Caron v. Mercedes-Benz
Financial Services











Filed 6/29/12 Caron v. Mercedes-Benz Financial Services
CA4/3













>NOT TO BE PUBLISHED IN
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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115>.















IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



FOURTH APPELLATE DISTRICT



DIVISION THREE




>

LEE ANNE CARON, Plaintiff and Respondent, v. MERCEDES-BENZ FINANCIAL SERVICES USA LLC et al., Defendants and Appellants.

G044550 (Super. Ct. No. 30-2010-00369466) O P I N I O N

Appeal from an order of the Superior Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Orange
County, Thierry Patrick Colaw, Judge.
Reversed and remanded.

Severson & Werson, Scott J. Hyman, Erin S. Kubota, Jan T.
Chilton and Donald J. Querio for Defendant and Appellant Mercedes-Benz
Financial Services USA LLC.

Tharpe & Howell, Christopher S. Maile, Soojin Kang and Robert A.
Olson for Defendant and Appellant Mission Imports.

Rosner, Barry & Babbitt, Hallen D. Rosner, Christopher P. Barry,
Angela J. Smith and Hawk Barry for Plaintiff and Respondent.

* * *

Defendants and appellants Mercedes-Benz Financial Services USA LLC,
formerly known as DCFS USA LLC (Mercedes Financial), and Mission Imports, doing
business as Mercedes-Benz of Laguna Niguel (Mission Imports; Mercedes Financial
and Mission Imports are collectively referred to as Defendants), appeal from an
order denying their petitions to compel arbitration. Defendants sought to compel plaintiff and
respondent Lee Anne Caron to arbitrate her claims based on an arbitration
provision included in the Retail Installment Sales Contract she signed to
purchase a preowned vehicle from Mission Imports.

Finding itself bound by the recent decision in Fisher v. DCH Temecula Imports LLC (2010) 187 Cal.App.4th 601
(Fisher), the trial court ruled that
(1) the arbitration provision was unenforceable because it waived Caron’s
right to bring a class action under the Consumers Legal Remedies Act (Civ.
Code, § 1750 et seq.; CLRA) and (2) the Federal Arbitration Act
(9 U.S.C. § 1 et. seq.; FAA) did not preempt the CLRA’s prohibition
against class-action waivers. Because it
found the CLRA rendered the arbitration provision unenforceable, the trial
court declined to rule on Caron’s challenge that the arbitration provision was
also unconscionable.

Defendants argue the trial court erred because the FAA preempts the
CLRA’s prohibition against class action waivers and therefore the trial court
could not rely on the CLRA as a ground for denying Defendants’ petitions. Based on the United State Supreme Court’s
decision in AT&T Mobility LLC v.
Concepcion (2011) ___ U.S. ___, ___; 131 S.Ct. 1740 (>AT&T Mobility), we agree the FAA
preempts the CLRA’s anti‑waiver provision because the provision acts as
an obstacle to the FAA’s intention of enforcing href="http://www.mcmillanlaw.com/">arbitration agreements according to
their terms.

Consequently, we reverse the trial court’s order denying Defendants’
petitions to compel arbitration and remand this matter for the trial court to
consider Caron’s unconscionability challenge.
If the court finds any term unconscionable, it must also decide whether
the term may be severed and the remainder of the arbitration provision
enforced.

I

Facts and Procedural History

In October 2008, Caron purchased a certified preowned Mercedes Benz
vehicle from Mission Imports for approximately $50,000. The sales contract Caron signed described the
transaction’s terms and conditions. A
few days later, Caron returned to Mission Imports to purchase an extended
warranty for the vehicle and Mission Imports had her sign a new sales contract
that recalculated the amount financed.

Approximately one month later, Mission Imports phoned Caron to
inform her Mercedes Financial would not finance her vehicle purchase unless she
agreed to shorten the length of her installment contract. Caron agreed and Mission Imports had her sign
a third sales contract shortening the installment contract to 59 months. Mission Imports backdated both of the later
sales contracts Caron signed to the original purchase date. Mission Imports assigned Caron’s third and
final sales contract to Mercedes Financial.


