Ciprianni, et al v. Omni La Costa Resort & Spa, LLC, et al.

Filing 41

ORDER granting 32 Motion to Compel Arbitration and Dismissing Plaintiffs Second Amended Complaint as to Defendants Omni La Costa Resort & Spa, LLC., Omni Hotels Management Corporation, and LC Investment 2010, LLC. Signed by Judge M. James Lorenz on 4/6/2017. (sjt)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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MICHAEL CIPRIANNI, et al.,

Case No.: 3:16-cv-01002-L-BGS
Plaintiffs,

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v.

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ORDER GRANTING DEFENDANTS’
MOTION [Doc. 32] TO COMPEL
ARBITRATION

OMNI LA COSTA RESORT & SPA, et
al.,

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Defendant.

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Pending before this Court is Defendants Omni La Costa Resort & Spa, LLC.,

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Omni Hotels Management Corporation, and LC Investment 2010, LLC’s (“Defendants”)

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motion to compel Plaintiffs Michael and Vanessa Cirprianni (“Plaintiffs”) to submit their

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claims to arbitration. The Court decides the matter on the papers submitted and without

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oral argument. See Civ. L. R. 7.1(d.1). For the reasons stated below, the Court

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GRANTS Defendants’ motion.

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3:16-cv-01002-L-BGS

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I.

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BACKGROUND
This case arises out of an injury sustained in July 2015 by Plaintiff Michael

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Ciprianni while using a fitness machine at a fitness facility (the “Resort”) owned and

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operated by Defendants. Plaintiffs joined the Resort in 2009. At that time, Plaintiffs

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executed an Agreement [Doc. 32–3] that set forth the terms and conditions of

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membership. Of relevance to the present motion, the Agreement mentioned an

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arbitration provision, bound Plaintiff to all written membership policies, and contained a

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change of terms provision reserving to Defendants the right to amend membership

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policies from time to time. (See Agreement.) In 2011, Defendants modified membership

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policy by enacting the 2011 Bylaws [Doc. 32–4], which contained an Arbitration

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Agreement. Defendants sent all Resort members a copy of the 2011 Bylaws and posted

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them on the member pages of the Resort’s website. (Miringoff Decl. [Doc. 32–2] ¶ 5.)

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Plaintiffs filed a complaint with the Superior Court of California on March 21,

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2016, alleging negligence and premises liability. (See Compl. [Doc. 1–2 Ex. A].)

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Defendants subsequently removed to this Court and answered. (See Removal Notice

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[Doc. 1]; Answer [Doc. 7].) Defendants now move to compel arbitration. (See Mot.

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[Doc. 32].) Plaintiffs oppose, arguing (1) the Federal Arbitration Act, 9 U.S.C. § 1 et seq.

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(“FAA”) does not govern this dispute; (2) compelling arbitration would be unduly

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prejudicial; (3) Defendant waived any alleged right to compel arbitration; and (4) the

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2011 Arbitration Clause is not valid. (See Opp’n [Doc. 33].) The Court will address

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these arguments in turn.

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II.

APPLICABILITY OF THE FEDERAL ARBITRATION ACT
Outside of the maritime context, the FAA governs only if the contract concerns

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interstate commerce. 9 U.S.C. § 1. Plaintiffs argue that this case does not concern

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interstate commerce because it involves only a “consumer contract for membership

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services provide[d] by a resort and spa located in California entered into by Plaintiffs in

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California and all services were provided in California.” (Opp’n 6:27–7:2.)
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In enacting the FAA, Congress intended to reach the full range of transactions

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covered by the Commerce Clause. Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56

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(2003). Thus, even if a specific economic activity alone would not affect interstate

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commerce in a substantial way, it suffices to trigger the interstate commerce

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jurisdictional hook of the FAA if the aggregate practice of which that economic activity

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is a part affects interstate commerce. Id. at 56–57. Furthermore, if some activity of one

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of the parties, even if not directly the subject of the contract or transaction at issue, has a

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nexus to interstate commerce, the FAA applies. See Allied-Bruce Terminix Companies,

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Inc. v. Dobson, 513 U.S. 265, 282 (holding the FAA applied to a local service contract

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between a homeowner and termite control company because the termite control company

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was multi-state in nature and used out of state material in performing on the contract).

