Weischadle v. Vo CA2/1 ( 2021 )

Filed 7/2/21 Weischadle v. Vo CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
GLORIA WEISCHADLE, B304845
Plaintiff and (Los Angeles County
Respondent, Super. Ct. No. LC107777)
v.
ALEX VO et al.,
Defendants and
Appellants.
APPEAL from an order of the Superior Court of
Los Angeles County, Shirley K. Watkins, Judge. Reversed with
directions.
Goldberg Segalla, Peter J. Woo, David Y. Choi, and Jordan
G. Cohen for Defendants and Appellants.
Gloria Weischadle, in pro. per., for Plaintiff and
Respondent.
____________________________
Appellants Alex Vo, David Jones, and their law firm,
Santiago & Jones (collectively S&J), moved the trial court for an
order compelling arbitration of the malpractice lawsuit that
former client Gloria Weischadle, respondent here, filed against
them. The trial court concluded that the arbitration agreement
Weischadle signed was unconscionable and unenforceable.
Additionally, the trial court ruled that S&J had waived
arbitration. On appeal, S&J contends that there was insufficient
evidence of unconscionability or waiver. We agree, and reverse.
FACTUAL BACKGROUND
Weischadle was injured in a fall at Los Angeles
International Airport on September 2, 2015. Representing
herself, Weischadle filed a personal injury complaint against
Los Angeles World Airports (LAWA) on September 19, 2016.
(Weischadle v. Los Angeles World Airports (Super. Ct. L.A.
County, 2018, No. BC634298).)
On September 29, 2017, Weischadle retained S&J to
represent her in her personal injury action against LAWA.
Weischadle and Jones (on behalf of S&J) signed a document
entitled “ATTORNEY-CLIENT CONTINGENCY CONTRACT,”
which contained the following provision:
“ARBITRATION
“Any dispute arising under this Contract or in connection
with Attorney’s services hereunder, including any claim by Client
against Attorney for malpractice or other tort claims, shall be
resolved by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association. Client acknowledges that he/she has been fully
advised of all of the possible consequences of arbitration
including but not limited to:
2
“a. If a malpractice action arises from this Contract,
neither Client nor Attorney will have the right to a jury trial.
“b. Both parties retain the right to retain counsel to
prepare their respective claims and/or defenses for the
arbitration hearing.
“c. Client can choose to hire an attorney who may not
request or whose retainer agreement does not contain an
arbitration provision.”
Weischadle signed the agreement and initialed and dated
each page.
On June 4, 2018, Jones, on behalf of S&J, and Weischadle
signed a substitution of attorney form substituting Weischadle
back into the litigation in propria persona against LAWA. The
form was filed on June 11, 2018.
Weischadle represented herself at the LAWA personal
injury trial, which began in October 2018. The trial court
granted LAWA’s motion for nonsuit in that action immediately
following Weischadle’s opening statement. (Weischadle v.
Los Angeles World Airports (Oct. 28, 2019, B294949) [nonpub.
opn.] at pp. 3, 5.) The trial court entered judgment for LAWA in
that matter on November 5, 2018, and denied Weischadle’s
motion for new trial on December 20, 2018. (Id. at p. 5.) Our
colleagues in Division Four affirmed the trial court’s judgment in
an unpublished opinion on October 28, 2019. (Id. at p. 9.)
PROCEDURAL BACKGROUND
1. Motion to compel arbitration
Weischadle filed the complaint in this action—alleging
legal malpractice against S&J in connection with their
representation of her in the LAWA action—on
September 12, 2018, before trial in that matter.
3
At a hearing on July 2, 2019, the trial court granted a
motion to quash service of Weischadle’s legal malpractice
complaint. Weischadle served the complaint on the defendants in
July and August 2019.
On September 6, 2019, counsel for S&J filed a declaration
in support of an automatic 30-day extension of time under Code
of Civil Procedure1 sections 430.41 and 435.5 to file a responsive
pleading. The declaration stated that counsel had contacted
Weischadle “to discuss the underlying facts, and to meet and
confer regarding deficiencies in the complaint.” The declaration
stated that Weischadle had declined to meet until counsel had
“reviewed the client file.” Counsel estimated this would take
several weeks, which would not leave sufficient time to meet and
confer prior to the deadline to file a responsive pleading absent
an extension.
