Opinion
H049913 H049959
11-16-2023
MARGUERITE RUTH EDWARDS, Petitioner, v. THE SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent; COMPLETE CREDIT SOLUTIONS, INC., Real Party in Interest. MARGUERITE RUTH EDWARDS, Petitioner, v. THE SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent; CENTRAL PORTFOLIO CONTROL, INC., Real Party in Interest.
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. Nos. 21CV375187, 21CV375435
BAMATTRE-MANOUKIAN, ACTING P.J.
I. INTRODUCTION
The instant pair of cases involve Marguerite Ruth Edwards's contention that the trial court erred in compelling arbitration of her claims against Complete Credit Solutions, Inc. (CCS) and Central Portfolio Control, Inc. (Central). Edwards filed two putative consumer class action complaints: one against CCS in case No. 21CV375187, and one against Central in case No. 21CV375435. Edwards allegedly incurred a debt in connection with a Pier 1 credit card that was issued by Comenity Bank. Comenity Bank assigned its right to collect the debt to a third party. After rights related to the debt were further assigned to CCS, CCS through its agent Central, sought to collect the debt from Edwards. Edwards separately sued CCS and Central, contending that CCS violated the Fair Debt Buying Practices Act (Civ. Code, § 1788.50 et seq.) and that Central violated the Rosenthal Fair Debt Collection Practices Act (§ 1788 et seq.). CCS and Central each moved to compel arbitration of Edwards's individual claim based on an arbitration provision in the Pier 1 credit card account agreement issued by Comenity Bank. The arbitration provision bars "class-wide arbitration." (Capitalization omitted.) The trial court granted the motions to compel arbitration by CCS and Central which had requested arbitration of Edwards's individual claims.
Comenity Bank was not a party in the actions below and is not a party here.
All further statutory references are to the Civil Code unless otherwise indicated.
Edwards filed an appeal in both cases. This court ordered the appeals considered together for purposes of briefing, oral argument, and disposition. In this court, Edwards contends that (1) the trial court should have denied the motions to compel arbitration at the outset rather than seeking supplemental briefing from the parties, holding an evidentiary hearing, and then granting the motions; (2) CCS and Central failed to establish that they may enforce the arbitration provision contained in Comenity Bank's Pier 1 credit card account agreement; and (3) CCS and Central failed to show that Edwards is bound by that particular credit card account agreement containing the arbitration provision.
For reasons that we will explain, we will treat the appeals as petitions for writ of mandate, and we will deny the petitions.
II. FACTUAL AND PROCEDURAL BACKGROUND
A. The Civil Complaint Against CCS in Case No. 21CV375187
Edwards filed a putative class action complaint against CCS in case No. 21CV375187. According to the complaint, Edwards allegedly incurred a debt in connection with a consumer credit account issued by Comenity Bank. The debt was allegedly sold or resold to CCS for collection purposes. CCS then engaged Central to collect the debt from Edwards. Central, as an agent for CCS, sent a written communication to Edwards regarding the alleged debt. The written communication allegedly did not contain the notice required by section 1788.52, subdivision (d)(1) of the Fair Debt Buying Practices Act. Edwards alleged that it was the standard practice of CCS to cause collection communications to be sent without containing the requisite notice. On behalf of a putative class that allegedly received the same written communication, Edwards alleged a single cause of action based on the violation of the Fair Debt Buying Practices Act.
The Fair Debt Buying Practices Act requires a debt buyer, meaning an "entity that is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes" (§ 1788.50, subd. (a)(1)), to provide the following notice in the first written communication to the debtor:" 'You may request records showing the following: (1) that [insert name of debt buyer] has the right to seek collection of the debt; (2) the debt balance, including an explanation of any interest charges and additional fees; (3) the date of default or the date of the last payment; (4) the name of the charge-off creditor and the account number associated with the debt; (5) the name and last known address of the debtor as it appeared in the charge-off creditor's or debt buyer's records prior to the sale of the debt, as appropriate; and (6) the names of all persons or entities that have purchased the debt. You may also request from us a copy of the contract or other document evidencing your agreement to the debt. [¶] A request for these records may be addressed to: [insert debt buyer's active mailing address and email address, if applicable].'" (§ 1788.52, subd. (d)(1).)
B. The Civil Complaint Against Central in Case No. 21CV375435
Edwards filed a putative class action complaint against Central in case No. 21CV375435. This complaint against Central contained similar factual allegations to the complaint against CCS. For example, Edwards alleged that Central, as an agent for CCS, sent a collection letter to Edwards regarding an alleged debt. In the complaint against Central, Edwards further alleged that the debt was time-barred and that the collection letter did not comply with section 1788.14, subdivision (d)(1) of the Rosenthal Fair Debt Collection Practices Act. Edwards alleged that it was the standard practice of Central to send initial collection communications for time-barred debt without the requisite notice under section 1788.14, subdivision (d)(1). On behalf of a putative class that allegedly received the same written communication that omitted the requisite notice for time-barred debt, Edwards alleged a single cause of action based on the violation of the Rosenthal Fair Debt Collection Practices Act.
Relevant here, section 1788.14, subdivision (d)(1) prohibits a debt collector from attempting to collect a consumer debt by "[s]ending a written communication to a debtor in an attempt to collect a time-barred debt without providing the debtor with . . . the following written notice[]" in the "first written communication provided to the debtor after the debt has become time-barred: [¶] 'The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it. If you do not pay the debt, [insert name of debt collector] may [continue to] report it to the credit reporting agencies as unpaid for as long as the law permits this reporting.' "
C. The Arbitration Provision in the Credit Card Account Agreement
The arbitration agreement at issue in this case is contained in a document entitled "Your Pier 1 Credit Card Account Agreement." (Bold omitted.) The arbitration provision states that if Comenity Bank or the cardholder "elect[s] to arbitrate a claim, [the cardholder] will not have the right to pursue that claim in court or have a jury decide the claim." (Capitalization omitted.) The arbitration provision covers "any claim, dispute or controversy between [the cardholder] and [the bank] that in any way arises from or relates to this Agreement, the Account, the issuance of any Card, any rewards program, any prior agreement or account.... It includes disputes based upon contract, tort, consumer rights, fraud and other intentional torts, constitution, statute, regulation, ordinance, common law and equity (including any claim for injunctive or declaratory relief)."
The arbitration provision states that it applies to (1) Comenity Bank and (2) "any other person or company that provides any services in connection with this Agreement if you assert a Claim against such other person or company at the same time you assert a Claim against any Bank Party."
The arbitration provision also contains a bar against class actions. Specifically, the provision states that if either party elects to arbitrate a claim, then neither party may "participate in a class action in court or in class-wide arbitration." (Capitalization omitted.)
The credit card account agreement states that the cardholder's "use of the account, or failure to close the account within the 30 days of receiving this document, indicates [the cardholder's] acceptance of the terms of this agreement ...." The agreement further states that the agreement includes an arbitration provision, that the account holder has a right to reject the arbitration provision, and that if the arbitration provision is not rejected then it will be a part of the credit card account agreement. To reject the arbitration provision, a written rejection notice must be sent to a specified Ohio address within 30 calendar days after the cardholder is provided with a credit card account agreement or written notice of the right to reject the arbitration provision.
The credit card account agreement states that it "is governed by Delaware and applicable federal law." (Capitalization omitted.) The arbitration provision itself states that "[t]his Arbitration Provision involves interstate commerce and is governed by the Federal Arbitration Act [citation], and not by any state arbitration law."
The cardholder agreement states that Comenity Bank "may transfer or assign [the cardholder's] Account and/or this Agreement, or any of [the bank's] rights under this Agreement, to another person or entity at any time without prior notice to [the cardholder] or [the cardholder's] consent."
