Court Opinion

ID: 8482429
Source: CourtListenerOpinion
Date Created: 2022-11-09 00:01:38.23512+00
Date Added: 2024-06-11T16:49:38.829781
License: Public Domain

Filed 11/8/22 Chai v. National Enterprise Systems CA6
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                      SIXTH APPELLATE DISTRICT

 DAVID CHAI,                                                         H049322
                                                                    (Santa Clara County
           Plaintiff and Respondent,                                 Super. Ct. No. 20CV361490)

           v.

 NATIONAL ENTERPRISE SYSTEMS,
 INC.,

           Defendant and Appellant.
         Respondent David Chai filed a class action complaint against appellant National
Enterprise Systems, Inc. (NES) seeking statutory damages under Civil Code section 1788
et seq., the California Rosenthal Fair Debt Collection Practices Act. The trial court
denied NES’s motion to compel arbitration, finding that NES failed to demonstrate the
existence of a binding arbitration agreement between the parties. Finding no error, we
affirm the trial court’s order.
                               I. FACTUAL AND PROCEDURAL BACKGROUND
         Chai filed a complaint against NES in 2020, claiming that, on an unknown date, he
was “alleged to have incurred a financial obligation in the form of a consumer credit
account owed to Citibank, N.A. [Citibank].” He admitted that he was unable to pay the
debt and defaulted. Chai contended that Citibank sold the debt to USI Solutions, Inc.
(USI), for “collection purposes.” USI thereafter “hired, contracted, or otherwise
engaged” NES to collect the debt on USI’s behalf. Chai asserted in the complaint that
NES engaged in a routine practice of sending initial communications that failed to
provide notice as required by Civil Code section 1788.14, subdivision (d)(2), which
governs attempts to collect “time-barred” debts—those that are “past the date of
obsolescence set forth in Section 605(a) of the federal Fair Credit Reporting Act (15
U.S.C. Sec. 1691c). . . .” (Civ. Code, § 1788.14, subd. (d)(2).)
       After filing a response to the complaint, in which it alleged that Chai’s claims
might be subject to an arbitration provision contained within the agreement between Chai
and Citibank, NES filed a motion to compel arbitration. In support of the motion, NES
offered two purported “cardholder agreements” produced by Citibank in response to a
subpoena, issued in a separate action, seeking “credit card agreements, contracts, and any
other document that outlines the terms and conditions [of the account belonging to
Chai]. . . .” NES provided a declaration from the custodian of records indicating that the
records provided were true copies of the records requested in the subpoena, prepared at or
near the relevant time in the ordinary course of business. NES also provided a letter from
the custodian, not signed under penalty of perjury, indicating that she was enclosing the
available card agreement copies for Chai’s credit card account. The two documents
provided by the custodian are entitled “Card Agreement,” one with a copyright date of
2005, and the other with a copyright date of 2011. Both include arbitration provisions.
Neither card agreement references Chai by name or account number, and neither includes
Chai’s signature.
       NES submitted the card agreements to the trial court as part of a declaration from
its then-attorney, along with a copy of the complaint, NES’s answer, and two case
management orders. Counsel did not include any additional documents received from
Citibank. Nor did counsel provide any substantive declaration regarding Chai’s
agreement(s) with Citibank.
       Chai opposed the motion to compel arbitration, arguing that NES failed to link
Chai to the “generic documents” offered with the motion. Chai denied having seen the

