Judge: Colin Leis, Case: 21STCV24044, Date: 2023-02-21 Tentative Ruling

Case Number: 21STCV24044    Hearing Date: February 21, 2023    Dept: 74

Superior Court of California

County of Los Angeles – CENTRAL DISTRICT

Department 74

MOVING PARTY:                Defendant Nissan North America, Inc.

RESPONDING PARTY:       Plaintiff Erin Carpenter

Defendant Nissan North America’s Motion to Compel Arbitration and Motion to Stay Proceedings

The court considered the moving papers, opposition, and reply filed in connection with this motion.

BACKGROUND

            On June 29, 2021, Plaintiff Erin Carpenter filed this lemon law action against Nissan North America arising out of Plaintiff’s purchase of a 2018 Nissan Rogue (“Subject Vehicle”).  The complaint asserts causes of action for: (1) violation of Subdivision (d) of Civil Code Section 1793.2, (2) violation of Subdivision (b) of Civil Code Section 1793.2, (3) violation of Subdivision (a)(3) of Civil Code Section 1793.2, (4) breach of express written warranty; and (5) breach of implied warranty of merchantability.  The complaint seeks civil penalties and alleges the vehicle suffered from numerous electrical defects.  (Compl. ¶ 9.)  

            Nissan moves to compel arbitration of all of Plaintiff’s claims and to stay the action pending completion of arbitration.

REQUEST FOR JUDICIAL NOTICE

            The court grants Nissan’s request for judicial notice in its entirety.

LEGAL STANDARD

In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement.  The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.).  (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413-414; Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 758.)

Generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2) the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues.  (Code Civ. Proc., § 1281.2; Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.”  (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)  “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.”  (Ibid. [internal quotations omitted].)  This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (“FAA”), which governs all agreements to arbitrate in contracts “involving interstate commerce.”  (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

DISCUSSION

Nissan submits evidence that Plaintiff purchased the Subject Vehicle from Mossy Nissan Escondido pursuant to a Retail Installment Sale Contract – Simple Finance Charge (with Arbitration Provision) (the “Contract”).  (Maugeri II Decl., ¶ 4, Exh. 3.)

The Contract contains an arbitration provision which states in pertinent part:

1.     EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.  

2.     IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.  

3.     DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.  

(Maugeri II Decl., ¶ 4, Exh. 3, p. 7.)

The arbitration provision provides that “[a]ny claim, dispute or controversy, 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 ... 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.”  (Maugeri II Decl., ¶ 4, Ex. 3 at p. 7.)  The provision further provides that “[a]ny arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act....” (Id.)

Directly above the signature line on the Contract is the following statement, set forth in bold and in capital letters: “You agree to the terms of this contract.  You confirm that before you signed this contract, we gave it to you, and you were free to take it and review it.  You acknowledge that you have read both sides of this contract, including the arbitration provision on the reverse side, before signing below.  You confirm that you received a completely filled-in copy when you signed it.”  (Maugeri II Decl., ¶ 4, Ex. 3 at p. 6.)

In a separate box that requires a separate signature is another arbitration acknowledgement which states as follows: “By signing below, you agree that, pursuant to the Arbitration Provision on the reverse side of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action.  See the Arbitration Provision for additional information concerning the agreement to arbitrate.”  (Maugeri II Decl., ¶ 4, Ex. 3 at p. 1.)

Plaintiff’s causes of action fall within the broad scope of this arbitration provision because the causes of action relate to the purchase and condition of the Subject Vehicle.  (See Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189 (noting that “arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question”).)

Plaintiff argues that Nissan has waived any right to arbitration, that no arbitration agreement exists between Plaintiff and Defendant, that this dispute is not subject to binding arbitration, that equitable estoppel does not apply, and that Defendant is not a third-party beneficiary of the sales contract.  The Court finds that Nissan has not waived its right to arbitrate and that the equitable estoppel doctrine applies, thus the Court need not address the merits of Nissan’s third-party beneficiary theory.

Waiver

Plaintiffs argue that Defendant waived its right to arbitrate by failing to indicate an intention to compel arbitration and by actively participating in the litigation process and availing itself of the benefits of litigation.  The record shows otherwise.

“To decide whether a waiver has occurred, the court focuses on the actions of the person who held the right; the court seldom considers the effects of those actions on the opposing party.”  (Morgan v. Sundance (2022) 142 S.Ct. 1708, 1713.)  “Courts have recognized that where the FAA applies, whether a party has waived a right to arbitrate is a matter of federal, not state, law. [Citation.]”  (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5^th 956, 963.)  In St. Agnes v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196 (St. Agnes), the California Supreme Court adopted a multi-factor test from the Tenth Circuit opinion in Peterson v. Shearson/American Express, Inc. (10th Cir. 1988) 849 F.2d 464 (Peterson) wherein a court may consider: (1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the “litigation machinery has been substantially invoked” and the parties “were well into preparation of a lawsuit” before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings: (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in¿arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.  (Peterson, supra, 849 F.2d at pp. 467-68; St. Agnes, at p. 1196.)  However, following the U.S. Supreme Court’s decision in Morgan, courts may no longer condition a determination of waiver on prejudice.  (See Morgan, supra, at p. 1713.)  The remaining Peterson factors are proper considerations in the waiver inquiry.  (Shiekh Shoes, supra, at p. 963.)   