D. CCS's and Central's Motions to Compel Arbitration
CCS and Central each filed a motion to compel arbitration of Edwards's individual claim against them and to stay the litigation. They contended that Edwards's Pier 1 credit card account agreement with Comenity Bank contained an arbitration provision that applied to the litigation claims asserted by Edwards. CCS argued that it could enforce the arbitration provision "as Comenity Bank's assignee," while Central argued that it could enforce the arbitration provision as an "agent of CCS."
In support of their contention that Edwards was subject to the arbitration provision in the Pier 1 cardholder agreement, CCS and Central provided a declaration from the custodian of records for Comenity Bank. The Comenity Bank custodian of records stated that Edwards applied for a Pier 1 credit card on January 14, 2014, and the bank mailed the credit card to her on or about January 20, 2014. According to the custodian of records, it was the bank's standard practice to enclose a copy of the applicable credit card account agreement as part of a "Welcome Kit" mailed with the credit card. The custodian of records indicated that the bank's records did not reflect that Edwards had sent a written rejection of the arbitration provision. The custodian of records stated that a copy of the credit card account agreement that was in effect during January 2014, when Edwards applied for and obtained the credit card, was attached to the custodian of records's declaration.
In support of the contention that CCS and Central could enforce Comenity Bank's arbitration agreement with Edwards, CCS and Central provided a declaration from CCS's president. CCS's president stated that Comenity Bank was the original lender on the account. Comenity Bank sold Edwards's account to Southwestern Investors Group, LLC (Southwestern) pursuant to a "Bill of Sale," a copy of which was attached to the declaration of CCS's president. (Some capitalization omitted.)
CCS's president stated that Southwestern, in turn, leased receivables to General Management Services, LLC (General Management). A copy of this "Accounts Receivable Lease Agreement" was attached to the declaration of CCS's president. (Some capitalization omitted.)
General Management, in turn, leased those same receivables, including Edwards's account, to CCS. A copy of this "Accounts Receivable Lease Agreement" between General Management and CCS was attached to the declaration of CCS's president.
CCS, in turn, entered into a contingent fee agreement with Central for Central to perform collection services on certain accounts, including Edwards's account.
E. Edwards's Oppositions to the Motions to Compel Arbitration
In opposition, Edwards contended that CCS and Central failed to establish that Comenity Bank had transferred its right to compel arbitration to CCS, the principal of Central. Edwards also argued that CCS and Central failed to establish that the credit card account agreement, which contained the arbitration provision, applied to her. On this latter point, Edwards raised evidentiary objections to the declaration from Comenity Bank's custodian of records. Edwards also provided a declaration denying that she had received the credit card account agreement or that she had agreed to be bound by its terms.
F. CCS's and Central's Replies in Support of the Motions to Compel Arbitration
CCS and Central contended that the agreements they provided with their motions to compel arbitration showed that the right to compel arbitration was transferred to them. They also argued that Edwards indicated in discovery she had used a Pier 1 credit card and that it was "common knowledge that terms and conditions go hand in hand with the issuance of a credit card." CCS and Central further contended that Edwards's evidentiary objections to the declaration by Comenity Bank's custodian of records were without merit. CCS and Central indicated that an evidentiary hearing would be appropriate in light of the factual dispute about whether Edwards received the credit card account agreement containing the arbitration provision.
G. The Trial Court's First Order (November 2021)
After a combined hearing on both motions to compel arbitration, the trial court filed a written order stating that it was continuing the matters pending supplemental briefing and, possibly, an evidentiary hearing. The court explained these rulings as follows:
First, the trial court addressed whether CCS and Central had the right to compel arbitration under the credit card account agreement. The court observed that the agreement stated that Comenity Bank "may transfer or assign [the cardholder's] Account and/or this Agreement, or any of [the bank's] rights under this Agreement, to another person or entity at any time without prior notice to [the cardholder] or [the cardholder's] consent." The court found that Comenity sold all rights, title, and interest in Edwards's account to Southwestern. However, the court found that CCS and Central failed to "cite . . . authority establishing that a lease of receivables for collection purposes," as reflected in the leases from Southwestern to General Management, and from General Management to CCS, "accomplishes an assignment of all the lessee's rights in the associated account, such that the lessee can petition for arbitration." The court observed that CCS and Central had "cited to cases applying Article 9 of the UCC, which generally provide that an assignee of accounts receivable can enforce an arbitration provision associated with the account. But Article 9 expressly does not apply to 'an assignment of accounts . . . which is for the purpose of collection only' (U. Com. Code, § 9-109, subd. (d)(5))-which seems to be what the leases at issue here are for."
The trial court observed that the arbitration provision also applied to "any other person or company that provides any services in connection with this Agreement" but only "if you assert a Claim against such other person or company at the same time you assert a Claim against any Bank Party." The court stated that it was "not immediately convinced that [CCS and Central] can stand in the shoes of 'Bank Part[ies]' under the Agreement, when they have merely been leased receivables for collection purposes. Rather, it seems that [CCS and Central] are merely servicing the account on behalf of the owner, which is now Southwestern. And because [Edwards] has not sued Southwestern, the terms of the Agreement would not appear to apply."
The trial court determined that, although CCS and Central failed to meet their burden to show they could enforce the agreement as assignees, Edwards "by the same token . . . cites no authority showing that an assignment of receivables under a lease should be treated differently than an assignment under a sale." The court also indicated that it was not persuaded by Edwards's argument that an assignment of receivables should be treated differently than an assignment of an account. The court noted that "the weight of . . . authority" did not support Edwards's argument. The court ultimately determined that the issue was "not clear-cut," that "the parties ha[d] not thoroughly briefed it," and therefore "direct[ed] the parties to provide supplemental briefing on this point."
Second, the trial court addressed the issue of whether Edwards consented to the credit card account agreement. Regarding the declaration from Comenity Bank's custodian of records, the court determined that the content of the declaration was insufficient to establish that the credit card account agreement and other records described in the declaration were business records. The court thus sustained Edwards's objections to the records described in the declaration on the grounds of hearsay and lack of foundation. The court also sustained Edwards's objection to certain portions of the declaration as violating the secondary evidence rule and sustained Edwards's objection that the declaration was not signed under the penalty of perjury under California law. The remaining evidence before the court included Edwards's denial that she had received the cardholder agreement. The court reasoned: "The Court here is presented with an admissible declaration by [Edwards] denying she received the [cardholder] Agreement and potentially-admissible evidence by [the Comenity Bank custodian of records] stating that the Agreement was mailed to [Edwards]. The Court therefore believes that an evidentiary hearing would be appropriate, but only if [CCS and Central] first show they are entitled to enforce the arbitration agreement."
The trial court directed the parties to file supplemental briefs addressing "whether assignment of receivables pursuant to a lease (as apparently occurred here) should be treated differently than an assignment pursuant to a sale." The court ordered the parties to "specifically address what law governs this issue, whether the UCC (and if so, which provisions of the UCC) or a particular body of common law." The court indicated that it would then either deny CCS's and Central's motions or set the matters for an evidentiary hearing regarding whether Edwards consented to arbitration.
H. Supplemental Briefing and the Trial Court's Second Order (December 2021)
After the parties filed supplemental briefing, the trial court in December 2021 issued its second order regarding CCS's and Central's motions to compel arbitration. The court made the following rulings:
The trial court stated that Central's rights to compel arbitration were "derivative of CCS's rights," so the court intended to focus on whether CCS possessed the right to compel arbitration. As the court explained, if CCS had the right to compel arbitration, "then [Central] does as well; if [CCS] doesn't, then [Central] doesn't, either."
