Judge: Joel L. Lofton, Case: 22AHCV00497, Date: 2023-01-10 Tentative Ruling

Case Number: 22AHCV00497    Hearing Date: January 10, 2023    Dept: X

   Tentative Ruling

Judge Joel L. Lofton, Department X

HEARING DATE:     January 10, 2023                                 TRIAL DATE: No date set.  

CASE:                         ALMA RAMIREZ ALEJANDREZ, v. NISSAN NORTH AMERICA, INC., a Delaware corporation, ONTARIO NISSAN, INC., a California corporation dba Metro Nissan Montclair, and DOES 1 through 10, inclusive.  

CASE NO.:                 22AHCV00497

MOTION TO COMPEL ARBITRATION

MOVING PARTY:               Defendants Nissan North America, Inc. and Ontario Nissan, Inc.

RESPONDING PARTY:      Plaintiff Alma Ramirez Alejandrez

SERVICE:                              Filed September 12, 2022

OPPOSITION:                       Filed December 27, 2022

REPLY:                                   Filed January 3, 2023

RELIEF REQUESTED

            Defendants move to compel Plaintiff to submit this action to binding arbitration.

BACKGROUND

            This case arises out of Plaintiff Alma Ramirez Alejandrez’s (“Plaintiff”) lemon law claim for a 2019 Nissan Rogue, Vehicle Identification Number KNMAT2MT6KP560515 (“Subject Vehicle”). Plaintiff alleges she purchased the Subject Vehicle on September 28, 2019. Plaintiff alleges that Defendants Nissan North America, Inc.(“Nissan”) and Ontario Nissan, Inc., dba Metro Nissan Montclair (“Metro Nissan”), (“Defendants”) knew of defects in the continuously variable transmission in vehicles like the Subject Vehicle but failed to disclose their existence. Plaintiff also alleges Defendants failed to remedy the defect in the Subject Vehicle.

            Plaintiff filed this complaint on July 22, 2022, alleging four causes of action for (1) violation of the Song-Beverly Act – Breach of Express Warranty, (2) Fraudulent Inducement – Intentional Misrepresentation, (3) Fraudulent Inducement – Concealment, and (4) Negligent Repair.

TENTATIVE RULING

            Defendants’ motion to compel arbitration is GRANTED.

            Defendant’s request to stay the proceedings pursuant to Code of Civil Procedure section 1281.4 is granted.

OBJECTION TO EVIDENCE

            Plaintiff’s objections are overruled.

REQUEST FOR JUDICIAL NOTICE

            Defendants’ request for judicial notice for exhibits 1, 2, and 3 is granted pursuant to Evidence Code section 452, subdivision (d).

LEGAL STANDARD

“California and federal law both favor enforcement of valid arbitration agreements.” (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 889.) “A party who files a motion to compel arbitration ‘bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.’’ (Cisnero Alverez v. Altamed Health Services Corporation (2021) 60 Cal.App.5th 572, 580.)

DISCUSSION

            Arbitration Agreement

            Defendants seek to compel arbitration pursuant to a Retail Installment Sale Contract (“Agreement”) between Plaintiff and KAB Group Investments, Inc. The arbitration clause provides, in part:

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.

(Richardson Decl. ¶ 3, Exhibit 1 at p. 7.)

            Whether the FAA Applies

            The first issue is whether the Federal Arbitration Act (“FAA”) applies to the present contract at issue. Both parties argue that the FAA applies to the arbitration provision at issue. Additionally, the agreement contains a provision that provides that “[a]ny arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et. seq.) and not by any state law concerning arbitration.” (Richardson Decl. ¶ 3, Exhibit 1 at p. 7.)

            The FAA applies “applies when a contract involves interstate commerce.” (Nixon v. AmeriHome Mortgage Company, LLC (2021) 67 Cal.App.5th 934, 945.) “The party seeking to enforce the arbitration agreement also bears the burden of establishing the FAA applies and preempts otherwise governing provisions of state law or the parties’ agreement.” (Id. at p. 946.) “ ‘[T]he phrase “ ‘involving commerce’ ” in the FAA is the functional equivalent of the term “ ‘affecting commerce,’ ” which is a term of art that ordinarily signals the broadest permissible exercise of Congress's commerce clause power.’ ” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238.)

            The Agreement specifically provides that FAA applies. Both parties argue that the FAA applies, at least substantively. Here, there is no dispute that the FAA applies to the Agreement.

            The Doctrine of Equitable Estoppel

            The next issue is whether Defendants can enforce the arbitration provision based on the doctrine of equitable estoppel.

            “As a general rule, only a party to an arbitration agreement may enforce the agreement.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495 (“Felisilda”.) However, “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.” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237.) “By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.” (Boucher v. Alliance Title Co., Inc (2005) 127 Cal.App.4th 262, 272.)

