Judge: Gail Killefer, Case: 21STCV38138, Date: 2023-03-20 Tentative Ruling
Case Number: 21STCV38138 Hearing Date: March 20, 2023 Dept: 37
HEARING DATE: March 20, 2023
CASE NUMBER: 21STCV38138
CASE NAME: Dianca C. Marshall v. Nissan North America,
Inc.
MOVING PARTY: Defendant, Nissan
North America, Inc. (“NNA”)
OPPOSING PARTY: Plaintiff, Dianca C. Marshall
TRIAL DATE: Not
set.
PROOF OF SERVICE: OK
MOTION: Defendant’s
Motion to Compel Arbitration
OPPOSITION: March
7, 2023
REPLY: March
13, 2023
TENTATIVE: Defendant’s
motion is granted. Plaintiff is ordered to arbitrate his claims against NNA.
This action is stayed pending completion of arbitration or further order of the
court. The court sets an order to show cause re status of the arbitration for March
20, 2024, at 8:30 a.m. in Department 37. NNA is to give notice.
Background
This is a lemon law action arising in connection with the
purchase by Dianca C. Marshall (“Plaintiff”) of a 2018 Nissan Sentra on April
29, 2018 (the “Vehicle”). Plaintiff
alleges that Defendant Nissan North America, Inc. (“NNA”) who manufactured the
Vehicle, provided Plaintiff various warranties in connection with the Vehicle
in which Defendants undertook to preserve or maintain the performance of the
Vehicle and to repair the Vehicle in the event of any defects during the warranty
period. Plaintiff alleges that the Vehicle developed numerous defects during
the warranty period, including but not limited to defects related to the
electrical system, transmission, and engine. Further, Plaintiff alleges that
the Defendants failed to repair defects to the Vehicle when it was presented to
Defendants and their authorized representatives for repair.
Plaintiff’s Complaint alleges the following causes of
action: (1) violation of the
Song-Beverly Act (Civ. Code § 1793.2(d)), (2) violation of the Song-Beverly Act
(Civ. Code § 1793.2(b)), (3) violation of the Song-Beverly Act (Civ. Code § 1793.2(a)(3)),
(4) breach of express written warranty (Civ. Code § 1791.2(a); § 1794), (5)
breach of implied warranty of merchantability (Civ. Code § 1791.2(a); § 1794; §
1795.5), (6) violation of the Magnuson-Moss Warranty Act, and (7) fraud.
NNA now moves to compel arbitration and for a stay of
this action pending completion or arbitration. Plaintiff opposes the motion.
Request for Judicial Notice
NNA requests judicial notice of the
following in support of its motion:
1. Complaint filed by Plaintiff in this matter; (Exhibit 1)
2. NNA’s Answer to the Complaint filed in this matter; (Exhibit
2)
3. The
Notice of Entry of Dismissal filed by Plaintiffs Dina C. Felisilda and Pastor
O. Felisilda on February 11, 2016 in the matter Dina C. Felisilda, et al, v.
FCA US LLC, et al., Sacramento Superior Court Case No. 34-2015-00183668. (Exhibit
3).
Plaintiff requests judicial notice of the following in support of his
opposition:
4. Ngo
v. BMW of N. Am., LLC (9th Cir., 2022) 23 F.4th 942 (Exhibit A);
5. Morgan
v. Sundance, Inc., (U.S., 2022) 142 S. Ct. 1708 (Exhibit B);
6. Davis
v. Shiekh Shoes, LLC (Cal.Ct.App., 2022) 84 Cal.App.5th 956, No. A161961
(Exhibit C).
The parties’ requests are granted. The existence and legal
significance of this document are proper matters for judicial notice. (Evid.
Code § 452(d), (h).) However, the court may not take judicial notice of the truth of the
contents of the documents. (Herrera v. Deutsche Bank National Trust
Co. (2011) 196 Cal.App.4th 1366, 1375.) Documents are only
judicially noticeable to show their existence and what orders were made.
The truth of the facts and findings within the documents are not judicially
noticeable. (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz
& McCort (2001) 91 Cal.App.4th 875, 885.)
Discussion
I.
