Watts v. Pacific Window Products

Filed 4/4/07 Watts v. Pacific Window Products CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION FOUR

APPEAL from a judgment of the Superior Court of Los Angeles County, Jean E. Matusinka, Judge. Affirmed.

Law Office of Christopher P. Blaxland and Christopher P. Blaxland for Plaintiff and Appellant.

Graves & King, Michael G. Martin and Dennis J. Mahoney for Defendants and Respondents.

__________________________________

Plaintiff Dorothy K. Watts argues the trial court erred in granting defendants petition to compel arbitration because the arbitration provision in their contract is unconscionable, and because she was entitled to litigate her Business and Professions Code section 7160 (section 7160) claim in court. We affirm.

FACTUAL AND PROCEDURAL SUMMARY

In July 2000, Dorothy K. Watts and her husband, George J. Watts, signed a form Property Improvement Agreement with Pacific Builders, a fictitious name for Pacific Window Products, Inc. (Pacific). The agreement was for construction of an additional room to the Watts home. The contract contained an arbitration clause providing that any controversy or claim arising out of the contract would be resolved by arbitration in accordance with the uniform rules of the Better Business Bureau (BBB). In addition to signing the contract, both Dorothy and George initialed the arbitration clause.

In August 2000, Dorothy, George and their son, Herbert C. Watts, went to Pacifics office to approve the initial plans for the project. Donald Hoeft, vice-president of Pacific, informed Dorothy and George that they would have to sign a new form contract (the August contract) at a price of $50,000, $5,000 more than the original contract price. Only Dorothy signed the August contract because George left the room during the meeting.

Three separate clauses of the August contract provide for arbitration of any dispute. The first, which appears on the first page of the contract, states: ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS CONTRACT, OR THE BREACH THEREOF, SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE UNIFORM RULES FOR BETTER BUSINESS BUREAU ARBITRATION, AND THE JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF.

The second clause appears on the third page of the contract: ARBITRATION OF DISPUTES: Any controversy or claim arising out of or related to this contract, or the breach thereof, shall be settled by arbitration in accordance with the uniform rules for Better Business Bureau Arbitration and the judgement [sic] upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. [] By initialing in the space below you are agreeing to have any dispute arising out of the matters included in the Arbitration of Disputes provision decided by neutral arbitration as provided by California law and you are giving up any rights you might possess to have the dispute litigated in a court or jury trial. By initialing in the space below you are giving up judicial rights to discovery and appeal, unless those rights are specifically included in the Arbitration of Disputes provision. If you refuse to submit to arbitration after agreeing to this provision, you may be compelled to arbitrate under the authority of the Business and Professions Code or other applicable laws. Your agreement to this arbitration provision is voluntary. We have read and understand the foregoing and agree to submit disputes arising out of the matters included in the Arbitration of Disputes provision to neutral arbitration. This language is followed by spaces for two people to initial the clause agreeing to arbitration. The copy of the August contract in the record has a clear dw on one line under the arbitration clause, and illegible writing on the second line. The arbitration clause is the only clause in the August contract that requires initialing.

The third clause is in paragraph 26 of the plans and specifications, which is incorporated into the August contract. Titled ARBITRATION, it states: Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the Uniform Rules for Better Business Bureau Arbitration, and the judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof.

Pacific began construction on the Watts home, but completed only 25 percent of the work. Dorothy and George claimed that Pacific abandoned the project. Pacific contended that Dorothy and George impeded their work and ordered their subcontractors off the worksite. Dorothy, George and Herbert sued Pacific and two of its officers for fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, violation of Business and Professions Code section 17200 (section 17200), negligence, intentional and negligent infliction of emotional distress, and declaratory relief.

Defendants filed a petition to compel arbitration. Plaintiffs opposed the petition claiming, among other things, the arbitration provision was unconscionable. The trial court granted the petition, and plaintiffs appealed. Plaintiffs asked us to construe the appeal as a writ petition because otherwise, Herbert would be compelled to arbitrate his section 17200 claim even though he was not a party to the contract. We dismissed the appeal as premature, declined to construe the appeal as a writ petition, and remanded the matter to the trial court to vacate its order dismissing the action and to enter an order staying the action until arbitration was completed.

At arbitration, a three-member panel ruled in favor of Pacific, finding that Dorothy had breached the terms of the contract by hindering and preventing performance. Defendants then filed a petition in the trial court for an order to confirm the arbitration award and enter judgment. Plaintiffs opposed, but not on the basis of unconscionability. Defendants also moved for judgment on the pleadings as to Herberts section 17200 claim. Both the petition and the motion were granted. Plaintiffs[1]appeal from the subsequent judgments[2]and the order compelling arbitration.[3]

DISCUSSION

I

Plaintiffs concede that Herbert has no standing to bring a section 17200 claim, and withdraw that portion of their appeal. They note that they are not withdrawing the appeal of the cost order made against Herbert by the trial court. However, plaintiffs provide no argument or authority as to why the cost order should be set aside. Thus, the appeal of the cost order has been abandoned.[4] (See In re Conservatorship of Ben C. (2007) 40 Cal.4th 529, 544, fn. 8; Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 685.)