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Applying this broad standard, the Court finds that the contract between the parties

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involves interstate commerce. Defendants are unquestionably multi-state in nature as

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they are citizens of Delaware and Texas that offer services nationwide to customers of

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diverse citizenship. Furthermore, it would seem beyond dispute that Defendants utilize

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some out of state materials and/or services in the operation of the Resort. Accordingly,

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the Court finds that the facts of this case trigger the FAA and therefore preempt any

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conflicting state law. 9 U.S.C. §2; Volt Information Scis., Inc. v. Board of Trs. of Leland

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Stanford Junior Univ., 489 U.S. 468, 478 (1989).

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III.

UNDUE PREJUDICE

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It is undisputed that Defendants Juan Manuel Anaya and San Diego Fitness

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Services, neither of whom are signatories to the Agreement, are not bound by the

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Arbitration Agreement. Thus, granting Defendants’ motion could require Plaintiffs to

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litigate their claims against the Omni Defendants in arbitration while litigating their

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claims against Defendants Juan Manuel Anaya and San Diego Fitness Services before

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this Court. Plaintiffs contend this would cause them undue prejudice and, for this reason,

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asks the Court to deny Defendants’ motion.
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This argument is problematic in that Plaintiffs do not cite to any authority that

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supports it. Furthermore, it is clearly established law that under the FAA “an arbitration

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agreement must be enforced notwithstanding the presence of other persons who are

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parties to the underlying dispute but not to the arbitration agreement.” Moses H. Cone

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Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 (1983). Accordingly, the Court

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finds that the presence of defendants Juan Manuel Anaya and San Diego Fitness Services

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cannot defeat this motion to compel arbitration as to the Omni Defendants.

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IV.

WAIVER
Plaintiffs contend Defendants waived their right to arbitrate by not bringing the

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instant motion sooner. In support of their argument, Plaintiffs rely entirely on California

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law. Having decided the FAA governs here, the Court will apply federal law. In the

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Ninth Circuit, “[t]he party arguing waiver of arbitration bears a heavy burden of proof.”

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Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir. 1990) (internal citations

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omitted). To carry this burden, the opposing party must show that the other party (1) had

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knowledge of the right to compel arbitration; (2) acted inconsistently with that right; and

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(3) resulting prejudice. Id.

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Plaintiffs argue that Defendants sat on their alleged right to compel arbitration for

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one year after injury and, as a result, caused Plaintiffs prejudice in the form of incurred

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legal fees and unintentional evidence spoliation. As an initial matter, the Court disagrees

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with Plaintiffs’ contention that the proper temporal focus is the time elapsed between

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injury and the filing of a motion to compel. Plaintiffs have not shown that, at time of

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injury, Defendants knew a lawsuit was forthcoming. Thus, the Court finds the proper

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focus is the time elapsed between service upon Defendants of the original complaint and

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the time Defendants first moved to compel arbitration. This period is only about four

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months (See Summons [Doc. 1-2]; First Mot. to Compel [Doc. 16].)), and during this

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four months, no substantive motion practice occurred. Accordingly, the Court finds

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Plaintiffs have failed to make an adequate showing that they were prejudiced in the form
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of unnecessary legal fees because of Defendants’ delay. Plaintiffs also speculate that, but

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for this delay, Defendants might not have unintentionally spoiled evidence by losing the

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Nautilus exercise machine at issue here. (Opp’n 11:3–10.) However, Plaintiffs fail to

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show that the Nautilus machine has in fact been irretrievably lost and, if so, how any

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delay in seeking arbitration occasioned this loss.

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Thus, the Court is not convinced that Plaintiffs suffered prejudice from any delay

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in moving to compel arbitration. Nor does the Court find that Defendants’ took any

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actions inconsistent with an intention to arbitrate. Other than move to compel,

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Defendants have merely removed and answered. Plaintiffs cite no authority, and the

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Court is unaware of any, holding that removal and answer are inconsistent with an

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intention to seek enforcement of an arbitration agreement. For these reasons, the Court

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finds Plaintiffs have failed to carry their “heavy burden” of showing Defendants waived

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their right to compel arbitration.

