Judge: Joel L. Lofton, Case: 23GDCV01041, Date: 2024-06-17 Tentative Ruling
Case Number: 23GDCV01041 Hearing Date: June 17, 2024 Dept: X
Judge Joel L. Lofton,
Department X
HEARING DATE: June 17, 2024 TRIAL DATE: No date set.
CASE: ARMEN HARUTYUNYAN,
an individual, v. MERCEDES-BENZ USA, LLC, a Delaware Limited Liability Company,
and DOES 1 through 10, inclusive.
CASE NO.: 23GDCV01041
MOTION
TO COMPEL ARBITRATION
MOVING PARTY: Defendant
Mercedes-Benz USA, LLC.
RESPONDING PARTY: Plaintiff Armen Harutyunyan
SERVICE: Filed February
20, 2024
OPPOSITION: Filed June 4, 2024
REPLY: None
RELIEF
REQUESTED
Defendant Mercedes-Benz USA, LLC
(“Defendant”) moves for an order compelling Plaintiff Agustin Lopez
(“Plaintiff”) to submit this case to binding arbitration.
BACKGROUND
This case arises out of Plaintiff’s lemon law
claim for the purchase of a 2022 Mercedes-Benz S580, Vehicle Identification
Number W1K6G7GB6NA127462 (“Subject Vehicle”). Plaintiff allegedly purchased the
Subject Vehicle on June 23, 2022. Plaintiff filed this complaint on May 19,
2023.
TENTATIVE RULING
Defendant’s
motion to compel arbitration is DENIED.
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.)
REQUESTS FOR
JUDICIAL NOTICE
The court
GRANTS the parties’ requests for judicial notice. (Evid. Code § 452, subds. (a),
(d).) But, the Court takes judicial notice only as to
the existence, content, and authenticity of such documents; it does not take
judicial notice of the truth of the factual matters asserted therein. (Dominguez v. Bonta (2022) 87 Cal. App. 5th 389, 400.)
EVIDENTIARY OBJECTIONS
The Court
OVERRULES Plaintiff’s evidentiary objection number 1, but SUSTAINS as to
evidentiary objection number 2 for lack of foundation. (Evid. Code, §§ 403,
702; see Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158,
168-169 (“Gamboa”) [trial court did not err in excluding evidence of
arbitration agreement based on lack of foundation after opposing party objected
on those grounds].)
DISCUSSION
FAA v. CAA
“’[T]he FAA's procedural provisions (9 U.S.C. §§ 3,
4, 10, 11) do not apply unless the contract contains a choice-of-law clause
expressly incorporating them.’ [Citation]. ‘[T]he question is not whether the
parties adopted the CAA’s procedural provisions: The state's procedural
statutes (§§ 1281.2, 1290.2) apply by default because Congress intended the
comparable FAA sections (9 U.S.C. §§ 3, 4, 10, 11) to apply in federal court.
The question, therefore, is whether the parties expressly incorporated the FAA’s
procedural provisions into their agreements.’” (Victrola 89, LLC v. Jaman
Properties 8 LLC (2020) 46 Cal.App.5th 337, 345, quoting Valencia v.
Smyth (2010) 185 Cal.App.4th 153, 177, italics in original.)
The arbitration provision in the Agreement (defined below) only provides
that the arbitration is governed by the FAA; it contains no language
indicating the FAA governs the enforcement of the Agreement. (Ameripour
Decl., Ex. 2, p. 5, italics added.) Accordingly, the CAA applies by default and
governs this motion to compel arbitration. (Victrola 89, LLC v. Jaman
Properties 8 LLC, supra, 46 Cal.App.5th at p. 345.)
Arbitration
Agreement
Defendant seeks to compel arbitration per the Retail
Installment Sale Contract (“Agreement”) between Plaintiff and MB of Los Angeles.
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.
(Ameripour Decl. ¶ 4, Exhibit 2 at p. 5.)
The moving party on a motion to
compel arbitration may meet its initial burden by simply setting forth the
agreement’s provisions in the motion. (Gamboa, supra, 72
Cal.App.5th at p. 165.) Defendant has therefore met its initial burden. The
burden now shifts to Plaintiff to challenge the validity of the Agreement. (See
Id.)
Plaintiff objected to the Agreement
on the grounds that it lacked foundation. (See Plaintiff’s Evidentiary
Objection No. 2.) As noted above, the court sustained this objection. The
burden now shifts back to Defendant to prove the validity of the Agreement with
admissible evidence. (Gamboa, supra, 72
Cal.App.5th at p. 165.)
Defendant did not submit a reply or
otherwise provide admissible evidence to prove the validity of the Agreement.
Defendant has therefore failed to meet its moving burden in establishing the
validity of the Agreement, and the motion will therefore be denied. (See Gamboa,
supra, 72 Cal.App.5th at pp. 165-166.)
Even assuming for the sake of
argument that Defendant had met its moving burden, the court would still deny
the motion for the reasons set forth below.
Third-Party
Beneficiary
Defendant argues that it may enforce the arbitration
provision as a third-party beneficiary.
Civil Code
section 1559 provides: “A contract, made expressly for the benefit of a
third person, may be enforced by him at any time before the parties thereto
rescind it.” The California Supreme Court in Goonewardene v. ADP, LLC (2019)
6 Cal.5th 817, 830 stated that the following elements must be present for a
third-party to move forward with a claim: “(1) whether the third party would in
fact benefit from the contract, but also (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.”
