Judge Gail Killefer, Case 21STCV44109 2023-01-18 Tentative Ruling

Judge: Gail Killefer, Case: 21STCV44109, Date: 2023-01-18 Tentative Ruling

Case Number: 21STCV44109 Hearing Date: January 18, 2023 Dept: 37

HEARING DATE: January 18, 2023

CASE NUMBER: 21STCV44109

CASE NAME: Fredy A. Estrada, et al. v. Nissan North America, Inc.

MOVING PARTY: Defendant, Nissan North America, Inc. (“NNA”)

OPPOSING PARTIES: Plaintiffs, Fredy A. Estrada and Francisca Estrada

TRIAL DATE: Not set.

PROOF OF SERVICE: OK

MOTION: Defendant’s Motion to Compel Arbitration

OPPOSITION: December 2, 2022

REPLY: December 8, 2022

TENTATIVE: Defendant’s motion is granted. Plaintiffs are ordered to arbitrate their 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 January 18, 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 Fredy A. Estrada and Francisca Estrada (together, “Plaintiffs”) of a 2018 Nissan Pathfinder on May 27, 2018 (the “Vehicle”). Plaintiffs allege that Defendant Nissan North America, Inc. (“NNA”) which manufactured the Vehicle, provided Plaintiffs 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. Plaintiffs allege 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, Plaintiffs allege that the Defendants failed to repair defects to the Vehicle when it was presented to Defendants and their authorized representatives for repair.

Plaintiffs’ Complaint alleges the following causes of action: (1) violation of the Song-Beverly Act (Civil Code § 1793.2(d)), (2) violation of the Song-Beverly Act (Civil Code § 1793.2(b)), (3) violation of the Song-Beverly Act (Civil Code § 1793.2(a)(3)), (4) breach of implied warranty of merchantability (Civil Code §§ 1791.1; 1794; 1795.5), and (5) fraudulent inducement – concealment.

NNA now moves to compel arbitration and for a stay of this action pending completion or arbitration. Plaintiffs oppose the motion.

Request for Judicial Notice

NNA requests judicial notice of the following in support of its motion:

1. Plaintiffs’ Complaint, filed in this matter. (Exhibit A).

Plaintiffs request judicial notice of the following in support of their opposition:

2. Ngo v. BMW of N. Am., LLC (9th Cir., 2022) 23 F.4th 942 (Exhibit A);

3. Morgan v. Sundance, Inc., (U.S., 2022) 142 S. Ct. 1708 (Exhibit B);

4. Davis v. Shiekh Shoes, LLC (Cal.Ct.App., 2022) 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, CCP § 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, plaintiffs 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 Plaintiffs must be ordered to arbitrate their claims because the Arbitration Agreement found in the Retail Installment Sales Contract (the “Agreement”) Plaintiffs executed at the time they purchased the Vehicle requires it. (Motion, 6-9; Declaration of Parada K. Ornelas (“Ornelas Decl.”), Exh. A.) 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. ...

(Ornelas Decl., Exh. A.)(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, 9-11.) 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, 12-14.) Defendants cite to 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.)

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.)

In opposition, Plaintiffs contend that NNA’s motion must be denied firstly because NNA has waived the right to arbitrate, pointing to federal precedent to suggest NNA’s delay of several months to be conclusive of its waiver of any right to arbitrate these claims. (Opposition, 3-6; citing Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708.) Second, Plaintiffs contend the motion must be denied because NNA is a non-signatory to the Agreement. (Opp., 6-7.) Plaintiffs point 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.

Additionally, Plaintiffs contend that since the FAA applies, then federal precedent supports a contrary holding to Felisilda, which Plaintiffs also contend does not apply. (Opp., 8-11.) This court finds Plaintiffs’ 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.

Additionally, Plaintiffs contend equitable estoppel does not apply here, since:

“Plaintiffs brings their claims against NNA based on the warranties received directly from NNA (Civ. Code, § 1790 et seq., 15 U.S.C. § 2301 et seq.) and NNA’s common law obligations, and none of the claims depend on the existence of the Sales Contract. ... Plaintiffs are not seeking to enforce any term or condition of the Sales Contract in bringing their claims against NNA. Thus, ‘the inequities that the doctrine of equitable estoppel is designed to address are not present.’” (Opp., 12-15; 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, 2-4.) NNA also correctly points out Plaintiffs’ reliance on Davis v. Shiekh Shoes, LLC, -- Cal.Rptr.3d --, 2022 WL 16546189 (Oct. 31, 2022) (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 also explains Plaintiffs’ 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.)

As waiver is a matter of state procedure determined by Civil Code § 1281.2(a), the court agrees with NNA that state authority is binding precedent and Plaintiffs have failed to make a showing of waiver here.

Next, NNA 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, 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, Plaintiffs would not have received the warranty. (Reply, 8-10.)

“Plaintiffs’ fraudulent omission claim also arises out of and relates to the purchase and condition of the Subject Vehicle. Without a purchase, Plaintiffs would lack any basis for their fraudulent inducement claims.” (Id.; citing Orozco v. WPV San Jose LLC (2019) 36 Cal.App.5th 375, 411.)

NNA also contends that Plaintiffs’ 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 FCA 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 Plaintiffs agree 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, Plaintiffs have 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 Plaintiffs’ 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.4^th, 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 discussed above, the court accepts NNA’s representation that it required additional time to file this motion because it was needed to independently obtain a copy of the Agreement. (Reply, 3-4.) Additionally, the court agrees that passage of time since Plaintiffs filed this action is, by itself, insufficient to demonstrate waiver. NNA has not filed any motions in this action, and the court accepts NNA’s representation that it has also not taken any discovery.

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 Plaintiffs do 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 Plaintiffs have failed to make a showing of either and both, NNA’s motion is granted.

Conclusion

NNA’s motion is granted. Plaintiffs are ordered to arbitrate their 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 January 18, 2024, at 8:30 a.m. in Department 37. NNA is to give notice.