Judge: Gregory Keosian, Case: 22STCV09952, Date: 2022-08-15 Tentative Ruling

Case Number: 22STCV09952    Hearing Date: August 15, 2022    Dept: 61

Defendant Mercedes-Benz USA,, LLC’s Motion to Compel Arbitration is DENIED.

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 a sales contract executed by Plaintiff and the selling dealership with the purchase of the subject vehicle May 24, 2022, and which includes an arbitration provision applicable to “any dispute over the interpretation, scope, or validity of this lease, arbitration section or the arbitrability of any issue), between you and us or any of our employees, agents, successors or assigns, which arises out of or relates to a credit application, this lease, or any resulting transaction or relationship arising out of this lease.” (Tahildoost Decl. Exh. 2.) Defendant is not a signatory to this agreement, but argues that it possesses standing to enforce the agreement as a third-party beneficiary, or under the doctrine of equitable estoppel. (Motion at pp. 4–9.)

Defendant raises no persuasive argument to enforce the arbitration agreement as a nonsignatory, either through equitable estoppel or as a third party beneficiary.

The doctrine of equitable estoppel applies to allow a nonsignatory defendant to arbitrate claims made against it which are “dependent upon, or founded in and inextricably intertwined with, the underlying contractual obligations of the agreement containing the arbitration clause.” (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 715.) This doctrine allows not only nonsignatory defendants to arbitrate claims against signatory plaintiffs, but also against nonsignatory plaintiffs whose claims rely upon the contract at issue. (See JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1240.)

Defendant relies upon the case of Felisilda v. FCA US LLC (2020) 53 Cal.App.5^th 486, in which the court held that a nonsignatory manufacturer could enforce an arbitration agreement that a lemon law plaintiff had signed with the dealership. However, the Felisilda court placed special emphasis upon the language of the arbitration agreement at issue, which specifically required arbitration of disputes involving  “any such [resulting] relationship with third parties who do not sign this contract.” (Id. at p. 490, italics in original.) The court held that the doctrine of equitable estoppel allowed the manufacturer to enforce the agreement because that agreement “provides for arbitration of disputes that include third parties so long as the dispute pertains to the condition of the vehicle.” (Id. at p. 497.) That all-important language is missing in this case.

Nor does this language indicate that Defendant is a third party beneficiary of the contract. To enforce an arbitration clause as a beneficiary, a nonsignatory party must show that the clause was “made expressly for [its] benefit.” (Fuentes v. TMCSF, Inc. (2018) 26 Cal.App.5th 541, 552.) Here, the only indication that the arbitration agreement was entered for Defendant’s benefit is the language that includes disputes arising from any “resulting transaction or relationship arising out of this lease.” (Motion at p. 5.) But there is little reason to include Defendant as a “resulting relationship” under this language.  In Soto v. American Honda Motor Co., Inc. (2012) 946 F.Supp.2d 949, an automobile-manufacturer defendant in a lemon law suit sought to compel arbitration through to an agreement that it had not signed, by reference to a provision with language identical to that relied on by Defendants here. (Id. at p. 955.) The court found this clause “inapposite,” because it applied only to nonsignatories in “resulting” transactions, i.e. transactions involving “a secondary sale of the car,” rather than the plaintiff’s “relationship with the manufacturer,” which “began at the moment he bought his [vehicle].” (Ibid.)

The motion is therefore DENIED.