Legal Standard
“California law reflects a strong public policy in
favor of arbitration as a relatively quick and inexpensive method for resolving
disputes. To further that policy, Code
of Civil Procedure, section 1281.2 requires a trial court to enforce a written
arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a
party waives the right to arbitration; (2) grounds exist for revoking the
arbitration agreement; and (3) pending litigation with a third party creates
the possibility of conflicting rulings on common factual or legal issues.” (CCP § 1281.2; Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th
959, 967.) Similarly, public policy
under federal law favors arbitration and the fundamental principle that
arbitration is a matter of contract and that courts must place arbitration
agreements on an equal footing with other contracts and enforce them according
to their terms. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.)
In deciding a motion or petition to compel
arbitration, trial courts must first decide whether an enforceable arbitration
agreement exists between the parties and then determine whether the claims are
covered within the scope of the agreement.
(Omar v. Ralphs Grocery Co.
(2004) 118 Cal.App.4th 955, 961.) The
opposing party has the burden to establish any defense to enforcement. (Gatton
v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 579 [“The petitioner ...
bears the burden of proving the existence of a valid arbitration agreement and
the opposing party, plaintiff here, bears the burden of proving any fact
necessary to its defense.”].)
II.
Existence of an Arbitration
Agreement
A motion to compel
arbitration or stay proceedings must state verbatim the provisions providing
for arbitration or must have a copy of them attached. (Cal. Rules of Court, rule 3.1330.)
A party may demonstrate express acceptance of the
arbitration agreement in order to be bound (e.g., Mago v. Shearson Lehman Hutton Inc. (9th Cir. 1992) 956 F.2d 932
[agreement to arbitrate included in job application]; Nghiem v. NEC Electronic, Inc. (9th Cir. 1994) 25 F.3d 1437
[agreement to arbitrate included in handbook executed by employee]; Lagatree v. Luce, Forward, Hamilton &
Scripps (1999) 74 Cal. App. 4th 1105 [employer may terminate employee who
refuses to sign agreement to arbitrate]) or implied-in-fact in fact acceptance
(Asmus v. Pacific Bell (2000) 23 Cal.
4th 1, 11 [implied acceptance of changed rules regarding job security]; DiGiacinto v. Ameriko-Omserv Corp.
(1997) 59 Cal. App. 4th 629, 635 [implied acceptance of changed compensation
rules]). (Craig v. Brown & Root (2000) 84 Cal.App.4th 416, 420 (Craig).)
“A signed agreement is not necessary, however, and a
party’s acceptance [of an agreement to arbitrate] may be implied in
fact….” (Pinnacle Museum Tower Ass’n v. Pinnacle Market Dev. (US), LLC
(2012) 55 Cal.4th 223, 23 (Pinnacle),
6.) “An arbitration clause within a
contract may be binding on a party even if the party never actually read the
clause.” (Ibid.)
NNA contends that Plaintiff must be ordered to
arbitrate their claims because the Arbitration Agreement found in the Retail
Installment Sales Contract (the “Agreement”) Plaintiff executed at the time
they purchased the Vehicle requires it. (Motion, 6-9; Declaration of Rodrigo E.
Salas (“Salas Decl.”), Exh. 4-5.) The Agreement provides in pertinent part as
follows:
ARBITRATION PROVISION:
PLEASE REVIEW- IMPORTANT – AFFECTS YOUR
LEGAL RIGHTS
1.
EITHER
YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION OR
BY JURY TRIAL.
2.
IF A
DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS
REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US
INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL
ARBITRATIONS.
3.
DISCOVERY
AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A
LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE
AVAILABLE IN ARBITRATION.
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 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 and not by a court
action. If federal law provides that a claim or dispute is not subject
to binding arbitration, this Arbitration Provision shall not apply to any such
claim or dispute. Any claim or dispute is to be arbitrated by a single
arbitrator on an individual basis and not as a class action. You expressly
waive any right you may have to arbitrate a class action. You may choose the
American Arbitration Association…or any other organization to conduct
arbitration subject to our approval. You may get a copy of the rules of an arbitration
organization by contacting the organization or visiting its website.
