In Brinkley v. Monterey Financial Services, Inc., 2015 WL 7302268 (Cal.App. 4 Dist., 2015), the California Court of Appeal found a TCPA/Call Recording case to be within the scope of an enforceable arbitration clause:=
We conclude that Brinkley’s claims fall within the scope of the arbitration agreement and that the arbitration agreement is enforceable, with the exception of one provision that we find to be unconscionable under the applicable jurisdiction’s law. We conclude, however, that it is possible to sever the unconscionable provision from the remainder of the arbitration agreement and from the contract as a whole. We therefore affirm the trial court’s order compelling arbitration of Brinkley’s claims. However, because the parties’ agreement delegates to the arbitrator the question whether class arbitration is available under the contract, we reverse that portion of the trial court’s order compelling the arbitration of Brinkley’s individual claims, alone, and dismissing Brinkley’s class claims.
First, the Court of Appeal found the claims within the scope of the Arbitration agreement, and that doubts about same should be resolved in favor of arbitration.
Turning to the language of the RIC pertaining to the scope of the arbitration provision, we attempt to ascertain the meaning of “arising out of or in any way related to this Agreement.” Similar language has been “well explored by Ninth Circuit cases.” (Golden v. Dameron Hosp. Ass’n (E.D.Cal. Sept. 19, 2012, No. Civ. S–12–0751 LKK/EFB) 2012 U.S.Dist. Lexis 134281, *20 (Golden ).) “[W]hen parties intend to include a broad arbitration provision, they provide for arbitration ‘arising out of or relating to’ the agreement.” (Cape Flattery,supra, 647 F.3d at p. 922, italics added.) In circumstances in which an arbitration clause is phrased in broad and general terms, “[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.” (Steelworkers v. Warrior & Gulf Co. (1960) 363 U.S. 574, 582–583.) When an arbitration clause is interpreted “broadly,” it “ ‘reaches every dispute between the parties having a significant relationship to the contract and all disputes having their origin or genesis in the contract.’ “ (Golden,supra, 2012 U.S. Dist. LEXIS 134281 at *21, quoting Simula, Inc. v. Autoliv, Inc. (9th Cir.1999) 175 F.3d 716, 721 (Simula ).) Stated differently, “[t]o require arbitration, [a party’s] factual allegations need only ‘touch matters’ covered by the contract containing the arbitration clause and all doubts are to be resolved in favor of arbitrability.” (Simula,supra, at p. 721.) Brinkley alleges that her telephone conversations with representatives at Monterey were recorded without her knowledge or consent. All of her claims arise from this alleged conduct on Monterey’s part. These telephone calls were initiated by Monterey and Brinkley in the facilitation of Monterey’s attempt to collect on the debt it believed to be due pursuant to the RIC. We conclude that these factual allegations “touch matters” covered by the contract—namely, debt collection pursuant to the contract.
The Court of Appeal found that, applying Washington law as the Arbitration Clause required, the Clause was not unconscionable, including the requirement that the Consumer travel to San Diego as the Arbitration Clause required, because, under AAA’s rules, the Defendant was required to bear all costs of arbitration, which would include such travel. Somewhat troubling, however, the Court of Appeal found that the prevailing party fee-shifting rules of the Arbitration Clause was contrary to its requirement that the Defendant bear all of the costs of the Arbitration. Accordingly, the Court of Appeal found that part of the Arbitration Clause to be unconscionable.