S&J and Jones subsequently filed form declarations on
October 9 and October 16, 2019, indicating that they would be
filing demurrers and that Weischadle “failed to respond to [their]
request to meet and confer or otherwise failed to meet and confer
in good faith.”
On November 8, 2019, S&J filed a motion to compel
arbitration and stay the matter. The motion included a
declaration from Jones stating, inter alia, that Weischadle had
entered into the contingency agreement with S&J described
above, and, “[o]n information and belief,” had dated and initialed
each page and signed the agreement.
Weischadle opposed the motion, arguing that S&J was
engaging in delay tactics, and the doctrine of laches applied.
Plaintiff further argued that S&J breached the retainer
1Unspecified statutory citations are to the Code of Civil
Procedure.
4
agreement by failing to represent her adequately in her personal
injury lawsuit, thus voiding the entire agreement, including the
arbitration provision.
The trial court first heard the matter on January 14, 2020.
The trial court’s minute order indicated that the matter was
“called for hearing and argued,” and that the trial court
requested supplemental briefing from each side, continuing the
hearing to February 4, 2020. Regarding the supplemental
briefing, the minute order stated, “No declarations or exhibits to
be attached to said briefs.” S&J’s notice of the continued hearing
indicated that the trial court “requested additional briefing
regarding the enforceability and potential unconscionability of
the subject arbitration clause, including whether that clause is
unconscionable because it requires commercial—as opposed to
consumer—arbitration.”
The parties filed their supplemental briefs. S&J’s brief
indicated that it was “in response to questions raised sua sponte
by the Court” regarding the propriety of the commercial
arbitration provision. S&J argued that commercial arbitration
provisions are enforceable and ethical in the attorney-client
context, S&J’s agreement with Weischadle was not a contract of
adhesion, and the agreement was not ambiguous.
Weischadle’s supplemental brief consisted primarily of
citations to statutes and case law regarding arbitrability,
unenforceability of arbitration agreements that limit statutory
remedies, fraud in the inducement, unconscionability, and costs
of arbitration. As to the specific facts of her case, she claimed she
was under duress when she signed the substitution of attorney
forms releasing S&J from her personal injury action, because
S&J refused to return her documents to her unless she did so.
Arguing that S&J should pay the costs of the arbitration,
Weischadle stated that she had been disabled and unable to work
5
since her accident at the airport, had relied on defendants to
represent her only to be abandoned shortly before trial, and that
she lost her case as a result.
2. Hearing and ruling
The trial court issued a five-page tentative ruling in
advance of the continued February 4 hearing, which concluded
that the arbitration agreement was procedurally and
substantively unconscionable. The trial court wrote that,
although the agreement required disputes be resolved through
commercial arbitration, “[t]here was no explanation of what
COMMERCIAL arbitration meant; there were no AAA rules or
fee schedules attached; the retainer does not mention that even
though plaintiff would be hiring the defendants to represent her
and she would not need to advance costs or owe them any money
if she had no recovery, she would have to spend thousands of
dollars to pursue a case against them in arbitration rather than
pursuing a case in court for little or no money. In particular, the
agreement is silent on who would be required to pay for
arbitration.”
The court continued, “The attorneys were clearly in a
superior bargaining position. First, they are attorneys; plaintiff
is not. Second, plaintiff was in a vulnerable state because of her
injuries and the need to find an attorney to substitute into an
existing case. Third, the attorneys knew that there was a
substantial cost associated with COMMERCIAL arbitration but
did not disclose this to plaintiff. That information was a material
term[ ] of the agreement known to defendants and not disclosed
to plaintiff, with whom they were in a fiduciary relationship.
This term would be substantially prejudicial to plaintiff because
of the cost and defendants knew, but did not disclose, that to
plaintiff. Fourth, defendants knew that plaintiff was a consumer
6
and that CONSUMER arbitration through AAA was intended for
persons in a consumer setting, as opposed to a commercial setting
whether both sides are in a business arrangement. Here,
plaintiff was obviously a consumer of legal services. By not
telling plaintiff that there was a choice between consumer and
commercial arbitration and the relative costs, plaintiff was
intentionally kept in the dark and could not make a knowing
waiver of her right to have a jury determine her case.”
The trial court found “the ‘evidence’ by defendants of the
circumstances of how the agreement was entered into is very thin
and asserted ‘on information and belief’ and not based on
personal knowledge.” As clarified at the hearing and discussed
post, this was a reference to the Jones declaration in support of
the motion to compel arbitration.
