Jones v. General Motors Corp.

• Decision Date: 07 August 2009
• Docket Number: No. CV-08-02099-PHX-GMS.,CV-08-02099-PHX-GMS.
• Citation: 640 F.Supp.2d 1124
• Parties: Christopher JONES, Plaintiff, v. GENERAL MOTORS CORP., a Delaware Corporation; Greater Glendale Automotive LLC, dba J.D. Byrider, and Arizona Limited Liability Company; Greater Glendale Finance LLC, dba Car Now Acceptance Company; Does 1-100, inclusive, Defendants.
• Court: U.S. District Court — District of Arizona

640 F.Supp.2d 1124

Christopher JONES, Plaintiff, v. GENERAL MOTORS CORP., a Delaware Corporation; Greater Glendale Automotive LLC, dba J.D. Byrider, and Arizona Limited Liability Company; Greater Glendale Finance LLC, dba Car Now Acceptance Company; Does 1-100, inclusive, Defendants.

No. CV-08-02099-PHX-GMS.

United States District Court, D. Arizona.

August 7, 2009.

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Harry Norman Stone, Shawn Louis Stone, The Stone Law Firm PLC, Phoenix, AZ, for Plaintiff.

Leslie Kay Harrach, Negatu Molla, Bowman & Brooke LLP, Barry Harris Uhrman, Jay P. Rosenthal, Jones Skelton & Hochuli PLC, Phoenix, AZ, for Defendants.

ORDER

G. MURRAY SNOW, District Judge.

Pending before the Court is the Motion to Dismiss and to Enforce Arbitration Agreement and Compel Arbitration of Defendant Greater Glendale Automotive LLC, dba J.D. Byrider ("Byrider"). (Dkt. # 33.) Defendant Greater Glendale Finance LLC ("the Creditor") has joined the motion. (Dkt. # 43.) Defendant General Motors Corporation ("General Motors") has not. For the following reasons, the Court grants Byrider's motion.¹

BACKGROUND

On March 7, 2008, Plaintiff purchased a truck from Byrider, an automobile dealer. Upon purchasing the truck, Plaintiff executed several documents, one of which included an agreement that the parties would submit all disputes between them to binding arbitration. (Dkt. # 11 Ex. A at 8-9.) After purchasing the truck, Plaintiff alleges that certain defects for which Defendants are responsible caused the engine to fail, catch fire, and destroy the truck.

Plaintiff brought suit in this Court on November 13, 2008. (Dkt. # 1.) Plaintiff's Third Amended Complaint advances five claims: count one, violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1605 et seq.; count two, breach of express warranties; count three, breach of the implied warranty of merchantability; count four, breach of the implied warranty of fitness for a particular purpose; and count five, negligent repair. (Dkt. # 36.) Counts two, three, and four are predicated on both Arizona law and the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301 et seq., and count five is a pendent claim based on Arizona common law. Defendant Byrider now brings a motion to dismiss this case and order arbitration proceedings pursuant to Federal Rule of Civil Procedure 12(b)(1), or in the alternative to stay these proceedings pending the outcome of arbitration. (Dkt. # 33.)

DISCUSSION

I. Legal Standard

The defense of lack of subject matter jurisdiction may be raised by the parties, Fed.R.Civ.P. 12(b)(1), or by the Court, Fed.R.Civ.P. 12(h)(3). In resolving a motion to dismiss for lack of subject matter jurisdiction, the Court is not limited to considering the allegations in the pleadings if the "jurisdictional issue is separable from the merits of [the] case." Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.1987). The Court is "free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving factual disputes where necessary." Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir.1983).

The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., "mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). "The court's role under the Act is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (citing 9 U.S.C. § 4). If a district court decides that an arbitration agreement is valid and enforceable, then it should either stay or dismiss the claims subject to arbitration. Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1276-77 (9th Cir.2006).

II. Analysis

In this case, Byrider argues that Plaintiff's claims against it are subject to binding arbitration. (Dkt. # 33.) There is no dispute that Plaintiff and Byrider entered into a binding arbitration agreement and that the claims now advanced fall within the scope of that agreement.² (See Dkt. # 11 Ex. A.) Plaintiff argues, however, that the Court should not enforce the agreement for five reasons: (A) the arbitration agreement is unconscionable; (B) Plaintiff's MMWA claims are not arbitrable; (C) Plaintiff's TILA claims are not arbitrable; (D) the arbitration clause does not cover Plaintiff's claims against General Motors; and (E) Plaintiff has not refused to arbitrate. Plaintiff also argues (F) that he is entitled to a jury trial on the issue of arbitrability. The Court will address each of these six arguments in turn.

