N O T F O R P U B L I C A T I ON

U N I T E D S T A T E S C OU R T O F A P P E A LS

F O R T H E N I N T H C I R C U IT

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a n d o n b e h a l f o f a l l o t h e r s s i m i l a r ly

s i t u a t e d,

P l a i n t i ff

- A p pe l l e e,

v.

H A N JI N S H I P P I N G C O

. , L T D

.,

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M E M O R A N D UM *

A pp e a l f r o m t he U n it e d S t a t e s D i s tr i c t C o u rt f o r t h e C e n tr a l D i s tr i c t o f C a l if o r n ia
D ea n D. P r e ge r s o n , D i s t ri c t J u d g e , P r es i d i ng

A r g u e d a n d S u b m i tt e d A p r i l 1 0

, 2 0 14
P a s a de n a , C a l if

o r n ia

B e f o r e : T H O M A S

, M

. S M I T H

, Jr

., a nd C H R I S T E N, C ir c u i t J ud g e s.

H an j i n S h i p p i n g C o

. ( “ H a n

ji n ” ) a pp e a l s t h e d i s t ri c t co u rt ’ s o r de r d e n y i ng

H an j i n ’ s m o ti o n t o c o m pe l a r b i tr a ti o n

. W e a ff

i r m

. B e c au s e t h e p a

rt i es a r e f a m ili ar

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# F I L ED

S E P 19 2014

M O L L Y C

. D W YE R

, C L E RK U

. S. C O U R T O F A PPEA LS

* T h i s d i s p o s it i o n i s n o t a p p r o p ri a t e f o r p u b l i c a ti o n a n d i s n o t p r ec e d e nt

e x c e p t a s p r o v i d e d b y 9 t h C i r

. R. 3 6

- 3.I

F o l l o w i n g s u b m i s s i o n o f t h i s a p p ea l

, t h e d i s t r i c t c o u rt e n t e r ed a n o r d er

r e s o l v i n g c e rt a i n c l a i m s

. W e r e q ue s t e d t h e p a rt i es t o b ri e f t h e q u e s t i o n o f w h e t h er

o r n o t t he d i s t

r i c t c o u rt o r d e r r e n d e r e d t h i s ap p e a l m o o t

. B o t h p a r t i e s a g r e e t h a t it

d i d n o t a n d

, a ft e r r e v i e w i ng t h e i r s u b m i s s i o n s w e c o n c l u de t h a t t h e a p pe a l is

j u s ti c i a b l e.

II

T he d i s t r i c t c o u rt d i d no t e rr i n h o l d i n g t h a t t h e a r b it r a t i on a g r e e m e n t

w as

u n c o n s c i o na

b l e u n d e r C a lif

o r n i a l a w an d

, t he r e f

o r e , t h a t t h e m o t i o n t o co m p el

a r b i t r a t i o n s h o u l d b e d e n i e d. 1 I n C a lif o r n i a , a c o n tr a c t c l a u s e i s u n co n sc i o n ab l e if

b o t h p r o ce d u r a l l y an d s u b s t an t i v e l y u n c on s c i on a b l e. S e e A rm e nd a r i z v

. F o u nd.

H ea l t h P s yc h ca r e S e rv s

. , I

n c. , 6 P

. 3 d 6 6 9

, 6 8 9 –9 0 ( C a l

. 20 0 0 ) ( a r t i c u l a t i ng

“ g e n e r a l p r i nc i p l es ” o f u n co n s c i o n a b ili t y )

. C a lif

o r n i a l a w u ti l i z e s a s l i d i n g sc a l e to

d e t e r m i n e t h e u l t i m a t e q u e s ti o n o f u nc o n s c i o n a b i l it y

— g r e a t e r s u b s t an t i ve

u n c o n s c i o n a b i l it y m ay c o m p e n sa t e f o r l e ss e r p r o c e d u r a l u nc o n s c i o n a b i l it y. I d. at

6 9 0

. I n C a lif

o r n i a , “ t h e co r e c o nc e r n o f u n c o n sc i on a b i lit y d o c tr i ne i s t he ‘ a b s e n ce

o f m ea n i n g f

u l c h o i c e o n t h e p a rt o f o n e o f t h e p a rti e s t o g e t h e r w it h c o n tr a c t t e r ms

1 T h e pa r t i e s a g r e e t ha t t he r e a

r e n o m a t e ri a l f

ac t u a l d i s p u t es ; h o w ev e r , t h ey d i sa g r e e a s t o t h e l e ga l s i g n if i ca n ce o f t he u nd i s p u t e d f a c t s

.

