Mills v. Nexgen Air Conditioning and Heating, LLC

• Plaintiff’s performance: Plaintiff performed by depositing the money required by the Agreement into the Seller’s bank account. [See SUMF ## 10, 11; Mvg. Otero Decl., ¶ 10.]

• Defendants’ breach: On July 31, 2025, Seller and Guarantor defaulted by instructing its bank to stop payments to Plaintiff under the Agreement. [SUMF # 5, Mvg. Otero Decl., ¶¶6-9, Exs. 2 & 3]. Plaintiff declared a breach and demanded payment from the Seller and Guarantor. [SUMF # 6, Id.] Despite Plaintiff’s demand, Seller and Guarantor failed to pay the amounts due under Agreement and as guaranteed under Guaranty. [SUMF ##7-8, Id.]

• Damages: The outstanding principal amount due on the Agreement at the time of the breach was $44,653.68 [SUMF # 6, Mvg. Otero Decl., ¶¶6-9, Exs. 2-3.]

The court finds that by this evidence, Plaintiff has met its prima facie burden of establishing each element of a breach of contract claim against the Seller and Guarantor under the Agreement and Guaranty.

The burden, therefore, shifts to Defendants to offer sufficient evidence to create a triable issue of fact. Defendants have failed to file an opposition with any contradicting evidence to dispute Plaintiff’s facts. Nor do Defendants object to the admissibility of any of Plaintiff’s evidence or offer any evidence of a viable defense for their alleged breaches.

As such, the court finds that the undisputed facts establish each element of the first and second causes of action of the complaint. The court, therefore, GRANTS summary judgment in Plaintiff’s favor.

Plaintiff to give notice.

12 Mills v. Nexgen Air TENTATIVE RULING: Conditioning and Heating, LLC Motion to Stay or Compel Arbitration

Defendants Nexgen Air Conditioning and Heating, LLC, and Marcus Van Valen move to stay this action pending resolution of the parties’ arbitration or, in the alternative, move to compel Plaintiffs Sheryl Mills and Stephen Mills to arbitrate the claims asserted in their Complaint. For the following reasons, the motion is GRANTED in part and DENIED in part.

Over-Length Brief

The court exercises its discretion to consider only the first 15 pages of the over-length opposition brief. (Cal. Rules Ct., Rule 3.1113(d).)

Standard on Motions to Compel Arbitration

The law of this state with respect to arbitration agreements is contained in the California Arbitration Act (the “CAA”), Civil Procedure Code section 1280, et seq. Under the CAA, when a party to an arbitration agreement refuses to submit to arbitration, the other party may petition the court to compel arbitration and stay any pending lawsuit. (See Code Civ. Proc., § 1281.2; Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218.)

The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. (Little v. Pullman (2013) 219 Cal.App.4th 558, 565.) The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. (Ibid.) In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination. (Ibid.)

Existence of Enforceable Arbitration Agreement

The party seeking to compel arbitration bears “the ultimate burden of proof, but the court [is] obliged to resolve the dispute using a threestep burden-shifting process.” (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755.) At the first step, “[t]he arbitration proponent must first recite verbatim, or provide a copy of, the alleged agreement. . . . At this step, a movant need not ‘follow the normal procedures of document authentication’ and need only ‘allege the existence of an agreement and support the allegation as provided in rule [3.1330].’ [Citation.]” (Ibid.)

If the arbitration proponent meets this initial burden, the burden shifts to the party opposing arbitration “to offer admissible evidence creating a factual dispute” as to the agreement’s existence (e.g., challenging the authenticity of signatures, or that they ever signed the agreement). (See ibid.) “The opponent . . . 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 . . . . [Citation.]” (Ibid.)

Here, Defendants meet their initial burden by reciting verbatim the arbitration provision (Mot. at 2:9-17), but Plaintiffs meet their shifted burden to show a factual dispute as to whether the arbitration provision is enforceable, given evidence that Plaintiffs rescinded the agreements pursuant to the California Home Solicitations Sales Act (the “HSSA”) (Civ. Code, § 1689.6). (See Stephen Mills Decl. ¶ 5, Exs. C-D; Sheryl Mills Decl. ¶ 4.)

