Mance v. Mercedes-Benz USA, LLC
Filing
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ORDER GRANTING 5 Defendant's Motion to Compel Arbitration. Pursuant to Civil Local Rule 7-1(b), the court finds this matter to be suitable for determination without further oral argument and VACATES the October 4, 2012 motion hearing. However, in light of the logistical issues resulting from this decision, the October 4, 2012 status conference remains on calendar. Signed by Magistrate Judge Laurel Beeler on 9/27/2012. (lblc2, COURT STAFF) (Filed on 9/28/2012)
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UNITED STATES DISTRICT COURT
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Northern District of California
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San Francisco Division
DEMETRIUS MANCE,
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For the Northern District of California
UNITED STATES DISTRICT COURT
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No. CV 11-03717 LB
Plaintiff,
ORDER GRANTING DEFENDANT’S
MOTION TO COMPEL
ARBITRATION
v.
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MERCEDES-BENZ USA,
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[ECF No. 5]
Defendant.
_____________________________________/
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I. INTRODUCTION
Plaintiff Demetrius Mance bought a new Mercedes-Benz automobile. As it turns out, the car had
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many problems, so, after numerous failed attempts to fix it, Mr. Mance sued Mercedes-Benz USA,
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LLC (“Mercedes-Benz”), the car’s manufacturer, for violation of the Song-Beverly Consumer
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Warranty Act, Cal. Civ. Code §§ 1790, et seq., California’s Lemon Law. Mercedes-Benz moved to
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compel Mr. Mance to arbitrate his claims pursuant to an arbitration clause found in the contract he
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signed when he purchased the car. For the reasons set forth below, the court finds the arbitration
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clause to be enforceable and, accordingly, GRANTS Mercedes-Benz’s motion.1
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As explained in more detail below, the court previously heard substantive oral argument on
Mercedes-Benz’s motion on October 20, 2011 and discussed the motion with the parties several
times at subsequent status conferences. Accordingly, and pursuant to Civil Local Rule 7-1(b), the
court finds this matter to be suitable for determination without further oral argument and VACATES
the October 4, 2012 motion hearing. However, in light of the logistical issues resulting from this
decision, the October 4, 2012 status conference remains on calendar. Pursuant to the 8/30/2012
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ORDER
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II. BACKGROUND
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On or about October 25, 2008,2 plaintiff Demetrius Mance, a California resident, bought a new
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2008 Mercedes-Benz E350 from Mercedes-Benz of Sacramento (“Dealer”), a dealer of automobiles
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made by defendant Mercedes-Benz. Complaint, ECF No. 1 ¶ 5.3 To purchase the car, Mr. Mance
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was required to sign a Retail Installment Contract (hereafter, the “contract”). Motion, ECF No. 6 at
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2; Universal Decl., ECF No. 7, Ex. A. Upon doing so, Mercedes-Benz expressly warranted, as Mr.
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Mance alleges, “to preserve or maintain the utility or performance of the subject vehicle.”
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Complaint, ECF No. 1 ¶ 8.
warranty. Id. ¶¶ 9-13. Despite its attempts, Mercedes-Benz has not been able to repair the car. Id. ¶
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10. Mr. Mance then filed the instant lawsuit against Mercedes-Benz for breach of an express
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For the Northern District of California
Mr. Mance alleges that the car has experienced numerous problems that are covered under the
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UNITED STATES DISTRICT COURT
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warranty, an implied warranty of merchantability, and an implied warranty of fitness in violation of
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the Song-Beverly Consumer Warranty Act, Cal. Civ. Code §§ 1790, et seq., also known as
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California’s Lemon Law.4 See Complaint, ECF No. 1.
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Minute Order, the parties may appear telephonically by making the appropriate arrangements
through CourtCall.
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Mr. Mance’s complaint alleges that he bought the car on or about October 25, 2008, but the
contract he signed in order to buy it is dated October 26, 2011. Compare Complaint, ECF No. 1 ¶ 5
with Universal Decl., ECF No. 7, Ex. A.
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Citations are to the Electronic Case File (“ECF”) with pin cites to the electronic page
number at the top of the document, not the pages at the bottom.
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To state a viable claim under California’s Song-Beverly Consumer Warranty Act, a
plaintiff must plead sufficiently a breach of warranty under California law. Birdsong v. Apple, Inc.,
590 F.3d 955, 958 n.2 (9th Cir. 2009).
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To plead an action for breach of express warranty under California law, a plaintiff must
allege: (1) the exact terms of the warranty; (2) reasonable reliance thereon; and (3) a breach of
warranty which proximately caused plaintiff’s injury. Williams v. Beechnut Nutrition Corp., 185
Cal. App. 3d 135, 142 (1986). A plaintiff also must plead that he or she provided the defendant with
pre-suit notice of the breach. Cal. Commercial Code § 2607.
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The Song-Beverly Consumer Warranty Act provides that “every sale of consumer goods that
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Mercedes-Benz has now moved for an order compelling Mr. Mance to arbitrate his claim
because the contract he signed contains an arbitration clause, which states in relevant part:
Any claim or dispute, whether in contract, tort, statute, or otherwise (including the
interpretation and scope of the arbitration clause, and the arbitrability of the 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 and not by a court action. . . .
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. . . We will advance your filing, administration, service or case management fee
and your arbitrator or hearing fee all up to a maximum of $2500, which may be
reimbursed by decision of the arbitrator at the arbitrator’s discretion. . . . The
arbitrator’s award shall be final and binding on all parties, except that in the event the
arbitrator’s award for a party is $0 or against a party is in excess of $100,000, . . . that
party may request a new arbitration under the rules of the arbitration organization by
a three-arbitrator panel. . . . Any arbitration under this arbitration clause shall be
governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and not by any state
law concerning arbitration.
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Motion, ECF No. 6, Ex. A. Mr. Mance opposed Mercedes-Benz’s motion. Opposition, ECF No. 13.
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He argues that (a) Mercedes-Benz, as a non-signatory to the contract, lacks standing to enforce the
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arbitration clause found within it, and (b) the arbitration clause is unconscionable and, thus,
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unenforceable.
