Judge: Barbara M. Scheper, Case: 21STCV34563, Date: 2023-01-30 Tentative Ruling
Case Number: 21STCV34563 Hearing Date: January 30, 2023 Dept: 30
Dept. 30
Calendar No.
Viramontes,
et. al. vs. Nissan North America, Inc.., et. al., Case
No. 21STCV34563
Tentative
Ruling re: Defendant’s Motion to Compel
Arbitration
Defendant Nissan North
America, Inc. (Nissan) moves to
compel Plaintiffs Erick Viramontes and Maria Medina (collectively, Plaintiffs)
to binding arbitration and stay proceedings pending resolution of the
arbitration. The motion is denied.
“On petition of a party to an
arbitration agreement alleging the existence of a written agreement to
arbitrate a controversy and that a party thereto refuses to arbitrate such
controversy, the court shall order the petitioner and the respondent to
arbitrate the controversy if it determines that an agreement to arbitrate the
controversy exists, unless it determines that: (a) The right to compel
arbitration has been waived by the petitioner; or (b) Grounds exist for the
revocation of the agreement.” (Code Civ.
Proc. §1281.2, subds. (a), (b).)
A proceeding to compel
arbitration is in essence a suit in equity to compel specific performance of a
contract. (Freeman v. State Farm Mutual
Auto Insurance Co. (1975) 14 Cal.3d 473, 479.) Such enforcement may be
sought by a party to the arbitration agreement. (Code Civ. Proc., § 1280, subd.
(e)(1).)
The petition to compel arbitration functions as a motion
and is to be heard in the manner of a motion, i.e., the facts are to be proven
by affidavit or declaration and documentary evidence with oral testimony taken
only in the court’s discretion. (Code Civ. Proc., §1290.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th
394, 413–414.) The petition to compel must set forth the provisions of the
written agreement and the arbitration clause verbatim, or such provisions must
be attached and incorporated by reference. (Cal. Rules of Court, rule 3.1330;
see Condee, supra, 88 Cal.App.4th at 218.)
Once petitioners allege that an arbitration agreement
exists, the burden shifts to respondents to prove the falsity of the purported
agreement, and no evidence or authentication is required to find the
arbitration agreement exists. (See Condee,
supra, 88 Cal.App.4th at 219.)
However, if the existence of the agreement is challenged, “petitioner bears the
burden of proving [the arbitration agreement’s] existence by a preponderance of
the evidence.” (Rosenthal v. Great
Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413; see also Espejo v. Southern California Permanente
Medical Group (2016) 246 Cal.App.4th 1047, 1058–1060.)
Plaintiffs’ Complaint asserts
seven causes of action again Nissan, for violations of the Song-Beverly Act,
Violation of the Magnuson-Moss Warranty Act, and Fraud. Plaintiffs’ claims
arise from their alleged purchase of a defective 2019 Nissan Altima. (Comp. ¶ 7.)
Plaintiffs allege that they received various warranties in connection with the
purchase, and that Nissan failed to conform the vehicle to those warranties
after numerous attempts to repair it. (Comp. ¶¶ 8-11.)
In support of this motion to
compel arbitration, Nissan has produced a copy of the Retail Installment Sale
Contract (the Sales Contract) made between Plaintiffs and the seller, Downey
Nissan, for the purchase of the vehicle. (Yu Decl. ¶ 5, Ex. 4.) The Sales Contract included
an “Arbitration Provision,” which reads as follows:
1.
EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN
US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.
[.
. .]
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 credit application, 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.
(Yu Decl. ¶ 8,
Ex. 5 [5].)
Nissan is a non-signatory to the
Sales Contract between Plaintiffs and Downey Nissan, and argues that it may enforce the
arbitration provision either as a third-party beneficiary or under the doctrine
of equitable estoppel.
Third-party beneficiary
A contract, made expressly for the
benefit of a third person, may be enforced by him at any time before the
parties thereto rescind it. (Civ. Code, § 1559.) Under
California law, a third party may enforce a contract entered into between other
parties when (1) the third party would in fact benefit from the contract, (2) a
motivating purpose of the contracting parties was to provide a benefit to the
third party, and (3) permitting a third party to bring its own breach of
contract action against a contracting party is consistent with the objectives
of the contract and the reasonable expectations of the contracting parties. (Goonewardene
v. ADP, LLC (2019) 6 Cal.5th 817, 830.) To satisfy the second element, “the
contracting parties must have a motivating purpose to benefit the third party,
and not simply knowledge that a benefit to the third party may follow from the
contract.” (Ibid.)
Nissan argues that it is a third-party
beneficiary to the Sales Contract based on the arbitration provision’s
applicability to claims or disputes arising out of “this contract or any
resulting transaction or relationship (including any such relationship with
third parties who do not sign the contract).” However, the scope of the
arbitration provision is expressly limited to “[a]ny claim or dispute, between
you [Plaintiffs] and us [Downey Nissan] or our employees, agents,
successors or assigns, which arises out of or relates to . . . this
contract or any resulting transaction or relationship . . .” (Ibid.
[emphasis added].) Nissan is not Downey Nissan’s employee, agent, successor, or
assign, and so Nissan has not shown that it would in fact benefit from the
contract.
