Judge Audra Mori, Case 22STCV06719 2023-03-10 Tentative Ruling

Plaintiff Yu Chol Kim (“Plaintiff”) filed this action against defendants Restaurant Depot, Jetro Cash & Carry, and Does 1-20 for damages relating to Plaintiff’s slip and fall while entering defendants’ store. Plaintiff has filed an Amendment to Complaint naming RD America, LLC a Doe 1. The operative First Amended Complaint alleges causes of action for negligence and premises liability against defendants.

Defendant RD America, LLC (“Defendant”) now moves for an order compelling arbitration of Plaintiff’s claims. Plaintiff opposes the motion, and Defendant filed a reply.

Defendant provides that the subject store where Plaintiff alleges he fell is operated by Defendant, and that the store is membership based and requires enrolled members to complete certain forms and exhibit a membership card when entering the store and purchasing products. Defendant asserts that on April 22, 2019, Louie and Dor, Inc. (“Louie”), which was Plaintiff’s employer, completed and signed a Free Membership Enrollment Form. Defendant argues that Louie’s execution of the agreement bound Louie and its employees to the Terms and Conditions for membership, including the arbitration provision contained therein. Defendant argues that the arbitration provision requires arbitration between Plaintiff and Defendant, and that Plaintiff’s claims are covered by the arbitration clause since Plaintiff was shopping on Louie’s behalf at the time of the incident. Additionally, Defendant argues that Plaintiff is bound by the arbitration agreement as a non-signatory because Plaintiff is a third-party beneficiary of Louie’s membership with Defendant, because Plaintiff has a preexisting relationship with Louie, and because Plaintiff is estopped from refusing to arbitrate.

In opposition, Plaintiff argues that he never agreed to arbitrate claims arising from a fall at the subject store, and that there is no arbitration agreement between Plaintiff and Defendant. Plaintiff asserts that he is not a signatory to the arbitration agreement submitted by Defendant, and that he is not an alter ego or agent of Defendant’s. Further, Plaintiff contends that Defendant cannot establish that equitable estoppel applies in this case because Plaintiff is not relying on any terms contained in the membership agreement for his claims against Defendant.[1]

In reply, Defendant asserts that Louie’s completion and execution of the enrollment form for Defendant’s store bound Louie and its employees to the terms and conditions, which included the arbitration clause. Defendant again asserts that Plaintiff is bound by the arbitration clause because Plaintiff is an intended beneficiary of the clause, and because Defendant may compel arbitration based on equitable estoppel.

In deciding a petition to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The opposing party has the burden to establish any defense to enforcement. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 579 (“The petitioner, T–Mobile here, bears the burden of proving the existence of a valid arbitration agreement and the opposing party, plaintiffs here, bears the burden of proving any fact necessary to its defense.”).)

“California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes…” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967; CCP § 1281.2.) However, California does not have a “policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate and which no statute has made arbitrable.” (Bouton v. USAA Cas. Ins. Co. (2008) 43 Cal.4th 1190, 1199.)

“Whether a third party is bound by an arbitration agreement presents a question of law. [Citation.] ‘[P]arties can only be compelled to arbitrate when they have agreed to do so.’” (Williams v. Atria Las Posas (2018) 24 Cal.App.5th 1048, 1053.)

“Under California law, a nonsignatory can be compelled to arbitrate under two sets of circumstances: (1) where the nonsignatory is a third party beneficiary of the contract containing the arbitration agreement; and (2) where ‘a preexisting relationship existed between the nonsignatory and one of the parties to the arbitration agreement, making it equitable to compel the nonsignatory to also be bound to arbitrate his or her claim.’ [Citations.]” (Crowley Maritime Corp. v. Boston Old Colony Ins. Co. (2008) 158 Cal.App.4th 1061, 1069-70.) “The preexisting relationship generally gives the party to the agreement authority to bind the nonsignatory. Examples of the preexisting relationship include agency, spousal relationship, parent-child relationship and the relationship of a general partner to a limited partnership. [Citations.] In the absence of such a relationship, or third party beneficiary status, courts will generally not compel a nonsignatory to arbitrate.” (Id. at 1070.)

