1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CESAR CORTES individually, and on Case No.: 20CV2375-GPC(DEB) behalf of all others similarly situated, 12 ORDER DENYING DEFENDANT’S Plaintiff, 13 AMENDED MOTION TO COMPEL v. ARBITRATION 14
CABRILLO CREDIT UNION, and DOES 15 [Dkt. No. 29.] 1 through 5, inclusive, 16 Defendant. 17
18 Before the Court is Defendant’s amended motion to compel arbitration. (Dkt. No. 19 29.) Plaintiff filed an opposition and Defendant replied. (Dkt. Nos. 30, 31.) Based on 20 the reasoning below, the Court DENIES Defendant’s amended motion to compel 21 arbitration. 22 Background 23 Plaintiff Cesar Cortes (“Plaintiff” or “Cortes”) filed a putative class action 24 complaint against Defendant Cabrillo Credit Union (“Defendant” or “Cabrillo”) alleging 25 violations of the Electronic Fund Transfer Act, Regulation E, 12 C.F.R. § 1005 et seq. 26 and violation of California’s Unfair Competition Law, California Business & Professions 27 Code section 17200. (Dkt. No. 1.) Around October 23, 2017, Plaintiff visited the 28 1 Cabrillo Credit Union to obtain an auto loan. (Dkt. No. 30-1, Cortes Decl. ¶ 2.) In order 2 to obtain a loan, Defendant required that an account be opened. (Id. ¶ 3.) Cortes opened 3 the required accounts, including a checking account, and signed a membership 4 application. (Id.; Dkt. No. 29-1, Davis Am. Decl. ¶ 7; id., Ex. B.) The Truth in Savings 5 Disclosure and Agreement (“Agreement”) is a standard form and according to 6 Defendant’s practice and policy, it is given to each new member when opening an 7 account and signing a membership application. (Dkt. No. 29-1, Davis Am. Decl. ¶¶ 3, 4; 8 id., Ex. A.) The Agreement contains an arbitration clause stating, “[i]n the event a 9 dispute arises under this Agreement or with respect to the obligation of either party under 10 this Agreement, the issue shall be submitted to binding arbitration under the rules then 11 prevailing of the American Arbitration Association and the judgment upon the aware may 12 be entered and enforced in any court of competent jurisdiction. (Dkt. No. 29-1, Davis 13 Am. Decl., Ex. A at 11.) Plaintiff asserts he was not provided the Agreement and no 14 representative of Defendant discussed the Agreement with him. (Dkt. No. 30-1, Cortes 15 Decl. ¶¶ 4, 5.) 16 Discussion 17 A. Federal Arbitration Act 18 Under the Federal Arbitration Act (“FAA”), arbitration agreements “shall be valid, 19 irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the 20 revocation of any contract.” 9 U.S.C. § 2. “[A] party aggrieved by the alleged failure, 21 neglect, or refusal of another to arbitrate under a written agreement for arbitration may 22 petition any United States district court . . . for an order directing that . . . arbitration 23 proceed in the manner provided for in such agreement.” 9 U.S.C. § 4. The United States 24 Supreme Court has stated that there is a federal policy favoring arbitration agreements. 25 Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Federal 26 policy is “simply to ensure the enforceability, according to their terms, of private 27 agreements to arbitrate.” Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford 28 Jr. Univ., 489 U.S. 468, 476 (1989). Courts are also directed to resolve any “ambiguities 1 as to the scope of the arbitration clause itself . . . in favor of arbitration.” Id. 9 U.S.C. § 2 2 is described as reflecting a “liberal federal policy favoring arbitration” and the 3 “fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v. 4 Concepcion, 563 U.S. 333, 339 (2011) (citations omitted). 5 “[A]rbitration is a matter of contract and a party cannot be required to submit to 6 arbitration any dispute which he has not agreed so to submit.” AT & T Tech., Inc. v. 7 Commc'n Workers of Am., 475 U.S. 643, 648 (1986); Chiron Corp. v. Ortho Diagnostic 8 Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (“it is a way to resolve those disputes-but 9 only those disputes-that the parties have agreed to submit to arbitration.”). In interpreting 10 an arbitration agreement, the courts must “apply ordinary state-law principles that govern 11 the formation of contracts.” Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1210 (9th 12 Cir. 1998) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). 