Judge: Theresa M. Traber, Case: 23STCV03790, Date: 2023-10-11 Tentative Ruling

Case Number: 23STCV03790    Hearing Date: October 11, 2023    Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE:     October 11, 2023                   TRIAL DATE: NOT SET

CASE:                         John Nguyen v. Shift Operations, LLC et al.

CASE NO.:                 23STCV03790           

MOTION TO COMPEL ARBITRATION

MOVING PARTY:               Defendants Shift Operations, LLC and American Contractors Indemnity

RESPONDING PARTY(S): Plaintiff John Nguyen

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

            This is a lemon law action filed on February 21, 2023 against the vehicle dealer and its assignee. Plaintiff purchased a 2016 Mercedes-Benz S-Class on October 28, 2022. Plaintiff subsequently discovered the vehicle had severe structural damage and engine leaks from a previous accident which was not disclosed to him before purchasing the vehicle.

Defendants Shift Operations, LLC and American Contractors Indemnity move to compel Plaintiff to binding arbitration with the American Arbitration Association.

TENTATIVE RULING:

Defendants’ Motion to Compel Arbitration is CONTINUED to November 15, 2023, at 9:00 AM for rescheduling purposes only. The parties are ordered to meet and confer regarding selection of a mutually agreeable arbitrator affiliated with NAM or, alternatively, preparation of a joint list of proposed arbitrators pursuant to Code of Civil Procedure section 1281.6.

            The parties are further ordered to file either a joint statement apprising the Court of the outcome of their efforts, or, alternatively, a joint list of proposed arbitrators no later than November 9, 2023.

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DISCUSSION:

Defendants Shift Operations, LLC and American Contractors Indemnity move to compel Plaintiff to binding arbitration with the American Arbitration Association.

Applicability of the FAA

Defendant argues that the Federal Arbitration Act governs the arbitration agreement at issue, and Plaintiffs do not appear to argue otherwise.

An arbitration clause is governed by the FAA if the agreement is a contract “evidencing a transaction involving commerce.” (9 U.S.C. § 2.) Courts “broadly construe” this phrase, because the FAA “embodies Congress’ intent to provide for the enforcement of arbitration agreements within the full reach of the Commerce Clause.” (Giuliano v. Inland Empire Pers., Inc. (2007) 149 Cal.App.4th 1276, 1286.)

Defendants have shown that the FAA governs the agreement. It contains a clause stating that “Any arbitration under this Arbitration Provision shall be governed under the Federal Arbitration Act” (Declaration of Aaron Chu ISO Mot Exh. A p.6), and automobile sale (or lease) contracts necessarily involve interstate commerce. (United States v. Oliver (9th Cir. 1995) 60 F.3d 547, 550.)

Accordingly, Defendants have met their “burden to demonstrate FAA coverage by declarations and other evidence.” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1207.)

Existence of Arbitration Agreement

Under California law, arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. (Blake v. Ecker (2001) 93 Cal.App.4th 728, 741 (overruled on other grounds by Le Francois v. Goel (2005) 35 Cal.4th 1094).) A party petitioning to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate, and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 356-57.)

            Defendant seeks to compel arbitration based on an arbitration provision in a retail installment sales contract (“Agreement”), which provides:

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.

(Chu Decl. Exh. A. p.6.)  The term, “You,” is defined as the Buyer, here Plaintiff, who has contracted with Defendant Shift Operations LLC, described as “the Seller – Creditor (sometimes ‘we’ or ‘us’ in this contract)” to buy the subject vehicle with financing according to a payment schedule in the Agreement.  (Id., p. 1.) 

            The signature of Plaintiff is visible on the proffered copy of the Agreement. (Chu Decl. Exh. A p.1, 7) Above the signature line on page 7 is a statement, in all capital letters, stating:

“You agree to the terms of this contract. You confirm that before you signed this contract, we gave it to you, and you were free to take it and review it. You acknowledge that you have read both sides of this contract, including the arbitration provision on the reverse side, before signing below. You confirm that you received a completely filled-in copy when you signed it.”

(Chu Decl. Exh. A. p. 7.) 

This evidence shows that Plaintiff agreed to submit claims falling within the terms of the arbitration provision of the Agreement to binding arbitration. Plaintiff does not dispute that he signed the arbitration agreement. The Court therefore finds that Defendants have demonstrated that Plaintiff entered into a binding arbitration agreement with the moving Defendants.

