Client Seeks Denial of Jackson Hewitt's Motion to Arbitrate Claims

LUIS LOMELI, individually and on behalf of a class of similarly situated individuals,
Plaintiff,
v.
JACKSON HEWITT, INC.; TAX SERVICES OF AMERICA, INC.
d/b/a JACKSON HEWITT TAX SERVICE; JJF & AC, INC.
d/b/a Guanajuato Insurance Agency and Jackson Hewitt Tax Service;
JUAN FLORES, an individual; and DOES 1-50, inclusive,
Defendants.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL ARBITRATION

[Filed concurrently with Declaration of Luis Lomeli]

Date: October 2, 2017
Time: 1:30 p.m.
Place: Courtroom 5D

Dylan Ruga, Esq. (SBN 235969)
dylan@stalwartlaw.com
Paul A. Traina, Esq. (SBN 155805)
paul@stalwartlaw.com
Ji-In Lee Houck, Esq. (SBN 280088)
jiin@stalwartlaw.com
Ian P. Samson, Esq. (SBN 279393)
ian@stalwartlaw.com
STALWART LAW GROUP
1100 Glendon Avenue, 17th Floor
Los Angeles, California 90024
Tel: (310) 954-2000

Attorneys for Plaintiff and the Proposed Class

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TABLE OF CONTENTS

I. INTRODUCTION

II. FACTUAL BACKGROUND

III. LEGAL STANDARD

IV. ARGUMENT

V. CONCLUSION

TABLE OF AUTHORITIES

Cases

Abramson v. Juniper Networks, Inc., 115 Cal. App. 4th 638 (2004)

Alvarez v. T-Mobile USA, Inc., No. CIV. 2:10–2373 WBS, 2011 WL 6702424 (E.D. Cal. Dec. 21, 2011) AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011)

AT&T Technologies, Inc. v. Commc’ns Workers of Am., 475 U.S. 643 (1986)

Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996 (9th Cir. 2010)

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006)

Capili v. The Finish Line, Inc., 2017 WL 2839504 (9th Cir. July 3, 2017)

Doctor’s Associates, Inc. v. Distajo, 107 F.3d 126 (2d Cir. 1997)

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995)

Gonzalez v. Preferred Freezer Services, LBF, LLC, No. 12-cv-3467 ODW, 2012 WL 2602653 (C.D. Cal. July 5, 2012)

Harper v. Ultimo, 113 Cal. App. 4th 1402 (2003)

Kinney v. United Healthcare Servs., Inc., 70 Cal. App. 4th 1322 (1999)

Knutson v. Sirius XM Radio, Inc., 771 F.3d 559 (9th Cir. 2014

Long v. Provide Commerce, 245 Cal. App. 4th 855 (2016)

Macaulay v. Norlander, 12 Cal. App. 4th 1 (1993)

McGill v. Citibank, 2 Cal. 5th 945 (2017)

Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2014)

Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279 (9th Cir. 2017)

Perez v. DirecTV Group Holdings, LLC, 2017 WL 1836357 (C.D. Cal. May 1, 2017)

Pokorny v. Quixtar, Inc., 601 F.3d 987 (9th Cir. 2010)

Sanford v. Memberworks, Inc., 483 F.3d 956 (9th Cir. 2007)

Simplicity Int’l v. Genlabs Corp., No. CV 09-6146 SVW, 2010 WL 11507526 (C.D. Cal. May 6, 2010)

Stewart v. Preston Pipeline Inc., 134 Cal. App. 4th 1565 (2005)

Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., Inc., 925 F.2d 1136 (9th Cir. 1991)

Windsor Mills, Inc. v. Collins & Aikman Corp., 25 Cal. App. 3d 987 (1972)

Statutes

9 U.S.C. § 4

Rules

Cal. Civ. Code § 1550

Cal. Civ. Code § 1565

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MEMORANDUM OF POINTS AND AUTHORITIES

I. INTRODUCTION

This is a case about deceit. Plaintiff Luis Lomeli, on behalf of himself and proposed classes of similarly-situated individuals, seeks recourse for those who paid Jackson Hewitt fees for tax preparation only to have their identities stolen to create artificial refunds and gin up unnecessary and duplicative fees. Defendants now double-down on their fraudulent scheme, this time hoping to pull a fast one on the Court by presenting demonstrably false evidence they claim compels Plaintiff to arbitrate his claims. Defendants’ arguments spectacularly backfire. Rather than show that Plaintiff agreed to arbitration, Defendants plainly corroborate Plaintiff’s allegations of widespread fraud.

A few of the most obvious examples prove the point. For Tax Year 2015, Defendants point to an arbitration agreement they say Plaintiff signed on April 22, 2016. That statement is not true. Mr. Lomeli had his taxes done on April 14 and 15, 2016. (He arrived late in the evening of April 14.) Nevertheless, Defendants insist that, on April 22, 2016, Plaintiff was at their office pouring over tax documents and willfully signing away his Seventh Amendment rights. He was not. Instead, he was at the hospital with his family celebrating the birth of his daughter. A comparison of Plaintiff’s photograph of his daughter hours after her birth and the “agreement” Defendants seek to enforce shows Defendants’ stunning efforts to mislead their way to compelling arbitration:

Plaintiff’s daughter’s birth certificate likewise corroborates how he was spending April 22, 2016: Welcoming his daughter to the world, not signing arbitration agreements.

