Judge Armen Tamzarian, Case Number: 23STCV03266, Date: 2023-10-27 Tentative Ruling

Judge: Armen Tamzarian, Case: 23STCV03266, Date: 2023-10-27 Tentative Ruling

Case Number: 23STCV03266 Hearing Date: October 27, 2023 Dept: 52

Defendant BMW of North America, LLC’s Motion to Compel Arbitration and to Stay All Proceedings

Defendant BMW of North America, LLC moves to compel arbitration of the complaint by plaintiff Fala Bar LLC and to stay this action.

Defendant is entitled to compel arbitration of this action. Plaintiff entered a lease agreement with non-party dealership BMW of Vista. The lease agreement begins by identifying the parties: the “Lessor” is “BMW of Vista” and the “Lessee” is “Fala Bar LLC.” (Fetterolf Decl. Ex. A, § 1.) The agreement further provides, “This Motor Vehicle Lease Agreement (‘Lease’) is entered into between the lessee and co-lessee, (‘Lessee’) and the lessor (‘Lessor’) named above. Unless otherwise specified, ‘I,’ ‘me’ and ‘my’ refer to the Lessee and ‘you’ and ‘your’ refer to the Lessor or Lessor’s assignee. … ‘Assignee’ refers to BMW Financial Services NA, LLC (‘BMW FS’) or, if this box is checked [X] to Financial Services Vehicle Trust. BMW FS will administer this Lease on behalf of itself or any assignee.” (Id., § 2.)

The lease agreement’s arbitration clause provides, “Either you or I may choose to have any despite between us decided by arbitration… . [¶] ‘Claim’ broadly means any claim, dispute or controversy … between me and you or your employees, officers, directors, affiliates, successors or assigns, or between me and any third parties if I assert a Claim against such third parties in connection with a Claim I assert against you, which arises out of or relates to my credit application, lease… or any resulting transaction or relationship (including any such relationship with third parties who do not sign this Lease.) Any Claim shall, at your or my election, be resolved by neutral, binding arbitration and not by a court action.” (Fetterolf Decl., Ex. A, § 38.)

Defendant BMW of North America, LLC may compel arbitration as a third-party beneficiary of this agreement. “[A] non-signatory beneficiary of an arbitration clause is entitled to require arbitration.” (Harris v. Superior Court (1986) 188 Cal.App.3d 475, 478.) “A third party may qualify as a contract beneficiary where the contracting parties must have intended to benefit that individual, an intent which must appear in the terms of the agreement.” (Principal Mut. Life Ins. Co. v. Vars, Pave, McCord & Freedman (1998) 65 Cal.App.4th 1469, 1486.) “The third party need not be identified by name. It is sufficient if the claimant belongs to a class of persons for whose benefit it was made.” (Ibid.)

A nonsignatory moving to compel arbitration as a third-party beneficiary is “obligated to prove that ‘express provisions of the contract,’ considered in light of the ‘relevant circumstances,’ show that (1) ‘the third party would in fact benefit from the contract;’ [and] (2) ‘a motivating purpose of the contracting parties was to provide a benefit to the third party.’ ” (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 946 (Ngo).)

The lease agreement defines “you” to include the signatory dealership’s “assignee,” BMW Financial Services NA or Financial Services Vehicle Trust. (Fetterolf Decl., Ex. A, § 2.) The arbitration clause provides for arbitration of disputes “between me and you or your employees, officers, directors, affiliates, successors or assigns.” (Id., § 38.) By agreeing that “you” may elect arbitration, plaintiff therefore agreed to arbitrate disputes between plaintiff and BMW Financial Services NA or Financial Services Vehicle Trust and their affiliates. Defendant establishes that it is an affiliate of both entities. It provides undisputed evidence that Financial Services Vehicle Trust is a “subsidiary” of BMW Financial Services NA, LLC which is a “wholly-owned subsidiary of” defendant BMW of North America, LLC. (Grener Decl., ¶¶ 3-4.) Defendant also submits evidence that BMW of North America, LLC is the sole managing member of BMW Financial Services NA, LLC. (Baker Decl., ¶ 2, Ex. A.)

In Ngo, the Ninth Circuit Court of Appeals distinguished a prior case, Hajibekyan v. BMW of North America, LLC (9th Cir. 2021) 839 F. App’x 187, because there the “arbitration clause defined arbitrable disputes as those between ‘me and you or your employees, officers, directors, affiliates, successors, or assigns,’ and defined ‘you’ and ‘your’ to include the assignee of the contract.” (Ngo, supra, 23 F.4th at p. 947.) Ngo noted that in Hajibekyan, “BMW was an affiliate of the assignee,” but in the present case, “arbitrable disputes do not include those involving BMW Bank of North America's assignees and affiliates, only those involving the dealership's assignees.” (Ibid.) The arbitration clause in Ngo made no reference to “affiliates” (id. at p. 945), unlike this agreement between plaintiff and BMW of Vista. Defendant thus shows it would in fact benefit from the contract and that a motivating purpose of the contracting parties was to provide a benefit to the BMW Financial Services NA, LLC and its affiliates, including defendant.

Disposition

Defendant BMW of North America, LLC’s motion to compel arbitration is granted. Plaintiff Fala Bar LLC is ordered to arbitrate this action with defendant. The court hereby stays the entire action pending the resolution of the arbitration proceeding.