAIMS. YOU UNDERSTAND THAT DISCOVERY AND
APPEAL RIGHTS ARE MORE LIMITED IN ARBITRATION
Defendant, AHM, also
notes that the Arbitration Provision then states the following:
Arbitration is a method of resolving
a claim, dispute or controversy without filing a lawsuit. By agreeing to
arbitrate, the right to go to court is waived and instead claims, disputes or
controversies are submitted to binding arbitration. This provision sets forth
the terms and conditions of our agreement…
By signing the Arbitration Consent, YOU
elect to have disputes resolved by arbitration. YOU, HONDA, or
any involved third party may pursue a Claim. “Claim” means any dispute between YOU,
HONDA, or any involved third party relating to your account, this Lease, or
our relationship, including any application, the Vehicle, its performance and
any representations, omissions or warranties.
(Declaration of
Jeanette C. Suarez (“Suarez Decl.”), ¶ 2, Exhibit A, Lease Contract.)
Here, the Court finds that AHM has
met its initial burden in establishing the existence of an arbitration
agreement. Under Cal. Rules of Court, Rule 3.1330, Defendant only needs to
allege the existence of an arbitration agreement and provide the written
agreement or state verbatim the provision that provides for arbitration. (See Condee
v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-19 [“[Cal.
Rules Court, Rule 3.1330] does not require the petitioner to introduce the
agreement into evidence or provide the court with anything more than a copy or
recitation of its terms. Petitioner need only allege the existence of an
agreement and support the allegation as provided in [Cal. Rules Court, Rule,
Rule 3.1330].”].)
Thus, the burden now shifts to
Plaintiff to establish that an arbitration agreement does not exist, to
demonstrate that the subject arbitration provision cannot be interpreted to
require arbitration of the dispute, or to provide evidence establishing a defense
to the arbitration agreement.
b. Waiver
Plaintiff
argues that AHM has waived any alleged right to arbitration because Defendant
AHM took advantage of civil process not available in arbitration by propounding
written discovery on Plaintiff, under threat of civil discovery sanctions. “‘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.)
Under the
FAA, a party claiming waiver “must show: ‘(1) knowledge of an existing right to compel
arbitration; (2) acts inconsistent with that existing right; and (3) prejudice
to the party opposing arbitration resulting from such inconsistent acts.”
(United States v. Park Place Assoc., Ltd. (9th Cir. 2009) 563 F.3d 907,
921.) Waiver of arbitration “is not to be lightly inferred and the party seeking
to establish it bears a ‘heavy burden of proof,’ with all doubts resolved in
favor of arbitration.” (Burton v. Cruise (2010) 190 Cal.App.4th
939, 945.) “Ordinarily, a delay is found unreasonable only when it is
combined with the attempt by the party asserting a right to arbitrate to obtain
an advantageous litigation position during the delay,” such as filing motions
and propounding discovery. (Gloster v. Sonic Automotive, Inc.
(2014) 226 Cal.App.4th 438, 449.) “Because merely participating in
litigation, by itself, does not result in a waiver, courts will not find prejudice where the
party opposing arbitration shows only that it incurred court costs and legal
expenses.” (St. Agnes Medical Center v. PacifiCare of California
(2003) 31 Cal.4th 1187, 1203.)
