Atlantic Home Health Care, LLC v. Wynwest Advance LLC

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ATLANTIC HOME HEALTH CARE, Case No. 25-cv-04365-RFL

LLC, et al.,

Plaintiffs, ORDER GRANTING MOTION

TO COMPEL ARBITRATION

v.

Re: Dkt. No. 4

WYNWEST ADVANCE LLC,

Defendant.

Finding itself in financial straits, Atlantic entered into three cash advance agreements

with Wynwest. Under the agreements, Atlantic sold its receivables to Wynwest in exchange for

a discounted lump sum. Atlantic would then pay back the full value of its sold receivables in

weekly installments and with Atlantic’s payment obligation secured by its receivables.

Dissatisfied with the terms of the agreements, Atlantic commenced this action, alleging, among

other things, that Wynwest charged usurious interest rates under the agreements. Wynwest now

moves to compel arbitration. (See Dkt. No. 4 (the “Motion”).)1 For the reasons set forth below,

the Motion is GRANTED. This Order assumes that the reader is familiar with the facts of the

case, the applicable legal standards, and the Parties’ arguments.

A. The Delegation Clause Is Not Unconscionable

Atlantic does not dispute that it entered into the agreements, and the Parties agree that the

agreements delegate the question of arbitrability to an arbitrator. This Order, therefore, need

address only the enforceability of the delegation clause. See Brennan v. Opus Bank, 796 F.3d

1 All citations to page numbers in filings on the docket refer to ECF page numbers.

1125, 1132 (9th Cir. 2015). Atlantic argues that the agreements’ delegation clauses are

unenforceable as unconscionable. “The prevailing view is that [procedural and substantive

unconscionability] must both be present in order for a court to exercise its discretion to refuse to

enforce a contract or clause under the doctrine of unconscionability.” Sanchez v. Valencia

Holding Co., 61 Cal. 4th 899, 910 (2015) (emphasis and citation omitted). Courts apply a

“sliding scale” approach in evaluating procedural and substantive unconscionability, where

“more of one kind mitigates how much of the other kind is needed” to render an agreement

unconscionable. See De La Torre v. CashCall, Inc., 5 Cal. 5th 966, 982 (2018) (citations

omitted). “As the party asserting unconscionability as a defense to the enforcement of the

arbitration agreement, [Atlantic] bears the burden of proving unconscionability.” Ronderos v.

USF Reddaway, Inc., 114 F.4th 1080, 1089 (9th Cir. 2024) (citation omitted).

Procedural unconscionability. Procedural unconscionability “addresses the

circumstances of contract negotiation and formation, focusing on oppression or surprise due to

unequal bargaining power.” See OTO LLC v. Kho, 8 Cal. 5th 111, 125 (2019) (citation omitted).

The lack of an ability to opt out of the agreements’ arbitration provisions does present at least

some minor procedural unconscionability. See, e.g., Brown v. Quantcast Corp., No. 19-cv-

05773-EMC, 2019 WL 6727503, at *4 (N.D. Cal. Dec. 11, 2019); Brookdale Inn & Spa v.

Certain Underwriters at Lloyds, London, No. 13-cv-02559-EJD, 2014 WL 116442, at *3 (N.D.

Cal. Jan. 13, 2014). However, the overall level of procedural unconscionability is low.

Atlantic asserts that it suffered oppression due to unequal bargaining power, as Wynwest

unilaterally set the terms of the agreements without providing Atlantic an opportunity to

negotiate. But these are commercial agreements that were alleged to have involved millions of

dollars in receivables. This is not a consumer context in which buyers making routine purchases

are offered lengthy adhesive contracts that they likely lack the time and opportunity to review.

Cf. Fli-Lo Falcon, LLC v. Amazon.com, Inc., 97 F.4th 1190, 1200-01 (9th Cir. 2024) (rejecting

unconscionability challenge based on purported lack of sophistication where plaintiffs were not

“unsophisticated consumers” but were instead “sophisticated” businesses). Atlantic offers no

evidence, beyond conclusory statements in the verified complaint, as to why it could not have

sought to negotiate or, if it was displeased with the terms, sought another vendor. Although

Atlantic observes that the agreement had an exclusivity provision that required Atlantic to obtain

Wynwest’s consent if Atlantic wished to sell receivables to another vendor, that provision would

not have prevented Atlantic from exploring contracts with other vendors in November 2024,

when it entered into the first agreement with Wynwest containing an arbitration provision.