Here, Defendant provides that on or about April 22, 2019, Plaintiff’s employer, Louie, obtained membership with Defendant by completing and signing a Free Membership Enrollment Form. (Mot. Chen Decl. ¶ 6.) The enrollment form states that it is being completed for Louie and is signed by a Young Jin Yang. (Id. at Exh. A.) The bottom of the form states in relevant part, “BY SIGNING BELOW, I CONFIRM THAT I HAVE READ AND AGREE TO (1) THE TERMS & CONDITIONS FOR MEMBERSHIP IN JETRO/RESTAURANT DEPOT (INCLUDING ITS ARBITRATION CLAUSE) available in-store and at www.restaurantdepot.com/membership/membership-terms-conditions, …” (Id., capitalizations in original.) Defendant’s Human Resources Manager states that they reviewed Louie’s membership file and confirmed that Louie did not opt-out of the arbitration clause in the terms and conditions. (Id. at ¶ 8.)

Definitions: “You” and “Your” refer to the business/organization listed in the Membership Enrollment Form (or any supplemental form), the person(s) who signed the form(s), as well as anyone authorized or permitted by the business/organization to use the membership. “Jetro” “Us” “We” and “Our” means Jetro Holdings, LLC and all of its divisions and affiliates, including Jetro Cash & Carry, Restaurant Depot, TheRDStore.com and any of their predecessors, successors, assigns, parents, subsidiaries, and corporate affiliates, and each of their respective officers, directors, employees and agents.

(a) Purpose. You and We agree that any Dispute involving You and Us shall be resolved on an individual basis through binding arbitration. By agreeing to binding arbitration, You are waiving Your right to pursue Your claims in a court of law.

(b) Definitions. “Dispute” means any claim or controversy related to Us or Our relationship with You, including but not limited to any and all: (1) claims for relief and theories of liability, whether based in contract, tort, fraud, negligence, statute, regulation, ordinance, or otherwise; (2) claims that arose before this or any prior agreement; (3) claims that arise after the termination or cancellation of Your membership; and (4) claims that are the subject of purported class action litigation.

Defendant avers that on the date of the incident, Plaintiff intended to and was shopping for Louie at Defendant’s store using Louie’s membership. Defendant argues that because Plaintiff was using Louie’s membership, Plaintiff and his claims fall within the scope of the membership agreement. The primary dispute between the parties, however, is whether Defendant can enforce the arbitration clause against Plaintiff as a nonsignatory to the enrollment form.

“Under the third party beneficiary theory, a nonsignatory may be compelled to arbitrate where the nonsignatory is a third party beneficiary of the contract.” (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 841.) “Whether a nonsignatory is an intended third party beneficiary to the contract is determined from the parties’ intent, as gleaned from the contract as a whole and the circumstances under which it arose.” (Id.)

“A third party beneficiary is someone who may enforce a contract because the contract is made expressly for his benefit. [Citation.] The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract. [Citation] [T]he mere fact that a contract results in benefits to a third party does not render that party a third party beneficiary.” (Pillar Project AG v. Payward Ventures, Inc. (2021) 64 Cal.App.5th 671, 677, internal quotations omitted, citing Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 301.)

In Pillar Project AG, the plaintiff hired a third party to exchange its cryptocurrency on an online exchange platform owned by Defendant. After the plaintiff’s funds were stolen, plaintiff sued the defendant for negligence and false advertising, and defendant moved to compel arbitration pursuant to an arbitration provision in terms of service (the “Terms”) to which the third party had agreed. The defendant argued, among other things, that the plaintiff was bound to the arbitration provision as a third party beneficiary of the Terms. On appeal, the court found no evidence that the parties intended to benefit the plaintiff when they agreed to the Terms and affirmed the denial of a motion to compel arbitration. (Id. at 676, 681.)

In this case, Defendant contends that Plaintiff was a third-party beneficiary of Louie’s membership and of its terms and conditions because Plaintiff was shopping for Louie on the day of the incident. However, per Defendant’s argument, Plaintiff was shopping for Louie’s benefit. It is unclear how this alone benefitted Plaintiff. Moreover, Defendant does not cite any language from the membership agreement or the terms and conditions showing that Plaintiff was expressly intended to benefit from the agreement between Defendant and Louie.[2] There is thus no showing that the agreement was made for Plaintiff’s benefit. (Pillar Project AG, 64 Cal.App.5th at 677.)

Defendant fails to establish that Plaintiff was a third-party beneficiary of the agreement with the arbitration provision.