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two card agreements before; he claimed he had not received the documents and had not
agreed to be bound by their terms. In reply, NES argued that the card agreements had
been properly authenticated.
          After considering the parties’ written submissions, and hearing oral argument, the
trial court determined that the card agreements proffered by NES were not admissible. 1
Even if the court could properly rely on the documents, the trial court found there was no
evidence the agreements were ever sent to Chai, nor did NES “explain how [Chai] could
have consented to any agreement with which he had never been provided.” Having failed
to show evidence of mutual assent, the trial court determined NES could not show that
the card agreements were enforceable binding arbitration agreements, and thus it denied
the motion to compel arbitration.2 NES timely appealed from the order. (Code Civ.
Proc., § 1294, subd. (a); Cal. Rules of Court, rule 8.104(a)(1)(B).)
                                            II. DISCUSSION
          While there is a strong public policy favoring contractual arbitration, that policy
only extends to parties who have agreed to arbitrate. (Gamboa v. Northeast Community
Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa); Esparza v. Sand & Sea, Inc. (2016) 2
Cal.App.5th 781, 787 (Esparza).) Thus, when hearing a motion to compel arbitration, the
trial court must first determine whether an agreement to arbitrate exists. (See Code Civ.
Proc., § 1281.2; Ahern v. Asset Management Consultants, Inc. (2022) 74 Cal.App.5th
675, 687; Gamboa, at p. 164.)
          The party seeking to compel arbitration bears the burden to prove the existence of
the agreement by a preponderance of the evidence pursuant to California law. (Gamboa,
supra, 72 Cal.App.5th at p. 165.) The moving party must first produce prima facie

          1   NES did not designate the record of the oral proceedings as part of the record on
appeal.
        In the same order, the trial court addressed Chai’s motion to compel discovery
          2

responses and related sanctions. That portion of the order is not at issue in this appeal.

                                                  3
evidence of the written arbitration agreement, either by attaching to the motion a copy of
the agreement purporting to bear the opposing party’s signature, or by setting forth the
agreement’s provisions in the motion. (Ibid.) If the opposing party disputes the
agreement, as is the case here, the burden shifts to the opposing party to challenge the
authenticity of the agreement, which the party can do by “testify[ing] under oath or
declar[ing] under penalty of perjury that the party never saw or does not remember seeing
the agreement, or that the party never signed or does not remember signing the
agreement. [Citations.]” (Ibid.) If the opposing party meets that burden, the moving
party must then establish “with admissible evidence” that a valid arbitration agreement
exists between the parties, by a preponderance of the evidence. (Id. at pp. 165-166.)
       “ ‘We review an order denying a [motion or] petition to compel arbitration for
abuse of discretion unless a pure question of law is presented. In that case, the order is
reviewed de novo.’ [Citation.]” (Gamboa, supra, 72 Cal.App.5th at p. 166.) We review
any findings of fact for substantial evidence. (Ibid.) “Where the decision ‘is based on the
court’s finding that [the party seeking arbitration] failed to carry its burden of proof, the
question for the reviewing court is whether that finding is erroneous as a matter of law.’
[Citation.]” (Ibid.) We view “ ‘all factual matters most favorably to the prevailing party
and in support of the judgment. [Citation.] “ ‘All conflicts, therefore, must be resolved
in favor of the respondent.’ ” ’ [fn. omitted] [Citation.]” (Id. at pp. 166-167.) If the order
is correct on any theory, we will affirm regardless of the trial court’s reasoning. (Young
v. California Fish and Game Commission (2018) 24 Cal.App.5th 1178, 1192-1193.)
       “ ‘ “In California, ‘[g]eneral principles of contract law determine whether the
parties have entered a binding agreement to arbitrate.’ [Citations.]” [Citation.] “An
essential element of any contract is the consent of the parties, or mutual assent.”
[Citation.] [Citation.] Further, the consent of the parties to a contract must be
communicated by each party to the other. (Civ. Code, § 1565, subd. 3.) “Mutual assent
is determined under an objective standard applied to the outward manifestations or

                                              4
expressions of the parties, i.e., the reasonable meaning of their words and acts, and not
their unexpressed intentions or understandings.” [Citation.]’ [Citation.]” (Esparza,
supra, 2 Cal.App.5th at pp. 787-788.)
       Applying these principles, we conclude that NES failed to meet its burden to prove
the existence of an arbitration agreement between Citibank and Chai. 3 While the trial
court found the card agreements offered by NES in support of the motion to be
inadmissible, we need not determine whether it erred in doing so. Even if we assume
without deciding that the agreements were admissible, NES did not provide sufficient
evidence to demonstrate that Chai received the agreements or accepted their terms.
Neither of the agreements are signed by Chai, or contain any reference to Chai, either by
name or by account number. While the custodian of records for Citibank declared that
the agreements were linked to Chai’s credit card account, the custodian did not declare
how or if the agreements were provided to Chai for his review and acceptance. NES did
not provide any evidence that the card agreements were given to Chai, or that Chai
assented to the terms of the agreements.
       Although NES cites Gamboa in support of its contention that it met its burden on
the motion to compel arbitration, the appellate court’s opinion reveals the opposite. In
Gamboa, the court determined that the moving party met the first step of its burden by
providing a copy of a signed arbitration agreement with its motion. (Gamboa, supra, 72
Cal.App.5th at p. 167.) Here, NES met the first step of its burden by setting forth the
provisions of the alleged arbitration agreement in its motion. (See Condee v. Longwood
Management Corp. (2001) 88 Cal.App.4th 215, 219 [as a preliminary matter the moving
party need only allege the existence of an agreement and support the allegation by
providing a recitation of its terms].) Both here and in Gamboa, the party opposing

