Brennan v. U.S. TelePacific Corp.



















Filed 2/25/13 Brennan v. U.S. TelePacific Corp. 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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


>

JOURNEY BRENNAN, Plaintiff and Respondent, v. U.S. TELEPACIFIC CORP, Defendant and Appellant.

G046225 (Super. Ct. No. 30-2010-00422317) ORDER MODIFYNG OPINION AND DENYING PETITION FOR REHEARING; NO CHANGE IN JUDGMENT

It
is ordered that the opinion filed on January
30, 2013 be modified as
follows:

On
page 2, in the first paragraph, delete “Telepacific” and replace it with
“TelePacific.”











This
modification does not change the judgment.
The petition for rehearing is DENIED.





THOMPSON,
J.



WE CONCUR:







BEDSWORTH, ACTING P. J.







ARONSON, J.

Filed
1/30/13 Brennan v.
U.S. Telepacific CA4/3 (unmodified version)







>NOT TO BE PUBLISHED IN OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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




>

JOURNEY BRENNAN, Plaintiff and Respondent, v. U.S. TELEPACIFIC CORP., Defendant and Appellant.

G046225 (Super. Ct. No. 30-2010-00422317) O P I N I O N

Appeal from an order of
the Superior Court
of Orange County,
Ronald L. Bauer, Judge. Affirmed.

Gibson, Dunn &
Crutcher, Daniel M. Kolkey, Christopher Chorba, Babak Lalezari and Melissa Case
for Defendant and Appellant.

Zeldes & Haeggquist,
Amber L. Eck, Aaron M. Olsen; Hunt Ortmann Palffy Nieves Lubka Darling &
Mah, Omel A. Nieves, Katherine J. Odenbreit and Alison C. Gibbs for Plaintiff
and Respondent.



* * *

Defendant U.S.
Telepacific Corp. appeals from the denial of its motion to compel arbitration
of a class action complaint filed by plaintiff Journey Brennan. Defendant’s motion was based on an arbitration
provision allegedly contained in a contract to provide telecommunication
services to plaintiff. Defendant
contends the court erred in finding it failed to meet its burden to show an
enforceable arbitration agreement. It
argues plaintiff made a judicial admission he was bound by an arbitration
agreement or is equitably estopped from denying the agreement. Defendant also claims the agreement is not
unconscionable and if there are any unconscionable terms, they may be
severed. Plaintiff challenges each of
these arguments and also asserts defendant waived the right to compel
arbitration. We agree there is
insufficient evidence to show the existence of an enforceable agreement to
arbitrate and affirm on that basis.



FACTS
AND PROCEDURAL HISTORY



According to the
complaint and plaintiff’s declaration, in February 2008 plaintiff entered into
an “Account Agreement” and “Service Contract” (collectively Service Contract)
for defendant to provide telecommunication services; the term of the contract
was two years. Plaintiff received six
documents comprising the Service Contract, none of which contained an
arbitration provision. The arbitration
provision is in a document entitled “Terms and Conditions” (Terms and
Conditions). Plaintiff declares that at
the time he executed the Service Contract he did not receive the Terms and
Conditions nor did defendant “call [his] attention to it.”

During the term of the
Service Contract plaintiff, unhappy with defendant’s services, contacted a
representative who advised him a contract could be terminated if the customer
gave written notice to defendant within 60 days of expiration of a term. Plaintiff gave such notice in January
2010. His declaration states that,
despite the notice, the Service Contract automatically renewed. When he spoke to a representative about
cancellation in June 2010, that was the first time he was informed about the
Terms and Conditions, which contained an early termination fee provision. To finally effect termination of the Service
Contract he was required to pay an early termination fee of over $4,000.

In late 2010 plaintiff
filed an action against defendant on behalf of himself and other members of the
class for unfair competition, violation of Civil Code section 1671, subdivision
(d) for unlawful liquidated damages, breach of contract and of the implied
covenant of good faith and fair dealing, unjust enrichment, and money had and
received, seeking damages and injunctive relief. Defendant filed a motion to compel
arbitration after the decision in
AT&T Mobility LLC v. Concepcion (2011) 563 U.S.
__ [131 S.Ct. 1740, 179 L.Ed.2d 742], which restricted states from imposing
certain limitations on the enforceability of arbitration agreements. The court denied the motion, ruling defendant
had not shown the existence of a binding arbitration agreement and had there
been such an agreement it would be unenforceable as unconscionable. It stated “the arbitration provision was not
brought to the attention of nor accepted by nor known to the plaintiff.”



