Judge: Frank M. Tavelman, Case: 22BBCV01134, Date: 2023-09-01 Tentative Ruling

Case Number: 22BBCV01134    Hearing Date: September 1, 2023    Dept: A

LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

MOTION TO COMPEL ARBITRATION

ALLEGATIONS: 

Harutyun Tanashyan (“Plaintiff”) filed suit against BMW of North America, LLC (“BMW”) and Century West BMW, LLC (“Century West”), on December 6, 2022 for claims arising out of the purchase of a 2022 BMW M440i xDrive. The Complaint contains four causes of action: (1) violation of Song-Beverly Act - breach of express warranty, (2) violation of Song-Beverly Act - breach of implied warranty, and (3) violation of the Song- Beverly Act section 1793.2(b), and (4) Negligent Repair.

BMW and Century West (“Moving Parties”) now move to compel arbitration of these claims and Plaintiff opposes.

JUDICIAL NOTICE:

BMW requests judicial notice, pursuant to Evidence Code § 451, of the fact that it is a distributor of vehicles throughout the United States and that it is headquartered in Rutherford, new Jersey. The Court GRANTS this request.

BMW also requests judicial notice, pursuant to Evidence Code § 452, of a laundry list of federal cases where motions to compel arbitration were granted for automobile manufacturers. BMW relies upon a number of these cases in their briefing but does not independently brief why the Court should take judicial notice of these rulings, except to say that it may. Nevertheless, the Court GRANTS this request.

Plaintiff requests judicial notice, pursuant to Evidence Code § 452, of federal cases where motions to compel arbitration of automobile manufactures were denied. Plaintiff cites Rodgers v. Sargent Controls & Aerospace (2006) 136 Cal.App.4th 82, which held that judicial notice of prior judgments could be granted to determine whether relitigation is precluded on collateral estoppel grounds. This case does not concern relitigation and Plaintiff’s authority is irrelevant. As such, the Court DENIES this request.

EVIDENTIARY OBJECTIONS:

Plaintiff’s evidentiary objections 1-5 are OVERRULED.

ANALYSIS: 

Compel Arbitration 

I.          LEGAL STANDARD 

C.C.P. § 1281.2 states: “[o]n petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement arbitrate the controversy exists.”

A party seeking to compel arbitration has the initial burden to prove, by a preponderance of the evidence, the existence of a valid and enforceable arbitration agreement. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) If the moving party has met its initial burden, then the burden shifts to respondents to prove the falsity or unenforceability of the arbitration agreement. (Ibid.) 

“In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.”¿¿(Weeks v. Crow¿(1980) 113 Cal.App.3d 350, 353.)¿

II.        MERITS 

Moving Parties base their motion primarily on the Fourth District Appellate Court decision in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486. Felisilda concerned arbitration clauses in dealership contracts which are nearly identical to those used by various dealerships, including the one in this case. For some time, Felisilda was the only on-point precedent in these matters, and many courts employed its holding to compel arbitration of automobile manufacturer claims based on dealership contracts.

However, on July 19, 2023, the Second District Appellate Court rendered an opposite decision in Ochoa v. Ford Motor Company (2023) 89 Cal.App.5th 1324.  Ochoa disagreed with Felisilda and found manufacturers could not compel arbitration under equitable estoppel or as third party nonsignatories.

On July 19, 2023, the California Supreme Court granted review of the ruling in Ochoa. In granting review, the Supreme Court held that the decision in Ochoa may be cited for its persuasive value and to show a conflict in authority which would allow trial courts to exercise discretion in ruling on such motions. (Ochoa v. Ford Motor Co. (In re Ford Motor Warranty Cases) (July 19, 2023, No. S279969) [2023 Cal. LEXIS 4235].) “Where there is more than one appellate court decision, and such appellate decisions are in conflict the superior court can and must make a choice between the conflicting decisions” (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456, citations and quotation marks omitted.)

The rulings in Felisilda and Ochoa present conflicting opinions from the Fourth and Second Appellate districts respectively. Ultimately, the Court finds the reasoning in Ochoa to be more persuasive in deciding whether to compel arbitration.

