Judge Barbara M. Scheper, Case Number: 22STCV36851, Date: 2023-07-10 Tentative Ruling

Judge: Barbara M. Scheper, Case: 22STCV36851, Date: 2023-07-10 Tentative Ruling

Case Number: 22STCV36851 Hearing Date: July 10, 2023 Dept: 30

Dept. 30

Calendar No.

Keefer, et. al. vs. BMW of North America, LLC, et.al., Case No. 22STCV36851

Tentative Ruling re: Defendant’s Motion to Compel Arbitration

Defendant BMW of North America, LLC (Defendant) moves to compel arbitration of the claims of Plaintiffs Deanna Keefer and Richard Keefer (collectively, Plaintiffs). The motion is granted.

“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 v. Longwood Mgmt. Corp. (2001) 88 Cal.App.4th 215, 218 (Condee).)

On purchase of the vehicle at issue in this lemon law action, Plaintiffs entered into the Lease Agreement (the Agreement) with the lessor Long Beach BMW. (Mendoza Decl. ¶ 2, Ex. A.) The Agreement contains a section entitled “Arbitration Clause,” which provides as follows:

Either you or I may choose to have any dispute between us decided by arbitration and not in a court or by jury trial. . . . ‘Claim’ broadly means any claim, dispute, or controversy, whether in contract, tort, statute or otherwise, whether preexisting, present or future, 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, purchase or condition of the Vehicle, this 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 court action.

(Mendoza Decl., Ex. A [9].)

Defendant is a nonsignatory to the Agreement between Plaintiffs and Long Beach BMW, but seeks to enforce the arbitration provision as either a third-party beneficiary or under the doctrine of equitable estoppel. The Court finds that Defendant may enforce the provision as a third-party beneficiary to the Agreement.

“There are circumstances in which nonsignatories to an agreement containing an arbitration clause can be compelled to arbitrate under that agreement. As one authority has stated, there are six theories by which a nonsignatory may be bound to arbitrate: ‘(a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or alter ego; (e) estoppel; and (f) third-party beneficiary.’” (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 859.)

Under the third party beneficiary doctrine, 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.)

Defendant seeks to enforce the Agreement as an affiliate of the Agreement’s assignee, BMW Financial Services NA, LLC (BMW FS). The Agreement identifies BMW FS as the Lessor’s assignee and provides that the terms “‘you’ and ‘your’ refer to the Lessor or Lessor’s assignee.” (Mendoza Decl., Ex. A, § 2 [4].)

Under the arbitration provision, “Claims” subject to arbitration include any claims “between me [Plaintiffs] and you or your employees, officers, directors, affiliates, successors or assigns.” (Mendoza Decl., Ex. A [9].) Because “you” and “your” may refer to either Long Beach BMW or BMW FS, this provision applies to claims between Plaintiffs and BMW FS’s “employees, officers, directors, affiliates, successors or assigns.”

Aaron Grener, the Controlling and Finance Systems Manager of BMW FS, states that BMW FS is a wholly owned subsidiary of Defendant. (Grener Decl. ¶ 4.) “Black's Law Dictionary defines an “affiliate” outside of the securities context as ‘[a] corporation that is related to another corporation by shareholdings or other means of control; a subsidiary, parent, or sibling corporation.’” (Iqbal v. Ziadeh (2017) 10 Cal.App.5th 1, 9–10 [citing Black's Law Dict. (10th ed. 2014) p. 69, col. 2.)].) Given the relationship between the entities, Defendant is an affiliate of BMW FS.

Because Defendant is an affiliate of BMW FS, Defendant is a third-party beneficiary of the Agreement. Defendant is expressly included in the Agreement’s list of parties that receive a benefit from the arbitration provision. (See Fuentes v. TMCSF, Inc. (2018) 26 Cal.App.5th 541, 551–552.) Defendant’s inclusion in this list as an “affiliate” of the assignee “demonstrate[s] the express intent to confer the benefit” upon Defendant. (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 302.) Accordingly, the motion is granted.