Each sales contract Caron signed included an identical arbitration
provision on the back of the one-page, double-sided agreement. In pertinent part, the arbitration provision
stated, “1. EITHER YOU OR WE MAY CHOOSE
TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY
JURY TRIAL. [¶] 2. 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. [¶] . . . [¶]
Any claim or dispute, whether in contract, tort, statute or otherwise
. . . between you and us . . . which arises out of or
relates to your credit application, purchase or condition of this vehicle, this
contract or any resulting transaction or relationship (including any such
relationship with third parties who do not sign this contract) shall, at your
or our election, be resolved by neutral, binding arbitration and not by a court
action. . . . Any claim or
dispute is to be arbitrated by a single arbitrator on an individual basis and
not as a class action. You expressly
waive any right you may have to arbitrate a class
action. . . . [¶] . . . Any arbitration under this Arbitration Clause
shall be governed by the [FAA] and not by any state law concerning arbitration. [¶]
. . . If any part of
this Arbitration Clause, other than waivers of class action rights, is deemed
or found to be unenforceable for any reason, the remainder shall remain
enforceable. If a waiver of class action
rights is deemed or found to be unenforceable for any reason in a case in which
class action allegations have been made, the remainder or this Arbitration
Clause shall be unenforceable.”

After her purchase, Caron experienced various difficulties with the
vehicle and repeatedly returned it to Mission Imports for repairs. Mission Imports, however, could not repair
the vehicle to Caron’s satisfaction. In
May 2010, Caron filed this action against Mission Imports, Mercedes Financial,
and Mercedes-Benz USA LLC, alleging various class and individual claims under
the CLRA, the Automobile Sales Finance Act (Civ. Code, § 2981 et seq.),
and the unfair competition law (Bus. & Prof. Code, § 17200 et
seq.). She also alleged additional individual
claims for false advertising, intentional and negligent misrepresentation,
Vehicle Code violations, and Song-Beverly Consumer Warranty Act (Civ. Code,
§ 1790 et seq.) violations.

Defendants separately petitioned to compel Caron to arbitrate her
individual claims and stay this action under the arbitration provision in the
sales contracts. Caron filed a
consolidated opposition, arguing the class action waiver in the arbitration
provision rendered the entire provision unenforceable. Citing the recent opinion in >Fisher, Caron argued the class action
waiver was invalid because it required her to waive her statutory right to
bring a class action under the CLRA. She
asserted the arbitration provision itself contained a “‘poison pill’” clause
making the entire provision unenforceable if a court found the class action
waiver invalid. Caron also claimed the
arbitration provision was unconscionable and Defendants failed to properly
authenticate the sales contract. In
reply, Defendants argued the FAA preempted Fisher
and prohibited the trial court from invalidating the arbitration provision’s
class action waiver. Defendants also
disputed that the arbitration provision was unconscionable and claimed they
adequately authenticated the sales contract.


The trial court denied both petitions “on the grounds that the FAA
does not preempt state law and under the CLRA, the arbitration provision is
unenforceable as it requires plaintiff to waive her statutory rights to bring a
class action in violation of the CLRA anti-waiver provision.” The court further explained, “The facts of
this case are virtually identical to the facts in Fisher . . . which was decided only three months
ago. While defendants argue that >Fisher was wrongly decided or at best
incomplete, as it failed to take into consideration one or more U.S. Supreme
Court decisions, it is not for this court to determine whether the court of
appeal is right or wrong in its analysis.
Trial courts are still bound by the principle of stare decisis.” Because the
invalid class action waiver “extinguished” the entire arbitration provision,
the court also found the unconscionability issue was “moot.” Nor did the court expressly rule on Caron’s
objection that Defendants failed to adequately authenticate the sales contract.

Defendants both timely appealed from the trial court’s order.

II

Discussion

Caron contends we may affirm the trial court’s refusal to enforce
the arbitration agreement on any one of three independent grounds: (1) Defendants failed to adequately
authenticate the sales contract containing the arbitration agreement and
therefore failed to meet their burden to show the parties agreed to arbitrate
Caron’s claims; (2) the CLRA’s anti-waiver rule invalidated the
arbitration provision’s class‑action waiver and the provision’s poison
pill clause rendered the entire arbitration provision unenforceable; and
(3) the arbitration provision is unconscionable.

A. Defendants Adequately Authenticated the Parties’ Arbitration Agreement

Caron argues Defendants failed to authenticate the sales contract
containing the arbitration provision because the declaration by Mission
Imports’ attorney lacked personal knowledge of how the agreement was executed
and whether the agreement qualified as a business record. Similarly, Caron argued the employee
declaration Mercedes Financial offered failed to authenticate the sales
contract because the employee did not witness Caron sign the agreement and
failed to establish all of the elements necessary for the agreement to qualify
as a business record. Caron’s challenge
lacks merit because other evidence sufficiently authenticated the sales
contract containing the arbitration provision.