DISCUSSION



>1.
Introduction

“‘The right to
arbitration depends upon contract; a petition to compel arbitration is simply a
suit in equity seeking specific performance of that contract. [Citations.]
There is no public policy favoring arbitration of disputes which the
parties have not agreed to arbitrate.
[Citation.]’ [Citation.]” (Hotels
Nevada>, LLC v. L.A. Pacific Center, Inc.
(2012) 203 Cal.App.4th 336, 347.)

Defendant maintains the
court erred in finding it had not established the existence of a valid
agreement to arbitrate as set out in the Terms and Conditions and presents
three arguments in support of its claim.



>2.
Judicial Admissions

“A judicial admission is
a party’s unequivocal concession of the truth of a matter.” (Gelfo
v. Lockheed Martin Corp. (2006) 140 Cal.App.4th 34, 48.) “An unclear or equivocal statement does not
create a binding judicial admission.
[Citations.]” (>Stroud v. Tunzi (2008) 160 Cal.App.4th
377, 385.)

Defendant asserts
certain allegations in the complaint constitute judicial admissions. Essentially he relies on plaintiff’s
allegation that the Service Contract had an early termination provision. This provision, defendant argues, is in the
Terms and Conditions, which also contains the arbitration agreement. Likewise, plaintiff alleged he gave notice of
termination pursuant to the provisions of the Service Contract. The termination provision is also in the
Terms and Conditions. Finally, defendant
points out the Terms and Conditions are attached as an exhibit to the
complaint. Defendant concludes from this
that plaintiff admitted he knew of and agreed to the arbitration
provision.

But these allegations do
not come close to satisfying the requirement that plaintiff make clear and
unequivocal admissions of a fact.
Nowhere does plaintiff plead or admit he agreed to the arbitration
provision. Further, in addition to the
allegations on which defendant relies, the complaint pleads the Terms and
Conditions were effective in December 2009, almost two years after execution of
the Service Contract. And attaching them
as an exhibit is in no way a concession plaintiff knew of or agreed to their
provisions, including the arbitration clause, at the time he entered into the
Service Contract.

Defendant also relies on
a comment made by plaintiff’s counsel during argument at the hearing on the
motion to compel, that the early termination fee was part of the agreement
plaintiff reached with defendant. But
this comment is selectively parsed from the larger argument the lawyer made.

In addressing contract
formation and the court’s question about whether plaintiff agreed to the terms
of the arbitration provision, counsel stated, “A cursory review of the
allegations in the complaint do reference the early termination fee provisions
and the cancellation provisions that were set forth in the standardized [T]erms
and [C]onditions . . . . It’s uncontested that
plaintiff was forced to pay an early termination fee pursuant to the [T]erms
and [C]onditions and, likewise, proceeded to attempt to cancel his services
within the cancellation provision under the [T]erms and [C]onditions. [¶] However, those provisions are actual
parts of the agreement that [was] reached.
And there is no specific express concession of fact that the arbitration
agreement containing the terms and conditions was ever agreed to by the
plaintiff.” And a few sentences later
she repeats, “There is no express allegation in the complaint that plaintiff
ever agreed to the arbitration provision in the [T]erms and [C]onditions.”

The only unequivocal
statements made there are denials of any judicial admissions in the
complaint. Reading in context the
statement on which defendant relies, it appears counsel was stating that the
early termination and fee provision were part of the agreement defendant was
claiming controlled. In any event, we
must give wider latitude to verbal statements because it is easier to misstate
a point or have statements be misinterpreted, especially those made in the heat
of a hearing. The lawyer’s comments
cannot be interpreted as an admission plaintiff consented to the agreement to
arbitrate. Moreover an attorney cannot
unilaterally make a concession that would significantly harm a client’s
substantive rights. (>Blanton v. Womancare, Inc. (1985) 38
Cal.3d 396, 404-405; see Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter
Group 2012) ¶ 10:146, p. 10-58.) The
judicial admissions doctrine does not apply.

