Judge: Joseph Lipner, Case: 22STCV39848, Date: 2023-08-29 Tentative Ruling
Case Number: 22STCV39848 Hearing Date: August 29, 2023 Dept: 72
Calendar: 4
Date: 8/29/23
(8:30 AM)
Case No.: 22STCV39848
Trial Date: Not
Set
Case Name: Amparo
Valencia, et al. v. Nissan North America, Inc.
Defendant Nissan North America,
Inc. (“Defendant”) seeks to compel arbitration of the Beverly-Song Act claims
filed by Plaintiffs Amparo Valencia and Daniel Valencia (collectively,
“Plaintiffs”). The motion is DENIED.
FACTUAL AND PROCEDURAL BACKGROUND:
On December 21, 2022, Plaintiffs
Amparo Valencia and Daniel Valencia (collectively, “Plaintiffs”) filed this
action against Defendant Nissan North America, Inc. (“Defendant”), alleging
causes of action for breach of the implied warranty of merchantability under
the Song-Beverly Act and breach of express warranty under the Song-Beverly Act
in connection with a vehicle manufactured by Defendant that Plaintiffs
purchased from a third-party car dealer on June 24, 2018.
On March 13, 2023, Defendant filed
the current motion to compel arbitration. On May 3, 2023, Plaintiffs opposed
the motion. On May 9, 2023, Defendant replied. An initial hearing set for June 20,
2023 was continued to this date.
ANALYSIS:
Legal Standard
Under
both the Federal Arbitration Act and California law, arbitration agreements are
valid, irrevocable, and enforceable, except on such grounds that exist at law
or equity for voiding a contract. (Winter v. Window Fashions Professions,
Inc. (2008) 166 Cal.App.4th
943, 947.) The party moving to compel arbitration must establish the existence
of a written arbitration agreement between the parties. (Code of Civ. Proc. §
1281.2.) This is usually done by presenting a copy of the signed, written
agreement to the court. “A petition to compel arbitration or to stay
proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must
state, in addition to other required allegations, the provisions of the written
agreement and the paragraph that provides for arbitration. The provisions must
be stated verbatim, or a copy must be physically or electronically attached to
the petition and incorporated by reference.” (Cal. Rules of Court, rule
3.1330.) The moving party must also establish the other party’s refusal to
arbitrate the controversy. (Code of Civ. Proc. § 1281.2.) The filing of a lawsuit
against the moving party for a controversy clearly within the scope of the
arbitration agreement affirmatively establishes the other party’s refusal to
arbitrate the controversy. (Hyundai Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 577.)
Requests for
Judicial Notice
The Court GRANTS
Defendant’s requests for judicial notice as to Exhibits 1 and 2, but denies as
to Exhibit 3. (Evid. Code § 452(d).) Exhibit 3 is merely a request for
dismissal filed in an unrelated case and is irrelevant to the determination of
this motion.
Evidentiary
Objections
The Court OVERRULES
Plaintiffs’ evidentiary objections, as the requirements for authentication of an
arbitration agreement are not the same in a motion to compel arbitration for
the reasons set forth below.
Existence of an Arbitration Agreement
“First, the
moving party bears the burden of producing prima facie evidence of a written
agreement to arbitrate the controversy. [Citation.] The moving party can meet
its initial burden by attaching to the motion or petition a copy of the
arbitration agreement purporting to bear the opposing party's signature.”
[Citation.] Alternatively, the moving party can meet its burden by setting
forth the agreement's provisions in the motion. [Citation]; see also Cal. Rules
of Court, rule 3.1330 [‘The provisions must be stated verbatim or a copy must
be physically or electronically attached to the petition and incorporated by
reference.’].) For this step, “it is not necessary to follow the normal
procedures of document authentication.” [Citation.] If the moving party meets
its initial prima facie burden and the opposing party does not dispute the
existence of the arbitration agreement, then nothing more is required for the
moving party to meet its burden of persuasion.” (Gamboa v.
Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165–166 [internal quotation marks, bracket
and citations omitted.])
“If the
moving party meets its initial prima facie burden and the opposing party disputes
the agreement, then in the second step, the opposing party bears the burden of
producing evidence to challenge the authenticity of the agreement. [Citation.]
The opposing party can do this in several ways. For example, the opposing party
may testify under oath or declare under penalty of perjury that the party never
saw or does not remember seeing the agreement, or that the party never signed
or does not remember signing the agreement. [Citations].” (Gamboa, supra, at pp. 165-166.)