The Arbitration Clauses

The relevant portions of the arbitration clause in Ochoa read as follows:

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

“[A]ny claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claims 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 did not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.”

(Ochoa supra, 89 Cal.App.5th 1324, at 1330.) 

This clause is virtually identical the clause presented in the agreement here. The agreement here provides:

Either you [Plaintiff] or I [Dealer] may choose to have any dispute between us decided by arbitration and not in a court or by jury trial…

“Claim” broadly means any claim, dispute or controversy, whether in contract, tort, statute or otherwise, whether preexisting, present, or future, between me and you or your employees, officers, directors, affiliates, successors, or assigns or between me and any third parties if I assert a Claim against such third parties in connection with a Claim I assert against you, which arises out of or relates to my credit application, lease, purchase, or condition of this Vehicle, this lease, or any resulting transaction or relationship.  

(Grener Decl. Exh. A pg. 6.)

The Court notes the arbitration clause in Felisilda is also virtually identical to the agreement here and the agreement in Ochoa.

Equitable Estoppel

Under both California and federal case law, “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.” (Felisilda supra, 53 Cal.App.5th 486, 495.) “Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.” (Id., at p. 496.)

The Felisilda court found equitable estoppel applied because the plaintiff’s claims were intimately founded in and intertwined with the dealership contract. The Felisilda court explained, “[t]he 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.” (Id. at 497.)

The Ochoa court disagreed with Felisilda’s finding that the plaintiff’s claims were “founded in or intertwined with” the dealership sales contracts. The court “disagree[d] with Felisilda that ‘the sales contract was the source of [FCA’s] warranties at the heart of this case.’” (Ochoa supra, 89 Cal.App.5th 1324, at 1334.) Instead, the Ochoa court held plaintiff’s claims were “…based on FMC’s statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty,” and not “on any express contractual language in the sale contracts.” (Id. at 1335.) The Ochoa court further reasoned “The sale contracts include no warranty, nor any assurance regarding the quality of the vehicle sold, nor any promise of repairs or other remedies in the event problems arise.  To the contrary, the sale contracts disclaim any warranty on the part of the dealers, while acknowledging no effect on ‘any warranties covering the vehicle that the vehicle manufacturer may provide.’  In short, the substantive terms of the sale contracts relate to sale and financing and nothing more.” (Id.)   

The Court is of the same opinion as Ochoa that Plaintiff’s claims are not “intimately founded in and intertwined” with the substantive terms of the dealership contract. Here, as in Ochoa, the dealership sales contract contains no aversion to a manufacturer warranty and in fact disclaims any warranty explicitly. (Grener Decl. Exh. A pg. 3.) The Court further agrees Plaintiff’s claims are based on statutory obligations under Song-Beverly, rather than the contractual relationship between Plaintiff and Century West. No language in the contract serves as the source Plaintiffs’ claims against Century West, absent extrapolation from the third-party non-signatory language. As will now be discussed, the Court feels this language is not intended to allow third parties to compel arbitration.

Third-Party Nonsignatories

The Court similarly agrees with Ochoa’s interpretation of the “third-party nonsignatory” language employed in the dealership contract.

At issue in Felisilda an Ochoa was the contract language “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 [Plaintiff’s] or [Dealer’s] election be resolved by neutral, binding arbitration and not by a court action…”

The court in Felisilda read the above language to mean that third parties could compel arbitration in disputes relating to the purchased vehicle. (Felisilda supra, at 498.) The Ochoa court instead read the language as “a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate.”  (Ochoa supra, 89 Cal.App.5th 1324, at 1335.) 

Ochoa clearly distinguishes between (1) the parties to the claims or disputes and (2) the subject matters of the claims or disputes. Here, the parties are defined as “…you and us or our employees, agents, successors or assigns”. The subject matter of the claim is “…any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract.)”. If there was a dispute between Plaintiffs and the dealership that arose out of or related to a resulting transaction or relationship with a third party, then Plaintiffs and the dealership could arbitrate that dispute.  However, based on the arbitration provision’s language and Ochoa’s clear interpretation thereof, there is no agreement requiring Plaintiff to arbitrate a claim or dispute between himself and a non-signatory third-party. 