- 2-w h i c h a

r e u n r ea s o n ab l y f

a vo r a b l e t o t h e o t he r p a

r t y

. ’ ” S o n i c

- C a l a b a s a s A

, I n c

. v.

M o r eno , 3 1 1 P

. 3 d 1 8 4

, 2 0 2 ( C a l

. 2 0 1 3 ) ( q u o t i ng W il l i a m s v

. W

a l k e r- T h o m as

F u r n i t u r e C o. , 3 5 0 F

. 2 d 4 4 5

, 4 4 9 ( D. C

. C i r

. 1 9 6 5 ) )

.

A

T he d i s t r i c t c o u rt d i d no t e rr i n c o n c l u d i ng t h a t t h e a r b i t r a t i o n a g r e e m ent

w as p r o c ed u r a ll y u nc o n s c i o n a b l e u n d e r C a l i f o r n i a l a w

. W h e t he r a n a

r b it r a ti on

a g r e e m e n t i s p r o c e d u r a ll y u n c o n sc i o n ab l e d e pe n d s o n “ ‘ t h e m an n e r i n w h i c h t he

c o n t r a c t w a s n e g o t i a t e d a n d t h e c ir c u m s t a n ce s o f t h e p a r t i e s a t t ha t t i m e

. ’ ” I

n g l e v.

C i r c u it C it y S t o r es , I

n c. , 3 2 8 F

. 3 d 1 1 6 5

, 1 1 7 1 ( 9 t h C i r

. 2 0 0 3 ) ( q u o t i n g K i n n ey v.

U n i t ed H ea l t h C a r e Se r vs ., I

nc. , 8 3 C a l

. R p tr

. 2 d 3 4 8

, 3 5 2

– 5 3 ( C a l

. A p p

. 1 9 9 9 ) )

.

P r o c ed u r a l un c o n sc i o n ab i li t y g e ne r a l l y t a k e s t h e f o r m o f a c o n tr a c t o f a dh e s i o n , in

w h i c h a c o n t r a c t d r a ft e d b y t h e p a r t y o f s u p e ri o r b a r g a i n i n g s tr e n g t h i s i m p o s e d on

t h e o t he r w it h o u t t h e op p o r t u n it y t o n e g o ti a t e t h e t e r m s. S h r o y e r v

. N e w C i n gu l ar

W i r e l e s s Se r vs ., I

nc. , 4 9 8 F

. 3 d 9 7 6

, 9 8 2 ( 9 t h C ir

. 2 0 0 7 )

. H e r e , t h e r e c o r d s u pp o rts

t h e d i s tr i c t c o u r t’ s c on c l u s i o n t h a t E l it e L og i s t i cs C o r p

. ( “ E l it e ” ) d i d n o t t a k e p a rt

i n a n y c o n tr a c t n e g o ti a ti o n s a n d h a d n o c h o i c e b u t t o s i g n t h e a g r ee m e n t i f it

w i s h e d t o co n d u c t b u s i ne s s a s a n i n t e r m o d a l c a rr i e r

. W i t h o u t a m e an i n g f ul

o p p o rt u n i t y f

o r E l it e t o ne g o t i a t e , a n d w it h E l i t e f a c e d w it h a “ t a k e it o r l e av e i t”

p r o p o s i ti o n , t h e d i s tri c t c o u r t d i d n o t e r r i n c o n c l u d i n g t h a t t h e c o n tr a c t w as

- 3-p r o c ed u r a l l y u n c o n s c i o na b l e u nd e r C a li f

o r n i a l a w. S e e P o ko r ny v

. Q u i x t ar , 6 01

F

. 3 d 9 8 7

, 9 9 4 ( 9 t h C ir

. 2 0 1 0 ) ( e x p l a i n i n g f e de r a l co u rt s a p p l y s t a t e -l a w p r i n c i p l es

t o d e t e r m i n e t h e v a li d it y o f a r b it r a ti o n a g r e e m e n t ). 2

B

T he d i s t r i c t c o u rt a l s o d i d n o t e r r i n c o n c l u d i n g t h a t t h e a r b it r a t i on p r o v i s i on

w as s u b s t a n ti v e l y u n r ea s o n ab l e

. U n d e r C a l i f o r n i a l a w , “ [s] u b s t an t i ve

u n c o n s c i o n a b i l it y f

oc u s e s o n t he o ne

- s i de d n e s s o r o ve r l y h a r s h e f f e c t o f t he

c o n t r ac t t e r m o r c l a u se

. ” H

a r p er v

. U l ti mo , 7 C a l

. R p t

r

. 3 d 41 8

, 4 2 3 ( C a l

. A p p.

