Judge: Barbara M. Scheper, Case: 22STCV21859, Date: 2023-03-28 Tentative Ruling

Case Number: 22STCV21859    Hearing Date: March 28, 2023    Dept: 30

Dept. 30

Calendar No.  

Flores-Soto vs. Nissan North America, Inc., et. al., Case No. 22STCV21859

Tentative Ruling re:  Defendant’s Motion to Compel Arbitration

Defendant Nissan North America, Inc. (Nissan) moves to compel Plaintiff Juan Flores-Soto (Plaintiff) to binding arbitration and to stay proceedings pending 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 three causes of action again Nissan under the Song-Beverly Act for breaches of express and implied warranties, in connection with Plaintiffs’ alleged purchase of a 2020 Nissan Rogue. (Comp. ¶ 8.) Plaintiff alleges that he purchased the vehicle on August 14, 2020, accompanied by express warranties from Nissan, and that the vehicle was defective and not conformed to the warranties, specifically, in its transmission and electrical system. (Comp. ¶ 9.)

In support of this motion to compel arbitration, Nissan has produced a copy of the Retail Installment Sale Contract (the Sales Contract) made between Plaintiff and the seller, Antelope Valley Nissan, for the purchase of the vehicle. (Chung Decl. ¶ 5, Ex. 4.) The Sales Contract includes 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.

(Chung Decl. ¶ 5, Ex. 4, p. 7 [11].)

Nissan is a non-signatory to the Sales Contract between Plaintiffs and Antelope Valley 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).” (Chung Decl. ¶ 5, Ex. 4, p. 7 [11].) However, the scope of the arbitration provision is expressly limited to “[a]ny claim or dispute, between you [Plaintiffs] and us [Antelope Valley 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 Antelope Valley 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 Goonewardene element, Nissan’s status as the manufacturer of the vehicle is insufficient to show that the Sales Contract between Plaintiff and Antelope Valley 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.” (Chung Decl. ¶ 5, Ex. 4, p. 5 [9].) 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.

            Nissan lacks grounds to compel arbitration of Plaintiff’s claims either as a third-party beneficiary or under the doctrine of equitable estoppel. Because Nissan cannot enforce the arbitration agreement as a non-signatory, it is unnecessary to consider Plaintiff’s waiver argument. Accordingly, the motion is denied.