Brinkley v. Monterey Fin. Servs., Inc.

• Decision Date: 19 November 2015
• Docket Number: D066059
• Citation: 15 Cal. Daily Op. Serv. 12,242 Cal.App.4th 314,2015 Daily Journal D.A.R. 12,196 Cal.Rptr.3d 1
• Court: California Court of Appeals Court of Appeals
• Parties: Tiffany BRINKLEY, Plaintiff and Appellant, v. MONTEREY FINANCIAL SERVICES, INC., Defendant and Respondent.

242 Cal.App.4th 314

196 Cal.Rptr.3d 1

15 Cal. Daily Op. Serv. 12

2015 Daily Journal D.A.R. 12

Tiffany BRINKLEY, Plaintiff and Appellant,

v.MONTEREY FINANCIAL SERVICES, INC., Defendant and Respondent.

D066059

Court of Appeal, Fourth District, Division 1, California.

Filed 11/19/2015

Niddrie Fish & Addams, Niddrie Addams, David A. Niddrie, John S. Addams, San Diego; Keegan & Baker, Patrick N. Keegan, Carlsbad; Wickman & Wickman, Steven A. Wickman and Christina E. Wickman, Escondido, for Plaintiff and Appellant.

Call & Jensen, Matthew R. Orr and Melinda Evans, Newport Beach, for Defendant and Respondent.

AARON, J.

I.INTRODUCTION

Plaintiff Tiffany Brinkley appeals from an order of the trial court compelling her to arbitrate her individual claims and dismissing her class claims. Brinkley filed a putative class action against defendant Monterey Financial Services, Inc. (Monterey), asserting statutory violations arising from allegations that Monterey unlawfully recorded and/or monitored telephone conversations that Brinkley had with Monterey's representatives. Monterey moved to compel Brinkley to arbitrate her individual claims and to dismiss Brinkley's class claims, based on an arbitration agreement contained in a contract that Brinkley entered into with a third party who subsequently assigned Brinkley's contract to Monterey. The trial court ordered Brinkley to arbitrate her individual claims, and dismissed the class claims, as Monterey had requested.

On appeal, Brinkley raises a number of challenges to the trial court's order compelling arbitration. She contends that (1) the claims fall outside the scope of the arbitration agreement; (2) the arbitration clause is unconscionable and therefore unenforceable; and (3) the court erred in dismissing her class action claims because the parties agreed that an arbitrator would determine whether class arbitration is available under the contract.

We conclude that Brinkley's claims fall within the scope of the arbitration agreement and that the arbitration agreement is enforceable, with the exception of one provision that we find to be unconscionable under the applicable jurisdiction's law. We conclude, however, that it is possible to sever the unconscionable provision from the remainder of the arbitration agreement and from the contract as a whole. We therefore affirm the trial court's order compelling arbitration of Brinkley's claims. However, because the parties' agreement delegates to the arbitrator the question whether class arbitration is available under the contract, we reverse that portion of the trial court's order compelling the arbitration of Brinkley's individual claims, alone, and dismissing Brinkley's class claims.

II.FACTUAL AND PROCEDURAL BACKGROUND

Monterey Financial Services provides three services to its customers, including consumer financing, loan servicing, and debt collecting. Real Estate Investor Education (REIE) was one of Monterey's customers.

On or about August 10, 2011, Brinkley signed up to receive six real estate coaching sessions through REIE for $4,195. Brinkley paid REIE $850, and financed the remainder of the purchase price through REIE's “Retail Installment Contract” (the RIC). Once Brinkley's financing was approved, she had 30 days to complete an e-signature process. During this period of time, she had the ability to access the RIC online. Brinkley executed the RIC with her e-signature on August 24, 2011. The RIC provided that Brinkley could cancel the contract within three days of e-signing it if she were to change her mind.

The RIC contains a choice of law provision that provides: “This Agreement shall be governed by and interpreted and constructed in accordance with the law of your state of residence as indicated on the address section hereof completed by you, as applied to contracts between residents of such state entered into and to be performed wholly within such state.” Brinkley identified her residence as being in the state of Washington.