>3.
Equitable Estoppel

“‘[E]quitable estoppel
is . . . a remedial judicial doctrine employed to insure
fairness, prevent injustice, and do equity.
It stems from the venerable judicial prerogative to redress unfairness
in the application of otherwise inflexible legal dogma, based on sound public
policy and equity. [Citation.]’ [Citation.]”
(Leasequip, Inc. v. Dapeer
(2002) 103 Cal.App.4th 394, 403.)
Defendant argues that “[w]hen it is successfully invoked, the court in
effect closes its ears to a point—a fact, argument, claim, or defense—on the
ground that to permit its assertion would be intolerably unfair.” (City
of Hollister v. Monterey Ins. Co. (2008) 165 Cal.App.4th 455, 486, fn.
omitted.) “A paradigmatic estoppel
arises from prior conduct by the asserting party that is somehow at odds with a
point now sought to be asserted in litigation.
Typically the triggering conduct is itself in some manner
blameworthy. [Citations.]” (Id.
at pp. 486-487.)

Defendant concludes
plaintiff is estopped from denying his obligations under the arbitration
provision because he “play[ed] fast and loose with his contractual obligations”
by relying on the early termination fee and automatic renewal provisions in the
Terms and Conditions all the while “disavowing the arbitration provision” in
that document.

But defendant has
misinterpreted or misapplied this doctrine or the facts. Plaintiff is not seeking to enforce these
provisions in the Terms and Conditions against defendant. He is suing to enjoin their enforcement and
recover for the damages he suffered. His
position is completely consistent.
Defendant is the one seeking to benefit from the provisions by enforcing
them. The very case defendant cites, >Goldman v. KPMG, LLP (2009) 173
Cal.App.4th 209, 220, defeats its argument.
Goldman bars a party only from
“‘seek[ing] to hold the non-signatory liable pursuant to duties imposed by the
agreement, which contains an arbitration provision, but, on the other hand,
deny[ing] arbitration’s applicability because the defendant is a
non-signatory.’ [Citation.]” (>Ibid.)


Likewise, the principal
enunciated in Inter. Paper v.
Schwabedissen Maschinene & Anlagen (4th Cir. 2000) 206 F.3d 411 (>Inter. Paper), cited with approval in >Metalclad Corp. v. Ventana Environmental
Organizational Partnership (2003) 109 Cal.App.4th 1705, 1711-1713, another
case on which defendant relies, is inapplicable. Inter.
Paper states a “buyer cannot sue to enforce the guarantees and warranties
of the distributor-manufacturer contract without complying with its arbitration
provision.” (Inter. Paper, supra, 206 F.3d at pp. 413-414.) Again, plaintiff is not suing to enforce any
provision of the Terms and Conditions; he seeks to prevent enforcement.

Metalclad, which applied equitable estoppel, does not support
defendant’s position either. There, the
plaintiff, who was not a party to the contract, sued for damages for breach of
that contract yet sought to evade the arbitration provision also contained in
it. (Metalclad
Corp. v. Ventana Environmental Organizational Partnership, supra, 109
Cal.App.4th at pp. 1713, 1717.) The
court held Metalclad was bound by the arbitration provision because it sought
the benefit of the contract. (>Id. at pp. 1718-1719.) Our facts are not parallel.

At oral argument
defendant took a different tack, arguing that, as the basis for his complaint,
plaintiff is relying on the provision allowing termination with 60 days’
notice, which is also in the Terms and Condition. According to plaintiff’s declaration he did
not know of the termination provision until defendant’s representative told him
about it during a phone conversation.
Plaintiff was advised this is how he could cancel his contract. He alleges that, although he followed the
procedure, defendant did not honor it but instead renewed the contract and then
charged him an early termination fee.

Nowhere in the complaint
is plaintiff seeking to take advantage of or basing the complaint on the 60-day
termination provision for the benefit of the class. The complaint revolves around the alleged
improper early termination fee. And
following the termination procedure defendant dictated is hardly the type of
“blameworthy” conduct that is typical in an equitable estoppel situation. (City
of Hollister v. Monterey Ins. Co., supra, 165 Cal.App.4th at pp.
486-487.)

