Judge: Gregory Keosian, Case: 22STCV09165, Date: 2022-08-04 Tentative Ruling

Case Number: 22STCV09165    Hearing Date: August 4, 2022    Dept: 61

Defendant Nissan North America, Inc.’s Motion to Compel Arbitration is GRANTED.

I.                   MOTION TO COMPEL ARBITRATION

On petition of a party to an arbitration agreement to arbitrate a controversy, a court must order the petitioner and respondent to arbitrate the controversy if it determines the arbitration agreement exists, unless (1) the petitioner has waived its right to arbitrate; (2) grounds exist for the revocation of the agreement; or (3) “[a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” (Code Civ. Proc., § 1281.2.)

“[T]he party moving to compel arbitration bears the burden of establishing the existence of a valid agreement to arbitrate, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. The role of the trial court is to sit as a trier of fact, weighing any affidavits, declarations, and other documentary evidence, together with oral testimony received at the court's discretion, to reach a determination on the issue of arbitrability.” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 758.)

Defendant presents an arbitration agreement executed by Plaintiff upon the purchase of the subject vehicle in in April 2021, which includes an arbitration agreement applicable to claims or disputes “between you and us or our employees, agents, successors or assigns, which arises out of 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)[.]” (Motion Exhs. 3, 4.) Defendant is not a signatory to the contract, which was propounded by the dealership.

Plaintiff argues that his signature on the agreement is not authenticated. (Opposition at pp. 12–14.) This argument is unpersuasive because “[f]or purposes of a petition to compel arbitration, it is not necessary to follow the normal procedures of document authentication.” (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218.) Once the moving party alleges and presents an arbitration agreement facially applicable to the controversy, actual authentication need only follow a challenge by the opposing party leveled against the authenticity of their signature on the agreement. “[A] petitioner is not required to authenticate an opposing party's signature on an arbitration agreement as a preliminary matter in moving for arbitration or in the event the authenticity of the signature is not challenged.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 846.) Plaintiff here offers no evidence or argument to the effect that he did not sign the arbitration agreement. Thus further authentication is unnecessary.

Plaintiff argues that Defendant cannot enforce the arbitration agreement because it is not a signatory to an agreement between Plaintiff and the dealership. (Opposition at pp. 14–15.) However, Defendant argues that arbitration should be compelled under the holding of Felisilda v. FCA US LLC (2020) 53 Cal.App.5^th 486, in which the court held that a nonsignatory vehicle manufacturer could compel arbitration of a lemon law plaintiff’s claims, based on application of the doctrine of equitable estoppel to an arbitration agreement signed with the dealership. The arbitration clause in Felisilda, as with the clause here, required arbitration of disputes relating to “the condition of the vehicle” or “any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract).” (Felisilda, supra, 53 Cal.App.5^th at p. 490.) The case was a lemon law action for violation of the Song Beverly Act. (Id. at p. 491.) The trial court granted the manufacturer’s motion to compel arbitration, and after the arbitration concluded, the court of appeal affirmed, reasoning that the lemon law plaintiff was barred from objecting to the manufacturer’s enforcement of the arbitration agreement by the doctrine of equitable estoppel. (Id. at p. 496.) “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.” (Id. at p. 495, internal quotation marks omitted.)

The court reasoned that the case at issue was covered by the contract, since it was a lemon law action related to the condition of the vehicle, and because the agreement squarely applied to disputes with third-party nonsignatories. (Id. at p. 496.) The court further held that the plaintiff’s warranty claims were intimately bound up with the purchase agreement: “The 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 p. 497.)

This logic applies here. The warranty claims that Plaintiffs allege relate to the condition of the vehicle. They allege that they entered into the warranty agreement at the same time as the purchase agreement, and their claims under Felisilda arise out of the latter agreement, which contains the arbitration clause.