Documents must be authenticated before the trial court may receive
them into evidence. “[A] document is
authenticated when sufficient evidence has been produced to sustain a finding
that the document is what it purports to be [citation]. As long as the evidence would support a
finding of authenticity, the writing is admissible. The fact conflicting inferences can be drawn
regarding authenticity goes to the document’s weight as evidence, not its
admissibility.” (Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 321 (>Jazayeri); see also Evid. Code,
§§ 1400-1401.)

The authentication methods on which Caron relies are just two of
several methods the Evidence Code recognizes for authenticating documents. (People
v. Smith (2009) 179 Cal.App.4th 986, 1001 (Smith).) For example,
Evidence Code section 1414 also provides, “A writing may be authenticated
by evidence that: [¶] (a)
The party against whom it is offered has at any time admitted its
authenticity; or [¶] (b)
The writing has been acted upon as authentic by the party against whom
it is offered.”

In Ambriz v. Kelegian
(2007) 146 Cal.App.4th 1519 (Ambriz),
the Court of Appeal relied on Evidence Code section 1414 to conclude a
plaintiff properly authenticated a portion of a deposition transcript because
the defendant had offered a different portion of the same transcript to support
their summary judgment motion. (>Id. at p. 1527.) The Ambriz
court explained, “[Defendants] admitted the authenticity of the transcript of
Detective Pitcher’s deposition by seeking to use portions of that deposition in
support of their motion for summary judgment.
Raising an objection as to lack of authentication of an excerpt from the
same deposition defendants themselves relied upon in their motion is
disingenuous, unless defendants can establish that the excerpt [plaintiff]
offered was not part of the deposition transcript. [Defendants] made no such allegation. [Fn. omitted.]” (Ibid.)

Here, the sales contract Defendants offered was a one-page,
double-sided document with Caron’s signature.
The arbitration provision appeared on the back of the document. Caron attached a copy of the front of the
same sales contract to her complaint and alleged it was “a true and correct
copy” of the agreement for her vehicle purchase. As in Ambriz,
Caron admitted the sales contract’s authenticity by relying on a different part
of it and she made no attempt to show the arbitration provision on which
Defendants relied was not part of the same agreement. The sales contract’s authenticity is further
bolstered by the fact the front page of the agreement Defendants offered
matched the front page Caron attached to her complaint. (Smith,
supra, 179 Cal.App.4th at
p. 1001 [“‘Circumstantial evidence, content and location are all valid
means of authentication’”]; Jazayeri,
supra, 174 Cal.App.4th at
p. 321 [same].)

Defendants adequately authenticated the sales contract containing
the arbitration provision and therefore we reject Caron’s contrary argument.href="#_ftn1" name="_ftnref1" title="">[1]

B. The FAA Preempts the CLRA’s Anti-Waiver Rule

1. Standard of Review

“In general, ‘[t]here is no uniform standard of review for
evaluating an order denying a motion to compel arbitration. [Citation.] If the court’s order is based on a decision of
fact, then we adopt a substantial evidence standard. [Citations.]
Alternatively, if the court’s denial rests solely on a decision of law,
then a de novo standard of review is employed.
[Citations.]’ [Citation.]” (Laswell
v. AG Seal Beach, LLC (2010) 189 Cal.App.4th 1399, 1406.) Whether the FAA preempts the CLRA’s anti‑waiver
rule is a purely legal question we review de novo. (Fisher,
supra, 187 Cal.App.4th at
p. 612.)

2. Governing Principles Regarding FAA
Preemption

The FAA “was designed ‘to overrule the judiciary’s longstanding
refusal to enforce agreements to arbitrate,’ [citation]
. . . .” (>Volt Info. Sciences v. Leland
Stanford Jr. U. (1989) 489 U.S. 468, 474 (Volt).) It applies to all
agreements to arbitrate a dispute arising from a contract involving interstate
commerce and commands that they “shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the revocation of any
contract.”href="#_ftn2" name="_ftnref2"
title="">[2] (9 U.S.C.
§ 2.)

“‘Section 2 [of the FAA] is a congressional declaration of a liberal
federal policy favoring arbitration agreements, notwithstanding any state
substantive or procedural policies to the contrary. . . .’ [Citation.]
. . . ‘[I]n enacting
§ 2 of the federal Act, Congress declared a national policy favoring
arbitration and withdrew the power of the states to require a judicial forum
for the resolution of claims which the contracting parties agreed to resolve by
arbitration.’ [Citation.]” (Perry
v. Thomas (1987) 482 U.S. 483, 489 (Perry).) “That national
policy . . . ‘appli[es] in state as well as federal courts’ and
‘foreclose[s] state legislative attempts to undercut the enforceability of
arbitration agreements.’
[Citation.]” (>Preston v. Ferrer (2008) 552 U.S.
346, 353 (Preston).)