The trial court in its tentative ruling also concluded that
S&J had waived arbitration. The court reasoned that by filing a
declaration invoking section 430.41’s “automatic 30-day extension
of time within which to file a responsive pleading,” S&J had
“availed themselves of remedies which were not available to them
in arbitration.” “What is striking to the court,” the ruling stated,
“is that defendants used the provisions of CCP section[s] 430.41
and 435.5 to give themselves an extension of time to file a
demurrer but instead of filing a demurrer, they filed a motion to
compel arbitration. They availed themselves of a statute which
was not intended to give them more time to file a motion to compel
arbitration; it is solely to allow meet and confer on a possible
demurrer.”
Responding to the tentative ruling at the hearing, S&J
argued that there was no basis for the trial court’s
unconscionability findings because “there has been no evidentiary
hearing and the court has not asked for evidence.” The court
responded that S&J “was given every opportunity to present
7
whatever evidence it wanted,” and “what I ended up with was a
declaration from your client on . . . information and belief, which
is almost valueless in terms of proving any particular point.”
Here the trial court was referring to the Jones declaration in
support of the original motion to compel arbitration, which stated
“on information and belief” that Weischadle had initialed the
pages of the agreement and signed it. S&J noted that the court
specifically instructed the parties not to submit additional
declarations with the supplemental briefing.
S&J also disputed the trial court’s conclusion regarding
waiver, to which the court responded that it was wrong for S&J
to use a statutory extension for filing a demurrer to instead file a
motion to compel arbitration.
The trial court adopted its tentative ruling as its final
ruling. S&J timely appealed.
DISCUSSION
A. The Unconscionability Finding Is Not
Supported By Substantial Evidence
S&J argues the trial court’s finding of unconscionability
was not supported by substantial evidence. We agree.
1. Applicable law
“ ‘California law . . . favors enforcement of valid arbitration
agreements[,]’ ” and courts may decline to enforce them only on
the same grounds as for other contracts. (Lange v. Monster
Energy Co. (2020) 46 Cal.App.5th 436, 444–445; accord
Armendariz v. Foundation Health Psychcare Services, Inc. (2000)
24 Cal.4th 83, 97–98.) “Unconscionability in a contract is one
reason a court may decline enforcement.” (Lange, supra, at
p. 445.)
8
“A contract is unconscionable if one of the parties lacked a
meaningful choice in deciding whether to agree and the contract
contains terms that are unreasonably favorable to the other
party. [Citation.] Under this standard, the unconscionability
doctrine ‘ “has both a procedural and a substantive element.” ’
[Citation.] ‘The procedural element addresses the circumstances
of contract negotiation and formation, focusing on oppression or
surprise due to unequal bargaining power. [Citations.]
Substantive unconscionability pertains to the fairness of an
agreement’s actual terms and to assessments of whether they are
overly harsh or one-sided.’ [Citation.]” (OTO, L.L.C. v. Kho
(2019) 8 Cal.5th 111, 125 (OTO), final bracketed insertion added.)
“Both procedural and substantive unconscionability must
be shown for the defense to be established, but ‘they need not be
present in the same degree.’ [Citation.] Instead, they are
evaluated on ‘ “a sliding scale.” ’ [Citation.] ‘[T]he more
substantively oppressive the contract term, the less evidence of
procedural unconscionability is required to’ conclude that the
term is unenforceable. [Citation.] Conversely, the
more deceptive or coercive the bargaining tactics employed, the
less substantive unfairness is required.” (OTO, supra, 8 Cal.5th
at pp. 125–126.)
“The burden of proving unconscionability rests upon the
party asserting it.” (OTO, supra, 8 Cal.5th at p. 126.) “Whether
an agreement is unconscionable presents a question of law which
we review de novo.” (Williams v. Atria Las Posas (2018)
24 Cal.App.5th 1048, 1055.) “ ‘[T]o the extent,’ ” however, “ ‘the
trial court’s determination that the arbitration agreement was
unconscionable turned on the resolution of conflicts in the
evidence or on factual inferences to be drawn from the evidence,
we consider the evidence in the light most favorable to the trial
9
court’s ruling and review the trial court’s factual determinations
under the substantial evidence standard.’ [Citation.]” (Ibid.)
