Kevin B. Williams v. American Arbitration Association, Inc., et al.

Background

Kevin B. Williams, proceeding without a lawyer, sued American Arbitration Association, Inc. and Autodeals Hayward, Inc. The dispute concerned arbitration fees paid in connection with a consumer dispute between Autodeals Hayward and Williams’s son. Williams alleged that Autodeals Hayward violated an arbitration agreement by refusing to pay the required fees and that the Association improperly disqualified him as his son’s representative in the arbitration.

Williams asserted five claims: breach of the arbitration agreement, violation of the Federal Arbitration Act, conversion, declaratory relief, and violation of California’s Unruh Civil Rights Act.

Screening standard

The court reviewed the first amended complaint under 28 U.S.C. § 1915(e)(2), which requires screening of proceedings brought without prepayment of filing fees. Under that statute, the court must dismiss an action that is frivolous or malicious, fails to state a claim for relief, or seeks money from a defendant immune from such relief. The court applied the same pleading standard used for a motion to dismiss for failure to state a claim. It also applied the rule requiring a short and plain statement giving defendants fair notice of the claim and its grounds.

Analysis

Breach of the arbitration agreement

The court held that Williams adequately identified the arbitration agreement and alleged that Autodeals Hayward failed to pay arbitration costs. But the agreement was between Williams’s son and Autodeals Hayward, not Williams. Williams therefore could proceed only if he adequately alleged that he was an intended third-party beneficiary. The court found his allegation on that point conclusory. The quoted contract language stated that Autodeals Hayward would pay “your” fees, apparently referring to Williams’s son, and did not show an intent to benefit Williams. The court also rejected Williams’s suggestion that equitable subrogation allowed him to enforce his son’s contractual rights because Williams voluntarily paid the fee for someone else. The court dismissed the breach-of-contract claim.

Federal Arbitration Act claim

Williams alleged that the Association’s exclusion of him as a representative conflicted with the Federal Arbitration Act because the Association relied on state rules concerning the unauthorized practice of law. The court explained that the Act can preempt state rules that obstruct the enforcement of arbitration agreements according to their terms. But Williams did not allege that the parties had agreed to use Association rules or that applying the state rules contradicted the arbitration agreement. The court therefore found that he had not stated a preemption claim.

The court also found that the theory was not tied to a legally recognized claim for relief. Williams did not allege that his disqualification affected the arbitration award or that the award should be vacated. He also did not allege that the requested reimbursement was caused by his disqualification, and he identified no authority allowing damages against an arbitrator for applying a supposedly preempted state rule. Any request for declaratory or injunctive relief was moot because Williams did not allege that he intended to return to arbitration. The court dismissed the Federal Arbitration Act claim.

Conversion

Williams alleged that the Association wrongfully retained $3,200 even though Autodeals Hayward was responsible for the arbitration costs. The court held that Autodeals Hayward’s agreement to cover Williams’s son’s costs did not require the Association to refund those costs to Williams. It also held that the claim was barred by California’s economic-loss rule because Williams sought reimbursement for economic losses covered by a contractual promise and did not allege additional harm beyond that promise. The court dismissed the conversion claim.

Unruh Civil Rights Act

Williams alleged that the Association violated California’s Unruh Civil Rights Act by disqualifying him from representing his son and daughter-in-law because he was not a licensed attorney. The court explained that the Act protects specified personal characteristics and, in some circumstances, similar characteristics. It found that Williams had not pleaded facts showing that his non-lawyer status was such a protected personal characteristic. The court dismissed the Unruh Act claim.

Declaratory relief

The court held that declaratory relief is a remedy, not an independent cause of action. Because the underlying Unruh Act and Federal Arbitration Act claims were dismissed, the court dismissed the declaratory-relief claim as well.

Disposition

The court dismissed the first amended complaint with leave to amend solely to cure the deficiencies identified in the order. Any amended complaint had to be filed within 28 days after entry of the order. The court also struck Autodeals Hayward’s answer and the Association’s motion to dismiss because the required screening occurred before there was an operative complaint on which those filings could proceed.