MILLER, Acting P. J.
Plaintiff and respondent Marlies Erickson owned a mobile home and leased a space from defendants and appellants Sierra Corporate Management, Inc. et al., Hollydale Lowertier Partner, LP and Hollydale Uppertier/Operating, LP (the Sierra Defendants) at a mobile home park located in Brea (the Park). She signed a written lease agreement for the space (the Lease). Erickson defaulted on her rent and the parties entered into another agreement, a forbearance agreement (the Forbearance Agreement), to allow her to stay in the Park. Both agreements contained arbitration clauses. Erickson attempted to sell her mobile home, but the Sierra Defendants refused to approve the potential buyers.
Erickson filed a complaint against the Sierra Defendants in superior court and the Sierra Defendants filed their petition to compel arbitration (the Petition) pursuant to the two agreements. The trial court initially granted the Petition but then granted Erickson's motion to vacate the Petition once arbitration in front of the American Arbitration Association (AAA) was dismissed due to the Sierra Defendants not paying the arbitration fees. The trial court also denied the Sierra Defendants' motion to have an alternative arbitrator appointed, or in the alternative, have the AAA apply specific rules to the dispute. The Sierra Defendants appeal the grant of the motion to vacate the Petition and denial of its motion.
On December 10, 2015, Erickson filed her first amended complaint against the Sierra Defendants (FAC). Erickson was 62 years old and lived in a mobile home located in the Park. The Park was owned by the Sierra Defendants but Erickson owned her mobile home. She paid rent for her space. The FAC was based on the Sierra Defendants' violation of the Mobile Home Residency Law in Civil Code section 798 et seq.
On December 31, 2013, the Sierra Defendants and Erickson entered into the Lease for her space in the Park. The Lease term was 25 years and provided for monthly payment of rent. On or about June 2014, Erickson put her mobile home up for sale. Erickson believed that the Sierra Defendants interfered with the sale. On February 13, 2015, Erickson and the Sierra Defendants entered into the Forbearance Agreement. The Forbearance Agreement was a negotiated agreement allowing her to stay at the Park rather than being evicted. In April 2015, Erickson received an offer of $50,000 cash for her mobile home from Antoine Gadpaille but she believed that the Sierra Defendants refused to enter into a lease with Gadpaille.
On June 25, 2015, the Sierra Defendants attempted to terminate Erickson's tenancy at the Park by initiating an unlawful detainer action alleging that she had defaulted on her May and June rent payments. In August 2015, Erickson received another offer on her mobile home from Hesham Shehab. On August 14, 2015, Erickson and her real estate agent were notified orally by the manager for the Park that Shehab had been approved; however, he was approved for any space in the Park except for Erickson's space due to the ongoing unlawful detainer action. Nonetheless, Erickson entered into escrow with Shehab and was set to close escrow on September 6, 2015.
The Sierra Defendants would not respond to her inquiries as to why Shehab could not purchase and occupy her mobile home. In August 2015, the unlawful detainer action was dismissed in favor of Erickson. A second unlawful detainer action was filed in September 2015 by the Sierra Defendants; it was dismissed in November 2015. The Sierra Defendants offered a settlement agreement to Erickson that if she paid them $8,828.79 for unpaid rent and utilities, $10, 971.17 in attorney fees and other charges, and waived any right to attorney fees from the second unlawful detainer action, they would sign a lease with Shehab so he could purchase Erickson's mobile home. Erickson countered she would pay her unpaid rent but would not pay any additional fees or waive her rights. In November 2015, Shehab withdrew his offer. Shehab purchased another mobile home at the Park—one that was owned by the Sierra Defendants.
Erickson's first cause of action was for a violation of the MRL based on the Sierra Defendants' application requirements for Gadpaille and Shehab. The Sierra Defendants violated section 798.14 by rejecting both Shehab and Gadpaille when they had the ability to pay. The Forbearance Agreement that allowed the Sierra Defendants to initiate an unlawful detainer action without first giving notice violated sections 798.56, 798.55 and 798.59. The inclusion of such provision was an attempt by the Sierra Defendants to have Erickson waive her rights under the MRL. Such practice violated sections 798.79 and 798.77.
