Cabatit v. Sunnova Energy Corp.

• Decision Date: 31 December 2020
• Docket Number: C089576
• Citation: 60 Cal.App.5th 317,274 Cal.Rptr.3d 720
• Court: California Court of Appeals Court of Appeals
• Parties: Daniel CABATIT et al., Plaintiffs and Respondents, v. SUNNOVA ENERGY CORPORATION et al., Defendants and Appellants.

60 Cal.App.5th 317

274 Cal.Rptr.3d 720

Daniel CABATIT et al., Plaintiffs and Respondents,

v.SUNNOVA ENERGY CORPORATION et al., Defendants and Appellants.

C089576

Court of Appeal, Third District, California.

Filed December 31, 2020

James Stephen Kostas, Kostas Law Firm, 1008 West Avenue M14, Suite A, Palmdale, CA 93551, for Plaintiff and Respondent.

Jodi Krystyn Swick, Allison Jean Fernandez, McDowell Hetherington LLP, 1 Kaiser Plaza, Suite 340, Oakland, CA 94612, Michael D. Matthews, McDowell Hetherington LLP, 1001 Fannin Street, Houston, TX 77002-6774, for Defendant and Appellant.

MAURO, J.

Daniel and Indiana Cabatit entered into a solar power lease agreement (the agreement) with Sunnova Energy Corporation.¹ After a solar power system was installed on the Cabatits’ residence, the Cabatits sued Sunnova, alleging damage to their roof. Sunnova moved to compel arbitration based on an arbitration clause in the agreement, but the trial court found the arbitration clause unconscionable and denied the motion.

Sunnova now contends (1) the arbitration clause requires the Cabatits to submit to an arbitrator the question whether the clause is enforceable, (2) the trial court erred in finding the arbitration clause unconscionable, and (3) despite the trial court's conclusion to the contrary, the rule announced in McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 216 Cal.Rptr.3d 627, 393 P.3d 85 ( McGill ) -- that an arbitration agreement waiving statutory remedies under the Consumers Legal Remedies Act, the unfair competition law, and the false advertising law is unenforceable -- does not apply to the circumstances of this case.

We conclude (1) Sunnova did not assert in the trial court that the arbitrator must determine whether the clause is enforceable, and hence we will not address the issue, (2) the arbitration clause is procedurally and substantively unconscionable and therefore unenforceable, and (3) we need not consider whether the McGill rule applies here because general considerations of unconscionability, independent of the McGill rule, support the trial court's determination.

We will affirm the trial court's denial of the motion to compel arbitration.

BACKGROUND

In opposition to Sunnova's motion to compel arbitration, the Cabatits filed the declaration of Indiana Cabatit detailing the circumstances leading to the signing of the agreement. Sunnova did not present any evidence concerning those circumstances other than the text of the agreement.

After a Sunnova salesperson went to the Cabatits’ home and made a presentation about solar products, the Cabatits selected a solar power lease plan and the salesperson opened the proposed agreement on an electronic device. The salesperson said the Cabatits did not need to read the agreement language because he would go over the details, but the Cabatits would need to sign the agreement and initial certain parts before any work could be done. The salesperson scrolled through the agreement language quickly, indicating where signatures or initials were needed.

Indiana Cabatit speaks and understands English fairly well, but she does not understand complicated or technical terms. As the salesperson scrolled through the agreement language, Indiana Cabatit signed or initialed where the salesperson indicated, even though she did not understand most of what he was saying. The salesperson did not explain anything about arbitration.

The Cabatits had no computer and no internet access. They did not receive a copy of the agreement until this dispute arose and their daughter obtained a copy.

The Cabatits sued Sunnova, seeking cancellation of the agreement as well as injunctive and declaratory relief. They alleged Sunnova damaged their roof while installing the solar panels, then removed the solar panels and replaced the Cabatits’ roof with an inferior type. They further alleged Sunnova violated the California Home Improvement Law, Home Solicitation Law, Unfair Competition Law, and Consumer Legal Remedies Act.

Sunnova moved to compel arbitration under the arbitration clause in the agreement. The trial court found the arbitration clause to be procedurally and substantively unconscionable and denied the motion to compel arbitration. The trial court also concluded that the arbitration clause is unenforceable under the rule announced in McGill, supra, 2 Cal.5th 945, 216 Cal.Rptr.3d 627, 393 P.3d 85.