            Whether Plaintiff’s Claims are Intimately Founded in and Intertwined with the Agreement

            Plaintiff argues that her claims are based on or intertwined with the Agreement because her claims are based on Nissan’s written warranties.

            In Felisilda, supra, 53 Cal.App.5th at p. 490, the court’s analysis of whether the plaintiff’s claims were intertwined with the sales agreement began with an evaluation of the language of the arbitration clause at issue. The arbitration clause in Felisilda encompassed “[a]ny claim or dispute . . . which arises out of or relates to . . . 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 . . ..” (Id. at p. 490.) The Court held that because the plaintiffs “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 [the defendant].” (Id. at p. 497.)

            The reasoning from Felisilda supports the conclusion that where a plaintiff agrees to arbitrate claims relating to the purchased vehicle’s condition and involving third parties, a claim for a defect in the vehicle’s condition is intertwined with the sales contract.

            Here, Plaintiff agreed to arbitrate claims “which arises out of or relates to . . . condition of this vehicle”, and the arbitration provision extended the scope of arbitration to relationships “including any such relationship with third parties who do not sign this contract”. (Richardson Decl. ¶ 3, Exhibit 1 at p. 7.)

            Further, Plaintiff’s claims are all predicated on the condition of the Subject Vehicle. Plaintiff’s first cause of action alleges that the Subject Vehicle suffered from defects that Defendants were unable to remedy in conformity with the applicable express warranty. (Complaint ¶¶ 62-65.) Plaintiff’s second cause of action alleges that Defendants were aware of the CVT defect presented in the Subject Vehicle but made false statements relating to the Subject Vehicle’s condition. (Id. ¶¶ 73-83.) Plaintiff’s third cause of action alleges that Defendants concealed the existence of the defect. (Id. ¶ 96.) Lastly, Plaintiff’s fourth cause of action alleges that Metro Nissan failed to properly repair the Subject Vehicle. (Id. ¶ 111.)

            In opposition, Plaintiff relies on Ngo v. BMW of North America, supra, 23 F.4th 942, in support of her position that Felisilda is not applicable in the present case. In Ngo, the Ninth Circuit briefly distinguished Felisilda, stating that the key distinction was that the plaintiffs initially sued both the dealership and the manufacturer, after which the dealership moved to compel arbitration. (Id. at p. 950.) The court emphasized that a signatory had moved to compel arbitration and the signatory was only dismissed after arbitration was compelled. (Ibid.)

However, Plaintiff’s reliance on Ngo is insufficient to distinguish Felisilda from the present case. In Felisilda, supra, 52 Cal.App.5th at p. 495, the court framed the relevant question as “whether a nonsignatory to the agreement has a right to compel arbitration under that agreement.” In Felisilda, the operative issue was not who was named a party to the case, but rather the nature of the claims encompassed within the arbitration clause. (Id. at p. 497.) Tellingly, the Felisilda Court distinguished the arbitration clause at issue from other federal cases because in the other cases “the arbitration provision lacked the key language present in this case, namely an express extension of arbitration to claims involving third parties that relate to the vehicle's condition.” (Id. at p. 498, emphasis added.)

Plaintiff also argues that the arbitration provision in the Agreement provides that arbitration can only be compelled “at your or our election.” However, the same language existed within the arbitration agreement in Felisilda, and the court still held the doctrine of equitable estoppel applied. As previously stated, the doctrine of equitable estoppel enables a nonsignatory to invoke an arbitration clause. (JSM Tuscany, LLC, supra, 193 Cal.App.4th at p. 1237.) “

Additionally, other published California cases support the conclusion that a claim for a defect in the vehicle’s condition may be intertwined with the sales contract. In Pacific Fertility Cases (2022) 301 Cal.Rptr.3d 611, 614, plaintiffs had filed suit against the manufacturer and seller of a cryogenic storage tank. The contract that contained an arbitration provision was between the plaintiffs and a defendant that provided fertility-related services that had purchased and used the cryogenic tank. (Ibid.) The court discussed a federal case Mance v. Mercedes-Benz USA (N.D.Cal. 2012) 901 F.Supp2d 1147, 1157, where the District Court held that a claim for breach of express written warranty arose out of the sales contract because the sales contract allowed the buyer to receive the warranty.

Some federal cases such as Ngo, supra, 23 F.4th 942, 949, have rejected the “but-for” reasoning. However, the court in Pacific Fertility Cases did not expressly disapprove of the reasoning in Mance. Rather, the court distinguished the facts of the cases before it and stated that the plaintiffs’ claims against the seller and manufacturer of the cryogenic tank were based on a defective tank, which did not arise out of the plaintiffs’ contract to pay for fertility-related services. Here, Plaintiff’s claims are not as easily extricated from the sales agreement containing the arbitration provision because the Agreement provided her with the Subject Vehicle and the warranties from Nissan.

