Judge Bruce G. Iwasaki, Case 21STCV20996 2022-08-16 Tentative Ruling

This is an action under the Song-Beverly Act in which Erin Armendarez (Armendarez or Plaintiff) allege breach of warranty claims against Defendant Nissan North America, Inc. (Nissan or Defendant) as to a 2020 Nissan Altima.

Nissan moves to compel arbitration based on a provision found in the Retail Installment Sale Contract (RISC) finance agreement between Armendarez and the dealership, Carson Nissan. The dealership is not named as a defendant in the Complaint.

The RISC lists Armendarez as the buyer and Carson Nissan as the seller-creditor and states that it “does not affect any warranties covering the vehicle that the vehicle manufacturer may provide.” (Chung Decl., Ex. 3, p. 5.) The subject arbitration provision is as follows:

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 this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.

Defendant Nissan, a non-signatory to the RISC, asserts that it may compel arbitration based on the doctrines of third-party beneficiary and equitable estoppel.

Plaintiff opposes. She argues that Defendant waived its right to compel arbitration, is not a third-party beneficiary, and equitable estoppel does not apply. She states that the dealership is not a named defendant, the causes of action alleged are separate from the RISC, and Nissan has no close relationship with the dealership.[1]

In reply, Nissan contends that federal cases are noncontrolling and inapposite. It reiterates that it has standing to compel arbitration under an equitable estoppel theory or as a third-party beneficiary.

Plaintiff’s request for judicial notice is granted as to the Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942 (Ngo) opinion. (Evid. Code, § 451, subd. (a).) Although not binding, federal court cases are citable as persuasive authority. (Aleman v. AirTouch Cellular (2012) 209 Cal.App.4th 556, 576, fn. 8; Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 219.) Defendant’s request for judicial notice as to the Complaint in this case and the Request for Dismissal in the Felisilda case is also granted. (Evid. Code, § 452, subd. (d).)

A non-signatory seeking to compel arbitration “bears the burden to establish he or she is a party to the arbitration agreement/provision covering the dispute.” (Jones v. Jacobson (2011) 195 Cal.App.4th 1, 15.) A non-signatory may invoke the arbitration clause if it is a third-party beneficiary of the agreement or that plaintiff is equitably estopped from repudiating the clause. (Jarboe v. Hanless Auto Group (2020) 53 Cal.App.5th 539, 549.)

Equitable estoppel does not apply because the claims are not intertwined or based upon the Retail Installment Sale Contract

Defendant Nissan argues that equitable estoppel applies because the signatory’s claims against a non-signatory arise out of the underlying contract and the non-signatory's conduct is intertwined with a signatory’s conduct. That is, Plaintiffs’ claims are purportedly premised on the RISC and the resultant purchase of the vehicle.

Under the doctrine of equitable estoppel in “both federal and California decisional authority, 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.” (Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271.) “By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.” (Id. at p. 272.) “[I]f a plaintiff relies on the terms of an agreement to assert his or her claims against a nonsignatory defendant, the plaintiff may be equitably estopped from repudiating the arbitration clause of that very agreement. In other words, a signatory to an agreement with an arbitration clause cannot ‘ “ ‘have it both ways’ ” ’; the signatory ‘cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed by the agreement, which contains an arbitration provision, but, on the other hand, deny arbitration's applicability because the defendant is a non-signatory.’ ” (Goldman v. KPMG, LLP, supra, 173 Cal.App.4th at p. 220.)

There are two scenarios in which the causes of action are “intimately founded in and intertwined” with the underlying contract obligations: “ ‘The first occurs when “adjudication of the disputes between the signatory and nonsignatory parties would require interpretation, and probably enforcement, of the specific terms and conditions of the underlying contract” [citation]—in other words, when the plaintiffs “‘must rely on the terms of the written agreement in asserting their claims.’” [Citation]. The second factual scenario warranting equitable estoppel occurs when the signatory raises allegations of “not merely parallel or similar, but substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract.’ [Citation.]” (Goldman v. KPMG, LLP, supra, 173 Cal.App.4th at p. 220.)

As to the second basis, the Complaint does not allege any “interdependent and concerted misconduct” between both the signatory dealership – which is not a party to this action and not mentioned in the Complaint – and non-signatory Nissan. Accordingly, the second basis for finding equitable estoppel does not apply.

As to the first basis, the issue is whether Plaintiffs’ claims against Nissan depend on the specific terms of the RISC. Defendant primarily relies on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (Felisilda). There, the plaintiff named both the signatory dealer and non-signatory manufacturer, and the dealership moved to compel arbitration. After the trial court ordered arbitration, the plaintiff dismissed the dealership. (Felisilda, supra, 53 Cal.App.5th at p. 489.) The appellate court affirmed the trial court’s order to compel arbitration between the manufacturer and plaintiff alone. (Id. at 499.)

The Felisilda case is distinguishable from the instant facts. Here, only non-signatory Nissan is named as a defendant and moved to compel arbitration. (Ngo, supra, 23 F.4th at p. 950 [“It makes a critical difference that the Felisildas, unlike Ngo, 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”]; Ruderman v. Rolls Royce Motor Cars LLC (C.D.Cal. 2021) 511 F.Supp.3d 1055, 1060 [“But Felisilda is not directly on point, because the Felisildas sued both the manufacturer and the dealer. Ruderman, on the other hand, sued only Rolls-Royce. Felisilda, therefore, does not change state law that directly controls this case. Kramer remains the controlling precedent for this case. Under the Kramer line of cases, Rolls-Royce cannot compel Ruderman to arbitrate his claims against it under the doctrine of equitable estoppel”].)

