Judge: Brock T. Hammond, Case: 22CHCV01269, Date: 2024-02-15 Tentative Ruling

Case Number: 22CHCV01269    Hearing Date: February 15, 2024    Dept: F43

Dept. F-49

Date: 2-15-24

Case # 22CHCV01269, Melissa Chavez vs. American Honda Motor Co.

Trial Date: N/A

PETITION TO COMPEL ARBITRATION

MOVING PARTY: Defendant American Honda Motor Co.

RESPONDING PARTY: Plaintiff Melissa Chavez

RELIEF REQUESTED

Defendant is requesting that the Court compel the case to arbitration and stay the action

RULING: Denied on two grounds: first, for lack of evidentiary support, and second, because Defendant is not a third-party beneficiary of the agreement

SUMMARY OF ACTION

On December 1, 2022, Plaintiff Melissa Chavez (Plaintiff) filed this action against Defendant American Honda Motor Co. (Defendant) for causes of action related to violations of the Song-Beverly Warranty Act.

On November 14, 2023, Defendant filed this petition to compel arbitration and stay the action. Plaintiff opposes.

Plaintiff’s evidentiary objection: Plaintiff has objected to the dealership retail installment sale contract attached as Exhibit A to the Declaration of Defendant’s attorney, Vanessa Dao. Plaintiff objects to the Exhibit on the basis that it is hearsay, lacks authentication, lacks foundation or personal knowledge, and is speculative and prejudicial. The Court sustains Plaintiff’s objection. Defendant’s attorney provides no foundation for the authenticity of this document. Dao’s declaration states that “I have personal knowledge of the facts set forth in this declaration” (Dao Decl., ¶ 1), but considering that she is neither a party to the agreement or otherwise affiliated with the dealership, it is unclear how she would have personal knowledge of the purchase contract. Nor could Dao testify as to the authenticity of the contract because she did not draft it or sign it.

ANALYSIS

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-972.) The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, the party opposing the petition then bears the burden of proving by a preponderance of the evidence any fact necessary to demonstrate that there should be no enforcement of the agreement, and the trial court sits as a trier of fact to reach a final determination on the issue. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) The Court is empowered by CCP § 1281.2 to compel parties to arbitrate disputes pursuant to an agreement to do so.   

CCP § 1281.2 states that: 

“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.  

(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.” (CCP § 1281.2.)

Defendant has not established an evidentiary basis for compelling arbitration because the Court sustained Plaintiff’s objection to the retail sales installment contract as discussed above. The petition is denied for lack of evidentiary support.

The Court alternatively denies the petition on the merits. Though Plaintiff makes arguments regarding the conscionability of the agreement, the main dispute rests on the fact that Defendant was not a signatory to the arbitration agreement in question, but Defendant argues that it should be able to compel arbitration by virtue of the doctrine of equitable estoppel and Defendant’s claim that it is a third-party beneficiary of the arbitration agreement.

“Under that doctrine [of equitable estoppel] …a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are intimately founded in and intertwined with the underlying contract obligations.” (JSM Tuscany, LLC v. Superior Ct. (2011) 193 Cal.App.4th 1222, 1237, quoting Boucher v. All Title Co. (2005) 127 Cal.App.4th 262, 271 and Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 217–18 (internal quotation marks omitted).) The sine qua non for application of equitable estoppel as the basis for allowing a nonsignatory to enforce an arbitration clause is, “that the claims plaintiff asserts against the nonsignatory must be dependent upon, or founded in and inextricably intertwined with, the underlying contractual obligations of the agreement containing the arbitration clause.” (Goldman, supra, 173 Cal.App.4th at 217–18; accord, JSM Tuscany, LLC, supra, 193 Cal.App.4th at 1237.) “The fundamental point is that a party is not entitled to make use of [a contract containing an arbitration clause] as long as it worked to her advantage, then attempt to avoid its application in defining the forum in which her dispute . . . should be resolved.” (Jensen v. U-Haul Co. of Cal. (2017) 18 Cal.App.5th 295, 306, quoting NORCAL Mut. Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 84 (internal quotation marks omitted).) Courts examine the facts alleged in the operative complaint to determine whether equitable estoppel applies. (Goldman, supra, 173 Cal.App.4th at 229–30.) 

In one case, an arbitration agreement that was in the retail sales agreement was found to extend to a nonsignatory car manufacturer because “the arbitration provision in this case provides for arbitration of disputes that include third parties so long as the dispute pertains to the condition of the vehicle.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 640, 648.) 

While the Court sustained Plaintiff’s objection to the retail sales agreement attached to the declaration of Defendant’s attorney, the language of the arbitration provision in the retail sales agreement mentions third parties. It states as follows: 

“Any claim or dispute … between you and us or our employees, agents, successors or assigns, which arises out of or relates to your … 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 this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.  

(Dao Decl., Ex. A.)

This language is very similar to the language in Felisilda, which allowed the defendant car manufacturer to compel arbitration as to the condition of the vehicle. However, it is also worth noting that nothing in the language of the arbitration agreement explicitly gives third parties the right to compel arbitration on a signatory to the agreement, as the agreement states “at your or our election,” meaning Plaintiff and the dealership. Additionally, the plaintiff in Felisilda had sued both the dealership and the manufacturer for Song-Beverly causes of action, which is not the case here. Plaintiff has only sued Defendant American Honda, as the manufacturer, for the Song-Beverly causes of action. The dealership that sold Plaintiff the vehicle, Galpin Honda, is not a party to this action.

As the Court of Appeal has observed, “[w]e agree with Ngo that the sales contracts reflect no intention to benefit a vehicle manufacturer…nothing in the sale contracts or their arbitration provision offers any direct “benefit” to the [manufacturer].” (Ochoa v. Ford Motor Company – Ford Motor Warranty Cases (2023) 306 Cal.Rptr.3d 611, 623.) The manufacturer’s “claim that it ‘would benefit from utilizing arbitration as an efficient means of dispute resolution as an efficient means of dispute resolution’ (italics added) if treated as a third party beneficiary begs the question: does the arbitration provision directly benefit [the manufacturer]? The answer is patently ‘no.’ Its direct benefits are expressly limited to those persons who might rely on it to avoid proceeding in court – the purchaser, the dealer, the dealer’s employees, agents, successors or assigns. [The manufacturer] is none of these.” (Id.)

The arbitration provision in this case does not directly benefit the manufacturer, despite Honda’s claims to the contrary. For reasons that are unclear, on page 13, and other pages, Defendant includes quotes from non-existent paragraphs of the alleged agreement that purport to mention Defendant American Honda. There are no such mentions of Defendant in the agreement attached to Dao’s declaration. Defendant, as the manufacturer, was clearly not a party to the arbitration agreement. Further, the doctrine of equitable estoppel would not apply because the causes of action against Defendant are not intertwined with the underlying contract obligations, which was a sales contract with the dealership. 

First, the petition is denied because Defendant failed to provide admissible evidentiary support for the alleged arbitration agreement.

Alternatively, this case is distinguishable from Felisilda and follows Ochoa more closely. Therefore, the petition to compel arbitration is also denied on the basis that Defendant is not a third-party beneficiary to the agreement.

Moving party to give notice.