22 Cal. App. 5th 970
Cal. Ct. App. 5th2018Background
- Plaintiff (Weiler), now elderly, sued Marcus & Millichap for alleged breach of fiduciary duty, negligence, negligent misrepresentation, and elder abuse after a bad commercial-property 1031 exchange produced multi‑million dollar losses. All relevant engagement agreements contained arbitration clauses and the superior court compelled arbitration.
- The case proceeded in AAA arbitration for nearly three years; arbitrators ordered a three‑member panel at high hourly rates and set procedural schedules that increased cost. Plaintiff paid over $15,000 and projected her 50% share to exceed $100,000 to finish arbitration.
- Plaintiff claimed she could no longer afford to continue in arbitration and, relying on Roldan, asked arbitrators to order defendants either to pay her share of arbitration costs or waive arbitration and allow court trial; the arbitrators said that relief was beyond their jurisdiction and directed her to the superior court.
- Plaintiff filed a declaratory action in superior court seeking an order: (1) defendants must pay the full arbitration costs if they want arbitration to continue, or (2) defendants waive arbitration and the matter proceeds in court. Defendants moved for summary judgment; the trial court granted it, finding plaintiff’s current finances irrelevant and treating the dispute as an unconscionability issue.
- The Court of Appeal reversed, holding plaintiff’s present inability to pay arbitration costs can be a basis for relief under Roldan and allied federal Ninth Circuit precedent (Tillman), and that triable issues of fact existed about plaintiff’s ability to pay and whether her financial condition resulted from defendants’ conduct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a party's current inability to afford arbitration is relevant to whether arbitration must continue | Weiler: current indigence matters; if she cannot pay, court should order defendant to pay her share or waive arbitration (Roldan) | Defendants: financial status at time of contract governs; current finances irrelevant; case already properly compelled to arbitration | Held: Current ability to pay is relevant; court erred in granting summary judgment because triable facts exist on ability to pay; Roldan relief may be available |
| Whether relief turns on unconscionability of arbitration clause | Weiler: does not challenge unconscionability; seeks forum she can afford regardless of clause validity | Defendants: characterized claim as unconscionability and argued it must be assessed at contract formation when plaintiff was wealthy | Held: Not an unconscionability case; court should evaluate present financial hardship, not only formation‑time facts |
| Whether court (not arbitrators) can order the remedy when arbitration becomes unaffordable | Weiler: arbitrators said issue was outside their jurisdiction; superior court can determine and direct remedy | Defendants: implied that courts lack authority once arbitration ordered or that relief is improper | Held: Court can fashion Roldan‑style relief (give defendant choice: pay fees or waive arbitration); if arbitration cannot proceed because plaintiff cannot pay, arbitration may be deemed "had" and court action proceed (consistent with Tillman) |
| Whether summary judgment was appropriate | Weiler: factual disputes over ability to pay defeat summary judgment | Defendants: facts show plaintiff was wealthy when contract signed; no triable issue | Held: Summary judgment improper; evidence construed for nonmoving party shows triable issues of material fact |
Key Cases Cited
- Roldan v. Callahan & Blaine, 219 Cal.App.4th 87 (Cal. Ct. App.) (party unable to afford arbitration may obtain court order giving adversary choice to pay arbitration costs or waive arbitration)
- Tillman v. Tillman, 825 F.3d 1069 (9th Cir.) (arbitration terminated for nonpayment may be deemed "had" so court proceedings resume when plaintiff cannot afford required deposits)
- American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (U.S. 2013) (strong federal policy favoring enforcement of arbitration agreements)
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (principles governing enforceability of arbitration agreements under California law)