“The FAA contains no express pre-emptive provision, nor does it
reflect a congressional intent to occupy the entire field of arbitration. [Citation.]
But even when Congress has not completely displaced state regulation in
an area, state law may nonetheless be pre-empted to the extent that it actually
conflicts with federal law — that is, to the extent that it ‘stands as an
obstacle to the accomplishment and execution of the full purposes and
objectives of Congress.’ [Citation.]”href="#_ftn3" name="_ftnref3" title="">[3] (Volt, supra,
489 U.S. at p. 477.)

“The ‘principal purpose’ of the FAA is to ‘ensur[e] that private
arbitration agreements are enforced according to their terms.’ [Citations.]”
(AT&T Mobility, >supra, 131 S.Ct. at p. 1748; >Stolt-Nielsen S.A. v. AnimalFeeds
International Corp. (2010) 559 U.S. ___, ___ [130 S.Ct. 1758,
1773] (Stolt-Nielsen); >Volt, supra, 489 U.S. at p. 478 [the FAA’s “passage ‘was
motivated, first and foremost, by a congressional desire to enforce agreements
into which parties had entered’”].)

“The FAA’s displacement of conflicting state law is ‘now well‑established,’
[citation], and has been repeatedly reaffirmed, [citations].” (Preston,
supra, 552 U.S. at
p. 353.) It preempts state statutes
that expressly invalidate arbitration agreements. (See, e.g., Perry, supra,
482 U.S. at pp. 484, 490 [the FAA preempts California Labor Code
provision requiring judicial resolution of certain wage claims despite
agreement to arbitrate].) The FAA also
preempts state statutes that do not expressly invalidate arbitration agreements
but have been judicially interpreted to do so.
(See, e.g., Southland Corp. v.
Keating (1984) 465 U.S. 1, 10 [the FAA preempts state statute
interpreted by the California Supreme Court to require judicial resolution of claims
brought under the California Franchise Investment Law].) Finally, the FAA preempts “state-law rules
that stand as an obstacle to the accomplishment of the FAA’s objective[]” of
enforcing arbitration agreements according to their specific terms. (AT&T
Mobility, supra, 131 S.Ct.
at p. 1748.)

In AT&T Mobility, the
United States Supreme Court recently addressed whether the FAA preempted the
so-called “Discover Bank rule,” which
California courts frequently used to find arbitration provisions in certain
consumer contracts of adhesion unconscionable because they included a waiver of
the consumer’s right to bring a class action.
(AT&T Mobility, >supra, 131 S.Ct. at
p. 1746.) The California Supreme
Court created the Discover Bank rule
because class-action waivers in consumer contracts of adhesion allowed
companies to effectively exonerate themselves from liability for cheating large
numbers of consumers out of money individually too small for a consumer to
bring an individual action.href="#_ftn4"
name="_ftnref4" title="">[4] (Ibid.)

In AT&T Mobility, the
lower courts refused to enforce the parties’ arbitration agreement based on the
Discover Bank rule. They found the rule “was not preempted by the
FAA because that rule was simply ‘a refinement of the unconscionability
analysis applicable to contracts generally in California.’ [Citation.]”
(AT&T Mobility, >supra, 131 S.Ct. at
p. 1745.) The United States Supreme
Court rejected that analysis and held the FAA preempted the >Discover Bank rule “[b]ecause it ‘stands
as an obstacle to the accomplishment and execution of the full purposes and
objectives of Congress [in enacting the FAA],’ [citation]
. . . .” (>Id. at pp. 1745, 1753.)

The AT&T Mobility
court explained that arbitration under the FAA is a contractual matter and the
parties are therefore generally free to structure their arbitration as they
desire. (AT&T Mobility, supra,
131 S.Ct. at pp. 1748-1749, 1752; Stolt-Nielsen,
supra, 130 S.Ct. at p. 1774; >Volt, supra, 489 U.S. at p. 479.) For example, the parties to an arbitration
agreement “may agree to limit the issues subject to arbitration, [citation], to
arbitrate according to specific rules, [citation], and to limit >with whom [they] will arbitrate [their]
disputes, [citation]. [¶] The point of affording parties discretion in
designing arbitration processes is to allow for efficient, streamlined
procedures tailored to the type of dispute.
It can be specified, for example, that the decisionmaker be a specialist
in the relevant field, or that proceedings be kept confidential to protect
trade secrets. And the informality of
arbitral proceedings is itself desirable, reducing the cost and increasing the
speed of dispute resolution.” (>AT&T Mobility, at
pp. 1748-1749, original italics.)