Erickson's second cause of action was for a violation of Business and Professions Code section 17200. Erickson alleged that asking Gadpaille for two years of tax returns, refusing Shehab's tenancy unless Erickson signed the settlement agreement, and making it impossible to sell her mobile home, constituted unfair business practices and unlawful competition because it violated the MRL. She sought a preliminary and permanent injunction against the Sierra Defendants from interfering with the sale of her mobile home.
Erickson's third and fourth causes of action were for intentional interference with contractual relations and intentional interference with prospective economic relations. These were based on the same facts. The Sierra Defendants interfered with the contracts to sell her home to Gadpaille. The Sierra Defendants eventually approved Shehab to live in the Park in any other mobile home and sold a mobile home directly to him. The Sierra Defendants interfered with her right to sell her home and disrupted a valid contract between her and Shehab.
Erickson's fifth cause of action was for negligent interference with prospective economic relations. This cause of action was again based on the facts that Gadpaille and Shehab were unable to purchase her mobile home due to the Sierra Defendants' actions of refusing to approve them for residency. She alleged that if the Sierra Defendants continued to block the sale of her mobile home she would become homeless. Erickson's sixth cause of action was for injunctive relief. She sought to enjoin the Sierra Defendants from blocking the sale of her mobile home.
Erickson attached a copy of the Lease. It provided that she could rent Space 109 at the Park for 25 years commencing on December 30, 2013.
Section 8 of the Lease was entitled "APPROVAL OF PURCHASER AND SUBSEQUENT TENANTS." It provided that Erickson could sell her mobile home at any time under the MRL. The buyer of her mobile home was required to complete an application for tenancy, be accepted by the Sierra Defendants, execute an assignment of the Lease, and comply with rules and regulations of the Park.
Section 38 was entitled DISPUTE RESOLUTION PROCESS. It provided as follows: "To ensure speedy resolution of disputes, neutral arbitration is used to resolve disputes. Arbitrator shall determine costs based on ability to pay. Arbitration applies to all claims for personal or bodily injury; and, claims for property damage and any claimed loss or expense whatsoever (apart from damages incidental to an unlawful detainer action). Arbitration shall be under the Federal Arbitration Act (FAA), as mobilehomes and appurtenances are constructed, shipped, financed and leased in interstate commerce.
"A. The arbitrator shall determine all issues including whether the dispute may be arbitrated. State laws shall not apply. Commercial Rules of the American Arbitration Association (`AAA') procedures apply. No joinder of actions or consolidation or class actions allowed. The award may be entered as a court judgment. Any alternative dispute resolution organization within 75 miles shall select 5 proposed arbitrators, each side strikes up to 2 names, the least expensive per hour of any remaining may be the arbitrators. Arbitration shall be completed within 4 months from demand for arbitration. [¶] B. . . . This clause is intended . . . to be construed per AT&T Mobility v. Concepcion, decided in April 2011, by the United States Supreme Court."
Erickson also attached the Forbearance Agreement. Pursuant to the Forbearance Agreement, Erickson's tenancy was terminated pursuant to the "Combined 3-Day Notice to Pay or Quit, 3 Day Notice to Perform Covenants or Quit [and] 60 Day Notice to Terminate Possession" served on Erickson on January 19, 2015. The Sierra Defendants agreed to forbear their rights to evict Erickson from the Park under certain terms and conditions. This included paying the back monies owed by Erickson and that she remain current on her rent.
The Forbearance Agreement contained its own dispute resolution clause entitled "
The Forbearance Agreement also included the language, "This Agreement shall be governed by the laws of the State of California."
On or about March 17, 2016, the Sierra Defendants filed their Petition based on the two arbitration clauses contained in the Lease and the Forbearance Agreement. The Sierra Defendants provided that Erickson admitted she was a party to both the Lease and the Forbearance Agreement. Further, all of the causes of action—violations of the MRL and interference with contractual relations—were subject to the arbitration agreements. Finally, even if there was a dispute as to whether the arbitration agreements applied, that claim would be decided by the arbitrator.
Erickson filed opposition to the Petition. Erickson alleged that the arbitration clauses in both the Lease and the Forbearance Agreement were unenforceable as contrary to public policy under California law; the FAA did not preempt California law because the transaction at issue—the sale of Erickson's mobile home—did not involve interstate commerce; and the arbitration clauses were unconscionable because of the parties gross inequality in bargaining power and the oppressive terms.