II

Plaintiffs principal argument is that the court erred in granting the petition to compel arbitration.[5] She argues that because the arbitration provision is unconscionable, it should not have been enforced. The following reasons are given to support this contention: (1) the contract was on a preprinted form, (2) Dorothy and George were 83 years old at the time the contract was signed, (3) Hoeft handed the contract to Dorothy and George and informed them that it had to be signed in order for work to begin, (4) Hoeft did not review the contract terms with Dorothy and George or explain the effect of the arbitration clause on their legal rights, (5) the arbitration clause is the last entry in a densely printed [three] page contract comprising many clauses in small dense typeface, (6) no copy of the BBB arbitration rules was attached to the contract or given to Dorothy and George, and (7) the BBB rules limit the legal remedies available to them in a court of law.

Unconscionability analysisbegins with an inquiry into whether the contract is one of adhesion. [Citation.] The term [contract of adhesion] signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113 (Armendariz).) Recent appellate decisions have focused more on what is unconscionable and less on what is adhesive. (Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1248.)

Both procedural and substantive unconscionability must be present before a court can refuse to enforce an arbitration provision based on unconscionability. (OHare v. Municipal Resource Consultants (2003) 107 Cal.App.4th 267, 273.) But they need not be present in the same degree . . . 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, supra, 24 Cal.4th at p. 114) Procedural unconscionability focuses on oppression, surprise and the manner in which the agreement was negotiated. (Ibid.; Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 113.) Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create overly harsh or one-sided results as to shock the conscience. (Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 808.)

Plaintiff has the burden of proving the arbitration provision is unconscionable. (Higgins v. Superior Court, supra, 140 Cal.App.4th at p. 1249.) The standard of review for an order on a petition to compel arbitration is either substantial evidence where the trial courts decision on arbitrability was based upon the resolution of disputed facts, or de novo where no conflicting extrinsic evidence was admitted in aid of interpretation of the arbitration agreement. (Hartnell Community College Dist. v. Superior Court (2004) 124 Cal.App.4th 1443, 1448-1449.)

Adhesion

Plaintiff argues the contract was one of adhesion because Hoeft gave Dorothy and George the contract and informed them that it had to be signed in order for work to begin. Further, she contends that there was no opportunity for them to read the contract, Hoeft did not inform them that the terms were negotiable, and being 83 years old, Dorothy and George were in an inferior bargaining position.

These facts are not enough to demonstrate that Dorothy and George were provided only the opportunity to adhere to the contract or reject it. Although Dorothy and George were in their 80s, there is no indication that they were infirm or that their ability to contract was negatively affected. Also, their son Herbert accompanied them to the meetings where the contracts were signed. After Dorothy and George decided to add a room to their home, Dorothy contacted Pacific to ascertain whether it would be a suitable choice . . . . There is no indication that Hoeft rejected any attempts to negotiate the terms of the contract, or that Dorothy and George was prevented from reading the contract.

Procedural Unconscionability

As we have discussed, procedural unconscionability focuses on surprise and oppression. Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice. (A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 486.) As discussed above, plaintiff has not shown that there was an absence of meaningful choice. Oppression also refers to the absence of reasonable market alternatives. (Morris v. Redwood Empire Bancorp (2005) 128 Cal.App.4th 1305, 1320.) There is no indication that Dorothy and George could not have shopped for a better or different contract, or that there was a lack of reasonable market alternatives for the construction of the room addition. Surprise involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in a prolix printed form drafted by the party seeking to enforce the disputed terms. (A & M Produce Co.,supra,at p. 486.)

Citing Harper v. Ultimo (2003) 113 Cal.App.4th 1402, plaintiff contends that the arbitration clause is unconscionable because Hoeft failed to explain the BBB rules, the BBB rules were hidden because they were referenced but not attached to the contract, and because the BBB rules are subject to change at any time. Although Hoeft may not have explained the BBB rules or provided Dorothy and George with a copy of the BBB rules, the contract was clear that all disputes arising from, and related to, the contract would be arbitrated in accordance with the uniform rules of the BBB. Hoeft stated that he discussed the arbitration clause with Dorothy and George at their first meeting, and informed Dorothy that the arbitration clause in the August contract was the same as the one agreed to in the July contract. Herbert recalls Hoeft mentioning the arbitration clause at their second meeting.

The arbitration clause appears in three different places in the contract, and the BBB is mentioned each time. On the third page of the contract and in paragraph 26 of the plans and specifications, the arbitration clause is made prominent by the capitalization of the heading of the clause. Further, the arbitration clause is the only provision in the contract requiring initials. Dorothy and George initialed the July contract and Dorothy initialed the August contract next to the words I (we) agree to arbitration.