The trial court held that if Article 9 of the Uniform Commercial Code (UCC) applies to an accounts receivable assignment, the assignee can enforce an arbitration provision associated with the account. The court observed that neither party disputed that (a) an assignment of accounts receivable through a lease is covered by Article 9 similar to an assignment of accounts receivable through a sale, and (b) if a lease assignment of accounts receivable is for collection purposes only then Article 9 does not apply.
Based on the evidence, the trial court determined that the Southwestern - General Management lease agreement and the General Management - CCS lease agreement "had other purposes besides collection." The court explained as follows: "Other rights and obligations relating to the account were transferred as well-not just the right to collect. For instance, [General Management] (and then CCS) had the obligation to service the account independently, not just collect on it on behalf of the assignor. Therefore, the lease assignment agreements were not 'only' for the purpose of collection. [¶] Article 9 of the UCC-as enacted in New York law-hence applies to these lease assignment agreements."
The trial court noted that no party disputed that New York law applied to this question. The lease agreements between Southwestern and General Management, and between General Management and CCS, indicated that New York law governed the agreements.
The trial court rejected Edwards's argument that because Southwestern, General Management, and CCS never recorded UCC-1 financing statements, they could not rely on Article 9. The court observed that Edwards provided "no authority showing that UCC-1 financing statements are required for a lease assignment of accounts receivable." The court also determined that the bill of sale previously provided to the court was sufficient to establish that Comenity Bank transferred all its rights regarding Edwards's account to Southwestern. The court rejected Edwards's contention that additional documentation, specifically the "Credit Card Account Purchase Agreement," was needed to establish that Comenity Bank transferred its rights under the credit card account agreement to Southwestern.
The trial court concluded that CCS and its agent Central therefore had standing to invoke the arbitration provision in the credit card account agreement. The court set the matters for an evidentiary hearing regarding whether Edwards consented to the arbitration provision in the agreement.
I. The Evidentiary Hearing
An evidentiary hearing was held without a court reporter. Edwards and a paralegal for Comenity Bank testified at the hearing, however the parties' settled statement of the hearing provides the testimony of only the Comenity Bank paralegal.
The paralegal for Comenity Bank testified about his review of the information contained in the bank's database regarding Edwards's account. The paralegal testified that when Edwards applied for a Pier 1 credit card account at a Pier 1 store in Gilroy on January 17, 2014, it was the bank's "policy to provide the account holder with a copy of the applicable credit card agreement at the time the account was opened." The paralegal testified that Edwards's application was processed in the store and that she thereafter used the credit account to make a purchase onsite. The paralegal had no firsthand knowledge regarding whether Pier 1 employees actually provided the agreement to her at the time the account was opened.
The paralegal testified that the credit card account agreement at issue governed all Pier 1 credit card accounts at the time Edwards's account was opened, based in part on his review of credit card account agreements in Comenity Bank's database and a determination that the date of the subject agreement was in effect on the date of the account opening.
The paralegal testified that it was Comenity Bank's "standard practice to mail the credit card account agreement to the new account holder, together with the actual physical credit card, as part of a 'Welcome Kit' mailed to the cardholder. Comenity use[d] a third-party vendor to process and mail the physical card and Welcome Kit." Based on information contained in bank records, Edwards's credit card was ordered on January 18, 2014, was to be processed on January 20, and was to be received in the mail in seven to 10 days.
The paralegal did not know the name of the third-party vendor that Comenity Bank used to mail the welcome kit. However, the paralegal had no reason to believe that the bank's standard mailing practices were not followed here, or that the welcome kit, including the credit card account agreement, was not actually mailed to Edwards. The paralegal testified that the bank's system logs returned mail, and there was no notation that any mail sent to Edwards was ever returned or that she ever changed the Gilroy mailing address that she provided at the time of her application. Further, on February 7, 2014, Comenity Bank's system logged Edwards's enrollment in the bank's online portal. To log into the online portal, a cardholder's 16-digit account number must be entered. The paralegal testified that this indicated that Edwards received the welcome kit, which included the physical card and the credit card account agreement.
The paralegal acknowledged that there was nothing on the credit card account agreement itself nor in the bank's records linking the specific agreement to Edwards's specific account. The paralegal testified that the agreement at issue was in effect at the time of Edwards's account and was the agreement that governed her account.
The paralegal testified that the agreement at issue contained an arbitration provision and that the express terms of the provision required an accountholder to expressly opt out to reject arbitration. According to the paralegal, Comenity Bank's system automatically logs all account related calls and written communications, and at times customer support personnel will notate such communications in the system. There was no record indicating that Edwards ever called or wrote to the bank to opt out, and the paralegal testified that based on his review of the information contained in the bank's database, no such contacts occurred. Pursuant to the terms of the agreement, use of the account indicates acceptance of the terms of the agreement, and Edwards used the account numerous times throughout 2014.
Edwards's account was closed on June 23, 2015. The paralegal testified that he found no account statements in Comenity Bank's system, "likely due to the passage of time and application of Comenity's standard document retention policy." The paralegal testified that various reports generated in response to subpoenas served on Comenity Bank in connection with this case were based on information contained in Comenity Bank's database relating to Edwards's account. Comenity Bank "maintains the information in its database in the regular course of its business, and the information contained in the database is populated either by live agents contemporaneous with the event report on (e.g., notes from a telephone call) or is pushed to Comenity's system automatically (e.g., from a vendor processing a credit card and mailing a Welcome Kit)."
J. Trial Court's Third Order (March 2022)
After the evidentiary hearing, the trial court on March 7, 2022 filed its third and final order regarding the motions to compel arbitration. The court ruled as follows:
"After evaluating the testimony of [the paralegal] and Ms. Edwards and the admitted exhibits [which included the credit card agreement at issue], the Court finds that Ms. Edwards impliedly consented to the arbitration provision in her credit card contract. That Ms. Edwards does not recall receiving the credit card agreement is not dispositive, given how long ago the relevant events occurred (early 2014).
"The Court finds that Ms. Edwards applied for a Pier 1 Imports credit card in midJanuary 2014 and Comenity issued and mailed a Pier 1 Imports - branded credit card to her on January 20, 2014....The Court credits [the paralegal's] testimony that it is Comenity's standard practice to enclose a copy of the applicable Credit Card Account Agreement-which contains the arbitration provision at issue-as part of the welcome kit mailed with the credit card to the account holder. The Court finds that there is no reason to believe that practice was not followed here for this credit card and account holder (Ms. Edwards), and thus finds that Comenity did, in fact, send the credit card agreement to Ms. Edwards.
"In addition, Comenity's records do not reveal any sign showing that Comenity received any mail from Ms. Edwards rejecting the arbitration provision in the Agreement. Finally, Ms. Edwards used the credit card account at issue, even after the credit card agreement had been mailed to her and she had had a chance to review the arbitration issue....
"Therefore, the Court holds that Ms. Edwards impliedly consented to the arbitration provision. In light of that holding, and in light of the Court's previous orders, the Court GRANTS the petitions to compel arbitration."
Edwards filed a notice of appeal regarding the March 7, 2022 order compelling arbitration in each case.
III. DISCUSSION
We first address the issue of appealability of the trial court's order compelling arbitration. We next set forth general legal principles regarding compelling arbitration and the standard of review. We then analyze Edwards' specific contentions regarding her claims of error as to each of the trial court's three orders.
A. Appealability
"The right to appeal in California is generally governed by the 'one final judgment' rule, under which most interlocutory orders are not appealable. [Citation.]" (In re Baycol Cases I & II (2011) 51 Cal.4th 751, 754, fn. omitted (Baycol).) "Ordinarily, no immediate appeal lies from an order compelling arbitration and review of the order must await appeal from a final judgment entered after arbitration." (Phillips v. Sprint PCS (2012) 209 Cal.App.4th 758, 766 (Phillips).)