Erickson submitted a declaration that she was not allowed to negotiate the Lease terms and was told she could "take it or leave it." She signed the Forbearance Agreement because she had missed a payment and the Sierra Defendants threatened to evict her if she did not sign the agreement.
The Sierra Defendants filed a reply to the opposition to the Petition. The Sierra Defendants noted Erickson relied on California law to support her claim that the arbitration clause did not apply. She failed to provide that she agreed in the Lease and the Forbearance Agreement that California law does not apply and that the FAA applied. Moreover, the FAA applied because mobile homes are constructed, shipped and financed in interstate commerce. Moreover, Erickson agreed that such issues would be decided by the arbitrator. The United States Supreme Court was clear that FAA agreements must be enforced. Moreover, the Lease and the Forbearance Agreement were not unconscionable because she was not forced to live at the location.
On March 17, 2016, the matter was heard. The trial court took the matter under submission. The trial court granted the Petition on March 28, 2016. It found "The arbitration agreements signed by [Erickson] both provide that disputes between the parties are governed by the Federal Arbitration Act, 9 U.S.C.A § 2. This is an enforceable contractual agreement. [¶] The arbitration agreements also both clearly and unmistakably empower the arbitrator to determine whether the dispute is arbitrable, including whether the asserted defenses to enforcement exist. Rent-A-Center, West Inc. v. Jackson (2010) 561 U.S. 63. [¶] Thus, the issues raised here as defenses to enforcement, the effect of Civil Code § 1953(a)(4) and unconscionability, must be considered by the arbitrator, who will have to determine whether the contract is enforceable or not. [¶] Accordingly this court is not a ruling [on] the merits of [Erickson]'s defenses to enforcement. [¶]
On August 12, 2016, Erickson filed a motion to vacate the trial court's order granting the Petition (Motion to Vacate). She sought to lift the stay and proceed with litigation in the superior court. Erickson alleged the arbitration proceedings had failed because the AAA would not administer the arbitration due to defects in the arbitration clauses. Further, the Sierra Defendants waived their right to arbitrate by delaying and refusing to engage in the arbitration they requested. Erickson alleged the AAA refused to arbitrate the case, and any other case involving the Sierra Defendants, because of the defects in the Sierra Defendants' arbitration clauses.
Erickson provided the following facts and evidence (a declaration from Erickson, her attorney and correspondence) of what occurred after the Petition was granted: On April 8, 2016, Erickson, not the Sierra Defendants, sent a demand for arbitration to the AAA because the arbitration clause stated that the AAA "Commercial Rules" apply. Two weeks later, the Sierra Defendants sent a letter to Erickson asking to use JAMS as the dispute resolution provider rather than the AAA. The Sierra Defendants insisted that the arbitration clauses did not require them to use the AAA to arbitrate. Further, the Sierra Defendants noted that using JAMS may require that the parties agree to use whatever rules JAMS required, not the Commercial Rules. Erickson refused and stated she would only accept the AAA as set forth in the arbitration clauses.
Thereafter, on April 30, 2016, the AAA, through their consumer case filing team (the Consumer Team) sent a letter to the Sierra Defendants stating that the consumer arbitration rules (Consumer Rules) applied to the dispute and asked that they pay the filing fees. The Sierra Defendants were to pay $3,200 and Erickson was to pay $200. The AAA required payment of the fee by May 16, 2016, or it may decline to administer the suit.
The Sierra Defendants sent a reply advising the AAA that it made a mistake that the Consumer Rules applied as the parties had agreed that the Commercial Rules applied. Also, the AAA erroneously referred to Code of Civil Procedure section 1281 but the parties agreed the Lease and the Forbearance Agreement would be subject to the FAA.
AAA sought Erickson's position on the issue. Erickson responded that the Consumer Rules should apply but the Lease and the Forbearance Agreement both stated the Commercial Rules; this was another reason the clauses were unconscionable and the arbitration should be terminated. The AAA responded that based on the dispute and the parties, it normally would apply the Consumer Rules. It stated, "The AAA has the discretion to apply or not to apply the Consumer Arbitration Rule, and the parties are able to bring any disputes concerning the application or non-application of the Rules to the attention of the arbitrator." The AAA asked the parties to comment on the applicability of the rules.
