Appel v. Concierge Auctions, LLC

• Court: District Court, S.D. California
• Decided: March 2, 2022
• Docket: 3:17-cv-02263
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 9 10 11 12 UNITED STATES DISTRICT COURT 13 SOUTHERN DISTRICT OF CALIFORNIA 14 15 HOWARD APPEL, et al., Case No. 17-cv-02263-BAS-MDD

16 Plaintiffs, ORDER DENYING PLAINTIFFS’ 17 v. MOTION TO LIFT STAY AND RECONSIDER ORDER 18 CONCIERGE AUCTIONS, LLC, et al., COMPELLING ARBITRATION 19 Defendants. (ECF No. 53)

22 Plaintiffs Howard Appel and David Cohen move the Court to lift its stay and 23 reconsider the April 13, 2018, Order Compelling Arbitration. Reconsideration may be 24 appropriate when there is an intervening change in controlling law or newly discovered 25 evidence. Plaintiffs argue this test is met in light of a 2021 Ninth Circuit decision and the 26 arbitration panel’s decision to apply New York law to the parties’ dispute. 27 The Court is unconvinced. The Ninth Circuit decision applied a rule that existed 28 before the Court’s Arbitration Order. And the arbitration panel’s ruling is not newly 1 discovered evidence under the reconsideration standard. Hence, the Court denies 2 Plaintiffs’ motion. 3 I. Background 4 Plaintiffs seek relief from the Arbitration Order based on a California rule that 5 prohibits the contractual waiver of a party’s right to seek public injunctive relief. The 6 Court first summarizes the Arbitration Order and then reviews both the California rule and 7 the Ninth Circuit decisions applying this rule. 8 A. Arbitration Order 9 As described in the Arbitration Order, Defendant Concierge advertises itself as a 10 large, high-end real estate company that auctions luxury residential real property. Plaintiffs 11 are real estate investors who participated in Concierge’s auctions. 12 Plaintiffs bring claims concerning Concierge’s solicitation and auction practices 13 against Concierge and eight related individuals. (First Am. Compl. (“FAC”), ECF No. 12.) 14 These claims include causes of action for violation of California’s Unfair Competition Law 15 and False Advertising Law. (Id. ¶¶ 78–82, 121–27.) Plaintiffs seek not only restitution, 16 but also “injunctive relief enjoining Concierge from soliciting sellers and/or bidders 17 through false and misleading advertising.” (Id. 37:13–14, 38:4–5.) 18 In 2018, Concierge moved to compel arbitration based on its form bidder registration 19 agreement (“Bidder Agreement”). (ECF No. 10.) The Bidder Agreement includes a clause 20 that clearly and unmistakably delegates arbitrability to the arbitrator. (Arbitration Order 21 8:18–11:6.) 22 Plaintiffs argued the delegation clause is unconscionable, so the Court considered 23 which jurisdiction’s law applies to this enforceability argument. (Arbitration Order 12:7– 24 13:4.) The Bidder Agreement includes a New York choice of law clause. The Court, 25 however, discerned no substantial relationship between New York and the parties or 26 transactions at issue. Further, as Concierge conceded, there is no material difference 27 between California and New York law on the issue of unconscionability. Hence, the Court 28 concluded California law applied to this issue. The Court then rejected Plaintiffs’ 1 unconscionability argument, granted the request to compel arbitration, and stayed the 2 remainder of this case pending conclusion of the arbitration. (Id. 13:6–22:10.) 3 B. McGill Rule 4 1. McGill v. Citibank, N.A. (Cal. 2017) 5 In 2017—before this case started—the California Supreme Court decided that a 6 contractual agreement waiving a party’s right to seek public injunctive relief in any forum 7 is unenforceable. McGill v. Citibank, N.A., 2 Cal. 5th 945 (2017). In McGill, the court 8 applied California Civil Code section 3513, which provides that “a law established for a 9 public reason cannot be contravened by a private agreement.” Under section 3513, a party 10 may contractually waive a statutory right only if the “statute does not prohibit doing so, the 11 statute’s public benefit is merely incidental to its primary purpose, and waiver does not 12 seriously compromise any public purpose that the statute was intended to serve.” McGill, 13 2 Cal. 5th at 961 (cleaned up) (quoting DeBerard Props., Ltd. v. Lim, 20 Cal. 4th 659, 669 14 (1999)). 15 The McGill court explained that public injunctive relief available under California’s 16 Unfair Competition Law, among other statutes, is “[b]y definition . . . primarily ‘for the 17 benefit of the general public.’” McGill, 2 Cal. 5th at 961 (quoting Broughton v. Cigna 18 Healthplans of Cal., 21 Cal. 4th 1066, 1082 (1999)). Waiver “of the right to seek public 19 injunctive relief under these statutes would seriously compromise the public purposes the 20 statutes were intended to serve.” Id. Therefore, these waivers are “invalid and 21 unenforceable under California law.” Id. 22 The contract in McGill was an arbitration agreement that waived the plaintiff’s right 23 to seek public injunctive relief in arbitration and required arbitration of all claims. Because 24 the contract waived the plaintiff’s right to seek a public injunction in any forum, the court 25 held the waiver was unenforceable under Civil Code section 3513. McGill, 2 Cal. 5th at 26 966–67. 27 28 1 2. Blair v. Rent-A-Ctr., Inc. (9th Cir. 2019) 2 The Ninth Circuit first addressed the McGill rule in Blair v. Rent-A-Ctr., Inc., 928 3 F.3d 819 (9th Cir. 2019). There, the defendant argued the Federal Arbitration Act preempts 4 the McGill rule. Id. at 822. The Ninth Circuit was unconvinced. The court explained that 5 “the McGill rule is a generally applicable contract defense derived from long-established 6 California public policy. It is a ‘ground[ ] . . . for the revocation of any contract’ and falls 7 within the FAA’s saving clause[.]” Id. at 828 (alterations in original) (quoting 9 U.S.C. § 8 2). Further, the rule does not interfere with arbitration because parties may arbitrate 9 requests for public injunctive relief. Id. at 827–29. The Ninth Circuit therefore held “the 10 FAA does not preempt the McGill rule.” Id. at 831.1 11 3. DiCarlo v. MoneyLion, Inc. (9th Cir. 2021) 12 More recently, in 2021, the Ninth Circuit again applied what it referred to as “the 13 McGill rule”—“California’s legal requirement that contracts allow public injunctive 14 relief.” DiCarlo v. MoneyLion, Inc., 988 F.3d 1148, 1152 (9th Cir. 2021). In DiCarlo, the 15 district court compelled arbitration of a putative class action that sought public injunctive 16 relief under California’s Unfair Competition Law, False Advertising Law, and Consumers 17 Legal Remedies Act. Id. at 1152. The plaintiff appealed, and the Ninth Circuit rejected 18 her argument that the arbitration agreement violated the McGill rule. The court explained 19 that because the agreement authorized the arbitrator to “award all [injunctive] remedies 20 available in an individual lawsuit under [California] law,” it encompassed the public 21 injunctive relief addressed in McGill and was enforceable. Id. at 1153–58 (alterations in 22 original). The Ninth Circuit also noted that “[o]nly an interpretation that public injunctive 23 relief remains available will render the arbitration provision ‘lawful’ and ‘capable of being 24 carried into effect.’” Id. at 1158 (quoting Cal. Civ. Code § 1643). 25 26

