Mejia v. Dacm Inc.

• Decision Date: 24 August 2020
• Docket Number: G058112
• Citation: 54 Cal.App.5th 691,268 Cal.Rptr.3d 642
• Court: California Court of Appeals Court of Appeals
• Parties: Joseph MEJIA, Plaintiff and Respondent, v. DACM INC., Defendant and Appellant.

54 Cal.App.5th 691

268 Cal.Rptr.3d 642

Joseph MEJIA, Plaintiff and Respondent,

v.DACM INC., Defendant and Appellant.

G058112

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

Filed August 24, 2020

Severson & Werson, Jan T. Chilton, John B. Sullivan and Erik Kemp, San Francisco, for Defendant and Appellant.

Kemnitzer, Barron & Krieg, Bryan Kemnitzer, Mark A. Chavez, Mill Valley, Adam McNeile and Kristin Kemnitzer, San Francisco, for Plaintiff and Respondent.

OPINION

ARONSON, J.

Defendant DACM, Inc. (Del Amo), a motorcycle dealership, moved to compel arbitration of a customer's claims Del Amo violated various consumer protection statutes when it sold the customer a motorcycle. The trial court denied Del Amo's petition to compel arbitration, finding the arbitration provision was unenforceable under McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 216 Cal.Rptr.3d 627, 393 P.3d 85 ( McGill ) because it barred the customer from pursuing "in any forum" his claim for a public injunction to stop Del Amo's allegedly illegal practices.

Del Amo contends the trial court erred in ruling the arbitration provision is unenforceable under McGill, supra , 2 Cal.5th 945, 216 Cal.Rptr.3d 627, 393 P.3d 85. Del Amo makes essentially four arguments. It contends McGill does not apply because, due to a choice-of-law provision in the contract, Utah law rather than California law governs the dispute. Del Amo further contends if California law applies, the arbitration provision "does not run afoul of McGill " because Mejia does not seek a public injunction. Del Amo also argues the arbitration clause is not unenforceable under McGill because the provision does not prevent a plaintiff from seeking public injunctive relief in all fora. Finally, Del Amo asserts if the arbitration provision is unenforceable under McGill , the Federal Arbitration Act (FAA) preempts McGill and requires enforcement of the clause.

There is no merit to any of these contentions. Consequently, we affirm the order.

I BACKGROUND

A. The Underlying Transaction

In May 2017, plaintiff Joseph Mejia (Mejia) bought a used motorcycle from Del Amo for $5,500. Mejia paid $500 cash and financed the remainder of the purchase price with a WebBank-issued Yamaha credit card he obtained through the dealership purchasing the motorcycle. In applying for the credit card, Mejia signed a credit application acknowledging he had received and read WebBank's Yamaha Credit Card Account Customer Agreement (the credit card agreement), which contained an arbitration provision. The arbitration provision, set forth in section 36 of the credit card agreement, stated either WebBank, Mejia, or "Yamaha (including its affiliates and dealers)," could, acting alone, elect and thereby "require that the sole and exclusive forum and remedy for resolution of a Claim be final and binding arbitration pursuant to this section ..." The provision defined "Claim," in pertinent part, as follows: "As used in this Arbitration Provision, ‘Claim’ shall include any ... claim, dispute, or controversy ... arising out of your application for and origination of this Account, this Agreement, your Account or the relationship between you and us, including (except to the extent provided otherwise in the last sentence of section (f) below) the validity or enforceability of this Arbitration Provision, any part thereof, or the entire Agreement...." (§ 36(a).)

In subpart (f), the arbitration provision specifically barred arbitration of all class, representative, or private attorney general claims: "NO ARBITRATION SHALL PROCEED ON A CLASS, REPRESENTATIVE, OR COLLECTIVE BASIS (INCLUDING AS PRIVATE ATTORNEY GENERAL ON BEHALF OF OTHERS), EVEN IF THE CLAIM OR CLAIMS THAT ARE THE SUBJECT OF THE ARBITRATION HAD PREVIOUSLY BEEN ASSERTED (OR COULD HAVE BEEN ASSERTED) IN A COURT AS CLASS, REPRESENTATIVE, OR COLLECTIVE ACTIONS IN A COURT.... Unless consented to in writing by all parties to the arbitration, an award in arbitration shall determine the rights and obligations of the named parties only, and only with respect to the claims in arbitration, and shall not (a) determine the rights, obligations, or interests of anyone other than a named party, or resolve any Claim of anyone other than a named party; nor (b) make an award for the benefit of, or against, anyone other than a named party.... Any challenge to the validity of this section (f) shall be determined exclusively by a court and not by the administrator or any arbitrator."