       3Because we find NES did not prove the existence of an agreement between
Citibank and Chai, we need not determine whether Citibank or its successor, USI,
assigned the right to compel arbitration to NES.

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arbitration met the burden under the second step by filing an opposing declaration. In
Gamboa, when presented with an agreement she allegedly signed, the opposing party
declared that she did not recall the arbitration agreement and would not have signed it if
she had been aware of it. (Gamboa, at p. 167.) Here Chai declared under penalty of
perjury that he had not seen or received the card agreements prior to receiving them as
part of NES’s motion to compel arbitration. He denied agreeing to settle disputes
regarding the Citibank account in arbitration. This sufficiently met the second step of the
burden shifting process, thus shifting the burden back to NES to establish the existence of
a valid arbitration agreement between the parties.
       As was true in Gamboa, here, NES did not meet that burden. In Gamboa, the trial
court properly excluded the declaration offered by the moving party as lacking
foundational facts, as the declarant did not show that she had personal knowledge of the
asserted facts, and the purported arbitration agreement was not authenticated . (Gamboa,
supra, 72 Cal.App.5th at pp. 168-169.) However, the appellate court found that even if
the court had admitted the declaration and agreement, those documents did not compel a
different result, as the documents did not explain how the declarant knew that the
opposing party had either seen or signed the arbitration agreement. (Id. at p. 170.)
       Similarly, the evidence offered by NES in support of the motion to compel
arbitration did not demonstrate that Chai had seen or accepted the subject card
agreements. NES contends that Chai’s admission in his complaint that he had a credit
account with Citibank, coupled with the declaration and letter from the Citibank
custodian of records that the card agreements she produced were from Chai’s credit
account, show that Chai received and accepted the card agreements. But NES misses an
important link in the chain necessary to form an enforceable contract. There is no
evidence in the record that Citibank provided the card agreements to Chai at any point.
Thus, if the court were to accept the premise that Citibank intended the card agreements
offered with the motion to compel to govern Chai’s account, there is no evidence that

                                             6
Citibank communicated that intent to Chai, or that Chai subsequently communicated his
intent to be bound by the agreements in using the credit account. While NES cites
caselaw allowing the court to infer an agreement to repay the debt from Chai’s use of the
card (see In re Anastas (1996) 94 F.3d 1280, 1285), it does not cite legal authority that
allows us to infer consent to the arbitration provisions of the card agreements absent
evidence Citibank provided the agreements to Chai. This is not a situation where the
evidence shows the cardholder received but failed to read the written agreement. Were
that the case, Chai would still be bound by the terms. (See 24 Hour Fitness, Inc. v.
Superior Court (1998) 66 Cal.App.4th 1199, 1215.) Rather, NES has failed entirely to
demonstrate that Citibank provided Chai with the card agreements containing the
arbitration provisions. Absent such evidence, the trial court properly determined that
NES failed to meet its burden to prove the existence of the agreement by a preponderance
of the evidence.
                                     III.   DISPOSITION
       The June 24, 2021 order denying NES’s motion to compel arbitration is affirmed.
Costs on appeal are awarded to Chai. (Cal. Rules of Court, rule 8.278(a).)

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                                            _______________________________
                                            Greenwood, P. J.

WE CONCUR:

______________________________________
       Grover, J.

______________________________________
       Lie, J.

Chai v. National Enterprise Systems, Inc.
H049322