Erickson submitted comments to the AAA. She provided that the Consumer Rules should apply. The Lease and the Forbearance Agreement were clearly consumer agreements and the Commercial Rules were only an issue because they were included in the Lease and the Forbearance Agreement. The Sierra Defendants objected to the use of the Consumer Rules; the Lease and the Forbearance Agreement both required that the Commercial Rules apply. Further, the language of the Forbearance Agreement did not fit within the definition of a consumer agreement. The Sierra Defendants had also contacted Judicate West to arbitrate; it would be much cheaper to arbitrate with them.
By June 2016, after Erickson had received no correspondence from AAA, she sent a letter to AAA requesting that an arbitrator be immediately appointed. The Sierra Defendants sent a response that it would only agree to arbitration by the AAA if the Commercial Rules applied.
On June 16, 2016, the AAA sent a letter to the parties that they would only administer the dispute if they used the Consumer Rules unless the parties were to agree to use the Commercial Rules or obtained a court order directing the use of the Commercial Rules. It provided, "The rules for applicability are met in
Erickson refused to agree to modify the Lease and the Forbearance Agreement arguing the clauses were unconscionable. The Sierra Defendants had to "stand or fall" with their arbitration clauses, which were unconscionable. The Sierra Defendants also refused to modify the arbitration clauses and sought to have the arbitration closed. The Sierra Defendants attempted to unilaterally start arbitration with Judicate West.
On August 5, 2016, Erickson sent a letter to the AAA checking on the status of the arbitration. Finally, on August 8, 2016, AAA closed the arbitration. It provided, "The AAA has received correspondence from the parties declining to waive the prevailing party provisions in the agreements. We also have not received the required fees from the business in this matter. Accordingly, we must decline to administer this case and have closed our file. According to R-1(d) of the Consumer Rules, should the AAA decline to administer an arbitration, either party may choose to submit its dispute to the appropriate court for resolution. [¶] Further, because the [Sierra Defendants'] failure to remit the filing fees constitutes a failure to adhere to our policies regarding consumer claims, we may decline to administer future consumer arbitrations involving [the Sierra Defendants]. The AAA's consumer policies can be found on the AAA's website, . . . We request that the businesses remove the AAA from their consumer arbitration clauses so that there is no confusion to the public regarding our decision."
Based on the foregoing, Erickson argued that the grant of the Petition be vacated. Erickson noted that based on Consumer Rule R-1(d), if the AAA refused to arbitrate, either party may submit its dispute to the appropriate court for resolution. Erickson requested reinstatement of her case. The AAA's Consumer Rules applied but the Sierra Defendants refused to agree to arbitrate the dispute under these rules. Further, the Sierra Defendants had delayed the arbitration by more than four months thereby waiving their right to arbitrate.
The Sierra Defendants filed a motion in the trial court to appoint Judicate West as arbitration provider or, in the alternative, to order the AAA to arbitrate under the Commercial Rules. They insisted that the Lease and the Forbearance Agreement did not require that they use AAA. However, if the trial court felt that AAA should arbitrate the dispute, it should order that the Commercial Rules apply.
The Sierra Defendants also filed opposition to the Motion to Vacate. First, the Sierra Defendants alleged that the Motion to Vacate was an untimely motion for reconsideration. The trial court already ordered arbitration and determined that the FAA applied. Erickson had to file a motion for reconsideration pursuant to Code of Civil Procedure section 1008 within 10 days after service of the trial court's order on the Petition. The Motion to Vacate was filed four months after the Petition was decided. The Motion to Vacate should not be considered by the trial court.
Moreover, the Sierra Defendants interpreted the Lease and the Forbearance Agreement as not requiring that the AAA arbitrate the dispute; they could choose another arbitrator. Judicate West was less expensive than AAA and met the requirements set forth in the agreements. Any delay in arbitration was caused by Erickson, who refused to use another arbitrator who would properly apply the Commercial Rules. Finally, the Sierra Defendants rejected that it had waived its right to arbitrate.
