Lewis v. Fletcher Jones Motor Cars, Inc.

• Decision Date: 25 April 2012
• Docket Number: No. G045603.,G045603.
• Parties: Christy LEWIS, Plaintiff and Respondent, v. FLETCHER JONES MOTOR CARS, INC., Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

140 Cal.Rptr.3d 206

2012 Daily Journal D.A.R. 5342

205 Cal.App.4th 436

Christy LEWIS, Plaintiff and Respondent,

v.FLETCHER JONES MOTOR CARS, INC., Defendant and Appellant.

No. G045603.

Court of Appeal, Fourth District, Division 3, California.

March 26, 2012.As Modified April 25, 2012.

Gilbert, Kelly, Crowley & Jennett, Orange, Stephen S. Grande and Wayne I. Jeung for Defendant and Appellant.

Law Office of Michael R. Vachon and Michael R. Vachon, San Diego, for Plaintiff and Respondent.

ARONSON, J.

Defendant Fletcher Jones Motor Cars, Inc. (Fletcher Jones) appeals from an order denying its motion to compel plaintiff Christy Lewis to arbitrate her claims arising out of the “California Motor Vehicle Lease Agreement” (the Lease) she entered into with Fletcher Jones. The trial court found the Lease's arbitration provision to be unconscionable and Fletcher Jones waived its right to arbitration by unreasonably delaying its arbitration demand and litigating Lewis's claims on the merits. Under the controlling standard of review, we conclude substantial evidence supports the trial court's waiver determination. Accordingly, we affirm the trial court's order without deciding whether the Lease's arbitration provision is unconscionable.

IFacts and Procedural History

In October 2006, Lewis leased a car from Fletcher Jones pursuant to the Lease. When she returned the car at the Lease's expiration in January 2011, Fletcher Jones billed Lewis nearly $19,000 for exceeding the Lease's mileage allowance, missed payments, and late charges.

On January 14, 2011, Lewis filed this action against Fletcher Jones, alleging claims for (1) violation of the Vehicle Leasing Act (Civ.Code, § 2985.7 et seq.); (2) violation of the Consumer Legal Remedies Act (Civ.Code, § 1750 et seq.); and (3) unfair competition (Bus. & Prof.Code, § 17200 et seq.). Lewis sought to rescind the Lease and recover damages based on Fletcher Jones's purported failure to include all transaction terms in the Lease. She served Fletcher Jones with the complaint on January 24, 2011, and shortly thereafter served several discovery requests, including special interrogatories, form interrogatories, requests for admissions, and document requests.

Fletcher Jones demurred to Lewis's complaint, arguing (1) Lewis failed to adequately allege Fletcher Jones violated the Vehicle Leasing Act and (2) the statute of limitations barred the claims Fletcher Jones violated the Consumer Legal Remedies Act and engaged in unfair competition. Fletcher Jones also moved to strike portions of the complaint. On March 7, 2011, Fletcher Jones responded to Lewis's discovery requests.

Lewis filed an amended complaint rather than oppose Fletcher Jones's demurrer and motion to strike. Her first amended complaint alleged a single cause of action for violation of the Vehicle Leasing Act. Fletcher Jones again demurred, arguing the trial court should sustain the demurrer without leave to amend because the conduct Lewis alleged did not violate the Vehicle Leasing Act. The trial court issued a tentative ruling sustaining the demurer without leave to amend, but following the hearing the court took the demurrer under submission and later sustained it with leave to amend.

In early May 2011, Lewis and Fletcher Jones engaged in meet-and-confer discussions regarding Fletcher Jones's discovery responses. During those discussions, Lewis asked Fletcher Jones to extend the statutory deadline for her to file motions to compel further responses until after she filed her second amended complaint and the court ruled on Fletcher Jones's anticipated demurrer to that pleading. Lewis explained it would waste both time and money to litigate the discovery motions before the court ruled on the next demurrer because the court would likely deny Lewis further leave to amend if it sustained the demurrer. Lewis also explained she would be willing to settle the case if the court ruled she adequately alleged her claim. Fletcher Jones nonetheless refused to extend the statutory deadline and forced Lewis to prepare and file three motions to compel further responses or waive the right to seek the requested discovery.

On May 9, 2011, the day before Lewis filed her discovery motions, Fletcher Jones made a written demand that Lewis submit her claims to binding arbitration as the Lease required. This was the first time Fletcher Jones expressed a desire to arbitrate Lewis's claims, and its demand letter provided no justification for Fletcher Jones's failure to request arbitration earlier. Lewis rejected the demand on May 27, 2011.