Furthermore,
for the second element, Nissan’s status as the manufacturer of the vehicle is
insufficient to show that the Sales Contract between Plaintiff and Downey
Nissan had a “motivating purpose” to benefit Nissan; Nissan’s benefit here is
merely incidental. (Restatement 2d Contracts § 302, cmt. e, Illustrations [“17. B
contracts with A to buy a new car manufactured by C. C is an incidental
beneficiary, even though the promise can only be performed if money is paid to
C”]; Goonewardene, 6 Cal.5th at 827-28 [“effect of section 1559
is simply ‘to exclude enforcement by persons who are only incidentally or
remotely benefited’”].)
The
Court therefore finds that Nissan is not an intended third-party beneficiary of
the Sales Contract.
Equitable
Estoppel
“Where a nonsignatory seeks to enforce an
arbitration clause, the doctrine of equitable estoppel applies in two
circumstances: (1) when a signatory must rely on the terms of the written
agreement in asserting its claims against the nonsignatory or the claims are
intimately founded in and intertwined with the underlying contract, and (2)
when the signatory alleges substantially interdependent and concerted
misconduct by the nonsignatory and another signatory and the allegations of
interdependent misconduct are founded in or intimately connected with the
obligations of the underlying agreement.” (Kramer v. Toyota Motor Corp.
(9th Cir. 2013) 705 F.3d 1122, 1128-29; see Goldman v. KPMG, LLP (2009)
173 Cal.App.4th 209, 219.) A nonsignatory seeking to enforce an arbitration
agreement has the burden to establish at least one of these circumstances
applies. (Jones v. Jacobson (2011) 195 Cal.App.4th 1, 16.)
In Felisilda v. FCA US LLC (2020) 53
Cal.App.5th 486, the dealership defendant sought to compel arbitration of the
plaintiffs’ Song-Beverly Act claim based on an arbitration provision identical
to the one at issue here. (Id. at 490.) The manufacturer defendant was a
non-signatory to the arbitration provision and so sought to enforce the
provision based on equitable estoppel. (Id. at 493-95.) The court
concluded that the manufacturer could enforce the arbitration provision based
on equitable estoppel, because the plaintiffs’ claim against the manufacturer “directly
relates to the condition of the vehicle that they allege to have violated
warranties they received as a consequence of the sales contract,” and the
plaintiffs “expressly agreed to arbitrate claims arising out of the condition
of the vehicle – even against third party nonsignatories to the sales
contract.” (Id. at 497.)
In Felisilda, the plaintiffs had sued
both the signatory dealership and the non-signatory manufacturer, and the
dealership moved to compel arbitration while the manufacturer filed a notice of
non-opposition. (Id. at 489.) The trial court granted the motion, and
the plaintiffs subsequently dismissed the dealership and arbitrated with the
manufacturer alone. (Id. at 499.)
In this action, only the non-signatory manufacturer,
Nissan, is a party to the action and alone seeks to compel arbitration. Given
this distinction, Felisilda is not controlling: “It makes a critical
difference that the Felisildas, unlike [plaintiff], sued the dealership in
addition to the manufacturer. In Felisilda, it was the dealership—a
signatory to the purchase agreement—that moved to compel arbitration rather
than the non-signatory manufacturer. . . . [T]he Felisildas dismissed the
dealership only after the court granted the motion to compel
arbitration. Felisilda does not address the situation we are
confronted with here, where the non-signatory manufacturer attempted to compel
arbitration on its own.” (Ngo v. BMW of North America, LLC (9th Cir.
2022) 23 F.4th 942, 950.)
Equitable estoppel applies when
the plaintiff’s claims are “intimately founded in and intertwined with the
underlying contract.” (Kramer, supra, 705 F.3d at 1128-29.) “[I]n order to be intertwined with the
purchase agreement, Plaintiff must allege a violation of a ‘duty, obligation,
term or condition’ imposed by the purchase agreement.” (Jurosky v. BMW of
North America, LLC (S.D. Cal. 2020) 441 F.Supp.3d 963, 970.) In Felisilda,
the court found that “the sales contract was the source of the warranties at
the heart of this case.” (Felisilda, 53 Cal.App.5th at 496.) In
contrast, the Sales Contract here contains a section entitled “WARRENTIES
SELLER DISCLAIMS,” which disclaims all warranties on the vehicle, with the
qualification that “[t]his provision does not affect any warranties covering
the vehicle that the vehicle manufacturer may provide.” (Yu Decl., Ex. 5 [10].)
As the court in Jurosky found when presented with a nearly identical
warranty disclaimer, “[t]his differentiation does not support the
interrelatedness of the dealership's purchase agreement and [manufacturer’s]
warranties. Instead, it demonstrates an intent to distinguish and distance the
dealership's purchase agreement from any warranty that [manufacturer] ‘may’
provide.” (Jurosky, supra, 441 F.Supp.3d at 970.)
The language in the warranty
disclaimer indicates that the Sales Contract is not intended to be the source
of the manufacturer’s warranties on which Plaintiff’s Song-Beverly claims are
based. Because Plaintiff’s claims against Nissan, the non-signatory, are based
on warranties “distinguish[ed] and distance[d]” from the Sales Contract (Jurosky,
441 F.Supp.3d at 970), those claims are not “intimately founded in and
intertwined with the underlying contract.” (Kramer, supra, 705 F.3d at
1128-29.) Consequently, equitable estoppel does not apply.