Donald Okada v. Nevada Property 1, LLC
Filing
64
ORDER that 39 Motion to Compel Arbitration is GRANTED. The parties shall promptly submit this matter to binding arbitration in accordance with the Paragraph 24.10 Arbitration provisions of the Condominium Unit Purchase and Sale Agreement, and tha t this matter shall henceforth proceed by arbitration. FURTHER ORDERED that this case shall be stayed pending the conclusion of the binding arbitration proceedings. FURTHER ORDERED that the parties shall submit a joint status report every 120 days regarding the progress of the arbitration proceedings. Signed by Judge Lloyd D. George on 9/16/15. (Copies have been distributed pursuant to the NEF - MMM)
1
2
3
4
5
6
7
UNITED STATES DISTRICT COURT
8
DISTRICT OF NEVADA
9
10
DONALD OKADA,
11
Plaintiff,
12
v.
13
Case No. 2:14-cv-01601-LDG (NJK)
NEVADA PROPERTY 1, LLC,
14
ORDER
Defendant.
15
16
Nevada Property 1, LLC (NP1) moves to compel (#39) Donald Okada to arbitrate
17
the claims he has brought against NP1, pursuant to an arbitration clause in the
18
Condominium Unit Purchase and Sale Agreement (Purchase Agreement) that Okada
19
entered into with 3700 Associates, NP1's predecessor-in-interest. Okada opposes the
20
motion (#47), arguing that (1) NP1 waived any right it had to arbitrate Okada’s claims; (2)
21
the arbitration agreement is unconscionable; and (3) Okada’s claims are beyond the scope
22
of the arbitration agreement. The Court has read the pleadings, papers, exhibits and
23
documents filed by the parties, and has considered the parties’ arguments, and will grant
24
NP1's motion to compel arbitration.
25
26
1
Waiver
2
Arbitration agreements are valid, irrevocable and enforceable, but are subject to
3
defenses that exist at law or under equity that apply towards the revocation of any contract.
4
9 U.S.C. § 2. Waiver of a contractual right to arbitration is not favored and the party
5
seeking to argue that waiver exists bears a heavy burden of proof. Fisher v. A.G. Becker
6
Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986). “[T]hree factors must be met for a party to
7
waive its right to arbitration: (1) the party must know of an existing right to compel
8
arbitration; (2) the party must engage in acts inconsistent with that right; and (3) the party
9
opposing arbitration must suffer prejudice as a result of the inconsistent acts.” Brown v.
10
Dillard's, Inc., 430 F.3d 1004, 1012 (9th Cir. 2005).
11
NP1 concedes that it had knowledge of its right to compel arbitration. Okada
12
previously filed a complaint against NP1 in state court against NP1. NP1 responded by
13
moving to compel Okada to arbitration, relying upon the same arbitration agreement at
14
issue in this matter. (That motion was not decided, as Okada voluntarily dismissed his
15
complaint.) NP1 subsequently filed a Demand for Arbitration against Okada. Okada
16
responded by filing a counterclaim in the arbitration proceedings initiated by NP1.
17
Ultimately, an arbitration award was entered in favor of NP1, and confirmed by the state
18
court.
19
Okada argues that NP1 acted inconsistent with its right to arbitrate his claims by
20
moving to dismiss those claims (a motion which was granted in part and denied in part),
21
and subsequently moving to dismiss Okada’s amended complaint (a motion also granted in
22
part and denied in part). None of the decisions cited by Okada suggest that NP1's decision
23
to first seek dismissal of Okada’s claims rises to the level of an act inconsistent with its right
24
to arbitrate the claims. In Samson v. NAMA Holdings, LLC, 637 F.3d 915, 934 (9th
25
Cir.2011), the court held this element satisfied on its finding that the parties had
26
“consistently refused to arbitrate claims against them. . . .” In Gutierrez v. Wells Fargo
1
Bank, 704 F.3d 712 (9th Cir. 2012), the Ninth Circuit did not f ully address whether the party
2
seeking arbitration had acted inconsistent with its right to arbitrate, noting the case
3
presented unusual, specific circumstances. Nevertheless, the court determined that
4
compelling arbitration–after five years of litigation, including bench trial and a pending
5
appeal--would not be appropriate as a result of the severe prejudice to the non-moving
6
party and the waste of judicial resources. In Van Ness Townhouses v. Mar Industries
7
Corp., 862 F.2d 754, 758 (9th Cir.1988), the party seeking arbitration had actively litigated
8
the entire matter—including pleadings, motions, and approving a pre-trial conference
9
order—for more than two years. In the present matter, Okada filed this action in California
10
and NP1 filed its motion to compel arbitration only seven months later. In the interim, NP1
11
moved to dismiss or, in the alternative, to transfer venue pursuant to a choice of venue
12
provision in the Purchase Agreement. The district court granted in part the motion to
13
dismiss, and Okada filed an amended complaint. NP1 again moved to dismiss the claims
14
or, in the alternative, to transfer venue. Again, the district court granted in part the motion
15
to dismiss. The court also granted the motion to transfer venue. Upon the transfer of the
16
case to this district, NP1 promptly moved to compel arbitration. NP1's efforts limited to
17
obtaining a judicial determination whether Okada had sufficiently alleged any claims
18
against NP1 was not inconsistent with its right to compel arbitration of sufficiently alleged
19
claims. Accordingly, the Court finds that NP1 has not waived any right it has to arbitrate
20
Okada’s claims.