That is not the only example of Defendants caught with their hands in the cookie jar. A troubling and consistent pattern appears on the face of Defendants’ documents: They show two sets of tax returns with two different signatures dated on two different dates for the same tax years. For instance, Defendants say that Plaintiff must arbitrate his claims related to Tax Year 2014 because he purportedly signed an arbitration agreement on April 27, 2015. Yet half of the signatures Defendants claim are from April 27, 2015 are in fact dated April 15, 2015 — the day Plaintiff actually visited Jackson Hewitt to prepare his Tax Year 2014 return. Even more damning, different signatures appear on different iterations of the same document, as shown below for a document entitled “California e-file Return Authorization” for Tax Year 2014:

Defendants offer only a half-baked explanation of this phenomenon for Tax Year 2016, claiming that they deliberately prepared two sets of tax documents (again, containing two markedly different signatures) because Plaintiff was missing a single form. Other than that illogical and inaccurate effort, Defendants essentially ask the Court to pay no attention to the man behind the curtain, pretending as if the documents clearly time-and-date-stamped one day are actually from another. Conveniently, the arbitration agreements Defendants seek to enforce are on days Plaintiff did not visit their offices; the days he did, by contrast, are bereft of any such agreements.

Beyond the evidence, which irrefutably demonstrates Defendants have misled the Court, common sense explains why Plaintiff would not have been presented with, let alone knowingly signed, the Defendants’ arbitration agreement. The relevant arbitration clause is in the contract for Defendants’ “Assisted Refund” program. Assisted Refund is a service that allows taxpayers to pay no upfront tax preparation fees and, instead, have those fees (and others) deducted directly from their anticipated refund. But in each of the relevant tax years, Plaintiff paid Defendants upfront fees for tax preparation (he has the receipts to prove it). And in Tax Years 2014 and 2015, Plaintiff did not expect refunds — at the risk of stating the obvious, an anticipated refund is a critical antecedent to the “Assisted Refund” program. As a result, enrolling in the Assisted Refund program in any of the relevant tax years would have cost Plaintiff additional fees for no added benefit or discernable purpose. Why would Plaintiff enroll in an Assisted Refund program when he anticipated no refund? Even when he did anticipate a refund, why would he agree to pay Defendants twice for the same services?

In light of the above, Defendants’ motion to compel arbitration must be denied because Defendants have failed to carry their burden to show that Plaintiff agreed to arbitrate his claims. At the very least, the Court must conduct an evidentiary hearing to determine whether Plaintiff agreed to arbitrate his claims. Sanford v. Memberworks, Inc., 483 F.3d 956, 962 (9th Cir. 2007) (“[W]hen one party disputes the making of the arbitration agreement, the Federal Arbitration Act requires that ‘the court [ ] proceed summarily to the trial thereof’ before compelling arbitration under the agreement. . . . [C]hallenges to the existence of a contract as a whole must be determined by the court prior to ordering arbitration.” (quoting 9 U.S.C. § 4) (emphasis in original)). Finally, in the extremely unlikely event the Court concludes that Defendants have shown the existence of an enforceable arbitration agreement, the motion still should be denied because the arbitration agreement is procedurally and substantively unconscionable.

All told, Defendants’ motion to compel arbitration is premised upon a continuing effort to misrepresent the facts of Plaintiff’s interactions with Jackson Hewitt. It should be denied in its entirety.

II. FACTUAL BACKGROUND

For several years, Plaintiff had visited the Jackson Hewitt location at 9212 California Avenue in South Gate, California (the “South Gate Jackson Hewitt”) to prepare his yearly tax returns. Declaration of Luis Lomeli (“Lomeli Decl.”) ¶ 4. This case concerns three different tax years: (1) Tax Year 2014, for which Plaintiff visited the South Gate Jackson Hewitt on or about April 15, 2015; (2) Tax Year 2015, for which Plaintiff visited the South Gate Jackson Hewitt on or about April 14 and 15, 2016; and (3) Tax Year 2016, for which Plaintiff visited the South Gate Jackson Hewitt on or about February 13 and 17, 2017. Each tax year is discussed below.

A. Tax Year 2014

On or about April 15, 2015, Plaintiff visited the South Gate Jackson Hewitt to prepare his tax return for Tax Year 2014. (Lomeli Decl. ¶ 5.) Plaintiff paid a fee upon arrival. (Id. ¶ 6.) After waiting, Plaintiff was called into Mr. Flores’s office. (Id. ¶ 7.) The office contained, among other things, a desk with a computer monitor and an electronic signature pad. (Id.) Plaintiff sat on one side of the desk and Mr. Flores on the other. (Id.) The computer monitor always faced Mr. Flores. (Id.)

After he prepared Plaintiff’s tax returns, Mr. Flores instructed Plaintiff to sign the electronic signature pad several times. (Id. ¶ 8.) Mr. Flores told Plaintiff that the signatures were for his tax documents. (Id.) He did not show Plaintiff the documents. (Id.) Instead, based upon the representations by Mr. Flores, Plaintiff believed that the electronic signatures were being applied to tax documents. (Id.) Mr. Flores never discussed arbitration, class action waiver, or the waiver of jury trial with Plaintiff. (Id. ¶ 9.) When the return was completed, Mr. Flores informed Plaintiff that he would neither receive a refund nor be obligated to pay additional taxes. (Id. ¶ 10.)

Defendants’ statements that Plaintiff visited the South Gate Jackson Hewitt on April 27, 2015 are wrong. (Id. ¶ 11.) Plaintiff neither visited the location that day nor signed any documents. (Id.) Further, the events Defendants claim happened on April 27, 2015 also did not occur when Plaintiff visited the South Gate Jackson Hewitt on April 15, 2015. (Id. ¶ 12.) Finally, Plaintiff did not sign, see, or otherwise agree to the agreement reflected on pages 70 to 72 of Exhibit A to the Flores Declaration, which Defendants claim is the arbitration agreement applicable to Plaintiff’s Tax Year 2014 claims. (Id. ¶ 13.)

B. Tax Year 2015

On or about April 14, 2016, Plaintiff returned to the South Gate Jackson Hewitt to prepare his tax return for Tax Year 2015. (Id. ¶ 14.) Because Plaintiff arrived late on the evening of April 14, 2016, some activities occurred on April 15, 2016. (Id.)

