Judge Holly J. Fujie, Case 21STCV04883 2023-01-09 Tentative Ruling

DEPARTMENT 56 JUDGE HOLLY J. FUJIE, LAW AND MOTION RULINGS. The court makes every effort to post tentative rulings by 5.00 pm of the court day before the hearing. The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)], and are also available in the courtroom on the day of the hearing [see CRC 3.1308(b)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) call Dept 56 by 8:30 a.m. on the day of the hearing (213/633-0656) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no telephone call is necessary and all parties should appear at the hearing in person or by Court Call. Court reporters are not provided, and parties who want a record of motions and other proceedings must hire a privately retained certified court reporter.

The Court has considered the moving, opposition and reply papers. The Court’s records indicate that Plaintiff’s opposition (the “Opposition”) was filed on December 23, 2022. The Proof of Service attached to the Opposition states that Moving Defendant’s counsel was served with the Opposition by email on December 23, 2022. Moving Defendant’s reply (the “Reply”) provides evidence that Moving Defendant’s counsel did not receive a copy of the Opposition by email and did not learn of the Opposition until counsel checked the Court’s website on December 29, 2022. (See Supplemental Declaration of Karyn L. Ihara (“Supp. Ihara Decl.”) ¶ 3.) After downloading the Opposition from the Court’s website on December 29, 2022, Moving Defendant’s counsel emailed Plaintiff’s attorney, who then sent the Opposition and accompanying papers to Moving Defendant’s counsel later that day. (Id.) Although the reasons Moving Defendant’s counsel did not receive the Opposition on December 23, 2022 are not clear, because Moving Defendant has since received the filings and has substantively responded to Plaintiff’s arguments, the Court exercises its discretion and has considered the Opposition.

This action arises out of the purchase of an allegedly defective vehicle (the “Vehicle”) manufactured by Moving Defendant. Plaintiff’s complaint (the “Complaint”) alleges: (1) breach of express warranty in violation of the Song-Beverly Act.

Moving Defendant filed a motion to compel arbitration and stay the proceedings (the “Motion”) on the grounds that when Plaintiff purchased the Vehicle, he signed a sales agreement (the “Contract”) containing a binding arbitration provision (the “Arbitration Agreement”) that requires that his claims be resolved in binding arbitration. Moving Defendant argues that while it is not a party to the Contract, it is entitled to enforce the Arbitration Agreement under the doctrine of equitable estoppel and as a third-party beneficiary.

Plaintiff’s objection to the Declaration of Karyn L. Ihara (“Ihara Decl.”) is OVERRULED.

The purpose of the Federal Arbitration Act (“FAA”) is to move the parties in an arbitrable dispute out of court and into arbitration as quickly and easily as possible. (Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp. (1983) 460 U.S. 1, 23.) The FAA is consistent with the federal policy to ensure the enforceability, according to their terms, of private agreements to arbitrate. (Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 57.) A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable, and irrevocable, save upon such grounds as exist for the revocation of any contract. (CCP § 1281.) California law, like federal law, favors enforcement of valid arbitration agreements. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97.) On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy unless grounds exist not to compel arbitration. (CCP § 1281.2.)

The party moving to compel arbitration bears the burden of producing prima facie evidence of a written agreement to arbitrate the controversy. (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.) The moving party can meet its initial burden by attaching a copy of the alleged arbitration agreement purporting to bear the opposing party’s signature. (Id.) Alternatively, the moving party can meet its burden by setting forth the agreement’s provisions in the motion. (Id.) It is not necessary to follow the normal procedures of document authentication. (Id.) If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion. (Id.)

If the moving party meets its initial prima facia burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement, which can be done in several ways. (Id.) For example, the opposing party may testify under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement. (Id.) If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. (Id.)

In support of the Motion, Moving Defendant provides evidence of the Contract entered into by Plaintiff and the dealer of the Vehicle, Hooman Nissan Long Beach (the “Dealer”), on September 28, 2016. (See Ihara Decl., Exhibit B.)

The seventh page of the Contract contains the Arbitration Agreement, which provides in part:

“EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

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 arises out of or relates 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.”

The first page of the Contract contains a signature line signed by Plaintiff that specifically provides that the buyer of the Vehicle had reviewed and agreed to the Arbitration Agreement before signing. (Ihara Decl., Exhibit B at 1.)