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For the Northern District of California
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The court heard oral argument on the motion on October 20, 2011. At the hearing, the court and
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parties discussed the possibility of settlement, and with the parties’ agreement, the court deferred
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ruling on Mercedes-Benz’s motion until the parties engaged in limited discovery and attended
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mediation, and until after Mr. Mance’s automobile could be inspected. 10/20/2011 Minute Order,
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are sold at retail in this state shall be accompanied by the manufacturer’s and the retail seller’s
implied warranty that the goods be merchantable.” Cal. Civ. Code § 1792. Goods in conformity
with the implied warranty of merchantability: “(1) Pass without objection in the trade under the
contract description[;] (2) Are fit for the ordinary purposes for which such goods are used[;] (3) Are
adequately contained, packaged, and labeled[;] and (4) Conform to the promises or affirmations of
fact made on the container or label.” Cal. Civ. Code § 1791.1(a). An “[i]mplied warranty of
fitness” means “(1) that when the retailer, distributor, or manufacturer has reason to know any
particular purpose for which the consumer goods are required, and further, that the buyer is relying
on the skill and judgment of the seller to select and furnish suitable goods, then there is an implied
warranty that the goods shall be fit for such purpose and (2) that when there is a sale of an assistive
device sold at retail in this state, then there is an implied warranty by the retailer that the device is
specifically fit for the particular needs of the buyer.” Cal. Civ. Code § 1791.1(b).
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ECF No. 16; 10/24/2012 Order, ECF No. 17; Stipulation, ECF No. 21. Mediation did not resolve
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the case, Certification of ADR Session, ECF No. 26, and the court discussed the case and Mercedes-
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Benz’s motion again at a status conference on March 1, 2012. 3/1/2012 Minute Order, ECF No. 27.
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The parties expressed the possibility that a car inspection during the summer months might be
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helpful (to better examine the automobile’s air conditioning system), so the court once again
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deferred ruling on Mercedes-Benz’s motion. Id.; 3/2/2012 Order, ECF No. 28. The court again
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heard from the parties at a status conference on August 30, 2012, and the parties informed the court
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that the inspection of the automobile had been done. 8/30/2012 Minute Order, ECF No. 32.
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III. LEGAL STANDARD
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Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., arbitration agreements “shall be
valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the
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revocation of a contract.” 9 U.S.C. § 2. “Once the court has determined that an arbitration
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agreement relates to a transaction involving interstate commerce, thereby falling under the FAA, the
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court’s only role is to determine whether a valid arbitration agreement exists and whether the scope
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of the dispute falls within that agreement.” Ramirez v. Cintas Corp., No. C 04-00281 JSW, 2005
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WL 2894628, at *3 (N.D. Cal. Nov. 2, 2005) (citing 9 U.S.C. § 4; Chiron Corp. v. Ortho Diagnostic
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Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)). If the court is satisfied “that the making of the
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arbitration agreement or the failure to comply with the agreement is not in issue, the court shall
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make an order directing the parties to proceed to arbitration in accordance with the terms of the
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agreement.” 9 U.S.C. § 4.
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The FAA reflects a “liberal federal policy favoring arbitration agreements.” Gilmer v.
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Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991) (quoting Moses H. Cone Mem’l Hosp. v.
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Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). Nonetheless, when a question arises as to whether
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“a particular party is bound by the arbitration agreement,” “the liberal federal policy regarding the
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scope of arbitrable issues is inapposite.” Comer v. Micor, Inc., 436 F.3d 1098, 1104 n.11 (9th Cir.
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2006) (emphasis in original; citation omitted).
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IV. DISCUSSION
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A. Whether Mercedes-Benz May Enforce the Arbitration Clause
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The FAA “imposes certain rules of fundamental importance, including the basic precept that
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arbitration ‘is a matter of consent, not coercion.’” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp.,
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S.Ct. 1758, 1773 (2010) (quoting Volt Information Sciences, Inc. v. Bd. of Trustees of Leland
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Stanford Univ., 489 U.S. 468, 479 (1989)).5 “The right to compel arbitration stems from a
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contractual right,” which generally “may not be invoked by one who is not a party to the agreement
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and does not otherwise possess the right to compel arbitration.” Britton v. Co-op Banking Group, 4
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F.3d 742, 744 (9th Cir. 1993) (citation omitted).
those who have actually signed the agreement to arbitrate. In certain circumstances, a signatory can
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For the Northern District of California
“The courts have made clear, however, that an obligation to arbitrate does not attach only to
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compel a nonsignatory to arbitrate. For example, a nonsignatory may be bound by an agreement to
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arbitrate under ordinary contract and agency principles, such as ‘1) incorporation by reference; 2)
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assumption; 3) agency; 4) veil-piercing/alter ego; and 5) estoppel.’” Amisil Holdings Ltd. v.
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Clarium Capital Mgmt. LLC, 622 F. Supp. 2d 825, 830 (N.D. Cal. 2007) (quoting Comer, 436 F.3d
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at 1101) (adopting magistrate judge’s report and recommendation).
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“Conversely, in certain circumstances, a nonsignatory can compel a signatory to arbitrate. For
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instance, a nonsignatory can enforce an arbitration agreement as a third-party beneficiary. Also, a
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signatory can be compelled to arbitrate at the non-signatory’s insistence under ‘an alternative
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Under the FAA, the question of whether a nonsignatory can compel a signatory to arbitrate
a claim pursuant to an arbitration agreement is determined by the federal substantive law of
arbitrability. Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 417
n.4 (4th Cir. 2000) (“The Supreme Court has directed that we ‘apply ordinary state law principles
that govern the formation of contracts,’ and the ‘federal substantive law of arbitrability.’ Thus state
law determines questions ‘concerning the validity, revocability, or enforceability of contracts
generally,’ but the [FAA] and the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, enforced by 9 U.S.C. §§ 201-08 (1994), ‘create a body of federal substantive law
of arbitrability, applicable to any arbitration agreement within the coverage of the Act.’”) (internal
citations omitted); see also Boucher v. Alliance Title Co., Inc., 127 Cal. App. 4th 262, 268 (2005);
Metalclad Corp. v. Ventana Environmental Organizational P’ship, 109 Cal. App. 4th 1705, 1712-13
(2003).
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estoppel theory’ – i.e., ‘because of the close relationship between the entities involved, as well as the
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relationship of the alleged wrongs to the nonsignatory’s obligations and duties in the contract . . .