2. Analysis
Much of the trial court’s written order focused on the
procedural unconscionability of the retainer agreement, that is,
“ ‘the circumstances of contract negotiation and formation,
focusing on oppression or surprise due to unequal bargaining
power.’ ” (OTO, supra, 8 Cal.5th at p. 125.) The court found that
S&J, as attorneys, were in a superior bargaining position, that
Weischadle was “in a vulnerable state” due to her injuries and
need to find an attorney to take over her existing case, and that
S&J failed to inform Weischadle of the choice between
commercial and consumer arbitration and that the former would
be significantly more costly for her than the latter.
The problem with the trial court’s findings is there was
virtually no evidence to support them. Weischadle, who had the
burden to prove unconscionability, submitted no evidence
regarding the circumstances in which she entered into the
retainer agreement. She filed no declarations—indeed, the trial
court forbade her from doing so in support of her supplemental
brief on unconscionability—and the record does not indicate she
testified before the trial court. The declaration submitted by S&J
noted only that the parties had executed the agreement and that
Weischadle had initialed each page and signed the agreement,
but said nothing else about negotiation or formation of the
agreement.
In the absence of evidence of the circumstances of
negotiation and formation of the retainer agreement, the trial
court appears to have relied on the content of the agreement
itself, noting that the agreement did not explain what commercial
arbitration was, who would be responsible for paying for it, and
10
what the cost would be. Assuming arguendo the lack of this
information would support a finding of procedural
unconscionability, there was no evidence from which the trial
court could conclude that S&J did not provide this information
some other way; in fact, the agreement expressly stated that
“Client acknowledges that he/she has been fully advised of all of
the possible consequences of arbitration,” which at least raises
the possibility that S&J provided advisements not contained in
the agreement itself.
Also unknown is to what extent Weischadle negotiated the
terms of the agreement with S&J, and whether she was in fact in
a “vulnerable state,” as the trial court presumed, or was instead
in control of her selection of attorneys and the terms of their
retention. It is possible, for example, that Weischadle chose S&J
out of a number of law firms she considered.
When S&J noted the lack of supporting evidence at the
hearing on the motion to compel arbitration, the trial court stated
that S&J “was given every opportunity to present whatever
evidence it wanted.” This was both a legal and factual error. It
was Weischadle’s burden, not S&J’s, to substantiate a claim of
unconscionability. As discussed, Weischadle submitted no
evidence in support of this claim, and thus S&J had no obligation
to present contrary evidence.
Even if it were S&J’s burden, S&J had no opportunity to
meet it. Weischadle did not raise the issue of unconscionability
in her opposition to the motion to compel arbitration, and
therefore S&J had no reason to provide evidence on that issue at
the January 14, 2020 hearing. The trial court focused on the
inadequacy of the Jones declaration, but that declaration was
never intended to address the issue of unconscionability, an issue
that did not arise until after the declaration was filed. When
unconscionability was raised for the first time at the January 14
11
hearing, the trial court ordered supplemental briefing but
prohibited submission of any evidence. S&J was never able to
submit evidence specific to the issue of unconscionability.
We acknowledge there is no transcript of the January 14
hearing in the record. We further acknowledge that “ ‘ “ ‘[a]
judgment or order of the lower court is presumed correct. All
intendments and presumptions are indulged to support it on
matters as to which the record is silent, and error must be
affirmatively shown.’ ” ’ ” (People v. Torres (2020) 47 Cal.App.5th
984, 989 (Torres).) Thus, had the trial court received evidence at
the January 14 hearing, in the absence of a transcript arguably
we would be compelled to presume that evidence supported the
trial court’s ruling.
We do not perceive the record as silent, however, as to what
occurred at the January 14 hearing. It is evident to us that the
trial court did not receive evidence at the hearing, or that S&J
made a concession that obviated the need for further evidence.
As discussed, Weischadle did not raise the issue of
unconscionability in her opposition to the motion to compel
arbitration, and therefore the issue did not arise until the
January 14 hearing. The minute order from the January 14
hearing did not refer to any testimony or submission of evidence.
We may infer from the minute order that no such testimony or
evidence was received. (See Copley Press, Inc. v. Superior Court
(1992) 6 Cal.App.4th 106, 113 [official court minutes “accurately
and officially reflect[ ] the work of the court”].)
