SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN DIEGO CENTRAL MINUTE ORDER

TIME: 10:00:00 AM JUDICIAL OFFICER PRESIDING: Jeffrey B. Barton CLERK: Deborah Jellison REPORTER/ERM: Not Reported BAILIFF/COURT ATTENDANT: DATE: 08/26/2013 DEPT: C-69

CASE NO: 37-2013-00306190-SC-SC-CTL CASE INIT.DATE: 02/13/2013 CASE TITLE: McMillan Law Group, Inc vs. Yelp, Inc CASE TYPE: Small Claims CASE CATEGORY: Small Claims

APPEARANCES
The Court having taken the Small Claims Appeal under submission on 08/23/2013 and having fully considered the arguments of all parties, both written and oral, as well as the evidence presented, now rules as follows: Defendant Yelp, Inc.'s appeal of a small claims judgment came on for hearing on August 23, 2013, before Judge Jeffrey B. Barton. The court received evidence, heard argument and the matter was taken under submission. There are two issues presented by the parties in this appeal: 1. Is plaintiff's action subject to mandatory contractual binding arbitration based on paragraph IX of the contract between the parties? 2. If the claim is not subject to arbitration, is plaintiff entitled to damages for breach of contract? The contract at issue was in evidence as exhibit D. Prior to its execution, Mr. McMillan and the Yelp representative had discussions concerning the services to be offered. In addition, there was negotiation concerning the term of the contract. Yelp agreed at plaintiff's request to a six month term. No other provisions of the contract were negotiated. The contract is a typical consumer contract with numerous preprinted terms that are presented to consumers without give and take negotiation over the contract in its entirety. Thus, there is an element of procedural unconscionability present. A "meaningful opportunity" to negotiate or reject the terms of a contract requires, at a minimum, that a party have "reasonable notice of (the) opportunity to negotiate or reject the terms of a contract, and . . . an actual, meaningful, and reasonable choice to exercise that discretion." (Circuit City Stores, Inc. v. Mantor (2003) 335 F3d 1101, 1106, emphasis and parentheses added.) However, in order to invalidate an arbitration provision in a contract, there must be both procedural and substantive unconscionability. This determination is properly one for the court. Several issues were raised concerning the substantive unconscionability of the subject agreement. First, there is a venue requirement that any actions be litigated in San Francisco before the American Arbitration Association. Second, there is an allegedly one sided injunction provision which empowers Yelp, Inc. to bring

DATE: 08/26/2013 DEPT: C-69

MINUTE ORDER

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CASE TITLE: McMillan Law Group, Inc vs. Yelp, Inc

CASE NO: 37-2013-00306190-SC-SC-CTL

injunctions in any court but is silent as to a comparable right by those purchasing Yelp's services. Plaintiff also pointed out in argument that the cost of litigating the matter in San Francisco outweighs the value of any claim. That theory was effectively eliminated by the United States Supreme Court decision in American Express, Co. vs. Italian Colors Restaurant (2012) 133 S. Ct. 2304. Substantive unconscionability focuses on the terms of the agreement and whether those terms are "overly harsh" or "one-sided." (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.) In determining substantive unconscionability, the "paramount consideration" is mutuality of the obligation to arbitrate. (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1287.) Here, the agreement does have mutual provisions regarding the requirement to arbitrate. The terms, with the exception of the injunctive relief, are all equally applicable to both parties. The agreement does expressly indicate that a party can appear at the American Arbitration Association in San Francisco in person or by telephone or by way of written filings. The damage limitation limits both parties to seeking damages to the amount of the money paid under the contract. (See, Chin v. Advanced Fresh Concepts Franchise Corp. (2011) 194 Cal.App.4th 704, 712.) There is the venue provision requiring the arbitration to occur in San Francisco. There are several cases invalidating an arbitration provision based on distant venue requirements. In one, a loan agreement requiring California borrowers to conduct binding arbitration in Minnesota was held "unconscionable". The court found that although arbitration itself may be within the reasonable expectations of consumers, a Minnesota venue is not. In addition in that case, the consumer was required to make a prompt demand and prepay fees in order to obtain a participatory hearing. The court concluded the likely impact was to deny a hearing to most borrowers. (Patterson v. ITT Fin. Corp., 14CA4th 1665, 1666). The cases concerning substantive unconscionability based on venue provisions, all appear to involve either distant locations (Minnesota, Georgia) or distant locations and additional terms like the prepayment requirements in Patterson, supra. In the instant case, San Francisco is not a distant location and provisions are stated in the agreement which enable participation by telephone or through written submissions. The plaintiff did not bring to the court's attention any cases which found substantive unconscionability based on a provision comparable to the one at issue in this litigation. The injunction provision is uninvolved in the instant litigation and does not add weight to substantive unconscionability. Either party may pursue injunctive relief pursuant to Code of Civil Procedure section 1281.8. Based on the authority presented by the plaintiff the court cannot find that the Yelp, Inc.'s arbitration agreement is substantively unconscionable. Thus, the case is ordered to binding arbitration with the American Arbitration Association in San Francisco. Plaintiff shall contact the AAA to begin the process. Based on this decision, the trial is deferred to be decided by the arbitrator and the underlying small claims judgment is vacated and the matter is dismissed IT IS SO ORDERED.

Judge Jeffrey B. Barton

DATE: 08/26/2013 DEPT: C-69

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