Judge: Holly J. Fujie, Case: 23STCV14722, Date: 2024-01-10 Tentative Ruling

Case Number: 23STCV14722    Hearing Date: January 10, 2024    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

MOVING PARTY: Defendant Mercedes-Benz USA, LLC (“Moving Defendant”)

RESPONDING PARTY: Plaintiff

            The Court has considered the moving and opposition papers.  No reply papers were filed.  Any reply papers were required to have been filed and served at least nine court days before the hearing under California Code of Civil Procedure (“CCP”) section 1005, subdivision (b).

BACKGROUND

            This action arises out of the sale of an allegedly defective vehicle (the “Vehicle”) that was manufactured by Moving Defendant.  Plaintiff’s complaint (the “Complaint”) alleges: (1) violations of the Consumers Legal Remedies Act; (2) intentional misrepresentation; (3) concealment; (4) negligent misrepresentation; (5) breach of express warranty; (6) violations of the Song-Beverly Consumer Warranty Act; (7) failure to commence repairs within a reasonable time and to complete them; (8) failure to promptly repurchase product; (9) violations of the Unfair Competition Law; and (10) violation of Vehicle Code section 11711. 

On August 14, 2023, Moving Defendant filed a motion to compel arbitration and stay the action (the “Motion”) on the grounds that when Plaintiff purchased the Vehicle, she signed a sales agreement (the “Contract”) containing a binding arbitration provision (the “Arbitration Agreement”).  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.

REQUEST FOR JUDICIAL NOTICE

            Moving Defendant’s Request for Judicial Notice is GRANTED as to the existence of the court document, but not to the truth of the matters stated therein.  (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113.) 

DISCUSSION

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.) 

Terms of the Arbitration Agreement

In support of the Motion, Moving Defendant provides evidence of the Contract entered into by Plaintiff and the dealership, MB of Los Angeles (the “Dealership”) on March 4, 2023 that is attached to the Complaint.  (See Declaration of Ali Ameripour (“Ameripour Decl.”) ¶ 2, Exhibit 1 at Ex. 1.)

The Arbitration Agreement included in the Contract, 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.”

(Ameripour Decl., Exhibit 1 at Ex. 1 p. 5.) 

Under the Contract, the terms “we” and “us” refer to the Dealer.  (Id. at p. 1.) 

Third-Party Beneficiary Standing

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 in this case expressly provides that the right to enforce its terms is vested in the signatories and their successors, agents or assigns.  Moving Defendant has not provided evidence that it is a successor, agent or assign of the Dealership or that the Dealership 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

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 connected with the Contract, even if they are rooted in the manufacturer’s warranty.  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.) 

            This matter can be distinguished from Felisilda.  Significantly, in Felisilda, the non-signatory manufacturer and the seller were parties to the lawsuit at the time the motion to compel arbitration was filed and granted.  Here, the Dealer is not a party to the action.  The distinction is significant because the language of the Arbitration Agreement provides that third-party disputes arising out of obligations under the Contract shall be subject to arbitration at the election of Plaintiff or the Dealer.  The plain language of the Arbitration Agreement states that the decision to arbitrate claims with third party non-signatories belongs to the signatories.  As Plaintiff opposes arbitration and Moving Defendant is not a party to the Contract, there are no signatories asserting their contractual right to have this matter proceed in arbitration.  Accordingly, the Court finds that Felisilda does not enable Moving Defendant to enforce the Arbitration Agreement under the doctrine of equitable estoppel.  The Court finds that the facts of Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324 are analogous to the facts of this case and adopts the reasoning set forth by the Second District Court of Appeal rejecting Felisilda.

            The Court therefore DENIES the Motion.

Moving party is ordered to give notice of this ruling.

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.

            Dated this 10th day of January 2024