Judge: Andrew E. Cooper, Case: 22CHCV00998, Date: 2023-09-15 Tentative Ruling

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Case Number: 22CHCV00998    Hearing Date: September 15, 2023    Dept: F51

MOTION TO COMPEL ARBITRATION

Motion filed: 6/20/23

MOVING PARTY: Defendants Toyota Motor Sales, U.S.A., Inc.; and GL HMH, LLC dba Hamer Toyota (collectively, “Defendants”)

RESPONDING PARTY: Plaintiff Evgeny Nagovitsyn (“Plaintiff”)

NOTICE: ok 

RELIEF REQUESTED: An order: (1) compelling binding arbitration of Plaintiff’s claims, and (2) dismissing this case or staying all proceedings in connection with this lawsuit pending the conclusion of arbitration.

TENTATIVE RULING: The motion is granted.

BACKGROUND

Plaintiff brings this action under the Song-Beverly Consumer Warranty Act (Civil Code § 1790 et seq.) for a vehicle he purchased from defendant Hamer Toyota on or around 9/18/21, for which defendant Toyota Motor Sales (“TMS”) issued the manufacturer’s express warranty. (Compl. ¶¶ 1, 6.)

Plaintiff alleges that the vehicle was advertised by Defendants as having a range over 400 miles on a single tank of hydrogen. (Id. at ¶ 7.) Plaintiff claims that the stated range was a major selling point, and he relied on this representation and would not have purchased the vehicle if it was not capable of achieving the advertised range. (Id. at ¶ 8.) Plaintiff claims that the subject vehicle cannot achieve this range, and Defendants misrepresented facts at the time of sale regarding the range. (Id. at ¶¶ 8–9.) Plaintiff further alleges that the vehicle contained an unspecified defect at the time of sale and was not merchantable, and both Defendants violated the implied warranty of merchantability under the Song-Beverly Act. (Id. at ¶¶ 16–20.) Lastly, Plaintiff claims that due to TMS’ refusal to repurchase the vehicle, TMS has converted funds belonging to Plaintiff. (Id. at ¶¶ 21–23.)

On 10/27/22, Plaintiff filed his complaint, alleging against Defendants the following causes of action: (1) Violation of Consumers Legal Remedies Act (Civil Code § 1770 et seq.); (2) Breach of Implied Warranty of Merchantability under the Song-Beverly Act; and (3) Conversion (against TMS).

On 6/20/23, Defendants filed the instant motion to compel arbitration of Plaintiff’s claims. On 9/1/23, Plaintiff filed his opposition. On 9/8/23, Defendants filed their reply.

ANALYSIS

Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ. Proc. § 1281.2.) This is usually done by presenting a copy of the signed, written agreement to the court. “A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, rule 3.1330.)

The moving party must also establish the other party’s refusal to arbitrate the controversy. (Code of Civ. Proc. § 1281.2.) The filing of a lawsuit against the moving party for a controversy clearly within the scope of the arbitration agreement affirmatively establishes the other party’s refusal to arbitrate the controversy. (Hyundai Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 577.)

A.    Retail Installment Sales Contract

Here, the parties do not dispute the existence of a written agreement containing an arbitration provision. The subject contract of sale (the “RISC”) itself, a copy of which Defendants have attached to their moving papers, provides the terms for the financing of the vehicle purchase, and includes an arbitration clause at the end of the agreement. (Ex. A to Decl. of John W. Myers IV.) Defendants have attached a copy of the RISC to their moving papers, and Plaintiff does not appear to dispute its existence nor validity.

Scope of Agreement

Here, the arbitration provision in the RISC provides, in relevant part: “Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your … purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign the contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.” (Ex. A to Myers Decl., p. 7 [emphasis added].)[1]

Defendants assert that all of Plaintiff’s allegations are centered on the purchase and condition of the vehicle, and therefore are subject to arbitration pursuant to the RISC. “Plaintiff alleges that Defendants made misrepresentations and/or concealed material facts at the time of his purchase regarding the fuel tank range, and he would not have purchased the vehicle had he known the true facts. Plaintiff further alleges that due to unspecified defects, the vehicle was not merchantable at the time of sale, and Defendants violated the implied warranty of merchantability. In addition, Plaintiff seeks remedies that directly impact the RISC, including rescission of the RISC and incidental and consequential damages from purchasing the vehicle. Plaintiff further contends that TMS converted the funds Plaintiff used to purchase the vehicle by failing to repurchase the vehicle under Song-Beverly due to the claimed defects as the warrantor/distributor. Thus, each and every cause of action and claim arises out of or relates to the RISC. The Complaint is therefore subject to arbitration.” (Defs.’ Mot. 9:4–14.)

Plaintiff argues in opposition that his “claims do not arise of the obligations in the purchase contract between Plaintiff and Dealer, but rather Plaintiff’s claims are based on TMS’s obligations to honor its warranties and not falsely advertise the merchantability of its vehicles.” (Pl.’s Opp. 2:14–16.) The Court disagrees, and notes that Plaintiff alleges the following in his complaint: “Plaintiff relied on both Toyota’s advertising and Dealer’s advertising, including verbal comments by Dealer’s salesperson that the Vehicle, in fact, could be driven over 400 miles on a single tank of hydrogen. Plaintiff would not have purchased the Vehicle if it, in fact, was not capable of achieving the advertised over-400-mile range in ordinary use.” (Compl. ¶ 8.) The Court finds that the allegations made in Plaintiff’s complaint directly relate to Plaintiff’s “purchase” and the “condition of the vehicle.” (Ex. A to Myers Decl., p. 7.)

