19-CIV-00093 CONLIZA PANG VS. CARLISLE WIDE PLANK FLOORS, INC. ET AL.

CONLIZA PANG CARLISLE WIDE PLANK FLOORS, INC.
MAJEED S. SAMARA DAVID S. PEARSON

DEFENDANT CARLISLE WIDE PLANK FLOORS, INC.’S PETITION FOR ORDER COMPELLING ARBITRATION, FILED 3-11-19 TENTATIVE RULING:

Defendant Carlisle Wide Plank Floors, Inc.’s Petition for Order Compelling Arbitration, filed 311-19, is GRANTED-IN-PART and DENIED-IN-PART. Code Civ. Proc. § 1281.2. Based on the evidence presented, the Court finds the New Hampshire forum selection clause in the parties’ arbitration agreement is unconscionable, and thus unenforceable. The remainder of the parties’ arbitration agreement, however, is valid and unenforceable.

As set forth in Defendant’s moving papers and not disputed by Plaintiff, California, New Hampshire, and federal law all favor the enforceability of arbitration agreements. See, e.g., California Arbitration Act (“CAA”), codified by Code Civ. Proc. Sect. 1281, et seq.; Armendariz v. Foundation Health Psychcare Services Inc. 24 Cal.4th 83, 97 (2000) (“California law, like federal law, favors enforcement of valid arbitration agreements.”); Cione v. Foresters Equity Services, Inc. 58 Cal.App.4th 625, 642 (1998) (a heavy presumption weighs in favor of enforcing arbitration agreements); Federal Arbitration Act (“FAA”), 9 United States Code Sect. 1, et. seq.

Defendant met its burden of proving, by a preponderance of the evidence, the existence of a valid agreement to arbitrate that covers the present dispute. Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842; Engalla v. Permanente Med. Group, Inc. (1997) 15 Cal.4th 951, 972. Mr. Algee, Director of Carlisle’s Commercial Western Division who was directly involved in the transaction and the signing of the agreement, authenticated the parties’ signed contract containing the arbitration agreement. Algee Decl., ¶2, Ex. A. Plaintiff’s signature appears to be on every page, including the Terms and Conditions page that includes the arbitration language. Plaintiff admits she signed the papers Mr. Algee presented to her, but argues did not read them or know what she was signing. She also suggests her signatures appear different than the signature on her driver’s license, although she does not go so far as to deny the signatures are hers. The preponderence of the evidence standard does not require 100% certainty. Defendant here has demonstrated it is more likely than not the parties entered into a contract that includes a valid arbitration agreement. Indeed, Plaintiff is suing for breach of this same agreement. Further, the language of the agreement is broad; Plaintiff does not dispute that its language is broad enough to cover this dispute.

Although Plaintiff is suing Defendant for breach of the same contract, Plaintiff argues the entire agreement is void for failure to include the three-day cancellation period language set forth in Civ. Code 1689.7. Code Civ. Proc. § 1281.2 states the Court may refuse to enforce an agreement to arbitrate if grounds exist for rescission of the agreement. Plaintiff’s Opposition brief, however, cites no case applying Civ. Code § 1689.7 to invalidate a contract containing an arbitration agreement. Accordingly, without deciding this issue or in any way precluding the arbitrator from addressing it on the merits, the Court finds that Plaintiff has not demonstrated the parties’ agreement to be unenforceable for non-compliance with § 1689.7.

Unconscionability

“Unconscionability” is one of the principal defenses to a request for arbitration. It is a generally applicable contract defense under California law. Civ. Code § 1670.5. Two elements must be shown: (1) “procedural” unconscionability, which focuses on the manner in which the contract was negotiated (e.g., adhesion contracts); and (2) “substantive” unconscionability, which concerns whether the contract’s terms are unreasonably one-sided. Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th 83, 113-115; see also Cotchett, Pitre & McCarthy v. Universal Paragon Corp. (2010) 187 Cal.App.4th 1405, 1419 (2010).