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and [the fact that] the claims were intimately founded in and intertwined with the underlying
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contract obligations.’” Id. at 830-31 (quoting Thomson-CSF, S.A. v. American Arbitration Ass’n, 64
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F.3d 773, 778 (2d Cir. 1995) and citing Comer, 436 F.3d at 1101) (internal citations and quotation
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marks omitted). Indeed, “courts have generally found . . . [that] arbitration is more likely to be
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attained when the party resisting arbitration is a signatory.” Amisil, 622 F. Supp. 2d at 831 (citing
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CD Partners, LLC v. Grizzle, 424 F.3d 795, 799 (8th Cir. 2005); Merrill Lynch Investment
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Managers v. Optibase, Ltd., 337 F.3d 125, 131 (2d Cir. 2003); Thomson-CSF, 64 F.3d at 779).
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Here, the court is faced with the latter circumstance, as Mercedes-Benz, a nonsignatory to the
contract, contends that Mr. Mance, a signatory, should be compelled to arbitrate his claim under an
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alternate estoppel theory.6 Two kinds of equitable estoppel may support a nonsignatory’s right to
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Mercedes-Benz also contends that Dealer was its agent, and “[w]here a principal-agency
relationship allegedly exists between a signatory and non-signatory to the arbitration agreement, the
non-signatory is also bound by that agreement due to that relationship.” Motion, ECF No. 6 at 17
(citing Rowe v. Exline, 153 Cal. App. 4th 1276, 1284 (2007); Dryer v. Los Angeles Rams, 40 Cal. 3d
406, 418 (1985)). It is true that Ninth Circuit precedent establishes that “agents of a signatory can
compel the other signatory to arbitrate so long as (1) the wrongful acts of the agents for which they
are sued relate to their behavior as agents or in their capacities of agents . . . and (2) the claims
against the agents arise out of or relate to the contract containing the arbitration clause.” Amisil, 622
F. Supp. 2d at 832 (summarizing the holdings of Letizia v. Prudential Bache Secs., Inc., 802 F.2d
1185 (9th Cir. 1986) and Britton v. Co-op Banking Group, 4 F.3d 742 (9th Cir. 1993)). But
Mercedes-Benz’s argument is not persuasive for two reasons. First, the case law that MercedesBenz cites addresses situations where nonsignatory agents enforced arbitration agreements signed by
their principals, but here a nonsignatory (purported) principal is attempting to enforce an arbitration
agreement signed by the (purported) agent. See Dryer, 40 Cal.3d at 418 (nonsignatory defendant,
who was the agent of a signatory, was allowed to enforce arbitration clause); Rowe, 153 Cal. App.
4th at 1284-90 (nonsignatory individual defendants could enforce arbitration agreement in part
because they were agents of signatory corporation). Perhaps a principal can assert its agent’s
contractual arbitration remedy, but Mercedes-Benz does not make that argument sufficiently.
Second, Mercedes-Benz has not put forth evidence to demonstrate that Dealer even was its agent
(instead stating that “of course” it was). Motion, ECF No. 6 at 16. But Mr. Mance points out in his
opposition that Dealer is not owned or operated by Mercedes-Benz. Opposition, ECF No. 13 at 11;
Gray Decl., ECF No. 13-2 ¶ 13.
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compel arbitration: (1) when the signatory’s claims against a nonsignatory arise out of the
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underlying contract; and (2) when the nonsignatory’s conduct is intertwined with a signatory’s
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conduct.
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First,
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equitable estoppel applies when the signatory to a written agreement containing an
arbitration clause must rely on the terms of the written agreement in asserting its
claims against the nonsignatory. When each of a signatory’s claims against a
nonsignatory makes reference to or presumes the existence of the written agreement,
the signatory’s claims arise out of and relate directly to the written agreement, and
arbitration is appropriate.
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Fujian Pacific Elec. Co. v. Bechtel Power Corp., No. C 04-3126 MHP, 2004 WL 2645974, at *5
1999) and discussing federal appellate caselaw). See, e.g., Sunkist Soft Drinks, Inc. v. Sunkist
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For the Northern District of California
(N.D. Cal. Nov. 19, 2004) (quoting MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.
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UNITED STATES DISTRICT COURT
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Growers, Inc., 10 F.3d 753, 758 (11th Cir. 1993) (“Although Sunkist does not rely exclusively on
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the license agreement to support its claims, each claim presumes the existence of such an agreement.
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We find that each counterclaim maintained by Sunkist arises out of and relates directly to the license
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agreement.”); Amisil, 622 F. Supp. 2d at 840 (quoting Fujian). It applies in such a situation because
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“[a] signatory to an agreement cannot . . . ‘have it both ways’: it cannot on the one hand, seek to
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hold the non-signatory liable pursuant to duties imposed by the agreement, which contains an
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arbitration provision, but on the other hand, deny the arbitration provision’s applicability because
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the defendant is a non-signatory.” Fujian, 2004 WL 2645974, at *5; see also Larson v. Speetjens,
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No. C 05-3176 SBA, 2006 WL 2567873, *4 (N.D. Cal. Sept. 5, 2006) (“A party should not be
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allowed to claim the benefit of the contract and simultaneously avoid its burdens”).
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Second,
where the conduct of a nonsignatory is substantially interdependent with the conduct
of a signatory, unless the nonsignatory is compelled to arbitrate, arbitration
proceedings between the two signatories would be rendered meaningless and the
federal policy in favor of arbitration effectively thwarted. In other words, where a
lawsuit against nonsignatories is inherently bound up with claims against a signatory,
the court should compel arbitration in order to avoid denying the signatory the benefit
of the arbitration clause, and in order to avoid duplicative litigation which
undermines the efficiency of arbitration.
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Fujian, 2004 WL 2645974, at *5 (quoting MS Dealer, 177 F.3d at 947 ). See Westmoreland v.
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Sadoux, 299 F.3d 462, 467 (5th Cir. 2002) (providing that a nonsignatory can compel arbitration
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when the signatory raises allegations of substantially interdependent and concerted misconduct by
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the nonsignatory and the other signatory); Thomson-CSF, 64 F.3d at 778 (noting that a signatory can
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be bound to arbitrate with a nonsignatory “because of the close relationship between the entities
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involved, as well as the relationship of the alleged wrongs to the nonsignatory’s obligations and
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duties in the contract . . . and [the fact that] the claims were intimately founded in and intertwined
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with the underlying contract obligations”); see also Comer, 436 F.3d at 1101 (acknowledging the
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same but not applying the theory because, unlike here, it was a signatory, and not a nonsignatory,
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who invoked estoppel).
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Because Mr. Mance does not bring any claims against Dealer – and so there are no claims
against a nonsignatory that are “inherently bound up” with claims against a signatory – only the first
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theory of equitable estoppel applies. See Hawkins v. KPMG LLP, 423 F. Supp. 2d 1038, 1050 (N.D.