This provision essentially undermines the fee provisions in the Consumer Supplementary Procedures discussed above, since the arbitration agreement requires an arbitrator to award a prevailing party “all [of that party’s] fees and costs.” This provision thus thwarts a consumer claimant’s right under the Consumer Supplementary Procedures to have the business bear all of the costs of arbitration with the exception of a limited filing fee, in that under the RIC, if a consumer fails to prevail, he or she will be liable for all of those fees (which includes any additional filing or administrative fees, plus the arbitrator’s fees and costs). Potentially even more costly to Brinkley, and more troubling for purposes of our unconscionability analysis, is that this provision appears to shift to the nonprevailing party the prevailing party’s attorney fees, in addition to the costs associated with the arbitration. Although Monterey suggests that Brinkley merely “speculates that the language of the RIC Contract could allow the arbitrator to award Monterey attorneys’ fees if it prevails,” our reading of the provision is the same as Brinkley’s. The arbitration agreement requires the nonprevailing party to pay “all fees and costs of the prevailing party.” (Italics added.) The most reasonable understanding of that phrase is that the nonprevailing party will be required to pay any and all of the fees and costs incurred by the prevailing party in arbitrating the matter before the arbitrator, which would include the attorney fees incurred by that party.
The Court of Appeal, however, found that clause of the Arbitration Clause to be severable.
Contrary to Brinkley’s contention, unconscionability does not permeate the arbitration agreement, but, rather, is found only in this single sentence. The offending sentence can readily be removed from the arbitration agreement without further upsetting the terms of that agreement and without requiring us to rewrite the parties’ agreement. We conclude that severing the fee and cost shifting provision is the most reasonable course of action in these circumstances. We therefore sever this language from the RIC. The contract may not be enforced to the extent that it requires an arbitrator to award “all fees and costs of the prevailing party” to that party.
As to class claims, the Court of Appeal found that the Arbitration Clause’s requirement that the matter be arbitrated before AAA necessarily incorporated AAA’s rules, which delegated to the Arbitrator the question of whether the Arbitrator could decide class claims.
The RIC provides that disputes “shall be resolved by binding arbitration in accordance with the rules of the [AAA].” Monterey, which was assigned REIE’s rights under the RIC, does not dispute that the RIC incorporates by reference the AAA rules. By incorporating the AAA rules, the RIC also incorporated the “Supplementary Rules for Class Arbitration” (Supplementary Class Arbitration Rules) effective October 8, 2003.19 The Supplementary Class Arbitration Rules provide, in relevant part: “Upon appointment, the arbitrator shall determine as a threshold matter, in a reasoned, partial final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class (the ‘Clause Construction Award’).” (Italics added.) When Brinkley signed the RIC, she agreed to the application of the AAA rules to any arbitration of her claims, including the AAA rule that the arbitrator is to decide the gateway issue of whether class arbitration is permissible under the parties’ agreement. That rule is thus part of the RIC.20 In our view, an agreement that incorporates by reference terms that address the question at issue, such as the agreements’ incorporation of the AAA rules in the instant case, is not silent regarding the delegation of arbitrable issues to the arbitrator. The parties’ agreement to arbitrate their disputes under a specifically designated set of rules, which in turn provide that the arbitrator shall decide whether the parties’ arbitration agreement permits class arbitration, is “clear and unmistakable” evidence that the parties intended to delegate the resolution of that question to the arbitrator. Our conclusion is not novel. Courts in the Ninth Circuit and other circuits have adopted an analysis similar to ours. (See Zenelaj v. Handybook, Inc. (ND Cal.2015) 82 F.Supp.3d 968, 972 [although the question whether the incorporation of the AAA rules demonstrates “ ‘clear and unmistakable’ evidence of the parties’ intent to arbitrate arbitrability” is not clearly settled in the Ninth Circuit, “the overwhelming consensus of other circuits, as well as the vast majority of decisions in this district, support Defendant’s claim that, in the context of this case, incorporation of the AAA Rules effectively delegates jurisdictional questions, including arbitrability and validity, to the arbitrator”].) In light of our conclusion that the availability of class arbitration is a matter for the arbitrator to decide, we reverse that portion of the trial court’s order compelling Brinkley to arbitrate her individual, but not class, claims. We also reverse the court’s order dismissing Brinkley’s class claims. The entire matter should be sent to arbitration. The arbitrator shall determine whether Brinkley may continue to pursue relief on behalf of a class in arbitration.