Plaintiff signed the arbitration agreement here under circumstances suggesting a high degree of procedural unconscionability. Procedural unconscionability pertains to the making of the agreement; it examines the “oppression that arises from unequal bargaining power and the surprise to the weaker party that results from hidden terms or the lack of informed choice. Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795. The evidence submitted by Plaintiff suggests she signed the contract at the airport under rushed circumstances and did not have sufficient time or ability to negotiate its terms. Defendant admits the contract was one of “adhesion” in the sense the arbitration language is standard language in all of Defendant’s contracts/Purchase Orders. By its terms, Plaintiff’s down payment constituted her “agreement to these Terms and Conditions,” which included the arbitration agreement. It further stated that “any additional or contrary terms proposed by you or contained in any other documents are expressly rejected.” Based on the foregoing, the Court finds there to have been a fairly high degree of procedural unconscionability in the signing of the agreement.

Substantively, the Court finds the arbitration agreement’s New Hampshire forum selection clause is substantively unconscionable, making it invalid, but the remainder of the agreement is not unconscionable, and therefore is valid and enforceable. Accordingly, the Court SEVERS and INVALIDATES the New Hampshire forum selection clause, but will enforce the remainder of the arbitration agreement. Substantive unconscionability refers to agreement terms which are “overly harsh,” “unduly oppressive,” “unreasonably unfavorable,” or “so one-sided as to shock the conscience,” all of which mean the same thing. Sanchez v. Valencia Holding Co., LLC, supra, 61 Cal.4th at 910-911)—an “old-fashioned bad bargain” or a contract term which “merely gives one side a greater benefit” insufficient. The test is whether the terms impair the integrity of the bargaining process or otherwise contravene public policy, or the terms “attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law” or “negate the reasonable expectations of the non-drafting party.” Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145; Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 247—term “outside the reasonable expectation of the non-drafting party or is unduly oppressive.”

The agreement here includes a severability clause. See Algee Decl., Ex. A (Terms and Conditions, bottom of page). The Court, in its discretion, may sever an unconscionable provision of the agreement and enforce the remainder of the agreement. Armendariz, 24 Cal.4th at 122. When a court finds that a contract or any clause in the contract was unconscionable at the time it was made, the court “may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” Civ. Code § 1670.5(a). “A court may ‘refuse to enforce the entire agreement’ only when it is “permeated” by unconscionability.” Armendariz, 24 Cal.4th at 122.

The N. Hampshire forum selection clause is substantively unconscionable because it strongly cuts against the reasonable expectations of a California consumer and appears to unreasonably favor the more powerful party. Magno v. The College Network, Inc. (2016) 1 Cal.App.5th 277, 288 (provision requiring California plaintiffs to travel to Indiana to arbitrate with a company that had solicited their business in California was unconscionable). A California resident in Plaintiff’s position would reasonably expect the ability to resolve any related dispute in California, whether it be in court or arbitration. Further, litigating against a large company in N. Hampshire would in many cases be prohibitively costly for the average California consumer. See also Bolter v. Superior Court (2001) 87 Cal.App.4th 900, 909 (finding provision requiring Plaintiff(s) to travel long distance to arbitrate to be unreasonable under the circumstances). Tompkins v. 23ANDME (2016) 840 F.3d 1016, discussed by Defendant, inapposite. There, the forum selection clause called for arbitration in San Francisco, in a case where several parties were already California residents. The forum selection clause here, in contrast, would force consumers to litigate across the country. See also Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 495–96 (although forum selection clauses are generally enforceable when knowingly entered into, the expense and inconvenience caused by such clauses are relevant factors to consider in the unconscionability analysis).

Aside from the forum selection clause, however, Plaintiff has not met her burden of proving the arbitration agreement to be unconscionable. Indeed, Plaintiff only argues substantive unconscionability as to the forum selection clause—she does not argue any other provisions are unfair or unreasonable.

Accordingly, Defendant’s motion is GRANTED-IN-PART. The case is STAYED pending resolution of the arbitration (Code Civ. Proc. Sect. 1281.4), which shall be conducted either in San Mateo or San Francisco, under the terms agreed to by the parties.