The Court therefore agrees with Defendants’ reply argument that “the causes of action and supporting allegations in this case arise directly out of the sales contract. For a CLRA claim, plaintiff needs misrepresentations or omissions which then result in a transaction. The sales contract is the transaction. Similarly, the conversion claim is expressly predicated upon a failure to return money paid under the sales contract. Even the Song-Beverly implied warranty claim necessarily arises from the sales contract.” (Defs.’ Reply 4:23–28.)

Based on the foregoing, the Court finds that Defendants have met their initial prima facie burden to establish the existence of a written agreement to arbitrate Plaintiffs’ asserted claims.

B.     Nonsignatory Standing

Here, the agreement is executed solely between Plaintiffs and defendant dealership Hamer Toyota. The right to arbitration may generally only be invoked by parties to the purported arbitration agreement. (Code of Civ. Proc. § 1281.2.)

The parties disagree on whether this Court should rule in accordance with Felisilda v. FCA US LLC¿(2020) 53 Cal.App.5th 486, or the recently decided Ochoa v. Ford Motor Company (2023) 89 Cal.App.5th 1324. Both Felisilda and Ochoa discuss a nonsignatory vehicle manufacturer’s right to invoke the arbitration provision of a sales contract entered into between a plaintiff buyer and a nonparty dealership.

In Felisilda, the Third District Court of Appeal found that the plaintiffs’ agreement to the sales contract constituted express consent to arbitrate their claims regarding the vehicle’s condition, even against third parties, as the agreement unambiguously included “an express extension of arbitration to claims involving third parties that relate to the vehicle's condition.” (53 Cal.App.5th at 498.) In Ochoa, the Second District Court of Appeal declined to follow Felisilda, and instead found that the nonsignatory manufacturer did not have the right to compel the plaintiffs’ claims to arbitration under either theory of equitable estoppel or third-party beneficiary standing.

Under the doctrine of stare decisis, superior courts are bound by all published decisions of the Court of Appeal, but where there is a split in authority, the superior court may choose which appellate decision to follow. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456.) However, here, the Court finds that it need not reach a decision to follow either case as they both center on the issue of equitable estoppel as a basis for a nonsignatory manufacturer to compel a plaintiff’s claims to arbitration, and neither case speaks to a motion to compel arbitration filed by the signatory dealership. As Defendants observe, the distinction between Felisilda and Ochoa is inapposite here “because the dealer, which is a signatory to the RISC, is a party to the lawsuit. The dealer has a direct right to enforce the arbitration provision.” (Defs.’ Mot. 10:11–13.)

C.    Inconsistent Rulings Doctrine

Code of Civil Procedure section 1281.2, subdivision (c) provides an exception to a party’s right to arbitration when “a party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.”

“If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c), the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.” (Id. at subd. (d).)

 However, “because the Federal Arbitration Act … contains no provision analogous to section 1281.2, subdivision (c), that subdivision cannot be applied to deny the enforcement of arbitration clauses governed by the FAA.” (Gloster v. Sonic Automotive, Inc. (2014) 226 Cal.App.4th 438, 446.)

Here, Plaintiff argues that because the instant action has been brought against TMS, who is not a party to the arbitration agreement, ordering separate judicial proceedings and arbitration proceedings against each of the two defendants “could easily lead to a wasteful duplication of efforts and likely two separate proceedings, regardless of outcome of an initial arbitration.” (Pl.’s Opp. 8:21–23.) Therefore, Plaintiff contends that “the better course—if the defendants ask that arbitration only as to Dealer be ordered—would be for Plaintiff to first pursue TMS in Superior Court. Whether Plaintiff prevailed or not against Toyota, Plaintiff would be unlikely to thereafter pursue claims in arbitration against the dealer.” (Id. at 9:16–19.)

Notwithstanding the foregoing, Section 1281.2, subdivision (c) is discretionary, and the Court finds that here, Plaintiff agreed, at his or the dealership’s election, to arbitrate any dispute arising out of or relating to the purchase and condition of the subject vehicle, in addition to any resulting relationships with third parties such as TMS. (Ex. A to Myers Decl., p. 7.) Had Plaintiff sued Hamer Toyota as the sole defendant in the instant action, his claims would likely have been ordered to arbitration without issue. Here, although TMS is a third party nonsignatory to the arbitration agreement, it is clear to this Court, by way of the instant motion, that TMS consents to being a party to arbitration. (“In order to promote efficiency and avoid inconsistent results, it makes sense to also refer to the claims against TMS to the same binding arbitration.” (Defs.’ Reply 6:17–18.)) Moreover, as Defendants note, “to the extent plaintiff believes his claim against the dealership would be unnecessary whether he prevailed or lost in his court proceedings against TMS, then plaintiff should dismiss his claims against the dealership and pursue his claims against TMS in court proceedings.” (Id. at 7:18–21.)

Based on the foregoing, the Court finds that Plaintiff has not shown sufficient cause for the Court to invoke Code of Civil Procedure section 1281.2, subdivision (c) to bar the arbitration of his claims against both Defendants.

Accordingly, the Court grants Defendants’ motion to compel the arbitration of Plaintiff’s claims against them. The entire action is therefore ordered to arbitration in compliance with the terms of the agreement between Plaintiff and Hamer Toyota.

D.    Stay of Proceedings

California Code of Civil Procedure section 1281.4 states that the court shall stay the action or proceeding if the court has ordered arbitration. (Code Civ. Proc. § 1281.4.) Here, as the Court grants Defendants’ motion to compel arbitration, the case is therefore stayed pending completion of arbitration.¿The Court will set an OSC re: Status of Arbitration and Stay at the time of the hearing.

CONCLUSION

The motion is granted.