Plaintiff contends that Defendant
AHM took advantage of the civil process not available in arbitration by
propounding written discovery on Plaintiff. Plaintiff contends that on August
15, 2023, Plaintiff complied, and provided code-compliant responses, including
the lease agreement and other responsive documents. Thus, Plaintiff argues that
Defendant has been fully aware of the lease agreement and its arbitration
provision on August 15, 2023, and yet, delayed this motion until February 22,
2024. This Court notes that the discovery requested was only on the limited
issue of documents involved with Plaintiff’s purchase of the vehicle, repair of
the vehicle at a Honda facility, or a repair of the vehicle at an outside
facility, resulting in only five (5) Requests for Production of Documents
total. But as of mid-August of last year, AHM had all the information it needed
to enforce the affirmative defense of arbitration raised in its Answer. Assuming that AHM had no earlier method of
obtaining a copy of the lease agreement containing the arbitration provision, Plaintiff
provided his copy of that agreement with his verified response to the document
demand. Not only was there an
unexplained delay of six months or more in bringing this motion, but also
Plaintiff took steps to also participate in California’s broad discovery
process in civil action, with AHM never mentioning its intention to seek arbitration
while requesting postponement of its responses to plaintiff’s discovery nor in
its ultimate responses to the propounded discovery. AHM’s reply brief does not address the waiver
argument either. The Court will take
oral argument on the waiver issue, but the Court is concerned about the delay
coupled with the lack of mention of any intent to seek arbitration until this motion
was filed. AHM has filed other motions
to compel arbitration in Lemon Law cases pending before this Court over the past
six months, and the Court of Appeal have generated a half dozen published
opinions in the last year on arbitration of Lemon Law cases so the issue cannot
be said to be unexpected, novel, or surprising.
c. Equitable
Estoppel
AHM
argues that it can enforce the arbitration provision under the doctrine of
Equitable Estoppel. Generally, only parties to a contract containing an
arbitration agreement may enforce that arbitration clause. (Thomas v.
Westlake (2012) 204 Cal.App.4th 605, 613.) There are exceptions to the
general rule. Under one such exception, the doctrine of equitable estoppel, a
nonsignatory defendant may move to enforce an arbitration clause. (JSM
Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236.) AHM’s motion
relies on Felisilda and the First District’s reasoning on the equitable
estoppel exception to the non-signatory rule. However, there has been a recent
conflict in the Court of Appeal in Lemon Law litigation as to the
enforceability of an arbitration agreement by a non-signatory manufacturer to
the dealer’s contract containing the arbitration provision. On April 4, 2023,
the Second District Court of Appeal declined to follow Felisilda in its
decision of Martha Ochoa v. Ford Motor Company (2023) 89 Cal.App.5th
1324. The Court notes that on July 19, 2023, the Supreme Court of California
granted review of Ochoa and instructed that California Rules of Court,
Rule 8.1115(e)(3) applies. However, the Supreme Court clarified that the Second
District’s opinion may be cited to, “not only for its persuasive value, but
also for the limited purpose of establishing the existence of a conflict in
authority that would in turn allow trial courts to exercise discretion under Auto
Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456, to choose
between sides of any such conflict.” This Court is exercising its discretion to
follow Ochoa and subsequent appellate cases listed in the RFJN rather
than Felislida as the better-reasoned appellate decisions.
AHM
argues that Plaintiff is bound to arbitrate by equitable estoppel because their
claims are “intimately founded in and intertwined” with the lease contract
because Plaintiff alleges that all causes of action are based on the
performance and warranties of the vehicle he acquired through the lease
contract. The Court discusses that argument below.
“Inextricable
Intertwined with the Underlying Contract”
AHM argues that Plaintiff is bound
by the doctrine of equitable estoppel to arbitrate because his Song-Beverly
claims are intimately founded in and intertwined with the obligations of the
Lease Agreement giving rise to his claims. AHM argues that Plaintiff reads the
arbitration provision containing functionally identical language as the Felisilda
plaintiff’s arbitration provision and expressly agreed to arbitrate claims
arising out of the lease, and/or condition of the vehicle, including any claims
against third party non-signatories. Based on this, AHM contends that pursuant
to the express terms of the lease agreement, which accounts for third parties
such as AHM, Plaintiff’s claims against it should be resolved through binding
arbitration.
