Sherf v. Rusnak

• Decision Date: 16 October 2012
• Docket Number: 2d Civil No. B237275
• Court: California Court of Appeals Court of Appeals
• Parties: ERIC SHERF, Plaintiff and Respondent, v. RUSNAK/WESTLAKE et al., Defendants and Appellants.

ERIC SHERF, Plaintiff and Respondent, v. RUSNAK/WESTLAKE et al., Defendants and Appellants.

2d Civil No. B237275

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX

Dated: October 16, 2012

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 56-2011-00390038)

(Ventura County)

Respondent Eric Sherf purchased a BMW automobile from appellant Rusnak/Westlake pursuant to a retail installment sale contract (Contract).¹ Sherf filed a lawsuit alleging unlawful business practices relating to the purchase, and Rusnak moved to compel arbitration under an arbitration agreement in the Contract. The trial court denied the motion ruling that the arbitration agreement included an unenforceable class action waiver, and that Sherf's claim for injunctive relief was not subject to arbitration. Rusnak appeals the denial of its motion. Rusnak contends that the trial court erred because in AT&T Mobility LLC v. Concepcion (2011) ___ U.S. ___ (Concepcion), the United States Supreme Court held that the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) preempts state law prohibiting a consumer from waiving class action rights and injunctive relief rights in an arbitration agreement.

We hold that Concepcion invalidates California authority prohibiting the waiver of class action rights in an arbitration agreement and that Sherf's waiver of the right to bring a class action is binding and enforceable. As to his claim regarding arbitration of injunctive relief, we conclude that Sherf has conceded the issue by failing to address it in his appellate brief.

In light of the above, we reverse and remand for further proceedings concerning whether the arbitration agreement is unconscionable under general principles of California law.

FACTS

On August 10, 2010, Sherf signed a Contract for the purchase of a BMW car. The Contract was a one-page printed form provided by Rusnak and had provisions on both sides of the page. In bold and capitalized letters on its front side, the Contract states that the buyer has read the arbitration agreement on the reverse side. The arbitration agreement provides in capital letters that either party "may choose" to arbitrate "any dispute" before a single arbitrator. 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 us including any right to class arbitration or any consolidation of individual arbitrations." The agreement provides that Rusnak will advance the buyer his/her filing fee, administration, service, arbitrator or hearing fee up to $2,500, but each party shall be responsible for its own attorney, expert or other fees. The arbitrator's award shall be final unless the award is $0 or against a party in excess of $100,000 or includes an award of injunctive relief. In such an event, that party may request a new arbitration before a three arbitrator panel. The agreement also provides that, if any part of the arbitration agreement "other than waivers of class action rights" is deemed unenforceable, the remainder of the agreement remains enforceable. If the waiver of class action rights is deemed unenforceable in a case in which class allegations have been made, the remainder of the agreement shall be unenforceable.

In January 2011, Sherf filed a complaint alleging that some BMW cars do not come with a spare tire but, instead, are equipped with tires that permit the car to bedriven safely for a period of time after a tire is punctured. One type of tire permits the car to be "run flat" with a puncture, and another type, called an "M Mobility System," comes with a repair kit allowing drivers to repair and reinflate a flat tire. Sherf's car was equipped with four M Mobility tires. There was no spare.

The complaint alleges that Rusnak improperly charged Sherf a statutory "tire fee" of $1.75 for a spare tire which was not provided or purchased.² The complaint also alleges that Rusnak improperly charged him $1,149 for a tire service contract which was applicable only to "run flat" tires and not to the M Mobility tires installed on his car.

The complaint includes four individual and class action causes of action pertaining solely to the new tire fee, and two individual causes of action covering the tire service fee. The class action causes of action include claims for violation of the Consumers Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.), and two other consumer protection statutes. The CLRA cause of action seeks injunctive relief as well as monetary damages. The individual causes of action concerning the tire service fee allege violation of the CLRA and Unlawful Business Practices Act. (Bus. & Prof. Code, § 17200 et seq.) The first cause of action for violation of the CLRA regarding the tire fee, and the fifth cause of action regarding the tire service contract seek injunctive relief.

