Judge: David A. Rosen, Case: 22GDCV00700, Date: 2023-03-17 Tentative Ruling

Case Number: 22GDCV00700    Hearing Date: March 17, 2023    Dept: E

Hearing Date: 03/17/2023 – 8:30am
Case No: 22GDCV00700
Trial Date: Unset
Case Name: ADRIAN SIEMPRE LORENZO, an indiv; and YOLAND MEDINA, an indiv; v. NISSAN NORTH AMERICA, INC., a Delaware Corporation, and DOES 1-10

TENTATIVE RULING ON MOTION TO COMPEL ARBITRATION

Moving Party: Defendant, Nissan North America, Inc. (Nissan)

Responding Party: Plaintiffs, Adrian Siempre Lorenzo and Yolanda Medina

Moving Papers: Motion; Ihara Declaration; Proposed Order

Opposing Papers: Opposition; Hamblin Declaration

Reply Papers: Reply

Proof of Service Timely Filed (CRC Rule 3.1300): Ok
16/21 Court Days Lapsed (CCP 1005(b)): Ok
Proper Address: Ok

CCP §1290.4
“A copy of the petition and a written notice of the time and place of the hearing thereof and any other papers upon which the petition is based shall be served in the manner provided in the arbitration agreement for the service of such petition and notice.” (CCP §1290.4(a).) “If the arbitration agreement does not provide the manner in which such service shall be made and the person on whom service is to be made has previously appeared in the proceeding or has previously been served in accordance with subdivision (b) of this section, service shall be made in the manner provided in Chapter 5 (commencing with Section 1010) of Title 14 of Part 2 of this code.” (CCP §1290.4(c).)

Here, Plaintiffs have already appeared as indicated by the fact that Plaintiffs filed the action. Defendant appears to have served this notice and the accompanying papers of this motion by e-mail, and Opposition has made no objections to how the instant motion has been served.

RELIEF REQUESTED
Defendant, Nissan North America, Inc. (“Nissan”) moves for an order compelling arbitration of this action commenced by Plaintiffs Adrian Siempre Lorenzo and Yolando Medina and staying this action during the pendency of that arbitration.

 

Specifically, Nissan moves to compel Plaintiffs’ claims related to their vehicle into arbitration pursuant to the Retail Installment Sale Contract (“RISC”) they entered into when they purchased the vehicle.

 

Nissan can compel this action into arbitration for three primary reasons:

(1) The RISC contains a valid and enforceable arbitration provision;

(2) Nissan may enforce the Arbitration Provision pursuant to the doctrine of equitable estoppel. As the California Court of Appeal recently held in Felisilda v. FCA US LLC (3d dist.-2020) 53 Cal.App.5th 486, 496-499, review denied (Nov. 24, 2020), equitable estoppel prevents plaintiffs from avoiding their obligations to arbitrate where, as here, their claims are intimately founded in, and intertwined with, their RISC and the purchase and the condition of their vehicle. Indeed, Plaintiffs’ claims are all based on alleged defects and nonconformities with the subject vehicle and Nissan’s alleged failure to conform the subject vehicle to warranty; and

(3) As a third-party beneficiary, Nissan may enforce the Arbitration Provision because it expressly encompasses claims arising out of relationships with third parties who do not sign the RISC, and Nissan bears a close relationship with the signatories.

 

If the Court finds the Arbitration Provision is valid and Nissan has standing to enforce it, then it must defer any questions of arbitrability to the arbitrator. Further, if the Court agrees that Nissan may compel arbitration, the FAA requires that this matter be stayed during the pendency of the arbitration proceedings.

 

Nissan brings this motion pursuant to Code of Civil Procedure section 1281, et seq., the Federal Arbitration Act, 9 U.S.C. § 2, and other applicable statutes and laws on the grounds that Plaintiff is bound by a valid, written agreement to arbitrate the subject matter of the Complaint. Code Civ. Proc. § 1281.2. Nissan further moves to stay this proceeding during the pendency of the arbitration pursuant to Code of Civil Procedure section 1281.4 which expressly provides that further proceedings “shall” be stayed “until an arbitration is had.”