The process of preparing the return was substantially similar as with Plaintiff’s visit to the South Gate Jackson Hewitt on April 15, 2015. Plaintiff paid a fee upon arrival. (Id. ¶ 15.) After waiting, Plaintiff was called into Mr. Flores’s office. (Id. ¶ 16.) The office contained, among other things, a desk with a computer monitor and an electronic signature pad. (Id.) Plaintiff sat on one side of the desk and Mr. Flores on the other. (Id.) The computer monitor always faced Mr. Flores. (Id.)

After he prepared Plaintiff’s tax returns, Mr. Flores instructed Plaintiff to sign the electronic signature pad several times. (Id. ¶ 17.) Mr. Flores told Plaintiff that the signatures were for his tax documents. (Id.) He did not show Plaintiff the documents. (Id.) Instead, based upon the representations by Mr. Flores, Plaintiff believed that the electronic signatures were being applied to tax documents. (Id.) Mr. Flores never discussed arbitration, class action waiver, or the waiver of jury trial with Plaintiff. (Id. ¶ 18.) When the return was completed, Mr. Flores informed Plaintiff that he would not receive a refund. (Id. ¶ 19.)

Defendants’ statements that Plaintiff visited the South Gate Jackson Hewitt on April 22, 2016 are wrong. (Id. ¶ 20.) Plaintiff neither visited the location that day nor signed any documents. (Id.) Instead, Plaintiff spent the day at Providence Saint Joseph Medical Center in Burbank, California for the birth of his daughter. (Id. ¶ 21.) Further, the events Defendants claim happened on April 22, 2016 also did not occur when Plaintiff visited the South Gate Jackson Hewitt on April 14 and 15, 2016. (Id. ¶ 22.) Finally, Plaintiff did not sign, see, or otherwise agree to the agreement reflected on pages 97 to 99 of Exhibit B to the Flores Declaration, which Defendants claim is the arbitration agreement applicable to Plaintiff’s Tax Year 2015 claims. (Id. ¶ 23.)

C. Tax Year 2016

On or about February 13, 2017, Plaintiff returned to the South Gate Jackson Hewitt to prepare his tax return for Tax Year 2016. (Id. ¶ 24.) Plaintiff paid a fee upon his arrival. (Id. ¶ 25.) Although Plaintiff had come to prepare his return, it was determined that he lacked a necessary document. (Id. ¶ 26.) He therefore left and planned to return with the required document. (Id.)

On or about February 17, 2017, Plaintiff returned to the South Gate Jackson Hewitt with the missing document. (Id. ¶ 27.) Plaintiff did not pay a fee because he had already paid for Tax Year 2016 on February 13, 2017. (Id. ¶ 28.) The process of preparing the return was substantially similar as with Plaintiff’s visits to the South Gate Jackson Hewitt on April 15, 2015 and April 14 and 15, 2016. After waiting, Plaintiff was called into Mr. Flores’s office. (Id. ¶ 29.) The office contained, among other things, a desk with a computer monitor and an electronic signature pad. (Id.) Plaintiff sat on one side of the desk and Mr. Flores on the other. (Id.) The computer monitor always faced Mr. Flores. (Id.)

After he prepared Plaintiff’s tax returns, Mr. Flores instructed Plaintiff to sign the electronic signature pad several times. (Id. ¶ 30.) Mr. Flores told Plaintiff that the signatures were for his tax documents. (Id.) He did not show Plaintiff the documents. (Id.) Instead, based upon the representations by Mr. Flores, Plaintiff believed that the electronic signatures were being applied to tax documents. (Id.) Mr. Flores never discussed arbitration, class action waiver, or the waiver of jury trial with Plaintiff. (Id. ¶ 31.) When the return was completed, Mr. Flores informed Plaintiff that he would be entitled to a refund. (Id. ¶ 32.) Plaintiff asked that Mr. Flores direct that the refund be paid from the government directly to Plaintiff. (Id.)

At no time did Plaintiff discuss the “Assisted Refund” program, ask to have his refund provided to him through that program, or review any “Assisted Refund” documents. (Id. ¶ 33.) Plaintiff did not sign, see, or otherwise agree to the agreement reflected on pages 38 to 39 of Exhibit C to the Flores Declaration, which Defendants claim is the arbitration agreement applicable to Plaintiff’s Tax Year 2016 claims. (Id. ¶ 34.) Likewise, Plaintiff did not provide Mr. Flores with an electronic signature, review documents (including the Assisted Refund agreement) with Mr. Flores, and give Mr. Flores permission to apply his electronic signature to the documents. (Id. ¶ 35.)

Plaintiff did not visit the South Gate Jackson Hewitt on February 21, 2017. (Id. ¶ 36.) He did not speak to Mr. Flores, sign any documents, or otherwise interact with Jackson Hewitt that day. (Id.) Plaintiff did not sign, see, or otherwise agree to the agreement reflected on pages 89 to 90 of Exhibit C to the Flores Declaration, which Defendants claim is the arbitration agreement applicable to Plaintiff’s Tax Year 2016 claims. (Id. ¶ 37.)

D. Plaintiff’s March 2017 Discovery of His Enrollment in the Assisted Refund Program

As described above, Plaintiff anticipated receiving a refund for Tax Year 2016 directly from the government. (Id. ¶ 38.) However, on or about March 1, 2017, Plaintiff received a cashier’s check from Civista Bank purporting to represent his refund for Tax Year 2016. (Id. ¶ 39.) The check was about $300 less than what Plaintiff anticipated. (Id.) Further, Plaintiff did not know why he had received a check from Civista Bank rather than the government. (Id.)