The Supreme Court emphasized that “‘[a] prime objective of an
agreement to arbitrate is to achieve “streamlined proceedings and expeditious
results,”’ . . . .
[Citation.]” (>AT&T Mobility, supra, 131 S.Ct. at p. 1749.) Towards that end, the arbitration agreement
in AT&T Mobility not only
required the parties to arbitrate all disputes, but also prohibited the
plaintiffs from asserting any class claims or joining any other parties in the
arbitration. The AT&T Mobility court explained that allowing class claims would
“sacrifice[] the principal advantage of arbitration — its informality — and
make[] the process slower, more costly, and more likely to generate procedural
morass than final judgment[]” because class claims require procedural formality
and necessitate additional and different procedures to protect absent parties’
interests. (Id. at p. 1751.)

Because the Discover Bank
rule prevented the parties from achieving the benefits of the bilateral
arbitration to which they agreed, the AT&T
Mobility court found the rule erected an obstacle to the FAA’s objective of
enforcing arbitration agreements according to their terms. The FAA therefore preempted the >Discover Bank rule. (AT&T
Mobility, supra, 131 S.Ct.
at pp. 1750-1753.)

The plaintiffs in AT&T
Mobility “argue[d] that the Discover
Bank rule, given its origins in California’s unconscionability doctrine and
California’s policy against exculpation, is a ground that ‘exist[ed] at law or
in equity for the revocation of any contract’ under FAA § 2” and therefore
the FAA did not preempt the rule. (>AT&T Mobility, supra, 131 S.Ct. at p. 1746.) The Supreme Court rejected that argument,
explaining the FAA’s preemptive effect may “extend even to grounds
traditionally thought to exist ‘“at law or in equity for the revocation of any
contract[]”’” when those grounds “have been applied in a fashion that disfavors
arbitration.” (Id. at p. 1747.)
The AT&T Mobility
court concluded the Discover Bank
rule applied California’s unconscionability doctrine in a manner that
disfavored arbitration because the rule in its practical application had a
disproportionate impact on arbitration agreements. (Id.
at pp. 1747-1748.)

Caron argues the FAA preempts only
state laws that single out arbitration for special treatment. She cites several Supreme Court decisions
stating, “By enacting § 2 [of the FAA], we have several times said,
Congress precluded States from singling out arbitration provisions for suspect
status, requiring instead that such provisions be placed ‘upon the same footing
as other contracts.’ [Citation.]” (See, e.g., Doctors Assocs. v. Casarotto (1996) 517 U.S. 681, 687 (>Doctors Assocs.).)

The cases Caron cites, however, do not define the limits of the
FAA’s preemptive effect; they merely describe why the FAA preempted the laws at
issue in those cases. (See, e.g., >Doctors Assocs., supra, 517 U.S. at p. 687 [holding FAA preempted state
statute conditioning arbitration agreements’ enforceability on compliance with
a special notice requirement not applicable to contracts in general].) AT&T
Mobility makes clear the FAA’s preemptive effect extends to any state law
that “‘stands as an obstacle to the accomplishment and execution of the full
purposes and objective of [the FAA].’” (>AT&T Mobility, supra, 131 S.Ct. at p. 1753; see also >Parks, supra, ___ Cal.4th ___ [2012 Cal. Lexis 5795, *32 [National
Bank Act (NBA) preempts California statute requiring certain disclosures on
preprinted checks provided to credit card users because the statute “‘“‘stands
as an obstacle to the accomplishment and execution of the full purposes and objectives’”’
of the NBA”].)

3. The CLRA’s Anti-Waiver Rule Stands as
an Obstacle to the FAA’s Purpose of Enforcing Arbitration Agreements According
to Their Terms

The CLRA makes unlawful various “unfair methods of competition and
unfair or deceptive acts or practices undertaken by any person in a transaction
intended to result or which results in the sale or lease of goods or services
to any consumer . . . .”
(Civ. Code, § 1770, subd. (a).)
A consumer who suffers damages because of a prohibited act or practice
may bring an action for actual damages, injunctive relief, restitution, and
punitive damages. (Civ. Code,
§ 1780, subd. (a).) The consumer
may also bring a class action to recover the same relief on behalf of other
similarly situated consumers. (Civ. Code,
§ 1781, subd. (a).)

The CLRA declares that “[a]ny waiver by a consumer of [its]
provisions . . . is contrary to public policy and shall be
unenforceable and void.” (Civ. Code,
§ 1751.) Because the CLRA expressly
authorizes consumers to bring class actions, this anti-waiver provision renders
a consumer’s waiver of the right to bring a class action “‘unenforceable and
void.’” (Fisher, supra,
187 Cal.App.4th at p. 613.)