Atlantic also presents insufficient basis for a finding of surprise based on Wynwest

“embedd[ing]” the arbitration provisions “deeply within prolix agreements consisting of more

than two dozen pages and thousands of words.” (See Dkt. No. 8 at 9.) Atlantic does not explain

why it lacked sufficient time to read the terms of the commercial contracts at issue, or why the

presence of an arbitration provision was surprising. See, e.g., Bielski v. Coinbase, Inc., 87 F.4th

1003, 1014 (9th Cir. 2023) (no surprise where, among other things, “the pre-arbitration dispute

resolution procedures are not . . . beyond the reasonable expectation of the user”). Further, the

arbitration provisions appear in sections titled “Arbitration” in bold, rendering them conspicuous.

See, e.g., Callahan v. Paychex N. Am. Inc., No. 21-cv-05670-CRB, 2022 WL 11902205, at *5-6

(N.D. Cal. Oct. 20, 2022) (no surprise where, among other things, “[t]he arbitration provision has

its own section with a bolded title”).

Substantive unconscionability. “Substantive unconscionability pertains to the fairness of

an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided.”

Kho, 8 Cal. 5th at 125 (citation omitted). Atlantic characterizes the agreements as one-sided

because they require a party to file its arbitration demand and pay all initiation fees prior to

moving to compel arbitration in court. Given that Wynwest’s agreements concern advancing

funds to cash-strapped businesses, Atlantic argues that Wynwest’s counterparty would likely

struggle to pay any such fees in most situations, leaving only Wynwest able to move to compel

arbitration. But as evidenced by Wynwest’s submissions, the initiation fee here amounted to

$303.85, which is less than the $405 fee to commence a civil action in this District. (See Dkt.

Nos. 10-1, 10-2.) Atlantic also submits no evidence that it could not afford to pay the arbitration

initiation fees in this dispute, which involves hundreds of thousands of dollars. To the contrary,

Atlantic’s profit and loss statements from the first quarter of 2025, which are attached to the

complaint, list a net income of $276,679.69 for March 2025. (See Dkt. No. 1-1 at 146.) Under

these circumstances, the fee requirement is not substantively unconscionable. See, e.g., In re

BAM Trading Servs. Inc. Sec. Litig., 733 F. Supp. 3d 854, 872 (N.D. Cal. 2024) (no substantive

unconscionability where “the only fee Plaintiff will bear is the $205 filing fee” which “is less

than the filing fee to bring an action in court,” and “Plaintiff has not argued he cannot afford this

fee”).

Atlantic next points to the lack of any provision in the agreements that permits a party to

dispute the appointment of an arbitrator. Yet nothing in the arbitration provisions affirmatively

prohibits a party from disputing the appointment of an arbitrator, the lack of an express term on

this point is not overly harsh, and any such inability would affect Atlantic and Wynwest

mutually. Further, Atlantic offers no discussion of whether the rules of the relevant arbitral

forum provides for the fair selection of a neutral arbitrator.

Atlantic also expresses concern with the relevant arbitral forum’s rules that limit

discovery and disclaim any required “conformity to legal rules of evidence.” (See Dkt. No. 8 at

10.) But the rules do permit the arbitrator to allow additional discovery beyond the enumerated

limitations “for good cause shown” and allow the arbitrator to address evidentiary concerns.

(See Dkt. No. 8-1, Ex. B at Rules 9(c), 19.) Such discretionary authority satisfies any

unconscionability concerns, and the rules affect Atlantic and Wynwest mutually. See Ramirez v.

Charter Commc’ns, Inc., 16 Cal. 5th 478, 506 (2024) (“Allowing the arbitrator to deviate from

agreed-upon default discovery limits ensures that neither party will be unfairly hampered in

pursuing a statutory claim based on circumstances that arise post-formation,” and “we assume

the arbitrator will act reasonably and in conformity with the law.” (citation omitted)).

Finally, Atlantic challenges the forum-selection provisions, which require arbitration to

occur in New York, a forum bearing no connection to the Parties or their transactions. Yet

Atlantic offers no argument or evidence explaining why “the forum selected would be

unavailable or unable to accomplish substantial justice” or why proceeding in New York would

be “so gravely difficult and inconvenient that [Atlantic] will for all practical purposes be

deprived of [its] day in court.” See Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1027, 1029 (9th

Cir. 2016) (citations omitted). Indeed, the arbitration provisions expressly permit remote

attendance at all hearings, thereby countering any potential assertions of difficulty and

inconvenience. (See, e.g., Dkt. No. 4-2 at 28.) That Wynwest’s counsel works in New York

does not compel a different conclusion; the unconscionability analysis focuses on “whether a

contract provision was unconscionable at the time it was made,” and the Parties entered into the

agreements before counsel began representing Wynwest in this action. See Sonic-Calabasas A,

Inc. v. Moreno, 57 Cal. 4th 1109, 1134 (2013) (emphasis added) (citations and quotation marks

omitted).