“There are cases in which an employee is held to be bound by an arbitration agreement entered into by his or her employer, even though the employee did not sign on to the agreement.” (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 302 [footnote omitted].) However, the general rule is that “ ‘[p]ersons are not normally bound by an agreement entered into by a corporation in which they have an interest or are employees.’ ” (Id. at 303.) “[T]he mere fact that parties are employees of a corporation ‘does not mean they were bound’ by an arbitration clause in an agreement between the corporation and a third party.” (Id., citing Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1514.)

“[T]he proper inquiry is not only whether there is any sort of preexisting agency relationship with one of the signatories to the arbitration agreement—whether employer-employee, or another form of agency—but also whether that preexisting relationship is of such a nature that it supports a finding of ‘implied authority for [one of the signatories] to bind [the nonsignatory] by their arbitration agreement.’ ” (Jensen, supra, 18 Cal.App.5th at 303.) “It is critical to ask who is seeking to bind whom, and on what basis; the question of whether a principal's acts bind an agent is fundamentally different from the question of whether an agent's acts bind a principal.” (Id.)

‘Not every agency relationship ... will bind a nonsignatory to an arbitration agreement. [Citation] “Every California case finding nonsignatories to be bound to arbitrate [on an agency theory] is based on facts that demonstrate, in one way or another, the signatory's implicit authority to act on behalf of the nonsignatory.” [Citations.] …’ ” (Pillar Project AG, 64 Cal.App.5th at 676, citing Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 860.)

In Jensen, the employee of a transport company sued a rental truck company for negligence after the truck he was driving blew a tire. (Jensen, 18 Cal.App.5th at 298.) The employee’s supervisor had signed a rental contract with the rental truck company that included an arbitration provision requiring arbitration of all claims between the rental truck company and the transport company, its agents, and employees. (Id. at 299.) Despite the agency relationship between the employee driver and his employer, the Court of Appeal applied the general rule and held the driver's company's agreement did not bind the employee personally. (Id. at 304.) There was nothing in the record that required the conclusion that the supervisor had implicit authority to bind the employee to the arbitration agreement. (Id.)

Here, Defendant asserts that a preexisting employment relationship existed between Plaintiff and Louie at the time of the incident.[3] The only evidence as to the nature of the relationship between Plaintiff and Louie is a declaration from one of Defendant’s assistant branch managers that states that at the time of the incident, Plaintiff advised the branch manager that he was Louie’s employee and was entering Defendant’s store to shop on behalf of Louie with Louie’s membership card. (Mot. Begando Decl. ¶ 4.) However, an agency relationship between an employer and its individual employee, without more, is insufficient to bind the employee to an arbitration agreement entered into by the employer. (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 860.) Defendant does not otherwise submit any evidence showing that Louie, or the person that signed the agreement on Louie’s behalf, had the authority to enter into the arbitration agreement on Plaintiff’s behalf. While the agreement was apparently signed by a Young Jin Yang, (Mot. Chen Exh. A), as in Jensen, where there was no evidence the supervisor had implicit authority to bind the employee driver, there is no evidence to support the conclusion that Young Jin Yang had implicit authority to bind Plaintiff to an arbitration agreement. (Jensen, 18 Cal.App.5th at 304.) Indeed, there is no explanation or evidence submitted regarding who Young Jin Yang is or what their relationship to Plaintiff is.

Furthermore, Defendant contends that the membership card Plaintiff used to enter the store states, “Use of this card is governed by all Jetro/Restaurant Depot Member Policies. For more information, visit www.restaurantdepot.com.” (Mot. at p. 13:18-19.) Defendant, however, does not explain how possessing this card is sufficient to show that Louie, or its other agents or employees, had implicit authority to bind Plaintiff to the arbitration agreement, nor does Defendant cite authority showing that possessing the card was sufficient to show Plaintiff agreed to the arbitration provision.

“The application of equitable estoppel principles to arbitrability questions arises in a variety of circumstances.” (Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 268, 25 Cal.Rptr.3d 440 (Boucher).) One such circumstance is that “[a] nonsignatory plaintiff may be estopped from refusing to arbitrate when he or she asserts claims that are ‘dependent upon, or inextricably intertwined with’ the underlying contractual obligations of the agreement containing the arbitration clause.” (Jensen, supra, 18 Cal.App.5th at p. 306, 226 Cal.Rptr.3d 797.) Another is that “ ‘[a] nonsignatory is estopped from refusing to comply with an arbitration clause “when it receives a ‘direct benefit’ from a contract containing an arbitration clause.” ’ ” (Boucher, at p. 269, 25 Cal.Rptr.3d 440.)