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Cal. 2006); see also Southern Energy Homes, Inc. v. Kennedy, 774 So.2d 540, 545 (Ala. 2000)
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(noting that “‘intertwining’ requires at least two threads to weave together”). And, upon
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examination, Mercedes-Benz should be allowed to compel Mr. Mance to arbitrate his claim because
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his claim “makes reference to or presumes the existence of” the underlying contract. Mercedes-
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Benz’s duty to comply with its warranty arose only when Mr. Mance bought the car. Had he not
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signed the contract, he would not have received the warranty from Mercedes-Benz. In other words,
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his claim for breach of warranty is premised on, and arises out of, the contract. See Fujian, 2004
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WL 2645974, at *6 (Patel, J.) (“Fujian’s claims against Bechtel directly relate to the Construction
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Agreement and the Engineering Contract. Indeed, the Corporate Guaranty premises Bechtel’s
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liability for money damages solely on the failure of [Bechtel’s subsidiaries] to fulfill their
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obligations under those agreements.”); but see Hawkins, 423 F. Supp. 2d at 1050-51 (Patel, J.)
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(Defendant argued that Plaintiff could not have purchased a tax shelter without executing a warrant
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that contained an arbitration clause; the court rejected Defendant’s equitable estoppel argument,
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stating: “[U]nlike the claims in Fujian and the cases cited by defendants, plaintiff’s claims do not
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rely on the content of the Warrant for their success. As already discussed plaintiff’s fraud claims
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depend only on the sale of the tax shelter as a whole. The complex innards of the shelter are for all
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relevant purposes a black box.”) (internal citation omitted). In such a situation, it would not be fair
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to allow Mr. Mance to rely upon his signing the contract to buy the car and get the warranty but to
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prevent Mercedes-Benz from attempting to enforce the contract’s arbitration clause.
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B. Whether the Arbitration Clause is Unconscionable
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Mr. Mance also argues that the arbitration clause is unenforceable because it is unconscionable.
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Because Mr. Mance is the party opposing enforcement of the arbitration agreement, he bears the
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burden to prove this defense. Engalla v. Permanente Medical Group, Inc., 15 Cal. 4th 951, 972
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(1997).
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1. AT&T Mobility, LLC v. Concepcion
Mercedes-Benz contends that AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2011),
precludes Mr. Mance from arguing that an arbitration clause is unconscionable under California law.
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See Motion, ECF No. 6 at 9. In Concepcion, the Supreme Court reviewed the California rule that an
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arbitration agreement that is part of a consumer contract and that contains a class action waiver
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generally is unconscionable. (This rule is known as the Discover Bank rule, for the California
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Supreme Court opinion so holding. See Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005).)
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The Supreme Court held that the Discover Bank rule was preempted by the FAA because
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“[r]equiring the availability of classwide arbitration interferes with fundamental attributes of
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arbitration and thus creates a scheme inconsistent with the FAA.” Concepcion, 131 S.Ct at 1748.
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This holding, however, does not reach as far as Mercedes-Benz suggests. As Judge Chen recently
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explained: “In Concepcion, the Supreme Court specifically noted that the FAA ‘permits agreements
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to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or
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unconscionability, [although] not by defenses that apply only to arbitration or that derive their
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meaning from the fact that than agreement to arbitrate is at issue.’ In short, arbitration agreements
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are still subject to unconscionability analysis.” Kanbar v. O’Melveny & Myers, No. C-11-0892
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EMC, 2011 WL 2940690, at *6 (N.D. Cal. July 21, 2011); see also Mission Viejo Emergency
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Medical Assocs. v. Beta Healthcare Group, 197 Cal. App. 4th 1146, 1158 n.4 (2011) (“Defendants
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appear to argue that AT & T essentially preempts all California law relating to unconscionability.
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We disagree, as the case simply does not go that far.”). Therefore, the court will address Mr.
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Mance’s unconscionability argument below.
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2. Unconscionability
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To determine whether an agreement to arbitrate is enforceable, the court must “apply ordinary
state-law principles that govern the formation of contracts.” Circuit City Stores v. Adams, 279 F.3d
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889, 892 (9th Cir. 2002) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944
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(1995)). “General contract defenses such as fraud, duress or unconscionability, grounded in state
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contract law, may operate to invalidate arbitration agreements.” Id. (citing Doctor’s Assocs., Inc. v.
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Casarotto, 517 U.S. 681, 687 (1996)); see also Ticknor v. Choice Hotels Int’l, Inc., 265 F.3d 931,
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937 (9th Cir. 2001) (citing same). “If the court as a matter of law finds the contract or any clause of
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the contract to have been unconscionable at the time it was made the court may refuse to enforce the
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contract.” Cal. Civ. Code § 1670.5(a).
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Unconscionability has both a procedural and a substantive component. Armendariz v. Found.
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Health Psychcare Servs., 24 Cal. 4th 83, 114 (2000). Although both components must be present
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before a court will refuse to enforce a contract, a sliding scale applies: “the more substantively
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oppressive the contract terms, the less evidence of procedural unconscionability is required to come
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to the conclusion that the term is unenforceable, and vice versa.” Id.
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I. Procedural Unconscionability
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“The procedural element of the unconscionability analysis concerns the manner in which the
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contract was negotiated and the circumstances of the parties at that time.” Gatton v. T-Mobile USA,
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Inc., 152 Cal. App. 4th 571, 581 (2007) (citing Kinney v. United HealthCare Services, Inc., 70 Cal.
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App. 4th 1322, 1329 (1999)). “The element focuses on oppression or surprise.” Id. (citing
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Armendariz, 24 Cal. 4th at 114). “Oppression arises from an inequality of bargaining power that
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results in no real negotiation and an absence of meaningful choice.” Id. (citing Flores v.
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Transamerica HomeFirst, Inc., 93 Cal. App. 4th 846, 853 (2001)). “Surprise is defined as ‘the
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extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed
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form drafted by the party seeking to enforce the disputed terms.’” Id. (quoting Stirlen v. Supercuts,
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Inc., 51 Cal. App. 4th 1519, 1532 (1997)) (internal quotation marks omitted).
