INSIGHT DIRECT USA, INC. vs DATA EXCHANGE CORPORATION

2024CUCL032970: INSIGHT DIRECT USA, INC. vs DATA EXCHANGE CORPORATION

months in filing the within motion to be heard two and a half months before a trial which has been scheduled for more than a year.

Defendant shall provide notice.

Defendant’s Objection to the Declaration of Jeffrey M. Galen

Defendant’s objections to paragraphs 2-4 and Exhibits 1-3 to the Declaration of Jeffrey M. Galen are OVERRULED. The objection to paragraph 5 is SUSTAINED. (Evid. Code §310, subd. (a).)

Discussion

The initial determination of whether the parties agreed to arbitrate the dispute in question “involves two considerations: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement.’ [Citation.]’ [Citations.]” (Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1283; Omar v. Ralphs Grocer Co. (2004) 118 Cal.App.4th 955, 961.)

If there is a valid agreement to arbitrate in this case, then the FAA shall apply. (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 687-688.) [“A party seeking to enforce an arbitration agreement has the burden of showing FAA preemption. . . For example, a petitioner seeking an order to compel arbitration must show that the subject matter of the agreement involves interstate commerce”].) This case involves the sale of a product by Plaintiff, an Illinois corporation from Arizona to Defendant, a California corporation. Further, the purported arbitration agreement contained within the Terms of Sale: Products and Services (“Terms of Sale”) provides that the arbitration agreement is subject to the FAA. (Galen Decl., Exh. 1, ¶ 16.) Defendant makes no argument and cites no authorities in support of a contrary conclusion.

“In determining the rights of parties to enforce an arbitration agreement within the FAA’s scope, courts apply state contract law while giving due regard to the federal policy favoring arbitration.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236; see also Cheng-Canindin v. Renaissance Hotel Associates (1996) 50 Cal.App.4th 676, 683 [“The question of whether the parties agreed to arbitrate is answered by applying state contract law even when it is alleged that the agreement is covered by the FAA”]; Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787 (“Esparza”) [“California law governs the determination as to whether an agreement was reached”].)

“Under California law, the question whether an arbitration agreement is unenforceable, in whole or in part, based on general contract law principles is a question for the court to decide, rather than an arbitrator.” (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 165.) “‘An essential element of any contract is the consent of the parties, or mutual assent.’ [Citation.] [Citation]. Further, the consent of the parties to a contract must be communicated by each party to the other. [Citation] ‘Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.’ [Citations].” (Esparza, supra, 2 Cal.App.5th at 788.) “Although ‘California has a strong public policy in favor of arbitration

2024CUCL032970: INSIGHT DIRECT USA, INC. vs DATA EXCHANGE CORPORATION

and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration,’ [citation] there is no public policy ‘that favors the arbitration of disputes the parties did not agree to arbitrate. [Citation.]’ [Citation].” (Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 764.)

“The party seeking to compel arbitration bears the burden of proving by a preponderance of the evidence an agreement to arbitrate exists.” (Nixon v. AmeriHome Mortgage Co., LLC (2021) 67 Cal.App.5th 934, 946; see also Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164 (“Gamboa”) [“The burden of persuasion is always on the moving party to prove the existence of an arbitration agreement with the opposing party by a preponderance of the evidence”].) “[T]he moving party can meet its burden by setting forth the agreement's provisions in the motion.” (Gamboa, supra, 72 Cal.App.5th at 165.) “For purposes of a petition to compel arbitration, it is not necessary to follow the normal procedures of document authentication.” (Condee v.

Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218; see also People v. Skiles (2011) 51 Cal.4th 1178, 1187 [“The means of authenticating a writing are not limited to those specified in the Evidence Code.” (citing Evid. Code, § 1410)].] and ibid. [“For example, a writing can be authenticated by circumstantial evidence and by its contents”].)

“If the moving party meets its initial prima facie burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement. [Citation]. The opposing party can do this in several ways. For example, the opposing party may testify under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement. [Citations].” (Ibid.) “If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties.

The burden of proving the agreement by a preponderance of the evidence remains with the moving party. [Citation].” (Gamboa, supra, 72 Cal.App.5th at 165-166.)

Analysis

The Court finds that Plaintiff has not carried its prima facie burden to establish an enforceable arbitration agreement between the Parties. Plaintiff asserts that the Terms of Sale attached as Exhibit 1 to the Declaration of Jeffrey Galen, contains a clear and unambiguous arbitration clause at paragraph 16. The Court agrees. Plaintiff further asserts that the Terms of Sale clearly provide that upon placing an order for products or services, the buyer agrees to be bound by and accept the Terms of Sale and that any additional or differing terms or conditions proposed or included in purchase order document will not become part of the agreement and are rejected. Again, the Court agrees that the Terms of Sale do so state.

However, Plaintiff has not established how or even whether the Terms of Sale were communicated to Defendant such that Defendant was aware of them prior to issuing its purchase order which it has characterized as an offer to buy that was accepted by Plaintiff when Plaintiff issued its Order Confirmation, and which clearly states on its face that acceptance of the purchase order is expressly subject to and limited to the terms and conditions at www.supplyitnow.com. These terms and conditions provide that (1) acceptance of the purchase order by the seller may be made by . . .

2024CUCL032970: INSIGHT DIRECT USA, INC. vs DATA EXCHANGE CORPORATION

express acceptance or by shipment of goods; (2) by accepting the purchase order, the seller agrees to comply fully with the terms and conditions on the face of the order and at the aforementioned website; and (3) if seller uses its own order acknowledgment or other form to accept the order it is understood that said form shall be used for convenience only, and no additional or different terms and conditions contained in the seller’s acknowledgment or acceptance of an order shall be a part of the agreement with respect to a purchase order. (A. Kheel Decl., ¶ 3; Exh. B.)