To be sure, this case presents facts
akin to Felisilda. For example, the arbitration agreements have similar
language, the plaintiff’s causes of action are very similar, and the charging
allegations of the complaints are similar. However, the facts here are also
very similar to those presented in Ochoa. The Ochoa court
disagreed with Felisilda because the Felisilda plaintiffs and the
dealer agreed in their sale contract to arbitrate disputes between them about
the condition of the vehicle but did not expressly or impliedly agree to
arbitrate disputes under the consumer protection statutes governing
manufacturer warranties as distinct from promises or warranties made in the
sales contract with the dealer. Ochoa noted that equitable estoppel
would apply if the plaintiffs had sued FCA based on the terms of the sale. But
that was not the gravamen of the Lemon Law suit in Felisilda, Ochoa,
or here. Like the plaintiffs in Felisilda and in Ochoa, Plaintiff
here predicates the suit on Honda’s claimed breach of its statutory duties and
for breach of the express and implied warranties, not based on plaintiff’s
lease agreement with the dealer.
Here,
AHM argues that Plaintiff signed a contract that bound Plaintiff to arbitration
against third party non-signatories. Such language was also present in the
contracts at issue in Felisilda and Ochoa. The Court in Ochoa
disagreed with the Felisilda court’s interpretation of the sales
contract as broadly calling for arbitration of any claims concerning the
condition of the vehicle “against third party nonsignatories,” and instead
noted that it did not read that language as consent by the purchaser to arbitrate
any or all claims with third-party nonsignatories. Rather, the Ochoa
Court read it as a further delineation of the subject matter of claims the
purchasers and dealers agreed to arbitrate, noting the purchaser(s) agreed to
arbitrate disputes “between” themselves—“you and us”— arising out of or
relating to “relationship[s],” including “relationship[s] with third parties
who [did] not sign th[e] [sale] contract[s],” resulting from the “purchase, or
condition of th[e] vehicle, [or] th[e] [sale] contract.” The Ochoa Court
further noted that the “third-party” language in the arbitration clause means
that if a purchaser asserts a claim against the dealer (or its employees,
agents, successors or assigns) that relates to one of these third-party
transactions (such as electing to buy insurance, theft protection, extended
warranties, and the like), the dealer can elect to arbitrate that claim. The
Second District found that such language says nothing of binding the purchaser
to arbitrate with the universe of unnamed third parties. IF
Plaintiff had sued the individual owners or sales personnel at the leasing
dealership regarding fraud in the inducement of the sale, or refusal to perform
services listed on the Due Bill, or for leasing a vehicle with scratches on the
paint finish (i.e., the condition of the vehicle) that were not visible at the
time of retail delivery, or for failure to obtain a promised insurance binder,
such third-party claims would be arbitrable. But that is not what Plaintiff
here is claiming.
AHM’s warranty, by itself, and
without the inclusion of the definition of “HONDA” to include AHM, would not be
intertwined with the leasing agreement. Song-Beverly claims are not intimately
founded in the leasing agreement. AHM and its dealer are separate entities. The
warranty and the leasing agreement are separate legal documents, neither of
which refer to or incorporate each other. Most automotive manufacturers
prohibit their authorized dealers from binding the manufacturer to warranties.
Applying Ochoa to this case, the Arbitration Agreement present in
Plaintiff’s leasing agreement does not, by itself and without the inclusion of
the definition of “HONDA” including AHM, bind them to arbitrate non-lease
agreement issues with AHM. While a Lemon Law case arguably is related to the
“condition” of the vehicle sold via the Leasing Contract/Financing Agreement,
the gravamen of Plaintiff’s suit here is not as to the condition of the vehicle
at the time of sale, but rather as to subsequent events that manifest only
after Plaintiff drove the vehicle off the lot, later experienced malfunctions
or defect, and unsuccessfully sought to have those post-sale matters remedied
within a reasonable number of repair attempts.