Here, the trial court found this anti-waiver provision invalidated
the class‑action waiver in the parties’ arbitration agreement and
therefore the poison pill clause made the entire arbitration agreement
unenforceable. The court also found the
FAA did not preempt the CLRA’s anti-waiver provision. We disagree with this latter conclusion.

No meaningful difference exists between the CLRA’s class action
prohibition and the Discover Bank
rule. Both are state-law rules that
prevent enforcement of an arbitration agreement according to its terms. As in AT&T
Mobility, Caron and Defendants’ arbitration agreement not only required
them to arbitrate all of their disputes, but also prohibited Caron from
asserting any class claims or joining any other parties in the
arbitration. By limiting the arbitration
to Caron’s individual claims, the agreement ensured the parties would receive
the benefits of contractual arbitration to which they agreed: “‘lower costs, greater efficiency and speed,
and the ability to choose expert adjudicators to resolve specialized
disputes.’ [Citation.]” (AT&T
Mobility, supra, 131 S.Ct.
at p. 1751.) Applying the CLRA’s
prohibition against class-action waivers would deprive the parties of those
benefits because it would allow Caron to assert class claims and impose the
complex, costly, and time-consuming procedures that the Supreme Court in >AT&T Mobility found so
objectionable. (Id. at pp. 1750-1751.)
Under AT&T Mobility’s
reasoning, the CLRA’s anti-waiver provision stands as an obstacle to the FAA’s
purpose and objective because it prevented the parties from enforcing their
arbitration agreement according to its terms.

The trial court concluded the recent decision in >Fisher required it to find the FAA did
not preempt the CLRA’s anti-waiver rule.
Fisher involved a petition to
compel arbitration based on a retail installment sales contract containing the
identical arbitration agreement at issue in this case. (Fisher,
supra, 187 Cal.App.4th at
p. 607.) The Fisher court found the CLRA’s anti-waiver provision invalidated the
arbitration agreement’s class-action waiver and that the FAA did not preempt
the CLRA’s anti‑waiver provision.
(Id. at pp. 613, 617.)

>Fisher’s preemption analysis did not address whether the CLRA’s anti‑waiver
provision stood as an obstacle to the FAA’s purposes and objectives of
enforcing arbitration agreements according to their terms. Instead, the Fisher court’s analysis relied on the FAA’s savings clause, which
allows courts to deny enforcement of an arbitration agreement on “such grounds
as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2; Fisher, supra,
187 Cal.App.4th at p. 613.)
The Fisher court found that
California law generally prohibits any contract from impairing statutory rights
enacted for a public purpose, and the right to bring a CLRA class action was an
unwaivable statutory right enacted for a public purpose. (Fisher,
at pp. 615-617.) Accordingly, >Fisher concluded, “The right to bring a
[CLRA] class action lawsuit . . . is ‘a separate, generally available
contract defense not preempted by the FAA.’
[Citation.]” (>Id. at p. 617.)

The Court of Appeal issued the Fisher
decision before the United States
Supreme Court decided AT&T Mobility. Consequently, the Fisher court lacked the opportunity to apply AT&T Mobility’s reasoning to its case, particularly whether the
FAA’s preemptive effect may extend to generally available contract defenses if
they are applied in a manner that generally discriminates against
arbitration. (AT&T Mobility, supra,
131 S.Ct. at p. 1747.)

We conclude Fisher applied
the CLRA’s anti-waiver provision in a manner that discriminates against
arbitration and therefore the FAA preempts it.
Applying the CLRA’s anti-waiver provision to class-action waivers in
arbitration agreements effectively prevents CLRA claims from being arbitrated
even though the CLRA does not expressly prohibit arbitration. If the anti-waiver provision applies, it
prevents businesses from enforcing a contract provision calling for arbitration
on an individual basis because consumers may avoid arbitration altogether by
merely alleging their claims as class claims.
Courts may not order arbitration of class claims unless the parties
expressly agree to class arbitration (Stolt-Nielsen,
supra, 130 S.Ct. at
p. 1775) and parties rarely, if ever, agree to this because it lacks the
benefits that motivate parties to agree to individual or bilateral arbitration
(AT&T Mobility, >supra, 131 S.Ct. at
pp. 1749-1752).href="#_ftn5"
name="_ftnref5" title="">[5] Fisher
stated it merely applied the generally available contract defense invalidating
private contracts that impaired unwaivable statutory rights, but it applied
that defense based on a statute that in its practical application discriminates
against arbitration. Accordingly, the
FAA preempts the CLRA’s anti-waiver provision.
(AT&T Mobility, >supra, 131 S.Ct. at pp. 1747-1748.)

