Wardlow v. U-Haul Int'l, Inc.
Wardlow v. U-Haul Int'l, Inc.
Opinion of the Court
Plaintiff William Wardlow is an Oregon citizen and an attorney. Defendant U-Haul International, Inc. is a business incorporated in Nevada with its primary business location in Arizona. Plaintiff filed suit in Deschutes County Circuit Court alleging intentional and negligent misrepresentations and unlawful trade practice by defendant. Defendant removed the case to federal court based on diversity jurisdiction under
For the reasons set forth below, plaintiff's Motion to Remand is DENIED, and defendant's Motion to Stay and Compel Arbitration is GRANTED.
BACKGROUND
This case arises from a dispute over a trailer rental. On May 26, 2016, plaintiff called defendant's office in Port Angeles, Washington to inquire about the availability of a 6' x 12' trailer. After confirming the availability of the trailer, plaintiff made a reservation to rent the trailer for May 29, 2016, through defendant's online portal. Plaintiff drove with his family to Port Angeles, Washington on May 27, 2016. On May 28, 2016, plaintiff alleges that he received a call informing him that the trailer he reserved was not available. Due to this unavailability, plaintiff asserts that he had to rent and use a smaller trailer on May 29, 2016. He alleges that this forced him to make a second trip from Sunriver, Oregon to Port Angeles, Washington to move items that would not fit on the first trip. Plaintiff also alleges that items were left behind and not moved due to the lack space in the trailer.
Plaintiff avers that he was initially unable to serve defendant in Oregon because defendant's status with the Oregon Secretary of State was "inactive," and its registered agent in Oregon declined to accept service. Wardlow Decl. at ¶ 4. After failed attempts to communicate with defendant's legal department, plaintiff filed his First Amended Complaint listing defendant's two entities in Arizona and Oregon alleging intentional and negligent misrepresentations and unlawful trade practice in Deschutes County Circuit Court. After plaintiff filed a Second Amended Complaint ("SAC"), defendant removed the case to federal court based on diversity jurisdiction.
Plaintiff filed the present motion to remand, alleging that there is no diversity jurisdiction between the parties. Defendant subsequently moved to dismiss or, in the alternative, stay proceedings and compel arbitration.
STANDARDS
A defendant may remove an action filed in state court to federal court if there is diversity or federal question jurisdiction.
*996DISCUSSION
I. Plaintiff's Motion to Remand
A motion to remand is proper for challenging removal.
A. Amount in Controversy
In his motion to remand, plaintiff alleges that the amount in controversy is under the required $75,000 threshold. The amount in controversy depends on the value of the unaggregated individual claims, both for monetary damages and equitable relief. In re Ford Motor Co./Citibank (S.D.), N.A. ,
The amounts proffered for compensatory and statutory damages are not in controversy. Plaintiff requests compensatory damages in the amount of $1,400.
Next, I look to plaintiff's potential punitive damages. Oregon law does not allow the pleading of punitive damages in an initial complaint. O.R.S. § 31.725. However, despite Oregon's punitive damages pleading requirements, federal courts may consider the potential for punitive damages when determining the amount in controversy. Gibson ,
In reviewing awards for punitive damages for unlawful trade practices, Oregon courts have approved ratios of 3.9:1 between the punitive damage award and the economic damage award. See Allen v. Morgan Drive Away, Inc. ,
Therefore, plaintiff's compensatory and statutory damages applied to the ratio of 3.9:1 yields $40,800 in potential punitive damages (total of compensatory and statutory damages multiplied by 3.9).
Next, I consider the amount of plaintiff's attorney fees. When an underlying statute *997authorizes an award of attorneys' fees, either with mandatory or discretionary language, such fees may be included in the amount in controversy. Missouri State Life Insurance Company et al. v. Jones ,
Here, plaintiff seeks an award of pre-removal attorney fees based on Rule 11 of the Federal Rules of Civil Procedure. While preserving arguments as to the reasonableness of plaintiff's fee expenditures or the merit of any of plaintiff's claims, defendants do not dispute the inclusion of pre-removal attorneys' fees in assessing the amount in controversy requirement. Therefore, pre-removal attorneys' fees, $28,470 as estimated by plaintiff, may be included in the amount in controversy. Galt G/S ,
The parties dispute whether potential future attorneys' fees should be considered in calculating the amount in controversy. Initially, I note that "[i]t remains an open question whether attorney's fees that are anticipated but unaccrued at the time of removal or filing in federal court ... may be included in the amount-in-controversy. Other circuits and the district courts in this circuit are divided on the issue." Gonzales , at 649 n.2.
The Third, Fourth, Fifth, and Tenth Circuits all allow potential attorneys' fees to be calculated as part of the amount in controversy, so long as recovery of fees is authorized by statute or contract.