Even though the plaintiff in Felisilda dismissed the dealership before filing the appeal, the fact that the dealership was originally named is a meaningful difference. By naming the dealership, this brought the claims within the scope of claims described by the arbitration agreement as arbitrable. (See Glassburg v. Ford Motor Co. (C.D.Cal. Nov. 2, 2021 Case No 2:21-cv-01333-ODW (MAAx)) 2021 U.S. Dist. Lexis 211786, *8.)

Here, Plaintiff’s claims against Nissan are not based upon or intertwined with the RISC. If the RISC did not exist, Plaintiff would still have their warranty claims against Nissan. (Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122, 1132 [“a consumer who purchased a vehicle with cash instead of credit would still state a claim for which relief could be granted, absent a Purchase Agreement”].)

The Court acknowledges that in the Complaint, Plaintiff does allege that “Express warranties accompanied the sale of the Subject Vehicle” as in Felisilda. However, the Complaint otherwise does not mention the RISC. Equitable estoppel applies if Plaintiff relies on the terms of the agreement in asserting its claims against the non-signatory. (See Goldman v. KPMG, LLP, supra, 173 Cal.App.4th at p. 218 [“merely ‘making reference’ to an agreement with an arbitration clause is not enough” for equitable estoppel].) Despite this language and in 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. (Goldman, supra, 173 Cal.App.4th at pp. 230-231.) That, the Complaint, does not do.

Further, the RISC expressly differentiates Defendant’s warranty from any warranties that the dealership may provide. The RISC contains a provision in which the dealership disclaims all warranties and states “If you do not get a written warranty, and the Seller does not enter into a service contract within 90 days from the date of this contract, the Seller makes no warranties, express or implied, on the vehicle, and there will be no implied warranties of merchantability or of fitness for a particular purpose.” The RISC further noted that it did “not affect any warranties covering the vehicle that the vehicle manufacturer may provide.” The RISC therefore distinguishes between dealer warranties and manufacturer warranties, the latter of which form the basis for the Complaint. (Kramer v. Toyota Motor Corp., supra, 705 F.3d at p. 1131.) This differentiation indicates an intent to distinguish the RISC from any warranty that Defendant Nissan may provide. As such, the warranties are not intertwined with the RISC and therefore, equitable estoppel does not apply. (See Id. at pp. 1128-1133 [“Plaintiffs do not seek to simultaneously invoke the duties and obligations of Toyota under the Purchase Agreement, as it has none, while seeking to avoid arbitration. Thus, the inequities that the doctrine of equitable estoppel is designed to address are not present”].)

Defendant asserts that it is a third-party beneficiary based on the clause in the RISC stating that Plaintiff agrees to arbitrate any claims, “including any such relationship with third parties who do not sign this contract.”

“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.) In evaluating whether a third party is a beneficiary, a court must analyze the “express provisions of the contract at issue, as well as all of the relevant circumstances” to determine (1) whether the third party would in fact benefit from the contract . . . (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to [enforce the contract] against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. All three elements must be satisfied to permit the third party action to go forward.” (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.)

Here, the “motivating purpose” of the RISC was not to provide a benefit to Defendant Nissan. The RISC was “drafted with the primary purpose of securing benefits for the contracting parties themselves . . . the purchaser seeks to buy a car, and the dealership and assignees seek to profit by selling and financing the car. Third parties are not purposeful beneficiaries of such an undertaking.” (Ngo, supra, 23 F.4th at p. 947.) In addition, given that the RISC itself “does not affect any warranties covering the vehicle that the vehicle manufacturer may provide,” this suggests that the parties expressly opted not to include Nissan as a contracting party or beneficiary. (See Id. at p. 948, italics added.) Therefore, because Nissan has failed to show that a “motivating purpose” of the parties was to provide a benefit to Nissan, it cannot invoke the arbitration clause as a third-party beneficiary.

In addition, the language of the arbitration clause indicates that Nissan is not an intended beneficiary. While the claims subject to arbitration are broad and include “such relationship with third parties who do not sign this contract,” this is limited to the scope of the arbitration agreement. As to who may compel arbitration, the RISC is more limited: “at your or our election,” which applies to only Carson Nissan and Armendarez. In other words, the decision to arbitrate claims with third party non-signatories belongs to the signatories. (See also Ngo, supra, 23 F.4th at pp. 946-947.) Accordingly, Nissan is not an intended beneficiary, and it may not compel arbitration in this matter.

Because Nissan lacks standing to enforce the Arbitration Agreement, the Court does not consider the arguments concerning waiver.

Defendant Nissan has not met its burden as a non-signatory to establish that it may invoke the arbitration provision against signatory Plaintiff under either principles of equitable estoppel or the third-party beneficiary doctrine. The motion to compel arbitration is therefore denied.

[1] Plaintiff also provides extrinsic evidence in the form of a “Dealer Agreement” between Nissan and its dealerships. (Amarkarian Decl., Ex. 21.) Since the Court does not find the arbitration agreement ambiguous, it does not consider this document. (Cedars-Sinai Medical Center v. Shewry (2006) 137 Cal.App.4th 964, 979-980.)

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