Although California’s Legislature enacted the CLRA’s anti-waiver
provision for the important goal of protecting consumers, that does not change
the analysis or outcome. According to
the Supreme Court, “States cannot require a procedure that is inconsistent with
the FAA, even if it is desirable for unrelated reasons.” (AT&T
Mobility, supra, 131 S.Ct.
at p. 1753.)

Caron argues FAA preemption is irrelevant because this action is
about class-action waivers, not arbitration.
According to Caron, the CLRA would render the class-action waiver
unenforceable if Defendants placed it anywhere else in the contract and
therefore Defendants may not impart special enforceability to the waiver by
placing it in the arbitration provision.
Caron misses the point of the foregoing analysis.

Defendants placed the waiver in the arbitration provision to prevent
Caron from using class allegations to avoid arbitration altogether. Consequently, the provision is first and
foremost an arbitration clause. It
merely includes a class-action waiver to ensure the parties arbitrate their
claims as agreed. The class-action
waiver would otherwise violate the CLRA, but it survives as part of the
arbitration provision because the FAA trumps the CLRA to the extent they
conflict.

Caron also argues FAA preemption does not apply because the CLRA’s
anti-waiver provision acts to invalidate the class-action waiver and then the
poison pill clause invalidates the entire arbitration provision before any
preemption issue arises. In Caron’s
view, the poison pill clause shows the parties intended not to arbitrate any
claims on a class basis and this interpretation merely carries out that
intent. Again, Caron is mistaken. Her interpretation would allow state law to
defeat the arbitration provision despite the provision’s clear statement that
the FAA governs. Caron cannot avoid
preemption in this manner.

Finally, Caron contends Defendants attempt to use the FAA to preempt
the entire CLRA, but Defendants do no such thing. They merely argue the FAA preempts the CLRA’s
anti-waiver provision and prevented the trial court from applying it to
invalidate the arbitration provision’s class-action waiver. The FAA does not prevent Caron from bringing
a claim against Defendants under the CLRA or from obtaining the various forms
of relief the CLRA authorizes, including actual damages, injunctive relief,
restitution, punitive damages, and attorney fees. (Civ. Code, § 1780, subds. (a) &
(e).)

Caron concedes “arbitration is perfectly allowable to resolve consumer
claims under the CLRA,”href="#_ftn6"
name="_ftnref6" title="">[6]
and that a contract may require a party to arbitrate a statutory cause of
action if arbitrating the claim does not impair the party’s ability to
vindicate his or her rights.href="#_ftn7"
name="_ftnref7" title="">[7] Caron fails to explain how requiring her to
arbitrate her CLRA claims would prevent her from vindicating her substantive
rights under the CLRA. Preventing Caron
from obtaining relief on behalf of other consumers or the general public does
not prevent Caron from vindicating her rights under the CLRA based on the
injuries she suffered. (See >Gilmer, supra, 500 U.S. at p. 32 [“‘even if the arbitration could
not go forward as a class action or class relief could not be granted by the
arbitrator, the fact that the [statute] provides for the possibility of bringing
a collective action does not mean that individual attempts at conciliation were
intended to be barred’”].) There is
nothing inherently improper about requiring a party to arbitrate on an
individual basis if the party agreed to that procedure. (See AT&T
Mobility, supra, 131 S.Ct.
at pp. 1752-1753.)

In sum, we conclude the FAA preempts the CLRA’s anti-waiver
provision and therefore we decline to follow Fisher. Accordingly, the
trial court erred in denying Defendants’ petitions to compel arbitration on
that ground.

C. Remand for the Trial Court to Decide Caron’s Unconscionability
Challenges

Regardless of whether the FAA preempts the CLRA’s anti-waiver
provision, Caron contends we should affirm the trial court’s ruling because
several provisions in the arbitration clause are unconscionable. She relies on the general rule that appellate
courts must affirm a trial court’s order if it is correct on any legal
theory. (See, e.g., >Cohen v. DIRECTV, Inc. (2006)
142 Cal.App.4th 1442, 1447 [“if a trial court’s order is correct on any
applicable theory of law, the order will be affirmed regardless of the basis
for the trial court’s conclusion, as we review the correctness of the order,
not the reasons given for the order”], overruled on other grounds in >AT&T Mobility, supra, 131 S.Ct. at pp. 1746, 1753.) Caron further argues we must review the
evidence regarding unconscionability in the light most favorable to the trial
court’s ruling denying Defendants’ petitions, and presume the trial court made
all findings necessary to support a conclusion the arbitration clause is
unconscionable. (See >Flores v. Transamerica HomeFirst, Inc.
(2001) 93 Cal.App.4th 846, 851; A
& M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 489.) Caron, however, misapplies these governing
legal principles.

