Judge: George F. Bird, Jr., Case: 22CMCV00355, Date: 2023-02-28 Tentative Ruling

Case Number: 22CMCV00355    Hearing Date: February 28, 2023    Dept: B

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES – SOUTH CENTRAL DISTRICT

I.       BACKGROUND

             Plaintiffs Suhaib Alqudah and Rasha Alkahalaileh (“Plaintiffs”) filed the Complaint on October 6, 2022, alleging violations of the statutory obligations under the Song-Beverly Warranty Act. Plaintiffs allege on or about February 27, 2021, they leased a 2021 Honda Pilot (the “Vehicle”) manufactured by American Honda Motor Co., Inc. (“Defendant”). (Complaint (“Compl.”), ¶ 6.) Plaintiffs allege they received express written warranties from Defendant which insured the utility and performance of the Vehicle or Defendant would provide compensation for the failures. (Compl., ¶ 10.) Plaintiffs allege that the Vehicle contained or developed a defective ignition system (Compl., ¶ 12.) Plaintiffs state that the Vehicle was provided to Defendant and its representatives and that the defects were unable to be repaired. (Compl., ¶¶ 14, 15.)

II.       MOTION TO COMPEL ARBITRATION AND STAY THE ACTION

A.    Defendant’s Motion.

            Defendant brought this Motion to Compel Arbitration and Stay the Action (“Motion”) on December 8, 2022. Defendant alleges that Plaintiffs entered into a Close End Motor Vehicle Lease Agreement that contained an arbitration provision when Plaintiffs leased the Vehicle. Defendant seeks to enforce the arbitration provision through the doctrine of equitable estoppel. Defendant also seeks to enforce the arbitration provision as a third-party beneficiary or because Defendant argues they are the parent company of the contract assignee, Honda Lease Trust.

B.     Plaintiffs failed to file an opposition.

            Pursuant to Code of Civil Procedure section 1005, subdivision (b), an opposition to a motion to compel arbitration must be filed and served nine court days before the hearing. The opposition deadline for this matter was February 14, 2023. As of February 22, 2023, three court days before the hearing, Plaintiffs have not filed an opposition. Defendant filed a notice of non-opposition on February 21, 2023. The Court will not consider any untimely oppositions filed after February 22, 2023, as Defendant will not have a sufficient opportunity to file a reply before the hearing on February 28, 2023.             

III.       LEGAL STANDARDS

A written arbitration agreement is “valid, enforceable and irrevocable” unless grounds for revocation of any contract exist. (Code Civ. Proc., § 1281.) The court shall order the parties to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless grounds exist for rescission of the agreement. (Code Civ. Proc., § 1281.2, subd. (b).) If the court orders arbitration, the court shall stay the action or proceeding. (Code Civ. Proc., § 1281.4.)

If the parties specifically contract to designate that the FAA controls the arbitration agreement, then the FAA governs rather than state procedural law. (Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1115.) The FAA provides that an arbitration agreement in any “contract evidencing a transaction involving commerce . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for revocation of any contract.” (9 U.S.C. § 2.) If the matter is referred to arbitration, the court shall stay the action. (9 U.S.C. § 3.) However, state law is applicable to determine which contracts are binding under Section 2 and enforceable under Section 3. (Arthur Andersen LLP v. Carlisle, supra.,  556 U.S. at pp. 630-631.)

IV.       REQUEST FOR JUDICIAL NOTICE

            Defendant asks this Court to take judicial notice of three documents: (1) Complaint filed in the Los Angeles Superior Court by Plaintiffs Suhaib Alqudah and Rasha Alkhalaileh on October 6, 2022, in the matter of Suhaib Alqudah, et al. v. American Honda Motor Company, Inc. (Case No. 22CMCV00355); (2) Notice of Entry of Dismissal and Proof of Service, filed in Sacramento Superior Court by plaintiffs Dina C. Felisilda and Pastor O. Felisilda on February 11, 2016, in the matter of Dina C. Felisilda, et al. v. FCA US LLC, et al. (Case No. 34-2015-00183668); and (3) Defendant American Honda Motor Co., Inc.’s Answer to Complaint, filed in the Los Angeles Superior Court on November 14, 2022, in the matter of Suhaib Alqudah, et al. v. American Honda Motor Company, Inc. (Case No. 22CMCV00355).

            Under Evidence Code section 452, subdivision (d), the court may take judicial notice of records of any court of this state. This Court will take judicial notice of all three documents. The Court will not take judicial notice of the facts contained within these documents as the facts are reasonably subject to dispute.

V.          DISCUSSION

            The Declaration of Maks Shapiro, counsel for Defendant, presents a copy of the Closed-End Motor Vehicle Lease Agreement Sale Contract (the “Sale Contract”). (See Declaration of Maks Shapiro, Exhibit 1.) The Lessee on the Sale Contract is Suhaib Alqudah, and the Co-Lessee is Rasha Alkahalaileh. (Ibid.) The Lessor is defined in the Sale Contract as Lessor (“Dealer”), Carson Honda, and Assignee, Honda Lease Trust. The Sale Contract explicitly clarifies that “American Honda Finance Corporation serves as the administrator of the Lessee on behalf of Honda Lease Trust. American Honda Finance Corporation is doing business as Honda Financial Services.” (Ibid.)