 

BACKGROUND
Plaintiffs, Adrian Siempre Lorenzo, and Yolanda Medina, filed a Complaint on 10/13/2022 against Defendant, Nissan North America, Inc. alleging four causes of action: (1) Violation of Song-Beverly Act – Breach of Express Warranty, (2) Violation of Song-Beverly Act – Breach of Implied Warranty, (3) Violation of the Song-Beverly Act Section 1793.2(b), and (4) Violation of the Song-Beverly Act Section 1793.22 – Tanner Consumer Protection Act.

 

Plaintiffs allege that on March 30, 2022, Plaintiffs purchased a new 2022 Nissan Pathfinder, that express warranties accompanied the sale of the subject vehicle, and that the subject vehicle was delivered to Plaintiffs with serious defects and nonconformities to warranty.

 

The instant motion pertains to whether or not Defendant (Nissan North America) a nonsignatory to the “Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision)”, can compel arbitration under the RISC when it was not a party to the RISC.

 

LEGAL STANDARD – MOTION TO COMPEL ARBITRATION
CCP §1281.2, governing orders to arbitrate controversies, provides in pertinent part:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that 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 recission of the agreement.

 

(CCP §1281.2(a)-(b).

 

Under the Federal Arbitration Act, arbitration agreements “shall be valid, irrevocable and enforceable, save upon such grounds that exist at law or in equity for the revocation of a contract.”  (9 U.S.C. section 2.)

 

There is a strong public policy in favor of arbitration of disputes and any doubts concerning the scope of arbitrable disputes should be resolved in favor of arbitration. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 (“courts will ‘indulge every intendment to give effect to such proceedings.’”) (quotation omitted)). (See also AT&T Mobility, LLC v. Concepcion (2011) 563 U.S. 333, 339.) 

 

ANALYSIS
Preliminary Matter
“A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, Rule 3.1330.)

Here, moving and opposing parties refer to the RISC with the alleged arbitration provision in their declarations. However, neither party provided a physical or electronic copy of the RISC that contained the alleged arbitration provision.

Therefore, the Court will assume that whatever both parties allege the RISC and the arbitration to state to be verbatim from the RISC/arbitration provision. Further, it does not appear that either parties dispute what the other party alleges the RISC/arbitration provision to allege.

Additionally, both parties allege that the RISC is between Glendale Nissan and Plaintiff Lorenzo. Neither party addresses if the RISC contains the other Plaintiff, Medina as a Co-Buyer.

RISC

In purchasing the subject vehicle, Plaintiff executed a “Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision)” (RISC) with the Seller-Creditor, Glendale Nissan. The RISC contains an arbitration provision that provides in relevant 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.

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.

 

(Def. Mot. p. 6.)

 

Defendant states that the RISC refers to Plaintiff Adrian Siempre Lorenzo as the “Buyer,” “Co-Buyer,” or “You.” Defendant also states that the RISC refers to Glendale Nissan as “Seller-Creditor,” “we,” or “us.” (Def. Mot. p. 5.)

Equitable Estoppel
Equitable estoppel associated with a nonsignatory compelling arbitration arises as follows:

 

To summarize, under 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. 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. The focus is on the nature of the claims asserted by the plaintiff against the nonsignatory defendant. That the claims are cast in tort rather than contract does not avoid the arbitration clause. Moreover, the federal decisional authority is not limited, as plaintiff suggests, to cases in which a contract with a subsidiary corporation is relied upon to compel arbitration with a parent entity. The fundamental point is that a party may not make use of a contract containing an arbitration clause and then attempt to avoid the duty to arbitrate by defining the forum in which the dispute will be resolved.

 

(Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271-272 [internal citations omitted].)

 

Defendant argues it can compel arbitration because Plaintiffs’ claims arise out of, and are intertwined with, the obligations of the RISC. Defendant relies on the case of Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (Felisilda) to support its argument.