Edwards contends that the trial court's orders compelling arbitration in this case are appealable under the" 'death knell' doctrine," which allows an order to be appealed if it effectively ends the case as to class claims. She argues that the trial court's orders were essentially a final judgment for the alleged class in each case because the court ordered her to arbitrate her claims on an individual basis.
The California Supreme Court has expressed "concern[] that orders dismissing all class action claims might in some instances escape review" and consequently the court has "adopted a 'death knell' doctrine that allow[s] a party to appeal such orders immediately." (Baycol, supra, 51 Cal.4th at p. 754.) The "death knell doctrine . . . renders appealable . . . those orders that effectively terminate class claims but permit individual claims to continue." (Ibid.) The doctrine" 'assumes that without the incentive of a possible group recovery the individual plaintiff may find it economically imprudent to pursue his [or her] lawsuit to a final judgment and then seek appellate review of an adverse class determination.' [Citations.]" (Id. at p. 758.) At the same time, an appeal is permitted" 'because the action has in fact and law come to an end, as far as the members of the alleged class are concerned.'" (Id. at p. 760.)
At least one appellate court has applied the death knell doctrine in the context of an order compelling arbitration. In Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277, the appellate court determined that the plaintiff could properly appeal from a trial court order compelling arbitration where the trial court also found that a class arbitration waiver was enforceable. (Id. at p. 1288.) The appellate court reasoned that the trial court's "order found that the class arbitration waiver was enforceable and instructed [the plaintiff] to arbitrate his claims individually. That was the 'death knell' of class litigation through arbitration.... Consequently, [the plaintiff] filed a proper appeal. [Citations.]" (Ibid.)
However, in another case, where a trial court's order both compelled arbitration and dismissed class claims, an appellate court questioned "whether the judicially created death knell exception to the one final judgment rule for an order dismissing class claims extends to make appealable an otherwise nonappealable order compelling arbitration when the two orders are issued simultaneously. [Citation.]" (Nixon v. AmeriHome Mortgage Co., LLC (2021) 67 Cal.App.5th 934, 943.) Based on the "uncertainty" of the right to appeal in this context among other reasons, the appellate court ultimately exercised its discretion to treat the portion of the appeal directed to the order compelling arbitration as a petition for writ of mandate and considered the merits of that order. (Id. at p. 944.) Other appellate courts have similarly treated such an appeal as a writ in this context. (See Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115, 1121-1123; Phillips, supra, 209 Cal.App.4th at pp. 766-768; Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 889.) In the interests of justice, we exercise our discretion and do the same by treating plaintiff's appeal in each case as a petition for writ of mandate.
B. General Legal Principles Regarding Compelling Arbitration
The arbitration provision at issue provides that it "involves interstate commerce and is governed by the Federal Arbitration Act, . . . and not by any state arbitration law." The parties on appeal do not appear to dispute that the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) governs the arbitration provision as the parties themselves refer to the FAA in their appellate briefs.
Section 2 of the FAA provides in part that "[a] written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." (9 U.S.C. § 2.) "This statute stands as 'a congressional declaration of a liberal federal policy favoring arbitration agreements ....'" (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 235 (Pinnacle).)
In general, California's procedures for a petition to compel arbitration apply in California courts even if the arbitration agreement is governed by the FAA. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 908 [arbitration provision stated that "[a]ny arbitration under this Arbitration Clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state law concerning arbitration"], 922 ["Although the arbitration agreement . . . provides that the arbitration is to be governed by the FAA and not California law, generally the California Arbitration Act governs arbitral procedures brought in California courts"].) Under California's procedures, the party seeking arbitration bears the burden of proving the existence of an arbitration agreement by the preponderance of the evidence, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any defense. (Pinnacle, supra, 55 Cal.4th at p. 236; Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 (Engalla).) "In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination." (Engalla, supra, at p. 972.)
"[A]rbitration under the FAA 'is a matter of consent, not coercion.' [Citation.] Thus,' "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit."' [Citations.] In determining the rights of parties to enforce an arbitration agreement within the FAA's scope, courts apply state contract law while giving due regard to the federal policy favoring arbitration. [Citations.]" (Pinnacle, supra, 55 Cal.4th at p. 236.)
In this case, the arbitration provision at issue was contained in a credit card account agreement that stated, "This agreement is governed by Delaware and applicable federal law." (Capitalization omitted.) Regarding this choice-of-law provision, the trial court determined that Delaware contract law applied to the interpretation of the agreement, but that there was "no indication that Delaware and California law are in conflict with regard to the issues raised by [CCS's and Central's] petitions." The trial court further concluded that "California law governs the evidentiary issues." (See Pfingsten v. Westenhaver (1952) 39 Cal.2d 12, 19 [explaining in a case involving Iowa law that the "law of the forum controls the rules of evidence, including the question of its sufficiency" and hence those issues "must be determined in accordance with the law of California"]; see id. at pp. 16, 21-22.) On appeal, no party challenges the trial court's conclusions regarding the application of California law in these respects.
C. The Standard of Review
Where, as here, the trial court resolved factual disputes in ruling on a motion to compel arbitration, the standard of review of those factual determinations is substantial evidence. (Brown v. Wells Fargo Bank, N.A. (2008) 168 Cal.App.4th 938, 953.) "In such a case we must' "accept the trial court's resolution of disputed facts when supported by substantial evidence; we must presume the court found every fact and drew every permissible inference necessary to support its judgment, and defer to its determination of the credibility of witnesses and the weight of the evidence."' [Citation.]" (NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 71.)
Edwards cites a footnote in Engalla, supra, 15 Cal.4th 951, for the proposition that a motion to compel arbitration is subject to de novo review. In Engalla, however, the California Supreme Court explained that the trial court in the case before it "incorrectly treated [the] petition to compel arbitration as a type of summary judgment motion, in which [the trial court] was obliged to determine only that there was a legitimate factual dispute among the parties and not to resolve that dispute." (Id. at p. 972, italics added.) The California Supreme Court explained that "[b]ecause the trial court . . . apparently abdicated its role as trier of fact in deciding the petition to compel arbitration, the case must be remanded to that court to resolve any factually disputed issues, unless there is no evidentiary support for the [plaintiffs'] claims. [Citation.]" (Id. at p. 973.) It was in this context that the California Supreme Court stated in a footnote that "[i]n reviewing this quasi-summary-judgment motion we will 'undertake[] an independent review of the evidence presented to the trial court to determine whether [any] triable issues of fact were presented.' [Citation.]" (Id. at p. 973, fn. 7.) In the present case, the trial court did not "incorrectly treat[] [the] petition to compel arbitration as a type of summary judgment motion" and did not "abdicate[] its role as trier of fact in deciding the petition to compel arbitration" (id. at pp. 972, 973), but instead made factual determinations which are subject to the usual substantial evidence standard of review. (See Chambers v. Crown Asset Management, LLC (2021) 71 Cal.App.5th 583, 591 (Chambers) [explaining that an order on a motion to compel arbitration is subject to substantial evidence review when the order is based on a decision of fact], 592, fn. 2 [observing that the standard of review described in Engalla, where the trial court abdicated its role as trier of fact, was "not the situation here"].)
Where the trial court had the authority to make a discretionary decision, such as whether to order an evidentiary hearing, we review the court's decision for abuse of discretion. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 414 (Rosenthal) [oral testimony may be taken in the trial court's discretion]; accord, Engalla, supra, 15 Cal.4th at p. 972; Chambers, supra, 71 Cal.App.5th at p. 592; see Fitzhugh v. Granada Healthcare & Rehabilitation Center, LLC (2007) 150 Cal.App.4th 469, 475 (Fitzhugh) [stating that an appellate court "will not disturb the [trial] court's discretionary ruling unless it exceeded the bounds of reason"].)
