Judge: Frank M. Tavelman, Case: 22BBCV01181, Date: 2023-02-24 Tentative Ruling

Case Number: 22BBCV01181    Hearing Date: February 24, 2023    Dept: A

LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

MOTIONS TO COMPEL ARBITRATION & STAY MATTER

ALLEGATIONS: 

Henry Ramirez Morataya (“Morataya”) & Bryan Ramirez (“Ramirez”) (collectively “Plaintiffs”) filed suit against Toyota Motor Sales, U.S.A., Inc. (“TMS”), on December 12, 2022 for claims arising out of the purchase of a 2021 Toyota Supra from Toyota of North Hollywood (“Dealer”). The Complaint contains three 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).

HISTORY: 

The Court received TMS’s Motion to Compel Arbitration and Motion for Stay on January 13, 2023. Plaintiff’s opposition filed on February 8, 2023. TMS’ Reply filed on February 15, 2023.  

RELIEF REQUESTED: 

Defendant moves to compel Plaintiff to submit the entire Complaint to binding arbitration, and to stay the proceedings for binding arbitration between the parties. 

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 

Existence of an Agreement to Arbitrate  ¿ 

TMS proved the existence of an arbitration agreement with Plaintiff, despite not being a signatory to the agreement.  On January 13, 2021, Plaintiff signed a Retail Installment Sale Contract (“Sales Contract”) with Dealer that contained an arbitration clause (“Arbitration Agreement”). (Elkayat Decl., Exh. A.).  Specifically, the Sales Contract provides that the term “you” refers to the Buyer and that “we” and “us” refer to the Seller-Creditor.  The Sales Contract defines the Buyer as Plaintiff and the Seller-Creditor as Dealer. (Elkayat Decl., Exh. A.)  The Arbitration Agreement provides as follows:

EITHER [Plaintiff] OR [Dealer] MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN [Plaintiff and Dealer] DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL…

Any claim or dispute, whether in contract or 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 [Plaintiff’s] or [Dealer’s] election be resolved by neutral, binding arbitration and not by a court action…

…Any arbitration under this Arbitration Clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et. seq.) [(“FAA”)] and not by any state law concerning arbitration.

(Elkayat Decl., Exh. A. (Emphasis added).)

In addition, in a signature box on the first page of the Sales Contract, Plaintiff signed below the following:

By signing below you agree that, pursuant to the Arbitration Provision on pg. 5 of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action.

(Elkayat Decl., Exh. A.)

Plaintiff does not deny signing the Sales Contract containing the Arbitration Agreement.  (See Opposition.)  Rather, Plaintiff argues TMS are not entitled to enforce the arbitration agreement against Plaintiff. 

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 v. FCA US LLC (2020) 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.) In Felisilda, the plaintiffs purchased a vehicle and signed a sales contract, which provided in pertinent part, "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 … 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." (Id. at 490)

The plaintiffs sued FCA and the dealership; the dealership moved to compel all parties to arbitration based on the sales agreement. The plaintiffs argued they could not be compelled to arbitrate their claims against non-signatory FCA. The Court of Appeal rejected this argument, finding that FCA could compel arbitration under equitable estoppel, which allows a non-signatory to enforce an arbitration agreement when "the causes of action against the non-signatory are 'intimately founded in and intertwined' with the underlying contract obligations." (Id. at 495; quoting JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236-1237.) Citing the arbitration provisions above, the 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 arbitration agreement executed by Plaintiff is not materially different from the one in Felisilda. Felisilda found equitable estoppel because the buyers' claims related to the condition of the subject vehicle. The buyers expressly agreed to arbitrate their claims arising out of the condition of the subject vehicle, including those against third party non-signatories to the sales contract. That reasoning is present here.

The Court finds TMS has established the existence of a valid arbitration agreement between Plaintiff and Dealer, which is enforceable by TMS, notwithstanding the fact TMS is not a named defendant in the instant action and, as such, has not moved to compel arbitration.

Plaintiffs’ reliance on the Ninth Circuit case Kramer v. Toyota Motor Corp.¿(9th¿Cir. 2013) 705 F.3d 1122 and subsequent cases is misplaced.¿Plaintiffs contend that, like Kramer plaintiffs,¿they do not depend¿upon the existence of the Sales Contract in asserting warranty claims against FCA, and therefore, their claims should not be subject to the equitable doctrine. (Kramer, supra, 705 F.3d 1122)¿However, the retail sales contracts in Kramer did not contain any language that could be construed as extending the scope of arbitration to third parties. By contrast, the arbitration provision in this case provides for arbitration of disputes that include third parties so long as the dispute pertains to the condition of the vehicle. The language of the arbitration provision here is nearly identical to the language at issue in Felisilda, supra, 53 Cal.App.5th at 497, where the Court of Appeal held that plaintiff’s agreement to a sales contract containing such language constituted express consent to arbitrate their claims regarding vehicle condition even against third parties. Just like Felisilda, Plaintiffs allege claims arising out of the condition of the Vehicle and are estopped from refusing to arbitrate their claims against FCA.