The RIC also contains the following arbitration provision:

“AGREEMENT DISPUTE RESOLUTION

“ARBITRATION: By signing this Agreement, you agree that, except as provided below, any claim or dispute arising out of or in any way related to this Agreement, whether past, present or future, or any matter of fact, law, background, circumstance, or other matter of any kind whatsoever relating to this Agreement, shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association. You further acknowledge and agree that the sole and exclusive venue for such binding arbitration shall be San Diego, California. The decision by the arbitrator or arbitrators shall be final and binding on all parties, and may be entered in any court of competent jurisdiction for enforcement. Such a decision shall include the payment of all fees and costs of the prevailing party. The determination of the ‘prevailing party’ shall be made by the arbitrator or arbitrators. The AGREEMENT FOR DISPUTE RESOLUTION shall not limit the right of any party to take non-judicial actions to enforce security interests and all rights related thereto, or to take judicial actions for (i) the enforcement of arbitration decisions, or (ii) the protection of any party pending arbitration decisions.

“SMALL CLAIMS PROCEDURE: Additionally, because the purpose of the AGREEMENT FOR DISPUTE RESOLUTION is to promote fast and inexpensive resolution of claims and disputes, Buyer, Seller and Seller's assignee remain free to choose the small claims court procedure to resolve any dispute or claim, as defined above, that is within the monetary jurisdictional limit of the court. Buyer, Seller and Seller's assignee agree, however, that any claims, counterclaims and/or disputes, as defined above, of any sort which are in excess of the small claims court jurisdictional monetary limit must be arbitrated before the American Arbitration Association and in accordance with its rules.”

In addition, the RIC informs consumers that the “Seller may assign this Agreement to any third party without prior notice to you,” and that “[u]pon any such assignment, such third party will become the holder of this agreement and your creditor.” It further informs consumers regarding the party to whom the assignment may be made, stating, “Seller intends to assign this agreement to Monterey Financial Services, [I]nc., 4095 Avenida de la Plata, Oceanside, CA 92056 (‘Monterey’),” and explains that “[a]fter the assignment of this Agreement to Monterey, all questions concerning the terms of this Agreement or payments should be directed to Monterey at its address indicated above.” Later, in a separate box that includes signature lines where the assignment can be effectuated, the consumer is told: “TERMS CONTAINED IN THIS BOX ARE NOT PART OF THE BUYER'S AGREEMENT.” According to Monterey, REIE assigned the RIC to Monterey shortly after the contract was executed.

At some point, Brinkley stopped making payments on the RIC. According to Brinkley, she never received all of the coaching sessions from REIE, which went out of business in August 2012. Monterey took the position that Brinkley owed it the remaining payments, and began collection efforts against her. During Monterey's collection efforts, Monterey called Brinkley, and Brinkley called Monterey.¹

According to the allegations in Brinkley's complaint, Brinkley made telephone calls to and received telephone calls from employees, officers, and/or agents of Monterey between December 2012 and March 2013. Brinkley also alleges that Monterey failed to inform Brinkley at any time that it was recording the telephone conversations between its representatives and Brinkley. During these calls, Brinkley revealed her identity and shared personal information. Brinkley believed that her calls were confidential and were not being monitored or recorded.

Brinkley filed a putative class action against Monterey in October 2013, asserting causes of action for invasion of privacy, unlawful recording of telephone calls, and unlawful and unfair business practices. The class that Brinkley seeks to represent includes persons who made telephone calls to or received telephone calls from Monterey while located or residing in California or Washington, and who were not provided notice that the calls might be recorded or monitored. Brinkley asserts that Monterey's conduct in recording her confidential communications without her knowledge was an invasion of her privacy and a violation of the California Invasion of Privacy Act (CIPA; Pen.Code, §§ 630–637.5), which was enacted “to address concerns that ‘advances in science and technology that have led to the development of new devices and techniques for the purpose of eavesdropping upon private communications and that the invasion of privacy resulting from the continual and increasing use of such devices and techniques has created a serious threat to the free exercise of personal liberties and cannot be tolerated in a free and civilized society.’ ” (Kight v. CashCall, Inc. (2011) 200 Cal.App.4th 1377, 1388, 133 Cal.Rptr.3d 450.) Among other things, the CIPA requires that all parties consent to the recording of a conversation involving confidential communication. (Flanagan v. Flanagan (2002) 27 Cal.4th 766, 769, 117 Cal.Rptr.2d 574, 41 P.3d 575.)²

Monterey moved to compel arbitration of Brinkley's individual claims, and sought dismissal of Brinkley's class claims.

After considering briefing and declarations from the parties, the court determined that the parties had entered into a valid arbitration agreement, that the parties had not agreed to arbitrate class claims, and that Brinkley's claims fell within the scope of the arbitration provision. The trial court ordered the parties to arbitrate Brinkley's individual claims, and dismissed Brinkley's class claims.

Brinkley filed a timely notice of appeal from the trial court's order.

III.DISCUSSION

Brinkley challenges the trial court's order requiring her to arbitrate...