13 On a motion to compel arbitration, the court may consider evidence outside the 14 pleadings. Macias v. Excel Bldg. Servs. LLC, 767 F. Supp. 2d 1002, 1007 (N.D. Cal. 15 2011) (“While the Court may not review the merits of the underlying case ‘[i]n deciding 16 a motion to compel arbitration, [it] may consider the pleadings, documents of uncontested 17 validity, and affidavits submitted by either party.’”) (quoting Ostroff v. Alterra 18 Healthcare Corp., 433 F. Supp. 2d 538, 540 (E.D. Pa. 2006)). 19 On a motion to compel arbitration, the court’s role is limited to deciding: “(1) 20 whether there is an agreement to arbitrate between the parties; and (2) whether the 21 agreement covers the dispute.” Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 22 2015). If these conditions are satisfied, the court is without discretion to deny the motion 23 and must compel arbitration. 9 U.S.C. § 4; Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 24 213, 218 (1985) (“By its terms, the [FAA] leaves no place for the exercise of discretion 25 by a district court, but instead mandates that district courts shall direct the parties to 26 proceed to arbitration.”). 27 / / / 28 / / / 1 B. Analysis 2 Defendant moves to compel arbitration of Plaintiff’s individual claims because he 3 agreed to arbitrate all disputes by way of the Truth in Savings Disclosure and Agreement 4 (“Agreement”) that is given to all customers when an account is opened. (Dkt. No. 29 at 5 4-5.1) Plaintiff responds that there was no agreement to arbitrate because he was unaware 6 of the Agreement and did not consent to arbitration. (Dkt. No. 30 at 11.) 7 “[T]he party seeking to compel arbitration[] has the burden of proving the 8 existence of an agreement to arbitrate by a preponderance of the evidence.” Knutson v. 9 Sirius XM Radio Inc., 771 F.3d 559, 565 (9th Cir. 2014) (citing Rosenthal v. Great W. 10 Fin. Sec. Corp., 14 Cal. 4th 394, 413 (1996)).
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CESAR CORTES individually, and on Case No.: 20CV2375-GPC(DEB) behalf of all others similarly situated, 12 ORDER DENYING DEFENDANT’S Plaintiff, 13 AMENDED MOTION TO COMPEL v. ARBITRATION 14
CABRILLO CREDIT UNION, and DOES 15 [Dkt. No. 29.] 1 through 5, inclusive, 16 Defendant. 17
18 Before the Court is Defendant’s amended motion to compel arbitration. (Dkt. No. 19 29.) Plaintiff filed an opposition and Defendant replied. (Dkt. Nos. 30, 31.) Based on 20 the reasoning below, the Court DENIES Defendant’s amended motion to compel 21 arbitration. 22 Background 23 Plaintiff Cesar Cortes (“Plaintiff” or “Cortes”) filed a putative class action 24 complaint against Defendant Cabrillo Credit Union (“Defendant” or “Cabrillo”) alleging 25 violations of the Electronic Fund Transfer Act, Regulation E, 12 C.F.R. § 1005 et seq. 26 and violation of California’s Unfair Competition Law, California Business & Professions 27 Code section 17200. (Dkt. No. 1.) Around October 23, 2017, Plaintiff visited the 28 1 Cabrillo Credit Union to obtain an auto loan. (Dkt. No. 30-1, Cortes Decl. ¶ 2.) In order 2 to obtain a loan, Defendant required that an account be opened. (Id. ¶ 3.) Cortes opened 3 the required accounts, including a checking account, and signed a membership 4 application. (Id.; Dkt. No. 29-1, Davis Am. Decl. ¶ 7; id., Ex. B.) The Truth in Savings 5 Disclosure and Agreement (“Agreement”) is a standard form and according to 6 Defendant’s practice and policy, it is given to each new member when opening an 7 account and signing a membership application. (Dkt. No. 29-1, Davis Am. Decl. ¶¶ 3, 4; 8 id., Ex. A.) The Agreement contains an arbitration clause stating, “[i]n the event a 9 dispute arises under this Agreement or with respect to the obligation of either party under 10 this Agreement, the issue shall be submitted to binding arbitration under the rules then 11 prevailing of the American Arbitration Association and the judgment upon the aware may 12 be entered and enforced in any court of competent jurisdiction. (Dkt. No. 29-1, Davis 13 Am. Decl., Ex. A at 11.) Plaintiff asserts he was not provided the Agreement and no 14 representative of Defendant discussed the Agreement with him. (Dkt. No. 30-1, Cortes 15 Decl. ¶¶ 4, 5.) 16 Discussion 17 A. Federal Arbitration Act 18 Under the Federal Arbitration Act (“FAA”), arbitration agreements “shall be valid, 19 irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the 20 revocation of any contract.” 