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“The California Supreme Court has consistently reiterated that ‘[t]he procedural element of an
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1
unconscionable contract generally takes the form of a contract of adhesion.’” Id. (quoting Discover
2
Bank v. Superior Court, 36 Cal. 4th 148, 160 (2005); citing Armendariz, 24 Cal. 4th at 113) (internal
3
quotations omitted). A contract of adhesion is a “standardized contract, which, imposed and drafted
4
by the party of superior bargaining strength, relegates to the subscribing party only the opportunity
5
to adhere to the contract or reject it.” Armendariz, 24 Cal. 4th at 113. “[California] [a]ppellate
6
courts considering unconscionability challenges in consumer cases have routinely found the
7
procedural element satisfied where the agreement containing the challenged provision was a contract
8
of adhesion.” Gatton, 152 Cal. App. 4th at 582 (collecting cases).
9
Mr. Mance essentially argues that the sales contract here was presented to him on a
pointed out to him by the Dealer’s representative and was “buried within" the contract rather than
12
For the Northern District of California
“take-it-or-leave-it” basis and that the arbitration provision found within it was not specifically
11
UNITED STATES DISTRICT COURT
10
being clearly disclosed.
13
His argument that he was surprised by the arbitration agreement is not persuasive. The
14
arbitration clause is found on the back of the contract and is highlighted by bold, capitalized text that
15
alerts the reader as follows:
16
ARBITRATION CLAUSE
17
PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL RIGHTS
18
1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE
BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY
JURY TRIAL.
19
20
21
22
23
24
2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO
PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON
ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY
RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF
INDIVIDUAL ARBITRATIONS.
3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE
GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER
RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE
AVAILABLE IN ARBITRATION.
25
26
Universal Decl., ECF No. 7, Ex. A. Also, right above the final signature block of the contract is the
27
following notice, again in bold, capitalized text:
28
YOU AGREE TO THE TERMS OF THIS CONTRACT. YOU CONFIRM THAT
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1
2
3
BEFORE YOU SIGN 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 CLAUSE ON THE REVERSE SIDE, BEFORE SIGNING
BELOW. YOU CONFIRM THAT YOU RECEIVED A COMPLETED FILLEDIN COPY WHEN YOU SIGNED IT.
4
5
Id. While Dealer’s representatives may not have discussed the clause with him, it was hardly hidden
6
from him. The arbitration clause is not printed in exceptionally small text or buried within a
7
contract that is pages upon pages long. Rather, it is conspicuously labeled on the back side of a
8
single, double-sided piece of paper and there is fair warning next to the signature block. In short,
9
Mr. Mance fails to convince the court that the arbitration clause was oppressive or took him by
Oct. 7, 2011) (“As an initial matter, the Court rejects any suggestion that Plaintiffs are not bound by
12
For the Northern District of California
surprise. See Chavez v. Bank of America, No. C 10-653 JCS, 2011 WL 4712204, at *6 (N.D. Cal.
11
UNITED STATES DISTRICT COURT
10
the arbitration clause or the Terms of Use based purely on the fact that the Plaintiffs did not read the
13
contract or its terms. The law is clear that a party entering a contract has responsibility for learning
14
its terms and that each and every term need not be explained orally to a party.”) (citing Higgs v.
15
Automotive Warranty Corp. of America, 134 Fed. Appx. 828, 831 (6th Cir. 2005); Murphy v.
16
DirecTV, Inc., No. 2:07–cv–06465–JHN–VBKx, 2011 WL 3319574 (C.D. Cal. Aug.2, 2011)); cf.
17
Goodridge v. KDF Automotive Group, Inc., --- Cal. Rptr. 3d ----, 2012 WL 3635279, at *9 (2012)
18
(“There is no provision for Goodridge’s signature or initials under or adjacent to that language.
19
Rather, his signature appears on the opposite side of the page under a larger, ‘boxed-in’ provision
20
regarding the lack of a ‘cooling-off’ period (unless otherwise agreed) that appears to the left of
21
above-quoted language in the two-thirds width of the page adjacent to the left margin. In the
22
circumstances of this case, we conclude that front-side reference to the back-side arbitration clause
23
was hidden within the prolix of the Contract in such a manner as to not reasonably notify Goodridge
24
of the existence of the arbitration clause.”).
25
Under California precedent, however, the sales contract was a contract of adhesion. Dealer,
26
which had superior bargaining strength, presented Mr. Mance with a form contract with the relevant
27
dollar amounts already filled in. Mance Decl., ECF No. 13-1 ¶ 4. Mr. Mance states that he did not
28
have an opportunity to negotiate its terms. Id. ¶ 6. In sum, Mr. Mance either had to accept the
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1
contract’s terms as they were presented to him, or walk away from the purchase entirely. Id. ¶¶ 4-7.
2
See, e.g., Gatton, 152 Cal. App. 4th at 582 (“It is clear that the T-Mobile service agreement was a
3
contract of adhesion: T-Mobile drafted the form agreement, its bargaining strength was far greater
4
than that of the individual customers, and customers were required to accept all terms and conditions
5
of the agreement as presented or forgo T-Mobile’s telephone service.”); Gutierrez v. Autowest, Inc.,
6
114 Cal. App. 4th 77, 89 (2003) (“The [automobile] lease was presented to plaintiffs for signature on
7
a ‘take it or leave it’ basis. Plaintiffs were given no opportunity to negotiate any of the preprinted
8
terms in the lease. The arbitration clause was particularly inconspicuous, [as it was] printed in
9
eight-point typeface on the opposite side of the signature page of the lease. Gutierrez was never
its inclusion within the lease or to agree upon its specific terms. He was not required to initial the
12
For the Northern District of California
informed that the lease contained an arbitration clause, much less offered an opportunity to negotiate
11
UNITED STATES DISTRICT COURT
10
arbitration clause.”).
13
California law is unclear whether a finding that a contract is adhesive is also a finding of
14
procedural unconscionability. See Graham v. Scissor-Tail, Inc., 28 Cal. 3d 807, 819-20 (1981) (“To
15
describe a contract as adhesive in character is not to indicate its legal effect. It is, rather, ‘the
16
beginning and not the end of the analysis insofar as enforceability of its terms is concerned.’ Thus, a
17
contract of adhesion is fully enforceable according to its terms unless certain other factors are
18
present which, under established legal rules – legislative or judicial – operate to render it
19
otherwise.”) (internal citations and footnotes omitted); Roman v. Superior Court, 172 Cal. App. 4th
20
1462, 1470 n.2 (2009) (“The adhesive nature of the contract will not always make it procedurally
21
unconscionable. When bargaining power is not grossly unequal and reasonable alternatives exist,
22
oppression typically inherent in adhesion contracts is minimal.”) (citations omitted); Gatton, 152
23
Cal. App. 4th at 585 (“[W]e hold that absent unusual circumstances, use of a contract of adhesion
24
establishes a minimal degree of procedural unconscionability notwithstanding the availability of
25
market alternatives.”) (footnote omitted); Aral v. EarthLink, Inc., 134 Cal. App. 4th 544, 557 (2005)
26
(describing a contract of adhesion as “quintessential procedural unconscionability”); Crippen v.
