Edgardo Diaz v. Tesla Energy Operations, Inc.

• Court: District Court, C.D. California
• Decided: September 1, 2021
• Docket: 2:21-cv-00211
• Status: Unknown

Opinion

1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 EDGARDO DIAZ, ) Case No. CV 21-00211 DDP (GJSx) ) 12 Plaintiff, ) ) ORDER GRANTING DEFENDANT TESLA 13 v. ) ENERGY OPERATIONS, INC.’S MOTION ) TO COMPEL ARBITRATION 14 TESLA ENERGY OPERATIONS, ) INC., ) 15 ) [Dkt. 14] Defendants. ) 16 17 Presently before the court is Defendant Tesla Energy 18 Operations, Inc. (“Tesla”)’s Motion to Compel Arbitration. Having 19 considered the submissions of the parties and heard oral argument, 20 the court grants the motion and adopts the following Order. 21 I. Background 22 In 2015, Plaintiff, a resident of Maryland, signed a “Power 23 Purchase Agreement” (the Agreement), under which Solar City, a 24 Tesla entity, would install solar panels on Plaintiff’s home. 25 (Complaint ¶ 9.) Under the Agreement, Plaintiff would not own any 26 of the equipment, but would instead pay Tesla for solar panel- 27 produced electricity at a pre-arranged rate. (Id.) 28 1 The Agreement includes an arbitration provision within a 2 section titled, “Applicable Law; Arbitration” (“the Arbitration 3 Provision”). (Declaration of Brionne Collins, Ex. 1.) The 4 Arbitration Provision states that the Agreement shall be governed 5 by the law of the customer’s home state, and that “any dispute, 6 claim, or disagreement . . . shall be resolved exclusively by 7 arbitration” administered by JAMS (formerly Judicial Arbitration 8 and Mediation Services, Inc.). (Collins Decl., Ex. 1 at 10.) The 9 Arbitration Provision also invokes JAMS’ “Streamlined Arbitration 10 Rules.” (Id.) 11 In 2020, Plaintiff attempted to refinance his home mortgage 12 and discovered that a credit report furnished by non-moving 13 Defendant Equifax Information Services, LLC (“Equifax”) listed a 14 debt owed to Tesla. (Complaint ¶ 10.) Plaintiff disputed the 15 report, but was informed by Equifax that the report was accurate, 16 and would continue to list an unsecured loan from Tesla with a 17 balance of approximately $21,000. (Complaint ¶¶ 11-13.) Plaintiff 18 alleges that this loan item reduced his credit score, impaired his 19 ability to obtain credit, caused him significant stress and lack of 20 sleep, and interfered with his personal relationships and his 21 ability to perform work tasks. (Compl. ¶ 14.) 22 Plaintiff’s Complaint alleges a cause of action under the Fair 23 Credit Reporting Act against both Tesla and Equifax, and a cause of 24 action under California Business & Professions Code Section 17200 25 against the former alone. Tesla now seeks to dismiss or stay all 26 claims against it, pursuant to the Arbitration Provision of the 27 Agreement. 28 II. Legal Standard 1 The Federal Arbitration Act (“FAA” or “Act”) requires courts to enforce covered arbitration agreements according to their terms. 3] Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1412 (2019) (citing 9 U.S.C. § 2). “Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT&T Techs., Inc. v. Comm’ns Workers 7]}of Am., 475 U.S. 643, ©48 (1986) (citations omitted). “The court’s role under the Act is [ ] limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether 10] the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000)). “If the response is affirmative on both counts, then the Act 13] requires the court to enforce the arbitration agreement in accordance with its terms.” Id. 15 The “party seeking to compel arbitration has the burden under the FAA to show (1) the existence of a valid, written agreement to arbitrate; and, if it exists, (2) that the agreement to arbitrate encompasses the dispute at issue.” Ashbey v. Archstone Property 19}}Mgmt., Inc., 785 F.3d 1320, 1323 (9th Cir. 2015). “When determining whether a valid contract to arbitrate exists, [courts] apply ordinary state law principles that govern contract 22} formation.” Davis v. Nordstrom, Inc., 755 F.3d 1089, 1093 (9th 23] Cir. 2014) (citing Ferguson v. Countrywide Credit Indus., Inc., 298 24 F.3d 778, 782 (9th Cir. 2002)). When the court is satisfied that an agreement to arbitrate exists, the policy favoring arbitration comes into play, and “ambiguities about the scope of an arbitration 27 agreement must be resolved in favor of arbitration.” Lamps Plus, 28]/139 S. Ct. at 1418-19.