Unconscionability is ultimately a question of law for the court to
decide, but factual issues may bear on that determination. (Baker
v. Osborne Development Corp. (2008) 159 Cal.App.4th 884, 892.) Accordingly, we review a trial court’s
unconscionability determination de novo, but, to the extent the determination
“turned on the resolution of conflicts in the evidence or on factual inferences
to be drawn from the evidence, we consider the evidence in the light most
favorable to the trial court’s ruling and review the trial court’s factual
determinations under the substantial evidence standard.” (Ibid.)

In the trial court, Caron asserted an unconscionability argument in
opposing Defendants’ petitions to compel arbitration. The trial court, however, based its ruling
solely on its finding the CLRA invalidated the arbitration provision’s
class-action waiver and the poison pill clause therefore made the entire
provision unenforceable. The trial court
did not decide whether any of the arbitration provision’s terms were
unconscionable. In fact, the trial court
expressly refused to reach that issue, finding its CLRA ruling “render[ed] moot
[the] issues of substantive [and] procedural unconscionability.”

“When the record shows a trial court does not ‘undertake the factual
inquiry necessary to determine’ a question, we may not infer on appeal that
factual finding. [Citation.]” (Bouton
v. USAA Casualty Ins. Co. (2008) 167 Cal.App.4th 412, 422.) Indeed, “where . . . a respondent
argues for affirmance based on substantial evidence, the record must show the
court actually performed the
factfinding function. Where the record
demonstrates the trial judge did not weigh the evidence, the presumption of
correctness is overcome.” (>Kemp. Bros. Construction, Inc. v. Titan
Electric Corp. (2007) 146 Cal.App.4th 1474, 1477, original italics.)

Here, Caron argues we should affirm the trial court’s ruling because
substantial evidence supports her contention that the arbitration provision is
unconscionable. But we cannot affirm the
trial court’s ruling on that ground because the court declined to decide
whether any of the arbitration terms rendered it unconscionable.

We also cannot decide Caron’s unconscionability challenge in the
first instance because some of her arguments require factual findings that we
cannot make. For example, she argues the
arbitration provision is hidden and was not brought to her attention, but
Mission Imports argues the sales contract adequately highlights the provision
and Caron must be presumed to have read it.
We cannot resolve this factual dispute because the record does not
include a copy of the sales contract as it appeared when Caron signed it.

The sales contract is printed on the front and back of a single
piece of paper that is 25 inches long.
The copies in the record are blowups of various portions of the sales
contract that must be pieced together to see the entire agreement. These pieces do not present an accurate
picture of the sales contract Caron signed and whether the arbitration
provision was reasonably highlighted in context. Defendants sought to present the original
sales contract Caron signed at the trial court hearing, but the court declined
to consider it because the court did not need the original to decide the FAA
preemption issue. Even one factual
dispute prevents us from considering Caron’s unconscionability challenge in the
first instance because unconscionability is evaluated on a sliding scale: “the more substantively oppressive the
contract term, the less evidence of procedural unconscionability is required to
come to the conclusion that the term is unenforceable, and vice versa.” (Armendariz
v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83,
114.)

Even if we agreed with Caron’s unconscionability analysis, we would
still remand the matter for the trial court to address whether the
unconscionable terms could be severed and the remainder of the arbitration
provision enforced. The decision whether
to sever an unconscionable term from an arbitration provision “is committed to
the discretion of the trial court” and the trial court should make that
determination in the first instance. (>Brown v. Ralphs Grocery Co. (2011)
197 Cal.App.4th 489, 503-504 [remanding case to trial court for it to
determine whether an unconscionable term should be severed and the remainder of
the arbitration provision enforced], criticized on other grounds in >Iskanian, supra, 2012 Cal.App. Lexis 650, *25-*27.)

Accordingly, we remand this matter to the trial court for it to
(1) resolve all factual issues raised by Caron’s unconscionability
challenge; (2) decide whether any of the arbitration provision’s terms are
unconscionable; and (3) decide whether any term it finds to be
unconscionable can be severed from the remainder of the arbitration provision.href="#_ftn8" name="_ftnref8" title="">[8]

III

Disposition

The order is reversed and the matter remanded for further
proceedings consistent with the views expressed in this opinion. Defendants shall recover their costs on
appeal.







ARONSON,
J.



WE CONCUR:







O’LEARY, P. J.







BEDSWORTH, J.