“A nonsignatory plaintiff may be estopped from refusing to arbitrate when he or she asserts claims that are ‘dependent upon, or inextricably intertwined with’ the underlying contractual obligations of the agreement containing the arbitration clause.” (Jensen, 18 Cal.App.5th at 306; see also Pillar Project AG, 64 Cal.App.5th at 678 [“’Claims that rely upon, make reference to, or are intertwined with claims under the subject contract are arbitrable.’ ”].) “[T]he plaintiff's actual dependence on the underlying contract in making out the claim against the nonsignatory ... is ... always the sine qua non of an appropriate situation for applying equitable estoppel. [Citation.] [E]ven if a plaintiff's claims “touch matters” relating to the arbitration agreement, “the claims are not arbitrable unless the plaintiff relies on the agreement to establish its cause of action.” (Pillar Project AG, 64 Cal.App.5th at 678, internal quotations omitted.)

Here, Plaintiff’s First Amended Complaint does not rely or depend on the terms of the enrollment form signed by Louie or on the terms and conditions incorporated into Louie’s membership with Defendant. Plaintiff’s allegations are not founded in or bound with the terms of the enrollment form or the obligations of that agreement. While Defendant contends that a membership card is required to enter its store, Plaintiff’s causes of action for negligence and premises liability are “ ‘fully viable without reference to the terms’ ” of the agreement. (Jensen, 18 Cal.App.5th at 306, citing Goldman v. KPMG, LLP 173 Cal.App.4th 209, 230.) Defendant does not provide any authority showing that Plaintiff’s claims cannot survive without reliance on the agreement between Louie and Defendant. “ ‘That being so, the basis for equitable estoppel—relying on an agreement for one purpose while disavowing the arbitration clause of the agreement—is completely absent.’ ” (Id.)[4]

Defendant does not establish that Plaintiff’s claims are inextricably intertwined with the terms and conditions of Louie’s agreement with Defendant.

Defendant further argues that Plaintiff is bound by the arbitration agreement because Plaintiff received a direct benefit from Louie’s membership with Defendant. Particularly, Defendant asserts that the membership provided Plaintiff with access to enter and shop at Defendant’s store, which Defendant contends is a benefit that flows directly from the terms and conditions. In making this argument, Defendant primarily relies on NORCAL Mut. Ins. Co. v. Newton (2000) 84 Cal.App.4th 64 and Nicosia v. Amazon.com, Inc. (E.D.N.Y. 2019) 384 F.Supp.3d 254.[5]

In NORCAL, a psychiatrist and his wife were sued for medical malpractice. (NORCAL, supra, 84 Cal.App.4th at p. 66, 100 Cal.Rptr.2d 683.) Both tendered the complaint to the psychiatrist's malpractice insurer, and the insurer agreed to provide a defense for the wife even though she was not covered by the policy. (Id. at pp. 67–68, 100 Cal.Rptr.2d 683.) In a subsequent dispute between the wife and the insurer, the insurer filed a petition to compel arbitration pursuant to the psychiatrist's insurance policy. (Id. at p. 70, 100 Cal.Rptr.2d 683.) The Court of Appeal held the wife was bound to the arbitration agreement in her husband's policy: “having sought and accepted the benefit of the insurance policy in handling the underlying malpractice suit, [the wife] was required to abide by the policy's requirement of arbitration of disputes. [¶] ... To allow [her] to rely upon the insurance policy to obtain representation but disavow the applicability of the arbitration provision to her would be to allow her to pick and choose the portions of the policy she wished to accept.” (Id. at p. 82, 100 Cal.Rptr.2d 683.)

