Flores v. W. Covina Auto Grp.

• Decision Date: 11 January 2013
• Citation: 151 Cal.Rptr.3d 481,212 Cal.App.4th 895
• Parties: Israel FLORES et al., Plaintiffs and Appellants, v. WEST COVINA AUTO GROUP, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

212 Cal.App.4th 895

151 Cal.Rptr.3d 481

Israel FLORES et al., Plaintiffs and Appellants,

v.WEST COVINA AUTO GROUP, Defendant and Respondent.

Court of Appeal,

Second District, Division 8, California.

B238265

Filed January 11, 2013

Limited on Preemption Grounds

Cal. Civ. Code § 1751.

Limited on Preemption Grounds

Cal. Civ. Code § 1781.

APPEAL from an order of the Superior Court of Los Angeles County, Maureen Duffy–Lewis, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC 441761)

Rosner, Barry & Babbitt, Hallen D. Rosner, Christopher P. Barry and Angela J. Smith for Plaintiffs and Appellants.

Callahan, Thompson, Sherman & Caudill, Robert W. Thompson, Charles S. Russell and George N. Koumbis for Defendant and Respondent.

FLIER, J.

Israel Flores and Andrea Naasz appeal from the trial court's order compelling arbitration. This lawsuit arises from their purchase of a previously owned vehicle from West Covina Auto Group, LLC, doing business as West Covina Toyota (WCT), and alleges both individual and class action claims. WCT moved to compel arbitration based on an arbitration clause in the sales contract between the parties. Appellants contend that the trial court erred in compelling arbitration because (1) a “poison pill” provision in the arbitration clause prohibits arbitration; (2) WCT waived its right to arbitration; (3) the arbitration clause is unconscionable; (4) there was no meeting of the minds or mutual consent regarding the arbitration clause; and (5) as an unexpected term in an contract of adhesion, the arbitration clause is unenforceable. We hold the trial court did not err and affirm.

FACTS AND PROCEDURAL HISTORY

1. Allegations of the First Amended Complaint

Naasz was looking to replace her 2004 Chrysler Pacifica in February 2010. She telephoned WCT and spoke to a salesman. She told him she was “upside down” on her current vehicle but wanted to trade it in and purchase a new one. He invited her to WCT and told her WCT could help her purchase another vehicle.

On or about February 19, 2010, Naasz and her husband went to WCT and met with the salesman. She told him she still owed approximately $13,675 on her current vehicle and wanted her monthly payments for her new vehicle to be no more than $500 to $600 a month. Naasz and her husband met with the WCT fleet manager, who explained that WCT could not work her negative equity in her trade-in vehicle into a contract for a brand new vehicle. He explained that she had a choice between two previously owned vehicles—a Nissan Titan or a Toyota Sequoia. WCT told Naasz and her husband that the Sequoia was a “certified” vehicle. Naasz and her husband test drove the Sequoia. Once back at the dealership, WCT told her that the monthly payments would be well over what she wanted, in light of the negative equity in her trade-in vehicle. If she found a cosigner for the purchase, however, her payments would be lower. Naasz and her husband left WCT and returned the same day with Naasz's father, Israel Flores, who agreed to be a cosigner.

A WCT finance manager prepared the retail installment sale contract for the Sequoia. WCT instructed Naasz and Flores where to sign and initial the documents. It was late at night by the time they signed the contract, so Naasz left the vehicle at the dealership to be washed and detailed and decided to retrieve it the following day. Naasz's husband returned to pick up the vehicle the following day.

On or about March 4, 2010, a salesperson from WCT called Naasz and Flores and told them that WCT had lowered the price of the vehicle, and they needed to return to WCT to sign a new contract. WCT told them that the lender required more money as a down payment, but knowing that Naasz had no more to put down, WCT had decided to lower the price of the vehicle. Naasz and Flores went to WCT and met with a different finance manager, who presented them with an “Acknowledgement of Rewritten Contract” stating that the original contract between WCT and appellants had been mutually rescinded. They signed that and also a new retail installment sale contract that was backdated to February 19, 2010.

