Johnny Dove v. AHC Acquisition LLC dba LA City Cars, et al.

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)

“This strong policy has resulted in the general rule that arbitration should be upheld “unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute. [Citation.]?? (Ibid.)

This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (FAA), which governs all agreements to arbitrate in contracts involving interstate commerce. (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

DISCUSSION

FAA v. CAA

?[T]he FAA's procedural provisions do not apply unless the contract contains a choice-of-law clause expressly incorporating them. [T]he question is not whether the parties adopted the CAA “s procedural provisions: The state's procedural statutes apply by default because Congress intended the comparable FAA sections to apply in federal court. The question, therefore, is whether the parties expressly incorporated the FAA “s procedural provisions into their agreements.” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345 (Victrola 89), internal citations omitted and italics in original.)?[P] revious cases have held that when an arbitration agreement provides that its “enforcement’ shall be governed by California law, the [CAA] governs a party's motion to compel arbitration.

It follows that when an agreement provides that its “enforcement’ shall be governed by the FAA, the FAA governs a party's motion to compel arbitration.” (Id. at p. 346.)

The Arbitration Agreement (defined below) does not specify the law that governs its enforcement. (Landa Decl., Ex. 1, p. 9 of pdf.) The CAA therefore applies by default and governs this motion. (Victrola 89, LLC, supra, 46 Cal.App.5th at pp. 345-346; see also Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1350, fn. 12 [contract only called for the arbitration itself to be governed by the FAA, not post-arbitration proceedings in court].)

Existence of Valid Arbitration Agreement and Covered Claims

Dealership seeks to compel arbitration based on an arbitration provision in the underlying purchase agreement (the Arbitration Agreement). (Landa Decl., Ex. 1, p. 9 of pdf.) By attaching a copy of the Arbitration Agreement, Dealership has therefore met its initial burden of establishing the agreement’s validity. The burden now shifts to Plaintiff to challenge its validity. (Condee, supra, 88 Cal.App.4th at pp. 218-219.)

Plaintiff contends Dealership’s motion rests on the conclusory assertion that Plaintiff entered into a binding arbitration agreement and that merely attaching a document to a declaration is insufficient to establish its existence and validity. Plaintiff contends Dealership provided no competent evidence showing mutual assent. Plaintiff contends there is no showing that the arbitration clause was explained to Plaintiff, that Plaintiff had a meaningful opportunity to review the provision, or that Plaintiff understood he was waiving his constitutional right to a jury trial.

The Court finds Plaintiff has failed to challenge the validity of the Arbitration Agreement. “The opponent need not prove that his or her purported signature is not authentic, but must submit sufficient evidence to create a factual dispute and shift the burden back to the arbitration proponent, who retains the ultimate burden of proving, by a preponderance of the evidence, the authenticity of the signature. [Citation.]? (Iyere v. Wise Auto Grp. (2023) 87 Cal.App.5th 747, 755, italics in original.)

Plaintiff provided no evidence to create a factual dispute as to the existence or validity of the Arbitration Agreement. (See generally, Opp.) Plaintiff’s conclusory arguments in the opposition are insufficient. It is also insufficient for Plaintiff to point out what Dealership purportedly did not show in its moving papers. (See Opp., 4:1-13.) Dealership was only required to attach a copy of the Arbitration Agreement to its moving papers to meet its initial burden, which it did. (Landa Decl., Ex. 1, p. 9 of pdf.) Accordingly, Dealership has met its burden of establishing the validity of the Arbitration Agreement. (See Condee, supra, 88 Cal.App.4th at pp. 218-219.)

The Court further notes that there is no dispute the Arbitration Agreement covers Plaintiff’s claims. Plaintiff instead argues that the Arbitration Agreement is unconscionable and therefore unenforceable. The Court will address these arguments next.

Unconscionability

?[P]rocedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102.)

The courts invoke a sliding scale which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves, i.e., the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa. (Id. at p. 114.)

Plaintiff bears the burden of proving that the provisions at issue are both procedurally and substantively unconscionable. (Mills v. Facility Sols. Grp., Inc. (2022) 84 Cal.App.5th 1035, 1050 [party asserting unconscionability bears the burden of proof].)

Procedural Unconscionability

“Procedural unconscionability focuses on the elements of oppression and surprise. Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice? Surprise involves the extent to which the terms of the bargain are hidden in a prolix printed form drafted by a party in a superior bargaining position.” (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469 (Roman), internal quotation marks and citations omitted.)