The Terms of Sale reflect that the agreement is between the buyer and “the Insight entity identified in our offer to sell (Quote” or “Quotation”). No evidence or information has been presented that a quote or offer to sell was issued to Defendant or set forth on Plaintiff’s website which contained reference to the Terms of Sale. As noted above, in order to establish the existence of a contract, Plaintiff must establish mutual assent, i.e., that it communicated the Terms of Sale to Defendant before Defendant issued its purchase order. This has not been established and therefore, the Court cannot conclude that Defendant accepted the terms of the Terms of Sale by issuing its purchase order.

Because Plaintiff has not met its burden to establish that it even communicated the Terms of Sale to Defendant, the burden does not shift to Defendant to dispute the authenticity of the Terms of Sale. However, Defendant has affirmed that it never agreed to arbitrate this dispute (Kheel Decl. ¶ 5). To the extent Plaintiff contends that the Order Confirmation or Invoice, attached as Exhibits 2 and 3 to the Declaration of Attorney Galen, respectively, inject the Terms of Sale into the Parties’ agreement, Defendant has made the argument that such terms cannot be part of the agreement since its purchase order (the “offer”) expressly limited acceptance to its terms, (Comm.

Code § 2207(2)(a).) Defendant further argues that the arbitration clause would “materially alter” the terms of the contract and therefore, it did not become part of the contract. (Comm. Code § 2207(2)(b).) If in fact the purchase order is the offer, the Court agrees. (See Windsor Mills, Inc. v. Collins & Aikman Corp. (1972) 25 Cal.App.3d 987, 995 “[I]t is clear that a provision for arbitration inserted in the acceptance or confirmation of an offer to purchase goods ‘materially alters’ the offer”].)

Waiver

Because the Court has determined that Plaintiff has not carried its burden, it need not determine the issue of waiver. However, even were the Court to conclude that an enforceable arbitration agreement exists, it would find that Plaintiff waived its right to compel arbitration. “Waiver, we have said, ‘is the intentional relinquishment or abandonment of a known right.’ [Citation]. To decide whether a waiver has occurred, the court focuses on the actions of the person who held the right; the court seldom considers the effects of those actions on the opposing party.” (Morgan v.

Sundance, Inc. (2022) 596 U.S. 411, 417.) “[T]he FAA's ‘policy favoring arbitration’ does not authorize federal courts to invent special, arbitration-preferring procedural rules . . . Accordingly, a court must hold a party to its arbitration contract just as the court would to any other kind. But a court may not devise novel rules to favor arbitration over litigation. [Citation]. If an ordinary procedural rule—whether of waiver or forfeiture or what-have-you—would counsel against enforcement of an arbitration contract, then so be it.

The federal policy is about treating arbitration contracts like all others, not about fostering arbitration.” (Id., at p. 418.)

2024CUCL032970: INSIGHT DIRECT USA, INC. vs DATA EXCHANGE CORPORATION

“To establish waiver under generally applicable contract law, the party opposing enforcement of a contractual agreement must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it. [Citations.] Under the clear and convincing evidence standard, the proponent of a fact must show that it is “highly probable” the fact is true. [Citation.] The waiving party's knowledge of the right may be ‘actual or constructive.’ [Citation.]

Its intentional relinquishment or abandonment of the right may be proved by evidence of words expressing an intent to relinquish the right or of conduct that is so inconsistent with an intent to enforce the contractual right as to lead a reasonable fact finder to conclude that the party had abandoned it. [Citation].” (Quach v. California Com. Club, Inc. (2024) 16 Cal.5th 562, 584 (“Quach”).)

Defendant focuses on prejudice, which the Court would not consider in light of Quach, and Plaintiff’s lengthy delay in asserting its right to arbitrate, which the Court would consider. The Court would determine that it is highly probable that Plaintiff knew of its asserted right to arbitrate. As pointed out by Plaintiff in its Reply, the Terms of Sale are attached to the Complaint filed on November 4, 2024. Additionally, the Court observes that Insight’s Vice President of Finance Adam Montero has provided a declaration in support of Plaintiff’s Reply to which Defendant does not have the opportunity to respond, wherein Mr.

Montero declares that he is familiar with Insight’s Terms of Sale which include the arbitration agreement and that Insight intended that all disputes arising from the sale of products to Defendant would be resolved through binding arbitration in accordance with the Terms of Sale. (Montero Decl. §§ 2-6.) Yet, despite this stated intention, Plaintiff filed suit and then delayed eighteen months to file this motion on May 7, 2026, just over three months before trial which has been scheduled since May 7, 2025.

Plaintiff argues that it did not request a jury, engage in discovery, or file motions like the defendant in Quach which propounded discovery, requested a jury trial and posted jury fees. Quach did not condition its holding on this level of conduct. Plaintiff’s institution of this lawsuit, lack of advisement to the Court of the intention to arbitrate asserted by Mr. Montero, failure to object to the setting of a trial and unexplained eighteen-month delay in bringing this motion is conduct that is so inconsistent with an intent to enforce a contractual right as to lead a reasonable fact finder to conclude Plaintiff had abandoned it.

In light of Plaintiff’s actions (and inaction) the Court would find that Plaintiff has intentionally relinquished its right to arbitrate.

Plaintiff’s motion is DENIED.

Defendant shall give notice.

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