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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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, G046225
v. (Super. Ct. No. 30-2010-00422317)
U.S. TELEPACIFIC CORP, ORDER MODIFYNG OPINION
AND DENYING PETITION FOR
Defendant and Appellant. 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.
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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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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, G046225
v. (Super. Ct. No. 30-2010-00422317)
U.S. TELEPACIFIC CORP., OPINION
Defendant and Appellant.
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
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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.)
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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.
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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.
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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.)
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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
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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
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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
9
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.
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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
11
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.
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