After the purchase, Naasz experienced a number of problems with her vehicle. Naasz took the vehicle to Toyota Motor Sales authorized repair facilities on numerous occasions, but Toyota Motor Sales had been unable to repair it or conform it to the express and implied warranties. She also requested that Toyota Motor Sales buy the vehicle back from her, which it refused to do.

Naasz and Flores filed a complaint against WCT and Toyota Motor Sales alleging both individual and class claims. They alleged class claims for violations of the Consumer Legal Remedies Act (CLRA) (Civ.Code, § 1750 et seq.), the Automobile Sales Finance Act (ASFA) (Civ.Code, § 2981 et seq.), and the unfair competition law (UCL) (Bus. & Prof.Code, § 17200 et seq.). They alleged individual claims for violations of the CLRA and UCL, violations of Vehicle Code sections 11713.18, 11713, and 24007, subdivision (b), fraudulent misrepresentation, negligent misrepresentation, and violations of the Song–Beverly Consumer Warranty Act (Civ.Code, § 1790 et seq.).

2. First 11 Months of Litigation

Appellants filed their complaint in July 2010 and the first amended complaint (FAC) in September 2010. WCT filed a case management statement in October 2010 stating that it was willing to participate in mediation but not arbitration, was requesting a jury trial, expected to file a motion for summary judgment or summary adjudication, and intended to complete the depositions of appellants and written discovery by January 2011. In November 2010, WCT demurred to all five of the class action causes of action. It also filed a motion to strike the portions of the FAC requesting classwide rescission of any sales contracts signed by putative class members. The court overruled the demurrers but granted the motion to strike. Appellants filed a writ petition seeking review of the court's ruling granting the motion to strike, and WCT filed a response to the petition.

WCT filed another case management statement in January 2011 requesting a jury trial, stating that it was willing to engage in mediation but not arbitration, and anticipating the same motions and discovery it identified in the prior case management statement. In February 2011, WCT filed an answer to the FAC asserting 46 affirmative defenses, none of which referenced a right to arbitrate.

In March 2011, WCT filed a third case management statement in which it again requested a jury trial, stated that it was willing to do mediation but not arbitration, anticipated the same motion practice, and anticipated written discovery and a vehicle inspection.

WCT noticed the depositions of Naasz and Flores in March 2011 and served them both with 25 requests for production of documents. It deposed them both on March 22, 2011, at which time both produced documents. Appellants served interrogatories, requests for documents, and requests for admission on WCT, to which WCT responded. Appellants also noticed the deposition of WCT's person most knowledgeable on certain topics and requested documents to be produced at the deposition. WCT objected to appellants' notice. Appellants deposed WCT's person most knowledgeable in May 2011.

3. WCT's Motion to Compel Arbitration

WCT filed a motion to compel arbitration and stay the action on or around June 10, 2011. The sales contract between appellants and WCT is a preprinted form contract produced by the Reynolds Company. The contract contains an arbitration clause with a waiver of the right to classwide arbitration. The clause reads in part:

“ARBITRATION CLAUSE

“PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL RIGHTS

“1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN U.S. DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

“2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST U.S. INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.

“3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.

“... If federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Clause shall not apply to such claim or dispute. Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action.... [¶] ... [¶]

“... If a waiver of class action rights is deemed or found to be unenforceable for any reason in a case in which class action allegations have been made, the remainder of this Arbitration Clause shall be unenforceable.”

The sales contract provides in another part, separate from the arbitration clause, that “[f]ederal law and California law apply to this contract.” In the arbitration clause, it states: “Any arbitration under this Arbitration Clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state law concerning arbitration.”

WCT asserted that it was precluded from moving to compel arbitration earlier in light of the decision in Fisher v. DCH Temecula Imports LLC (2010) 187 Cal.App.4th 601, 114 Cal.Rptr.3d 24 ( Fisher ), which was decided on August 13, 2010, just after appellants filed their original complaint. In Fisher, also a putative class action, the plaintiff had purchased a used car and signed a sales contract containing an arbitration clause identical to the one in appellants' contract. (Id. at p. 607, 114 Cal.Rptr.3d 24.) In particular, the arbitration clause contained the same “poison pill” provision stating that if the waiver of class action rights was found to be unenforceable, the entire arbitration clause would be unenforceable. ( Ibid. ) The Fisher plaintiff had also...