Erickson filed opposition to the Sierra Defendants' request that the trial court appoint Judicate West to arbitrate the proceedings or compel AAA to utilize the Commercial Rules. Erickson insisted that by specifying the AAA's Commercial Rules in their arbitration agreements, the parties agreed to arbitrate only with the AAA. Nothing in the agreements allowed the trial court to rewrite the provisions to appoint Judicate West. The trial court had no power to force the AAA to arbitrate the dispute under Commercial Rules. The Lease and the Forbearance Agreement were clear that the AAA procedures apply. Moreover, the AAA rules were clear that no other agency could use the Commercial Rules.
Erickson disputed that other language in the Lease and the Forbearance Agreement allowed for another arbitrator. These included language that "Any alternative dispute resolution organization within 75 miles shall select 5 proposed arbitrators, each side strikes up to 2 names" and language that "all qualified disputes will be arbitrated . . . before an impartial arbiter jointly selected by lessor and homeowner for a list provided by an alternative dispute resolution organization such as the AAA[.] If more than one alternate dispute organization is proposed, the closest and least expensive shall apply." Erickson argued that the specific language that the Commercial Rules apply controlled over the above general language. There was no authority provided that the court could order anyone other than the AAA to arbitrate the dispute or force it to use Commercial Rules.
Erickson also filed a reply in support of her Motion to Vacate. Erickson insisted arbitration failed because of the arbitration agreements drafted by the Sierra Defendants. Erickson again asserted by designating that the Commercial Rules applied to the arbitration, and AAA refused to arbitrate under these rules, the arbitration clauses were unworkable and litigation should go forward. Further, by failing to pay the fee for arbitration, the Sierra Defendants waived arbitration.
The trial court issued a tentative ruling on October 6, 2016. It first noted it had ordered arbitration but did not decide the issue of unconscionability. The trial court found, "Although there was no explicit finding by the AAA that the arbitration provision was unconscionable, the facts imply such a determination was made. . . . By insisting the commercial rules could not be applied to this situation, AAA implied it was unconscionable for the harsher commercial rules to be applied in what is obviously a consumer action." The trial court referred to the letter sent from AAA to the parties that it would not apply the Commercial Rules unless there was a specific agreement by the parties. The AAA also noted it would not arbitrate the dispute because the Sierra Defendants failed to pay the required fees.
The trial court noted that the closing of an arbitration claim for failure to pay the required fees may result in the matter being pursued in court. Further, the trial court referred to Section 3 of the FAA, which allows for arbitration as long as a party was not in default. The trial court noted the AAA found that the Sierra Defendants failed to pay their fees. It concluded, "[T]he AAA had the right to terminate the proceedings and [Erickson] has the right to have this court hear and determine the matter."
The trial court addressed the Sierra Defendants' motion and found it had no jurisdiction to appoint Judicate West. It extensively reviewed Maggio v. Winward Capital Mgmt. Co. (2000) 80 Cal.App.4th 1210, 1215 (Maggio). It found "the arbitration agreement states the `AAA Commercial Rules will apply' rather than Maggio's `In accordance with' the Commercial rules. However, the slight difference in semantics doesn't change the result that the Commercial rules require the arbitration to be filed with the AAA. If the AAA rules apply, per the reasoning of the Maggio court, the only organization that may arbitrate the controversy is the AAA."
The trial court tentatively ruled "Based on the above, the court denies defendant's motion to compel the arbitration using Judicate West as the arbitrator. [¶] The court
A hearing on the tentative opinion was held on October 6, 2016. The trial court noted the AAA found not only that the Lease and the Forbearance Agreement were consumer contracts subject to their Consumer Rules but also that the Sierra Defendants failed to pay their fees; they had been fired as customers by the AAA. The trial court admitted initially ordering the issue to arbitration but noted that issues had come to light that made it unfair to apply arbitration. The trial court stated the AAA decided the Commercial Rules were unfair, and the trial court would not force those rules to be applied as it was unconscionable. Even with the FAA applying, the state courts still retained the authority to find a contract unconscionable. The trial court felt that the Sierra Defendants were stuck with what they wrote in the contract, e.g. that AAA would arbitrate and the trial court could not order that Judicate West be appointed. It could not alter the contract. The trial court adopted its tentative ruling.
