Victor Paredes et al vs FORD MOTOR COMPANY et al

Defendant Ford Store Morgan Hill moves to compel arbitration of this action pursuant to the Retail Installment Sales Contract (“RISC”). Defendant argues the Arbitration Provision in the RISC is governed by the Federal Arbitration Act (“FAA”) and California Arbitration Act (“CAA”). Defendant maintains it has not waived its right to arbitrate and no other grounds exist for revocation of the agreement. Having reviewed the language of the Arbitration Provision and the circumstances of its execution, the Court concludes that the motion should be granted.

II. LEGAL STANDARD Defendant maintains that the FAA governs the Arbitration Provision based on the language itself and because the agreement affects interstate commerce. (Mtn. to Compel Arbitration at pp. 6:24-7:1.) The Arbitration Provision states “[a]ny arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.) and not by any state law concerning arbitration.” (Declaration of Trina M. Clayton [“Clayton Decl.”], Ex. A.) Under the FAA, the court’s role is limited to determining “(1) whether a valid agreement to arbitrate exists, and if it does (2) whether the agreement encompasses the dispute at issue.” (Chiron Corp. v.

Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130.) To determine “whether a valid contract to arbitrate exists,” courts apply “ordinary state law principles that govern contract formation.” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1093 [citations omitted]; see also Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1170.)

Alternatively, the CAA governs the Arbitration Provision. Code of Civil Procedure section 1281.2 provides:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy in that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] The right to

compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for rescission of the agreement . . . .

In determining the threshold question of whether an arbitration agreement exists between the parties, the court employs a three-step burden shifting analysis. (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755 (Iyere); see also Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.) The party seeking to compel arbitration bears the initial burden of showing an agreement to arbitrate. If that burden is met, the burden shifts to the opposing party to show a factual dispute regarding the agreement’s existence. If the opposing party does so, then the burden shifts back to the proponent of arbitration to show the existence of a valid agreement by a preponderance of the evidence. (Iyere, supra, 87 Cal.App.5th at p. 755.)

III. ANALYSIS

A valid agreement to arbitrate exists between the parties. The Arbitration Provision in the RISC provides in relevant part:

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, any allegation of waiver of rights under this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this Vehicle, this contract or any resulting transaction of 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.

(Clayton Decl., Ex. A at p. 5.) Plaintiffs signed the agreement on November 11, 2022. In addition, Plaintiffs signed and acknowledged notice of the Arbitration Provision as follows: “Agreement to Arbitrate. By signing below, you agree that pursuant to the Arbitration Provision on page 5 of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action. See the Arbitration Provision for additional information concerning the agreement to arbitrate.” (Id. at p. 1..)

The RISC further drew the Arbitration Provision to Plaintiffs’ attention through the following disclaimer: “. . . YOU ACKNOWLEDGE THAT YOU HAVE READ ALL PAGES OF THIS CONTRACT, INCLUDNG THE ARBITRATION PROVISION ON PAGE 5, BEFORE SIGNING BELOW.” (Id. at p. 6.) Plaintiffs’ signature evinces the fact that they assented to the Arbitration Provision. (See Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 777 [“A party’s acceptance of an agreement to arbitrate may be express, as where a party signs the agreement.”].)

The scope of the agreement is covered by Plaintiff’s claims. Here, the Arbitration Provision applies to “any claim or dispute, whether in contract, tort, statute, or otherwise . . which arises out of or relates to your . . . purchase or condition of this Vehicle . . . .” (Clayton Decl., Ex. A at p. 5.) Plaintiffs’ sole cause of action against Defendant is for negligent repair, which inherently relates to the condition of the vehicle. 24

The Court next considers whether Defendant has waived its right to arbitration and whether any other grounds for revocation exist.

Waiver

The California Supreme Court has identified various factors that are “relevant and properly considered in assessing waiver claims.” (St. Agnes Medical Center v. Pacific Care of California (2003) 31 Cal.4th 1187, 1195-1196.) Those factors are:

(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g. taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.

(Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 992 [internal citations and quotations omitted; St. Agnes, supra, 31 Cal.4th at p. 1196.) The prejudice requirement under the sixth factor has been abrogated by the California Supreme Court. (Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562 (Quach).) The sixth factor regarding prejudice was based on federal cases that “applied an arbitration-specific rule that required a showing of prejudice to establish waiver.” (Quach, supra, 16 Cal.5th at p. 569.) “To establish waiver, there is no requirement that the party opposing enforcement of the contractual right demonstrate prejudice or otherwise show harm from the waiving party’s conduct.” (Id. at p. 585.)

