2013-00142383-CU-BC

Marc S. Cooper vs. Wells Fargo Bank

Nature of Proceeding: Petition to Compel Arbitration

Filed By: Christopherson, Dean A.

Wells Fargo’s Motion to Compel Arbitration is granted.

This matter was continued for further briefing from October 8, 2013.

The Court has reviewed the supplemental briefs filed by Wells Fargo on October 30
2013 and by plaintiff on November 13, 2013.

After having reviewed all of the relevant evidence the Court now grants the motion to
compel arbitration.

In this action, Plaintiff Marc Cooper alleges that Defendant agreed to provide a safe
deposit box to Plaintiff and agreed to keep the contents safe, but subsequently closed
the box and removed the contents without any notice to Plaintiff.

Defendant now moves to compel arbitration of Plaintiff’s claims in this matter.
Defendant contends that when Plaintiff opened the safe deposit box, he executed a
“Safe Deposit Box Lease Agreement” that contained an arbitration provision. (Lowry
Decl. Ex. 1.) The Lease Agreement incorporated the Safe Deposit Box Lease Terms
disclosure, which provided that claims arising out of the lease of the safe deposit box
must be resolved through binding arbitration. (Lowry Decl. Ex. 1.) Defendant
contends that Plaintiff is bound by this agreement to arbitrate because his claims for
fraud and breach of contract arise out of the agreement to lease the safe deposit box.

Plaintiff opposes the motion on a number of grounds. First, Plaintiff contends that copy of the alleged lease agreement is not authentic. Plaintiff argues that he signed a lease
agreement on December 12, 2006, but the copy of the agreement Defendant presents
in support of its motion indicates the document was executed on April 21, 2007, over
five months later. Plaintiff contends that the discrepancy in the date of the purported
agreement to arbitrate undermines Defendant’s contention that Plaintiff did in fact
execute the agreement on December 12, 2006, the date the safe deposit box was
opened.

After the court continued the hearing to this date, Defendant has presented credible
evidence explaining the reason why the April 21, 2007 document was presented
instead of the December 2006 document. (Declaration of Jia-Yi Lin) Defendant has
also presented the declaration of David S. Moore, handwriting expert, who states that
the signature on the April 2007 agreement is the original signature of Marc S. Cooper.
Therefore, Wells Fargo has met its burden to show that plaintiff agreed to arbitration in
connection all claims arising out of the safe deposit box.

The Supreme Court has outlined the burden-shifting scheme for petitions to compel
arbitration as follows:

“[W]hen a petition to compel arbitration is filed and accompanied by prima facie
evidence of a written agreement to arbitrate the controversy, the court itself
must determine whether the agreement exists and, if any defense to its
enforcement is raised, whether it is enforceable. Because the existence of the
agreement is a statutory prerequisite to granting the petition, the petitioner
bears the burden of proving its existence by a preponderance of the evidence. If
the party opposing the petition raises a defense to enforcement–either fraud in
the execution voiding the agreement, or a statutory defense of waiver or
revocation (see § 1281.2, subds. (a), (b))–that party bears the burden of
producing evidence of, and proving by a preponderance of the evidence, any
fact necessary to the defense. [citation].”

(Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413,
emphasis added.)

The supplemental evidence contained in the November 15 Declaration of Marc S.
Cooper is irrelevant to the issue of whether he agreed to arbitrate any dispute arising
out of the agreement and does not meet plaintiff’s burden of showing that he has a
defense to the arbitration.

Plaintiff next asserts that the agreement is unconscionable. C.C.P., sec. 1281,
provides that a written agreement to submit to arbitration is “valid, enforceable and
irrevocable, save upon such grounds as exist for the revocation of any contract.”

The Court may refuse to enforce any contract determined to be unconscionable. (CC
§ 1670.5.) “To be unenforceable, a contract must be both procedurally and
substantively unconscionable, but the elements need not be present in the same
degree.” (Gatton v. T-Mobil USA, Inc. (2007) 152 Cal.App.4th 571, 579.)

Unconscionability has both a “procedural” and a “substantive” element, the former
focusing on oppression or surprise due to unequal bargaining power, the latter on
overly harsh or one-sided results. The prevailing view is that procedural and
substantive unconscionability must both be present in order for a court to exercise its
discretion to refuse to enforce a contract or clause under the doctrine of
unconscionability. But they need not be present in the same degree. Essentially a
sliding scale is invoked which disregards the regularity of the procedural process of the
contract formation, that creates the terms, in proportion to the greater harshness or
unreasonableness of the substantive terms themselves. In other words, the 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 v. Foundation Health Psychcare Servs. (2000) 24 Cal. 4th
83, 114.

Procedural unconscionability focuses on oppression, surprise and the manner in which
the agreement was negotiated. Martinez v. Master Protection Corp. (2004) 118
Cal.App.4th 107, 113. To show “oppression” for procedural unconscionability, plaintiffs
must show that as the weaker party they lacked not only the opportunity to bargain but
also any realistic opportunity to look elsewhere for a more favorable contract; they
must either adhere to the standardized agreement or forego the needed service.
Gatton v. T-Mobile USA, Inc., supra, at p. 595.

Substantive unconscionability focuses on “the actual terms of the agreement and
evaluates whether they create such “overly harsh” or “one-sided” results as to “shock
the conscience.” Suh v. Superior Court (2010) 181 Cal. App. 4th 1504, 1515; Ingle v.
Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1173, quoting Kinney v. United
HealthCare Servs., Inc. (1999) 70 Cal.App.4th 1322, 1330.

Here, the Court finds neither. As to the contract, it may be characterized as one of
adhesion. Generally, a contract offered on a take-it-or-leave-it basis is deemed
adhesive, and a commercial transaction conditioned on a party’s acceptance of such a
contract is deemed procedurally unconscionable. (Gentry v. Superior Court (2007) 42
Cal.4th 443, 469. However, the conclusion that the Arbitration Agreement is an
adhesion contract “heralds the beginning, not the end, of [the court’s] inquiry into its
enforceability.” Mayers v. Volt Management Corp. (2012) 203 Cal.App.4th 1194, 1207.
There are degrees of procedural unconscionability. Further, a consideration of the
factors of “surprise and oppression” is also required. (Id. at 1207-08.) The use of a
preprinted, non-negotiable contract is common in the modern commercial world.
Indeed, given the myriad of laws and regulations affecting commercial banking
transactions, a preprinted form may be the bank’s only means of ensuring its
compliance with the law. The Declaration of plaintiff on this issue does not establish a
ground for oppression. It is not stated that defendant interfered or blocked his review of
the agreement, or actually prevented him from reading the document. Nor is it alleged
that he was coerced into signing. Cooper does not aver that he wanted to review the
contract privately, or seek legal advice, and was prevented from doing so. Nor does
the Court find surprise.

On substantive unconscionability, plaintiff asserts that the contract terms imposing a
limitation of liability and prohibition of other parties being party to the arbitration to be
unconscionable. As noted in Pinnacle Museum Tower Assn. v. Pinnacle Market
Development, LLC (2012) 55 Cal. 4th 223, 246, “A contract term is not substantively
unconscionable when it merely gives one side a greater benefit; rather, the term must
be ‘so one-sided as to “shock the conscience.’” The alleged unconscionable terms
(limitation of liability and prohibition of other parties being party to the arbitration) are
not unconscionable. The limitation of liability is clearly and unequivocally set forth in
the “Liability” section, and is a reasonable and not unexpected term in a safe-deposit box agreement, and the prohibition of third parties as parties to the arbitration is
merely a restatement of the law.

This case is stayed pending the outcome of the arbitration.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.