Judge Elaine W. Mandel, Case Number: 23SMCV01240, Date: 2023-12-06 Tentative Ruling

Judge: Elaine W. Mandel, Case: 23SMCV01240, Date: 2023-12-06 Tentative Ruling

Case Number: 23SMCV01240 Hearing Date: January 18, 2024 Dept: P

Tentative Ruling

Berman v. Sonic Automotive, Inc., et al., Case No. 23SMCV01240

Hearing date January 18, 2024

Plaintiff Berman’s Motion to File First Amended Complaint

Defendant Sonic Santa Monica’s Motion to Compel Arbitration

Plaintiff Berman purchased an allegedly defective car from defendant Sonic Automotive, which moves to compel arbitration. On December 6, 2023 the court continued the hearing to allow supplemental briefing regarding whether the contract should be rescinded due to fraud/negligent misrepresentation. Plaintiff seeks to file a FAC, adding new causes of action for fraud, racketeering and declaratory relief, and removing Mercedez Benz as a defendant.

Defendant Sonic’s Motion to Compel Arbitration

Evidentiary Objections

SUSTAIN: 1, 2, 3 (second sentence only), 4, 5 (third and fourth sentences only)

OVERRULE: 6, 7, 8, 9, 10

Code of Civil Procedure section 1281.2(b) provides an exemption from an agreement to arbitrate if grounds exist for rescission of that agreement.

The vehicle sold was previously involved in a collision, which was disclosed to defendant Sonic a month before Sonic sold it to Berman. Berman argues this supports his request for recission, and section 1281.2(b) applies. Berman cites William Little v. David Pullman (2013) 219 Cal.App.4th 558, which allows a trial court to determine a party’s entitlement to recission in the context of a motion to compel arbitration. Id. at 570. “A party that believes it has been fraudulently induced to enter into a contract may rescind. Village Northridge Homeowners Ass’n. v. State Farm Fire & Casualty Co. (2010) 50 Cal.4th 913, 921, 114 Cal.Rptr.3d 280, 237 P.3d 598. Rescission is accomplished by giving notice to the other party to the agreement and restoring or offering to restore everything of value received. (Civ.Code, § 1691; Larsen v. Johannes (1970) 7 Cal.App.3d 491, 503, 86 Cal.Rptr. 744 [settlement agreement may be rescinded if the rescinding party returns benefits received under the agreement].)” Little, supra, 219 Cal.App.4th at 566.

In Little, the court found rescission of the agreement ineffective because defendant failed to restore funds received. Id. at 567. The court identified three problems with that tender: (1) “Pullman did not offer to pay or deliver the $42,500, but merely made available for pickup a check for $42,500;” (2) “tender was conditional on Little accepting that it constituted “payment in full to effect the rescission of agreement”; and (3) “Little, in the end, rejected the check, which he was entitled to do” such that “Pullman was then obligated to make a conforming tender,” which he refused to do. Id. 566-567.

Here, Berman complies with all rescission requirements: (1) he asserted his right to rescission via letter dated March 2, 2023 to W.I. Simonson (Sonic), prior to filing the lawsuit; (2) he sought rescission in the complaint and proposed FAC; and (3) he offered to restore all consideration exchanged and demands return of the purchase price. See Plaintiff’s Supp. Brief p. 4.

The March 2, 2023 letter provides Sonic notice of recission. Supp. Slott Decl., Exh. I, p. 2. Berman offered to return the vehicle, and the rescission of the parties’ RISC agreement is effective. Berman provided the location and address of where the vehicle could be picked up. Id. Berman did not make the tender conditional; he did not state his offer to return the vehicle constituted recission of the agreement; he demanded a refund of the purchase along with an offer to return the vehicle to signify the parties’ rescission. Additionally, unlike in Little, where a settlement payment was involved, here, the only conforming tender for the rescission was an offer to return the vehicle itself. A conforming tender was made.

Sonic fails to rebut this showing with any contradicting evidence or authority. From the evidence presented, the finds plaintiff meets the criteria for rescission. The motion to compel arbitration is DENIED.

Plaintiff’s Motion for Leave to File FAC

There is great liberality in allowing for amendment of pleadings, as acknowledged in defendant’s opposition. As the motion to compel arbitration is denied, the motion is GRANTED.