The multifactor test is not “a mechanical process in which each factor is assessed and the side with the greater number of favorable factors prevails,” nor is the list of factors exclusive: rather, the factors reflect the principles that should guide courts in determining whether a party has waived its right to demand arbitration. (Zamora v. Lehman (2010) 186 Cal.App.4th 1, 15 [internal quotation marks and citation omitted].) “The waiver inquiry is exclusively focused on the waiving party’s conduct; neither the effect of that conduct on the party seeking to avoid enforcement nor that party’s subjective evaluation of the waiving party’s intent is relevant.” (Quach, supra, 16 Cal.5th at p. 585.)

The facts here do not demonstrate that Defendant has waived its right to arbitration. Defendant has only filed an Answer in this action. (Clayton Decl. at ¶ 4.) Defendant’s Answer includes the affirmative defense of an agreement to arbitrate. (Id., Ex. C.) Defendant has not propounded or responded to any discovery in this matter. (Id. at ¶¶ 5, 6.) Thus, Defendant has not engaged in litigation-related conduct. No trial date has been set in these proceedings. (Id. at ¶ 7.) Accordingly, no waiver has occurred, and Defendant may move to arbitrate these claims.

Other Grounds for Revocation

As an initial matter, Plaintiffs do not assert any claims for fraud against Defendant the Ford Store Morgan Hill. The cause of action for fraudulent inducement is only asserted against Defendant Ford Motor Company. Instead, at issue is whether the Arbitration Provision is unconscionable.

The party challenging a contractual arbitration provision bears the burden of proving that it is both procedurally and substantively unconscionable. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (OTO).) This may be done on a sliding scale, where the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required, and vice versa. (Id. at pp. 125-126.) Nevertheless, both must be shown. Procedural Unconscionability focuses on oppression or surprise to the “weaker” party based on unequal bargaining power, whereas substantive unconscionability focuses on the terms of the agreement and whether they are overly harsh or one-sided. (OTO, supra, 8 Cal.5th at pp. 125- 129.)

Here the Arbitration Provision is not procedurally unconscionable. Plaintiff was given notice of the arbitration provision prior to signing. (Clayton Decl., Ex. A.) The Arbitration Provision itself was on a separate page in bold and capitalized font. (Id. at p. 5.) (See cf. Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1250-1251 [noting that procedural unconscionability has been found where the presence of an arbitration provision has not been distinguished through bold lettering, larger font, or capitalization].)

The Court also does not find the Arbitration Provision to be substantively unconscionable as the arbitration is subject to the rules of the American Arbitration Association (“AAA”). (Clayton Decl., Ex. A.) In addition, the Arbitration Provision provides that Defendant is to “pay the filing, administration, service, or case management fee and arbitrator hearing fee up to a maximum of $5,000, unless the law or rules of the chosen arbitration organization require us to pay more.” (Ibid.) The arbitrator is also to apply “governing state law and the applicable statute of limitations.” (Ibid.)

In the absence of procedural or substantive unconscionability, the Arbitration Provision is enforceable.

Plaintiffs do not object to these arguments. In fact, Plaintiffs have not filed any opposition whatsoever. (See Notice of Non-Opposition.) The failure to timely file an opposition is a basis for the Court to grant the motion, as the Court may construe such nonopposition as a concession that the motion is meritorious. (See D.I. Chadbourne, Inc. v. Super. Ct. (1964) 60 Cal.2d 723, 728, fn. 4; see also Cal. Rule of Court 8.54, subd. (c) [appellate rule stating that “[a] failure to oppose a motion may be deemed consent to the granting of the motion”].)

For these reasons, the Court GRANTS the Motion to Compel Arbitration. This action is hereby STAYED pending the outcome of arbitration. (Code Civ. Proc. § 1281.4; 9 U.S.C. § 3.)

IV. CONCLUSION

The Motion to Compel Arbitration is GRANTED. The entire action is STAYED pending the outcome of arbitration.1

The matter shall be set for a Status Hearing re: Arbitration on January 29, 2027, at 11:00 a.m. in Department 13.

Moving party shall prepare and submit the final order, accompanied by the necessary Form EFS-020 within 10 days of the date of the hearing.

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1 Defendant the Ford Store Morgan Hill moves for a stay of the entire action. Defendant Ford Motor Company does not oppose. As noted above, Plaintiff has not opposed any aspect of the motion. Under these circumstances, the Court will not engage in a sua sponte analysis of whether the arbitration with Defendant the Ford Store Morgan Hill and lawsuit with Defendant Ford Motor Company should proceed separately. 27