27
Central Valley RV Outlet, 124 Cal. App. 4th 1159, 1165-66 (2004) (“[T]here is no general rule that a
28
form contract used by a party for many transactions is procedurally unconscionable. . . . In general,
C 11-03717 LB
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13
1
nothing prevents purchasers of used vehicles from bargaining with dealers, even though dealers use
2
form contracts, and nothing in the record shows that plaintiff could not bargain in this case.”);
3
Flores, 93 Cal. App. 4th at 853 (“A finding of a contract of adhesion is essentially a finding of
4
procedural unconscionability.”); California Grocers Assoc., Inc. v. Bank of America, National Trust
5
and Savings Accoc., 22 Cal. App. 4th 205, 214 (1994) (“To speak in terms of ‘procedural’
6
unconscionability is to elevate the fact of adhesiveness, which is not per se oppressive, to the same
7
level as ‘substantive’ unconscionability, thus tending to obscure the real issue.”).
8
The clear import of Concepcion, though, pushes against finding that an adhesive contract,
in which consumer contracts were anything other than adhesive are long past.”); see also id. at 1753
11
(Thomas, J., concurring) (“As I would read it, the FAA requires that an agreement to arbitrate be
12
For the Northern District of California
without more, is per se procedurally unconscionable. Concepcion, 121 S.Ct. at 1750 (“[T]he times
10
UNITED STATES DISTRICT COURT
9
enforced unless a party successfully challenges the formation of arbitration agreement, such as by
13
proving fraud or duress.”). Indeed, recent federal opinions considering this question post-
14
Concepcion, seem to agree. See, e.g., Cruz v. Cingular Wireless, LLC, 648 F.3d 1205, 1215 (11th
15
Cir. 2011) (“In addition, like the plaintiffs in Concepcion, the Plaintiffs here do not allege any
16
defects in the formation of the contract, aside from its generally adhesive nature, which alone is
17
insufficient to invalidate a consumer contract.”) (citing Concepcion, 131 S.Ct. at 1750, 1753);
18
Grabowski v. C.H. Robinson Co., No. 10cv1658, 2011 WL 4353998, at *10 (S.D. Cal. Sep. 19,
19
2011) (“Plaintiff has presented evidence that the agreements were presented on a ‘take it or leave
20
[it]’ basis, with little or no option for the employee to negotiate. In light of the Supreme Court’s
21
decision in Concepcion, however, the Court does not find that the adhesive nature of the agreement
22
weighs strongly in favor of procedural unconscionability.”) (citing Concepcion, 121 S.Ct. at 1750);
23
Ruhe v. Masimo Corp., No. SACV 11-00734-CJC (JCGx), 2011 WL 4442790, at *3 (C.D. Cal. Sep.
24
16, 2011) (“Here, the arbitration agreement is not procedurally unconscionable. Although Plaintiffs
25
assert the arbitration agreement was a contract of adhesion, presented a mandatory condition of
26
employment, ‘[t]he adhesive nature of [a] contract will not always make it procedurally
27
unconscionable. When bargaining power is not grossly unequal and reasonable alternatives exist,
28
oppression typically inherent in adhesion contracts is minimal.’”) (quoting Roman, 172 Cal. App.
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1
4th at 1470 n.2); In re Gateway LX6810 Computer Products Litig., No. SACV 10-1563-JST (JEMx),
2
2011 WL 3099862, at *3 (C.D. Cal. July 21, 2011) (“Plaintiffs’ procedural unconscionability
3
argument is indistinguishable from the assertion that the [arbitration agreement] was contained
4
within a contract of adhesion. In California, ‘a contract of adhesion is fully enforceable according to
5
its terms unless certain other factors are present which, under established legal rules – legislative or
6
judicial – operate to render it otherwise.’ Thus, the Court concludes that Plaintiff has not shown that
7
the [arbitration agreement] is procedurally unconscionable.”) (internal citations omitted) (quoting
8
Graham, 28 Cal. 3d at 819-20); Bernal v. Burnett, No. 10-cv-01917-WJM-KMT, 2011 WL
9
2182903, at *6 (D. Colo. June 6, 2011) (“[T]he fact that the contract at issue in Concepcion was an
Concepcion appears to be little troubled by that fact. As a result, this Court has no alternative but to
12
For the Northern District of California
adhesion contract did not affect the Supreme Court’s analysis and, indeed, the majority in
11
UNITED STATES DISTRICT COURT
10
discount the weight to be attributed the adhesive nature of the Arbitration Agreements at issue
13
here.”).
14
In this post-Concepcion legal landscape, the court cannot find that the adhesive sales contract
15
Mr. Mance signed was procedurally unconscionable. As stated above, the arbitration provision was
16
highlighted, apparent, and not oppressive, and it should not have taken Mr. Mance by surprise.
17
Moreover, it is unclear whether Mercedes-Benz, in this particular instance, was in the stronger
18
negotiating position.7 See Gatton, 152 Cal. App. 4th at 583 (“The existence of consumer choice
19
decreases the extent of procedural unconscionability but does not negate the oppression and obligate
20
court to enforce the challenged provision regardless of the extent of substantive unfairness.”). And
21
while the contract was adhesive, this fact, alone and after Concepcion, does not render the
22
arbitration provision procedurally unconscionable. Thus, because procedural unconscionability
23
must be present before a court will refuse to enforce a contract, Mr. Mance’s unconscionability
24
argument fails.
25
ii. Substantive Unconscionability
26
27
28
7
See Dale Kasler, Car-mecca state suffers; Region hit hard by auto slump; Dealers close,
staffs cut, tax revenue down, SACRAMENTO BEE, Nov. 30, 2008, at A1; Jon Ortiz and Dale Kasler ,
Lagging car sales add to state’s woes, SACRAMENTO BEE, Oct. 28, 2008, at A1.
