Judge: Jon R. Takasugi, Case: 22STCV17732, Date: 2022-09-08 Tentative Ruling

Case Number: 22STCV17732    Hearing Date: September 8, 2022    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendant’s motion to compel arbitration is GRANTED. This matter is ordered stayed pending the completion of arbitration proceedings.

            On 5/31/2022, Plaintiff John Nelson (Plaintiff) filed suit against Ford Motor Company and Airport Marina Ford, alleging violations of statutory obligations.

            Now, Defendant moves to compel Plaintiff to arbitrate his Complaint.

Legal Standard

Where the Court has determined that an agreement to arbitrate a controversy exists, the Court shall order the petitioner and the respondent to arbitrate the controversy …unless it determines that…  grounds exist for rescission of the agreement.” (Code Civ. Proc., § 1281.2.) Among the grounds which can support rescission are fraud, duress, and unconscionability. (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.) The Court may also decline to compel arbitration wherein there is possibility of conflicting rulings on a common issue of law or fact. (Code Civ. Proc., § 1281.2 (c).)

Discussion

The party moving to compel arbitration “bears the burden of proving [the] existence [of an arbitration agreement] by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) The moving party also bears the burden of demonstrating that the claims fall within the scope of the arbitration agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.)

A.    Existing Agreement

            Defendant submitted evidence that on 5/31/2019, Plaintiff purchased the subject vehicle by signing a Retail Installment Sale Contract (RISC) which contained an arbitration provision. (Sullivan Decl., Exh. B.)

In opposition, Plaintiff argues that Defendant has no standing as a non-signatory to invoke arbitration because there is no principal-agent relationship, no third-party beneficiary relationship, and because the doctrine of equitable estoppel does not apply.

Where a non-signatory seeks to enforce an arbitration clause, the doctrine of equitable estoppel applies in two circumstances: (1) when a signatory must rely on the terms of the written agreement in asserting its claims against the non-signatory or the claims are “intimately founded in and intertwined with” the underlying contract [citations], and (2) when the signatory alleges substantially interdependent and concerted misconduct by the non-signatory and another signatory and “the allegations of interdependent misconduct [are] founded in or intimately connected with the obligations of the underlying agreement.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495.) 

            In Felisilda, the Third District Court of Appeal applied California law to the same contract language at issue here, and held that the non-signatory defendant was entitled to enforce the Arbitration Agreement.

For similar reasons, the Court is persuaded that the doctrine of equitable estoppel applies here.

First, Plaintiffs’ Complaint not only assumes the existence of the underlying vehicle sales contract, but necessarily relies on this contract’s existence in order to assert causes of action under Song-Beverly. While Plaintiff may argue otherwise, Plaintiff received the Subject Vehicle and manufacturer warranties when he executed the RISC. If Plaintiff did not enter into the RISC, he would not have received the Subject Vehicle or the corresponding warranties and certifications from Defendant.  Defendant’s duty to comply with warranties arose only after Plaintiff purchased the vehicle.

Second, Plaintiff’s Song-Beverly claims all directly relate to the “condition” of the subject vehicle that Plaintiff alleges violated warranties received via his sales contract.  Specifically, Plaintiff’s Complaint alleges the Subject Vehicle contained a defective transmission system, body system, electrical system, and seating system (Complaint ¶ 12), and that Defendant was unable to conform the Subject Vehicle to its express warranties and failed to comply with its obligations with respect to these defects (Complaint ¶¶ 15, 23.) As such, Plaintiff’s claims are intimately founded in and intertwined with the underlying contract.

            In opposition, Plaintiff cites Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817 and Ngo v. BMW of N. Am. LLC (9th Cir. 2022) 23 F.4th 942, 949. However, Goonewardene concerns third-party beneficiaries, and the Court “need not determine whether Ford is a third-party beneficiary to the sales contract in order to rule as a matter of law that Plaintiff is equitably estopped from repudiating the arbitration clause contained in that sales contract.” (Defendant’s Reply, 2: 14-15.) As for Ngo, that is a federal decision, and Felisilda is a California state law decision (See Franklin v. Community Regional Medical Center 998 F.3d 867, 874, fn. 9 [where a California appellate court has directly spoken on an issue of state law, reliance on a federal court’s view of state law is improper].

In Felisilda, the Court analyzed an identical arbitration provision to that in the RISC here and concluded that the non-signatory could compel arbitration under the doctrine of equitable estoppel. In reaching that holding, the Court did not rely on whether the selling dealership originally had been sued or was still in the case. Rather, the Court relied on the specific language of the arbitration provision which expressly contemplated non-signatory third parties and extended arbitration over any claim or dispute which arises out of, or relates to, the condition of this vehicle. (Defendant’s Reply, 2: 6-9.)

In sum, the Court concludes that Plaintiff’s claims arise out of the purchase and/or condition of this vehicle and are intimately intertwined with the underlying sales contract. Given that Plaintiffs’ claims are intertwined with the “purchase or condition” of the vehicle, the doctrine of equitable estoppel applies. (Felisilda, supra, 53 Cal.App.5th at p. 495.)   

A.    Covered Claims

As set forth above, Plaintiff’s claims against Defendant arise out of the purchase and condition of the subject vehicle, and thus fall within the scope of the arbitration agreement.  (See Sullivan Decl., Exh. B.)

Given that Defendant has established by a preponderance of the evidence that an arbitration agreement exists, and that Plaintiff’s claims are covered by that agreement, the burden shifts to the Plaintiff to establish that the arbitration clause should not be enforced. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236. (Pinnacle).)

II.               Plaintiff’s Burden 

The party opposing arbitration bears the burden of proving, by a preponderance of the evidence any defense, such as unconscionability or duress. (Pinnacle, supra, 55 Cal.4th at p. 236.)

            Here, Plaintiff did raise any defense to enforceability, other than that Defendant could not enforce the agreement as a non-signatory.

            As a result, Plaintiff has failed to meet his burden.

Based on the foregoing, Defendant’s motion to compel arbitration is granted. This matter is ordered stayed pending the completion of arbitration proceedings.

It is so ordered.

Dated:  September    , 2022

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar. 

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