The reporter’s transcript from the February 4 hearing, as
well as the trial court’s detailed five-page written order, indicate
the court’s ruling was not based on anything that occurred at the
January 14 hearing. In the transcript and written order, the
trial court never referred to any evidence other than the retainer
agreement itself and the declaration S&J filed in support of its
12
motion to compel arbitration, a declaration submitted before the
issue of unconscionability arose. Particularly given S&J’s
express protest at the February hearing that S&J had not been
allowed to present evidence, we would expect the trial court to
have cited to evidence presented or concessions made at the
January 14 hearing to dispute S&J’s claim had such evidence or
concessions existed.
In short, every indication in the record is that nothing
occurred at the January 14 hearing to support the trial court’s
ruling. The record therefore is not “ ‘ “ ‘silent’ ” ’ ” as to what
transpired at the hearing, even in the absence of a transcript,
and we need not make “ ‘ “ ‘[a]ll intendments and
presumptions’ ” ’ ” in favor of the trial court’s ruling. (Torres,
supra, 47 Cal.App.5th at p. 989.)
Having concluded there was no evidence to support the
trial court’s finding of procedural unconscionability, we need not
address its findings regarding substantive unconscionability.
(OTO, supra, 8 Cal.5th at p. 125 [“Both procedural and
substantive unconscionability must be shown for the defense to
be established . . . .”].)
B. S&J Did Not Waive Arbitration
S&J contends the trial court erred in concluding S&J had
waived arbitration. We agree.
1. Applicable law
A court may decline to grant a petition to compel
arbitration upon a finding that “[t]he right to compel arbitration
has been waived by the petitioner.” (§ 1281.2, subd. (a).)
“[W]aivers are not to be lightly inferred and the party seeking to
establish a waiver bears a heavy burden of proof.” (St. Agnes
Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187,
1195 (St. Agnes).)
13
“Both state and federal law emphasize that no single test
delineates the nature of the conduct that will constitute a waiver
of arbitration. [Citations.] ‘ “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 ‘wilful misconduct’ of a party may constitute a
waiver and thus justify a refusal to compel arbitration.
[Citations.]” ’ [Citation.]” (St. Agnes, supra, 31 Cal.4th
at pp. 1195–1196, first & last bracketed insertion added.)
Our Supreme Court has listed the following factors as
relevant when assessing claims of waiver: “ ‘ “(1) whether the
party’s actions are inconsistent with the right to arbitrate;
(2) whether ‘the litigation machinery has been substantially
invoked’ and the parties ‘were well into preparation of a
lawsuit’ before the party notified the opposing party of an intent
to arbitrate; (3) whether a party either requested arbitration
enforcement close to the trial date or delayed for a long period
before seeking a stay; (4) whether a defendant seeking
arbitration filed a counterclaim without asking for a stay of the
proceedings; (5) ‘whether important intervening steps [e.g.,
taking advantage of judicial discovery procedures not available in
arbitration] had taken place’; and (6) whether the delay ‘affected,
misled, or prejudiced’ the opposing party.” ’ [Citation.]”
(St. Agnes, supra, 31 Cal.4th at p. 1196.)
“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. [Citations.] ‘When,
however, the facts are undisputed and only one inference may
14
reasonably be drawn, the issue is one of law and the reviewing
court is not bound by the trial court’s ruling.’ [Citation.]”
(St. Agnes, supra, 31 Cal.4th at p. 1196.)
2. Analysis
The trial court ruled that S&J waived arbitration by
invoking an automatic extension under section 430.41 to file a
demurrer, then using that extension to file a motion to compel
arbitration instead.2 As the trial court explained at the
February 4 hearing, it viewed S&J as obtaining “an extension of
time under false pretenses,” and that S&J “misuse[d]” the
statutory extension.
Assuming arguendo that invoking a section 430.41
extension under false pretenses constitutes a waiver of
arbitration, an issue we do not decide, there is no evidence in the
record to support a finding that S&J, at the time it filed its
declaration in support of the automatic extension, had no
intention of filing a demurrer. That was speculation on the part
of the trial court. Further, we are aware of no authority that a
party who seeks a 30-day extension to file a demurrer becomes
obligated thereby actually to file a demurrer—parties commonly
switch tactics as litigation proceeds, and it would be a waste of
time to require a party to file a particular responsive pleading it
no longer deems necessary simply because the party earlier
declared an intent to file that pleading.
2 Section 430.41 grants a “demurring party” an automatic
30-day extension to file a responsive pleading if the parties are
unable to meet and confer at least five days before the date the
responsive pleading is due. (§ 430.41, subd. (a)(2).) S&J also
invoked section 435.5, which provides a similar extension to a
party seeking to file a motion to strike. (§ 435.5, subd. (a)(2).)