27 1 Relatedly, in a 2020 unpublished decision, the Ninth Circuit determined a district court did not abuse its discretion by reconsidering a 2016 order compelling arbitration in light of the 2017 McGill 28 1 Citing DiCarlo, Plaintiffs now ask the Court to lift its stay and reconsider the 2018 2 Arbitration Order. (Mot., ECF No. 53.) Concierge opposes. (Opp’n, ECF No. 58.)2, 3 3 II. Legal Standard 4 Reconsideration is an “extraordinary remedy.” Kona Enters., Inc. v. Est. of Bishop, 5 229 F.3d 877, 890 (9th Cir. 2000). It should be used sparingly in the interests of finality 6 and conserving judicial resources. Id. 7 Therefore, “a motion for reconsideration should not be granted, absent highly 8 unusual circumstances, unless the district court is presented with newly discovered 9 evidence, committed clear error, or if there is an intervening change in the controlling law.” 10 Kona Enters., 229 F.3d at 890 (quoting 389 Orange St. Partners v. Arnold, 179 F.3d 656, 11 665 (9th Cir. 1999)). A reconsideration motion “may not be used to raise arguments or 12 present evidence for the first time when they could reasonably have been raised earlier in 13 the litigation.” Id. (emphasis omitted). 14 III. Analysis 15 A. Intervening Change in Controlling Law 16 Plaintiffs argue reconsideration is appropriate “due to the intervening change in law 17 that occurred when DiCarlo was decided.” (Mot. 18:1–22:21.) The Court is unconvinced. 18 DiCarlo was not the first Ninth Circuit decision to address the public injunctive relief issue 19 from McGill. See Blair, 928 F.3d 819. And the fact that the Ninth Circuit in DiCarlo 20 refers to the relevant issue as the “McGill rule” belies Plaintiffs’ argument. See 988 F.3d 21 at 1152. McGill was decided in April 2017. 2 Cal. 5th 945. Plaintiffs did not raise the 22 McGill rule in their opposition to Concierge’s motion to compel arbitration filed in January 23 24 25