The HSSA provides in relevant part that:

In addition to any other right to revoke an offer, the buyer has the right to cancel a home solicitation contract written pursuant to Section 7151.2 of the Business and Professions Code [governing home improvement contracts] until midnight of the third business day . . . after the buyer receives a signed and dated copy of the contract or offer to purchase that complies with Section 1689.7 of this code.

(Civ. Code, § 1689.6(a)(2).)

Here, it is undisputed the HSSA covers the Plumbing Contract and HVAC Contract. (See generally Reply.) Plaintiffs submit evidence they canceled the contracts pursuant to the HSSA. (See Stephen Mills Decl. ¶ 5, Exs. C-D; Sheryl Mills Decl. ¶ 4.) This is sufficient to show a fact dispute regarding the enforceability of the arbitration agreement.

Defendants do not meet their ultimate burden of proving the existence of an enforceable arbitration agreement. Defendants rely on Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 to argue that rescission under the HSSA does not void the arbitration provision within the larger contract. The Moncharsh opinion, however, does not support Defendants’ argument. The California Supreme Court in Moncharsh held that when “the alleged illegality goes to only a portion of the contract (that does not include the arbitration agreement), the entire controversy, including the issue of illegality, remains arbitrable. [Citations.]” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 30.) Because the arbitration opponent challenged the legality of only a fee-splitting provision in that case, the Supreme Court concluded that the alleged illegality did not void the arbitration clause. (Ibid.)

The Moncharsh court clarified that “[i]f a contract includes an arbitration agreement, and grounds exist to revoke the entire contract, such grounds would also vitiate the arbitration agreement.” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 29.) “ ‘[C]ontracts that are contrary to express statutes or to the policy of express statutes . . . are illegal contracts[, and a]ny such illegality voids the entire contract. [Citation.]’” (Duffens v. Valenti (2008) 161 Cal.App.4th 434, 451, citing Green v.

Mt. Diablo Hospital Dist. (1989) 207 Cal.App.3d 63, 73.) Therefore, a contract that is unenforceable under the HSSA precludes a party from enforcing any rights under that contract, including the right to arbitration. (See Nordeman v. Dish Network LLC (N.D. Cal. 2021) 525 F.Supp.3d 1080, 1087 [denying defendant’s motion to dismiss or stay case pending arbitration, where the arbitration opponents established a factual dispute as to whether the HSSA applied to the contract, which did not contain the required no right-to-rescind provision].)

Unlike the purported illegality in Moncharsh that affected only a discrete portion of the contract, there is evidence here of timely rescission, which would vitiate the entire agreement, including the arbitration provision.

Waiver

Irrespective of the enforceability of an arbitration agreement, a party can consent to arbitration where the party voluntarily initiates arbitration. (See, e.g., Nghiem v. NEC Electronic (9th Cir. 1994) 25 F.3d 1437, 1440 [finding employee had waived his right to challenge the arbitrator’s authority to decide the employee’s claims, after having voluntarily initiated the arbitration, attended the hearings with representation, presented evidence, and submitted a closing brief of fifty pages].)

“To establish waiver . . ., the party . . . 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 Commerce Club, Inc. (2024) 16

Cal.5th 562, 584 [abrogating prior case law that required in the arbitration context an additional showing of prejudice to establish waiver].)

In Nghiem, the employee voluntarily initiated arbitration, attended hearings with representation, presented evidence at the merits hearing, and submitted a 50-page closing brief before filing suit on substantially similar claims in the state court. (Id. at p. 1439.) At least two courts have interpreted Nghiem to support that “[o]nce a claimant submits to the authority of an arbitrator and pursues arbitration, the claimant must continue in the same forum,” even if no merits hearing has yet taken place. (Tomasetti v.

Prudential Ins. Co. of America (E.D. Cal., July 2, 1996) 1996 WL 604752, at *7 [holding that “[o]nce a claimant submits to the authority of an arbitrator and pursues arbitration, the claimant must continue in the same forum”]; see also Roderick v. Mazzetti & Associates, Inc. (N.D. Cal., Nov. 9, 2004) 2004 WL 2554453, at *5 [holding that “it is the initiation of arbitration, not the termination of it, which renders the arbitration process binding on the parties”].)