However, “ ‘the “mere fact that a
contract results in benefits to a third party does not render that party a
‘third party beneficiary.’ ” ’ [Citation.] Nor does knowledge that the third
party may benefit from the contract suffice.” (Ford
Motor Warranty Cases (2023) 89 Cal.App.5th
1324, 1336 (“Ochoa”).) The court recognizes that Ochoa is pending
before the California Supreme Court, but the court may cite Ochoa for
its persuasive value and also for the limited purpose of establishing the
existence of a conflict in authority that allows the court to exercise it
discretion under Auto Equity Sales, Inc. v. Superior Court (1962) 57
Cal.2d 450, 456, to choose between sides of any such conflict. (Ford Motor
Warranty Cases (2023) 532 P.3d 270.)
Defendant argues that it is a
third-party beneficiary because the arbitration provision of the Agreement
contemplates types of disputes such as the one that gives rise to the current
case. Even if true, Defendant’s argument fails to address the other
requirements to enforce the arbitration provision as a third-party beneficiary.
Defendant’s arguments that it is a third-party beneficiary are unavailing. The
Court of Appeal in Ochoa rejected the auto manufacturer’s third-party
beneficiary argument. Analyzing the Ninth Circuit Court of Appeal's recent
decision in Ngo v. BMW of North America, LLC (2022) 23 F.4th 942,
the Second District agreed that the sales contracts reflect no intention to
benefit a vehicle manufacturer under the Goonewardene factor – nothing
in the sales contracts or their arbitration provision offers any direct
“benefit” to the manufacturer, there was no indication that a benefit to the
manufacturer was a motivating purpose of the contract, and allowing the
manufacturer to enforce the arbitration would be inconsistent with the
reasonable expectations of the contracting parties. (Ochoa, supra, 89 Cal.App.5th at pp. 1337-1338.)
Applying the same reasoning here,
there is insufficient evidence to show a motivating purpose of the contracting
parties was to provide a benefit to Defendant. Civil Code section 1559 requires
that a contract benefiting a third party must be made expressly for the benefit
of a third person before that third party can enforce it. (Civ. Code § 1559.)
The Court finds no language in the arbitration provision of the Agreement
indicating an express intent to benefit Defendant, nor does the Court find that
allowing Defendant to compel arbitration would be consistent with the
reasonable expectations of the contracting parties.
Here, the arbitration provision
expressly states that only two parties—Plaintiff and the seller MB of Los
Angeles—may compel arbitration. The Agreement defines "you" as
Plaintiff and "we" as the seller MB of Los Angeles. (Ameripour Decl.,
Ex. 2, pp. 1, 7.) The provision specifies that "[e]ither you or we
may choose to have any dispute between us decided by arbitration and not in
court or by jury trial." (Id., Ex. 2, p. 7, italics added). The
clause also states that "[a]ny 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." (Id., p. 7, italics added.) Though the language
allows for arbitration of certain claims concerning third parties, it still
gives only Plaintiff and MB of Los Angeles the power to compel arbitration.
Nothing in the clause or, for that matter, in the purchase agreement reflects
any intention to benefit Defendant by allowing it to take advantage of the
arbitration provision.
Based on the foregoing, the Court
rejects Defendant’s third-party beneficiary argument, and refuses to compel
arbitration on those grounds.
Equitable
Estoppel
Defendant
further argues that equitable estoppel should apply to allow it to enforce the Agreement
as a nonsignatory.
“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.)
Defendant
argues that this court should follow the reasoning in Felisilda and that
equitable estoppel applies to estop Plaintiff from enforcing the arbitration
provision of the Agreement. In Felisilda, supra, 53 Cal.App.5th at p. 490, the Court
of Appeal’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 of Appeal 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.)
However, the
Court of Appeal in Ochoa disagreed with the reasoning and conclusion in Felisilda.
The Second District in Ochoa concluded that the plaintiffs’ warranty
claims were not based on their sales contract. (Ochoa, supra, 89
Cal.App.5th at p. 1334.) The Court of Appeal in Ochoa specifically ruled
that, “California law does not treat manufacturer warranties imposed
outside the four corners of a retail sale contract as part of the sale
contract.” (Id., at p. 1335.) Additionally, the Court also stated that the language of the
arbitration provision did not provide that the plaintiffs had consented to
arbitrate claims with third-party nonsignatories. (Id., at p. 1334.)
Rather, the court interpreted the language as listing the subject matter of
claims the plaintiffs agreed to arbitrate with the dealers. (Id., at p.
1335.)
Defendant argues that the Agreement with the
arbitration provision directly supplies the basis for Plaintiff’s warranty
claims. The Court of Appeal in Ochoa rejected a similar argument. The Second
District stated, “our Supreme Court
distinguished between, on the one hand, warranty obligations flowing from the
seller to the buyer by contract, and, on the other hand, manufacturer
warranties ‘that arise[ ] independently of a contract of
sale between the parties.’ ” (Ochoa, supra, 89
Cal.App.5th at p. 1336.) The Court of Appeal held that “independent
manufacturer warranties are not part of, but are independent from, retail sale
contracts.” (Ibid.)
Here, the
court opts to follow the decision in Ochoa and holds that Plaintiff’s
warranty claims are not intimately founded in and intertwined with the Agreement.
CONCLUSION
Defendant’s
motion to compel arbitration is DENIED.
Dated: June 17, 2024 ___________________________________
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. alhdeptx@lacourt.org