We are not persuaded
plaintiff is somehow seeking to benefit from the provisions of the Terms and
Conditions by using them as the basis of the class action with the hopes of
recovering a “large judgment (or settlement) with big attorney fees.” The fact he brought a class action, a
theoretically perfectly legitimate vehicle, to enjoin enforcement of the
alleged improper provisions is not the equivalent of someone seeking to enforce
contract terms while simultaneously attempting to avoid an arbitration
requirement. It would violate the very
equitable premise of equitable estoppel to apply it to these
circumstances.



>4.
Substantial Evidence

Defendant suggests that
even if it does not prevail on judicial admission or estoppel theories,
plaintiff is still required to arbitrate based on “traditional principals of
contract law.” (Bold and capitalization
omitted.)

Initially, the parties
disagree about the standard of review of this issue. Plaintiff submits that we review this for
substantial evidence. Defendant claims
case law dictates we look at it de novo.
It points to Marcus &
Millichap Real Estate Investment Brokerage Co. v. Hock Investment Co.
(1998) 68 Cal.App.4th 83, and a case from our division, Mayhew v. Benninghoff (1997) 53 Cal.App.4th 1365. In Mayhew
the court considered an order denying a motion to compel arbitration and held
it would review the arbitration provision de novo “[s]ince the extrinsic
evidence . . . consist[ed] entirely of written
declarations.” (Id. at p. 1369.)

Subsequent to >Mayhew we decided Metters v. Ralphs Grocery Co. (2008) 161 Cal.App.4th 696, which
reviewed a finding an arbitration agreement did not exist. We explicitly declined to conduct a de novo
review, stating the court had made factual decisions after considering extrinsic
evidence. Thus, we used the substantial
evidence standard. (Id. at p. 701.)

Mayhew and Metters are
not inconsistent. In >Mayhew both parties admitted the
existence of the arbitration provision.
The only dispute was whether it applied to the allegations of the
complaint. (Mayhew v. Benninghoff, supra, 53 Cal.App.4th at p. 1370.) Thus the question revolved around an
interpretation of the language of the arbitration clause, a legal issue. “It is . . . solely a
judicial function to interpret a written instrument unless the interpretation
turns upon the credibility of extrinsic evidence.” (Parsons
v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.)

In Metters, by contrast, the parties disputed whether a valid
arbitration agreement even existed and introduced declarations to support their
respective positions. (>Metters v. Ralphs Grocery Co., supra,
161 Cal.App.4th at pp. 698, 700.) Thus,
we had to review factual determinations and the substantial evidence standard
applied. (Id. at p. 701.)

“‘Whether the parties formed a valid agreement
to arbitrate is determined under general California contract law.
[Citations.]’ . . . ‘Where the trial court’s
decision on arbitrability is based upon resolution of disputed facts, we review
the decision for substantial evidence.
[Citation.] In such a case we
must “‘accept the trial court’s resolution of disputed facts when supported by
substantial evidence; we must presume the court found every fact and drew every
permissible inference necessary to support its judgment, and defer to its
determination of the credibility of witnesses and the weight of the
evidence.’” [Citation.]’ [Citation.]”
(Hotels Nevada, LLC v. L.A.
Pacific Center, Inc., supra, 203 Cal.App.4th at p. 348.)

In both his declaration
and his deposition plaintiff stated he never received the Terms and Conditions
at the time he entered into the Service Contract. Further, documents he produced in discovery
support his claim he never received the Terms and Conditions. In his declaration plaintiff states the fax
stamp on the Terms and Conditions showed a date of June 2010 while the Service
Contract faxed to him when he executed it showed February 2008. Defendant’s contrary evidence was a
declaration of its sales representative stating it was her standard practice to
send the Terms and Conditions along with other documents when an account was
opened. There was no evidence the Terms
and Conditions had specifically been provided to plaintiff.