Arbitrators shall be
attorneys or retired judges and shall be selected pursuant to the applicable
rules. The arbitrator shall apply substantive law and the applicable statute of
limitations. The arbitration hearing shall be conducted in the federal district
in which you reside unless the Seller-Creditor is a party to the claim or
dispute, in which case the hearing will be held in the federal district where
this contract was executed. We will pay your filing, administration, service or
case management fee and your arbitrator or hearing fee all up to a maximum of
$5000, unless the law or the rules of the chosen arbitration organization
require us to pay more. The amount we pay may be reimbursed in whole or in part
by decision of the arbitrator if the arbitrator finds that any of your claims
is frivolous under applicable law. Each party shall be responsible or its own
attorney, expert and other fees, unless awarded by the arbitrator under
applicable law. ... Any arbitration under this Arbitration Provision shall be
governed by the Federal Arbitration Act (9 U.S.C. §
1, et seq.) and not by any state law concerning arbitration. ...
You and we retain the
right to seek remedies in small claims court for disputes or claims within the
court’s jurisdiction, unless such action is transferred, removed or appealed to
a different court. Neither you nor we waive the right to arbitrate by using
self-help remedies, such as repossession, or by filing an action to recover to
vehicle, to recover a deficiency balance, or for individual injunctive relief.
Any court having jurisdiction may enter judgment on the arbitrator’s award.
This Arbitration Provision shall survive any termination, payoff, or transfer
of this contract. ...
(Salas Decl., Exh. 4-5.)(emphasis added)
Additionally, NNA contends that
notwithstanding its status as a non-signatory to the Agreement, NNA may still
compel arbitration because claims against it are related to the condition of
the Vehicle, that the Agreement is valid under the FAA, and was valid as agreed
to between the parties. (Motion, 5-8.) NNA alternatively contends that it has
standing to compel arbitration because it is an intended third-party
beneficiary of the Agreement, as NNA is the manufacturer of the Vehicle.
(Motion, 9-16.) Defendant cites Felisilda v. FCA US LLC, (2020) 53
Cal.App. 5th 486 (Felisilda) for this argument.
Felisilda arose in connection with the sale of a used Dodge
Grand Caravan that Plaintiffs purchased from a dealership and manufactured by
defendant, FCA US, LLC. (“FCA”) (Id. at 489.) Plaintiffs brought an
action against the dealership and FCA after the vehicle began exhibiting
problems. (Id.) The dealership moved to compel arbitration relying on
the retail installment sales contract signed by Plaintiffs, and the trial court
ordered Plaintiffs to arbitrate against both the dealership and FCA. (Id.)
FCA did not move to compel arbitration but instead filed a notice of
non-opposition. (Id.) The Court of Appeal concluded that the trial court
correctly determined that Plaintiff’s claims against FCA were encompassed by
the arbitration agreement. (Id.) In reaching this conclusion, the Court
of Appeal examined an identical arbitration clause which stated in pertinent
part: “[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, this contract or any resulting transaction or relationship
(including any such relationship with third parties who do not sign this
contract) shall … be resolved by neutral, binding arbitration and not by a court
action.” The appellate court found that the equitable estoppel doctrine
applied: “The [buyers’] claim against [the manufacturer] 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 [buyers] 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 [the manufacturer].
Consequently, the trial court properly ordered the [buyers] to arbitrate their
claim against [the manufacturer]. (Id. at pp. 496-497.)
Moreover, before Felisilda was decided, the Court reached
this same conclusion about the equitable estoppel theory in prior motions to
compel arbitration brought in lemon law cases.
Under the doctrine of equitable estoppel,
“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.” (JSM Tuscany, LLC v. Superior Court (2011)
193 Cal.App.4th 1222, 1237.) The doctrine applies in either of two
circumstances: (1) when the signatory must rely on the terms of the written
agreement containing the arbitration clause in asserting its claims against the
nonsignatory or (2) when the signatory alleges “substantially interdependent
and concerted misconduct” by the nonsignatory and a signatory and the alleged
misconduct is “founded in or intimately connected with the obligations of the
underlying agreement.” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209,
218-219.) At bottom, “[t]he linchpin for equitable estoppel is equity—fairness.””
(Id. at p. 220.)