 

In Felisilda, the Third District Court of Appeal upheld an order compelling the plaintiffs to arbitration with the manufacturer of the alleged lemon vehicle even though it was not a signatory to the contract. The Felisilda court stated:

 

In signing the sales contract, the Felisildas agreed that “[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 ... shall ... be resolved by neutral, binding arbitration and not by a court action.” (Italics added.) Here, the Felisildas’ claim against FCA relates directly to the condition of the vehicle.

 

In their complaint, the Felisildas alleged that “express warranties accompanied the sale of the vehicle to [them] by which FCA ... undertook to preserve or maintain the utility or performance of [their] vehicle or provide compensation if there was a failure in such utility or performance.” Thus, the sales contract was the source of the warranties at the heart of **648 this case. The Felisildas noted they “delivered the vehicle to an authorized FCA ... repair facility for repair of the nonconformities.” However, “FCA ... has failed to *497 either promptly replace the new motor vehicle or promptly make restitution in accordance with the Song-Beverly Consumer Warranty Act.”

 

The Felisildas’ claim against FCA 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 Felisildas 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 FCA. Consequently, the trial court properly ordered the Felisildas to arbitrate their claim against FCA.

 

(Felisilda v. FCA US LLC (3d dist.-2020) 53 Cal.App.5th 486, 496-496.)

 

Intimately Founded In and Intertwined
Defendant argues Plaintiff’s claims are inextricably intertwined with the RISC because the express warranty is an additional term of the RISC that imposes obligations on Nissan, and Plaintiffs allege violations of those obligations.

Plaintiff argues that Nissan’s warranties, express or implied, are not contractual terms of the RISC and Plaintiffs don’t rely upon the obligations of the RISC. Plaintiff argues the sales contract disclaims any effect on the manufacturer’s warranty. Further, Plaintiff states, “the written warranty agreement between Plaintiffs and Defendant – which formulates the basis for this lawsuit – directs dissatisfied consumers to contact the BBB Auto Line program offered by the Council of Better Business Bureaus, Inc. for voluntary mediation or arbitration. (Hamblin Decl., ¶ 5, Ex B, p. 2.)” (Oppo. p. 8.) Plaintiff also argues the causes of action are not intimately intertwined because none of the claims in the Complaint pertain to the RISC but instead are based on the Song-Beverly Act.

As stated in Ngo, “Lastly, BMW’s standing argument fails. It is the retail sale – the fact that Ngo bought a BMW – not the purchase agreement, that gives a plaintiff standing to bring claims under the Song-Beverly Act…Because Ngo’s standing to bring these claims against BMW does not derive from the purchase agreement, BMW cannot establish that Ngo’s claims are “inextricably tied up” with the purchase agreement.” (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 950.) Further, “As an initial matter, under California law, warranties from a manufacturer that is not a party to a sales contract are ‘not part of [the] contract of sale.” (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 949 citing Corp. of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v. Cavanaugh (1963) 217 Cal.App.2d 492, 514.)

 

Therefore, here, Plaintiffs’ Complaint is not based on the RISC, as the Complaint does not reference the RISC as its basis for its action. The basis for Plaintiffs’ claims are violations of the Song-Beverly Act.

As stated in Ngo, “Like Ngo's purchase agreement, the contracts in Kramer “expressly differentiate[d] dealer warranties from manufacturer warranties” and disclaimed any effect on the manufacturer's warranties. Id. We held that warranty claims against the manufacturer “arise[ ] independently from the Purchase Agreements, rather than intimately relying on them.” Id.” (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 950.)

Here, Plaintiffs argued the sales contract disclaims any effect on the manufacturer’s warranty. Although Plaintiffs did not provide any verbatim language from the RISC to support this argument, Defendant does not seem to argue that this disclaimer does not exist in the RISC. Further, even if Defendant were to argue that this disclaimer did not exist, the burden to establish the agreement to arbitrate/RISC was on the moving party to begin with, and Defendant did not attach the RISC or the arbitration agreement.