In contrast, the Seventh Circuit allows only those attorneys' fees (as long as fee recovery is authorized by statute or contract) incurred up to the time of removal to be included in the amount in controversy. Gardynski-Leschuck v. Ford Motor Co. ,
This analysis is consistent with recent District of Oregon cases. See , Reames v. AB Car Rental Services, Inc. ,
Because attorneys' fees incurred up to the time of removal are concrete and tangible, and any post-removal settlement would be reached taking them into account, their inclusion in the amount in controversy is entirely acceptable. Allowing potential attorneys' fees to be calculated in the amount in controversy risks increasing litigation in federal courts under diversity jurisdiction, contrary to Congress's intent. See Lynch v. Household Fin. Corp. ,
In sum, the amount in controversy in this case exceeds the requirement of $75,000 even without including the contested costs of injunctive relief and disgorgement
B. Diversity of Citizenship
Plaintiff is an Oregon citizen and U-Haul International is a Nevada corporation with its principal place of business in Arizona. Plaintiff alleges that defendant is a citizen of Oregon because it accepted jurisdiction of Oregon when it merged with an Arizona corporation. Plaintiff also argues that defendant was once registered as an Oregon Domestic Business Corporation, which makes it fall under the scope of
Defendant avers that its acceptance of continuing jurisdiction of Oregon is irrelevant because it concerns personal jurisdiction. Moreover, defendant cites O.R.S. § 60.497(1)(a) which provides that a merged corporation no longer retains the citizenship of the original state when the surviving corporation is a citizen of another state. As to the interpretation of the *999phrase "has been" in
It is established that "a corporation is typically a citizen of two states for determining the existence of diversity jurisdiction: the state of incorporation and the state in which it has its principal place of business." Montrose Chem. Corp. of Cal. v. Am. Motorists Ins. Co. ,
Taking the amount in controversy and diversity of citizenship into consideration, this case satisfies the requirements for diversity jurisdiction under
II. Defendants' Motion to Dismiss or Stay and Compel Arbitration
Defendant maintains that a valid and binding arbitration agreement was signed by plaintiff as part of the rental agreement on May 29. In response, plaintiff argues that the arbitration agreements were either revoked or inapplicable to the instant action or equitable claims. Plaintiff further alleges that the agreements are procedurally and substantively unconscionable.
Under the Federal Arbitration Act, arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or equity for the revocation of any contract."
A. Scope of the Agreement
First, plaintiff alleges that the May 26 agreement was revoked, rendering the arbitration provision therein void. Defendant responds that this dispute is still subject to subsequent May 29 agreement. Plaintiff further contends that the May 29 agreement is inapplicable not only to the instant action, but also to his equitable claims. Defendant avers that the term "claims" as defined by the arbitration agreement is to include all claims arising out of plaintiff's dealings with defendant.
*1000When he rented the 5' x 8' trailer, plaintiff signed a rental contract on May 29, 2016, which included the term: "I agree to submit all legal claims in accordance with the U-Haul Arbitration Agreement, incorporated by reference, and available at uhaul.com/arbitration or from my local U-Haul representative." Settles Decl. Ex. 3. The contract also includes the term just above the signature block: "I acknowledge that I have received and agree to the terms and conditions of this Rental Contract and the Rental Contract Addendum,"
The Rental Addendum contains additional references to the terms of the Arbitration Agreement listing many of the provisions contained in the agreement. The Arbitration Agreement itself provides that:
"By commencing or making a reservation to, or agreeing to, purchase retail products or purchase or rent "Equipment" ... U-Haul and You agree that any and all Claims ... between U-Haul and You relating in any way to your rental purchase from U-Haul shall be submitted to binding Arbitration before the American Arbitration Association ..."
Settles Dec. Ex. 4. Especially pertinent to the case, where plaintiff alleges class action claims, is the following provision:
U-HAUL AND YOU AGREE THAT CLAIMS MAY ONLY BE BROUGHT IN AN INDIVIDUAL CAPACITY AND IN THE NAME OF AN INDIVIDUAL PERSON OR ENTITY AND THAT CLAIMS MUST PROCEED ON AN INDIVIDUAL AND NON-CLASS AND NON REPRESENTATIVE BASIS. U-HAUL AND YOU AGREE THAT CLAIMS OF TWO OR MORE PERSONS MAY NOT BE JOINED OR CONSOLIDATED IN THE SAME ARBITRATION UNLESS ARISING FROM THE SAME TRANSACTION.
Settles Dec. Ex. 4. (capitalization in original). "Claims" for the purposes of the arbitration agreement are defined therein:
Claims is to be broadly interpreted to include any dispute, claim or cause of action arising out of or relating to, Your dealing with U-Haul, including but not limited to, the reservation and/or reservation process, use of any affiliated U-Haul website, advertising, rental or sales contract, or Equipment. Claims include any and all legal theories, including but not limited to, all statutory and tort claims, that may be asserted by You.
Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. Moses H. Cone Memorial Hosp. v. Mercury Const. Corp. ,
B. Unconscionability
Next, plaintiff contends that defendant's arbitration agreements were *1001unconscionable. Under Oregon law, a contractual provision may be rendered unconscionable when there is a "substantial disparity in bargaining power combined with terms that are unreasonably favorable to the party with the greater power...." Vasquez-Lopez v. Beneficial Oregon, Inc. ,
A. Procedural Unconscionability
Here, plaintiff alleges procedural unconscionability by relying on both oppression and surprise. Procedural unconscionability looks to two factors at the time of contract formation: oppression and surprise. Vasquez-Lopez ,
First, plaintiff alleges that defendant possesses monopoly power as is a basis for arguing oppression. This argument is unavailing. As defendant correctly notes, it does not hold a monopoly position in the trailer rental services market. Even assuming an unequal bargaining power between an individual customer and a company because of inherent asymmetry of information, such inequality in bargaining power alone does not render an arbitration agreement unconscionable in Oregon. Motsinger ,
Next, plaintiff alleges that defendant concealed the arbitration provisions in the agreements which constituted procedural unconscionability due to surprise. While plaintiff focuses on the visibility and accessibility of the specific provisions, defendant focuses on multiple occasions that plaintiff could have actually read and signed the rental agreements containing arbitration provisions.
It is true that inconspicuous contract terms, in general, may be used as evidence to demonstrate surprise and potential procedural unconscionability. However, the fact that plaintiff is an attorney who was given notice throughout the reservation process by means of two separate *1002documents and an addendum weighs against finding surprise. Indeed, in Oregon, a party is "presumed to be familiar with the contents of any document that bears the person's signature." Motsinger ,
B. Substantive Unconscionability
Substantive unconscionability exists where a contract's terms render the agreement unreasonably unfair and one-sided. Motsinger ,
Here, plaintiff briefly alleges substantive unconscionability based on defendant's alleged monopoly power and vaguely on the terms of the Arbitration Agreement itself. Plaintiff's monopoly power argument is misplaced. Because I have already analyzed defendants' monopoly power in relation to the procedural unconscionability, I will briefly examine the terms of the arbitration agreements. Addressing several provisions of the arbitration agreements, plaintiff alleges that the terms are unfair and one-sided. Defendant counters by elaborating on each provision's language explaining that none of the provisions are substantively unfair. Answering the questions of substantive unconscionability, I first note that the Supreme Court has concluded that waivers of class-wide relief are per se enforceable. See AT & T Mobility LLC v. Concepcion ,
Based on the validity of the arbitration agreements signed by plaintiff and absence of procedural or substantive unconscionability, the Arbitration Agreements are enforceable.
Thus, considering all of the arguments from the parties, defendants' motion to stay and compel arbitration is GRANTED. Rather than dismissing this case, the proper remedy is to stay the case and compel arbitration. Once arbitration is completed, I can resolve any outstanding issues which may still exist before entering a final Judgment dismissing the case.
CONCLUSION
For these reasons set forth herein, plaintiff's Motion to Remand (doc. 10) is DENIED and defendant's Motion to Stay and Compel Arbitration (doc. 11) is GRANTED. This case is therefore *1003STAYED while the parties engage in arbitration pursuant to the terms of the Arbitration Agreement. The parties shall inform the court when arbitration is completed, or within 90 days of this order, the parties shall submit a joint status report to the Court on the status of arbitration.
IT IS SO ORDERED.
Plaintiff alleges his family incurred at least $900 due to extra trips that had to be made and at least $500 worth of items were lost during the move.
See, e.g. , Suber v. Chrysler Corp. ,
The court further explained that "the Supreme Court held that legal expenses yet to be incurred on the date a suit begins do not create a 'case or controversy' within the meaning of Article III."
Defendant cites Beaver v. NPC Int'l, Inc. ,
Defendant also urges this Court to include costs of compliance with the injunctive relief sought by plaintiff. Defendant further argues that this court should include plaintiff's claims for disgorgement in calculating the amount in controversy. Plaintiff argues that because he is bringing suit on behalf of other similarly situated plaintiffs, the costs of compliance and disgorgement may not be aggregated under Ford, supra. There, the court held that such costs cannot be aggregated in a class action suit. In re Ford Motor Co./Citibank (S.D.), N.A. , at 958-959. Regardless, it is unnecessary to consider these arguments here, as the unaggregated damages and costs outlined above already place the amount in controversy above the jurisdictional threshold.
Reference
- Full Case Name
- William WARDLOW, an individual v. U-HAUL INTERNATIONAL, INC. and Does 1 through 50, inclusive
- Cited By
- 2 cases
- Status
- Published