A review of longstanding precedent in
California law reveals a strong interrelationship between warranties and
underlying purchase agreements. “A
warranty is a contractual term concerning some aspect of the sale,
such as title to the goods, or their quality or quantity.” (Jones
v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1200 (emphasis
added).) “A warranty is as much one of
the elements of sale and as much a part of the contract of sale as any other
portion of the contract and is not a mere collateral undertaking.” (A. A.
Baxter Corp. v. Colt Industries, Inc. (1970) 10 Cal.App.3d 144,
153.) To this point, in reviewing the
Song-Beverly Act’s legislative history, the California Supreme Court has noted
that “the Legislature apparently conceived of an express warranty as being part
of the purchase of a consumer product.”
(Gavaldon v. DaimlerChrysler Corp. (2004) 32 Cal.4th 1246, 1258; see
also Felisilda, supra, 53 Cal.App.5th at 496 (“[T]he sales
contract was the source of the warranties at the heart of this case.”).)
In view of this legal backdrop, the
equitable estoppel doctrine applies in lemon law cases like this because the
buyer relies upon the underlying purchase agreement to (1) establish standing,
(2) invoke implied warranties, and (3) obtain remedies.
Standing: Standing to bring Song-Beverly Act claims
is limited to a “buyer of consumer goods” (Civ. Code § 1794(a)), which the
Song-Beverly Act defines as “any individual who buys consumer goods from a
person engaged in the business of manufacturing, distributing, or selling
consumer goods at retail.” (Civ. Code §
1791(b).) Without this purchase
agreement, Plaintiff cannot meet this standing requirement or, indeed, the
standing requirement for any warranty claim.
(Jones, supra, 198 Cal.App.4th at 1201 (“As a
general rule, a cause of action for breach of implied [or express] warranty
requires privity of contract; ‘there is no privity between the original
seller and a subsequent purchaser who is in no way a party to the original
sale.’ ”).)
Implied Warranties: The implied warranty of merchantability
attaches to “every sale of consumer goods that are sold at retail in this
state,” unless properly disclaimed.
(Civ. Code § 1792.) Without the
Sales Contract, Plaintiff would have no implied warranties to invoke.
Remedies: According
to the Complaint, Plaintiff seeks to “reimbursement” for the costs of
financing, and owning the Vehicle and “rescission” of the purchase agreement of
the Vehicle. (Complaint. ¶¶ 43, Prayer
for Relief.) These remedies require
examination and presentation of the Sales Contract.
Because the Sales Agreement underlies
Plaintiff’s causes of action, including a claim for an express breach of the
Agreement, the equitable estoppel doctrine must apply.
In opposition, Plaintiff contends that NNA’s
motion must be denied firstly because NNA has waived the right to arbitrate
under the guidance provided by federal authority, pointing to federal precedent
to suggest NNA’s delay to be conclusive of its waiver of any right to arbitrate
these claims. (Opposition, 2-6; citing Morgan v. Sundance, Inc. (2022)
142 S.Ct. 1708.)
Second, Plaintiff contends the motion must
be denied because NNA is a non-signatory to the Agreement. (Opp., 7-8.) Plaintiff
also points to the specific “you” or “we” language of the Arbitration provision
as limiting definitions, which reflect what parties were intended on being
included in the Agreement. (Id.) However, the underlined portions of the
Agreement specifically consider and highlight an inclusion of any
“relationship” “with third parties who do not sign this contract,” which this
court reads to specifically consider and include third parties which may have a
beneficiary relationship as a result of the Agreement. Further, as this court
has discussed above, binding California authority, and a reading of California
law, shows the nonsignatory defendant, NNA, can compel arbitration as
Plaintiff’s claims are sufficiently “intertwined” with its contractual
obligations.