Plaintiffs argue in reply that Felisilda is procedurally inapposite to this case, in that it concerned an instance in which plaintiffs filed suit against both the manufacturer and the dealer. Plaintiffs do not explain how this distinction has any bearing on the Felisilda court’s finding that a third party can enforce a sales contract when the language of that contract specifically contemplates enforcement by non-signatories. It cannot be that Plaintiffs can avoid the ruling in Felisilda by simply not bringing a claim against the dealership themselves. Plaintiff’s refusal to name the dealership as a defendant has no bearing on the fact that the Sales Agreement exists, that the action arises from the sale of a vehicle under that Sales Agreement, and that the Sales Agreement contains language averring to third parties.

Based on the foregoing, TMS proved the existence of a valid Arbitration Agreement between Dealer and Plaintiff that is enforceable by TMS. 

As to Bryan Ramirez

Plaintiffs argue in their opposition that plaintiff Bryan Ramirez is not a signatory to the Sale Contract and therefore TMS has no standing to compel his arbitration. TMS argues in reply that Ramirez arguably does not have a claim under Song-Beverly as he is not the owner of the vehicle and whether Ramirez signed the agreement is irrelevant.

The issue of Ramirez’s standing is not directly before the Court on this motion.  However, it does not appear to the Court that Ramirez has not pled facts supporting that he has independent standing to bring a claim under the Song-Beverly Act. The prerequisites for standing to assert statutorily-based causes of action are determined from the statutory language, as well as the underlying legislative intent and the purpose of the statute. (Dagher v. Ford Motor Co. (2015) 238 Cal.App.4th 905, 916.) It is the plaintiff's burden of pleading and proving that the Song-Beverly Act applies to his or her claims. (Id. at 917.) For a plaintiff to bring an action under Song-Beverly they must show (1) whether the purchase was one of “consumer goods” at all, (2) whether the purchaser was a “buyer” or “retail buyer,” and (3) whether the plaintiff purchased goods from a statutory “retail seller.” (Id.)

Ramirez does not allege that he is the owner of the vehicle, was the co-purchaser of the vehicle, or that Ramirez holds title to the vehicle by way of any purchase either from the Dealer or from Morataya. Plaintiffs’ sole claim as to Ramirez is that he was the primary driver of the vehicle, and thus any potential standing is derivative through Morataya (the Court is not ruling on standing). (Murray Decl. ¶5.) Ramirez point to no legal authority which supports that Ramirez’s independent status as the primary driver provides standing for his Song-Beverly claims.

When a plaintiff is suing on a contract—on the basis that, even though the plaintiff was not a party to the contract, the plaintiff is nonetheless entitled to recover for its breach, the plaintiff should be equitably estopped from repudiating the contract's arbitration clause. (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1240.) This is particularly true where the plaintiffs, signatory and nonsignatory, are related entities. (Id.) A nonsignatory can be compelled to arbitrate when a preexisting relationship existed between the nonsignatory and one of the parties to the arbitration agreement, making it equitable to compel the nonsignatory to arbitrate as well. (Id.) Examples of the preexisting relationship include agency, spousal relationship, parent-child relationship and the relationship of a general partner to a limited partnership. (Crowley Maritime Corp. v. Boston Old Colony Ins. Co. (2008) 158 Cal.App.4th 1061, 1070.)

Here, Ramirez’s claims are the same as Morataya’s. Presumably Morataya entered into the contract for the vehicle with the intent that the benefit be experienced by Ramirez as the primary driver. The Court finds it would be inequitable for Ramirez to have received the benefit of the contract, the car, without being bound by the arbitration agreement in the contract. The Court lacks the appropriate information to determine a preexisting relationship as between parent and child in this instance. Cases in which such a relationship have been found are dependent on the child being a minor. (County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47 Cal.App.4th 237, 242.) Plaintiff makes not aversion as to whether Ramirez was a minor at the time the contract was signed. Regardless, Ramirez claims are still subject to arbitration under the doctrine of equitable estoppel by virtue of his third-party benefit.  As such, the Court finds it equitable that Bryan’s claims are also subject to arbitration.

III.        CONCLUSION 

The Court finds that an enforceable arbitration agreement exists as between Plaintiffs and TMS. As such, the motion to compel arbitration is GRANTED in its entirety.

--- 

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 grants the motion to compel arbitration in its entirety, the Court also grants the motion to stay the proceedings pending arbitration. 

III.        CONCLUSION 

The Court grants the instant motion. 

--- 

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 

Defendant Toyota Motor Sales, U.S.A., Inc.’s Motion to Compel Arbitration and Motion for Stay came on regularly for hearing on February 24, 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: 

THE MOTION TO COMPEL ARBITRATION IS GRANTED. 

THE MOTION FOR STAY IS GRANTED. 

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

IT IS SO ORDERED. 

DATE:  February 24, 2023                             _______________________________ 

                                                                         F.M. TAVELMAN, Judge 

Superior Court of California 

County of Los Angeles