Plaintiff investigated and learned that Civista Bank issued the check as part of Jackson Hewitt’s Assisted Refund program. (Id. ¶ 40.) Plaintiff also learned for the first time that he had been enrolled in the program for Tax Years 2014, 2015 and 2016, and that cashier’s checks purportedly for refunds from Tax Years 2014 and 2015 had been issued in his name and cashed without his knowledge. (Id.) Prior to his investigation in March 2017, Plaintiff was unaware of the Assisted Refund program, let alone his enrollment in it. (Id.)

Even if Plaintiff had known about the Assisted Refund program prior to March 2017, he would not have enrolled in any of the relevant tax years. For Tax Year 2014, Plaintiff paid an upfront fee and did not anticipate a refund. (Id. ¶ 41.) Enrolling in the program would have been illogical and forced Plaintiff to incur duplicative fees. (Id.) For Tax Year 2015, Plaintiff paid an upfront fee and did not anticipate a refund. (Id. ¶ 42.) Enrolling in the program would have been illogical and forced Plaintiff to incur duplicative fees. (Id.) For Tax Year 2016, Plaintiff paid an upfront fee and asked to receive his anticipated refund directly from the government. (Id. ¶ 43.) Enrolling in the program would have been illogical and forced Plaintiff to incur duplicative fees. (Id.) In fact, the duplicative fees Plaintiff was charged for his Tax Year 2016 refund, among other things, prompted the March 2017 investigation that led to his discovery of his enrollment in the Assisted Refund program. (Id.)

III. LEGAL STANDARD

A. The Existence of an Arbitration Agreement Is a Question for the Court

Because arbitration is a “matter of contract,” a party “cannot be required to submit to arbitration any dispute which he has not agreed to so submit.” Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279, 1283 (9th Cir. 2017) (quoting AT&T Technologies, Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648 (1986)). Thus, prior to compelling arbitration, a court must determine “whether a valid arbitration agreement exists, and whether the agreement encompasses the disputes at issue.” Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171, 1175 (9th Cir. 2014). As the party seeking to compel arbitration, Defendants bear the burden to demonstrate the existence of an arbitration agreement. Knutson v. Sirius XM Radio, Inc., 771 F.3d 559, 565 (9th Cir. 2014).

Defendants confusingly advance two inapposite versions of the applicable legal framework. In the beginning of their brief, they correctly recognize that the Court must determine whether an agreement to arbitrate exists and whether it covers the dispute in question. See MTC Arb. at 8. Later, however, Defendants argue that an arbitrator, and not the Court, should decide whether Plaintiff agreed to arbitrate his claims. See id. at 13 (“Plaintiff attempts to plead around the obligation to arbitrate by alleging his enrollment in the Assisted Refund program was ‘unwitting’ or unknown. . . . [T]his argument, and all others that pertain to enforceability, are for the arbitrator.”). The absurdity of Defendants’ latter argument is apparent on its face: Plaintiff agreed to submit to arbitration the dispute of whether he agreed to arbitration in the first place.

Hoping to avoid the obvious logical disjunction, Defendants misconstrue Supreme Court authority, including Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). In Buckeye, aggrieved consumers sought to challenge the validity of their check-cashing agreements under Florida state usury laws. Because they acknowledged signing the agreements, the consumers did not contest their existence; instead, they argued that the contracts were void as illegal under Florida law. Since the contracts were void, the consumers reasoned, the arbitration agreement contained therein was unenforceable. The Supreme Court rejected the argument, holding instead that because the consumers did not dispute the existence of the agreement to arbitrate, their claim that the contract itself was void was for the arbitrator to decide. Id. at 448-49.

Buckeye has no applicability here. Plaintiff does not seek to invalidate the entire agreement on a legal ground. He denies agreeing to it in the first place. Although similar, invalidity and existence are different questions. One asks whether the contract is legally proper; the other, whether it exists at all. No surprise that the Supreme Court anticipated and rejected Defendants’ argument, writing that “[t]he issue of the contract’s validity is different from the issue whether any agreement between the alleged obligor and obligee was ever concluded,” including the question whether “the alleged obligor ever signed the contract.” Id. at 444 n.1 (citation omitted). Further, Buckeye specifically recognizes that challenges to the arbitration clause are for the court to decide, not the arbitrator. Id. at 444. Defendants fail to appreciate the distinction. Their insistence that Plaintiff’s assent to the agreements is for the arbitrator to decide is meritless.

B. Evidentiary Standards and Applicability of Jury Trial

As noted above, Defendants bear the burden to show the existence of a valid agreement that covers the disputes in question. Sanford, 483 F.3d at 962. “Only when there is no genuine issue of fact concerning the formation of the agreement should the court decide as a matter of law that the parties did or did not enter into such an agreement.” Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., Inc., 925 F.2d 1136, 1141 (9th Cir. 1991) (citation omitted). However, if a triable issue exists, then a jury trial is appropriate to determine whether an agreement to arbitrate exists. See Doctor’s Associates, Inc. v. Distajo, 107 F.3d 126, 129 (2d Cir. 1997) (citing 9 U.S.C. § 4); see also Alvarez v. T-Mobile USA, Inc., No. CIV. 2:10–2373 WBS, 2011 WL 6702424, at *8 (E.D. Cal. Dec. 21, 2011) (“If doubts as to the formation of an agreement to arbitrate exist, the matter should be resolved through an evidentiary hearing or mini-trial.”). The party resisting arbitration bears the burden to show that a jury trial is necessary. Id.