C 11-03717 LB
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15
1
Even so, for Mr. Mance to defeat Mercedes-Benz’s motion, the arbitration clause would have to
2
be substantively unconscionable. Armendariz, 24 Cal. 4th at 114. Substantive unconscionability
3
focuses on the harshness and one-sided nature of the substantive terms of the contract. A & M
4
Produce Co. v. FMC Corp., 135 Cal. App. 3d 473, 486–87 (1982). An adhesive agreement to
5
arbitrate will satisfy this general standard for substantive unconscionability if the agreement lacks a
6
“modicum of bilaterality.” Armendariz, 24 Cal. 4th at 117. Whether an arbitration agreement is
7
sufficiently bilateral is determined by an examination of the actual effects of the challenged
8
provisions. Ellis v. McKinnon Broadcasting Co., 18 Cal. App. 4th 1796, 1803 (1993) (“Substantive
9
unconscionability . . . refers to an overly harsh allocation of risks or costs which is not justified by
10
the circumstances under which the contract was made.”) (internal quotation marks omitted).
Mr. Mance contends that the arbitration clause is substantively unconscionable for the following
12
For the Northern District of California
UNITED STATES DISTRICT COURT
11
reasons: (1) the cost of arbitration – which he states would be $10-15,000 – is prohibitively high; (2)
13
the binding arbitration would leave him with limited appeal rights; (3) the selection of the arbitral
14
forum is within the control of Mercedes-Benz, and (4) unlike Mercedes-Benz, he has no self-help
15
remedies. Opposition, ECF No. 13 at 19-23; Gray Decl., ECF No. 13-2 ¶¶ 6-10, 12, Ex. C..
16
Regarding his first argument, courts have concluded that “where a consumer enters into an
17
adhesive contract that mandates arbitration, it is unconscionable to condition that process on the
18
consumer posting fees he or she cannot pay.” Gutierrez, 114 Cal. App. 4th at 89-90; see also
19
Ramirez, No. C 04-00281 JSW, 2005 WL 2894628, at *5 (N.D. Cal. Nov. 2, 2005) (“California
20
appl[ies] the principle that if a litigant is required to arbitrate statutory claims, he or she must be able
21
to effectively vindicate those rights in the arbitral forum and cannot be required to pay fees that he
22
or she would not be required to pay to litigate those claims in court.”) (citations omitted); Parada v.
23
Superior Court, 176 Cal. App. 4th 1554, 1574, 1584-85 (2009) (arbitration would have required the
24
plaintiffs to pay arbitral fees in excess of $12,000 per day under the challenged arbitration clause;
25
court followed Gutierrez and found clause to be substantively unconscionable).
26
Gutierrez is instructive. In that case, the plaintiffs entered into an automobile lease with the
27
defendants. Gutierrez, 114 Cal. App. 4th at 83. The lease contained an arbitration clause that
28
required disputes to be arbitrated under the authority and rules of the American Arbitration
C 11-03717 LB
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16
1
Association (“AAA”). Id. at 84. The plaintiffs later sued the defendant lessor for violation of
2
statutory rights, and the defendant moved to compel arbitration. Id. at 85. The plaintiffs opposed
3
the defendant’s motion, in part, on the ground that the arbitral forum fees exceeded their ability to
4
pay. Id.
5
The court found that, in carrying their burden, the plaintiffs would have been required to spend
6
more than $10,000, exclusive of attorney’s fees, to arbitrate their case. Id. at 85, 91. The plaintiffs
7
submitted evidence that demonstrated that they did not have the money to pay these fees and costs.
8
Id. at 90-91. And, unlike in the judicial system, there was no effective procedure for a consumer to
9
obtain a fee waiver or reduction. Id. at 91. The defendant pointed out that the plaintiffs, should they
plaintiffs here, who cannot afford to initiate the arbitration process in the first place.” Id. at 90.
12
For the Northern District of California
win, may be reimbursed, but the court noted that this provided “little comfort to consumers like
11
UNITED STATES DISTRICT COURT
10
“While arbitration may be within the reasonable expectations of consumers,” the court stated, “a
13
process that builds prohibitively expensive fees into the arbitration process is not.” Id. The court
14
thus found the arbitration clause substantively unconscionable and held that “consumers may
15
challenge a predispute arbitration clause as unconscionable if the fees required to initiate the process
16
are unaffordable[] and [if] the agreement fails to provide the consumer an effective opportunity to
17
seek a fee waiver.” Id. at 83.
18
The situation here is similar. The arbitration clause allows Mr. Mance to choose to arbitrate with
19
the AAA (as the plaintiffs in Gutierrez were required), the National Arbitration Forum (“NAF”), or
20
“any other organization that you choose subject to [Mercedes-Benz’s] approval.” Universal Decl.,
21
ECF No. 7, Ex. A. Mr. Mance’s counsel submitted a declaration stating that the NAF does not
22
conduct arbitrations involving individual parties and that the estimated AAA fees to be borne by Mr.
23
Mance, according to its publicly-available fee schedule, would be approximately $10,000, even after
24
the $2,500 fee advance from Mercedes-Benz that the arbitration clause contemplates. Gray Decl.,
25
ECF No. 13-2 ¶¶ 6-10, 12, Ex. C. Mr. Mance submitted a declaration stating that he does not have
26
the financial resources to pay such costs. Mance Decl., ECF No. 13-1 ¶ 13.
27
28
Mercedes-Benz counters in two ways: (1) Concepcion precludes this substantive
unconscionability analysis; and (2) Mr. Mance will not pay the arbitral fees because his attorney is
C 11-03717 LB
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17
1
2
likely representing him on a contingency fee basis.
First, Mercedes Benz contends that Concepcion precludes this court from relying on the
3
substantive unconscionability analysis set forth in Gutierrez. In Concepcion, the court held that the
4
California Supreme Court’s rule in Discover Bank — that class action waivers in consumer
5
arbitration agreements may be unenforceable or unconscionable — is preempted by the FAA
6
because “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of
7
arbitration and thus creates a scheme inconsistent with the FAA.” Id. at 1748. In so holding, the
8
Court explained that while “[t]he final phrase of [9 U.S.C.] § 2 . . . permits arbitration agreements to
9
be declared unenforceable ‘upon such grounds as exist at law or in equity for the revocation of any
‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by
12
For the Northern District of California
contract[,]’ [t]his savings clause [only] permits agreements to arbitrate to be invalidated by
11
UNITED STATES DISTRICT COURT
10
defenses that apply only to arbitration or that derive their meaning from the fact that an agreement
13
to arbitrate is at issue.” Id. at 1746 (emphasis added). In other words, Concepcion holds that
14
contract defenses that interfere with fundamental objectives of arbitration are preempted.