Crucially for this appeal, the arbitration agreement also contained a "poison pill" provision. Subpart (h) of section 36 states, in pertinent part, as follows: "If any portion of this Arbitration Provision other than section (f) is deemed invalid or unenforceable, the remaining portions of this Arbitration Provision shall nevertheless remain valid and in force. If an arbitration is brought on a class, representative, or collective basis, and the limitations on such proceedings in section (f) are finally adjudicated pursuant to the last sentence of section (f) to be unenforceable, then no arbitration shall be had. " (Italics added.)

The credit card agreement also contained a choice-of-law provision stating, "This Agreement is governed by applicable federal law and by Utah law."

B. The Petition to Compel Arbitration

Sometime after his purchase, Mejia filed a complaint against Del Amo on behalf of himself and other similarly situated consumers alleging Del Amo "has violated and continues to violate" the Rees-Levering Automobile Sales Finance Act (Rees-Levering) by failing to provide its customers with a single document setting forth all the financing terms for motor vehicle purchases made with a conditional sale contract. According to Mejia, Rees-Levering's " ‘single document rule’ ... requires motor vehicle dealers in transactions involving the financing of motor vehicles to state in a single document all the agreements concerning the total cost and terms of payment, including the terms of financing as required by Civil Code section 2981.9."

In essence, the complaint alleges Del Amo induces its customers to finance their motorcycle purchase with a WebBank credit card, an "open-ended" credit arrangement which, over time, substantially increases the customer's cost. Moreover, Mejia alleges, by facilitating the customer's use of a credit card for the purchase, Del Amo deceptively makes the transaction appear to be a "cash purchase," which is exempt from Rees-Levering. In actuality, Mejia asserts, the financing arrangement is a conditional sale contract in which WebBank, the legal owner of the motorcycle, takes a security interest in the motorcycle which does not vest in the customer until after the customer makes all payments due to WebBank. Consequently, Mejia contends, the purchase transaction is governed by Rees-Levering.

The complaint alleges Del Amo's failure to provide all the required financing information in a single document violates not only Rees-Levering and Civil Code section 2981 et seq., but also the Consumers Legal Remedies Act (CLRA, Civ. Code, § 1750 et seq. ) and the Unfair Competition Law (UCL, Bus. & Prof. Code, § 17200 et seq. ). Among the relief requested, the complaint requests an injunction prohibiting Del Amo from selling motor vehicles "without first providing the consumer with a single document containing all of the agreements of Del Amo and the consumer with respect to the total cost and the terms of payment for the motor vehicle, including any promissory notes or other evidence of indebtedness in accordance with Civil Code [section] 2981.9." The complaint further requests an injunction preventing Del Amo from selling motor vehicles "without first providing the consumer with all disclosures mandated by Civil Code [section] 2982 in a single document."

Based on the arbitration clause in the credit card agreement, Del Amo moved to compel arbitration and to dismiss or stay the case pending completion of the arbitration.

Mejia filed opposition to the motion to compel arbitration. Mejia argued Del Amo, a nonsignatory to the credit card agreement, lacked standing to enforce the arbitration provision in that agreement. Mejia also argued his claims against Del Amo "are well beyond the scope of the Arbitration Agreement," given the complaint does "not even mention[ ]" the credit card agreement and "only disputes the adequacy of the disclosures provided by Del Amo for a separate Sales Agreement ." Mejia also argued the arbitration provision is unenforceable under McGill, supra , 2 Cal.5th 945, 216 Cal.Rptr.3d 627, 393 P.3d 85, because it purports to waive Mejia's right to seek a public injunction " ‘in any forum.’ " (See McGill, supra , 2 Cal.5th at p. 961, 216 Cal.Rptr.3d 627, 393 P.3d 85 [arbitration provision purporting to waive right to seek "in any forum" statutory remedy of public injunctive relief "is invalid and unenforceable under California law"].)

C. The Order Denying the Petition to Compel Arbitration

The trial court denied the petition to compel arbitration. Though the court concluded the arbitration provision "appears to encompass [Mejia's] claims in this action, and Del Amo appears to be an intended third-party beneficiary of that provision," the court nonetheless ruled the arbitration provision is unenforceable under McGill, supra , 2 Cal.5th 945, 216 Cal.Rptr.3d 627, 393 P.3d 85. The court explained its reasoning as follows:

"Plaintiff's Complaint seeks, among other remedies, a public injunction. The arbitration provision, as Plaintiff correctly argues, prevents Plaintiff from seeking and obtaining a public injunction in arbitration. And because, if Del Amo elects to compel arbitration, arbitration is the only forum available to Plaintiff, Plaintiff is effectively precluded from seeking a public injunction in any forum.

"As held in McGill [, supra ,] 2 Cal.5th 945, 961 [216 Cal.Rptr.3d 627, 393 P.3d 85], Plaintiff's right to seek a public injunction is not waivable, and thus, at the least, this...