As an initial matter, the Court finds that Moving Defendant has presented sufficient evidence of the existence of the Arbitration Agreement. Plaintiff’s objection to Moving Defendant’s evidence of the Arbitration Agreement, which is asserted on the ground that it was not properly authenticated, is not persuasive since a party moving to compel arbitration is not required to follow the normal procedures of document authentication. (See Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.) The Opposition does not dispute that Plaintiff signed the Contract or otherwise argue that the document is not authentic. As a result, Plaintiff has not met his burden of producing evidence to dispute the existence of the Arbitration Agreement. (See Gamboa v. Northeast Community Clinic, supra, 72 Cal.App.5th at 165.)

Third parties may enforce a contract with an arbitration provision where they are intended third-party beneficiaries or are assigned rights under the contract. (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 856.) This right is predicated on the contracting parties’ intent to benefit the third party and the third party should therefore not be permitted to enforce promises not made for his benefit. (Fuentes v. TMCSF, Inc. (2018) 26 Cal.App.5th 541, 551-52.) To determine whether a third party may bring a claim pursuant to a contract’s terms, courts carefully examine the express provisions of the contract at issue, as well as all of the relevant circumstances under which the contract was agreed to, in order to determine: (1) whether the third party would in fact benefit from the contract; (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party; and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.) All three elements must be satisfied to permit the third party’s action to go forward. (Id.)

The Arbitration Agreement at issue expressly provides that the right to enforce its terms is vested in the signatories and their successors, agents or assigns. (See Ihara Decl., Exhibit B at 7.) Moving Defendant has not provided evidence that it is a successor, agent or assign of the Dealer or that the Dealer and Plaintiff intended for the Contract to classify Moving Defendant as such. Accordingly, the Court finds that Moving Defendant may not enforce the Arbitration Agreement as a third-party beneficiary.

Equitable estoppel applies when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the non-signatory party. (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 218.) The signatory cannot seek to hold the non-signatory liable pursuant to duties imposed by an agreement containing an arbitration provision and then deny the applicability of arbitration because the defendant is a non-signatory. (Id. at 220.) Under the doctrine of equitable estoppel, a non-signatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the non-signatory are “intimately founded in and intertwined” with the underlying contract obligations. (Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271.) To determine whether the plaintiff’s claim is founded on or intimately connected with the sales contract, a court examines the facts of the operative complaint. (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 496 (“Felisilda”).)

Moving Defendant argues that it is entitled to enforce the Arbitration Agreement under Felisilda because Plaintiff’s claims are intimately intertwined with the Contract, even if the allegations in the Complaint are rooted in the manufacturer’s warranty. (See Complaint ¶ 13, Exhibit 1.) In Felisilda, the plaintiffs brought breach of warranty claims under the Song-Beverly Act against a car dealership and manufacturer. (Felisilda, supra, 53 Cal.App.5th at 489.) The dealership moved to compel arbitration based on the sales contract and the manufacturer filed a notice of non-opposition to the dealership’s motion. (Id.) The trial court ordered the plaintiffs to arbitrate their claims against both the dealership and the manufacturer. (Id.) On appeal, the plaintiffs argued that they were improperly compelled to arbitrate their claims against the non-signatory manufacturer, but the Court of Appeal rejected their argument, finding that the manufacturer was entitled to compel arbitration under an equitable estoppel theory because the sales contract was the source of the warranties underlying the lawsuit. (Id. at 496-97.)

The Court is persuaded that Felisilda applies to the instant matter. Accordingly, the Court finds that Felisilda empowers Moving Defendant to enforce the Arbitration Agreement under the doctrine of equitable estoppel. The Court is further unpersuaded by Plaintiff’s arguments regarding unconscionability.

The Court therefore GRANTS the Motion. The Court sets a status conference on July 6, 2023 at 8:30 a.m. in this department. The parties are ordered to file a joint status report by June 29, 2023. This action is STAYED pending the conclusion of the arbitration proceedings.

In consideration of the current COVID-19 pandemic situation, the Court strongly encourages that appearances on all proceedings, including this one, be made by LACourtConnect if the parties do not submit on the tentative. If you instead intend to make an appearance in person at Court on this matter, you must send an email by 2 p.m. on the last Court day before the scheduled date of the hearing to SMC_DEPT56@lacourt.org stating your intention to appear in person. The Court will then inform you by close of business that day of the time your hearing will be held. The time set for the hearing may be at any time during that scheduled hearing day, or it may be necessary to schedule the hearing for another date if the Court is unable to accommodate all personal appearances set on that date. This rule is necessary to ensure that adequate precautions can be taken for proper social distancing.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court