Lewis filed her second amended complaint on May 23, 2011, again alleging a single cause of action for violation of the Vehicle Leasing Act. On June 2, 2011, Fletcher Jones filed a motion to strike Lewis's complaint and dismiss the action because Lewis failed to file the second amended complaint within the time the court ordered. Alternatively, Fletcher Jones moved to compel Lewis to submit her claims to binding arbitration as the Lease required. On June 22, 2011, Fletcher Jones filed a demurrer to the second amended complaint, arguing Lewis still had not alleged facts establishing a Vehicle Leasing Act violation and therefore the court should sustain the demurrer without leave to amend.

After continuing all pending motions to July 22, 2011, the court denied the motion to strike and the motion to compel arbitration. As to the motion to compel arbitration, the court's minute order explained, “There is an arbitration agreement, but its provisions are procedurally and substantively unconscionable. [Citation.] Here, similar to Gutierrez, there is no effective way for Plaintiff to obtain a fee waiver or reduction. [¶] Moreover, Defendant has waived its right to compel arbitration by its conduct in delaying a demand for arbitration for an unreasonable period of time and repeatedly availing itself of the superior court forum to the substantial prejudice of the Plaintiff. [See Burton v. Cruise (2010) 190 Cal.App.4th 939, 947, 118 Cal.Rptr.3d 613 [ ( Burton ) ].]” The court also overruled Fletcher Jones's demurrer to the second amended complaint and granted in part Lewis's discovery motions.

On August 5, 2011, the court signed an order prepared by Lewis's counsel denying the motion to strike and the motion to compel arbitration. The order expanded on the unconscionability and waiver rulings the court made in its minute order. As to the waiver ruling, the order explained, “Defendant waived the right to compel arbitration because: [¶] (i) Defendant sought multiple merits rulings from this Court; and [¶] (ii) Defendant delayed moving to compel arbitration for an unreasonably long period of time, causing substantial prejudice to Plaintiff, including forcing Plaintiff to defend against motions seeking merits ruling[s] from this Court and causing Plaintiff to spend over six months and over $40,000 in attorney fees, costs and expenses litigating this lawsuit in court.” ¹ Fletcher Jones timely appealed the trial court's ruling denying the motion to compel arbitration.

IIDiscussion

Fletcher Jones challenges the trial court's decision denying the motion to compel arbitration on two grounds. First, it argues the trial court erred in finding the Lease's arbitration provision unconscionable. Second, it argues the trial court erred in finding Fletcher Jones waived the right to arbitrate Lewis's claims. Because we affirm the trial court's decision based on its waiver ruling, we need not consider whether the Lease's arbitration provision is unconscionable. (See Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 984, 72 Cal.Rptr.2d 43 ( Sobremonte ).)

A. Standard of Review

Whether a party waived the right to contractual arbitration is a factual question we review under the substantial evidence standard of review. ( Augusta v. Keehn & Associates (2011) 193 Cal.App.4th 331, 337, 123 Cal.Rptr.3d 595 ( Augusta ); Burton, supra, 190 Cal.App.4th at p. 946, 118 Cal.Rptr.3d 613.) The trial court's “determination of this factual issue, ‘ “if supported by substantial evidence, is binding on an appellate court.” ’ [Citations.] Only ‘ “in cases where the record before the trial court establishes a lack of waiver as a matter of law, [may] the appellate court ... reverse a finding of waiver made by the trial court.” ’ [Citation.]” ( Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443, 1450, 110 Cal.Rptr.3d 104 ( Adolph ); Zamora v. Lehman (2010) 186 Cal.App.4th 1, 12, 111 Cal.Rptr.3d 335 ( Zamora ).)

We imply all necessary findings supported by substantial evidence ( Berman v. Health Net (2000) 80 Cal.App.4th 1359, 1364, 96 Cal.Rptr.2d 295 ( Berman ); Sobremonte, supra, 61 Cal.App.4th at p. 992, 72 Cal.Rptr.2d 43; Davis v. Continental Airlines, Inc. (1997) 59 Cal.App.4th 205, 214, 69 Cal.Rptr.2d 79) and “construe any reasonable inference in the manner most favorable to the judgment, resolving all ambiguities to support an affirmance” ( Burton, supra, 190 Cal.App.4th at p. 946, 118 Cal.Rptr.3d 613).

Fletcher Jones does not address the standard of review applicable to a waiver finding. Instead, it focuses on the unconscionability finding and argues we should review the trial court's entire decision de novo. Unconscionability is generally a legal question we review under the de novo standard. ( Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1567, 98 Cal.Rptr.3d 743; see also Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1468–1469, 92 Cal.Rptr.3d 153.) As explained above, however, waiver is a factual question we must review under the substantial evidence standard.

B. Legal Principles Governing Waiver of Contractual Arbitration

Federal and state law reflect a strong public policy favoring arbitration as “ ‘ “a speedy and relative inexpensive means of dispute resolution.” ’ ” ( St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1204, 8 Cal.Rptr.3d 517, 82 P.3d 727 ( St.Agnes ); AT & T...