The Court finds Ochoa’s interpretation of the arbitration language to be the most logical. The language indicates the clause intends to allow arbitration of claims arising out of interaction with third party non-signatories by either Plaintiffs or the dealership. The clause simply does not contemplate manufacturers, or any third party for that matter, as having the right to compel arbitration under the terms of the agreement.

The Court finds while the arbitration clause here varies slightly in form, its function remains identical to that in Felisilda and Ochoa. If anything, the contract language employed here makes it even clearer that there remains a distinction between the parties to the claim and the subject matter of the claim. Here, the contract clearly establishes the purchaser and dealerships as the only parties which can compel arbitration. It is only in a separate proceeding clause that third parties are mentioned and only in service of defining what a “claim” is that can be arbitrated under the previous provision.   

Century West BMW

Neither Moving Parties nor Plaintiff address the arbitrability of claims against Century West. The motion to compel arbitration clearly indicates that Century West BMW, LLC is a moving party. Plaintiff has not dismissed the dealership from this action.

“[T]he moving party bears the burden of producing prima facie evidence of a written agreement to arbitrate the controversy. The moving party can meet its initial burden by attaching to the motion or petition a copy of the arbitration agreement purporting to bear the opposing party's signature.” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165, internal citations omitted.)

“It is not necessary to follow the normal procedures of document authentication. If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion.” (Id. at 166, internal citations omitted.)

Here, Plaintiff makes no claim that a valid arbitration agreement exists as between himself and the Century West. This agreement is attached to the motion as Exhibit A. As such, Century West has satisfied its burden in making a prima facie showing of a valid arbitration agreement. Plaintiff has made no showing to the contrary. Accordingly, Century West’s motion to compel arbitration is GRANTED.

III.       CONCLUSION 

The Court finds the reasoning of Ochoa to be more persuasive than that of Felisilda. The Court finds the language of the arbitration agreement here does not contemplate allowing BMW to compel arbitration of Plaintiffs’ claims. Further, the doctrine of equitable estoppel does not apply as Plaintiffs’ claims against TMS are not intimately founded in or intertwined with the dealership agreement. As such, the Court DENIES BMW’s motion to compel arbitration.

However, Century West has shown a valid arbitration agreement between themselves, and Plaintiff which Plaintiff does not dispute. As such, the Court GRANTS Century West’s motion to compel arbitration.

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Arbitration Stay 

I.          LEGAL STANDARD 

Once arbitration has been compelled, in whole or in part, a stay of proceedings is mandatory if the issues in the arbitration and the pending action overlap. (C.C.P. § 1281.4 (if a court “has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.”)) 

“The purpose of the statutory stay [under section 1281.4] is to protect the jurisdiction of the arbitrator by preserving the status quo until arbitration is resolved. In the absence of a stay, the continuation of the proceedings in the trial court disrupts the arbitration proceedings and can render them ineffective.” (Federal Ins. Co. v. Superior Court (1998) 60 Cal.App.4th 1370, 1374-1375 (citations omitted).) 

II.        MERITS 

As the Court denies BMW’s motion to compel arbitration in its entirety on reconsideration, its motion to stay proceedings is moot.  

As the Court grants Century West’s motion to compel arbitration, the Court orders the action against Century West stayed pending arbitration.

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER 

BMW Of North America, LLC and Century West BMW, LLC’s Motions to Compel Arbitration came on regularly for hearing on September 1, 2023 with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows: 

BMW’S MOTION TO COMPEL ARBITRATION IS DENIED AND ITS MOTION FOR STAY IS MOOT.

CENTURY WEST’S MOTION TO COMPEL ARBITRATION IS GRANTED, AND THE MOTION FOR STAY IS GRANTED.

UNLESS ALL PARTIES WAIVE NOTICE, BMW IS TO GIVE NOTICE.

IT IS SO ORDERED. 

DATE:  September 1, 2023                            _______________________________ 

                                                                        F.M. TAVELMAN, Judge 

Superior Court of California 

County of Los Angeles