9 U.S.C. § 2. “[A] party aggrieved by the alleged failure, 21 neglect, or refusal of another to arbitrate under a written agreement for arbitration may 22 petition any United States district court . . . for an order directing that . . . arbitration 23 proceed in the manner provided for in such agreement.” 9 U.S.C. § 4. The United States 24 Supreme Court has stated that there is a federal policy favoring arbitration agreements. 25 Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Federal 26 policy is “simply to ensure the enforceability, according to their terms, of private 27 agreements to arbitrate.” Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford 28 Jr. Univ., 489 U.S. 468, 476 (1989). Courts are also directed to resolve any “ambiguities 1 as to the scope of the arbitration clause itself . . . in favor of arbitration.” Id. 9 U.S.C. § 2 2 is described as reflecting a “liberal federal policy favoring arbitration” and the 3 “fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v. 4 Concepcion, 563 U.S. 333, 339 (2011) (citations omitted). 5 “[A]rbitration is a matter of contract and a party cannot be required to submit to 6 arbitration any dispute which he has not agreed so to submit.” AT & T Tech., Inc. v. 7 Commc'n Workers of Am., 475 U.S. 643, 648 (1986); Chiron Corp. v. Ortho Diagnostic 8 Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (“it is a way to resolve those disputes-but 9 only those disputes-that the parties have agreed to submit to arbitration.”). In interpreting 10 an arbitration agreement, the courts must “apply ordinary state-law principles that govern 11 the formation of contracts.” Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1210 (9th 12 Cir. 1998) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). 13 On a motion to compel arbitration, the court may consider evidence outside the 14 pleadings. Macias v. Excel Bldg. Servs. LLC, 767 F. Supp. 2d 1002, 1007 (N.D. Cal. 15 2011) (“While the Court may not review the merits of the underlying case ‘[i]n deciding 16 a motion to compel arbitration, [it] may consider the pleadings, documents of uncontested 17 validity, and affidavits submitted by either party.’”) (quoting Ostroff v. Alterra 18 Healthcare Corp., 433 F. Supp. 2d 538, 540 (E.D. Pa. 2006)). 19 On a motion to compel arbitration, the court’s role is limited to deciding: “(1) 20 whether there is an agreement to arbitrate between the parties; and (2) whether the 21 agreement covers the dispute.” Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 22 2015). If these conditions are satisfied, the court is without discretion to deny the motion 23 and must compel arbitration. 9 U.S.C. § 4; Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 24 213, 218 (1985) (“By its terms, the [FAA] leaves no place for the exercise of discretion 25 by a district court, but instead mandates that district courts shall direct the parties to 26 proceed to arbitration.”). 27 / / / 28 / / / 1 B. Analysis 2 Defendant moves to compel arbitration of Plaintiff’s individual claims because he 3 agreed to arbitrate all disputes by way of the Truth in Savings Disclosure and Agreement 4 (“Agreement”) that is given to all customers when an account is opened. (Dkt. No. 29 at 5 4-5.1) Plaintiff responds that there was no agreement to arbitrate because he was unaware 6 of the Agreement and did not consent to arbitration. (Dkt. No. 30 at 11.) 7 “[T]he party seeking to compel arbitration[] has the burden of proving the 8 existence of an agreement to arbitrate by a preponderance of the evidence.” Knutson v. 9 Sirius XM Radio Inc., 771 F.3d 559, 565 (9th Cir. 2014) (citing Rosenthal v. Great W. 10 Fin. Sec. Corp., 14 Cal. 4th 394, 413 (1996)). “It is undisputed that under California law, 11 mutual assent is a required element of contract formation.” Knutson, 771 F.3d at 565; see 12 Cal. Civ. Code, §§ 1550, 1565. Mutual assent may be manifested through “written or 13 spoken words, or by conduct,” and acceptance can be implied through action or inaction. 