The court weighed the
conflicting evidence on this issue and came down in plaintiff’s favor, when it
found plaintiff did not know about or agree to the arbitration agreement. To prevail on a motion to compel arbitration
a party must prove the existence of an arbitration agreement by a preponderance
of the evidence. (Olvera v. El Pollo Loco, Inc. (2009) 173 Cal.App.4th 447,
453.) Defendant failed to meet its
burden.

Defendant argues that
even if plaintiff did not initially receive the Terms and Conditions, it sent a
brochure with the November 2009 invoice announcing they had been revised. The brochure directed plaintiff to
defendant’s Web site to find the complete text of the revised Terms and
Conditions. Defendant maintains this was
sufficient to bind plaintiff to the arbitration provision. We are not persuaded.

In Badie v. Bank of America (1998) 67 Cal.App.4th 779, the defendant
enclosed an insert with the invoice to the plaintiff, an existing customer,
seeking to add an arbitration provision.
The court held it was not enforceable, holding the provision had been
added unilaterally and the plaintiff had never agreed to arbitrate. “‘“‘[T]here is no policy compelling persons
to accept arbitration of controversies which they have not agreed to
arbitrate . . . .’”
[Citations.]’ [Citations.]” (>Id. at p. 788.)

Defendant attempts to
distinguish Badie, arguing that here
there was only a modification to the Service Contract, no addition of an
arbitration provision, and it made only “minor, non-substantive edits.” But that is not correct, given the trial
court’s finding plaintiff never agreed to the original arbitration
provision. Thus, the so-called revision
would in actuality have been a unilateral addition of an arbitration agreement,
which, under Badie, is not allowed.

Furthermore, there is no
evidence plaintiff knew of or agreed to the terms of the so-called amended
arbitration provision. Plaintiff
testified in his deposition the invoice containing the brochure was sent to his
accountant. He had no opinion as to
whether the accountant actually received it but had no “reason to doubt” that
she did and did not “recall one way or the other” whether he himself received
it. He stated in his declaration he
never received the brochure and had never seen it before it was faxed to him in
June 2010.

Defendant
argues receipt by the accountant was sufficient to bind plaintiff. It relies on plaintiff’s testimony that the
accountant was authorized to “‘receive and process invoices’” and maintains
plaintiff also stated she forwarded “‘important’” mail to plaintiff. But defendant points to nothing in the record
actually supporting the latter assertion.
And, as plaintiff points out, limited authority to pay invoices is not
the same as authorization to waive the right to a jury trial. “An agent has such authority as the
principal, actually or ostensibly, confers upon him.” (Civ. Code, § 2315; see >Flores v. Evergreen at San Diego, LLC
(2007) 148 Cal.App.4th 581, 594 [authority to make medical decisions does not
extend to authority to authorize arbitration, which “waive[s] important legal
rights”].)

Defendant
also contends Badie did not discuss
Civil Code section 1589, which provides that “[a] voluntary acceptance of
the benefit of a transaction is equivalent to a consent to all the obligations
arising from it, so far as the facts are
known, or ought to be known, to the person accepting.” (Italics added.) In making this argument defendant failed to
quote the italicized portion of the section or address the knowledge
requirement, which, obviously, is the crucial issue here. And, as discussed, the trial court properly
found plaintiff had no such knowledge.

Finally,
defendant asserts that at the very least, rather than outright denying the
motion the trial court should have held an evidentiary hearing including live
testimony. We disagree. First, the argument is set out in a footnote,
violating court rules requiring discrete headings for each issue, and we are
not required to consider it. (>Evans v. CenterStone Development Co. (2005)
134 Cal.App.4th 151, 160.) Second, even
on the merits the contention fails. The
case defendant cites to support its claim makes clear there is no requirement
for a court to do so but rather it lies within its discretion. (Bouton
v. USAA Casualty Ins. Co. (2008) 167 Cal.App.4th 412, 428.) Defendant has not shown it even requested
such a hearing or that the court abused its discretion in failing to set one.

Because we affirm the
trial court’s finding plaintiff did not agree to enter into the arbitration
provision, we have no need to decide the issues of unconscionability and
waiver.



DISPOSITION



The order is
affirmed. Plaintiff is entitled to costs
on appeal.









THOMPSON,
J.



WE CONCUR:







BEDSWORTH, ACTING P. J.







ARONSON, J.