The Sierra Defendants contend Erickson's Motion to Vacate was an untimely motion for reconsideration pursuant to Code of Civil Procedure section 1008. Since the Motion to Vacate was filed after the 10-day time period, the trial court had no jurisdiction to hear the Motion to Vacate.
Code of Civil Procedure section 1008 provides in pertinent part that "When an application for an order has been made . . . and refused in whole or in part . . . any party affected by the order may, within 10 days after service . . . of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge . . . to reconsider the matter." A court on its own order can reconsider a prior interim order beyond the 10-day period if it is concerned that it was erroneous and can solicit briefing from the parties on the matter. (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1108.)
Even if we were to consider the Motion to Vacate an untimely motion for reconsideration, which we are not convinced it is, the Sierra Defendants completely ignores that it filed a motion to have Judicate West appointed as the arbitrator or have the trial court order the AAA to apply the Commercial Rules. In reaching a decision on the Sierra Defendants' motion, the trial court necessarily had to consider the decisions by the AAA. The trial court could consider these issues in denying the Sierra Defendants' request and could raise the issue of waiver and unconscionability on its own to resolve the case.
The Sierra Defendants contend the Consumer Team at the AAA was not an arbitrator and could not determine that the Lease and the Forbearance Agreement were subject to the Consumer Rules. It was not an arbitrator chosen by the parties that was either an attorney with 25 years of experience or a retired judge as required by the Lease and the Forbearance Agreement. Moreover, the Consumer Team did not make a decision on unconscionability as it stated it was not providing an opinion whether the arbitration agreement or any part of the contract was legally enforceable. The Sierra Defendants additionally contend there is no evidence that the designation of the AAA's Commercial Rules rendered the Lease and the Forbearance Agreement unconscionable. Under the FAA, arbitration agreements are to be enforced according to their terms, and the AAA and trial court could not alter the rules to make the Consumer Rules apply. The Sierra Defendants insist they could not be found to have waived arbitration by failing to pay the arbitration fees because they were being forced to arbitrate under the Consumer Rules. The Consumer Team could not make the decision on default because it was not the arbitrator. Finally, they contend the trial court should have granted their motion to appoint Judicate West or force AAA to apply the Commercial Rules. We conclude the Sierra Defendants waived their right of arbitration and we need not address unconscionability.
The FAA recognizes "`"arbitration as a speedy and relatively inexpensive means of dispute resolution"'" (Saint Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1204 (St. Agnes)) and require that agreements to arbitrate be rigorously enforced (Shearson/American Express, Inc. v. McMahon (1987) 482 U.S. 220, 226).
"Code of Civil Procedure section 1281.2 requires a trial court to grant a petition to compel arbitration `if [the court] determines that an agreement to arbitrate the controversy exists.' [Citation.] Accordingly, `"when presented with a petition to compel arbitration the trial court's first task is to determine whether the parties have in fact agreed to arbitrate the dispute. [¶] . . ." [Citation.]' [Citations.] `A party seeking to compel arbitration has the burden of proving the existence of a valid agreement to arbitrate. [Citations.] Once that burden is satisfied, the party opposing arbitration must prove by a preponderance of the evidence any defense to the petition.'" (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59.) The trial court here initially granted arbitration.
"Under both federal and state law, arbitration agreements are valid and enforceable, unless they are revocable for reasons under state law that would render any contract revocable. [Citation.] Reasons that would render any contract revocable under state law include fraud, duress, and unconscionability." (Tiri v. Lucky Chances Inc. (2014) 226 Cal.App.4th 231, 239.)
Code of Civil Procedure section 1281.2 provides that one ground for denying a petition to compel arbitration is that "[t]he right to compel arbitration has been waived by the petitioner." Under both the FAA and state law, the party seeking to establish arbitration waiver bears the burden of proof. (St. Agnes, supra, 31 Cal.4th at p. 1195; see also 9 U.S.C. § 2.) "`Generally, the determination of waiver is a question of fact, and the trial court's finding, if supported by sufficient evidence, is binding on the appellate court. [Citation.] "When, however, the facts are undisputed and only one inference may reasonably be drawn, the issue is one of law and the reviewing court is not bound by the trial court's ruling."'" (Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348, 375.)
In Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, the lease for a car included an arbitration agreement that was governed by the FAA. (Id. at p. 444.) However, the court concluded, "under the Federal Arbitration Act and the California Arbitration Act (Code Civ. Proc., § 1280 et seq.) courts apply the same standards in determining waiver claims. [Citation.] `Both state and federal law emphasize that no single test delineates the nature of the conduct that will constitute a waiver of arbitration.' [Citation.] In St. Agnes, the California Supreme Court adopted as the California standard the same multifactor test employed by nearly all federal courts for evaluating waiver claims." (Ibid.)
Waiver may be express or implied from the parties' conduct, including failing to perform an act it is required to perform. (St. Agnes, supra, 31 Cal.4th at p. 1195, fn. 4; Cinel v. Barna (2012) 206 Cal.App.4th 1383, 1389, 1391 [right to arbitrate waived by refusing to pay AAA arbitration fees].) Our Supreme Court has stated that under both state and federal law, "[N]o single test delineates the nature of the conduct that will constitute a waiver of arbitration." (St. Agnes, at pp. 1195-1196; see also Cinel, at p. 1390.) "St Agnes cautions us to examine each case in context." (Burton v. Cruise (2010) 190 Cal.App.4th 939, 945.)
Our Supreme Court has explained: "`In the past, California courts have found a waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration [citations] to instances in which the petitioning party has unreasonably delayed in undertaking the procedure. [Citations.] The decisions likewise hold that the "bad faith" or "willful misconduct" of a party may constitute a waiver and thus justify a refusal to compel arbitration.'" (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 983; see also St. Agnes, supra, 31 Cal.4th at p. 1196.) "[A] party's unreasonable delay in demanding or seeking arbitration, in and of itself, may constitute a waiver of a right to arbitrate." (Burton v. Cruise, supra, 190 Cal.App.4th at p. 945.)
Here, arbitration was ordered by the trial court in March 2016. In April 2016, Erickson, not the Sierra Defendants, filed a demand for arbitration with AAA. The arbitration agreements here stated that the Commercial Rules apply. The Sierra Defendants immediately sent a letter to Erickson seeking to have JAMS appointed and to use different rules. At the end of April 2016, the AAA notified the parties that the Consumer Rules, not the Commercial Rules, applied to the dispute. The Sierra Defendants were to pay the fees for the arbitrator by May 16, 2016, in order for an arbitrator to be appointed. The Sierra Defendants disputed that the Commercial Rules applied; the AAA welcomed any comments.
In June 2016, AAA responded that the parties had agreed to be subject to its rules in the Lease and the Forbearance Agreement. In particular, Rule R-2 of the AAA, as provided by the parties, provides, "When parties agree to arbitrate under these rules, or when they provide for arbitration by the AAA and an arbitration is initiated under these rules, they thereby authorize the AAA to administer arbitration. The authority and duties of the AAA are prescribed in the agreement of the parties and in these duties, and may be carried out through such of the AAA's representatives as it may direct. The AAA may, in its discretion, assign the administration of an arbitration to any of its offices. Arbitrations administered under these duties shall only be administered by the AAA or by an individual or organization authorized to do so." AAA's position was that if there was a reference to the Commercial Rules in an agreement that was a consumer arbitration agreement, according to the AAA's rules, this also made the Consumer Rules applicable. However, the AAA also specifically advised the parties that the final decision on the rules that applied was with the arbitrator. The Sierra Defendants were advised to pay the fee so an arbitrator could be appointed. The Sierra Defendants never paid the fee and initiated an arbitration with Judicate West. The matter was finally closed by the AAA on August 8, 2016.
Here, the Lease and the Forbearance Agreement undeniably stated that they would be subject to the Commercial Rules. However, AAA explained that such Commercial Rules did not apply to a consumer contract. The Sierra Defendants decided to not pay for the arbitrator because it did not want to be forced to pay under the Commercial Rules. However, the Consumer Team clearly stated that despite paying the fees, the issue could be addressed with the arbitrator. Moreover, the Sierra Defendants had agreed to be bound by the AAA rules. The AAA rules clearly stated that it had the right to administer the arbitration within its rules. The Sierra Defendants failed to pay the fees and the arbitration had to be closed.
