Cohen v. CBR Systems, Inc.

Background

Plaintiffs alleged that GI Partners and CBR Systems, Inc. charged annual cord-blood storage fees that were higher than the fees advertised in their service contracts. Plaintiffs Koneru and Cohen understood their annual fees for storage years 2 through 18 to be fixed at $125, while Plaintiff Vaccarella understood hers to be fixed at $130. They asserted claims involving breach of contract and deceptive marketing and billing practices.

The service contracts contained mandatory arbitration provisions. In an earlier order, the court found valid arbitration agreements, compelled arbitration of plaintiffs’ individual claims, and stayed the case. The court had stated that the individual claims were being sent to individual arbitration because the contracts were silent about class-wide arbitration.

The parties had not begun arbitration. Plaintiffs said they had communicated their intent to arbitrate with the American Arbitration Association by January 3, 2023, but defendants did not object to that forum until March 23, 2023. Defendants identified JAMS as the only forum to which they would agree and conditioned that agreement on plaintiffs’ acknowledging that JAMS could not consolidate the arbitrations under its rules or otherwise. Plaintiffs declined to make that acknowledgment and filed the motion at issue.

Parties’ Arguments

Plaintiffs asked the court to consolidate their claims into one arbitration. They argued that California law, which was expressly incorporated into their agreements, permitted consolidation and that consolidation would promote efficiency and avoid inconsistent results.

Defendants argued that the motion effectively sought reconsideration of the court’s earlier arbitration ruling and therefore should not be considered. The court rejected that characterization because it had not previously decided whether the individual claims could be consolidated, as opposed to whether class claims could be referred to arbitration.

Court’s Analysis

The court relied on Meadows v. Dickey’s Barbecue Restaurants Inc., which treated consolidation as a procedural question for the arbitrator. Courts generally decide gateway questions of arbitrability—whether a dispute must be arbitrated—but arbitrators generally decide procedural questions that arise from the dispute and concern how the arbitration will proceed.

The court held that consolidation was a procedural issue for the arbitrator. Although California Code of Civil Procedure section 1281.3 and related provisions were expressly incorporated into the agreements, that incorporation did not change the procedural nature of the consolidation question. The court recognized that consolidation could theoretically save time and promote consistency, but concluded that the parties’ disagreement concerned how the individual claims should be administered.

Disposition

The court denied plaintiffs’ motion for an order to consolidate arbitrations. It concluded that consolidation was a procedural question for the arbitrator to decide if and when the issue was properly raised in arbitration.