Therefore, this disclaimer also seems to further support the argument that the warranties of the dealer and manufacturer are separate.

Here, equitable estoppel would not be appropriate.

Third-Party Beneficiary
In the notice of motion, Defendant argues that it is a third-party beneficiary to the arbitration provision. However, in the body of the moving papers, nowhere does Defendant address this argument. Defendant first addresses this argument in Reply.

The California Supreme Court has set forth the following test for determining if a party may be recognized as a third-party beneficiary:

 

Instead, a review of this court's third party beneficiary decisions reveals that our court has carefully examined the express provisions of the contract at issue, as well as all of the relevant circumstances under which the contract was agreed to, in order to determine not only (1) whether the third party would in fact benefit from the contract, but also (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 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. All three elements must be satisfied to permit the third party action to go forward.

 

(Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 829-830.)

 

Here, when Defendant first addresses that the doctrine of third-party beneficiary applies, Defendant does not even address a single one of the three elements that must be satisfied under Goonewardene.  Further, even if Defendant had done so, the Defendant would not be able to satisfy the second element.

 As stated in Ngo when addressing the second element:

 

Unlike agreements to draft wills or to manage trusts or mutual funds—arrangements inherently formed with third parties in mind—the vehicle purchase agreement in question was drafted with the primary purpose of securing benefits for the contracting parties themselves. In such an agreement, 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.

 

The text of the arbitration clause supports this conclusion. It provides that claims and disputes “which arise[ ] out of or relate[ ] 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.” (emphasis added). Though the language allows for arbitration of certain claims concerning third parties, it still gives only Ngo, the dealership, and the assignee the power to compel arbitration. Nothing in the clause or, for that matter, in the purchase agreement reflects any intention to benefit BMW by allowing it to take advantage of the arbitration provision.

 

(Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 947-948.)

 

Here, the language of the arbitration provision does not indicate a motivating purpose of the contracting parties was to provide a benefit to the third party. The language explicitly states that “you” or “we” and “your” or “our” can elect to arbitrate. Nothing refers to the third party being able to elect arbitration.

In Reply, Defendant argues how Felisilda is a California Court of Appeals case and is binding on this Court, whereas the federal district court decisions are not.

 

The Court notes that Defendant’s argument that Felisilda is controlling and binding and that the Court should not apply the federal law of Ngo, is unavailing. Plaintiff distinguished Felisilda from the instant facts. Therefore, even to the degree that Felisilda is persuasive but not binding authority upon this Court, Felisilda is not on point with the facts of the case at bar. Further, while the opinion in Ngo is not binding on this Court, the Court still finds the Ngo opinion, and Plaintiff’s arguments more convincing than Defendant’s arguments.

 

Defendant heavily relies on Felisilda to compel arbitration by the Defendant, a nonsignatory, because Felisilda had a similar arbitration provision and Felisilda compelled arbitration of a nonsignatory to the sales contract. While Defendant is correct to note that here the causes of action against Defendant do concern the condition of the subject vehicle, Plaintiffs accurately distinguished Felisilda because in Felisilda the plaintiffs sued a dealership and the manufacturer. Here, Plaintiffs only sued the manufacturer. Further, in Felisilda, the motion to compel arbitration was brought by the seller-dealer/signer of the arbitration agreement with the motion seeking to include the manufacturer. (Felisilda, supra, 53 Cal.App.5th at 498.) Here, moving Defendant was not named the seller-dealer in the RISC. Further here, Seller-Dealer is not even a named party in the action.

 

Lastly, Defendant argues that the question of arbitrability is for the arbitrator to decide. Defendant’s argument is unavailing as it assumes the existence of an arbitration agreement between the two parties. Defendant did not meet its burden in demonstrating that such an agreement existed between the parties.

TENTATIVE RULING
Defendant’s motion to compel arbitration and stay proceedings is DENIED.