21
Unconscionability
22
“It is well-established that unconscionability is a generally applicable contract
23
defense, which may render an arbitration provision unenforceable.” Shroyer v. New
24
Cingular Wireless Services, Inc., 498 F.3d 976, 981 (9th Cir. 2007). Under Nevada law,
25
courts may invalidate arbitration provisions when both procedural unconscionability and
26
1
substantive unconscionability are present. D.R. Horton v. Green, 120 Nev. 549, 553
2
(2004). Unconscionability is determined on a sliding scale; less evidence of one form of
3
unconscionability is required in cases involving more evidence of the other form
4
of unconscionability. Id. at 553-54.
5
Procedural unconscionability exists when a party lacks a meaningful opportunity to
6
agree to arbitration clause terms either because of unequal bargaining power, as in an
7
adhesion contract, or because the clause and its ef fects are not readily ascertainable upon
8
a review of the contract. D.R. Horton, 120 Nev. at 554; Gonski v. Second Judicial Dist.
9
Court of State ex rel. Washoe, 245 P.3d 1164, 1170 (Nev. 2010).
10
Okada argues that the Purchase Agreement is “a classic example of an adhesion
11
contract.” He asserts, by declaration, that he attempted to re-negotiate several terms of
12
the Purchase Agreement, that 3700 Associates refused to negotiate any term of the
13
agreement, and instead informed him that if he didn’t like any term of the contract he
14
should walk away.
15
As noted in Obstetrics and Gynecologists, et al. v. Pepper, 101 Nev.105, 107, 693
16
P.3d 1259, 1260 (1985), "[a]n adhesion contract has been def ined as a standardized
17
contract form offered to consumers of goods and services on a 'take it or leave it' basis . . ."
18
Id. Pepper dealt with a health clinic's requirement that its patients sign an arbitration
19
agreement before receiving treatment. Id. at 106, 693 P.3d at 1259. Significant to the
20
court's findings was the fact that a patient would be denied medical treatment if she
21
refused to sign the agreement. Id. at 107, 693 P.3d at 1260. A contract of adhesion is
22
defined, in Black's Law Dictionary, as a “standard-form prepared by one party, to be signed
23
by the party in a weaker position, [usually] a consumer, who adheres to the contract with
24
little choice about the terms.”
25
26
Even accepting Okada’s statement that 3700 Associates would not negotiate any
terms of the Purchase Agreement, the Purchase Agreement does not represent a classic
1
example of an adhesion contract. As alleged by Okada in his complaint, he purchased a
2
condominium in a project marketed as offering “ultra-luxurious accommodations for wealthy
3
individuals,” which he “specifically wanted for business purposes.” As Okada further
4
acknowledges in his opposition, he “had the opportunity to review the purchase contract
5
with an attorney prior to signing. . . .” The Purchase Agreement specifically provided that
6
“[n]otwithstanding that this Agreement was prepared by one party hereto, it shall not be
7
construed more strongly against or more favorably for either party; it being known that both
8
parties have had equal bargaining power, have been represented (or have had the
9
opportunity to be represented) by their own independent counsel and have equal business
10
acumen . . . .” Okada did not suffer from a lack of a “meaningful opportunity to agree” to
11
the arbitration agreement.