As discussed below, Defendants are not entitled to compel arbitration because the arbitration agreements they seek to enforce did not exist and are not binding on Plaintiff. Thus, the Court may decide this motion as a matter of law. Three Valleys, 925 F.2d at 1141. However, should the Court determine that a genuine issue exists, the matter should be tried to a jury because (1) Plaintiff hereby demands jury trial on this issue and (2) has submitted sufficient evidence to demonstrate a question of fact. Simplicity Int’l v. Genlabs Corp., No. CV 09-6146 SVW, 2010 WL 11507526, at *6 (C.D. Cal. May 6, 2010) (holding that, to preserve jury right as to formation of agreement, a plaintiff must demand jury in connection with the question and “‘submit evidentiary facts showing that there is a dispute of fact to be tried’” (quoting Doctor’s Associates, 107 F.3d at 129-30)).

IV. ARGUMENT

As set forth above, the Court’s initial task on a motion to compel arbitration is to decide whether an arbitration agreement exists. To make this determination, a court must “apply ordinary state-law principles that govern the formation of contracts.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Defendants concede that California law applies. See MTC Arb. at 9 (citing California law).

Arbitration is improper for two reasons. First, there is no agreement to arbitrate because Plaintiff did not consent. Defendants bear the burden on that point, and their misleading evidence fails to satisfy it. Second, even if the agreement Defendants offer were to be considered, it is procedurally and substantively unconscionable. On either ground, Defendants’ motion fails as to each relevant tax year. It should be denied.

A. Defendants’ Evidence Is Baseless, and the Facts Upon Which Their Motion Relies Lack Evidentiary Support

As demonstrated above, Defendants’ evidence, limited to the Declaration of Juan Flores and its attachments, is replete with outright misrepresentations and is irreparably impeached by Plaintiff’s evidence. Even so, there is a more disturbing aspect: The obvious dichotomy between the “facts” in the Flores Declaration and the inapposite information in the documents it attaches as exhibits.

Even a cursory review of Defendants’ exhibits reveals a striking pattern. Each year contains two sets of nearly identical documents, except that the first set has “Plaintiff’s signatures” with similar time and date stamps, while the second has different versions of “Plaintiff’s signatures” with time and date stamps a week or two after the first set. (This pattern is particularly remarkable considering that the core of Plaintiff’s allegations concerns the submission of a doctored return in the place of a legitimate one.) Although the Flores Declaration claims that the documents attached as Exhibit A reflect documents signed on April 27, 2015, see Flores Decl. ¶ 6, half of the signatures attributed to Plaintiff are clearly date-stamped as April 15, 2015. The same is true of Exhibit B; although the Flores Declaration claims that they were signed April 22, 2016 (the date Plaintiff welcomed his daughter to the world at the hospital), see Flores Decl. ¶ 9, half of the signatures are date-stamped as April 15, 2016. The documents are nearly identical with one major exception: While there is an “Assisted Refund” agreement in the April 27, 2015 and April 22, 2016 sets, there is no “Assisted Refund” agreement in the April 15, 2015 and April 15, 2016 sets. How convenient.

The obvious questions — What is the legitimate reason for two sets of tax returns? Why would Mr. Flores fail to discuss two visits by Plaintiff for those years? Why are the signatures obviously different, even within the same tax year? — are left unanswered. Not that Defendants fail to recognize this phenomenon elsewhere; the Flores Declaration explains the presence of two sets of returns for Tax Year 2016. The explanation, though baseless, only serves to highlight Defendants’ failure to explain Tax Years 2014 and 2015. It also raises many of the same questions: Why complete a full tax return in the face of missing information only to go through the process again days later? Why would Plaintiff enroll in a program and agree to pay back-end tax preparation fees when he had already paid those fees in advance?

To make matters worse, scattered throughout Defendants’ exhibits are vastly different signatures on different iterations of the same document. Plaintiff provided an example at the outset of this opposition, and similar examples are legion. Compare Flores Decl., Ex. C at 47 with id., Ex. C at 95. Again, what legitimate purpose could two versions of the same document — with vastly different signatures — possibly serve? And if there is a legitimate purpose, why do Defendants fail to share what it is?

Defendants’ evidence is not merely contradicted by Plaintiff’s evidence. It is baseless on its face. The factual statements upon which Defendants’ motion rely lack evidentiary support. Thus, as discussed below, their motion must be denied.

B. Plaintiff Did Not Agree to Arbitrate His Disputes

California contract law requires mutual assent for contract formation. Cal. Civ. Code §§ 1550, 1565; see also Nguyen, 763 F.3d at 1175 (recognizing that “mutual manifestation of assent . . . is the touchstone of contract” under California law (citation omitted)); Gonzalez v. Preferred Freezer Services, LBF, LLC, No. 12-cv-3467 ODW, 2012 WL 2602653, at *2 (C.D. Cal. July 5, 2012) (Wright, J.) (applying California law and determining that “absent persuasive proof of Plaintiff’s assent to arbitration . . . the Defendant has not met its burden of establishing that the parties mutually agreed to arbitrate their disputes”). “The doctrine of mutual assent applies with particular force to contracts of adhesion.” Perez v. DirecTV Group Holdings, LLC, 2017 WL 1836357, at *5 (C.D. Cal. May 1, 2017) (citing Knutson, 771 F.3d at 566). California law also makes clear that “an offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.” Long v. Provide Commerce (2016) 245 Cal. App. 4th 855, 862 (quoting Windsor Mills, Inc. v. Collins & Aikman Corp. (1972) 25 Cal. App. 3d 987, 993).

None of the four purported arbitration agreements Defendants identify in their motion compels Plaintiff to arbitrate his claims or prohibits the instant class action.

1. Plaintiff Did Not Agree to Arbitrate Claims Related to Tax Year 2014

Defendants argue that Plaintiff must arbitrate claims related to Tax Year 2014 because he purportedly signed an Assisted Refund agreement containing an arbitration clause for that tax year. See MTC Arb. at 2-3, 5 (citing Flores Decl., Ex. A at 70-72 ¶ 9). Defendants cite no other arbitration agreement or provision applicable to Tax Year 2014. Similarly, Defendants offer no mechanism of consent other than Plaintiff’s supposed signature, which they claim he affixed to the document on April 27, 2015.

