Unreported / Non-Citable
Background
Christopher Kovacs and Kye Teshirogi brought a proposed class action against Enterprise Holdings, alleging that synthetic fragrances in rental facilities and vehicles discriminated against people with chemical sensitivities. Their claims invoked the Americans with Disabilities Act, California’s Unruh Civil Rights Act, the Consumers Legal Remedies Act, and the Unfair Competition Law. Teshirogi alleged that Enterprise did not honor requests to avoid detailing a vehicle and to leave its windows open before pickup.
Enterprise moved to compel arbitration based on electronic rental agreements. Teshirogi disputed that he had agreed, while both plaintiffs argued that the contract did not clearly assign threshold questions—such as whether the dispute fell within the arbitration clause—to the arbitrator. Enterprise alternatively sought dismissal based on personal jurisdiction, standing, and pleading defects.
The Court’s Holding
The court compelled both plaintiffs to arbitrate and stayed the federal case. Enterprise produced evidence of the online rental process, records tying Teshirogi to the transaction, and rental-agreement summaries containing the arbitration terms. That was enough to establish an agreement despite Teshirogi’s denial. Kovacs did not dispute his assent.
The agreements also clearly and unmistakably delegated gateway questions of arbitrability to the arbitrator. The contract expressly assigned disputes over the arbitration provision’s interpretation, applicability, enforceability, or formation to arbitration. Arguments that the clause was buried or surprising addressed procedural unconscionability, but the plaintiffs did not show substantive unconscionability. California law requires both. Because the delegation provision was enforceable, the arbitrator—not the judge—must resolve challenges concerning the reach of the broader arbitration agreement.
The court noted that, if arbitration had not controlled, it would have dismissed the complaint with leave to amend. Enterprise Holdings was alleged to be a holding company rather than the California rental operator, and the plaintiffs agreed they needed to name the proper entities. The pleaded facts also did not adequately connect the defendant to an imminent future injury or plausibly establish the statutory claims. Those observations were alternative reasoning; the operative result is arbitration and a stay.
Key Takeaways
- Businesses seeking to enforce online arbitration terms should preserve transaction records that connect a customer, the assent flow, and the version of the contract presented.
- An express delegation clause can send threshold disputes about scope and enforceability to the arbitrator, leaving the court to decide only whether an agreement and delegation provision were formed.
- Under California law, surprise or unequal bargaining power alone does not establish unconscionability; some substantively unfair term must also be shown.
- A court compelling arbitration must ordinarily stay, rather than dismiss, the federal action when a party requests a stay.
- Plaintiffs suing a national brand should identify the operating entity responsible for the challenged California conduct, not assume the parent or holding company is the proper defendant.
Why It Matters
The ruling is a useful reminder that consumer-accessibility claims may be diverted from court before the merits are reached. For California companies, the enforceability of an electronic arbitration program often turns on mundane evidence: screen flows, timestamps, customer identifiers, and archived terms. Clear delegation language can sharply narrow the judge’s role.
For plaintiffs, challenges to arbitration should target the delegation clause specifically and address both procedural and substantive unconscionability. The alternative dismissal discussion also signals that disability-access suits seeking prospective relief need concrete allegations of a likely return and must connect the challenged policy to the entity actually before the court.
The merits remain undecided. Compelling arbitration does not validate the fragrance policy or reject chemical sensitivity as a disability; it selects the forum that will decide those questions. Businesses should therefore treat accessible-service requests independently from their dispute-resolution clauses, train frontline personnel to document accommodation discussions, and ensure that the entity identified in customer-facing terms matches the entity operating the California location.