15
Although substantial invocation of litigation machinery or
use of litigation procedures not available in arbitration may
result in waiver (St. Agnes, supra, 31 Cal.4th at p. 1196), S&J’s
use of an automatic extension intended for litigants filing
demurrers is not substantial invocation of litigation machinery or
procedures. Participation in litigation does not in itself result in
waiver, absent a determination on the merits of arbitrable issues
or prejudice to another party. (Id. at p. 1203.) Thus,
“[a]nswering a complaint does not result in waiver,” nor does
filing a demurrer if it is withdrawn prior to a determination on
the merits. (Khalatian v. Prime Time Shuttle, Inc. (2015)
237 Cal.App.4th 651, 662.) If filing a demurrer is insufficient to
waive arbitration, then the preliminary step of obtaining an
extension to file a demurrer also cannot constitute waiver.
None of the other St. Agnes factors applies. S&J moved to
compel arbitration nearly at the outset of the lawsuit, before
responding to the complaint. Thus, very little litigation or
preparation had taken place, the suit was not close to trial, S&J
filed no counterclaims, and S&J had not taken important
intervening steps such as seeking judicial discovery. (See
St. Agnes, supra, 31 Cal.4th at p. 1196.) Most significantly,
Weischadle offered no evidence that she was “ ‘ “ ‘affected, misled,
or prejudiced’ ” ’ ” by the brief delay between service of the
complaint and the motion to compel arbitration. (Ibid.) To the
extent S&J’s conduct led her to expect a demurrer that never
came, we cannot conceive how that prejudiced her.
C. There Is No Other Basis To Affirm the Trial
Court’s Order
Section 1281.2 requires the trial court to order the parties
“to arbitrate the controversy if it determines that an agreement
to arbitrate the controversy exists,” unless one of four exceptions
16
applies. The trial court’s order relied on two of those exceptions,
waiver and grounds for rescission (namely, unconscionability)
(§ 1281.2, subds. (a)–(b)), and we have explained ante why those
exceptions do not apply.3 The other exceptions also do not apply:
there are no separate pending proceedings with third parties
arising from the same transaction, and S&J is not “a state
or federally chartered depository institution.” (§ 1281.2,
subds. (c)–(d).)
It is undisputed that “an agreement to arbitrate the
controversy exists.” (§ 1281.2.) Weischadle and S&J executed
the retainer agreement containing the arbitration clause, which
encompasses “[a]ny dispute arising under this Contract or in
connection with Attorney’s services hereunder, including any
claim by Client against Attorney for malpractice or other tort
claims.” Weischadle’s complaint targets the services S&J
provided, thus bringing it within the ambit of the arbitration
clause. Accordingly, the trial court should have ordered the
parties to arbitration.
3 In her papers below, Weischadle contended that S&J’s
purported breach of the retainer agreement rendered the
arbitration provision unenforceable. We reject this argument.
“The mere fact of a contractual breach in no way impairs the
continuing efficacy of the arbitration provision: the very purpose
of arbitration is to resolve the controversy created by the alleged
breach.” (Thorup v. Dean Witter Reynolds, Inc. (1986)
180 Cal.App.3d 228, 237.)
17
DISPOSITION
The trial court’s order is reversed. The trial court is
directed to grant appellants’ motion to compel arbitration and
stay further proceedings. Appellants are awarded costs on
appeal.
NOT TO BE PUBLISHED.
BENDIX, Acting P. J.
I concur:
FEDERMAN, J.*
* Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
18
CHANEY, J., Dissenting.
I respectfully dissent.
“If an appellant intends to raise any issue that requires
consideration of the oral proceedings in the superior court, the
record on appeal must include a record of these oral proceedings
in the form of one of the following: [¶] (1) A reporter’s transcript
under rule 8.130; [¶] (2) An agreed statement under rule 8.134; or
[¶] (3) A settled statement under rule 8.137.” (Cal. Rules of
Court, rule 8.120(b); Southern California Gas Co. v. Flannery
(2016) 5 Cal.App.5th 476, 483.) “A reporter’s transcript [or
settled statement] may not be necessary if the appeal involves
legal issues requiring de novo review. [Citation.] In many cases
involving the substantial evidence or abuse of discretion standard
of review, however, a reporter’s transcript or an agreed or settled
statement of the proceedings will be indispens[a]ble.” (Flannery,
at p. 483.)