Lastly, a trial court's interpretation of the law, or interpretation of a contract" 'when it is based on the words of the instrument alone'" or" 'when there is no conflict in the extrinsic evidence,'" is a question of law subject to de novo review. (Oakland-Alameda County Coliseum Authority v. Golden State Warriors, LLC (2020) 53 Cal.App.5th 807, 818-819; see Robertson v. Health Net of California, Inc. (2005) 132 Cal.App.4th 1419, 1425; Contreras v. Superior Court (2021) 61 Cal.App.5th 461, 468.)
D. Analysis
1. Trial Court's First Order
Edwards contends that the trial court "erred" in its first order regarding the motion to compel arbitration "when [the court] solicited supplemental briefing, rather than denying" the motion "despite:" (1) "finding that CCS 'cite[d] no authority establishing that a lease of receivables for collection purposes accomplishes an assignment of all the lessee's rights in the associated account, such that the lessee can petition for arbitration' "; (2) "finding that 'the Court is not immediately convinced that [CCS and Central] can stand in the shoes of "Bank Part[ies]" under the Agreement, when they have merely been leased receivables for collection purposes. Rather, it seems that [CCS and Central] are merely servicing the account on behalf of the owner, which is now Southwestern. And because [Edwards] has not sued Southwestern, the terms of the Agreement would not appear to apply. In sum, [CCS and Central] do not meet their burden to show that they can enforce the Agreement as assignees' "; (3) "sustaining [Edwards's] evidentiary objections to CCS's witness's Declaration, on the basis of hearsay, lack of foundation, and insufficient evidence that the proffered documents were business records"; and (4) "sustaining [Edwards's] secondary evidence objections."
CCS and Central contend that the trial court's first order is not appealable but they acknowledge that Edwards's arguments regarding the first order may be considered in the context of her challenges to the court's second and third orders.
In the trial court's first order, on the issue of whether CCS and Central could enforce the arbitration provision, the court determined that neither CCS, Central, nor Edwards provided sufficient legal authority regarding whether CCS, who had received an assignment of receivables under a lease agreement, could enforce the arbitration provision. Because the issue was "not clear-cut, and the parties ha[d] not thoroughly briefed it," the court requested supplemental briefing from the parties. Specifically, the court directed the parties to file supplemental briefs addressing "whether assignment of receivables pursuant to a lease (as apparently occurred here) should be treated differently than an assignment pursuant to a sale." The court ordered the parties to "specifically address what law governs this issue, whether the UCC (and if so, which provisions of the UCC) or a particular body of common law."
On appeal, Edwards fails to persuasively demonstrate that the trial court erred in requesting supplemental briefing from the parties. Indeed Edwards cites no authority to support the proposition that a trial court errs in requesting supplemental briefing when the court determines that the initial briefing by all parties is inadequate.
On the second issue of whether Edwards consented to the credit card account agreement, the trial court explained in its order that Edwards in a declaration had denied receiving the agreement. After sustaining Edwards's objections to CCS's and Central's evidence, the court stated that it was left with "potentially-admissible evidence . . . that the Agreement was mailed to [Edwards]." Given the state of the evidence, the court determined that "an evidentiary hearing would be appropriate, but only if [CCS and Central] first show they are entitled to enforce the arbitration agreement."
On appeal, Edwards fails to persuasively demonstrate that the trial court abused its discretion in determining that an evidentiary hearing would be appropriate regarding whether Edwards consented to the credit card account agreement. On a motion to compel arbitration, a trial court has discretion to receive oral testimony. (Rosenthal, supra, 14 Cal.4th at p. 414; accord, Chambers, supra, 71 Cal.App.5th at p. 592.) Where, as here, "the enforceability of an arbitration clause may depend upon which of two sharply conflicting factual accounts is to be believed, the better course would normally be for the trial court to hear oral testimony and allow the parties the opportunity for cross-examination." (Rosenthal, supra, at p. 414.) As the California Supreme Court has observed," 'it's pretty difficult to weigh credibility without seeing the witnesses.'" (Ibid.)
In this case, we understand Edwards to contend that an evidentiary hearing was unwarranted because the trial court sustained her evidentiary objections to the declaration from Comenity Bank's custodian of records and consequently Edwards's own declaration denying that she received the credit card account agreement was the only admissible evidence before the court. We determine that it was not an abuse of discretion for the court to determine that an evidentiary hearing was necessary. The declaration from the custodian of records for Comenity Bank stated, among other things, that a credit card had been mailed to Edwards, that it was the bank's standard practice to mail a copy of the credit card account agreement with the credit card, and that a copy of the agreement that was in effect at the relevant time was attached to the custodian of records's declaration. The trial court sustained evidentiary objections to the declaration regarding whether the documents described in the declaration were business records, the application of the secondary evidence rule, and the failure to sign the declaration under penalty of perjury. Nevertheless, it was not unreasonable for the trial court to believe that at least some of the deficiencies in the declaration, such as the failure to sign under penalty of perjury, could be cured by oral testimony. For example, aside from the failure to sign under penalty of perjury, the court did not sustain any other objection to the custodian of records's statements that it was Comenity Bank's practice to mail the applicable credit card account agreement with a newly issued card and that Edwards's account records did not show that the bank received any mail from Edwards rejecting the arbitration provision. On this record, it was not unreasonable for the court to determine that an evidentiary hearing was warranted where Edwards's denial of receiving a credit card account agreement essentially amounted to the cardholder claiming that her credit card was not subject to any written terms and conditions. In order to resolve the factual dispute between the parties about whether a particular credit card account agreement was sent to Edwards, we determine that the trial court did not err in setting the matter for an evidentiary hearing. (See Fitzhugh, supra, 150 Cal.App.4th at p. 475 [an appellate court "will not disturb the [trial] court's discretionary ruling unless it exceeded the bounds of reason"].)
In sum, we determine that the trial court in its first order did not err in requesting supplemental briefing on the issue of whether CCS and Central could properly enforce the arbitration provision, where the court found that the issue was "not clear-cut, and the parties," including Edwards, "ha[d] not thoroughly briefed it." We likewise determine that the court did not abuse its discretion in ordering an evidentiary hearing regarding whether Edwards received the particular credit card account agreement at issue and whether she consented to the arbitration provision contained in the agreement.
2. Trial Court's Second Order
The trial court issued its second order after receiving supplemental briefing from the parties. In the second order, the court concluded that CCS and Central had standing to invoke the arbitration provision in the Comenity Bank credit card account agreement. On appeal, we understand Edwards to make several contentions regarding why the court erred in concluding that CCS and Central could enforce the arbitration provision. In the context of analyzing each of Edwards's contentions below, we set forth the evidence and the trial court's determinations that form the basis for the court's conclusion that CCS and Central could properly seek enforcement of the arbitration provision.
a. Comenity Bank's sale and assignment to Southwestern
Neither CCS nor its agent Central were a party to the original Pier 1 credit card account agreement that contained the arbitration provision at issue. "Someone who is not a party to a contractual arbitration provision generally lacks standing to enforce it. [Citations.] Third parties may enforce a contract with an arbitration provision, however, where they . . . are assigned rights under the contract. [Citations.]" (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 856.) "An assignee '" 'stands in the shoes'"' of the assignor, taking his or her rights and remedies ...." (Creative Ventures, LLC v. Jim Ward & Associates (2011) 195 Cal.App.4th 1430, 1447 (Creative Ventures).)