Defendants are wrong. Plaintiff did not sign that agreement. (Lomeli Decl. ¶ 13.) He did not visit the South Gate Jackson Hewitt on April 27, 2015. (Id. ¶ 11.) He had no knowledge of the agreement, was completely unaware of the “Assisted Refund” program, did not anticipate receiving a refund in any form, and never had any discussions with anyone at Jackson Hewitt regarding Assisted Refund or arbitration. (Id. at ¶ 12.) In fact, had Plaintiff known of the Assisted Refund program at that time he completed his Tax Year 2014 return, he would not have enrolled; to state the obvious, there was no need for Plaintiff to do so because he did not anticipate a refund and because he had already paid tax preparation fees to Jackson Hewitt. Id. at ¶ 41.)

Plaintiff plainly did not consent to the arbitration agreement and therefore did not form a contract under California law. Cal. Civil Code §§ 1550, 1565; Long, 245 Cal. App. 4th at 862. He thus may not be compelled to arbitrate his claims. Norcia, 845 F.3d at 1283. Accordingly, Plaintiff’s claims related to Tax Year 2014 are not subject to arbitration. Defendants’ motion should be denied.

2. Plaintiff Did Not Agree to Arbitrate Claims Related to Tax Year 2015

Defendants argue that Plaintiff must arbitrate claims related to Tax Year 2015 because he purportedly signed an Assisted Refund agreement containing an arbitration clause for that tax year. See MTC Arb. at 3-5 (citing Flores Decl., Ex. B at 97-99 ¶ 9). Defendants cite no other arbitration agreement or provision applicable to Tax Year 2015. Similarly, Defendants offer no mechanism of consent other than Plaintiff’s supposed signature, which they claim he affixed to the document on April 22, 2016.

Defendants are wrong. Plaintiff did not sign that agreement. (Lomeli Decl. ¶ 23.) He did not visit the South Gate Jackson Hewitt on April 22, 2016. (Id. ¶ 20.) Instead, Plaintiff was at the hospital for the birth of his daughter. (Id. ¶ 21.) He had no knowledge of the agreement, was completely unaware of the “Assisted Refund” program, did not anticipate a refund, and never had any discussions with anyone at Jackson Hewitt regarding Assisted Refund or arbitration. (Id. ¶ 22.) In fact, had Plaintiff known of the Assisted Refund program at that time he completed his Tax Year 2015 return, he would not have enrolled; Plaintiff did not anticipate a refund and had already paid tax preparation fees to Jackson Hewitt. (Id. ¶ 42.)

Plaintiff plainly did not consent to the arbitration agreement and therefore did not form a contract under California law. Cal. Civil Code §§ 1550, 1565; Long, 245 Cal. App. 4th at 862. He thus may not be compelled to arbitrate his claims. Norcia, 845 F.3d at 1283. Accordingly, Plaintiff’s claims related to Tax Year 2015 are not subject to arbitration. Defendants’ motion should be denied.

3. Plaintiff Did Not Agree to Arbitrate Claims Related to TY 2016

Defendants argue that Plaintiff must arbitrate claims related to Tax Year 2016 because he purportedly signed two Assisted Refund agreements each containing an arbitration clause for that tax year. See MTC Arb. at 5 (citing Flores Decl., Ex. C at 38-39 ¶ 9 (the “February 17 agreement”), and 89-90 ¶ 9 (the “February 21 agreement”)). Defendants cite no other arbitration agreement or provision applicable to Tax Year 2016. Similarly, Defendants offer no mechanism of consent other than Plaintiff’s supposed signature, which they claim he affixed to the documents on February 17 and February 21, 2017. For the reasons stated below, neither agreement compels arbitration of Plaintiff’s claims.

a. Plaintiff Did Not Consent to the February 17 Agreement

Defendants are wrong that the February 17 agreement compels arbitration because Plaintiff did not consent to that agreement. Like their recitation of the alleged “disclosures” made to Plaintiff, Defendants’ explanation for Plaintiff’s signatures on the documents is false. Mr. Flores neither requested nor received Plaintiff’s permission to “apply [Plaintiff’s] electronic signature . . . to the signature line or each document” after he (Mr. Flores) “reviewed each document with [Plaintiff].” (Compare Flores Decl. ¶ 12 with Lomeli Decl. ¶ 35.) Yet that appears to be how the signatures made their way onto the document. Each signature is time-stamped at the exact same time (8:08 p.m. on February 17) indicating that they were applied en masse to the documents. (See Flores Decl., Ex. C at 11, 13, 15, 18, 31, 32, 33, 34, 35, 39, 42, 45, 46, 47, 48.) Plaintiff gave no such permission. Further, the mass application of Plaintiff’s alleged signature on fifteen documents at the same time belies Mr. Flores’s insistence that he “reviewed each document with [Plaintiff]” before requesting Plaintiff’s “consent[ ] to applying his electronic signature . . . to the signature line of each document.” (Id. ¶ 12.) It goes without saying that discussing the contents of fifteen documents spread over forty-eight pages and obtaining approval to apply a signature to each within the span of a single minute is an absurd impossibility.

