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Hermenegildo ("Jay") Martinez, An Individual v. the Welk Group

January 12, 2012

HERMENEGILDO ("JAY") MARTINEZ, AN INDIVIDUAL, ON HIS OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
PLAINTIFF,
v.
THE WELK GROUP, INC.; WELK RESORT GROUP INC.; WELK MUSIC GROUP, INC.; SOLEIL COMMUNICATIONS, INC.; AND DOES 1 THROUGH 25,
DEFENDANTS.



The opinion of the court was delivered by: Hon. Anthony J. Battaglia U.S. District Judge

ORDER DENYING DEFENDANTS' MOTION TO COMPEL ARBITRATION [Doc. 81]

Presently before the Court is Defendants' Motion to Compel Arbitration and Stay This Action Under the Federal Arbitration Act. (Doc. 81.) For the reasons set forth below, the Court DENIES the motion.

I.

BACKGROUND

This matter is a putative class action brought by Plaintiff Martinez on behalf of a class of timeshare interest owners, alleging that Defendants failed to abate and disclose the presence of mold at the Welk Resort San Diego (the "Resort").

Plaintiff initially purchased 120,000 Platinum Points from Welk Resort Group, Inc. ("WRGI") in 2007, which provided him with the opportunity to stay at Welk resorts around the world or at any other time-share resort that accepts Platinum Points for vacation stays. Plaintiff then "upgraded" his 2007 Platinum Points interest in April 2009 to 240,000 Platinum Points. (Fourth Amended Complaint filed Feb. 1, 2011 ("4AC"), ¶ 23; Exhibit A to the 4AC, p. 24; Exhibit B to the 4AC, p. 54.) Both the 2007 Agreement and the 2009 Agreement contain arbitration clauses, requiring the parties to submit any dispute arising from the Agreements to binding arbitration. (Exhibit A to the 4AC, pp. 30-31 of 83; Exhibit B to the 4AC, pp. 60-61.)

This lawsuit was filed in San Diego Superior Court in November 2009. In December 2009, Defendants removed it to this Court. The parties then met and conferred for many months. The lengthy meet and confer process resulted in the filing of three different amended complaints by September 2010. At that time, Defendants again chose this forum to litigate their disputes with a former employee, Mr. Wade Brent, and filed counterclaims against him.

Following Defendants' two motions to dismiss, the parties finally achieved an operative complaint in June 2011, after the Court denied Defendants' motion to dismiss the 4AC and granted their motion to strike. (Doc. 70.) In August 2011, Defendants filed a preemptive motion to deny class certification. (Doc. 74.) The Court denied the motion sua sponte, finding it to be premature, since Plaintiff had not yet moved for class certification and discovery had not yet been conducted. (Doc. 78.) Shortly thereafter, Defendants filed the instant motion to compel arbitration on October 31, 2011. Defendants move this Court to compel arbitration of Plaintiff's claims pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq.

II.

LEGAL STANDARDS

FAA Standard

The FAA applies to any contract evidencing a transaction involving interstate commerce. 9 U.S.C. § 2. It requires a district court to stay judicial proceedings and compel arbitration of claims governed by a valid and enforceable arbitration agreement. 9 U.S.C. § 3. In deciding whether to compel arbitration under the FAA, the district court need only determine whether: (1) there is an agreement between the parties to arbitrate; (2) the claims at issue fall within the scope of the agreement; and (3) the agreement is valid and enforceable. Valle v. Lowe's HIW, Inc., 2011 U.S. Dist. LEXIS 93639, *8 (N.D. Cal. Aug. 22, 2011). If these three factors are met, the court must enforce the arbitration agreement according to its precise terms. See Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985) ("The FAA leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed."); see also AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1748 (2011) (courts must enforce arbitration agreements according to their terms).

While generally applicable defenses to contract such as fraud, duress, or unconscionability invalidate arbitration agreements, the FAA preempts state-law defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. AT&T Mobility, 131 S. Ct. at 1745-47. Because of the strong policy favoring arbitration, doubts are to be resolved in favor of the ...


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