In this case, Comenity Bank's credit card account agreement for the Pier 1 credit card contained the arbitration provision at issue. The agreement stated that Comenity Bank "may transfer or assign your Account and/or this Agreement, or any of [the bank's] rights under this Agreement, to another person or entity at any time without prior notice to you or your consent." Regarding the transfer or assignment of rights, the evidence reflected the following.
CCS's president indicated in a declaration that Comenity Bank, the original lender on the account, sold Edwards's account to Southwestern as reflected in a bill of sale, a copy of which was attached to the declaration of CCS's president. The bill of sale stated that "Comenity Bank ('Seller'), for value received and pursuant to the terms and conditions of Credit Card Account Purchase Agreement dated May 8, 2015 between Seller and Southwestern Investors Group ('Purchaser'), its successors and assigns . . ., hereby assigns effective . . . June 24, 2015 all rights, title and interest of Seller in and to those certain receivables, judgments or evidence of debt described in Exhibit 1 attached hereto and made part hereof for all purposes." (Italics added.)
Also attached to the declaration of CCS's president was an "Affidavit of Sale of Accounts by Original Creditor." The affidavit was signed by Comenity Bank's CFO. The affidavit stated that "[o]n or about June 24, 2015, the Seller [(Comenity Bank)] sold a pool of charged-off accounts (the Accounts) by a Credit Card Account Purchase Agreement and a Bill of Sale to Southwestern Investor Group (the 'Purchaser')[.] As part of the sale of the Accounts, electronic records and other records were transferred on the Accounts to the Purchaser. These records were kept in the ordinary course of business of the Seller."
Based on the bill of sale between Comenity Bank and Southwestern, the trial court found that "Comenity sold all 'rights, title, and interest' in [Edwards's] account to [Southwestern]."
On appeal, we understand Edwards to raise several arguments as to why the trial court erred in reaching this conclusion.
First, Edwards contends that the bill of sale between Comenity Bank and Southwestern was insufficient evidence to show that "Comenity Bank transferred it rights under the [Pier 1 cardholder] Agreement to [Southwestern]." As we have recited above, the bill of sale stated that "Comenity Bank ('Seller'), for value received and pursuant to the terms and conditions of Credit Card Account Purchase Agreement dated May 8, 2015 between Seller and Southwestern Investors Group ('Purchaser'), its successors and assigns . . ., hereby assigns effective . . . June 24, 2015 all rights, title and interest of Seller in and to those certain receivables, judgments or evidence of debt described in Exhibit 1 attached hereto and made part hereof for all purposes." Edwards contends that the entire "Credit Card Account Purchase Agreement" dated May 8, 2015 should have been provided to the trial court and that without it, the trial court "had no evidence on which to base its assumption that Comenity Bank transferred its rights under the proffered [Pier 1 cardholder] Agreement to [Southwestern]." (Italics omitted.) The trial court "disagree[d]" with Edwards on this point, finding that "the bill of sale supplied to the Court is sufficient." We agree with the trial court as Edwards fails to persuasively articulate why the bill of sale was insufficient and why the May 8, 2015 agreement was necessary to support the trial court's factual finding.
Second, Edwards contends that the record does not support the trial court's determination that Southwestern obtained all rights, title, and interest in her account. She argues that the bill of sale transfers only the receivable associated with her account.
As a factual matter, although the bill of sale between Comenity Bank and Southwestern referred to the assignment of "all rights, title and interest of Seller in and to those certain receivables, judgments or evidence of debt" (italics added), according to an affidavit that was also signed by the CFO of Comenity Bank the same day as the bill of sale, Comenity Bank nevertheless understood that it had "sold a pool of charged-off accounts (the Accounts) by a Credit Card Account Purchase Agreement and a Bill of Sale to Southwestern Investor Group (the 'Purchaser')." (Italics added.) Indeed, elsewhere in her opening brief on appeal, Edwards acknowledges that, "[b]y all indications, the original creditor Comenity Bank sold the subject account, among others, to [Southwestern]."
Even assuming the transaction between Comenity Bank and Southwestern involved an assignment of "receivables," not an account, Edwards fails to persuasively demonstrate that such an assignment does not include the right or remedy of arbitration.
In support of her argument distinguishing an account from a receivable, Edwards cites Sprayberry v. Portfolio Recovery Associates, LLC (D.Or. Apr. 11, 2018, No. 3:17-cv-00112-SB) 2018 U.S.Dist. Lexis 78713 (findings and recommendation by federal magistrate judge). In Sprayberry, the credit card agreement, which included an arbitration clause, applied to the issuing bank and its "assigns." (Id. at p. *6.) The defendant purchased several accounts, including the plaintiff's receivable, from the bank. (Id. at p *3.) The court determined that the defendant could not "identify any agreement whereby [the bank] assigned [the plaintiff's] consumer account, or her receivable, to [the defendant]." (Id. at p. *10.) The court reasoned that "pursuant to the express terms of [the bank's] agreements, [the bank] never assigned [the plaintiff's] receivable or her consumer account to [the defendant], and therefore [the defendant] may not enforce [the bank's] arbitration clause as its assign." (Id. at p. *15, italics added.) In the instant case, Edwards does not dispute that an assignment took place between Comenity Bank and Southwestern. Instead, she disputes the scope of the assignment, that is, whether the assignment included the arbitration provision from the credit card account agreement.
We likewise find unpersuasive Edwards's reliance on Munoz v. Pipestone Financial, LLC (D.Minn. 2005) 397 F.Supp.2d 1129 (Munoz). In Munoz, the plaintiff's credit card account agreement provided that the cardholder would have to pay attorney's fees under certain circumstances for an account in default. (Id. at p. 1130.) The plaintiff defaulted, and subsequently certain rights relating to the debt were assigned to another entity. Specifically, the bill of sale provided for the assignment of" 'all rights, title and interest of Seller in and to those certain receivables, judgments or evidences of debt.'" (Ibid.) The court held that the "plain meaning of 'receivable' is 'an amount owed'" and that "it does not refer to interest not yet accrued or future attorney fees." (Id. at pp. 1131, 1132.) The court concluded, on summary judgment, that the moving defendants had "failed to demonstrate that, as a matter of law, . . . the rights to collect interest and attorney fees" had been assigned. (Id. at p. 1132.)
We are not persuaded by Edwards's reliance on Munoz, as it did not address whether an assignment of receivables also includes an assignment of the arbitration provision contained in the underlying account agreement. Instead, Munoz addressed only the issue of whether an assignment of receivables included an assignment of "interest not yet accrued or future attorney fees." (Munoz, supra, 397 F.Supp.2d at p 1132.) Edwards also acknowledges that Munoz, a Minnesota federal district court case, is "not binding" with respect to the instant case.
Edwards also cites several cases arising under California law that she contends are "analogous" to support her contention that there is a distinction between an assignment of an account and an assignment of a receivable. For example, Edwards quotes from Creative Ventures, supra, 195 Cal.App.4th 1430, which states that "[a]n assignment . . . usually refers to the transfer of a cause of action or rights in or concerning property-as opposed to the particular item of property itself. [Citation.]" (Id. at p. 1447.) However, Creative Ventures immediately thereafter explains that "[i]n the case of assignment, the assignee's rights are derivative of whatever rights the assignor may have. Thus, the general rule is that the assignee takes subject to all equities and defenses existing in favor of the maker. [Citation.] An assignee '" 'stands in the shoes'"' of the assignor, taking his or her rights and remedies subject to any defenses the obligor has against the assignor prior to notice of the assignment. [Citations.]" (Ibid., italics added.)