In reality, Plaintiff signed an electronic signature pad several times during his visit to the South Gate Jackson Hewitt on February 17. (Lomeli Decl. ¶ 30.) Those signatures, if they were ever recorded, are nowhere to be found in Defendants’ documents. Instead, as noted above, Defendants deny multiple signatures, and instead insist that Plaintiff signed only one time for application to several documents. That is false. In any event, when Plaintiff signed the electronic signature pad, he did so under the belief that he was applying his signature to tax documents. (Id.) He was neither presented with the documents as he signed them nor able to see the monitor on which they were (apparently) displayed. (Id.) He did not discuss the Assisted Refund program, did not receive documents concerning the Assisted Refund program, or ask to have his refund disbursed via the Assisted Refund program. (Id. ¶ 33.) In fact, had Plaintiff known of the Assisted Refund program at that time he completed his Tax Year 2016 return, he would not have enrolled; Plaintiff specifically requested to have his refund disbursed directly to him by the government and had already paid tax preparation fees to Jackson Hewitt. (Id. ¶ 43.) Finally, at no point did Plaintiff discuss arbitration or “terms and conditions” applicable to him, including those allegedly imposed by the Assisted Refund program. (Id. ¶ 31.)

As such, Plaintiff did not consent to the arbitration agreement and therefore did not form a contract under California law. Cal. Civil Code §§ 1550, 1565. Even if the signatures on the documents were construed to be Plaintiff’s (which Plaintiff disputes for the reasons stated above), any such “apparent manifestation of [ ] consent” cannot bind Plaintiff to “inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.” Long, 245 Cal. App. 4th at 862. As set forth above, Plaintiff was unaware of the Assisted Refund Program, its terms and conditions, and the agreement to arbitrate when he signed the electronic signature pad. He further did not believe that he was signing a contract, but rather his tax return documents for submission to the government. Under longstanding California principles of contract, even if Plaintiff “signed” the agreement via the electronic signature pad, his lack of awareness of the contract’s existence in the first place renders any such “apparent manifestation of consent” inoperable to form a viable agreement.

Sensing this straightforward position under California law, Defendants misconstrue Plaintiff’s argument as an attempt to avoid a contract’s effect by claiming ignorance of its terms while nevertheless conceding its existence. Indeed, it is axiomatic that a party may not skirt contractual obligations by claiming that he or she did not read before signing. See MTC Arb. at 9 (citing Stewart v. Preston Pipeline Inc. (2005) 134 Cal. App. 4th 1565, 1588-89; Macaulay v. Norlander (1993) 12 Cal. App. 4th 1, 6). But that is not Plaintiff’s position. The plaintiffs in Stewart and Macaulay each received the relevant agreement, had the opportunity to review it, and, most fundamentally, knew it existed. See Stewart, 134 Cal. App. 4th at 1570 (noting that the plaintiff received a copy of the relevant settlement agreement before signing it following a mediation); Macaulay, 12 Cal. App. 4th at 5 (noting that the relevant agreement was “mass-mailed” to the plaintiffs, who were instructed to sign and return it, which they did). By contrast, Plaintiff did not receive a copy of the arbitration agreement, did not have an opportunity to review it, or was even aware that it existed. In fact, he was not shown any of the documents he signed, but instead was told that his signatures were being applied to necessary tax return documents — not contracts or agreements with the “Jackson Hewitt System.” After all, Plaintiff had already paid for tax preparation services; what further agreements would he reasonably expect to sign?

Thus, even if Plaintiff had signed the February 17 agreement (which, again, he denies), it still would not be an enforceable agreement because it lacks consent. Cf. Long, 245 Cal. App. 4th at 862. Accordingly, because Plaintiff did not consent to arbitration, he may not be compelled to arbitrate his claims. Norcia, 845 F.3d at 1283.

b. Plaintiff Did Not Consent to the February 21 Agreement

In addition to the February 17 agreement, Defendants claim that the February 21 agreement compels Plaintiff to arbitrate his claims. Defendants are wrong. Plaintiff did not sign the February 21 agreement. (Lomeli Decl. ¶ 37.) He did not visit the South Gate Jackson Hewitt on February 21, 2017. (Id. ¶ 36.) And as noted above, Plaintiff had no knowledge of the agreement, was completely unaware of the “Assisted Refund” program, did not anticipate receiving a refund in any form, and never had any discussions with anyone at Jackson Hewitt regarding Assisted Refund or arbitration. (Id. ¶ 33.) Just as with the February 17 agreement, the February 21 agreement provides no basis for Defendants to compel arbitration of Plaintiff’s claims because Plaintiff did not consent. Norcia, 845 F.3d at 1283. Defendants’ motion should be denied as to Plaintiff’s claims for Tax Year 2016 as well.

C. Alternatively, the Arbitration Agreement Is Procedurally and Substantively Unconscionable

As set forth above, the arbitration agreements upon which Defendants’ motion relies cannot compel Plaintiff to arbitrate because he did not agree to them. Thus, the Court need not reach the question of whether the agreements are unconscionable because Defendants cannot carry their burden to show that they exist in the first place. But even if Plaintiff had signed the agreements (which he did not), they would still be unenforceable because they are unconscionable.

California law provides that unconscionability may prevent the formation of a contract; that defense is applicable to invalidate an arbitration clause. See, e.g., Capili v. The Finish Line, Inc., __ Fed. App’x __, 2017 WL 2839504, at *1 (9th Cir. July 3, 2017); Perez, 2017 WL 1836357, at *10. A finding of unconscionability, upon which courts routinely rely to deny motions to compel arbitration, “‘requires a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.’” Gonzalez, 2012 WL 2602653, at *2 (quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 340 (2011) (applying California law)). These elements are considered on a “sliding scale”; thus, the more procedurally unconscionable an agreement, the less substantively unconscionable it must be, and vice versa. Pokorny v. Quixtar, Inc., 601 F.3d 987, 996 (9th Cir. 2010) (applying California law); see also Harper v. Ultimo (2003) 113 Cal. App. 4th 1402, 1406 (“Yet while both [procedural and substantive unconscionability] must be present, they need not be present in equal amounts.”). The question of whether an arbitration clause is unconscionable is for the court to decide. Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1000 (9th Cir. 2010) (citing Buckeye, 546 U.S. at 444).