1 III. Discussion 2 As stated above, the Arbitration Provision purports to apply 3 to “any dispute, claim, or disagreement” between Plaintiff and 4 Tesla. Plaintiff does not dispute that he entered into the 5 Agreement, nor that the phrase “any dispute, claim, or 6 disagreement” covers Plaintiff’s credit reporting issue. Plaintiff 7 instead argues, by reference solely to California rather than 8 Maryland law, that portions of the Arbitration Provision are 9 unconscionable and, therefore, unenforceable. (Opposition at 5.) 10 As an initial matter, Plaintiff’s contention that a single 11 unconscionable provision “in an arbitration agreement would render 12 the arbitration agreement unenforceable in its entirety” is an 13 overstatement, even of California law. (Opp. at 11:14-15.) “[A]s 14 a matter of substantive federal arbitration law, an arbitration 15 provision is severable from the remainder of the contract.” 16 Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006). 17 “California law grants courts the discretion either ‘to sever an 18 unconscionable provision or refuse to enforce the contract in its 19 entirety.’” Ingle v. Cir. City Stores, Inc., 328 F.3d 1165, 1180 20 (9th Cir. 2003) (quoting Cir. City Stores, Inc. v. Adams, 279 F.3d 21 889, 894 (9th Cir. 2002)). Although Plaintiff is correct that the 22 court in Adams did invalidate an entire dispute resolution 23 agreement, it did so not because a single provision was 24 unconscionable, but because “the objectionable provisions 25 pervade[d] the entire contract.” Adams, 279 F.3d at 896. 26 More fundamentally, although Plaintiff here does assert that 27 several of the Arbitration Provisions are substantively 28 unconscionable, the Arbitration Agreement delegates decisionmaking 1 authority over questions of unconscionability to the arbitrator.1 2 The Arbitration Provision states that JAMS Streamlined Arbitration 3 Rules shall apply. One of those rules provides that “arbitrability 4 disputes, including disputes over the . . . validity . . . of the 5 agreement under which arbitration is sought . . . shall be 6 submitted to and ruled on by the Arbitrator.” (Declaration of Marc 7 C. Mao in Support of Motion, ¶ 6.) Certain “gateway” issues, 8 including the validity of an arbitration agreement, may be 9 delegated to an arbitrator, provided that an agreement “clearly and 10 unmistakably” delegates such authority. Brennan v. Opus Bank, 796 11 F.3d 1125, 1130 (9th Cir. 2015). The Ninth Circuit has held that 12 the incorporation of a third party arbitration organization’s rules 13 “constitutes clear and unmistakable evidence that contracting 14 parties agreed to arbitrate arbitrability.” Id. Accordingly, this 15 Court cannot reach Plaintiff’s unconscionability arguments, which 16 must instead be presented to the arbitrator. 17 IV. Conclusion 18 For the reasons stated above, Tesla’s Motion to Compel 19 Arbitration is GRANTED. All claims against Tesla are dismissed, 20 pending arbitration. 21 IT IS SO ORDERED. 22 23 Dated: 24 September 1, 2021 DEAN D. PREGERSON United States District Judge 25 26 1 Plaintiff’s argument regarding procedural unconscionability 27 is based solely upon the contention that the Power Purchase Agreement is a contract of adhesion, without reference to Maryland 28 law.