Finally, the BBB rules are readily available on its Web site at , evidenced by the fact that plaintiffs obtained a copy of the rules from the Web site to attach to their complaint. And although the arbitration clause did not specify whether the BBB rules at the time of contracting, or at the time of arbitration, would apply to the resolution of their disputes, there is no indication that the rules changed between contracting and arbitration. To the extent that plaintiff has shown any oppression or surprise, it is that she was surprised by the limitation of remedies set out in the rules of the BBB.

Substantive Unconscionability

Plaintiff argues that the BBB arbitration rules are unconscionable because they limit the available remedies. The BBB rules state: The following remedies may be awarded in an arbitration proceeding: a) full or partial refund of the cost of the product and/or service involved in the transaction, including sales tax and other direct incidental costs associated with the sale of the product or service; b) completion of promised work or fulfillment of contractual obligations; c) repairs, or reimbursement for the cost of repairs, to fix a defective product; and/or, d) the amount of any actual out of pocket loss or property damage, not to exceed $2,500, caused by the provision of the service. The rules also state that compensation for mental anguish, punitive damages and legal fees may not be awarded unless specifically agreed to by the parties.

In the complaint, plaintiff sought completion of the contracted work, repair of defendants allegedly defective work, punitive damages, legal fees, and compensation for mental anguish. An arbitration clause is substantively unconscionable if it is so harsh or one-sided as to shock the conscience. Plaintiff has not made that showing. Although the BBB rules limit the remedies available to both parties, the rules did not result in harsh or one-sided results. The arbitration panel ruled in favor of defendants on the merits, finding that Dorothy and George had breached the contract. Plaintiff was not entitled to any of the remedies she seeks, including any remedy that could have been awarded in court. And plaintiff does not claim on appeal that she was precluded from presenting her case before the arbitration panel, nor does she challenge the arbitration award on any ground.[6] Thus, the BBB rules did not result in harsh or one-sided results. Accordingly, we need not disturb the trial courts order compelling arbitration.

III

Plaintiff also argues that the court erred in granting the petition to compel arbitration because section 7160 gives her the right to litigate her claim in court.[7] Section 7160 states: Any person who is induced to contract for a work of improvement, including but not limited to a home improvement, in reliance on false or fraudulent representations or false statements knowingly made, may sue and recover from such contractor or solicitor a penalty of five hundred dollars ($500), plus reasonable attorneys fees, in addition to any damages sustained by him by reason of such statements or representations made by the contractor or solicitor. (Bus. & Prof. Code, 7160.)

Plaintiff counts on the word sue in section 7160 to contend that she has a right to sue in court. Even if this is true, plaintiff waived her right to do so by agreeing to arbitrate any controversy or claim arising out of or related to th[e] contract. The arbitration provision specifically stated that by agreeing to arbitration, you are giving up any rights you might possess to have the dispute litigated in a court or jury trial.

Civil Code section 3513 (section 3513) states that: Any one may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement. Plaintiff argues that because section 7160 is a law established for a public reason, section 3513 precludes waiver of the right to sue in court. Section 3513 precludes waiver of the substantive advantages conferred by a law established for a public reason. (See Armendariz, supra, 24 Cal.4th at pp. 100-101 [holding that the substantive statutory rights conferred by the Fair Employment and Housing Act could not be waived].) The substantive advantages conferred by section 7160 are damages, attorney fees and a $500 penalty, not the right to sue in court. Thus, plaintiff could, and did, waive her right to litigate the section 7160 claim in court. In doing so, she retained the right to arbitrate her section 7160 claim. That was done, since this claim was part of the matter submitted to arbitration. The arbitration panels ruling against her on the merits precludes recovery on the section 7160 claim. There is no basis to reverse the trial courts order.

DISPOSITION

The judgment confirming the arbitration award is affirmed. Respondents are to recover their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

EPSTEIN, P. J.

We concur:

MANELLA, J.

SUZUKAWA, J.

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[1] George J. Watts is now deceased.

[2] Although the signed judgments do not appear in the record, the reporters transcript shows that the trial judge stated she would sign the judgments, which were prepared by defendants. We shall assume that they were duly signed and entered. (See Evid. Code, 664.)

[3] This is a nonappealable order but the validity of the order may be reviewed on appeal from the judgment of confirmation. (Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 811, fn. 1.)

[4] Since George J. Watts is deceased and his estate is not a party to the appeal, and Herbert C. Wattss appeal is abandoned, subsequent references to plaintiff refer to Dorothy K. Watts.

[5] Although plaintiff appeals from the judgment confirming the arbitration award, she does not challenge the arbitration award itself.

[6] In her opposition to defendants petition to confirm the arbitration award, plaintiff claimed the arbitration panel refused to hear evidence of fraud because it was rebuttal evidence. The trial court found that there was no evidence that the arbitrator[s] refused to hear the evidence or look at the exhibits, only that the arbitrators refused to admit the exhibits into evidence.

[7] In the complaint, plaintiff requested attorney fees and a $500 penalty under section 7160.