14 Id. (citation omitted). The mutual consent necessary to form a contract “is determined 15 under an objective standard applied to the outward manifestations or expressions of the 16 parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed 17 intentions or understandings.” Deleon v. Verizon Wireless, LLC, 207 Cal. App. 4th 800, 18 813 (2012) (citation omitted). “Although mutual consent is a question of fact, whether a 19 certain or undisputed state of facts establishes a contract is a question of law for the 20 court.” Id. “[A]n offeree, knowing that an offer has been made to him but not knowing 21 all of its terms, may be held to have accepted, by his conduct, whatever terms the offer 22 contains” but “when the offeree does not know that a proposal has been made to him this 23 objective standard does not apply.” Windsor Mills, Inc. v. Collins & Aikman Corp. 25 24 Cal. App. 3d 987, 992-93 (1972). “This principle of knowing consent applies with 25 particular force to provisions for arbitration.” Id. at 993. 26 27 28 1 In this case, the parties dispute whether Plaintiff was given the Agreement when he 2 opened his account and whether he assented to the arbitration provision contained in the 3 Agreement. According to Defendant, the Agreement is a standard form given to every 4 customer when they open an account. (Dkt. No. 29-1, Davis Am. Decl. ¶ 3; id., Ex. A.) 5 In 2017, it was Defendant’s policy to provide the Agreement to the customer prior to 6 signing the membership application. (Id. ¶ 4.) Customers are advised to review the 7 Agreement and inquire with any questions and each new customer agrees to abide by the 8 terms and conditions of the Agreement. (Id. ¶¶ 5, 6.) Based on this, Defendant maintains 9 that when Plaintiff signed the membership application, (id., Ex. B), he opened an account 10 and expressly agreed to the terms and conditions of the Agreement. (Id. ¶ 7.) 11 In response, Plaintiff states, to his knowledge, that when he opened his account, no 12 representative of Defendant provided him or discussed with him a document called the 13 “Truth in Savings Disclosure and Agreement.” (Dkt. No. 30-1, Cortes Decl. ¶ 4.) The 14 folder of materials he received from the Cabrillo representative who assisted with his 15 loan also did not contain the Agreement. (Id. ¶ 5.) Plaintiff states he was unaware that 16 he would be required to arbitrate any claims concerning his account and he did not enter 17 into any agreement with Defendant to arbitrate any legal claims he might have pursuant 18 to his account. (Id. ¶ 7.) 19 While Plaintiff signed the 2017 membership application, it does not contain an 20 arbitration agreement. (Dkt. No. 29-1, Davis Am. Decl., Ex. B.) The membership 21 application also does not incorporate by reference the Agreement which contains the 22 arbitration clause. Besides company practice and policy, Defendant does not provide any 23 evidence that it provided Plaintiff with the Agreement and that he assented to the terms in 24 the Agreement on the day he opened his account. Defendant’s representative even 25 testified that there is no documentation that shows Plaintiff actually received the 26 Agreement or that he agreed to be bound by it. (Dkt. No. 30-3, Davis Depo. at 65:15-21; 27 87:18-88:10.) Therefore, because Defendant has failed to offer evidence that Plaintiff 28 was given the Agreement and assented to the terms in the Agreement, Defendant has 1 || failed to demonstrate by a preponderance of the evidence that there was an agreement to 2 arbitrate. See Knutson, 771 F.3d at 565. Accordingly, because there was no agreement to 3 || arbitrate, the Court DENIES Defendant’s motion to compel arbitration.” 4 Conclusion 5 Based on the above, the Court DENIES Defendant’s motion to compel arbitration. 6 || The hearing set on July 2, 2021 shall be vacated. 7 IT IS SO ORDERED. 8 ||Dated: June 24, 2021 =< (Qrowkos Ce LE 9 Hon. Gonzalo P. Curiel 10 United States District Judge 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Because the Court denies the motion to compel arbitration because there was no valid arbitration agreement, the Court declines to address Plaintiffs additional arguments that the arbitration clause is 26 || unconscionable, that the dispute exceeds the scope of the arbitration clause and that Defendant waived its right to enforce the arbitration clause. See Doherty v. Barclays Bank Delaware, Case No.: 16-cv- 27 01131-AJB-NLS, 2017 WL 588446, at *4 n. 8 (S.D. Cal. Feb. 14, 2017) (declining to address the 28 parties’ arguments concerning the scope of the Agreement and waiver by conduct because it denied motion to compel arbitration for failing to demonstrate that a valid arbitration agreement existed). fa