In fact, where a plaintiff voluntarily initiates arbitration and then “seeks to change course,” “the waiver analysis is ‘significant[ly]’ ‘differen[t]’—and waiver is more likely.” (Hofer v. Boladian (2025) 111 Cal.App.5th 1, 17 [citing Christensen v. Dewor Developments (1983) 33 Cal.3d 778, 783, superseded by statute on other grounds].)

On the other hand, limited participation while maintaining an objection to the arbitration does not waive the opponent’s objection to arbitration. (See, e.g., Nagrampa v. MailCoups, Inc. (9th Cir. 2006) 469 F.3d 1257, 1277-1278 [noting the plaintiff’s first act was to object to proceeding with arbitration, asserted “serious concerns” about the validity of the arbitration provision, objected to the venue and fee provisions, and participated in limited procedural issues while undertaking certain actions to preserve her rights, including the participation in a conference call that resulted in a scheduling order, an unsuccessful attempt to file a counter-demand, that was not accepted when she could not afford to pay the fee demanded by the arbitrator, and one set of discovery requests]; Textile Unlimited, Inc. v.

A..BMH and Co., Inc. (9th Cir. 2001) 240 F.3d 781, 784, 788 [finding the plaintiff did not waive its objection to arbitration where the plaintiff had submitted a letter challenging the arbitration itself, reserved the right to challenge jurisdiction, and stated that nothing in the letter should be deemed a waiver].)

Here, Plaintiffs waived any objection to the arbitration of their claims against Defendants NexGen and Van Valen. Unlike the plaintiffs in

Nagrampa and Textile Unlimited that initially and consistently maintained their objection to the arbitration, Plaintiffs themselves had purported to cancel the Plumbing Contract and HVAC Contract in 2024 (see Mr. Mills Decl. ¶ 5, Exs. C-D; Mrs. Mills Decl. ¶ 4, Ex. F) but later voluntarily initiated the arbitration of their claims pursuant to those contracts. This shows Plaintiffs’ knowing forfeiture of their right to pursue their claims in court. The fact Plaintiffs sought to change course early in the administrative proceeding does not invalidate their waiver.

Plaintiffs cite no authority providing that a waiver can be invalidated by subsequent conduct, and the court has found none. In fact, at least one court noted that “it is the initiation of the arbitration, not the [timing of the] termination of it, which renders the arbitration process binding on the parties.” (Roderick v. Mazzetti & Associates, Inc. (N.D. Cal., Nov. 9, 2004) 2004 WL 2554453, at *5.)

Therefore, the court finds Plaintiffs consented to arbitration of the eight claims submitted in their initial Statement of Claim and to the authority of the arbitrator.

Arbitration Procedural Rules

As the moving parties, Defendants bear the burden to justify their requested relief—including their position that the court must compel an arbitration proceeding that applies the AAA’s Construction Industry Arbitration Rules.

Defendants do not establish any valid agreement providing for the application of AAA’s Construction Industry Arbitration Rules.

The court finds Plaintiff did not consent to the application of AAA’s Construction Industry Arbitration Rules or otherwise waive their right to object to those rules. Here, Plaintiffs filed a demand for arbitration pursuant to the AAA’s “Consumer Arbitration Rules” (see Nelson Decl., Ex. A at pp. 1-2), attempted to invoke those consumer rules (see id. at ¶ 3), and consistently and expressly maintained an objection to the application of the AAA’s Construction Industry Arbitration Rules (id. at ¶¶ 4, 5, 7).

This court is aware of no authority permitting the court to enforce specific terms within an unenforceable arbitration agreement, where the plaintiff has generally consented to arbitration of claims but consistently maintained an objection to the specific contractual terms the defendant seeks to enforce.

For these reasons, the court will GRANT the motion as to the eight claims submitted in Plaintiffs’ initial AAA Statement of Claim, on the ground Plaintiffs consented to the authority of the Arbitrator to adjudicate those claims.

The court will DENY the motion to the extent it seeks an order compelling the application of the AAA’s Construction Industry Arbitration Rules to the parties’ arbitration proceeding. The Arbitrator SHALL employ the Arbitrator’s customary and/or standard procedure for determining the applicable procedural rules, where no arbitration agreement exists between the parties.

The court hereby STAYS the action pending resolution of the arbitration. (Code Civ. Proc., § 1281.4.)

The court hereby sets an ADR Review Hearing for February 23, 2027, at 9:00 a.m. in this Department.

Defendants to give notice.

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