Judge: Deborah C. Servino, Case: 30-2022-01246919, Date: 2022-09-30 Tentative Ruling

Defendants Hyundai Motor America and Hertz Car Sales, LLC’s motion to compel binding arbitration, is granted.

Defendants contend that all of Plaintiff Jazmin Harrell’s claims are subject to binding arbitration, pursuant to an arbitration provision in her “Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provisions),” (the “RISC”), with Defendant Hertz. The arbitration provision appears on the bottom of the second page of the RISC. (Tahsildoost Decl., at ¶ 4, Exh. 2 [RISC at p. 2].)

The arbitration provision expressly states that it “shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et. seq.) and not by any state law concerning arbitration.” Plaintiff has not disputed that the FAA governs the contractual arbitration.

The FAA provides that a “written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof . . . shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) “The ‘principal purpose’ of the FAA is to ‘ensur[e] that private arbitration agreements are enforced according to their terms.’” (Lacayo v. Catalina Restaurant Group Inc. (2019) 38 Cal.App.5th 244, 257 [citing AT&T Mobility LLC. v. Concepcion (2011) 563 U.S. 333, 344].) The party seeking to compel arbitration “has the burden of proving the existence of a valid agreement to arbitrate.” “Once that burden is satisfied, the party opposing arbitration must prove by a preponderance of the evidence any defense to the petition.” (Ibid.)

Here, Defendants have met their burden of proving a valid agreement to arbitrate. Defendant Hertz is a signatory to the RISC, and its name appears at the bottom of page 1. The RISC further reflects that the “Buyer” is “Jazmin Andrea Harrell” and that her signature appears throughout the RISC next to “Buyer.” (Mot., at pp. 5-6.)

While Hyundai is not a signatory to the RISC, Hyundai argues that it has the right to enforce the arbitration provision as a third party beneficiary and under the doctrine of equitable estoppel. (Mot., at pp. 6-10.)

The general rule is that “one must be a party to an arbitration agreement to be bound by it or invoke it. (DMS Services., Inc. v. Superior Court (2012) 205 Cal.App.4th 1346, 135, internal quotes and citation omitted.) Courts have recognized limited exceptions to this general rule. The doctrine of equitable estoppel and third party beneficiary are two of the exceptions. (Young Seok Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1513.)

Under the doctrine of equitable estoppel, a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate the plaintiff’s claims when the causes of action against the nonsignatory are “intimately founded in and intertwined” with the underlying contract obligations. (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495.) “ ‘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 the agreement.’ [Citations.] ” (Id. at p. 496 [quoting JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237].)

“ ‘In any case applying equitable estoppel to compel arbitration despite the lack of an agreement to arbitrate, a nonsignatory may compel arbitration only when the claims against the nonsignatory are founded in and inextricably bound up with the obligations imposed by the agreement containing the arbitration clause.’ ” (Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at p. 496 [emphasis in original, quoting Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 219].) In Felisilda, the plaintiffs in that case 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.” (Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at p. 496 [emphasis in original].) The Felisilda court determined that the plaintiffs’ Lemon Law claim against the manufacturer related directly to the condition of the vehicle. (Ibid.)

Similarly, the RISC in the instant case provides:

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. . . .

(Tahsildoost Decl., at Exh. 2.) 

Plaintiff’s claims for negligence and breach of implied and express warranties under the Song-Beverly Act and the Magnuson-Moss Act are all encompassed by the arbitration agreement, as each claim directly relates to the condition of the subject vehicle and Defendants’ warranties, (or obligation to make repairs), with respect to the vehicle. (See e.g., FAC at ¶¶ 11, 17, 27, 31, 40, 41, 55, 59, 62.) Thus, Plaintiff’s claims against Defendant Hyundai are “inextricably bound up with the obligations imposed by the agreement containing the arbitration clause,” (i.e., the RISC). Because Plaintiff expressly agreed to arbitrate claims arising out of the condition of the vehicle, even against third party nonsignatories to the sales contract, she is estopped from refusing to arbitrate her claim against Hyundai. (Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at p. 497.)

Hyundai is also a third-party beneficiary of the RISC.  As one court explained:

The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract . . . . [I]t is not enough that the third party would incidentally have benefited from performance. . . . The contracting parties must have intended to confer a benefit on the third party.

(Souza v. Westlands Water Dist. (2006) 135 Cal.App.4th 879, 891.) The RISC, here, expressly refers to claims which arise out of the “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) . . .” Defendants have demonstrated that the RISC was made for Hyundai’s benefit. As a third-party beneficiary, Hyundai can invoke the arbitration agreement. (See Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at p. 498.)

Lastly, Plaintiff does not oppose the motion.  By failing to do so, she has not met her burden of showing there is any defense to the arbitration provision.

Accordingly, the motion to compel arbitration is granted. Plaintiff is ordered to arbitrate her claims. The action is stayed pending final resolution of the arbitration. (Code Civ. Proc., § 1281.4.) The court sets an arbitration status conference for April 7, 2023 at 9:00 am in Department C21.

Defendants shall give notice of the ruling and of the April 7, 2023 arbitration status conference.

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