Case Name: Dan Harrison v. Corbro, LLC dba Stevens Creek Volkswagen, et al.

Case No.: 2016-1-CV-297975

Petition to Compel Arbitration Pursuant to Cal. Code of Civil Procedure §1281.2 by Plaintiff Dan Harrison

I. Request for judicial notice.

In opposition to the petition to compel arbitration filed by plaintiff Dan Harrison (“Harrison”), defendant Corbro, LLC dba Stevens Creek Volkswagen (“Corbro”) requests judicial notice of (1) a transcript of the April 21, 2016 hearing in the case of In re: Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation (USDC, N. District CA, No. 3:15-MD-02672-CRB, MDL No. 2672, Hon. Charles R. Breyer presiding). The request for judicial notice is DENIED. California Rules of Court, rule 3.1306, subdivision (c) requires, “A party requesting judicial notice of material under Evidence Code sections 452 or 453 must provide the court … with a copy of the material.” Corbro states that a copy is attached to the declaration of Sean P. Conboy as exhibit B. However, the referenced exhibit is an “Order Granting Preliminary Approval of Settlement,” not a hearing transcript.

Corbro also requests judicial notice of California Assembly Bill No. 802. Legislative history is a proper subject of judicial notice. (See In re Greg F. (2012) 55 Cal.4th 393, 409, fn. 2.) Accordingly, defendant Corbro’s request for judicial notice of California Assembly Bill No. 802 is GRANTED. (See also Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc. (2005) 133 Cal.App.4th 26, 31-37 [discussing categories of documents that constitute cognizable legislative history for purposes of judicial notice].)

II. Plaintiff’s petition to compel arbitration is DENIED.

Pursuant to Code of Civil Procedure section 1281, et seq. (the California Arbitration Act or “CAA”), a party to a written arbitration agreement may move for an order compelling arbitration. Absent limited exceptions, the court must grant the motion if it determines that there is an agreement to arbitrate the parties’ dispute. (Code Civ. Proc., § 1281.2—“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists.”)

“A party seeking to compel arbitration pursuant to CCP § 1281.2 must ‘plead and prove a prior demand for arbitration under the parties’ arbitration agreement and a refusal to arbitrate under the agreement.’” (Weil & Brown, et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2016) ¶9:408.1, pp. 9(I)-172 to 9(I)-173 citing Mansouri v. Superior Court (2010) 181 Cal.App.4th 633, 640-641; et al.) Where this burden has been satisfied, the opposing party bears the burden to prove by a preponderance of the evidence any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 357; see also Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)

The arbitration provision at issue purportedly states:

Any claim or dispute … between you and us … 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 … You may choose one of the following arbitration organizations and its applicable rules: the National Arbitration Forum, Box 50191, Minneapolis, MN 55405-0191 (www.arb-forum.com), the American Arbitration Association, 335 Madison Ave., Floor 10, New York, NY 10017-4605 (www.adr.org), or any other organization that you may choose subject to our approval.

There is no dispute that an arbitration provision exists and that plaintiff made a demand for arbitration. However, plaintiff Harrison has not made the requisite showing that defendant Corbro has refused to arbitrate under the agreement. Instead, the dispute between the parties is with the selection of the arbitration provider. Plaintiff Harrison contends he has proposed the use of JAMS or Judicate West as the arbitration provider, but that defendant Corbro will not agree to the use of either arbitration provider. Plaintiff Harrison has not met his burden of demonstrating defendant Corbro’s refusal to arbitrate. Accordingly, plaintiff Harrison’s petition to compel arbitration pursuant to Code of Civil Procedure section 1281.2 is DENIED.

III. Plaintiff’s alternative request for severance or appointment of an arbitrator is DENIED.

In the alternative, plaintiff Harrison requests this court either (1) sever portions of the arbitration provision regarding the use of the American Arbitration Association (“AAA”) and giving defendant Corbro the right to approve of plaintiff Harrison’s choice of arbitration provider, or (2) appoint JAMS or Judicate West as the arbitrator pursuant to Code of Civil Procedure section 1281.6.