The necessity for a record of oral proceedings rests on the
bedrock principle that the trial court’s orders are presumed to be
correct—the “Presumption of Correctness.” (Eisenberg et al.,
Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group
2020) ¶ 8:17.) A leading practice guide on appellate law
identifies this presumption as “[t]he most fundamental rule of
appellate review.” (Id. at ¶ 8:15, italics added.) “ ‘All
intendments and presumptions are indulged to support [the
appealed judgment or order] on matters as to which the record is
silent, and error must be affirmatively shown.’ [Citations.] This
includes the presumption ‘that the record contains evidence to
support every finding of fact.’ [¶] Appellate courts never
speculate that trial court error occurred. Any ambiguity in the
record is resolved in favor of the appealed judgment or order.”
(Id. at ¶¶ 8:15, 8:16, original italics.)
“ ‘A necessary corollary to this rule [is] that a record is
inadequate, and appellant defaults, if the appellant predicates
error only on the part of the record he provides the trial court,
but ignores or does not present to the appellate court portions of
the proceedings below which may provide grounds upon which
the decision of the trial court could be affirmed.’ ” (Osgood v.
Landon (2005) 127 Cal.App.4th 425, 435, italics added.) The
“appellant’s burden to affirmatively demonstrate error remains
the same whether or not respondent files a brief.” (Eisenberg
et al., Cal. Practice Guide: Civil Appeals and Writs, supra,
¶ 8:17.3.)
Our jurisprudence is bursting at the seams with cases
applying these rules to affirm what may be otherwise reversible
trial court orders and judgments. In Gee v. American Realty &
Construction, Inc. (2002) 99 Cal.App.4th 1412, for example, the
court affirmed a trial court’s order denying a motion in the trial
court. The appellant failed to provide a reporter’s transcript (or
other acceptable record of the oral proceedings) of the hearing at
which the motion was denied; the Court of Appeal concluded that
it was “conceivable” that something had happened at that
hearing that would support the trial court’s order. “So long as
such possible grounds may exist for the trial court to have denied
[appellant’s] motion in the exercise of its discretion, [appellants]
have not sustained their burden as appellants to demonstrate
error, thus overcoming the presumption of correctness attending
the order denying their motion.” (Id. at p. 1416, italics added;
see also, e.g., Foust v. San Jose Construction Co., Inc. (2011)
198 Cal.App.4th 181, 186 [cataloguing cases]; Aguilar v. Avis
2
Rent A Car System, Inc. (1999) 21 Cal.4th 121, 132 [where
appellants failed to provide a reporter’s transcript they could not
challenge the sufficiency of the evidence to support a trial court
finding]; Ballard v. Uribe (1986) 41 Cal.3d 564, 574 [failure to
include a transcript or settled statement precluded review of
denial of motion for new trial and other issues on appeal];
Cosenza v. Kramer (1984) 152 Cal.App.3d 1100, 1102 [“evidence
is conclusively presumed to support the judgment”]; Vo v. Las
Virgenes Municipal Water Dist. (2000) 79 Cal.App.4th 440, 447
[affirming order fixing amount of attorney fees based on
appellant’s failure to provide an adequate record]; Jameson v.
Desta (2018) 5 Cal.5th 594, 608 [cataloguing cases; “absence of a
court reporter at trial court proceedings and the resulting lack of
a verbatim record of such proceedings will frequently be fatal to a
litigant’s ability to have his or her claims of trial court error
resolved on the merits by an appellate court”]; Rossiter v. Benoit
(1979) 88 Cal.App.3d 706, 712 [demurrers]; Maria P. v. Riles
(1987) 43 Cal.3d. 1281, 1295 [attorney fee award].)
The appellants in this matter requested a substantial
evidence review of a trial court’s order denying a motion to
compel arbitration. The trial court heard that motion at two
hearings. The first hearing was on January 14, 2020, and no
court reporter was present. The second hearing, on February 4,
2020, was reported. The appellants provided us with a reporter’s
transcript of the second hearing, but designated no record of the
oral proceedings on January 14, 2020 in any form.
The review of this case should have ended with appellants’
failure to designate a complete record of the oral proceedings at
which their motion to compel arbitration was considered.
3
We cannot know what happened at the hearing on January
14, 2020. Consequently, we must presume that something
happened that would justify the trial court’s denial of the motion
to compel arbitration. Litigants frequently concede points in
response to bench officers’ questions or make representations or
assertions of fact upon which trial courts must be allowed to rely.