However, as described in detail
below, the Arbitration Agreement includes a definition of “HONDA” which is
defined in the Lease Contract to include AHM. As such, despite the factual similarities
of Felisilda and Ochoa, this Arbitration Agreement includes a key
difference by including AHM in the very definition of “HONDA.”
d. Third-Party Beneficiary
AHM
argues that it can compel arbitration as a third-party beneficiary to the
arbitration provision. “ ‘A third party beneficiary is someone who may enforce
a contract because the contract is made expressly for his benefit.’ ” (Jensen
v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 301, 226 Cal.Rptr.3d
797; see also Civ. Code, § 1559 [“[a] contract, made expressly for the benefit
of a third person, may be enforced by him ....”].) A person “only incidentally
or remotely benefited” from a contract is not a third-party beneficiary. (Lucas
v. Hamm (1961) 56 Cal.2d 583, 590, 15 Cal.Rptr. 821, 364 P.2d 685.) Thus,
“the ‘mere fact that a contract results in benefits to a third party does not
render that party a “third party beneficiary.” (Jensen, at p. 302, 226
Cal.Rptr.3d 797.) Nor does knowledge that the third party may benefit from the
contract suffice. (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830,
243 Cal.Rptr.3d 299, 434 P.3d 124 (Goonewardene).) Rather, the parties
to the contract must have intended the third party to benefit.
In
order for a third party to show that the contracting parties intended to
benefit it, under the express terms of the contract at issue and any other
relevant circumstances under which the contract was made, “(1) “the third party
would in fact benefit from the contract”; (2) “a motivating purpose of the
contracting parties was to provide a benefit to the third party”; and (3)
permitting the third party to enforce the contract “is consistent with the
objectives of the contract and the reasonable expectations of the contracting
parties.” (Ochoa, citing Goonewardene, supra, 6 Cal.5th at
p. 830.) Here, AHM argues that it is a member of the class of persons for whose
benefit the contract was made. The terms of the lease expressly define “HONDA”
to include:
HONDA means Lessor, Dealer,
Honda Lease Trust, American Honda Finance Corporation (AHFC), American Honda
Motor Co., Inc., Honda Finance Exchange, Inc., Acura Financial Services
(AFS), Honda Financial Services (HFS), HVT, Inc., their parents, subsidiaries,
predecessors, successors, assignees, and officers, employees, representatives
and agents. YOU means Lessee and Co-Lessee to this Lease.
(Suarez Decl., ¶ 2, Exhibit A, Least
Contract, p. 6.)
Here,
this Court notes that in circumstances in which the manufacturer is not defined
in the arbitration agreement, and the manufacturer has brough a motion claiming
they are a third party beneficiary because of language similar to: “[a]ny claim
or dispute . . . which arises out of or relates to . . . any resulting
transaction or relationship (including any such relationship with third parties
who do not sign this contract,” this this Court will not find that the
manufacture is manifested as “including any such relationship with third
parties who do not sign this contract.” This is because, this Court has found
that the Court in of Martha Ochoa v. Ford Motor Company (2023) 89
Cal.App.5th 1324, noted that that allowing a manufacturer to enforce the
arbitration provision as a third party beneficiary would be inconsistent with
the “reasonable expectations of the contracting parties” where they twice
specifically vested the right of enforcement in the purchaser and the dealer
only. The Court also notes the Ninth Circuit Court of Appeal’s decision of Ngo
v. BMW of North America (9th Cir. 2022) 23 F.4th 943. As noted by the
Second District, federal authority is not binding on this court, but a
discussion of Ngo is persuasive nonetheless.
This
Court determines that the Ninth Circuit ruling with respect to the law of
arbitration is persuasive, because the arbitration provision of the sales
contract expressly states that any arbitration under that sales contract
provision “shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et
seq.) and not by any state law concerning arbitration.” In Ngo, the
Ninth Circuit Court found that BMW could not enforce the arbitration provision
because the clause, which is identical to the one at issue, was strictly
limited to the dealership and the Plaintiff, but not BMW. (See Ngo, supra, at
p. 948.) As such, BMW was not a party to the agreement, and its obligations to
the Ngo family arose independently of the plaintiff’s agreement with the
dealership. (Id. at 949.) The Second District analyzed Ngo at
length, ultimately reaching the conclusion that the Sales Contract in Ochoa did
not benefit a vehicle manufacturer under Goonewardene for three
fundamental reasons that the Court need not recite here.
However, this contract in this case,
did not merely state a clause like: “[a]ny claim or dispute . . . which arises
out of or relates to . . . any resulting transaction or relationship (including
any such relationship with third parties who do not sign this contract.”