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V.

VALIDITY OF THE ARBITRATION AGREEMENT
An agreement to arbitrate is “valid, irrevocable, and enforceable, save upon such

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grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.

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Under California law, the elements of a valid contract are (1) parties capable of

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contracting; (2) mutual consent; (3) a lawful object; and (4) consideration. Cal. Civ. Code

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§ 1550. However, a court will not enforce an otherwise valid contract if there exists a

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viable defense. 1 Witkin, Summary 10th (2005) Contracts, § 331, p. 365.

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Plaintiffs argue the 2011 Arbitration Agreement is invalid because of a lack of

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notice. Plaintiffs’ argument relies entirely on Badie v. Bank of America, 67 Cal. App. 4th

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779 (1998). In Badie, plaintiffs were individuals who opened credit card accounts with

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defendant Bank of America (“BoA”). Badie, 67 Cal. App. 4th at 783. When plaintiffs

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opened their accounts, they signed account agreements that did not include an arbitration

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provision. Id. at 787. However, the account agreements did contain a change of terms

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clause that purported to give BoA unilateral authority to change the terms of the account
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agreements so long as BoA provided plaintiffs with advance notice. Id. at 786–87. BoA

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subsequently mailed plaintiffs letters announcing a change in terms requiring arbitration

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of disputes arising out of the account agreements. Id. at 785.

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Plaintiffs sued to enjoin enforcement of the arbitration provision, arguing that the

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change of terms provision did not bestow carte blanche upon BoA to make any change it

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wanted provided it gave advance notice. Badie, 67 Cal. App. 4th at 783–84. The Court

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of Appeals agreed. Id. at 807. Plaintiffs argue that the instant case is on all fours with

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Badie because, like BoA, Defendants here seek to (1) take advantage of a change of

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terms provision to (2) modify an existing agreement such that (3) any disputes arising out

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of the agreement must go to arbitration.

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While the Court agrees that there are some similarities between the present action

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and Badie, Plaintiffs’ opposition ignores a central distinction. The Badie court reasoned

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that a change of terms provision confers upon a party only the authority to modify a term

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“whose general subject matter was anticipated when the contract was entered into.”

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Badie, 67 Cal. App. 4th at 791. Because the original account agreement contained no

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mention at all regarding dispute resolution, the Court of Appeals reasoned that an

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arbitration provision fell outside the reach of the change of terms provision and was not

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valid as a modification of the original agreement. Id. at 795. Here, by contrast, the

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subject matter of arbitration was undeniably “anticipated when the contract was entered

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into.” Indeed, the 2008 Rules and Regulations [Doc. 32–6] in place when Plaintiffs’

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joined the Resort included an arbitration agreement, and this arbitration agreement was

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expressly referenced in the Agreement.

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Furthermore, the Agreement indicated assent to (1) the 2008 Rules and

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Regulations, (2) an arbitration provision, and (3) subsequent amendments to Resort

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policies. (Agreement.) When Defendants adopted the 2011 Bylaws, they sent a copy to

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all members and posted them on the members’ pages of the Resort’s website. (Miringoff

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Decl. ¶ 5.) Accordingly, the Court finds that the Arbitration Agreement contained in the

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2011 Bylaws was effective when Plaintiff sustained his injury in 2015. Under the FAA, a
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Court must compel arbitration of claims covered by a valid arbitration agreement.

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Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).

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Here, there is no dispute as to whether the Arbitration Agreement covers Ciprianni’s

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claim. Accordingly, the Court GRANTS Defendants’ motion to compel arbitration and

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dismisses Plaintiffs’ Second Amended Complaint as to the moving Defendants.

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VI.

CONCLUSION AND ORDER
For the foregoing reasons, the Court GRANTS Defendants’ Motion to Compel

arbitration and dismisses Plaintiffs’ Second Amended Complaint as to the following

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Defendants only: Omni La Costa Resort & Spa, LLC., Omni Hotels Management

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Corporation, and LC Investment 2010, LLC.

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IT IS SO ORDERED.

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Dated: April 6, 2017

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