As demonstrated below, and assuming for argument’s sake only that Plaintiff signed the agreements, the arbitration agreements are both procedurally and substantively unconscionable.¹ Thus, although the Court need not reach these arguments because Plaintiff did not consent to any of the agreements, they provide alternative grounds to deny Defendants’ motion in its entirety.

1. The Arbitration Agreement is Procedurally Unconscionable

“Procedural unconscionability turns on factors of ‘oppression’ and ‘surprise,’ with courts focusing on ‘the manner in which the contract was negotiated and the circumstances of the parties at that time.’” Gonzalez, 2012 WL 2602653, at *2 (quoting Kinney v. United Healthcare Servs., Inc. (1999) 70 Cal. App. 4th 1322, 1329). “Oppression” stems from “inequality of bargaining power” and the “absence of real negotiation or a meaningful choice on the part of the weaker party.” Kinney, 70 Cal. App. 4th at 1329; see also Pokorny, 601 F.3d at 996. “Surprise” refers to the pertinent terms being obscured from the weaker party, including those “hidden in a prolix printed form drafted by the party seeking to enforce them.” Kinney, 70 Cal. App. 4th at 1329-30.

In this matter, “[p]roof of oppression abounds.” Gonzalez, 2012 WL 2602653, at *2. Plaintiff did not have a meaningful choice. Cf. Pokorny, 601 F.3d at 996 (“[Defendant], a large corporation doing business throughout the United States, occupied a superior bargaining position to that of [the plaintiff].”). Arbitration is a condition of the Assisted Refund program, and there is no opportunity to opt-out. Plaintiff also had no opportunity to negotiate the applicability of arbitration; on top of the inequity of bargaining power, he was unaware of the clause’s existence, not provided with any documents, and did not even know he was signing up for the Assisted Refund program. Cf. id. at 997 (finding the defendant’s failure to attach a copy of the arbitration agreement to the parties’ agreement as procedurally unconscionable); see also Perez, 2017 WL 1836357, at *11 (discussing cases finding procedural unconscionability (and lack of formation) in instances where the arbitration agreement is not provided to the consumer at the time of signing). For the same reason, the terms come as a complete surprise to Plaintiff. It is clear that the agreement is procedurally unconscionable.

2. The Arbitration Agreement Is Substantively Unconscionable

Substantive unconscionability focuses on the terms of the agreement rather than the manner of its negotiation. Gonzalez, 2012 WL 2602653, at *3. “The focus of the inquiry is whether the term is one-sided and will have an overly harsh effect on the disadvantaged party.” Pokorny, 601 F.3d at 997. Mutuality “is the ‘paramount’ consideration when assessing substantive unconscionability.” Id. (quoting Abramson v. Juniper Networks, Inc. (2004) 115 Cal. App. 4th 638, 657). Unilateral arbitration clauses are substantively unconscionable. Gonzalez, 2012 WL 2602653, at *3; see also Abramson, 115 Cal. App. 4th at 657 (“When only the weaker party’s claims are subject to arbitration, and there is no reasonable justification for that lack of symmetry, the agreement lacks the requisite degree of mutuality.”).

The agreement is substantively unconscionable because it strongly favors Defendants at the expense of Plaintiff. First, it does not expressly require members of the “Jackson Hewitt System” to arbitrate any claims they have against their consumers. Instead, each of the provisions is directed toward the consumer’s claims, providing members of the “Jackson Hewitt System” an escape hatch to file their disputes in court. Rather than expressly create a mutual obligation to arbitrate, the agreement provides that, “[i]n consideration of the services provided in connection with this Agreement, I [the consumer] agree to the terms of this arbitration provision . . .” Flores Decl., Ex. A at 70 ¶ 9 (emphasis added). The “scope” of arbitration also limits certain categories of claims that might be brought by the Jackson Hewitt System against the consumer. For example, the only “claims for money damages” within the “scope” of the agreement are those “asserted by me [i.e., the consumer] against the BANK, Servicer and/or any of the Related Third Parties [i.e., the “Jackson Hewitt System”].” See Flores Decl., Ex. B at 98 ¶ 9.B.vii (emphasis added). And although each party may “demand” arbitration, the ability to demand is not the same as an express agreement to submit to arbitration. See Flores Decl., Ex. C at 38. Without a mutual obligation to arbitrate, that provision permits the consumer to demand arbitration over his or her own claim without any reciprocal right to demand arbitration as to any claim brought by members of the “Jackson Hewitt System.” Thus, the consumer’s ability to “demand arbitration” is illusory, as is the mutuality of obligation to arbitrate. That is substantively unconscionable. See Gonzalez, 2012 WL 2602653, at *3; see also Pokorny, 601 F.3d 1000-01.

Second, the agreement favors Defendants by eliminating all public injunctive relief and the ability to pursue claims on a class-wide basis. Defendants’ efforts to waive a consumer’s substantive right to public injunctive relief are not enforceable, see McGill v. Citibank (2017) 2 Cal. 5th 945, 963, but that is beside the point: Defendants’ efforts indicate that the agreement is written to lead to “one-sided” results. See Gonzalez, 2012 WL 2602653, at *3 (finding substantive unconscionability where an agreement “specifically excludes certain injunctive relief from arbitration”). Coupled with its other waivers that affect only the consumer, and not the “Jackson Hewitt System,” the agreement is substantively unconscionable.

V. CONCLUSION

For the foregoing reasons, Plaintiff respectfully requests that Defendants’ motion to compel arbitration be denied in its entirety.

Dated: August 28, 2017

STALWART LAW GROUP

By: Ian P. Samson
Dylan Ruga, Esq.
Ji-In Lee Houck, Esq.
Paul A. Traina, Esq.
Ian P. Samson, Esq.

Attorneys for Plaintiff and the Proposed Class