In Nicosia v. Amazon.com, Inc. (E.D.N.Y. 2019) 384 F.Supp.3d 254 (Nicosia), affd. (2d Cir. 2020) 815 Fed.Appx. 612, the plaintiff's wife created an Amazon account and in doing so agreed to terms and conditions, including an arbitration agreement. (Id. at pp. 258–259, 270.) The plaintiff subsequently made purchases using his wife's account and sued Amazon over the purchases. (Id. at p. 261.) The court found the plaintiff estopped from avoiding arbitration because the use of his wife's account “allowed him to step into the shoes of his wife and enjoy the same contractual rights she enjoyed, viz., the right to place an order on Amazon.com. Because plaintiff knowingly accepted the benefit of [his wife's] contractual relationship with Amazon, he must also be held to the arbitration clause that governs that relationship.” (Id. at p. 275.)

(64 Cal.App.5th at 679, footnote omitted.)[6] The Pillar Project AG Court further noted that in NORCAL and Nicosia, the plaintiffs had a close, personal relationship with the signatory party- their spouses. (Id. at 680 n. 7.)

However, unlike in NORCAL and Nicosia, Defendant does not establish that Plaintiff received a direct benefit from the agreement containing the arbitration clause. Rather, as Defendant seemingly acknowledges, Plaintiff was shopping for Louie’s benefit. There is no evidence showing he was shopping for his own benefit. Louie, therefore, received the benefit that its employees or agents could shop on its behalf, presumably for Louie’s business. There is no evidence to suggest otherwise. Consequently, any benefits Plaintiff received from the agreement between his employer and Defendant were indirect or remote from the agreement. (See Pillar Project AG, 64 Cal.App.5th at 680 [“We are unwilling to extend” the equitable estoppel doctrine to “a plaintiff who has received only indirect or remote benefits from a contract containing an arbitration clause.”]; see also Crowley Maritime Corp. v. Boston Old Colony Ins. Co. (2008) 158 Cal.App.4th 1061, 1070-1071 [case law “ ‘consistently requires a direct benefit under the contract containing an arbitration clause before a reluctant party can be forced into arbitration’ ”].)

Moreover, unlike the plaintiffs in NORCAL and Nicosia, where the signatory parties were the plaintiffs’ spouses, in this case, the only evidence concerning the relationship between Plaintiff and Louie is that of employer-employee. As stated above, the general rule is that persons are not normally bound by an agreement entered into by a corporation in which the persons are employees. (Jensen, 18 Cal.App.5th at 304.) Accordingly, “ ‘[t]his case does not present the unfairness that equitable estoppel is designed to avoid.’ ” (Pillar Project AG, 64 Cal.App.5th at 681.)

Based on the foregoing, Defendant fails to establish that Plaintiff is bound by the arbitration agreement under an equitable estoppel theory.

[1] In the notice of Plaintiff’s opposition, Plaintiff asserts that Defendant’s motion is untimely because Defendant has filed an answer and has propounded and responded to discovery. Plaintiff does not otherwise cite any authority to support this contention nor make this argument in his memorandum of points and authorities. The Court’s records show that Plaintiff filed an Amendment to Complaint naming Defendant as a Doe defendant on September 26, 2022, Defendant then filed its answer to Plaintiff’s complaint, and on February 15, 2023, Defendant filed the instant motion. Plaintiff fails to establish that Defendant’s motion is untimely or that Defendant waived its right to compel arbitration under the facts presented.

[2] In contrast, the language of the agreement more clearly expresses a benefit to Defendant’s employees and agents. It states that Louie waives its right to go to court when it makes certain claims against Defendant’s “employees and agents,” indicating that Louie relinquishes rights to the advantage of Defendant’s employees and agents.

[3] Defendant does not argue or provide evidence that Louie employed Plaintiff when it entered into the agreement. In Pillar Project AG, 64 Cal.App.5th at 676, the court found that there was no evidence that the third party was acting as plaintiff’s agent at the time it agreed to the Terms, two years before the plaintiff hired it, or that plaintiff even knew the Terms existed, making plaintiff unable to ratify the terms.

[4] Plaintiff’s original Complaint alleged a single cause of action for premises liability. The claim did not expressly rely on or refer to the terms and conditions or any of its provisions.

[5] Nicosia v. Amazon.com, Inc. is a Federal District case from the Eastern District of New York and is not binding authority on this Court.

[6] The Court in Nicosia v. Amazon.com, Inc. also noted that by using his wife’s account to make the purchase, the plaintiff implicitly represented that he was the true accountholder and directly benefitted from that representation. (384 F.Supp.3d at 275.)