            The arbitration provision in the Sale Contract is designated on its own page and states, “By signing the Arbitration Consent, YOU elect to have disputes resolved by arbitration. YOU, HONDA or any involved third party may pursue a Claim. “Claim” means any dispute between YOU, HONDA, or any involved third party relating to your account, the Lease, or our relationship, including any application, the Vehicle, its performance and any representations, omissions or warranties.” (Ibid.) HONDA is defined to include Honda American Motor Co., Inc., who is the Defendant in this action. Plaintiffs initialed the bottom of the page containing the arbitration provision and initialed section 15 of the Sale Contract acknowledging they read the arbitration clause. (Ibid.) It is clear that Plaintiffs agreed to arbitrate claims relating to the Vehicle's performance and the warranties, but Defendant was not a signatory to the Sale Contract. Defendant wishes to enforce the arbitration provision of the Sale Contract on a theory of equitable estoppel, as a third-party beneficiary, or as a parent company to the assignee of the Sale Contract. 

            “Under the doctrine of equitable estoppel, ‘as applied in ‘both federal and California decisional authority, 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 [266 Cal.Rptr.3d 640, 647, 53 Cal.App.5th 486, 495] (hereinafter “Felisilda”).) “In determining whether the plaintiffs’ claim is founded on or intimately connected with the sales contract, we examine the facts of the operative complaint.” (Id. at 496.)

            Here, the Song-Beverly Warranty Act claims are founded in the Sale Contract. The warranty provided by Defendant is a condition of leasing the Vehicle through the Sale Contract. In Felisilda, the warranties at issue “accompanied the sale of the vehicle” in which the manufacturer undertook to preserve the utility of the vehicle or provide compensation if there was a failure. (Felisilda v. FCA US LLC, supra., 53 Cal.App.5th at p. 496.) Based on these facts, the Court of Appeal determined “Thus, the sales contract was the source of the warranties at the heart of this case.” (Ibid.) The Court of Appeal recognized that the warranties received were “a consequence of the sale contract.” (Id. at 497.) Here, Plaintiffs state that warranties from Defendant were received “in connection with the lease of the Vehicle” and Defendant agreed to maintain the utility of the Vehicle. (Compl., ¶ 10.) As in Felisilda, the Sale Contract is the source of the warranty provided by Defendant. The claims for violation of the warranty are sufficiently founded in the Sale Contract.

            The claims are also intertwined with the underlying contract obligations. The Sale Contract arbitration provision states that Plaintiffs agree to arbitrate disputes with HONDA which includes Defendant. Though not a signatory, Defendant is specifically contemplated by the arbitration provision. The arbitration provision applies to claims including disputes related to the performance or warranties related to the Vehicle. The Song-Beverly Warranty Act claims here dispute the performance and compliance with the warranties. Defendant may enforce the arbitration provision of the Sale Contract on a theory of equitable estoppel.

            Defendant also wishes to enforce the arbitration provision as a third-party beneficiary. “A third party may enforce a contract where he shows that he is a member of a class of persons for whose benefit it was made.” (Internal quotations omitted.) (Ronay Family Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 839 [157 Cal.Rptr.3d 680, 686].) In Ronay Family Limited Partnership, the Court of Appeal found that a third-party agent of the signatory of the contract could enforce the arbitration provision because the arbitration provision was intended to benefit the agent by compelling arbitration for transaction with “[CapWest], its officers, directors, agents, registered representatives and/or employees….” (Ronay Family Limited Partnership v. Tweed, supra., 216 Cal.App.4th at p. 839.) Here, the arbitration provision was intended to benefit Defendant because American Honda Motor Co., Inc. is specifically defined as HONDA in the arbitration provision. (Declaration of Maks Shapiro, Exhibit 1.) Defendant may also enforce the arbitration provision as a third-party beneficiary.

            Finally, Defendant argues they can enforce the arbitration provision as a parent organization to an assignee of the Sale Contract. The Sale Contract lists Honda Lease Trust as an assignee. Honda Lease Trust is allegedly a wholly owned subsidiary of American Honda Finance Corporation and Defendant is allegedly the parent company of American Honda Finance Corporation. (Declaration of Maks Shapiro, ¶¶ 8, 9.) “... [W]here the party seeking to compel arbitration can show the parent had sufficient control over the subsidiary's activities such that the subsidiary was a mere agent or instrumentality of the parent and the causes of action or claims against the parent arise out of this relationship.” (Cohen v. TNP 2008 Participating Notes Program, LLC, 31 Cal.App.5th 840, 864–65, 243 Cal. Rptr. 3d 340, 363 (2019).) Defendant summarily states that they had sufficient control without offering any factual demonstration of control over either American Honda Finance Corporation or Honda Lease Trust. Defendant fails to demonstrate the requisite control and Defendant cannot enforce the arbitration provision as a parent company to an assignee of the Sale Contract.

            Based on the foregoing, Defendant may enforce the arbitration provision of the Sale Contract against Plaintiffs as a third-party beneficiary or on a theory of equitable estoppel. As the Court has found arbitration is proper, the Court shall stay this action. (Code Civ. Proc., § 1281.4; 9 U.S.C. § 3.)

VI.    CONCLUSION

             This Motion to Compel Arbitration and Stay the Action is GRANTED.

Dated: February 28, 2023                                           __________________________________

                                                                                                Judge of the Superior Court