Judge: Thomas S. Mcconville, Case: 2022-1286707, Date: 2023-05-22 Tentative Ruling

Defendants American Home Shield of California, Inc. and Frontdoor, Inc.’s motion to compel arbitration is GRANTED.  The proceedings are STAYED pending resolution of the arbitration.

“A core object of both the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) and the California Arbitration Act (Code Civ. Proc., § 1280 et seq.) is to ensure the enforcement of arbitration agreements in accordance with their terms. [Citation.]… [¶] ‘[P]arties can agree to arbitrate “gateway” questions of “arbitrability,” such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.’ [Citation.] Similarly, ‘ “[p]arties to an arbitration agreement may agree to delegate to the arbitrator, instead of a court, questions regarding the enforceability of the agreement.” ’ [Citation.]…[¶] The answer to ‘the question “who has the primary power to decide arbitrability” turns upon what the parties agreed about that matter.’ [Citation.] ‘When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally ... should apply ordinary state-law principles that govern the formation of contracts.’ [Citation.] [¶] Under the objective theory of contracts, the best indicator of the parties' intent in a written contract is the words they chose for the agreement. [Citation.] When no extrinsic evidence was admitted regarding the meaning of the terms of the contract, we examine the contract and language de novo to determine the parties' intent [citation], including on questions of arbitrability [citation]. [¶] ‘Under California law, it is presumed the judge will decide arbitrability, unless there is clear and unmistakable evidence the parties intended the arbitrator to decide arbitrability.’ [Citation.]” (Nelson v. Dual Diagnosis Treatment Center, Inc. (2022) 77 Cal.App.5th 643, 653-654.)

Here, Defendant AHS submitted a copy of the Service Agreement between AHS and Plaintiffs, which contains an arbitration provision.  [ROA 30, Sandoval decl., ¶ 2, Exh. 2]  Plaintiffs do not dispute that they entered into the Service Agreement or that it covers their claim against Defendant AHS. 

With regards to who determines arbitrability, the arbitration provision states:  “The arbitrator, not any federal, state, or local court, shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, unconscionability, arbitrability, enforceability or formation of this Agreement including any claim that all or any part of the Agreement is void or voidable.”  The delegation language is plain, the parties agreed that the arbitrator, not the court, determines arbitrability, including defenses of unconscionability.  Plaintiffs did not challenge the delegation provision and only argue that the arbitration provision should not be enforced because it is unconscionable.  Because Defendant AHS demonstrated the existence of a valid arbitration agreement and Plaintiffs do not dispute that they agreed that issues of defenses, including unconscionability, are to be determined by the arbitrator, AHS’ motion to compel arbitration is GRANTED.  (See Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63 [language in arbitration provision which provided that “the arbitrator … shall have exclusive authority to resolve any dispute relating to the … enforceability … of this Agreement, including, but not limited to any claim that all or any part of this Agreement is void or voidable” should be enforced when delegation language is explicit and opposing party did not challenge delegation provision but only enforcement of the arbitration provision as a whole].)

Plaintiffs argue that Defendant AHS’ motion to compel should be denied because of the likelihood of contradictory judgments under Code of Civil Procedure section 1281.2(c) due to litigation with a Defendant Frontdoor, with whom there is no arbitration agreement.  However, Defendant Frontdoor argues that Plaintiffs should be compelled to arbitration with it along with Defendant AHS under the doctrine of equitable estoppel.

Under the doctrine of equitable estoppel, “as applied in ‘both federal and California decisional authority, a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are “intimately founded in and intertwined” with the underlying contract obligations.’ [Citations.] ‘By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.’ [Citations.] ‘The rule applies to prevent parties from trifling with their contractual obligations.’ [Citation.] [¶] Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement. [Citation.] In such cases, the nonsignatory is not a ‘third party’ within the meaning of section 1281.2(c), and that provision simply does not apply. [Citation.]” (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 706 (Molecular Analytical).)

“Courts applying equitable estoppel against a signatory have looked to the relationships of persons, wrongs and issues, in particular whether the claims that the nonsignatory sought to arbitrate were intimately founded in and intertwined with the underlying contract obligations. [Citation.] Application of the estoppel doctrine in this context does not require a conscious or subjective intent to avoid arbitration, but turns upon the nexus between the contract and the causes of action asserted. [Citation.] The focus is on the nature of the claims asserted by the plaintiff against the nonsignatory defendant. [Citation.] Claims that rely upon, make reference to, or are intertwined with claims under the subject contract are arbitrable. [Citation.]” (Molecular Analytical, supra, 186 Cal.App.4th at p. 715, internal quotation marks omitted.)

“‘[C]laims framed in tort are subject to contractual arbitration provisions when they arise out of the contractual relationship between the parties.’ [Citation.] The same principle applies in cases involving nonsignatories: ‘That the claims are cast in tort rather than contract does not avoid the arbitration clause.’ [Citation.]”  (Molecular Analytical, supra, 186 Cal.App.4th at p. 715-716.)

Here, the complaint essentially alleges Defendant AHS wrongfully denied claims for covered repairs, Defendant Frontdoor provided substantial assistance to AHS’ wrongful denial of claims, and Defendants were agents of each other.  [Complaint, ¶ 5, 8, 23]  Although Plaintiffs argue that the 2nd cause of action for aiding and abetting against Defendant Frontdoor is not dependent upon or inextricably intertwined with the obligations interposed by the Service Agreement, a review of the complaint’s allegations shows otherwise.  The 2nd cause of action for aiding and abetting against Defendant Frontdoor incorporates all of the previous allegations, including those regarding the Service Agreement and Defendant AHS’ breach of it, and further alleges that Frontdoor provided substantial assistance to AHS in its breach.  [Complaint, ¶ 20-27]  Patently, the 2nd cause of action is rooted in the Service Agreement and is intimately intertwined with it.  Because the doctrine of equitable estoppel applies, Defendant Frontdoor has a right to enforce the arbitration agreement and is not a third party within the meaning of Code of Civil Procedure section 1281.2(c).  (Molecular Analytical, supra, 186 Cal.App.4th at p. 717.)  Accordingly, Defendant Frontdoor’s motion to compel arbitration is also GRANTED.

The court sets the matter for a review of the status of arbitration on November 6, 2023 at 9:00 am in C-28.

Defendants shall give notice.