Plaintiff contends the underlying purchase agreement is an adhesion contract presented to Plaintiff on a take-it-or-leave-it basis in a consumer vehicle transaction. Plaintiff contends he would not have bargaining power since Dealership had already pulled his credit. Plaintiff contends he had no ability to negotiate the terms of the arbitration provision, and that there is no evidence he was given any meaningful choice regarding its inclusion.

Dealership contends there is no evidence of surprise or oppression here because Plaintiff submitted no declaration. Dealership contends Plaintiff does not say that he asked questions or was misled, that anyone hid the arbitration provision, that he was rushed, denied a copy, prevented from reading, or unable to understand the document. Dealership contends that the Arbitration Agreement is conspicuously displayed. Dealership contends Plaintiff’s claim regarding his credit having already been pulled is both unsupported and legally insufficient.

The Court finds Plaintiff has not adequately demonstrated procedural unconscionability. Dealership correctly notes the lack of evidence from Plaintiff to support Plaintiff’s contentions or otherwise demonstrate the circumstances surrounding Plaintiff’s signing of the Arbitration Agreement. (Opp., 4:14-5:4.) Additionally, even assuming for the sake of argument that the arbitration agreement is an adhesion contract, that by itself is not dispositive. (Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1470.)

Substantive Unconscionability

“Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create overly harsh or one-sided results, that is, whether contractual provisions reallocate risks in an objectively unreasonable or unexpected manner.” (Roman, supra, 172 Cal.App.4th at pp. 1469-1470, internal quotation marks and citations omitted.)

Plaintiff contends the Arbitration Agreement is unenforceable because it does not provide adequate discovery. Plaintiff also contends the cost provision imposes an unfair burden on Plaintiff because Plaintiff can potentially be liable for costs exceeding the amount specified in the Arbitration Agreement.

Dealership contends Plaintiff failed to prove substantive unconscionability. Dealership contends the Arbitration Agreement is mutual and that the California Supreme Court in Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899 (Sanchez) upheld a similar arbitration clause. Dealership contends AAA Consumer Rule R-20 expressly permits discovery, including depositions, interrogatories, document production, and other appropriate means. Dealership contends Plaintiff is not entitled to defeat arbitration by demanding full civil litigation discovery before any arbitrator is appointed. Dealership contends Plaintiff offers no evidence that AAA or NAM would prevent him from obtaining the documents or testimony needed to present this dispute.

Dealership further contends the cost provision is enforceable and more favorable than Sanchez because this agreement provides for Dealership to advance up to $5,000.00, whereas the dealership in Sanchez only had to provide up to $2,500.00 of the consumer’s arbitration fees. Dealership also contends the provision in this case yields to any greater obligation imposed by law or forum rules. Dealership contends Plaintiff’s alternative request to require Dealership to pay all arbitration costs regardless of outcome is not a basis to deny arbitration or rewrite the agreement.

The Court finds Plaintiff has not adequately demonstrated substantive unconscionability. Plaintiff provided no evidence concerning the purportedly inadequate discovery under the Arbitration Agreement. (Opp., 5:24-6:20.) Dealership, on the other hand, presented evidence showing that AAA provides many standard discovery tools, such as “depositions, interrogatories, document production, or by other means?? (Nezaratizadeh Reply Decl., Ex. A, rule R-20.) Plaintiff’s argument regarding uncertainty of potential exposure beyond the $5,000.00 arbitration cost limit is also unpersuasive as Plaintiff provided no evidence that he could not afford any such costs even if they were to occur or otherwise have a deterrent effect on Plaintiff’s claims. (Opp., 6:11-16; Sanchez, supra, 61 Cal.4th at p. 920 [“the provision cannot be held unconscionable absent a showing that appellate fees and costs in fact would be unaffordable or would have a substantial deterrent effect in [plaintiff’s] case”].)

Based on the foregoing, the Court finds the Arbitration Agreement is not unconscionable.

Code of Civil Procedure § 1281.2, subd. (c)

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:? (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.

For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295. (Code Civ. Proc., § 1281.2, subd. (c).)

