Court Opinion

ID: 3200475
Source: CourtListenerOpinion
Date Created: 2016-05-04 20:01:03.867459+00
Date Added: 2024-06-11T07:39:12.846382
License: Public Domain

NOT FOR PUBLICATION                         FILED
                         UNITED STATES COURT OF APPEALS                      MAY 4 2016
                                                                         MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS
                                FOR THE NINTH CIRCUIT

    ARTHUR MERKIN; JAMES SMITH,                      No. 14-55397
    individually and on behalf of all others
    similarly situated, and on behalf of the         D.C. No. 2:13-cv-08026-CAS-
    general public,                                  MRW

                 Plaintiffs - Appellees,
                                                     MEMORANDUM*
       v.

    VONAGE AMERICA, INC.,

                 Defendant - Appellant.

                        Appeal from the United States District Court
                            for the Central District of California
                        Christina A. Snyder, District Judge, Presiding

                          Argued and Submitted February 2, 2016
                                   Pasadena, California

Before: WARDLAW and HURWITZ, Circuit Judges and RICE,** Chief District
Judge.

            In this putative class action, Arthur Merkin and James Smith (“Plaintiffs”)

allege that Vonage America, Inc. (“Vonage”) violated California law by charging

*
      This disposition is not appropriate for publication and is not precedent except
as provided by 9th Cir. R. 36-3.
**
      The Honorable Thomas O. Rice, Chief United States District Judge for the
Eastern District of Washington, sitting by designation.
certain fees in connection with its Voice over Internet Protocol service. Vonage

filed a motion to compel arbitration pursuant to its Terms of Service. The district

court denied the motion, and Vonage timely appealed. We have jurisdiction under

9 U.S.C. § 16(a)(1)(B) and reverse with directions to grant the motion.

      1. We reject Vonage’s argument that the district court should have referred

to the arbitrator the Plaintiffs’ contention that the arbitration provision in the Terms

of Service was unconscionable. “[W]hen a plaintiff’s legal challenge is that a

contract as a whole is unenforceable, the arbitrator decides the validity of the

contract,” but “when a plaintiff argues that an arbitration clause, standing alone, is

unenforceable . . . that is a question to be decided by the court.” Bridge Fund

Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1000 (9th Cir. 2010).

Plaintiffs’ challenge was clearly directed at the arbitration provision.

      2. “Under California law, a contract must be both procedurally and

substantively unconscionable to be rendered invalid.”           Chavarria v. Ralphs

Grocery Co., 733 F.3d 916, 922 (9th Cir. 2013); see also Sanchez v. Valencia

Holding Co., 353 P.3d 741, 748 (Cal. 2015) (“[P]rocedural and substantive

unconscionability must both be present.”) (alterations omitted). We agree with the

district court that the arbitration provision in the Vonage Terms of Service is

procedurally unconscionable because it is adhesive, Sanchez, 353 P.3d at 751, and

can be unilaterally modified by Vonage. See Westlye v. Look Sports, Inc., 22 Cal.

                                           2
Rptr. 2d 781, 792 (Ct. App. 1993) (describing procedural unconscionability as

arising in situations where there is “no real negotiation and an absence of meaningful

choice”); Chavarria, 733 F.3d at 923 (explaining that the Ninth Circuit has held,

when applying California law, that the “degree of procedural unconscionability is

enhanced when a contract binds an individual to later-provided terms”).

      3. In the district court, Plaintiffs identified several provisions of the

arbitration agreement in the 2013 Terms of Service as substantively

unconscionable.1 The only provision among those challenged below asserted on

appeal to be substantively unconscionable is Section 14.10, which exempts certain

categories of claims from arbitration. We therefore address only that provision.

See Collins v. City of San Diego, 841 F.2d 337, 339 (9th Cir. 1988) (“It is well

established in this Circuit that claims which are not addressed” on appeal “are

deemed abandoned.”).

      4. Assuming arguendo that Section 14.10 is unconscionable, “[w]here . . .

only one provision of the agreement is found to be unconscionable and that provision

can easily be severed without affecting the remainder of the agreement, the proper

1
     The unilateral modification clause of the 2013 Terms of Service was not
among the provisions that Plaintiffs claimed were substantively unconscionable.
The district court only cited that clause, however, in finding procedural
unconscionability.

                                          3
course is to do so.”2 Dotson v. Amgen, Inc., 104 Cal. Rptr. 3d 341, 350 (Ct. App.

2010) (finding an abuse of discretion for refusing to sever such a provision). The

district court therefore erred by “declin[ing] to sever the offending provision.”

      5. The order of the district court denying Vonage’s motion to compel

arbitration is REVERSED, and this case is REMANDED with instructions to grant

the motion.

2
      Because the district court did not find Vonage’s unilateral modification clause
substantively unconscionable, we do not address whether the alleged
unconscionability of a unilateral modification provision is a basis for declining to
sever any other unconscionable provisions in an arbitration agreement.

                                          4