Instead, included in the definition of HONDA, was AHM. As such, this Court
finds that Defendant AHM has shown that although it is a nonsignatory of the
lease agreement, the inclusion of AHM in the arbitration clause would benefit
defendant by allowing these claims to be resolved by arbitration. Further, the
inclusion of AHM as a party who may pursue a claim in arbitration shows that
the parties indeed provide a benefit. Lastly, under the arbitration clause AHM
would have also been able to pursue a claim through arbitration. Therefore,
despite arguments made in Plaintiff’s opposition, this Court finds that all
three elements are met, and the defendant is a third party beneficiary.
C.
Unconscionability
Plaintiff next argues, in his opposition, that the
contract drafted by AHM is unconscionable.
Unconscionability is a valid
defense to a petition to compel arbitration. (Sonic-Calabasas A, Inc. v.
Moreno (2013) 57 Cal.4th 1109, 1143.) State law governs the
“unconscionability” defense. (Doctor’s Assocs., Inc. v. Casarotto (1996)
517 US 681, 687.) The core concern of the unconscionability doctrine is the
“absence of meaningful choice on the part of one of the parties together with
contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas,
supra, 57 Cal.4th at 1145.) The unconscionability doctrine ensures that
contracts—particularly contracts of adhesion—do not impose terms that have been
variously described as overly harsh, unduly oppressive, so one-sided as to
shock the conscience, or unfairly one-sided. (Id.) Here, Plaintiff has not identified any overly
harsh or unduly oppressive provisions, other than depriving them of the court
system to resolve their dispute without any other option. The Court finds that such a deprivation,
without much more, is no overly harsh, unduly oppressive, nor shocking of the
conscience.
“The procedural element of unconscionability focuses on
whether the contract is one of adhesion. (Armendariz, supra, 24
Cal.4th at p. 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; Mercuro v. Superior Court, supra, 96 Cal.App.4th
at p. 174.) 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 v. Superior Court, 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., supra, 70 Cal.App.4th at p. 1329.).” McManus
v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 87.)
Procedural Unconscionability
Plaintiff argues
that the arbitration agreement are adhesive and therefore procedurally
unconscionable. Plaintiff bases his arguments on the fact that contract is
presented as a ‘take it or leave it’ without any opportunity to negotiate its
harshly one-sided terms. Further, Plaintiff argues that the full definition of
“HONDA” was only later defined what entities comprised the term, and that the
arbitration provision itself, is attenuated with small fine print. Here, the
Court disagrees. The Arbitration Agreement appears to be on the last page, is
in the same size type as the rest of the agreement, and is in fact, bolded more
so than other provisions on the page. Further, When there is no other indication
of oppression other than the adhesive aspect of an agreement, the degree of
procedural unconscionability is low. (Serpa v. California Surety
Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.)
As such,
this Court finds that the procedural unconscionability is low.
Substantive Unconscionability
Next, Plaintiff argues that the
arbitration agreement is substantively unconscionable because it is devoid of
mutuality as AHM is not bound to arbitrate any claims against Plaintiff. The
Court does not find that this – alone – is enough to find substantive
unconscionability. What
Plaintiff fails to acknowledge is that while AHM may not be bound to
arbitrating claims against Plaintiff, the terms of the arbitration, if chosen
by the parties, apply equally to both sides. Here, the Court does not find
enough substantive unconscionability to find the entire arbitration agreement
unconscionable. Unlike other cases where the arbitration agreement imposes
unjust or arguably punitive substantive terms, such as requiring the Plaintiff
to arbitrate in another state or to pay all of the costs of arbitration or be
subject to an excessively brief contractual statute of limitations contrary to California
law, Plaintiff has not identified any unfairly harsh substantive terms in this agreement. Accordingly, the Court finds the substantive
unconscionability is low and that Plaintiff has failed to carry his burden of
showing overall unconscionability that would preclude enforcement.
The
Court will thus take oral argument on the waiver issue, which will be determinative
of this motion.