Plaintiff further contends the motion should be denied under Code of Civil Procedure section 1281.2, subdivision (c), on the grounds that this case involves multiple defendants, including entities that are not signatories to the Arbitration Agreement. Plaintiff contends his claims against all Defendants are from the same transaction and have overlapping factual and legal issues. Plaintiff contends there is a risk of conflicting rulings on common issues if Plaintiff’s claims against Dealership were compelled to arbitration.

Defendant contends Code of Civil Procedure section 1281.2, subdivision (c), does not justify denial because the FAA governs the arbitration. Defendant then contends that even if section 1281.2, subdivision (c), did apply, it is discretionary and does not require denial, such as ordering arbitration among the parties who agreed to arbitrate and staying the court action as to remaining parties. Defendant further contends Plaintiff identifies no common issue creating a realistic risk of inconsistent rulings, as Plaintiff’s claims against Dealership arise from the purchase and alleged sale representations, while claims against the surety can be invoked only if the arbitrator finds Dealership liable.

Dealership contends the same is true for the finance company, as it is the assignee of the purchase agreement. Dealership also contends Plaintiff’s claim against First Extended Service is derivative since it was purchased by Plaintiff as offered by Dealership, and the purchase has been reflected in the sales documents.

The Court finds Code of Civil Procedure section 1281.2, subdivision (c), does not warrant denying this motion. Section 1281.2, subdivision (d), further provides that,” [i]f the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c), the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.” (Code Civ.

Proc., § 1281.2, subd. (d), hanging paragraph, italics added.)

The Court finds the best approach here is to compel arbitration between Plaintiff and Dealership and to stay this action pending the completion of the arbitration, which will avoid the risk of inconsistent rulings. Plaintiff dismissed Defendant Beneficial State Bank on March 26, 2026. (Request for Dismissal (3/26/26).) As such, the bulk of Plaintiff’s claims, i.e., six out of eight, are alleged solely against Dealership. (See generally, Compl.) Plaintiff’s Eighth Cause of Action for claim against dealer bond is also derivative of any liability Dealership may have. (See Compl., ¶¶ 89-94.) Resolution of those claims first will likely facilitate resolution of Plaintiff’s claims against the remaining Defendants. (See generally, Compl.) Accordingly, the Court DENIES Plaintiff’s request to deny compelling arbitration under Code of Civil Procedure section 1281.2, subdivision (c).

Plaintiff’s Request for JAMS Over AAA and Ordering Dealership to Pay All Arbitration Costs

Plaintiff asks the Court to order arbitration before JAMS instead of AAA if the Court decides to grant Dealership’s motion. Plaintiff contends JAMS is superior to JAMS. Plaintiff also contends the Arbitration Agreement attempts to limit its obligation by capping fee payments and leaving open the possibility that Plaintiff could incur additional costs depending on the rules of the arbitration forum or outcome of the case.

Dealership contends Plaintiff cannot rewrite the agreed forum selection clause to require JAMS. Dealership also contends the request for JAMS is not supported by evidence that it is necessary for obtaining a fair or neutral arbitrator. Dealership contends AAA provides neutral arbitrators. Dealership also contends JAMS is more expensive and imposes additional fees on the consumer, whereas the parties actually selected AAA.

The Court declines to change the selected arbitration forum or to make Dealership pay for all arbitration costs. The parties agreed to AAA or NAM as the arbitration forum and that Dealership would pay up to $5,000.00 in arbitration costs. (Landa Decl., Ex. A, p. 9 of pdf.) The Court cannot rewrite the Arbitration Agreement to select a different arbitration forum.” [C]ourts enforce an unambiguous agreement as written rather than rewriting it to contain limitations the parties did not express. [Citations.]? (Duran v. EmployBridge Holding Co. (2023) 92 Cal.App.5th 59, 66.) Accordingly, the Court DENIES Plaintiff’s requests regarding JAMS and ordering Dealership to pay all arbitration costs. The Court GRANTS Dealership’s motion to compel arbitration and stay this action pending the completion of arbitration.

CONCLUSION

The Court GRANTS Defendant AHC Acquisition LLC dba LA City Cars’ motion to compel arbitration. The Court STAYS this action pending the completion of the arbitration. Defendant AHC Acquisition LLC dba LA City Cars is ordered to give notice of the Court’s ruling within five calendar days of this order.

[1] The parentheses are contained in Defendant Merchants Bonding Company (Mutual)?s name and are not intended as a defined term herein. Home -->)" -->