15
The question, then, becomes: What contract defenses so interfere? In its decision, the Court
16
highlighted informality, efficiency, speed, and relative inexpensiveness as fundamental attributes of
17
arbitration. Id. at 1749 (“The point of affording parties discretion in designing arbitration processes
18
is to allow for efficient, streamlined procedures tailored to the type of dispute. It can be specified,
19
for example, that the decision-maker be a specialist in the relevant field, or that proceedings be kept
20
confidential to protect trade secrets. And the informality of arbitral proceedings is itself desirable,
21
reducing the cost and increasing the speed of dispute resolution.”). Moreover, the Court’s examples
22
of rules that likely would run afoul of these attributes (such as a rules requiring judicially-monitored
23
discovery, adherence to the Federal Rules of Evidence in arbitration, or ultimate disposition of the
24
arbitration by a panel of twelve lay arbitrators) further emphasize the importance of these attributes.
25
See id. at 1747; see also Kanbar v. O'Melveny & Myers, No. C-11-0892 EMC, 2011 WL 2940690,
26
at *9 (N.D. Cal. July 21, 2011).
27
28
Here, this court does not believe that the rule set forth in Gutierrez – that “consumers may
challenge a predispute arbitration clause as unconscionable if the fees required to initiate the process
C 11-03717 LB
ORDER
18
1
are unaffordable[] and [if] the agreement fails to provide the consumer an effective opportunity to
2
seek a fee waiver” – runs afoul of those fundamental attributes. Indeed, the Court itself has
3
recognized – albeit in the federal context – that an arbitration agreement may be unenforceable if the
4
existence of large arbitration costs preclude a litigant from effectively vindicating his federal
5
statutory rights in an arbitral forum. See Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90
6
(2000); see also Kaltwasser v. AT&T Mobility LLC, No. C 07-00411 JF, 2011 WL 4381748, at *6
7
(N.D. Cal. Sep. 20, 2011) (noting that although Concepcion did not explicitly overrule Green
8
Tree,“[i]f Green Tree has any continuing applicability, it must be confined to circumstances in
9
which a plaintiff argues that costs specific to the arbitration process, such as filing fees and
either provide for affordable arbitral fees or provide an effective opportunity for a party to seek a fee
12
For the Northern District of California
arbitrator’s fees, prevent her from vindicating her claims.”). Requiring arbitration agreements to
11
UNITED STATES DISTRICT COURT
10
waiver would not hinder arbitration’s informality, efficiency, or speed, and, in fact, would reinforce
13
its relative inexpensiveness. Thus, Mercedes-Benz fails to persuade the court that Gutierrez is no
14
longer good law.
15
Second, Mercedes Benz argues that even if Gutierrez is good law, it is inapplicable here. It
16
contends that Mr. Mance’s counsel is likely representing him on a contingency fee basis, so Mr.
17
Mance would not be paying these costs anyway. This point is unpersuasive. First, Mercedes-Benz
18
cites no authority for distinguishing between plaintiffs who are represented by counsel on a
19
contingency fee basis and those who are not. Second, doing so arguably would lead to the unfair
20
results: the arbitration clause at issue would be enforceable with respect plaintiffs who are
21
represented by counsel on a contingency fee basis but would be unconscionable with respect to
22
plaintiffs who are either paying for their counsel upfront or who are representing themselves. Third,
23
much more practically, the arbitral forum carries substantially higher costs than the relatively
24
modest costs associated with the federal judicial forum (particularly because discovery costs are
25
often modest in these types of cases).
26
Accordingly, this court finds that the arbitration clause is substantively unconscionable because
27
Mr. Mance has shown that the fees required to initiate the arbitral process are unaffordable and that
28
the arbitration agreement fails to provide him with an effective opportunity to seek a fee waiver.
C 11-03717 LB
ORDER
19
1
Mr. Mance’s remaining three arguments are less persuasive. He argues that the binding
2
arbitration would leave him with limited appeal rights, but conclusiveness is one of the primary
3
purposes of arbitration. Moncharch v. Heily & Blase, 3 Cal. 4th 1, 11 (1992) (noting that the “very
4
essence” of arbitration connotes a binding award). The arbitration clause here allows either party to
5
appeal if the arbitrator’s award is either $0 or more than $100,000. Universal Decl., ECF No. 7, Ex.
6
A. Mr. Mance cites Saika v. Gold, 49 Cal. App. 4th 1074, 1076-77 (1996), but in that case, the
7
arbitration agreement provided virtually no conclusiveness if the plaintiff won the arbitration, as it
8
allowed a party to disregard the result only if the arbitration award exceeded $25,000 – a choice
9
which, in that case’s context, would almost certainly only have been chosen by a losing defendant.
10
This provision is not nearly so one-sided.
He also argues that the arbitration clause is unconscionable because the selection of the arbitral
12
For the Northern District of California
UNITED STATES DISTRICT COURT
11
forum is within the control of Mercedes-Benz, but he cites no authority for this argument. In any
13
case, the arbitration agreement provides Mr. Mance with a choice of two common arbitration
14
associations and allows him to suggest an alternative. Universal Decl., ECF No. 7, Ex. A. His
15
contention that Mercedes-Benz would refuse any suggested alternative is speculative.
16
Lastly, he argues that the arbitration clause is unconscionable because it leaves open self-help
17
remedies, such as repossession, to Mercedes-Benz. He, on the other hand, has no such self-help
18
remedies. Again, Mr. Mance cites no authority for the proposition that such a provision renders an
19
arbitration agreement unconscionable. The case he does cite involved an arbitration clause that
20
required an employee’s claims against the employer to be arbitrated, but did not so require the
21
employer’s claims against an employee. See Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1173
22
(9th Cir. 2003). The situations are not analogous.
23
In sum, the court finds that Mr. Mance has established substantive unconscionability. But
24
because both procedural and substantive unconscionability must be present and the court found
25
above that the arbitration agreement was not procedurally unconscionable, Mr. Mance’s
26
unconscionability argument fails.
27
///
28
///
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20
1
V. CONCLUSION
2
Based on the foregoing, Mercedes-Benz’s motion to compel arbitration is GRANTED.
3
IT IS SO ORDERED.
4
Dated: September 28, 2012
5
_______________________________
LAUREL BEELER
United States Magistrate Judge
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10
12
For the Northern District of California
UNITED STATES DISTRICT COURT
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