In sum, the agreements’ delegation provisions are not unconscionable. Accordingly, an

arbitrator, and not this Court, must determine the arbitrability of the Parties’ dispute. See

Caremark, LLC v. Chickasaw Nation, 43 F.4th 1021, 1030 (9th Cir. 2022).

B. An Arbitrator, and Not This Court, Must Resolve Arguments About

the Purported Unconscionability of the Arbitration Agreements Overall

Atlantic also argues that the arbitration agreements broadly (beyond just the delegation

provisions) are unconscionable because they contain six purportedly problematic provisions: (1)

class-action waiver; (2) one-sided counterclaim waiver; (3) jury waiver; (4) one-sided 20-day

deadline to dispute arbitrability upon receipt of an arbitration demand; (5) one-sided fee shifting;

and (6) one-sided waiver of traditional methods of service of process. Because the agreements

contain an enforceable delegation clause, an arbitrator must evaluate this argument. See Suski v.

Coinbase, Inc., 55 F.4th 1227, 1229 (9th Cir. 2022).

To be sure, in evaluating the unconscionability of a delegation clause, a court may look to

“unrelated” provisions of an agreement (as this Order did above), but in doing so, a court should

not analyze the unconscionability of the agreement as a whole; rather, “if a party cites provisions

outside of the delegation clause in making an unconscionability challenge, it must explain how

those provisions make the fact of an arbitrator deciding arbitrability unconscionable.” See

Holley-Gallegly v. TA Operating, LLC, 74 F.4th 997, 1002 (9th Cir. 2023) (citation omitted).

Yet Atlantic neither argues nor explains how its six enumerated provisions implicate the

unconscionability of the delegation provisions. This Order, therefore, declines to evaluate those

provisions. See, e.g., Build Grp., Inc. v. Indian Harbor Ins. Co., No. 24-cv-03426-VC, 2025 WL

1836797, at *1 (N.D. Cal. July 3, 2025); Jimerson v. SUN Tech. Servs., LLC, No. 24-cv-01150-

BAS, 2025 WL 1639415, at *8 (S.D. Cal. June 6, 2025).

C. An Arbitrator, and Not This Court, Must Resolve Arguments About Scope

The arbitration provisions permit a party to move to compel arbitration only after they

first file an arbitration demand and pay any required initiation fees. Atlantic, however, received

an invoice from the arbitration organization on June 17, after Wynwest filed the Motion.

Wynwest accordingly argues that no required initiation fee was yet due at the time the Motion

was filed. Atlantic nonetheless argues that the Motion must be denied because Wynwest failed

to satisfy the precondition for its filing, despite the lack of an invoice for the initiation fee.

But whether Wynwest has satisfied the contractual prerequisites for arbitration by paying

the filing fee after it received the invoice (but not before it filed the Motion) goes to the scope of

the claims submitted. The central issue is an interpretation of the meaning of the arbitration

provisions to determine whether the claims at issue fall within the scope of arbitrable claims, in

light of the contractual requirements for when payment must be made. The issue does not

implicate whether the Parties formed an agreement to arbitrate or agreed to delegate arbitrability,

or the enforceability of the delegation provisions. Accordingly, this Order may not evaluate

Atlantic’s argument. See Caremark, 43 F.4th at 1030 (“[I]f the parties did form an agreement to

arbitrate containing an enforceable delegation clause, all arguments going to the scope or

enforceability of the arbitration provision are for the arbitrator to decide in the first instance.”).

D. Remaining Issues

Atlantic’s admissibility objections to certain statements contained within the declaration

that Wynwest filed along with the Motion are OVERRULED. In evaluating a motion to compel

arbitration, courts apply a summary-judgment standard, which generally does not require an

analysis of the admissibility of the evidence presented. See, e.g., Lomeli v. Midland Funding,

LLC, No. 19-cv-01141-LHK, 2019 WL 4695279, at *7 (N.D. Cal. Sept. 26, 2019).

Atlantic’s request for judicial notice is DENIED AS MOOT because consideration of

the documents in question would not change the analysis in this Order.

E. Conclusion

For the foregoing reasons, the Motion is GRANTED. This action is STAYED pending

resolution of arbitration. The Parties shall file a joint status report every 180 days to update the

Court on the arbitration proceedings, starting from the date of this Order, and shall file a status

report within 14 days of the completion of arbitration proceedings.

IT IS SO ORDERED.

Dated: September 9, 2025

RITA F. LIN

United States District Judge