DISCUSSION

I

Sunnova contends the arbitration clause requires the Cabatits to submit to an arbitrator the question whether the clause is enforceable.

"When ... ‘the assertion by the claimant is that the parties excluded from court determination not merely the decision of the merits of the grievance but also the question of its arbitrability, vesting power to make both decisions in the arbitrator, the claimant must bear the burden of a clear demonstration of that purpose.’ [Citations.] ... ‘[T]he normal situation is that courts decide arbitrability; a party seeking to upset normal expectations must therefore make a "clear demonstration" to the contrary.’ [Citation.]" ( Hartley v. Superior Court (2011) 196 Cal.App.4th 1249, 1259, 127 Cal.Rptr.3d 174, italics omitted.) The delegation of this issue to the arbitrator must be clear and unmistakable. ( Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 781, 137 Cal.Rptr.3d 773.)

If a party fails to raise an issue or theory in the trial court, we may deem consideration of that issue or theory forfeited on appeal. ( City of Cerritos v. State of California (2015) 239 Cal.App.4th 1020, 1046, 191 Cal.Rptr.3d 611.)

Sunnova did not raise this issue in the trial court. After the Cabatits, in their respondents’ brief in this appeal, noted Sunnova's failure to raise the issue in the trial court, Sunnova responded that it had argued in the trial court that the arbitration clause contained a clear and unmistakable delegation provision. But as best we can tell based on our review of the record, Sunnova said nothing in the trial court about the arbitrator deciding whether the arbitration clause was enforceable. Instead, Sunnova's moving papers appear to assume that the trial court would decide whether the arbitration clause was enforceable. And at the hearing on the motion to compel arbitration, Sunnova did not assert that the arbitrator should decide arbitrability. We therefore conclude Sunnova forfeited consideration of this issue.

II

Sunnova next contends the trial court erred in finding the arbitration clause unconscionable.

Unconscionability of the arbitration clause is a defense to a motion to compel arbitration. ( Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1142, 163 Cal.Rptr.3d 269, 311 P.3d 184.) " ‘One common formulation of unconscionability is that it refers to " ‘an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.’ " [Citation.] As that formulation implicitly recognizes, the doctrine of unconscionability has both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.’ " ( Id. at p. 1133, 163 Cal.Rptr.3d 269, 311 P.3d 184.) "Arbitration is favored in this state as a voluntary means of resolving disputes, and this voluntariness has been its bedrock justification." ( Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 115, 99 Cal.Rptr.2d 745, 6 P.3d 669 ( Armendariz ).)

The party opposing a motion to compel arbitration bears the burden of showing unconscionability. ( Dougherty v. Roseville Heritage Partners (2020) 47 Cal.App.5th 93, 102, 260 Cal.Rptr.3d 580.) The trial court may exercise its discretion to refuse to enforce a contract if it is both procedurally and substantively unconscionable. In making its determination, the trial court employs a sliding scale: "the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa." ( Armendariz, supra, 24 Cal.4th at p. 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 )

Procedural Unconscionability

A primary question concerning procedural unconscionability is whether the arbitration clause was part of a contract of adhesion, which is a " ‘standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.’ " ( Armendariz, supra, 24 Cal.4th at p. 113, 99 Cal.Rptr.2d 745, 6 P.3d 669.) "A finding of a contract of adhesion is essentially a finding of procedural unconscionability. [Citations.]" ( Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846, 853, 113 Cal.Rptr.2d 376.)

The circumstances of the signing of the agreement in this case support the trial court's finding that it is a contract of adhesion. Sunnova drafted the agreement language, and there is no indication the Cabatits were given any option other than to take it or leave it. Indiana Cabatit did not understand the complicated and technical terms, and they were not explained to her. The agreement language was presented on an electronic device, and the salesperson scrolled through to the parts to be signed or initialed. The salesperson did not explain anything about the arbitration clause. The Cabatits were told they would need to sign the agreement before work could start, and they were not provided a copy of the agreement after it was signed. In sum, the agreement was Sunnova's standard contract, and the Cabatits had no opportunity to bargain over its terms. ( Armendariz, supra, 24 Cal.4th at p. 113, 99 Cal.Rptr.2d 745, 6 P.3d 669.) It was a procedurally unconscionable contract of adhesion.

Sunnova challenges the procedural-unconscionability finding by arguing (1) Indiana Cabatit signed a statement that she had read the terms of the agreement, (2) the arbitration clause is...