Advanced Air Mgmt., Inc. v. Gulfstream Aerospace Corp.
| Decision Date | 06 September 2017 |
| Docket Number | B265723 |
| Court | California Court of Appeals Court of Appeals |
| Parties | ADVANCED AIR MANAGEMENT, INC., Plaintiff and Respondent, v. GULFSTREAM AEROSPACE CORPORATION, Defendant and Appellant. |
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. NC059702)
APPEAL from an order of the Superior Court of Los Angeles County, Ross M. Klein, Judge. Reversed with directions.
Jenner & Block, Andrew F. Merrick, Michael A. Doornweerd, Alan J. Iverson, Kate T. Spelman; Greines, Martin, Stein & Richland, Kent L. Richland and David E. Hackett for Defendant and Appellant.
Bailey & Partners, Patrick E. Bailey, Keith A. Lovendosky and F. Phillip Peche for Plaintiff and Respondent.
Gulfstream Aerospace Corporation (Gulfstream) appeals from an order denying its petition to compel arbitration of a complaint filed by Advanced Air Management, Inc. (Advanced). Advanced alleges that Gulfstream negligently maintained and repaired an airplane operated by Advanced. The trial court found that the parties' contract was unconscionable, so the arbitration agreement contained within it was unenforceable.
Gulfstream argues that the parties agreed to delegate to an arbitrator the authority to decide disputes concerning the enforceability of the arbitration agreement, and Advanced never specifically challenged the validity of that delegation, so the trial court was required to order arbitration and allow the arbitrator to decide whether the arbitration agreement as a whole is enforceable. We agree. We therefore reverse the order with directions to grant the petition.
Advanced is a charter aircraft company. Advanced operated several aircraft, including a twin-engine Gulfstream G-IV business jet. As that airplane was approaching its 5,000th landing, Advanced arranged for a required inspection and additional maintenance and repair services.
On June 27, 2013, Gulfstream sent Advanced a 15-page proposal for maintenance and repair services. The last paragraph of the proposal immediately above the signature line stated, On June 27, 2013, Advanced's maintenance director, Scott Chikar, signed the proposal.
On September 19, 2013, Advanced delivered the airplane to Gulfstream's Long Beach facility. Chikar met with Gulfstream's personnel at that time, who handed him a two-page Work Authorization Form. The first page included information about the aircraft, the customer, the service team members, and other information. The second page included the heading "WORK AUTHORIZATION AGREEMENT TERMS AND CONDITIONS" and set forth 19 numbered paragraphs. Paragraph 17 stated:
On September 19, 2013, Chikar signed the front and back of the Work Authorization Form. Gulfstream worked on the airplane for several months.
On April 17, 2014, having completed its work on the airplane, Gulfstream returned the airplane to Advanced. Advanced dispatched the airplane to Europe for a charter flight. On April 21, 2014, during a flight from Kazakhstan to Switzerland, the pilot was forced to make an emergency landingin Ufa, Russia because of low oil pressure. An inspection revealed that the gearbox oil drain plugs on the left and right engines had been removed and had not been securely replaced; a plug consequently came loose, resulting in loss of oil from the right engine. Advanced returned the airplane to Gulfstream's Long Beach facility for repairs.
On September 30, 2014, Advanced filed a complaint against Gulfstream. Advanced alleged that certain provisions of the Work Authorization Agreement purporting to limit Gulfstream's liability and the arbitration provision of the same agreement are procedurally and substantively unconscionable. Advanced also alleged that Gulfstream was negligent in performing the maintenance and repair work and did not adequately perform its contractual obligations. Advanced alleged causes of action for (1) declaratory relief, seeking a declaration that the challenged provisions are unenforceable; (2) negligence; and (3) breach of contract.
On April 22, 2015, Gulfstream filed a petition to compel arbitration, seeking to enforce the arbitration provision in the Work Authorization Agreement. Gulfstream argued that the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) applied because the contract evidenced a transaction involving interstate commerce. Gulfstream argued that the arbitration agreement was valid and enforceable and encompassed all of the claims alleged in the complaint.
Advanced argued in opposition to the petition that the Work Authorization Agreement and the arbitration agreementwere unconscionable.1 Advanced argued that the Work Authorization Agreement as a whole, and the arbitration agreement in particular, were procedurally unconscionable because Gulfstream provided the Work Authorization Agreement to Chikar for the first time on September 19, 2013, three months after Chikar had signed the proposal incorporating the Work Authorization Agreement's terms and conditions. Advanced argued that Chikar had no opportunity to negotiate the terms of the Work Authorization Agreement and was not aware of the arbitration agreement in the dense text in small type on the preprinted form. Advanced also argued that the Work Authorization Agreement as a whole, and the arbitration agreement in particular, were substantively unconscionable because the choice of Georgia law was "unexpected and unreasonable" and the provisions limiting Gulfstream's liability were unfairly one-sided.
Gulfstream argued in reply that the arbitrator rather than the court should decide whether the arbitration provision was unconscionable. Gulfstream also argued that the arbitration provision was neither procedurally nor substantively unconscionable.
On June 29, 2015, the trial court entered a minute order denying the petition to compel arbitration. The order stated that Gulfstream had carried its initial burden of establishing the existence of a contract with an arbitration provision. The order also stated that Advanced had carried its burden to show that the Work Authorization Form was procedurally unconscionable based on surprise. The order stated further:
Gulfstream timely appealed from the order denying its petition.2
Advanced argues that because the parties clearly and unmistakably agreed that the arbitrator shall decide questions of the existence, scope, and validity of the arbitration agreement, the trial court erred by addressing Gulfstream's unconscionability arguments on the merits. Rather, the court should have granted the petition and allowed the arbitrator to decide the issue of unconscionability. We agree.3
The FAA provides that a written arbitration agreement is enforceable according to its terms but may be invalidated ongrounds generally applicable to other contracts, such as fraud, duress, or unconscionability. (9 U.S.C. § 2; Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 67-68 [130 S.Ct. 2772, 177 L.Ed.2d 403] (Rent-A-Center).) Section 2 of the FAA "reflect[s] both a 'liberal federal policy favoring arbitration[]' [citation], and the 'fundamental principle that arbitration is a matter of contract[]' [citation]." (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339 [131 S.Ct. 1740, 179 L.Ed.2d 742].) "The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." (Moses H. Cone Memorial Hosp. v. Mercury Const. (1983) 460 U.S. 1, 24 [103 S.Ct. 927, 74 L.Ed.2d 765].) Advanced does not dispute that the Work Authorization Agreement affected interstate commerce and that the FAA therefore applies. (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 273-274 [115 S.Ct. 834, 130 L.Ed.2d 753].)
Courts presume the parties intended the court, rather than an arbitrator, to decide questions of arbitrability, which include questions concerning the existence of a valid and enforceable arbitration agreement and whether a particular dispute is within the scope of an arbitration agreement. (BG Group, PLC v. Republic of Argentina (2014) ___ U.S. ___, ___ [134 S.Ct. 1198, 1206-1207, 188 L.Ed.2d 220]; Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83-84 [123 S.Ct. 588, 154 L.Ed.2d 491].) The...
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