Edwards also quotes the following from Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972 (Heritage): "Fraud rights are not, as a matter of law, incidental to the transfer of the promissory note." (Id. at p. 991, fn. omitted.) However, Heritage explains that "[a]n assignment of a right generally carries with it an assignment of other rights incident thereto. (Civ. Code, § 1084.)" (Id. at p. 990.) In Heritage, the appellate court explained in the case before it that "[t]he fraud claims based on [the defendant's] loan application with [the lender] are not 'incidental to' the transfer of the promissory note to [the plaintiff]. 'A suit for fraud obviously does not involve an attempt to recover on a debt or note.' [Citations.]" (Id. at pp. 990-991.)
Section 1084 states, "The transfer of a thing transfers also all its incidents, unless expressly excepted; but the transfer of an incident to a thing does not transfer the thing itself."
In accordance with the legal principle that an assignment of a right generally also includes incidental rights (Heritage, supra, 215 Cal.App.4th at p. 990), California courts have held that an assignment to receive money due under a settlement agreement, or an assignment to receive money due under a lease, also include the incidental contractual right under those agreements to seek attorney's fees incurred to recover such moneys. (A. J. Industries, Inc. v. Ver Halen (1977) 75 Cal.App.3d 751, 762 [assigning" 'right, title and interest to receive and to collect money becoming due . . . pursuant to that certain Compromise and Settlement Agreement,'" which also provided for attorney's fees if company failed to make payment pursuant to settlement agreement]; Adjustment Corp. v. Marco (1929) 100 Cal.App. 338, 341 [assigning" 'all right, title and interest in and to a certain claim for . . . [$2,000] . . . on account of rental of a certain premises,'" where the lease also provided for attorney's fees to enforce any rights under the lease].)
In this case, Edwards fails to persuasively demonstrate that Comenity Bank's assignment of receivables to Southwestern did not include the underlying contractual right or remedy to arbitrate, either directly with the assignment itself or as an incident to the assignment. (See Creative Ventures, supra, 195 Cal.App.4th at p. 1447; Heritage, supra, 215 Cal.App.4th at p. 990.)
Third, Edwards contends that, although Comenity Bank sold certain accounts to Southwestern, "[Southwestern] did not thereafter sell the portfolio of accounts, as [Southwestern] was prohibited from doing so." In support of her argument that Southwestern was "prohibited" from selling the accounts, Edwards relies on a different credit card account purchase agreement between Comenity Bank and Southwestern dated June 15, 2015, which Edwards obtained through discovery in a separate lawsuit against Southwestern regarding her Lane Bryant account. That purchase agreement states that Southwestern "is prohibited from reselling the Charged-off Accounts to an affiliated entity or to an unrelated third party" and that Southwestern "agrees not to resell the Charged-off Accounts to another purchasing entity."
To the extent that Edwards is contending that these restrictions in the purchase agreement between Comenity Bank and Southwestern regarding her Lane Bryant account applies in the instant case, we are not persuaded by Edwards's argument. First, Edwards fails to demonstrate that the credit card account purchase agreement between Comenity Bank and Southwestern dated June 15, 2015, which pertained to Edwards's Lane Bryant account, also applies to her Pier 1 account, which is the credit card account at issue in the instant case. Second, even assuming the June 15, 2015 agreement applies here, Edwards fails to persuasively articulate why the provisions in that agreement barring Southwestern from reselling accounts also precludes Southwestern from entering into the lease agreement that it entered into with General Management in the instant case.
b. Lease agreements between Southwestern and General Management and between General Management and CCS
CCS's president stated in a declaration that after Comenity Bank sold the accounts, including Edwards's account, to Southwestern, Southwestern in turn leased numerous receivables to General Management. A copy of the "Accounts Receivable Lease Agreement" was attached to the declaration of CCS's president. (Some capitalization omitted.) The agreement stated that Southwestern, the lessor, had "acquired certain charged off accounts ('Receivables')" and that it "desire[d] to lease certain of the Receivables in order to attempt collection of the accounts" for a period of time. The agreement stated that Southwestern "leases, transfers and assigns to [General Management], [Southwestern's] interest of the Receivables ...." The lease term was for five years from the "[c]losing [d]ate" of December 5, 2018. The agreement also stated, "This is a lease agreement. [General Management] agrees that this Lease is a true Lease for tax and other purposes and that [Southwestern] will receive the benefits of ownership." The agreement further stated the following regarding title to the accounts: Southwestern "holds title in and to the Accounts, free and clear of all encumbrances, liens and claims and is the lawful owner of the Accounts and will remain as such for the Lease Term of this Agreement."
CCS's president stated that General Management, in turn, leased those same receivables, including Edwards's account, to CCS. A copy of this "Accounts Receivable Lease Agreement" between General Management and CCS was attached to the declaration of CCS's president. Similar to the Southwestern - General Management lease agreement, the General Management - CCS lease agreement stated that General Management, the lessor, had "acquired certain charged off accounts ('Receivables')" and that it "desire[d] to lease certain of the Receivables in order to attempt collection of the accounts" for a period of time. The agreement stated that General Management "leases, transfers and assigns to [CCS], [General Management's] interest of the Receivables ...." The lease term was for five years from the "[c]losing [d]ate" of December 14, 2018. The agreement also stated, "This is a lease agreement. [CCS] agrees that this Lease is a true Lease for tax and other purposes and that [General Management] will receive the benefits of ownership."
CCS's president stated that CCS, in turn, entered into a contingent fee agreement with Central to perform collection services on certain accounts, including Edwards's account.
On appeal, Edwards contends that Southwestern's lease to General Management, and General Management's lease to CCS, only pertained to the lease of receivables, not to the lease of accounts. In other words, according to Edwards, General Management and CCS through their respective lease agreements are" 'subleasing' only the right to collect a receivable." (Boldface and italics omitted.) Edwards argues that the right to arbitrate consequently "was assigned no further than to [Southwestern]" and "did not pass to [General Management] or to CCS."
We are not persuaded by Edwards's arguments. Both lease agreements - between Southwestern and General Management, and between General Management and CCS -define" 'Receivables'" as certain "charged off accounts."
Further, even assuming the lease agreements pertain to receivables and not to the entire accounts, and to the extent Edwards's argument is premised on the California and out-of-state federal cases that we have discussed above in relation to the bill of sale and assignment between Comenity Bank and Southwestern, we are not persuaded by Edwards's argument. Further, as Edwards acknowledges, the two lease agreements (between Southwestern and General Management, and between General Management and CCS) contain a New York choice of law provision and hence the California and federal cases cited by Edwards are not helpful.
Moreover, on the issue of the assignment of receivables under the lease agreements and whether the arbitration provision in the underlying credit card account agreement was enforceable, the trial court explained that "if Article 9 of the Uniform Commercial Code ('UCC') applies to an accounts receivable assignment, the assignee can enforce the arbitration provision associated with the account." The court observed that "both parties do not dispute the following two propositions: [¶] a. An assignment of accounts receivable through a lease presumptively is covered by Article 9 in the same way an assignment of accounts receivable through a sale. [¶] b. If a lease assignment of accounts receivable is for collection purposes only, then Article 9 would not apply. (See UCC, § 9-109, subd. (d)(5).)" The court explained that if Article 9 applied, then "the assignee (in this case [General Management], and then CCS) could enforce the arbitration provision associated with Ms. Edwards's account."
Article 9 of the national UCC pertains to secured transactions. (See U. Com. Code, § 9-109, subd. (a).) Article 9 expressly states that it does not apply to "an assignment of accounts, chattel paper, payment intangibles, or promissory notes which is for the purpose of collection only." (U. Com. Code, § 9-109, subd. (d)(5).)
