Hartley v. Superior Court
127 Cal. Rptr. 3d 174
Cal. Ct. App.2011Background
- Hartley, an elderly widow, sued Monex and related entities for fiduciary breach, negligence, fraud, elder abuse, and CLRA claims, seeking declaratory relief on enforceability of arbitration clauses.
- Hartley signed Atlas Account Agreements with Monex after her husband’s death; the new agreement added an arbitration clause similar to the old one she claimed outdated.
- Hartley alleged the arbitration clause was onerous, costly, and favoring a three-member panel, with broad prohibitions and waivers that rendered arbitration unconscionable.
- The trial court granted Monex’s petition to compel arbitration, deciding the gateway issue of arbitrability (unconscionability) would be decided by the arbitrator in light of Rent-A-Center.
- Hartley sought judicial declaration that the arbitration provisions were unconscionable and that certain disclaimers and claims for injunctive relief should be decided by the court before arbitration.
- The court concluded the agreement clearly and unmistakably delegated arbitrability to the arbitrator, citing conflicts in the contract’s severability and injunctive-relief provisions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides gateway arbitrability questions? | Hartley argues court should decide unconscionability; ambig. favors court. | Monex contends arbitration panel decides arbitrability under the clause. | Ambiguity prevents exclusive delegation; court must decide. |
| Does the contract clearly and unmistakably delegate unconscionability to the arbitrator? | Hartley asserts lack of clear-cut delegation due to conflicting clauses. | Monex asserts the arbitration clause and severability clause show delegation to arbitrator. | Ambiguity exists; not clearly and unmistakably delegation to arbitrator. |
| Are injunctive/declaratory relief issues reserveable to the court notwithstanding arbitration? | Hartley seeks court handling of equitable relief before arbitration. | Monex argues relief should be determined within arbitration framework. | Court retains authority to decide equitable relief questions. |
| Does Rent-A-Center govern state-law arbitrability in the face of California law? | Hartley relies on state-law framework for gateway determinations. | Monex urges Rent-A-Center framework; seeks arbitrator control if clearly delegated. | California law and ambiguity preclude exclusive arbitration delegation. |
Key Cases Cited
- Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005) (courts decide unconscionability, not arbitrator, unless clear delegation)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. Supreme Court 2011) (federal policy favors arbitration; unconscionability defenses limited)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. Supreme Court 1995) (gateway issues delegated only by clear and unmistakable evidence)
- Rent-A-Center, West, Inc. v. Jackson, 56? U.S. 0 (U.S. Supreme Court 2010) (party may delegate arbitrability to arbitrator with clear and unmistakable evidence)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. Supreme Court 2002) (who decides gateway issues depends on delegation clarity)
- Parada v. Superior Court, 176 Cal.App.4th 1554 (Cal. App. 2009) (ambiguity in arbitration/delegation defeats exclusive arbitrator power)
- Dream Theater, Inc. v. Dream Theater, 124 Cal.App.4th 547 (Cal. App. 2004) (venue provisions don't expressly limit arbitration scope; enforceability depends on context)
- Murphy v. Check 'N Go of California, Inc., 156 Cal.App.4th 138 (Cal. App. 2007) (arbitration issues and gateway questions analyzed with clarity)
- Bruni v. Didion, 160 Cal.App.4th 1272 (Cal. App. 2008) (ambiguous agreements impact arbitrability decisions)
- Sonic-Calabasas A, Inc. v. Moreno, 51 Cal.4th 659 (Cal. 2011) (unconscionability questions generally court-facing; Rent-A-Center as caveat)