2 0 0 3 )

. “ S u b s t a n t i v e u nc o n s c i o n a b i l it y a d d r e ss e s t h e f a i r ne s s o f t h e t e r m in

d i s p u t e .” S

z e t e l a v

. D i sc o ve r B a nk

, 1 1 8 C a l

. R p t r

. 2 d 86 2

, 8 6 7 ( C a l

. A p p

. 2 0 0 2 )

.

M u t u a l it y i s t h e “ pa

r a m o u n t ” c o n s i d e r a t i o n w h e n a s se s s i n g s u b s t a n ti ve

u n c o n s c i o n a b i l it y. A b r

a m s o n v

. J

u n i p er N e t w o r ks

, I n c. , 9 C a l

. R p t

r

. 3 d 4 2 2

, 4 36

2 T h e d i s se n t a

r g u e s t h a t u n de r A T & T

M o b ili t y L

. L .C

. v

. C

o nc e pc i on , 1 31
S

. C t

. 1 7 40 ( 2 0 1 1 )

, a n a r

b itr a ti o n c l a u se m a y n o t be f o u n d p r oc e d u r a l ly

u n c o n s c i o n a

b l e b e ca u s e i t a p p ea

r s i n a c o n tr a c t o f a d h es i on

. H o w e v e r , t h is

c h a r ac t e ri z a t i o n s tr i p s t h e C o u r t’ s l a n g u a g e o f it s c o n t e x t u a l fr a m e w o r k

. In
C on c e p c i on , t he C o u rt c o n c l u d e d t h a t a r b i tr a ti o n c l a u s es c o n t a i n ed i n s o me

a d h e s i o n c o n t

r ac t s

— n a m e l y , t h o se c o n t a i n ed i n a d h es i ve c o n s u m er

c o n t r a c t s

— m a y s t i ll b e v a l i d

. I d. a t 1 7 5 0

. H o w e v e r , t h e C o u r t d i d n o t h o l d t h a t

t h a t a r b i t r a t i o n c l a u s e s m a y n e ver be f o u n d p r oc e d u r a l l y u nc o n s c i o n a b l e m e r e ly
b e ca u s e t h e y a pp e a

r i n a c o n tr a c t o f ad h e s i o n

. I n de e d

, w e h av e h e l d t hat
C on c e p c i on d i d n o t f

u n d a m e n t a l l y a l t e r t h e l e ga l l an d s c ap e o f p r oc e d u r al

u n c o n s c i o n a b i l t y. C

o ne f f v

. A T & T

, 6 7 3 F

. 3 d 1 1 5 5

, 1 1 6 1 ( 9 t h C i r

. 2 0 1 2) ( p r o ce d u r a l u n c o n s c i o n a b i l it y i s “a n i n q u i r y f o r w h i c h C on c e

p c i on g i v e s li t tle

g u i d an c e b e y o n d a r ec o g n it i on o f t h e d o c tri n e ’ s co n ti n u e d v i t a l it y ” ).

- 4-( C a l

. A p p

. 2 0 04 )

. “ A g r e e m en t s t o a r b i tr a t e m u s t c o n t a i n a t l ea s t a m o d i c u m of

b i l a t e r a li t y t o a v o i d u n c o n s c i o n a b il i t y

. ” I d. a t 4 3 7 ( i n t e r n a l q u o t e s a n d c i t a t i on

o m it t ed )

.