The Sierra Defendants complain that the decision was made not by an arbitrator having the necessary experience, but by a panel of unknown persons who may or may not have the experience specified in the Lease and the Forbearance Agreement. While this may be true, the Sierra Defendants drafted the agreement that adopted the AAA rules. Moreover, the decision by the Consumer Team was not conclusive. The panel repeatedly advised the parties that the ultimate decision as to whether the Consumer Rules or Commercial Rules applied were up to the arbitrator. In advising the parties that it had decided that the Consumer Rules applied, it also stated, "The parties may raise this issue to the arbitrator for final determination." In an earlier email to the parties, the Consumer Team advised the parties that it applied the Consumer Rules to disputes between businesses and individuals. It also noted, "The AAA has discretion to apply or not to apply the Consumer Arbitration Rule, and the parties are able to bring any disputes concerning the application of non-application of the Rules to the attention of the arbitrator."
Despite this language, the Sierra Defendants continued to refuse to pay the fee so that an arbitrator could be appointed. It is reasonably inferred that the Sierra Defendants did not want to arbitrate the matter with the AAA. It was Erickson who had to file the request for arbitration. Moreover, the Sierra Defendants immediately suggested that Erickson agree to use JAMS to arbitrate the matter. Although the Consumer Team stated the Commercial Rules would apply, it also stated it was ultimately up to the arbitrator to decide which rules applied. Despite this knowledge, the Sierra Defendants refused to pay the fee so that an arbitrator could be appointed. Action had to be taken or a stalemate would continue indefinitely. The matter was already delayed for five months. The trial court properly determined that the Sierra Defendants relinquished their rights to arbitrate by causing an unreasonable delay and failing to pay the arbitration fees.
"`In California, whether or not litigation results in prejudice also is critical in waiver determinations.' [Citation.] `The moving party's mere participation in litigation is not enough; the party who seeks to establish waiver must show that some prejudice has resulted from the other party's delay in seeking arbitration.'" (Augusta v. Keehn Associates (2011) 193 Cal.App.4th 331, 340; see also St. Agnes, supra, 31 Cal.4th at p. 1203.) Here, the matter was delayed over five months. The Lease and the Forbearance Agreement provided that arbitration would be completed in four months/120 days. Further, Erickson alleged that the delay could result in her becoming homeless and she had already lost two potential buyers of her mobile home. Erickson was prejudiced by the delay.
The Sierra Defendants insist the trial court erred by refusing to appoint another arbitrator. They rely on language in the Lease and the Forbearance Agreement referring to other alternative dispute resolution organizations. "The issue of who should decide arbitrability turns on what the parties agreed in their contract." (Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th 547, 551.)
In Maggio, supra, 80 Cal.App.4th 1210, the dispute was over whether the parties had contracted that the AAA had to conduct the arbitration, or whether the parties decided that the AAA rules applied but anyone could arbitrate. (Id. at pp. 1212-1213.) The appellate court first noted that the parties used the language that disputes would be decided "in accordance with" the AAA rules. The appellate court looked to the AAA rules, which provided that once the parties agreed that the AAA rules applied, that the arbitration must "take place before that body." (Id. at p. 1215.)
Here, the Lease provided "Commercial Rules of the American Arbitration Association (`AAA') procedures apply" and the Forbearance Agreement provided "AAA . . . Commercial Rules will apply." As found in Maggio, once the parties agreed to be bound by the AAA rules, arbitration was required to be conducted in front of that body. (Maggio, supra, 80 Cal.App.4th at p. 1215.) The trial court had no authority to appoint Judicate West. Language referring to "other" dispute resolution organizations was not controlling, as the explicit language of the Lease and the Forbearance Agreement said the AAA rules shall apply. Moreover, the Lease and the Forbearance Agreement state the arbitrator will decide "all aspects of the dispute." The trial court had no authority to decide which rules applied. The trial court properly denied the Sierra Defendants' motion to appoint Judicate West, or force AAA to use the Commercial Rules.
The trial court's order granting Erickson's Motion to Vacate the petition and denying the Sierra Defendants' request to appoint Judicate West, or in the alternative, order AAA to use the Commercial Rules is affirmed. Costs are awarded to Erickson as the prevailing party.
