Judge: Barbara M. Scheper, Case: 22STCV10663, Date: 2022-10-24 Tentative Ruling
Case Number: 22STCV10663 Hearing Date: October 24, 2022 Dept: 30
Dept. 30
Calendar No.
Scutter
vs. American Hondo Motor Co., Inc., et. al., Case No. 22STCV10663
Tentative
Ruling re: Defendant’s Motion to Compel
Arbitration
Defendant American Honda
Motor Co., Inc. (Defendant) moves to compel Plaintiff Kendrick Scutter
(Plaintiff) 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.)
Plaintiff’s Complaint asserts
two causes of action against Defendant under the Song-Beverly Act (Civ. Code §§
1790, et seq.) for Breach of Express Warranty and Breach of Implied
Warranty. Plaintiff purchased the vehicle, a used Honda CR-V, from the
dealership Long Beach Honda on April 3, 2019. (Hancox Decl. ¶ 2.) The Sales
Contract entered into between Plaintiff and Long Beach Honda includes a section
entitled “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.
(Hancox Decl. ¶
2, Ex. A, p. 6 [27].)
Defendant is a non-signatory to the
Sales Contract, and argues that it may enforce the arbitration provision
against Plaintiff 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.) “A third party may enforce a contract where he shows that he
is a member of a class of persons for whose benefit it was made.” (Ronay
Family Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 839.)
Defendant argues that it is a
third-party beneficiary of the Sales Contract, relying on the language in the
Arbitration Provision that “[a]ny 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.” (Hancox Decl., Ex. A, p. 7.)
The Court does not agree that
Defendant is a third-party beneficiary to the sales contract. The arbitration
provision provides that arbitration may be compelled “at your or our election”
– that is, at the election of either Plaintiff or the dealership, not Defendant.
The fact that Plaintiff’s claims arise out of the “condition of the vehicle”
does not bring the vehicle within the scope of the arbitration provision,
because the provision applies to “[a]ny claim or dispute . . . between you
and us or your employees, agents, successors, or assigns, which arises . .
.” (Ibid. [emphasis added].) Defendant is not the dealership’s employee,
agent, successor, or assign. The sales contract does not confer any benefits on
Defendant either specifically or generally. Accordingly, the Court finds that Defendant
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 plaintiffs then dismissed the
dealership, after which the district court ordered the plaintiffs to arbitrate
with the manufacturer alone. (Id. at 499.) Here, in contrast, only the
non-signatory manufacturer is a party to the action and alone seeks to compel
arbitration. Based on this distinction, Felisilda is not controlling.
(See Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 950
[“It makes a critical difference that the Felisildas, unlike [plaintiff], sued
the dealership in addition to the manufacturer. . . . Accordingly, Felisilda
does not address the situation we are confronted with here, where the
non-signatory manufacturer attempted to compel arbitration on its own”].)
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.) Here, in
contrast, the Sales Contract contains a section entitled “WARRANTIES SELLER
DISCLAIMS,” whereby Long Beach Honda 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.” (Motion, Ex.
A, p. 4 [25].) Presented with a nearly identical warranty disclaimer, the court
in Jurosky found that “[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 Defendant, 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 to compel arbitration
of Plaintiff’s claims against Defendant.