Additionally, Plaintiff contends that since the FAA applies, then federal precedent
supports a contrary holding to Felisilda, which Plaintiff also contends does not
apply. (Opp., 9-12.) This court finds Plaintiff’s reliance on federal
authorities that reach a contrary conclusion unpersuasive. (See, e.g., Ngo
v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942.) Plaintiff
argues that Felisilda is distinguishable because the buyers in that case
brought claims against both the dealership and manufacturer whereas here the
claims are brought solely against the manufacturer. This is a distinction
without a meaningful difference. The reasoning in Felisilda for
upholding the equitable estoppel finding was that the buyers’ claims related to
the condition of the subject vehicle and the buyers expressly agreed to
arbitrate their claims arising out of the condition of the subject vehicle,
including those against third party nonsignatories to the sales contract. The
same rationale is found here in these circumstances, with this Agreement. Further,
the FAA does not “alter background principles of state contract law regarding
the scope of agreements (including the question of who is bound by
them).” (Arthur Andersen LLP v. Carlisle (2009) 556 U.S. 624,
630.)¿ As opposed to the California Court of Appeal ruling in Felisilda,
Ngo is not binding on this court and provides persuasive authority only.
(See¿Felisilda, supra, at 497.)¿ The Court does not find Ngo
more persuasive than binding authority in Felisilda. Because state
law determines whether a nonsignatory party may compel arbitration, the court
rejects Plaintiff’s argument that the choice-of-law provision in the arbitration
agreement here precludes the applicability of Felisilda.
Additionally, Plaintiff contends equitable
estoppel does not apply here, since:
“Plaintiff brings his claims against NNA based on the warranties
received directly from NNA (Civ. Code, § 1790 et seq.,) and NNA’s common law
obligations, and none of the claims depend on the existence of the Sales
Contract. ... Thus, ‘the inequities that the doctrine of equitable estoppel is
designed to address are not present.’” (Opp., 11-14; citing Jarboe v.
Janless Auto Group (2020) 53 Cal.App.5th 539 (Jarboe).)
In Jarboe, Plaintiff, who was
terminated from an automobile dealership, brought a wage and hour action
individually and on behalf of a putative class against his former employer and
affiliated dealerships. (Jarboe, supra, 53 Cal.App.5th at 543-544.) The
trial court granted Defendants’ motion to compel arbitration as to 11 out of 12
causes of action against the employer and denied the motion as to the request
for a stay and as to the other defendants. (Id.) The Court of Appeal
found that the trial court correctly rejected Defendants’ arguments about
standing to compel arbitration as third-party beneficiaries and under the
theory of equitable estoppel. (Id. at 547.) According to the Court of
Appeal, even if the other owners had standing to compel arbitration under the
operative agreement, it is limited to the “context of their ownership” of the
company named in the employment agreement also at issue. (Id. at 550.)
Additionally, the Jarboe court concluded that it was correct to refuse
to compel arbitration against the other defendants because there was no showing
that plaintiff’s claims against these other defendants are “rooted” in his
employment with his former employer or his agreement to arbitrate with his
former employer. (Id. at 552-556.)
In reply, NNA
first contends it has not waived its right to arbitrate under California civil
procedure, as it has not acted inconsistently with the exercise of that right.
(Reply, 1-3.) NNA also correctly points out, assuming in arguendo that
federal precedent applies, Plaintiffs’ reliance on Davis v. Shiekh Shoes,
LLC, (2022) 84 Cal.App.5th 956, 967 (Shiekh Shoes) is misplaced as
the defendant in that case waited one and a half years before moving to compel
arbitration, and in that time participated in discovery, confirmed a trial
schedule, and requested a trial. (Id.) NNA here asserts no discovery
responses were produced by Plaintiff, and NNA’s motion to compel arbitration
here was filed “just one week after obtaining a portion of the Sales Contract
through discovery.” (Id.) NNA also explains Plaintiff’s reliance on Morgan
v. Sundance, 142 S.Ct. 1709 (2022) is misplaced as Morgan considered
“waiver as a matter of federal procedure to be
followed by federal courts pursuant to the FAA—not state procedural rules that
govern in California’s state courts.” (Reply, 4-5.)
Next, NNA correctly
contends that NNA has standing to move to compel arbitration as a third-party
beneficiary of the Agreement because the FAA does not alter principles of
California contract law. (Reply, 6-7; citing Arthur Andersen LLP v. Carlisle,
(2009) 556 U.S. 624, 630.) According to NNA, any breach of express warranty
claim is tethered to the Agreement because without the Agreement, Plaintiff
would not have received the warranty. (Reply, 7-9.)