The standard of review that the appellants invoked and the
presumptions that bind us command us to presume something
happened at the January 14, 2020 hearing that supported the
trial court’s order; nothing in the record before us demonstrates
otherwise.
That the hearing was not reported is of no consequence.
The rules of court allow appellants the alternatives of an agreed
statement or a settled statement when they must provide the
Court of Appeal with a record of oral proceedings and no
reporter’s transcript exists. (Cal. Rules of Court, rule 8.120(b).)
The absence of any record of an oral proceeding, however, is
glaring. The parties’ oral argument in this case demonstrates
why.
At argument, the appellants told us in their principal
argument that unconscionability—the principal issue on appeal—
was not discussed at the January 14, 2020 hearing. “The issue of
unconscionability never came up” at the January 14 hearing,
counsel informed us. In her argument, respondent informed us
that the issue was discussed at the January 14 hearing:
“Unconscionability was raised and talked about; it was a long
discussion.” Indeed, the respondent told us that “the denial [of]
the motion [to compel arbitration] was based [on] the discussion
during the [January] hearing.” On rebuttal, and after reviewing
a minute order that reflected that the issue must have been
4
discussed at the January 14 hearing, appellant’s counsel
conceded at argument in our court that there was discussion of
unconscionability at the January 14 hearing. “The first thing I
need to do [on rebuttal],” appellants’ counsel told us, “is apologize
to this court because [the respondent] is correct that
unconscionability did come up at the January [14] hearing. I
don’t have a clear recollection of it . . . .”
The appellants’ counsel informed us that his misstatement
was an oversight. But the exchange is—in and of itself—why the
appellate courts will not presume error and will require error to be
demonstrated on an adequate record. We cannot determine—in
the middle of oral argument or otherwise—whether what we
think might have happened at a hearing in the trial court is what
actually happened, and whether one party is more or less correct
than the other about whether something was discussed. This
exchange demonstrates why the strict rules about the contents of
the record are what they are and why we make the presumptions
we make.
To find otherwise is to create two new and impossible
burdens for participants in the judicial system.
First, not presuming correctness of trial court orders and
judgments—contrary to the presumption of correctness—will
require trial courts to affirmatively establish the correctness of
their orders, and to do so on the face of each of their orders.
Allowing parties to challenge the sufficiency of the evidence to
support an order by providing only a partial record means that
we no longer accept the correctness of trial court orders that do
not contain a statement of reasons that we can determine on
their face to have included every fact and factor and legal
authority considered. That the trial court’s order makes no
5
reference to the January 14 hearing does not foreclose that
something may have happened at that hearing that could have
provided grounds upon which the decision could have been
affirmed. To be sure, the trial court’s order makes no reference to
the February 4 hearing, either, yet we know what happened at the
February 4 hearing because we have a reporter’s transcript. The
absence of a statement in the order or on another transcript is no
more than the absence of a statement; it is not in itself an
affirmative statement that nothing happened at the January 14
hearing.
The other impossible burden it creates is that it
affirmatively shifts the burden to a respondent to demonstrate
the correctness of the trial court’s action on a sufficiency of the
evidence review—the review appellants invoked here.
Together, these new burdens represent a sea change; they
upend the presumption of correctness. They also put the trial
court in the position of being an advocate at hearings—requiring
trial judges to argue on the record in favor of the position adopted
in a tentative ruling, just in case the appellant fails (or declines)
to designate a complete record on appeal. And they create the
strange incentive for attorneys to be careless or sloppy in their
practice both in the trial courts and here to allow the Court of
Appeal to fill in the gaps a missing or partial record creates with
whatever information suits how it views the rest of the
information it has.
Finally, procedural rules applied consistently are part of
the foundation of due process. The rules that govern our
review—like other rules of procedure, standards of review, and
presumptions parties are entitled to—are intended in part to give
litigants equal access to the judicial process. Courts tip the
6
scales when they decline to consistently apply those procedural
prescriptions.
Because the appellants failed to procure a record of oral
proceedings from both hearings on their motion to compel
arbitration, we are not in a position to review the trial court’s
order on anything other than a de novo basis—review that the
appellants did not ask for and that their arguments do not
invoke. The record is insufficient to support any other review,
including the substantial evidence review the appellants request.
On that basis, I would affirm.
CHANEY, J.
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