H e r e , t h e d i s tr i c t c o u r t p r o p e rl y c o n c l u d ed t h a t t h e c o n tr a c t w as

s u b s t a n ti v e l y u n c on s c i o n a b l e u n d e r C a l i f o r n i a l a w

. U n de r t he a g r e e m e n t

, t he

i n v o i c e d p a rt y m u s t p r o v i d e w r it t en n o t i ce o f i t s d i s p u t e a s t o a n i n v o i c e w i t h i n 30

d a y s , w h i c h i s s ho r t e r t h a n C a li f o r n i a ’ s f o u r

- ye a r s t a t u t e o f l i m i t a t i o n s

. T he b u r d en

t o d i s p u t e a n i n v o i c e i s o n t he i n v o i c e d p a rt y

. A f t e r r e c e i v i n g t h e d i s p u t e r e s p o n se

f r o m t h e i n vo i c i n g p a rt y , t h e i n v o i c e d p a rt y h as 1 5 da y s t o p a y t h e i n v o i c e o r se ek

a r b i t r a t i o n

. I f a n i n v o i ce d p a r t y p r o c ee d s t o a r

b i tr a ti o n , i t m

u s t s u b m it a l l o f its

a r g u m e n t s t o t h e a r

b i tr a ti o n pa n e l f

ir s t

. F u rt h e r , t h e a r

b itr a ti o n p a n e l l a c k s t he

a u t h o r i t y t o e n

j o i n w r o n g f

u l c o n d u c t

, w h i c h i s a s i g n if i ca n t b u r d e n i n c as e s s u c h as

t h e o n e a t b a r w h e r e r e c u rri n g i n vo i ce p r o b l e m s a r e a t i ss u e

.

C

T he d i s t r i c t c o u rt d i d no t f

a i l t o ap p l y t he p ri n c i p l e s o f t h e F e d e r al

A r b i tr a t i o n A c t

, a s c l a i m e d b y H a n ji n

. “ T h e F e d e r a l A r

b it r a t i o n A c t ( ‘ F A A ’ )

, 9

U

. S

. C

. § § 1

, e t s eq

. , r e fl e c t s a ‘ li b e r a l f e d e r a l p o l i c y ’ i n f

a vo r o f a r b it r a ti o n

. ” D av is

v

. N o r d s t r o m , I n c. , 7 5 5 F

. 3 d 1 0 8 9

, 1 0 9 2 ( 9 t h C i r

. 2 01 4 ) ( q u o ti n g A T & T M o b ili ty

L L C v

. C o n c ep c i on , 1 3 1 S

. C t

. 17 4 0

, 1 7 4 5 ( 20 1 1 ) )

. P u r s u a n t t o t h e S u p r e m acy

- 5-C l a u se o f t h e U n i t e d S t a t es C o n s ti t u t i o n , “ t h e F A A p r ee m p t s c o n tr a r y s t a t e l a w.”

M o r t e n se n v

. B re s n a n C

o m m c ' n s , L LC

, 7 2 2 F

. 3 d 1 1 5 1

, 1 1 5 8 ( 9 t h C i r

. 2 01 3 )

.

H o w ev e r , t h e F A A do e s n o t p r e e m p t C a li f o r n i a ’ s p r o c e du r a l u n c o n s c i o na b il i ty

r u l e s. C ha v a r r i a v

. R a l

p h s G r o c e r y , C o ., 7 3 3 F

. 3 d 9 1 6

, 9 26 ( 9 t h C i r

. 2 0 1 3 ); s ee

a l s o S o n i c

- C a l a b a s a s A

, I n c

. v

. M o r eno , 3 1 1 P

. 3 d 1 8 4

, 1 8 8 ( C a l

. 2 0 1 3)

( c o n fi r m i n g t h a t “ s t a t e co u r t s m a y c o n t i n u e t o e n f o r c e un c o n sc i o n ab i lit y r u l es t h at

d o no t ‘ i n t e r f

e r e [] w i t h f

u n d a m e n t a l a t t ri b u t e s o f a r b i tr a ti o n ’ ” ) ( q u o t i n g A T &T

M o b ili t y L L C v

. C o n c e

pc i on , 1 3 1 S

. C t

. 1 7 4 0

, 1 7 4 8 ( 2 0 1 1 ))

. A lt h o u g h t h e F AA

m a y p r e e m p t s t a t e l a w s h a v i n g a “d i s p r o p o r t i o n a t e i m p ac t ” on a r

b i tr a t i o n , it

“ c a n no t b e r e a d t o i m m

u n i z e a ll a

r b i t r a t i o n a g r e e m en t s fr o m i n v a l i d a ti o n .”