26 2 The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Fed. R. Civ. P. 78(b); Civ. L.R. 7.1(d)(1). 27 3 After their reply, Plaintiffs filed an additional brief in support of their motion without the Court’s permission. (ECF No. 61.) This brief was not authorized under the Civil Local Rules or this Court’s 28 1 2018. (ECF No. 21.) The Court issued its Arbitration Order in April 2018—after McGill. 2 So, the relevant rule is not an intervening change in controlling law under the 3 reconsideration standard. 4 Even so, Plaintiffs argue that “[w]hile the Ninth Circuit did apply the McGill rule in 5 Blair, it did so pre-DiCarlo concerning a contract with express terms precluding public 6 injunctive relief.” (Reply 4:27–28.) Plaintiffs further frame DiCarlo as having “expanded 7 the McGill rule to contracts having the practical effect of preventing the parties from 8 obtaining public injunctive relief in the Court and in arbitration.” (Id. 8:22–24.) This 9 construction is not convincing. Blair applied the same rule. Each new application of the 10 McGill rule by the Ninth Circuit is not an intervening change in controlling law. The Court 11 thus concludes reconsideration is not warranted on this basis. 12 B. Newly Discovered Evidence 13 Plaintiffs also argue there is “newly discovered or previously unavailable evidence” 14 that supports reconsideration. (Mot. 15:6–17:8.) After the Court’s Arbitration Order, the 15 parties proceeded to arbitration. In December 2020, a three-member arbitration panel 16 determined New York law applies to the parties’ dispute and dismissed Plaintiffs’ 17 California statutory claims. (ECF No. 53-3, at Ex. 11.) Plaintiffs claim that this ruling, 18 combined with the McGill rule applied in DiCarlo, means the arbitration agreement is 19 unenforceable. (Mot. 15:1–17:8.) Therefore, Plaintiffs contend the Court should 20 reconsider the Arbitration Order. 21 Plaintiffs’ argument is not persuasive. Plaintiffs do not point the Court to any Ninth 22 Circuit authority showing an interim arbitration ruling can be used to support 23 reconsideration of an order compelling arbitration. (See Mot. 15:6–27.) Rather, Concierge 24 convincingly argues that the relevant “evidence” for determining whether to compel 25 arbitration in 2018 was the parties’ agreement containing the arbitration clause. “Movants 26

27 4 Nor do Plaintiffs argue the Court committed clear error by not applying the McGill rule to the parties’ arbitration agreement sua sponte. But if Plaintiffs had advanced this claim, their argument would 28 1 |}could have relied on that evidence . . . by making the same . . . argument that they make 2 ||now—that the parties’ Arbitration Agreement|] contain[s] a New York choice of law 3 [clause] that would deprive them of the right to seek public injunctive relief, making [it] 4 |/invalid and unenforceable under McGill.” (Opp’n 11:17—21.) Plaintiffs made no such 5 |}argument. And how an arbitration panel might rule down the line is typically not germane 6 ||to the Court’s decision to compel arbitration. Were the opposite true, parties would 7 || frequently return to the district court for reconsideration of orders compelling arbitration 8 ||based on subsequent arbitration rulings. Hence, the interests of finality and conserving 9 || judicial resources do not support reconsideration here. In short, the Court finds there is not 10 ||newly discovered evidence supporting reconsideration of the Arbitration Order.° 11 Conclusion 12 For the foregoing reasons, the Court DENIES Plaintiffs Howard Appel and David 13 |}Cohen’s motion to lift the stay and reconsider the April 13, 2018, Order Compelling 14 || Arbitration. (ECF No. 53.) 15 IT IS SO ORDERED. 16 ) 17 || DATED: March 2, 2022 ( itl A (Lohan 6 ig United States District Judge 19 20 21 22 23 24 25 26 > Along the same lines, the Court is not persuaded by Plaintiffs’ argument that “highly unusual circumstances” or a “manifest injustice” warrant reconsideration. (See Mot. 14:16-17; 17:9-21.) See 27 || also Zimmerman vy. City of Oakland, 255 F.3d 734, 740 (9th Cir. 2001); Sch. Dist. No. 1J, Multnomah 28 Cty., 5 F.3d 1255, 1263 (9th Cir. 1993). The timeline here and unfavorable arbitration ruling do not satisfy these standards.