Plaintiff in opposition attempts to distinguish Felisilda by arguing the motion in that case was brought by the dealership — the signatory party — not by the manufacturer, who merely passively supported the dealership’s motion. (Opposition at pp. 2–3.) But this is not a material distinction; the claims against the dealer in Felisilda were dismissed, leaving only the claims against the manufacturer, and the appellate court expressly framed the issue as “the question of whether a nonsignatory to the agreement has a right to compel arbitration under that agreement.” (Felisilda, supra, 53 Cal.App.5th at p. 495.) The court indeed disapproved the holding of the case Jurosky v. BMW of North America, LLC (C.D. Cal. 2020) 441 F.Supp.3d 963, in which the federal court had denied a motion to compel arbitration brought by the manufacturer (after the dealership was dismissed) in similar circumstances. (Felisilda, supra, 53 Cal.App.5th at p. 498.) The Felisilda court held that the Jurosky decision had “gloss[ed] over language in an arbitration clause that expressly include[d] third party nonsignatories.” (Ibid.)[1]

Plaintiff argues that there exists an optional alternative dispute resolution procedure in Defendant’s warranty manual that otherwise permits Plaintiff to file a court action, in contradiction with the arbitration provision in the sales contract. (Opposition at pp. 18–19.) But the warranty provision does not purport to allow litigation in court in contradiction with other binding arbitration agreements, but rather states that any decision reached in the optional arbitration process may be used as evidence in any subsequent court proceedings if the plaintiff rejects the arbitrator’s decision. (Opposition Exh. 1.) Nothing in the warranty expressly allows for court action, as Plaintiff contends.

Plaintiff argues that the agreement is unconscionable. (Opposition at pp. 3–12.)  “Unconscionability requires a showing of both procedural unconscionability and substantive unconscionability.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.) Arbitration contracts presented to employees on a take-it-or-leave-it basis and imposed upon employees as a condition of “necessary employment” are at least minimally procedurally unconscionable. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.) Here, the agreement is procedurally unconscionable to some degree, as it is a contract of adhesion drafted by the dealer and propounded upon a consumer as part of a take-it-or-leave-it sales contract.

But Plaintiff identifies no substantively unconscionable provisions of the agreement. Plaintiff argues that the arbitration agreement, by allowing Defendant to pursue arbitration, does not adequately define the parties. (Opposition at p. 8.) But the contract defines the parties as Plaintiff describes — Plaintiff and the dealership — and Defendant is only able to enforce the agreement by application of the doctrine of equitable estoppel as held in Felisilda. Plaintiff also argues that the agreement does not provide for attorney fees, but this is untrue. The agreement plainly states that although parties generally bear their own attorney fees, the arbitrator retains the power to award “attorney, expert and other fees . . . under applicable law,” such as the Song Beverly Act. (Opposition Exh. 3.) Plaintiff further argues that the contract lacks mutuality because it states that a party “may” seek arbitration of claims, implying that it is an option “to be sought by the party who believes it can benefit more from it.” (Opposition at p. 8.) But it is in the nature of arbitration agreements that they permit one or the other party to seek arbitration of disputes. There is no lack of mutuality, because Plaintiff acknowledges that if Defendant were to sue him, he would have the option to invoke the same agreement in his defense. (Opposition at p. 9.)

Plaintiff further argues that the arbitration agreement, by its nature, permits no third party discovery, but this is not true. (Opposition at pp. 10–12, 20–22.) Arbitrators may issue “[a] subpoena requiring the attendance of witnesses, and a subpoena duces tecum for the production of books, records, documents and other evidence, at an arbitration proceeding or a deposition . . . for the purposes of discovery” under California law (Code Civ. Proc. § 1282.6, subd. (a)), and “may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case” under the Federal Arbitration Act. (9 U.S.C. §7.) The authority that Plaintiff cites holds that this power of third-party production applies at the arbitration hearing, and may not take place before, not that it may not take place at all. (Opposition at p. 9, citing Aixtron, Inc. v. Veeco Instruments Inc. (2020) 52 Cal.App.5th 360, 395.) Plaintiff has identified no impediment to the effective vindication of their claims.

Plaintiff finally argues that issue preclusion ought to prevent Defendant from seeking arbitration here, as arbitration has been denied in other cases on similar or identical contracts. (Opposition at pp. 22–23.) The elements of issue preclusion are: “(1) the issue sought to be precluded from relitigation is identical to that decided in a prior proceeding; (2) the issue was actually litigated in the prior proceeding; (3) the issue was necessarily decided in the former proceeding; (4) the decision in the former proceeding is final and on the merits; and (5) the party against whom preclusion is sought is the same as, or in privity with, the party to the former proceeding. “(Bullock v. City of Antioch (2022) 78 Cal.App.5th 407, 415–416.) Issue preclusion does not apply here, however, because the issue in the prior case is not identical to the issue here. The case that Plaintiff identifies addressed the enforceability of a different contract with a different consumer for the purchase of a different vehicle. (Opposition Exh. 2.)

Accordingly, the motion to compel arbitration is GRANTED.