C h a va r r ia

, 7 3 3 F

. 3 d a t 92 7

. I n s o f a r a s a n a p p li c a ti o n o f s t a t e s u b s t an t i ve

u n c o n s c i o n a b i l it y r u l es d o no t d i s c r i m i n a t e u n f a v o r ab l y a g a i n s t a

r b i t r a t i o n , t h e y do

n o t o f f e n d t h e F A A. I

d.

H e r e , t h e d i s tr i c t c o u r t a p p r o p ri a t e l y c o n s i d e r e d t h e F A A ’ s p o li c y and

p r ee m p ti v e r ea c h i n c on c l u d i n g t h a t t h e a r b i t r a t i o n a g r e e m e n t w a s un c o n sc i o n ab le

u n d e r C a lif

o r n i a l a w.

I II

I n s u m , t h e ap p e a l i s n o t m o o t

. T he d i s t r i c t c o u rt p r op e rl y c o n c l u d e d t h at

t h e a r b it r a t i on a g r e e m e n t

w as u nc o n s c i o n a b l e u n de r C a l i f o r n i a l a w a nd

, t h e r e f

o r e,

- 6-p r o p e r l y de n i e d t h e m o t i o n t o c o m p e l a r b i t r a t i o n

. W e n ee d no t

, a n d d o n o t

, r e a ch

a n y o t h e r qu e s t i o n u r g e d b y t h e pa r ti e s o n a p p ea l.

A FF I R M E D.

- 7-E lit e L o g i s ti c s v

. H a n ji n S h i p p i ng , 1 2

- 5 6 2 38

M

. S M I T H, C ir c u i t J u d ge , d i s s e n t i ng:

I r e s p e c t f u l l y d i ss e n t

. I n h o l d i n g t h a t t h e d i s tr i c t c o u r t c o r r e c tl y v o i de d t he

a r b i t r a t i o n c l a u s e a s u n co n s c i o n a b l e u n d e r C a li f o r n i a l a w , t h e m a

j o ri t y r e l i e s on

P o k o r n y v

. Q u i x t ar , 6 0 1 F

. 3 d 9 8 7 ( 9 t h C i r

. 2 0 1 0 )

, S h r o ye r v

. N e w C i n g u l ar

W i r e l es s S e r v i c e s , I

nc. , 4 9 8 F

. 3 d 9 7 6 ( 9 t h C i r

. 2 0 0 7 )

, A b r a m s o n v

. J

u n i per

N e t w o r k s , I nc. , 9 C a l

. R p tr

. 3 d 4 2 2 ( C a l

. A p p

. 2 0 0 4 ), I n g l e v

. C i rc u it C i t

y S t o r e s,

I n c. , 3 2 8 F

. 3 d 1 1 6 5 ( 9 t h C i r

. 2 0 0 3 ), H a r p e r v

. U lt i mo , 7 C a l

. R p tr

. 3 d 4 1 8 ( C a l.

A p p

. 2 0 0 3 )

, S

z e t e l a v

. D i sc o ve r B a nk

, 1 1 8 C a l

. R p t r

. 2 d 8 6 2 ( C a l

. A p p

. 2 0 0 2 )

, a nd

A r m e n d a r i z v

. F o u nd

. H e a l t h P s yc h ca r e S e rv i c es , I n c. , 6 P

. 3 d 6 6 9 ( C a l

. 2 0 0 0 ).

I n s o d o i n g , t he m a

j o r it y f a il s t o a c kn o w l e d ge t h a t i n A T & T M o b i lit y L L C v.

C on c e p c i on , – – U

. S

. – – , 1 3 1 S

. C

. 1 7 40

, 1 7 4 7 ( 20 1 1 )

, t h e S u p r e m e C o u rt h e l d t h at

t h e F e de r a l A r

b i t r a t i o n A c t p r e e m

p t s c e rt a i n s t a t e l a w c o n t

r ac t d e f e n s e s t h a t h a v e a

d i s p r o p o r ti o na t e e f

f ec t o n a r b i t r a t i o n c l a u s e s

. T h e S u p r e m e C o u r t a l s o c l a r i fi ed

t h a t a n a r b itr a ti o n c l au s e i s n o t p r o c e d u r a l l y u n co n sc i o n ab l e m e r e l y be c au s e it

a p p e a r s i n a co n tr a c t o f a d h es i on

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f e c t a t t h e t i m e i t r en d e r s i ts d e c i s i o n .” C l a b o u r

n e v

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