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PDAA Not Enforceable for Lack of Assent, Where English Language Contract Contained Arbitration Agreement, but Spanish Translation Did Not
Posted on Categories Arbitration Agreements, Court Decisions, Non-Securities ArbitrationTags , ,

A unanimous California Court of Appeal declines to enforce a predispute arbitration agreement (“PDAA”) contained in a used car purchase agreement, where the Spanish language version of the contract did not include the PDAA.

The Facts

What happened in Ramos v. Westlake Services LLC, No. A141353 (Calif. Ct. App. Nov. 24, 2015)? The somewhat complex facts boil down as follows: 1) Spanish-speaking Ramos, buys a used car; 2) negotiations take place primarily in Spanish; 3) the English language purchase agreement contains a PDAA; the Spanish version does not; 4) after a dispute arises, Ramos sues and the defendants move to compel arbitration per the PDAA; 5) Trial Court denies the motion to compel arbitration, and an appeal follows.

FAA Primer

As we have said before, a core element of SCOTUS’ support for PDAAs is the so-called separability doctrine, which holds that, under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq., a PDAA is a separate contract from the one in which it is embedded, and must be on “equal footing” with any other contract. Indeed, section 2 of the FAA provides that a PDAA must be enforced “save upon such grounds as exist in law or in equity for the revocation of any contract.” Lack of mutuality is a basis for revoking contracts in general, and AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), says that States may invalidate PDAAs on general contract principles, as long as they don’t single out PDAAs for disparate treatment. Last, section 4 of the FAA directs courts to order arbitration, if “satisfied that the making of the agreement for arbitration or the failure to comply therewith is not an issue.”

No Mutual Assent

The core issue before the Court of Appeal was whether an arbitration agreement existed. In affirming the Trial Court, a unanimous Court of Appeal finds there was not. Ramos, the Court finds, is not relieved from the purchase agreement or the PDAA contained in it because he did not understand English. “Under the general contract principles just discussed, the fact that Ramos signed a contract in a language he may not have completely understood would not bar enforcement of the arbitration agreement. If Ramos did not speak or understand English sufficiently to comprehend the English Contract, he should have had it read or explained to him.” What dooms enforcement of the PDAA is the conflict between the English version of the purchase agreement (contains a PDAA), and the Spanish version (no PDAA) upon which Ramos reasonably relied. “We agree with the trial court’s ruling denying the motion to compel arbitration, but affirm on a different ground raised by Ramos, but not explicitly addressed by the trial court: there was no mutual assent because the arbitration agreement was hidden in the English Contract and not included in the Ramos Translation. This is a claim of fraud in the execution (otherwise known as fraud in the inception) of the arbitration agreement. We conclude that Westlake failed to establish an agreement to arbitrate because it did not demonstrate the existence of mutual assent” (footnote omitted).

(ed: *We see no FAA preemption problems, since the Court relied on general contract formation defenses. **This case reminds us somewhat of Basulto v. Hialeah Automotive, 141 So.3d 1145 (2014), where a divided Florida Supreme Court declined to enforce an English language PDAA against a consumer who did not speak English (see SAA 2014-12).) (SAC Ref. No. 2015-46-03)

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