Judge: Joel R Wohlfeil, Case: 37-2023-00010059-CU-BC-CTL, Date: 2024-05-17 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - May 15, 2024

05/17/2024  09:00:00 AM  C-73 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Joel R. Wohlfeil

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Civil - Unlimited  Breach of Contract/Warranty Motion Hearing (Civil) 37-2023-00010059-CU-BC-CTL GALLEGOS VS AMERICAN HONDA MOTOR CO INC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion - Other, 04/08/2024

The Motion (ROA # 67) of Defendant AMERICAN HONDA MOTOR CO., INC. ('Defendant' or 'AHM') for an order compelling arbitration and to stay this action pending the outcome of this Motion and completion of arbitration, is DENIED.

Defendant's Request (ROA # 70) for judicial notice is GRANTED IN PART and DENIED IN PART. The Court takes judicial notice of Exh. '2' and the dates only on which Exh's '1 and 3' were filed with the Court; otherwise, the Request is DENIED.

The Request (ROA # 76) for judicial notice by Plaintiffs ROGELIO GALLEGOS and DOMINGO GALLEGOS ('Plaintiffs') is GRANTED.

It is undisputed that federal law would control if the applicable arbitration agreement is relevant to this action.

First, the arbitration provision in the 'Closed-End Motor Vehicle Lease Agreement – California' expressly provides for the application of federal law. In accordance with choice-of-law principles, parties to an arbitration agreement may limit the trial court's authority to stay or deny arbitration under state law by adopting the more restrictive procedural provisions of the Federal Arbitration Act. Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal. App. 5th 337, 345.

Second, the lease affects interstate commerce. The Federal Arbitration Act ('FAA,' 9 U. S. C. § 1 et seq.) governs if the underlying contract facilitates interstate commercial transactions, or directly or indirectly affects commerce between states. 9 U. S. C. § 2 and Knight, Chernick, Flynn and Quinn, Cal. Prac. Guide: Alternative Dispute Resolution (The Rutter Group 2023) at ¶ 5:51 (citing Bernhardt v. Polygraphic Co. of America (1956) 350 U S 198, 201 and Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967) 388 U S 395, 401, 402, fn. 7). The contract at issue here concerns a vehicle, which either itself or through its parts moved in interstate commerce. Therefore, the FAA applies.

Section 2 of the FAA provides that arbitration agreements 'shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract ....' Davis v. Shiekh Shoes, LLC (2022) 84 Cal. App. 5th 956, 964 (citing 9 U. S. C. § 2).

However, like any contract right, the right to arbitrate may be waived, either expressly or by implication.

Id. (citing federal law). A waiver inquiry focuses on the conduct of the parties, and whether a defendant knowingly relinquishes the right to arbitrate by acting inconsistently with that right. Morgan v. Sundance, Calendar No.: Event ID:  TENTATIVE RULINGS

3112945 CASE NUMBER: CASE TITLE:  GALLEGOS VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2023-00010059-CU-BC-CTL Inc. (2022) 596 U. S. 411, 412.

The strong federal policy in favor of enforcing arbitration agreements is based upon the enforcement of contract, rather than a preference for arbitration as an alternative dispute resolution mechanism. Davis v. Shiekh Shoes, LLC, supra. Thus, the question of whether there has been waiver in the arbitration agreement context should be analyzed in much the same way as in any other contractual context. Id. The essential question is whether, under the totality of the circumstances, the defaulting party has acted inconsistently with the arbitration right. Id. Federal cases identify the following factors as relevant to assessing waiver claims: (1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether Defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; and (5) whether important intervening steps (e.g., taking advantage of judicial discovery procedures not available in arbitration) had taken place. Id. at 964, 965.

Prejudice to the other party is not a factor: under the FAA, the Court may not condition a waiver of the right to arbitrate on a showing of prejudice. Id. at 965.

'As courts have found, the absence of a reasonable explanation for delay is a significant factor weighing in favor of finding waiver. (See Smith v. GC Services Limited Partnership (7th Cir. 2018) 907 F. 3d 495, 499, 500 [finding Defendant's 'entirely inadequate' explanation for five-month delay was factor showing Defendant acted inconsistently with right to arbitrate]; see also Gray Holdco, Inc. v. Cassady (3d Cir.

2011) 654 F. 3d 444, 455 & fn. 9 ['It is significant that ... Gray offered no explanation to the District Court for its delay in waiting ten months after filing suit ... and that it certainly has not offered such an explanation on this appeal'].)' Id. at 798.

This action was filed on March 10, 2023. Personal service occurred on March 13, 2023. Honda filed its Answer on April 12, 2023. An affirmative defense within this Answer alleges the existence of an agreement to arbitrate. This Motion was filed on March 22, 2024. Trial is currently scheduled for October 24, 2024.

This amounts to over an 11 month delay. During this time, the parties proceeded as if this action would remain in Court. Both parties engaged in discovery. Defendant propounded written discovery on Plaintiffs and responded to written discovery. Defendant also noticed Plaintiffs' depositions and a vehicle inspection.

Defendant American Honda submits the declaration of counsel with its reply. This declaration contains no information explaining the delay, other than to attach Plaintiffs' responses to discovery. Although the discovery responses did not include a complete copy of the lease agreement, this is immaterial.

Paragraph 2 of the declaration of Jeanette Suarez (ROA # 69) states: The lease 'was provided to my office by Norm Reeves Honda Superstore, the selling dealership herein, after they conducted a search under the VIN number set forth above and was represented to be the Lease Contract pertaining to the Subject Vehicle.' As the Complaint contains the VIN number, this search could have occurred at any time. The lease agreement is a Honda Financial Services form agreement. Defendant was aware of the terms of this form agreement.

Defendant's long delay has not been explained. During this delay, Defendant engaged in and invoked the 'litigation machinery' of the Superior Court. This conduct evidences waiver and the Motion is denied on this basis. As a result of this ruling, the Court does not address the other substantive arguments Calendar No.: Event ID:  TENTATIVE RULINGS

3112945 CASE NUMBER: CASE TITLE:  GALLEGOS VS AMERICAN HONDA MOTOR CO INC [IMAGED]  37-2023-00010059-CU-BC-CTL raised by the parties.

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