Court Opinion

ID: 4556643
Source: CourtListenerOpinion
Date Created: 2020-08-18 22:02:05.668264+00
Date Added: 2024-06-11T09:37:50.256698
License: Public Domain

Filed 8/18/20 Villanueva v. Rabobank CA4/1
                 NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                 DIVISION ONE

                                         STATE OF CALIFORNIA

 JOE VILLANUEVA, etc.,                                                D075455

           Plaintiff and Respondent,

           v.                                                         (Super. Ct. No. 37-2018-
                                                                      00028998-CU-BT-CTL)
 RABOBANK, N.A.,

           Defendant and Appellant.

         APPEAL from an order of the Superior Court of San Diego County,
Kenneth J. Medel, Judge. Reversed and remanded with directions.

         Duane Morris, Paul J. Killion, Cyndie M. Chang, and Christine C. Ross
for Defendant and Appellant.
         Kaliel, Jeffrey Douglas Kaliel, Sophia Goren Gold; Hindman, Thomas
Jesse Hindman; Carlson Lynch, Todd D. Carpenter and Scott G. Braden for
Plaintiff and Respondent.
         Plaintiff Joe Villanueva (Plaintiff) and defendant Rabobank, N.A.
(Defendant) have stipulated that the superior court’s November 19, 2018
order denying Defendant’s petition to compel arbitration be reversed and
remanded with directions. As we explain, the stipulation complies with Code
of Civil Procedure section 128, subdivision (a)(8) (section 128(a)(8)), and for
that reason we will reverse the order.
                        I. STATEMENT OF THE CASE
      Alleging causes of action for breach of contract and unfair business
practices, Plaintiff filed the underlying action as “a nationwide class action
seeking damages and other relief from [Defendant] for its deceptive
assessment and collection of so-called continued overdraft fees from its
customers in violation of [Defendant’s] standardized account agreement . . .
(‘Deposit Agreement’).”
      Defendant petitioned to compel arbitration. The Deposit Agreement
includes a “Dispute Resolution and Arbitration” provision (Arbitration
Provision), which applies to “[a]ll claims . . . , regardless of legal theory and
remedy sought.” Among other terms, the Arbitration Provision delegates to
the arbitrator all issues, including the interpretation and application of the
provision: “All issues shall be for the arbitrator to decide, including the scope
of this [Arbitration] Provision” (delegation clause, italics added). The
Arbitration Provision also provides that, because the Deposit Agreement
concerns interstate commerce, the Federal Arbitration Act (FAA; 9 U.S.C. § 1
et seq.) governs the ability to arbitrate.
      Plaintiff opposed the petition, arguing that the Arbitration Provision is
unenforceable. Plaintiff principally argued that, because the complaint
sought “public injunctive relief” and the Arbitration Provision contains a
waiver of “public injunctive relief,” the entire provision is void, and none of
Plaintiff’s claims are subject to arbitration under the Arbitration Provision.
(Citing and quoting McGill v. Citibank, N.A. (2017) 2 Cal. 5th 945 (McGill).)

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      Defendant filed a reply brief, and the trial court entertained oral
argument.
      The court denied Defendant’s petition. Citing Smythe v. Uber
Technologies, Inc. (2018) 24 Cal. App. 5th 327, 332 (Smythe) for the proposition
“that if arbitrability is ‘wholly groundless,’ then the Court can refuse to
enforce the delegation clause,” the court concluded that the waiver of public
injunctive relief in the Arbitration Provision rendered the provision invalid
and unenforceable in this case. (Quoting McGill, supra, 2 Cal.5th at p. 962.)
      Defendant timely appealed from the order denying its petition to
compel arbitration. (Code Civ. Proc., § 1294, subd. (a).)
      In its opening brief on appeal, Defendant relied on new authority that
was unavailable at the time the trial court ruled. Citing Henry Schein, Inc. v.
Archer and White Sales, Inc. (2019) __ U.S. __ [139 S. Ct. 524] (Henry Schein),
Defendant argued “that the ‘wholly groundless’ exception to delegating
arbitrability to an arbitrator[—on which the trial court relied in denying
Defendant’s petition here—]is inconsistent with the FAA and with U.S.
Supreme Court precedent.” (Quoting Henry Schein, at p. __ [139 S.Ct. at
p. 530] [“ ‘[T]he [FAA] contains no “wholly groundless” exception, and we may

not engraft our own exceptions onto the statutory text.’ ”].1)