Lastly, “the decisions of federal district and circuit courts, although entitled to great weight, are not binding on state courts even as to issues of federal law.” (Felisilda, supra, 53 Cal.App.5th 486, 497 (“Felisilda”.) Felisilda is binding on this court. The decision in Felisilda relied on the existence of language that extended arbitration to claims involving third parties that relate to the vehicle conditions. Similar language extending the arbitration of claims involved is present in the Agreement at issue here. Thus, the doctrine of equitable estoppel applies to allow Defendants to enforce the arbitration agreement was a nonsignatory.

            Close Relationship Between Signatory and Nonsignatory

            Plaintiff also seeks to assert that Defendants must prove they had a “close relationship
 with the dealership to enforce the arbitration provision, citing Jarboe v. Hanlees Auto Group (2020) 53 Cal.App.5th 539 (“Jarboe”.) However, the decision in Jarboe does not support Plaintiff’s assertion that a “close relationship” is required. The court in Jarboe did discuss the existence of a close relationship between signatories and nonsignatory, but the court did not, contrary to Plaintiff’s assertion, create a rule stating that a close relationship was required. In fact, the court’s decision ultimately rested on the finding that the plaintiff’s claims against nonsignatory defendants did not arise out of his agreement with the signatory defendant. (Id. at p. 555.) Thus, Plaintiff’s assertion that a close relationship is required to assert equitable estoppel is rejected. 

            Unconscionability

            Plaintiff argues that the arbitration agreement is unenforceable because it is unconscionable.

“ ‘[U]nconscionability has both a “procedural” and a “substantive” element,’ the former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on “overly harsh” or “one-sided” results. [citation.] ‘The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’ ” (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114.)

“Procedural unconscionability ‘addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power.’ ” (Carbajal v. CWPSC, Inc., supra, 245 Cal.App.4th at p. 243.) “ ‘It is well settled that adhesion contracts in the employment context, that is, those contracts offered to employees on a take-it-or-leave-it basis, typically contain some aspects of procedural unconscionability.’ ” (Id. at p. 243.) “When . . . there is no other indication of oppression or surprise, ‘the degree of procedural unconscionability of an adhesion agreement is low, and the agreement will be enforceable unless the degree of substantive unconscionability is high.’ ” (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.)

Plaintiff argues that the Agreement is procedurally unconscionable because it was a nonnegotiable contract where the parties had uneven bargaining power. However, Plaintiff submits no evidence to support her claims that the contract was, in fact, not negotiable. Plaintiff also does not demonstrate oppression or surprise. Plaintiff also asserts, without support, that Nissan forced her to sign the Agreement, but the Agreement was between her and a third-party dealership. Plaintiff has failed to demonstrate that the Agreement is procedurally unconscionable.

            “Substantive unconscionability pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided.” (The McCaffrey Group, Inc. v. Superior Court (2014) 224 Cal.App.4th 1330, 1348.) “A contractual provision is not substantively unconscionable simply because it provides one side a greater benefit.” (Carbajal, supra, 245 Cal.App.4th at p. 248.)

            Plaintiff argues a variety of one-sided or harsh terms exist in the Agreement. However, Plaintiff again fails to support her contentions with evidence. Plaintiff first argues that the Agreement is unconscionable because the arbitrator must be approved. However, the Agreement allows Plaintiff to make the initial choice of which arbitrator to utilize. This term is not overly harsh or one-sided. Plaintiff also argues that the Agreement violates her right to a jury trial. However, the Agreement specifically disclaims as the first, bolded point, that “either you or we may choose to have any dispute between us decided by arbitration and not in Court or by jury trial.” (Richardson Decl. ¶ 3, Exhibit 1 at p. 7.) Plaintiff does not provide any authority to support the claim that the Agreement is unconscionable based on her agreement to its terms.

            Plaintiff also argues that arbitrations routinely cost more than the $5,000 the dealership agreed to pay under the Agreement. However, the language at issue provides “We will pay your filing administration, service r case management fee . . . up to a maximum of $5000, unless the law or the rules of the chosen arbitration organization require us to pay more.” (Richardson Decl. ¶ 3, Exhibit 1 at p. 7.) Plaintiff has failed to establish that the Agreement is substantively unconscionable.

            Plaintiff has failed to establish that the agreement is either procedurally or substantively unconscionable.

            Stay of the Proceedings

            “If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc. section 1281.4, emphasis added.)

            Defendants’ request for a stay of the proceedings is granted.

CONCLUSION

            Defendants’ motion to compel arbitration is granted.

            Defendant’s request to stay the proceedings pursuant to Code of Civil Procedure section 1281.4 is granted.

            Case Management Conference is off calendar.

            Court sets the case for status hearing on October 11, 2023, at 8:30am.

            Moving Party to give notice.

Dated:   January 10, 2023                                           ___________________________________

                                                                                    Joel L. Lofton

                                                                                    Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court indicating their

intention to submit.  Parties intending to appear are strongly encouraged to appear remotely.  alhdeptx@lacourt.org