12
The Court also finds that the clause and its effects were readily ascertainable upon
13
a review of the contract. While the presentation of the arbitration clause–its typeface and
14
placement–within the Purchase Agreement is not particularly conspicuous, neither is it
15
particularly inconspicuous. The arbitration clause was immediately preceded by the
16
underlined word “Arbitration.” The typeface of the entire paragraph is in the same font and
17
size as the remainder of the contract. Given that Okada was presented with an opportunity
18
to review the entire contract with an attorney prior to signing, the presentation of the clause
19
cannot be described as suggesting an effort to escape notice or review and is not evidence
20
of procedural unconscionability.
21
As the arbitration clause is not procedurally unconscionable, the Court need not
22
address whether the clause is substantively unconscionable. However, even assuming
23
that Okada has shown some slight evidence that the clause is procedurally
24
unconscionable, he has not shown sufficient evidence of substantive unconscionability to
25
render the clause unenforceable.
26
1
Okada’s Claims
2
Okada argues that his claims are not subject to arbitration. “[A] party can be forced
3
to arbitrate only those issues it specifically has agreed to submit to arbitration.” First
4
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945 (1995). Though the purchase
5
agreement itself is governed by Nevada law, federal law applies to the Court’s
6
determination of the scope of the arbitration clause because NP1 brought its motion to
7
compel arbitration pursuant to the Federal Arbitration Act and because there is no specif ic
8
language in the arbitration clause regarding the choice of law in determining the arbitrability
9
of a dispute. Cape Flattery Ltd. v. Titan Maritime, LLC, 647 F.3d 914, 921 (9th Cir. 2011);
10
Mediterranean Enterprises, Inc. v. Ssangyong Corp., 708 F.2d 1458, 1463 (9th Cir. 1983).
11
The arbitration clause in the purchase contract states that the parties ag reed to arbitrate
12
“any dispute related to this Agreement.” (Purchase Contract at page 12, § 24.10.) As a
13
general rule, any doubts about the scope of an arbitration agreement should be resolved in
14
favor of arbitration. Cape Flattery, 647 F.3d at 922-23. Moreover, the use of the “related
15
to” language indicates an intent by the parties to have a broad arbitration provision instead
16
of a narrow arbitration provision. Id. at 922.
17
Okada argues, however, that the the Ninth Circuit reaffirmed in Cape Flattery that
18
when a tort claim constitutes an “independent wrong” from a breach of the contract
19
featuring the arbitration clause, then that tort claim is not arbitrable. Id. at 924. At issue in
20
Cape Flattery, however, was an arbitration agreement limited to covering disputes “arising
21
under” the agreement. As Okada apparently recognizes, the Ninth Circuit distinguished
22
this language as requiring a narrow interpretation, as contrasted with agreements to
23
arbitrate disputes “related to” the agreement, indicating a broad arbitration provision. Thus,
24
as recognized in Cape Flattery, because the dispute did not require interpretation of the
25
agreement, it was not arbitrable pursuant to an “arising under” the arbitration clause. In the
26
present matter, the arbitration clause applies to “any dispute related to” the agreement.
1
To paraphrase the decision of the Central District of California to transfer this matter
2
to this district pursuant to the Purchase Agreements venue selection clause: “Given the
3
broad language used in Mr. Okada's purchase agreement, his tort claims are subject to the
4
[arbitration] clause. Although the claims are not breach of contract claims, they do "arise
5
out of” [and are related to] the contract. All of the damages claimed by Mr. Okada result
6
from the purchase agreement.” Accordingly,
7
8
9
THE COURT ORDERS that Nevada Property 1, LLC’s Motion to Compel Arbitration
(#39) is GRANTED.
THE COURT FURTHER ORDERS that the parties shall promptly submit this matter
10
to binding arbitration in accordance with the Paragraph 24.10 Arbitration provisions of the
11
Condominium Unit Purchase and Sale Agreement, and that this matter shall henceforth
12
proceed by arbitration.
13
14
15
16
THE COURT FURTHER ORDERS that this case shall be stayed pending the
conclusion of the binding arbitration proceedings.
THE COURT FURTHER ORDERS that the parties shall submit a joint status report
every 120 days regarding the progress of the arbitration proceedings.
17
18
DATED this ______ day of September, 2015.
19
20
21
22
23
24
25
26
Lloyd D. George
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?