As a preliminary matter, defendant Corbro objects on the basis that plaintiff Harrison did not provide adequate notice of this alternative request. “Notices must be in writing, and the notice of a motion, other than for a new trial, must state when, and the grounds upon which it will be made, and the papers, if any, upon which it is to be based.” (Code Civ. Proc., §1010; see also Cal. Rules of Court, rule 3.1110, subd. (a)—“A notice of motion must state in the opening paragraph the nature of the order being sought and the grounds for issuance of the order.”) “But this is not an absolute requirement. Relief may be granted on grounds appearing anywhere in the accompanying declarations and points and authorities … provided the notice states the motion will be made on grounds disclosed in the accompanying papers.” (Weil & Brown, et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2016) ¶9:41, p. 9(I)-24 citing Carrasco v. Craft (1985) 164 Cal.App.3d 796, 808—“Even though the notice of motion fails to state a particular ground for the motion, where the notice states, as here, that the motion is being made upon the notice of motion and accompanying papers and the record, and these papers and the record support that particular ground, the matter is properly before the court and the defect in the notice of motion should be disregarded.”) Here, the court will disregard any defect in the notice of motion.

A. Severance.

“If the court as a matter of law finds the contract or any clause of the contract to have been 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, subd. (a); see also Knight, Chernick, Haldeman & Bettinelli, CAL. PRAC. GUIDE: ALTERNATIVE DISPUTE RESOLUTION (The Rutter Group 2012) ¶5:150.1, pp. 5-104 to 5-105 citing Civ. Code, §1670.5, subd. (a); Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz); et al.)

“ ‘One common formulation of unconscionability is that it refers to “ ‘an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.’ ” [Citation.] As that formulation implicitly recognizes, the doctrine of 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.’ ” [Citation.] “ ‘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.’ [Citation.] 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.’ [Citations.] 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.” [Citation.] Courts may find a contract as a whole “or any clause of the contract” to be unconscionable. (Civ. Code, § 1670.5, subd. (a).)

(Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910.)

Here, plaintiff Harrison contends the portions of the arbitration provision regarding use of AAA and giving defendant Corbro the right to approve of plaintiff Harrison’s choice of arbitration provider are unconscionable because plaintiff is left without any real choice. This court disagrees.

Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create “overly harsh” or “one-sided results” (Armendariz, supra, 24 Cal.4th at p. 114), that is, whether contractual provisions reallocate risks in an objectively unreasonable or unexpected manner. (Jones v. Wells Fargo Bank (2003) 112 Cal.App.4th 1527, 1539.) To be substantively unconscionable, a contractual provision must shock the conscience. (California Grocers Assn. v. Bank of America (1994) 22 Cal.App.4th 205; 214; Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1332, 1330 [“[s]ubstantive unconscionability focuses on the terms of the agreement and whether those terms are so one-sided as to “shock the conscience.”]; see Wayne v. Staples, Inc. (2006) 135 Cal.App.4th 466, 480.) “The phrases ‘harsh,’ ‘oppressive,’ and ‘shock the conscience’ are not synonymous with ‘unreasonable.’ Basing an unconscionability determination on the reasonableness of a contract provision would inject an inappropriate level of judicial subjectivity into the analysis. ‘With a concept as nebulous as “unconscionability” it is important that courts not be thrust in the paternalistic role of intervening to change contractual terms that the parties have agreed to merely because the court believes the terms are unreasonable. The terms must shock the conscience.’” (Morris v. Redwood Empire Bancorp (2005) 128 Cal.App.4th 1305, 1322 – 1323.)

Here, the arbitration provision allows plaintiff Harrison to choose from either two designated arbitration providers or a third arbitration provider of plaintiff’s choosing, but subject to defendant Corbro’s approval. As defendant Corbro correctly points out, “unconscionability is determined as of the time the contract was entered into, not in light of subsequent events.” (Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1583; see also Civ. Code section 1670.5, subd. (a)—unconscionability is determined “at the time [the contract] was made.”) The fact that plaintiff and defendant cannot now agree does not render these portions of the arbitration provision substantively unconscionable when made. Moreover, plaintiff’s insistence on JAMS/ Judicate West and defendant’s insistence on AAA does not leave the parties without choice. Other arbitration providers exist. Plaintiff Harrison offers no analogous legal authority to support his assertion that such provisions shock the conscience. The court will not rewrite the parties’ agreement. (See Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1159—unnecessary to decide issue of procedural unconscionability where substantive unconscionability not found.)

B. Appointment of arbitrator.

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; emphasis added.)

Here, plaintiff contends the parties have reached an irreconcilable impasse with regard to the selection of an arbitration provider. As noted, the evidentiary record is deficient. Even if the court accepted plaintiff’s evidentiary assertions, the court is not convinced that the deadlock cannot be broken. As previously stated, other arbitration providers do exist. Furthermore, the specific relief requested by plaintiff Harrison is not available. Section 1281.6 sets forth a specific procedure for the appointment of an arbitrator by the court. The court cannot simply appoint JAMS or Judicate West. Accordingly, plaintiff Harrison’s alternative request for severance or appointment of an arbitrator is DENIED.