A. Unconscionability

Plaintiff first argues that the arbitration agreement is unconscionable. (Dkt. # 38 at 2-13.) The FAA "provides that arbitration agreements `shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'" Chalk v. T-Mobile USA, Inc., 560 F.3d 1087, 1092 (9th Cir.2009) (quoting 9 U.S.C. § 2). Although "the FAA clearly enunciates a congressional intention to favor arbitration, general contract defenses such as unconscionability, grounded in state contract law, may operate to invalidate arbitration agreements." Kam-Ko Bio-Pharm Trading Co. Ltd.-Australasia v. Mayne Pharma (USA) Inc., 560 F.3d 935, 940 (9th Cir.2009) (internal citations, ellipsis, and quotations omitted).

"[U]nconscionability is governed by state law," Chalk, 560 F.3d at 1092, and in this case the parties agree that Arizona law controls (Dkt. # 33 at 9-12; Dkt. # 38 at 2-3). Thus, the Court's task is to determine whether the Arizona courts would consider this arbitration agreement unconscionable. See In re First Alliance Mortgage Co., 471 F.3d 977, 993 (9th Cir.2006) ("[W]hen interpreting state law a federal court must predict how the highest state court would decide the issue and ... where there is no convincing evidence that the state supreme court would decide differently, a federal court is obligated to follow the decisions of the state's intermediate appellate courts[.]") (internal quotations and ellipsis omitted).

Arizona recognizes that both procedural and substantive unconscionability can play a role in determining whether an agreement is enforceable. Maxwell v. Fid. Fin. Servs., Inc., 184 Ariz. 82, 90, 907 P.2d 51, 59 (1995). The Arizona Supreme Court has held that substantive unconscionability alone can be enough to render an agreement unenforceable, but it has declined to take a position on whether procedural unconscionability alone can be inherently sufficient. See id. This Court need not resolve that question, however, because none of Plaintiff's arguments about either type of unconscionability, alone or in concert, are sufficient to render the arbitration agreement unenforceable.

1. Procedural Unconscionability

"Procedural or process unconscionability is concerned with unfair surprise, fine print clauses, mistakes or ignorance of important facts or other things that mean bargaining did not proceed as it should." Id. at 88-89, 907 P.2d at 57-58. Plaintiff argues that the arbitration agreement here is procedurally unconscionable because: (a) it appears in a contract of adhesion; (b) it does not recite the rules of the arbitration organizations; and (c) it was "hidden in a lengthy form contract." (Dkt. # 38 at 3-6.) The Court disagrees that the arbitration agreement is unenforceable under any of these arguments.

a. Adhesion

Plaintiff argues that the arbitration agreement is unenforceable because it appears in a contract of adhesion (i.e., a form contract containing terms over which Plaintiff could not negotiate). (Id. at 4.) This is an issue the Court cannot consider. Nagrampa, 469 F.3d at 1267 ("On a motion to compel arbitration, a court cannot consider whether the contract as a whole is unconscionable. Instead, a court is limited to considering whether the arbitration clause in the agreement is unconscionable.") (citation omitted). This argument must therefore be presented to the arbitrator. Id. at 1277 (holding that if "the district court concludes that the challenge is not to the arbitration provision itself but, rather, to the validity of the entire contract, then the issue of the contract's validity should be considered by an arbitrator in the first instance").

Alternatively, the Court notes that the "conclusion that the contract was one of adhesion is not, of itself, determinative of its enforceability." Broemmer v. Abortion Servs. of Phoenix, Ltd., 173 Ariz. 148, 151, 840 P.2d 1013, 1016 (1992). Rather, a court that determines that an agreement constitutes a contract of adhesion would then conduct independent reasonable expectations and unconscionability analyses. See id. As Plaintiff advances no reasonable expectations arguments, the unconscionability analysis below would therefore be the dispositive inquiry.

b. Rules of the Arbitration Organizations

Plaintiff next argues that the arbitration agreement is unenforceable because it "did not disclose the relevant rules of procedure that would apply to the arbitration process." (Dkt. # 38 at 5-6.) Plaintiff cites California law for this proposition, Lucas v. Gund, Inc., 450 F.Supp.2d 1125, 1131 (C.D.Cal.2006), but California law does not govern this case.

Even under the California standard, however, Plaintiff's argument would still fail. The Lucas court explained that, in the California cases utilizing this rule, "the problem wasn't just that the rules were not attached, but that it was done to hide the fact that the weaker party was giving up significant rights," for instance through the limitation of remedies or by conflicting with other provisions in the arbitration agreement. Id. Where, as in Lucas, there was no indication that the failure to attach...