In August 2011, Rusnak filed a motion to compel arbitration of all causes of action, strike the class action claims, and stay the proceeding pending completion of arbitration. After a hearing, the trial court denied the motion. The trial court ruled (1) the waiver of the right to bring a class action violated the CLRA and is unenforceable under Fisher v. DCH Temecula Imports LLC (2010) 187 Cal.App.4th 601, and (2) claims for injunctive relief are not arbitrable as set forth in Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066. The court acknowledged Concepcion but concluded that it did not invalidate the "facially neutral anti-waiver provisions" in the CLRA. The trial court did not consider Sherf's claim that the arbitration agreement is unconscionable. The trialcourt also declined to order arbitration of claims other than for class and injunctive relief due to the commonality of issues and the substantial possibility of conflicting rulings.

DISCUSSION

Concepcion and the FAA

Rusnak contends that the trial court erred in denying its motion to compel arbitration because, under Concepcion, the class action waiver provision in the arbitration agreement is enforceable. Rusnak also contends that any injunctive relief claim is subject to arbitration under the arbitration agreement. We agree that the class action waiver is enforceable under Concepcion, and conclude that Sherf has conceded Rusnak's contention regarding injunctive relief.

On appeal from the denial of a motion to compel arbitration based solely on a decision of law, we review the arbitration agreement de novo to determine whether it is enforceable under applicable principles of law. (See, e.g., Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 707.) Here, we review the trial court's order de novo because its rulings regarding the waiver of class action claims and arbitrability of injunctive relief claims were based solely on questions of law.

Both state and federal law favor the arbitration of disputes. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195; Concepcion, supra, 131 S.Ct. at p. 1745.) Under California law, the court must enforce an arbitration agreement unless the right to compel arbitration has been waived, grounds exist for the revocation of the agreement, or a party to the arbitration is also a party to a pending court action where there is a possibility of conflicting rulings on a common issue of law or fact. (Code Civ. Proc., § 1281.2; see Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113-114.) Under the FAA, arbitration agreements are valid and enforceable "save upon such grounds as exist at law or in equity for the revocation of any contract." (9 U.S.C. § 2.) Grounds for revocation include "'generally applicable contract defenses, such as fraud, duress, or unconscionability.'" (Concepcion, at p. 1746.)

Sherf's class action and injunctive relief allegations are based on the CLRA and its interpretation by the California courts. The CLRA creates a nonexclusivestatutory remedy for unfair or deceptive acts or practices in connection with the sale of goods or services to consumers. (Wang v. Massey Chevrolet (2002) 97 Cal.App.4th 856, 869.) Any consumer who is damaged by a deceptive practice set forth in the CLRA may "bring an action" to recover damages, injunctive relief, restitution, punitive damages, and any other relief the court deems proper. (Civ. Code, § 1780.) The CLRA permits class actions and injunctive relief and expressly declares that any waiver by a consumer of its provisions "is contrary to public policy and shall be unenforceable and void." (Civ. Code, § 1751, see also id. at § 1781, subd. (b).)

At the time of Concepcion, California authority limited the enforceability of class action waivers. In Discover Bank v. Superior Court (2005) 36 Cal.4th 148 (Discover Bank), the plaintiff filed a class action alleging consumer credit card practices which were prohibited by a Delaware statute. After the bank successfully moved to compel arbitration, the plaintiff sought to compel class arbitration. The arbitration agreement expressly precluded class actions and class arbitration. (Id. at pp. 152-154.)

Our Supreme Court stated that "under some circumstances, the law in California is that class action waivers in consumer contracts of adhesion are unenforceable, whether the consumer is being asked to waive the right to class action litigation or the right to classwide arbitration." (Discover Bank, supra, 36 Cal.4th at p. 153.) Where the class action waiver is included in a "consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is...