1      We note that the Supreme Court left no doubt about the inapplicability
of the “wholly groundless” exception to delegating the issue of arbitrability to
the arbitrator under the FAA: “[W]e reject the ‘wholly groundless’ exception.
The exception is inconsistent with the [FAA’s] statutory text and with our
precedent. It confuses the question of who decides arbitrability with the
separate question of who prevails on arbitrability. When the parties’ contract
delegates the arbitrability question to an arbitrator, the courts must respect
the parties’ decision as embodied in the contract.” (Henry Schein, supra, __
U.S. at p. __ [139 S.Ct. at p. 531].) Thus, “[w]hen the parties’ contract
delegates the arbitrability question to an arbitrator, a court may not override
the contract. In those circumstances, a court possesses no power to decide
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      Plaintiff submitted a one-sentence document entitled “Respondent’s
Notice of Non-Opposition,” which provides: “Plaintiff . . . files this Statement
of Non-Opposition in response to Appellant’s Opening Brief, filed by
Defendant[.]”
      In response to our inquiry regarding the parties’ intent to proceed with
the appeal, they submitted a Joint Application and Request to Enter
Stipulated Reversal of Order Denying Motion to Compel Arbitration

(Stipulation).2 Among other facts, Plaintiff represents to the court that, by
his prior Notice of Non-Opposition, he “acknowledged that reversal is
warranted” and that by the current Stipulation, he “acknowledges that the
United States Supreme Court’s decision in Henry Schein[, supra, __ U.S. __

the arbitrability issue. That is true even if the court thinks that the argument
that the arbitration agreement applies to a particular dispute is wholly
groundless.” (Id. at p. __ [139 S.Ct. at p. 529], italics added.)
      We further note that, in applying the “wholly groundless” exception to
delegating the issue of arbitrability to the arbitrator under the FAA in the
present case, the trial court relied on the Court of Appeal’s opinion in Smythe,
supra, 24 Cal.App.5th at pages 331-332; Smythe relied on specific language in
Qualcomm Inc. v. Nokia Corp. (Fed. Cir. 2006) 466 F.3d 1366, 1371, in which
the federal Court of Appeals expressly authorized the application of the
“wholly groundless” exception under the FAA; and Henry Schein, supra, __
U.S. at page __ [139 S.Ct. at pp. 528-529], abrogated that ruling from
Qualcomm Inc.

2      In their Stipulation, the parties not only request that we reverse the
order denying Defendant’s petition to compel arbitration, they further
request that, on remand, we “(1) direct the Superior Court to grant said
motion and order this matter to arbitration, with the first issue to be decided
in the arbitration whether [Defendant’s] arbitration provision is enforceable.
If the arbitrator determines the arbitration agreement is enforceable, the
parties will then arbitrate the matter. If the arbitrator determines it is not
enforceable, the matter will return to the trial court; (2) issue the remittitur
forthwith; and (3) each party shall bear its own costs on appeal [sic].”

                                       4
[139 S. Ct. 524,] requires reversal of the trial court’s ruling and that an
arbitrator rather than the court must decide whether the arbitration
provision is enforceable under McGill[, supra, 2 Cal. 5th 945].”
                               II. DISCUSSION
      In Neary v. Regents of University of California (1992) 3 Cal. 4th 273
(Neary), our Supreme Court held that “when the parties to an action agree to
settle their dispute and as part of their settlement stipulate to a reversal of
the trial court judgment, the Court of Appeal should grant their request for
the stipulated reversal absent a showing of extraordinary circumstances that
warrant an exception to this general rule. Any determination that such
circumstances exist must be made on a case-by-case basis.” (Id. at p. 284.)
      After Neary, the Legislature modified the appellate court’s power to
accept a stipulated reversal. Section 128(a)(8) provides that an appellate
court may not accept a stipulated reversal unless the court concludes both of
the following: “(A) There is no reasonable possibility that the interests of
nonparties or the public will be adversely affected by the reversal”; and
“(B) The reasons of the parties for requesting reversal outweigh the erosion of
public trust that may result from the nullification of a judgment and the risk
that the availability of stipulated reversal will reduce the incentive for
pretrial settlement.”
      The court is satisfied that there is no reasonable probability that the
interests of nonparties or the public will be adversely affected by the

reversal.3 Further, in the circumstances of this case, the reversal of the trial

3     In particular, we are satisfied that Plaintiff will be able to present to
the arbitrator his claim for a “public injunction.” We express no opinion as to
the arbitrator’s determination of the effect of the public injunction waiver
contained in the Arbitration Provision.

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court’s order denying Defendant’s petition to compel arbitration does not
erode the public trust or reduce the incentive for pretrial settlement.
                              III. DISPOSITION
      The order denying Defendant’s petition to compel arbitration is
reversed. The matter is remanded with directions to grant the petition and

to either stay or dismiss the action, as requested in the petition.4 The
remittitur shall issue immediately. The parties shall bear their respective
costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)

                                                                      IRION, J.

WE CONCUR:

BENKE, Acting P. J.

HUFFMAN, J.

4    Despite the parties’ request in their Stipulation (see fn. 2, ante), on
remand we decline to direct actions that the parties did not request from or
present to the trial court in the first instance. Likewise, on remand, we
express no opinion as to whether the court should stay or dismiss the action.

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