Here, Defendant has not participated in the litigation process to the extent of finding that it acted inconsistently with the right to arbitrate.  Defendant filed an answer, which set forth an affirmative defense for arbitration (Answer p. 6, ln. 12-16), a case management statement, and the instant motion to compel arbitration.  Defendant has not filed any demurrers, motions to strike, or otherwise engaged in the merits of Plaintiffs’ claims.  With regards to discovery, Defendant has responded to Plaintiffs’ written discovery.  (Opp. p. 4:3-7.)  Defendant, however, has not propounded any discovery of its own, even if it stated that it wants to inspect Plaintiffs’ vehicle, propound written discovery requests, and take Plaintiffs’ depositions.  (Maugeri II., Decl. ¶ 7.)  Moreover, Nissan moved to compel arbitration a little more than a year after filing its answer.   

Based upon the above, Defendant has participated in the litigation.  However, mere participation in the litigation is insufficient, standing alone, to establish waiver.  (St. Agnes, supra, 31 Cal.4th at p. 1203.)  There must also be some judicial litigation of the merits of arbitrable issues.  (Ibid.)  Here, Plaintiffs make no showing that there has been judicial litigation of the merits of arbitrable issues.  The waiver argument is not well taken.   

In sum, given the relatively short period of time between filing an answer and moving to compel arbitration, as well as Defendants relatively minimal participation in the litigation process, the Court finds that Defendant has not waived its right to compel arbitration.   

Equitable Estoppel

Under the 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 Court (2011) 193 Cal.App.4th 1222, 1237.)  The doctrine applies in either of two circumstances: (1) when the signatory must rely on the terms of the written agreement containing the arbitration clause in asserting its claims against the nonsignatory or (2) when the signatory alleges “substantially interdependent and concerted misconduct” by the nonsignatory and a signatory and the alleged misconduct is “founded in or intimately connected with the obligations of the underlying agreement.”  (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 218-219.)  At bottom, “[t]he linchpin for equitable estoppel is equity—fairness.””  (Id. at p. 220.)

In Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 490, the Court of Appeal examined an identical arbitration clause which stated in pertinent part: “[A]ny claim or dispute, whether in contract, tort, statute or otherwise … between you and us … which arises out of or relates to … [the] 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 … be resolved by neutral, binding arbitration and not by a court action.”  The appellate court found that the equitable estoppel doctrine applied: “The [buyers’] 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.  Because the [buyers] expressly agreed to arbitrate claims arising out of the condition of the vehicle — even against third party nonsignatories to the sales contract — they are estopped from refusing to arbitrate their claim against [the manufacturer].  Consequently, the trial court properly ordered the [buyers] to arbitrate their claim against [the manufacturer].  (Id. at pp. 496-497.)

Nissan contends that the equitable estoppel doctrine applies because Plaintiff’s claims are inextricably intertwined with the Contract.  The Court agrees. 

This arbitration agreement is not materially different from the one examined in Felisilda.  In this case, like the buyers’ claims in Felisilda, Plaintiff’s claims against Nissan “directly relate[] to the condition of the vehicle that [allegedly] violated warranties [Plaintiff] received as a consequence of the sales contract.”  (Felisilda, supra, at p. 497.)  Because Plaintiff “expressly agreed to arbitrate claims arising out of the condition of the vehicle — even against third party nonsignatories to the sales contract — [Plaintiff is] estopped from refusing to arbitrate their claim against [Nissan].”  (Ibid.)

Moreover, the Court finds Plaintiff’s reliance on federal authorities that reach a contrary conclusion unpersuasive.  (See, e.g., Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942.)  Plaintiff argues that Felisilda is distinguishable because the buyers in that case brought claims against both the dealership and manufacturer whereas here the claims are brought solely against the manufacturer.  This is a distinction without a meaningful difference.  The reasoning in Felisilda for upholding the equitable estoppel finding was that the buyers’ claims related to the condition of the subject vehicle and the buyers expressly agreed to arbitrate their claims arising out of the condition of the subject vehicle, including those against third party nonsignatories to the sales contract.  This same finding has been made here. 

CONCLUSION

Based on the foregoing, the court grants Nissan’s motion to compel arbitration.

The Court orders that this action is stayed pending completion of arbitration of Plaintiff’s arbitrable claims.

The court sets an arbitration completion status conference on ______, at 8:30 a.m. in Dept. 3.  The parties are ordered to file a joint report regarding the status of the arbitration by _______.  

Nissan is ordered to give notice of this ruling.

IT IS SO ORDERED.

DATED:  February 21, 2023

_____________________________

Colin Leis

Judge of the Superior Court