Scope of Arbitration Agreement

            The parties agree that Plaintiff’s claims against these Defendants fall within the scope of the Arbitration Agreement.

Choice of Forum

            Although Plaintiff states in opposition that he is amenable to arbitration of this dispute, Plaintiff objects to Defendants’ choice of the American Arbitration Association as the forum for arbitration.

            Code of Civil Procedure section 1281.6 governs the choice of arbitrator when arbitration is sought:

If the arbitration agreement provides a method of appointing an arbitrator, that method shall be followed. If the arbitration agreement does not provide a method for appointing an arbitrator, the parties to the agreement who seek arbitration and against whom arbitration is sought may agree on a method of appointing an arbitrator and that method shall be followed. In the absence of an agreed method, or if the agreed method fails or for any reason cannot be followed, or when an arbitrator appointed fails to act and his or her successor has not been appointed, the court, on petition of a party to the arbitration agreement, shall appoint the arbitrator.

When a petition is made to the court to appoint a neutral arbitrator, the court shall nominate five persons from lists of persons supplied jointly by the parties to the arbitration or obtained from a governmental agency concerned with arbitration or private disinterested association concerned with arbitration. The parties to the agreement who seek arbitration and against whom arbitration is sought may within five days of receipt of notice of the nominees from the court jointly select the arbitrator whether or not the arbitrator is among the nominees. If the parties fail to select an arbitrator within the five-day period, the court shall appoint the arbitrator from the nominees.

(Code Civ. Proc. § 1281.6.)

            Here, the Arbitration Agreement contains a choice of forum provision which states:

You or we may choose the American Arbitration Association (www.adr.org) or National Arbitration and Mediation (www.namadr.com) as the organization to conduct the arbitration. If you and we agree, you or we may choose a different arbitration organization. You may get a copy of the rules of an arbitration organization by contacting the organization or visiting its website.

(Chu Decl. Exh. A. p. 6.)

            Defendants state in their initial moving papers that they seek to compel arbitration with AAA, asserting a firm disapproval of any other forum, with specific reference to JAMS, ADR Services, and JudicateWest, citing greater expense, slower pace, and more burdensome discovery than under AAA rules. Defendants have also produced a “Buyer Acknowledgment” signed by Plaintiff which states that “[if] negotiations between the parties [to resolve a dispute] are not successful, either party may initiate an arbitration, which shall be administered by the American Arbitration Association (“AAA”) under the Consumer Arbitration Rules (“AAA Rules”).” (Chu Decl. Exh. B. p. 5.) Defendants do not, however, contend that the Buyer Acknowledgment supersedes the Arbitration Agreement.

            In opposition, Plaintiff objects to Defendant’s choice of AAA on the basis that requiring Plaintiff to submit to AAA would effectively deny Plaintiff access to any meaningful discovery and would be unconscionable. Plaintiff requests that the Court instead permit Plaintiff to select an arbitration organization pursuant to the terms of the agreement, or, alternatively, to have the Court select an arbitrator pursuant to Code of Civil Procedure section 1281.6.

            Defendants, in reply, appear to have relaxed their hardline position as presented in the moving papers, and state that they are willing to consent to arbitration with National Arbitration and Mediation or to arbitrator selection under either the FAA or section 1281.6. Although Defendants argue that Plaintiff is not entitled to impose arbitration with JAMS under the terms of the agreement, no such demand is presented in any of Plaintiff’s materials filed in opposition. Plaintiff merely appears to object to AAA as the sole choice for arbitration and seeks alternatives pursuant to the Agreement and California law. As Defendants express their consent to both options, the Court finds that, rather than ruling on the motion, this matter would be more efficiently resolved by instructing the parties to meet and confer regarding selection of a mutually agreeable arbitrator.

CONCLUSION:

            Accordingly, Defendants’ Motion to Compel Arbitration is CONTINUED to November 15, 2023, at 9:00 AM for rescheduling purposes only. The parties are ordered to meet and confer regarding selection of a mutually agreeable arbitrator affiliated with NAM or, alternatively, preparation of a joint list of proposed arbitrators pursuant to Code of Civil Procedure section 1281.6.

            The parties are further ordered to file either a joint statement apprising the Court of the outcome of their efforts, or, alternatively, a joint list of proposed arbitrators no later than November 9, 2023.

            Moving Parties to give notice.

IT IS SO ORDERED.

Dated: October 11, 2023                                 ___________________________________

                                                                                    Theresa M. Traber

                                                                                    Judge of the Superior Court

            Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@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 or in part.