“Plaintiff’s [fraud] claim also arises out of and
relates to the purchase and condition of the Subject Vehicle. Without a
purchase, Plaintiff would lack any basis for his [fraud] claims.” (Id.;
citing Orozco v. WPV San Jose LLC (2019) 36 Cal.App.5th 375, 411.)
NNA also contends
that Plaintiff’s claims are intertwined with the Agreement because the
Song-Beverly Act expressly provides that it only applies to consumers who
purchase a vehicle from a retail seller within the meaning of the Song-Beverly
Act. (Id.)
The court agrees with NNA that Felisilda applies and gives NNA
standing to move to compel arbitration in this action. Pursuant to Felisilda,
NNA has standing to compel arbitration if Plaintiff’s claims relate to the
condition of the vehicle and Plaintiff has agreed to arbitrate claims arising
out of the condition of the vehicle. Further, the court concludes that Jarboe
does not conflict with Felisilda. Instead, Jarboe held that
arbitration could not be compelled against non-signatory companies because
there was no showing that plaintiff’s claims arise out of his employment with
his former employer or his agreement to arbitrate with his former employer.
Thus, Felisilda and Jarboe stand for the same principles.
As discussed above, the Agreement provides in pertinent part that
Plaintiff agrees to arbitrate claims “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).” Thus,
Plaintiff has agreed to arbitrate claims arising out of or relating to the
“condition” of the Vehicle, or any resulting “relationship,” including any
relationship with “third parties who do not sign the contract,” such as NNA.
For these reasons, the
court finds that a valid agreement to arbitrate exists which applies to all of
Plaintiff’s claims against NNA in this action. The court will now analyze the
parties’ arguments regarding defenses to enforcement.
III.
Defenses to Enforcement
A. Waiver
Generally, ‘waiver’ denotes the voluntary
relinquishment of a known right. But it can also mean the loss of an
opportunity or a right as a result of a party’s failure to perform an act
it is required to perform, regardless of the party’s intent to . . .
relinquish the right.” (Engalla v. Permanent Medical Group,
Inc. (1997), 15 Cal.4th, 951, 983.) “Whether there has
been a waiver of a right to arbitrate is ordinarily a question of fact, and a
finding of waiver, if supported by sufficient evidence, is binding on an
appellate court.” (Ibid.) “In determining waiver, a
court can consider (1) whether the party’s actions are inconsistent with
the right to arbitrate; (2) whether the litigation machinery has been
substantially invoked and the parties were well into preparation of a
lawsuit before the party notified the opposing party of an intent to
arbitrate; (3) whether a party either requested arbitration enforcement close
to the trial date or delayed for a long period before seeking a stay; (4)
whether a defendant seeking arbitration filed a counterclaim without asking
for a stay of the proceedings; (5) whether important intervening
steps [e.g., taking advantage of judicial discovery procedures not available in
arbitration] had taken place; and (6) whether the delay affected, misled, or
prejudiced the opposing party.” (St. Agnes Med. Ctr. v. PacifiCare of
Cal. (2003) 31 Cal.4th 1187, 1196 (St. Agnes).)
As mentioned above, Plaintiff argues that NNA waived its
right to arbitrate by failing to indicate an intention to compel arbitration
and by utilizing the acts of litigation.¿¿Furthermore, under the recent
decision in Morgan v. Sundance (2022) 142 S.Ct. 1708 (Morgan),
prejudice is no longer a factor in determining whether a party waived the right
to arbitrate.
NNA contends Morgan is not controlling.
Further, NNA has not participated in the litigation process in a manner giving
rise to waiver, nor is there evidence NNA has unreasonably delayed in bringing
this motion.¿
Contrary to NNA’s assertion, Morgan is
controlling. (See Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th
956, 967 (Shiekh Shoes) [recognizing that a finding of waiver on a
showing of prejudice is unauthorized under the FAA, as articulated in Morgan].)
Notwithstanding NNA’s incorrect contention, the court
finds that Nissan has not waived its right to arbitrate. “To decide whether
a waiver has occurred, the court focuses on the actions of the person who held
the right; the court seldom considers the effects of those actions on the
opposing party.” (Morgan, supra, at p. 1713.)