Based on the lease agreements, the trial court determined that the Southwestern -General Management lease agreement and the General Management - CCS lease agreement "had other purposes besides collection." The court explained as follows: "Other rights and obligations relating to the account were transferred as well-not just the right to collect. For instance, [General Management] (and then CCS) had the obligation to service the account independently, not just collect on it on behalf of the assignor. Therefore, the lease assignment agreements were not 'only' for the purpose of collection. [¶] Article 9 of the UCC-as enacted in New York law-hence applies to these lease assignment agreements." The court concluded that CCS and Central, whose rights were derivative of CCS's rights, therefore had standing to invoke the arbitration provision in Edwards's credit card account agreement.
The court noted that no party disputed that New York law applied to this question.
On appeal, Edwards contends that "Article 9 of the Uniform Commercial Code does not apply to the [accounts receivable lease agreement] between [Southwestern] and [General Management]."
First, in making this contention, we understand Edwards to argue that Southwestern's assignment to General Management, and General Management's assignment to CCS, was for the purpose of collection only and therefore Article 9 does not apply. We are not persuaded by Edwards's argument. It has been stated that "[a]n assignment is 'for collection only' where it allows an assignee to 'br[ing] suit to collect money owed to [its] assignors' and the assignee 'promised to turn over to those assignors the proceeds secured through litigation.' [Citation.]" (SE Prop. Holdings, LLC v. Unified Recovery Grp., LLC (E.D.La. 2019) 410 F.Supp.3d 775, 782.) In this case, the trial court determined that both lease agreements "had other purposes besides collection," that is, General Management and then CCS "had the obligation to service the account independently, not just collect on it on behalf of the assignor." Substantial evidence supports the trial court's finding. The lease agreement between Southwestern and General Management provided that "all rights, obligations, liabilities and responsibilities of [Southwestern] with respect to servicing of the Receivables, if any, shall pass to [General Management]." Similarly, the lease agreement between General Management and CCS provided that "all rights, obligations, liabilities and responsibilities of [General Management] with respect to servicing of the Receivables, if any, shall pass to [CCS]." Edwards does not point to anything in the respective lease agreements indicating that the assignments allowed "an assignee[, for example CCS,] to 'br[ing] suit to collect money owed to [its] assignor[ General Management]' and the assignee [CCS] 'promised to turn over to [that] assignor[ General Management] the proceeds secured through litigation.' [Citation.]" (SE Prop. Holdings, LLC, supra, at p. 782, italics added.) Instead, Edwards on appeal argues that the trial court "did not explain what it means to 'service' an account that is already in default, and how, if at all, this 'servicing' is different from collection." Edwards's burden is to show error by the trial court. Edwards fails to demonstrate error, such as by citing applicable legal authority, with respect to the court's finding that the lease agreements included a purpose besides collection.
Second, we understand Edwards to argue that a "UCC financing statement" must be filed by the "buyer of a receivable" "in order to perfect its ownership interest in such receivable." Here, because "neither lessee [General Management] nor CCS filed a UCC-1 financing statement," Edwards contends that this "confirm[s] that none of the parties believed that the subject accounts were being sold outright as opposed to leased for collection purposes only." We conclude, similar to the trial court, that Edwards provides "no authority showing that UCC-1 financing statements are required for a lease assignment of accounts receivable."
In sum, Edwards fails to demonstrate error in the trial court's second order in which the court determined that CCS and Central had standing to invoke the arbitration provision in the Comenity Bank credit card account agreement.
3. Trial Court's Third Order
Following an evidentiary hearing, the trial court determined in its third and final order that Edwards "impliedly consented to the arbitration provision" in her credit card contract. On appeal, Edwards contends that the court erred in finding her consent. We understand Edwards to contend that there was not substantial evidence to support the trial court's finding.
Under California law, "[a]n essential element of any contract is the consent of the parties, or mutual assent. [Citations.]" (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 270.) "Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings. [Citation.]" (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 141.) "Generally, an arbitration agreement must be memorialized in writing. [Citation.] A party's acceptance of an agreement to arbitrate may be express, as where a party signs the agreement. A signed agreement is not necessary, however, and a party's acceptance may be implied in fact (e.g., [Craig v. Brown &Root, Inc. (2000) 84 Cal.App.4th 416,] 420, [employee's continued employment constitutes acceptance of an arbitration agreement proposed by the employer]) ...." (Pinnacle, supra, 55 Cal.4th at p. 236.)
Similarly, under Delaware law, mutual assent is required for the formation of a contract. The inquiry is an" 'objective' one: whether a reasonable [person] would, based upon the 'objective manifestation of assent' and all of the surrounding circumstances, conclude that the parties intended to be bound by contract. [Citations.]" (Leeds v. First Allied Connecticut Corp. (Del.Ch. 1986) 521 A.2d 1095, 1101.)" '[A] n implied contract is one inferred from the conduct of the parties, though not expressed in words.' 'The parties' intent and mutual assent to an implied-in-fact contract is proved through conduct rather than words.'" (Capital Management Co. v. Brown (Del. 2002) 813 A.2d 1094, 1098, fns. omitted.)
In this case, following the evidentiary hearing, the trial court determined that Edwards "impliedly consented to the arbitration provision" in her credit card contract. The court's determination was based on its findings that Comenity Bank sent the credit card account agreement to Edwards, the bank did not receive a writing from Edwards opting out of the arbitration provision, and Edwards used the card after receiving the agreement containing an arbitration provision.
We determine that substantial evidence supports the trial court's findings. The paralegal from Comenity Bank identified the credit card account agreement that applied to Edwards's account based on the January 2014 date that her account was opened. Pursuant to the terms of the agreement, use of the account indicated acceptance of the terms of the agreement. Edwards used the account numerous times after the account was opened.
The Comenity Bank paralegal testified that that bank maintains account information "in its database in the regular course of its business, and the information contained in the database is populated either by live agents contemporaneous with the event report on (e.g., notes from a telephone call) or is pushed to Comenity's system automatically (e.g., from a vendor processing a credit card and mailing a Welcome Kit)."
The paralegal testified that it was Comenity Bank's "standard practice to mail the credit card account agreement to the new account holder, together with the actual physical credit card, as part of a 'Welcome Kit' mailed to the cardholder." Although Comenity Bank used a third party to process and mail the physical card and welcome kit, Comenity Bank kept track of returned mail and there was no indication that any mail sent to Edwards was ever returned. Further, approximately one week after the date that the bank anticipated Edwards would receive the physical card and welcome kit, the bank's system reflected that Edwards had enrolled in the bank's online portal. To log into the online portal, a cardholder's 16-digit account number must be entered. The paralegal testified that this indicated that Edwards received the welcome kit, which included the physical card and the credit card account agreement.
Further, the arbitration provision requires an accountholder to expressly opt out to reject arbitration. The paralegal testified that Comenity Bank's system automatically logs all account related calls and written communications. The paralegal testified that there was no record indicating that Edwards ever called or wrote to the bank to opt out.
In view of this record, substantial evidence supports the trial court's findings that the credit card account agreement, which contained the arbitration provision, was sent to Edwards; that Comenity Bank did not receive a written rejection of the arbitration provision from Edwards; and that Edwards continued to use the card after receiving the agreement containing the arbitration provision. On this record, the trial court did not err in including that Edwards "impliedly consented to the arbitration provision."
IV. DISPOSITION
Marguerite Ruth Edwards's appeal from the order granting Complete Credit Solutions, Inc.'s motion to compel arbitration (case No. H049913) and her appeal from the order granting Central Portfolio Control, Inc.'s motion to compel arbitration (case No. H049959) are treated as petitions for writ of mandate. Both petitions are denied. Costs in this proceeding are awarded to Complete Credit Solutions, Inc. and Central Portfolio Control, Inc.
WE CONCUR: DANNER, J. WILSON, J.