“Courts have recognized that where the FAA applies, whether a party has waived
a right to arbitrate is a matter of federal, not state, law. [Citation.]”
(Shiekh Shoes, supra, 84 Cal.App.5th at p. 963.)
In St. Agnes v. PacifiCare of California (2003) 31
Cal.4th 1187, 1196 (St. Agnes), the California Supreme Court adopted a
multi-factor test from the Tenth Circuit opinion in Peterson v.
Shearson/American Express, Inc. (10th Cir. 1988) 849 F.2d 464 (Peterson)
wherein a court may consider: (1) whether the party’s actions are inconsistent
with the right to arbitrate; (2) whether the “litigation machinery has been
substantially invoked” and the parties “were well into preparation of a
lawsuit” before the party notified the opposing party of an intent to
arbitrate; (3) whether a party either requested arbitration enforcement close
to the trial date or delayed for a long period before seeking a stay; (4)
whether a defendant seeking arbitration filed a counterclaim without asking for
a stay of the proceedings: (5) whether important intervening steps [e.g., taking
advantage of judicial discovery procedures not available in¿arbitration] had
taken place; and (6) whether the delay affected, misled, or prejudiced the
opposing party.¿ (Peterson, supra, 849 F.2d at pp. 467-68; St.
Agnes, at p. 1196.)¿¿ However, following the U.S. Supreme Court’s decision
in Morgan, courts may no longer condition a determination of waiver on
prejudice. (See Morgan, supra, at p. 1713.) The
remaining Peterson factors are proper considerations in the waiver
inquiry. (Shiekh Shoes, supra, at p.
963.)
Here, the arbitration agreement states: “Any arbitration
under this Arbitration Provision shall be governed by the Federal Arbitration
Act (9 U.S.C. § 1 et. Seq.) and not by any state law concerning
arbitration.” (Salas Decl., Ex. 4-5.) Accordingly, federal law
supplies the law on waiver in this case. (See Shiekh Shoes, supra,
at p. 963.)
NNA represents it
has not litigated the matter substantively and moved to compel arbitration
after obtaining the Agreement. (Reply, 1-3.) NNA has not filed any demurrers, motions to strike, or otherwise
engaged in the merits of Plaintiff’s claims. Based upon the above,
unquestionably Nissan has participated in the litigation. However, mere
participation in the litigation is insufficient, standing alone, to establish
waiver. (St. Agnes, supra, 31 Cal.4th at p. 1203.)¿There
must also be some judicial litigation of the merits of arbitrable
issues. (Ibid.) The waiver argument is not persuasive. Plaintiff
makes no showing that there has been judicial litigation of the merits of
arbitrable issues.
For these reasons, the court finds that NNA has not
waived its right to compel arbitration.
B. Procedural
& Substantive Unconscionability
Pursuant to Armendariz
v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz)
both procedural and substantive unconscionability must be present in order for
a court to exercise its discretion to refuse to enforce a valid arbitration
agreement. Additionally, in Armendariz,
the California Supreme Court recognized that it is more appropriate to
sever and restrict illegal terms that are collateral to the main purpose of a
contract than to find the entire contract invalid. (Armendariz,
supra, 24 Cal.4th at 124 [“Courts are to look to the various purposes of
the contract. If the central purpose of the contract is tainted with
illegality, then the contract as a whole cannot be enforced. If the
illegality is collateral to the main purpose of the contract, and the illegal
provision can be extirpated from the contract by means of severance or
restriction, then such severance and restriction are appropriate.”].)
As Plaintiff does
not point to any alleged unconscionability in the Agreement, the court finds
that the Agreement is not procedurally or substantively unconscionable.
Because both
substantive and procedural unconscionability are required before the court may
refuse to enforce a valid arbitration agreement, and Plaintiff has failed to
make a showing of either and both, NNA’s motion is granted.
Conclusion
NNA’s motion is
granted. Plaintiff is ordered to arbitrate his claims against NNA. This action
is stayed pending completion of arbitration or further order of the court. The
court sets an order to show cause re status of the arbitration for March 20,
2024, at 8:30 a.m. in Department 37. NNA is to give notice.