“If the
opposing party meets its burden of producing evidence, then in the third step,
the moving party must establish with admissible evidence a valid arbitration
agreement between the parties. The burden of proving the agreement by a
preponderance of the evidence remains with the moving party.” (Gamboa, supra, at p. 166.)
Here, Defendant has attached a copy of a
“Retail Installment Sale Contract – Simple Finance Charge (with Arbitration
Provision)” (the Arbitration Agreement) to its moving papers and has also
quoted provisions from it. (Mejia Decl., Ex. 1.) The Arbitration Agreement
provides that:
“Any claim or dispute, whether in
contract, tort, statute or otherwise…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.”
(Mejia Decl., Ex. 1.)
The Arbitration Agreement also
appears to be signed. Accordingly, Defendant has met its initial burden in
proving the existence of a valid arbitration agreement governing Plaintiffs’
claims here. The burden now shifts to Plaintiffs to challenge the validity of
the Arbitration Agreement.
Plaintiffs contend Defendant has
failed to provide admissible evidence of any arbitration agreement. This
contention is based primarily on Plaintiffs’ evidentiary objections, which the
Court overruled as noted above. The Court also notes that Plaintiffs did not
provide any counter declarations claiming that they did not sign the
Arbitration Agreement or do not remember signing it. (See Gamboa, supra, at pp. 165-166.)
Accordingly, Plaintiffs have failed to challenge the validity of the
Arbitration Agreement. The question now becomes whether Defendant can enforce
it under the doctrine of equitable estoppel or as a third-party beneficiary,
since Defendant tacitly concedes it is not a signatory to the Arbitration
Agreement. (Motion, 11:8-11.)
Equitable Estoppel
Defendant contends it is entitled to
compel arbitration under the Arbitration Agreement based on the doctrine of
equitable estoppel. (Motion, 11:15-14:21.)
Generally, only a party to an arbitration
agreement may enforce the agreement, but the doctrine of equitable estoppel is
an exception that allows a non-signatory to enforce an agreement. (Felisilda
v. FCA US LLC (2020) 53 Cal.App.5th 486, 495 (Felisilda).) Under the
doctrine of equitable estoppel, “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.) The doctrine applies in
either of two circumstances: (1) when the signatory must rely on the terms of
the written agreement containing the arbitration clause in asserting its claims
against the nonsignatory; or (2) when the signatory alleges “substantially
interdependent and concerted misconduct” by the nonsignatory and a signatory
and the alleged misconduct is “founded in or intimately connected with the
obligations of the underlying agreement.” (Goldman v. KPMG, LLP (2009)
173 Cal.App.4th 209, 218-219.)
The court in Felisilda examined a similar arbitration clause
contained in a dealer’s sales contract: “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 . . . 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. . . .” (Felisilda,
supra, 53 Cal.App.5th at p. 490.) The court concluded that the equitable
estoppel doctrine applied: “Because the
[buyers] 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
manufacturer]. Consequently, the trial court properly ordered the [buyers] to
arbitrate their claim against FCA.” (Id. at p. 497.)
Plaintiffs allege having received warranties in connection with the
purchase of the subject vehicle. (E.g., Compl., ¶ 7.) The court in Felisilda
held that a similar allegation established that “the sales contract was the
source of the warranties at the heart of this case.” (Felisilda, supra,
53 Cal.App.5th at p. 496.) As in Felisilda, plaintiff’s claims against
the manufacturer “directly relate[] to the condition of the vehicle that they
allege to have violated warranties they received as a consequence of the sales
contract.” (Id. at p. 497.) The Court of Appeal also expressly framed
the issue as “whether a nonsignatory to the agreement has a right to compel
arbitration under that agreement.” (Id. at p. 495.)
After Defendant filed the instant
motion, the Court of Appeal issued a published decision in Ford Motor
Warranty Cases (2d Dist. 2023) 89 Cal.App.5th 1324, 306 Cal.Rptr.3d 611 (Ochoa),
which declined to follow Felisilda. This Court can now choose to either
continue to follow Felisilda or instead adopt Ochoa’s reasoning.
(Sarti v. Salt Creek Ltd. (2008) 167 Cal.App.4th 1187, 1193 [“All trial
courts are bound by all published decisions of the Court of Appeal . . . Unlike
at least some federal intermediate appellate courts, though, there is no
horizontal stare decisis in the California Court of Appeal.”].)
The Ochoa court determined that equitable estoppel did not apply
because the plaintiffs failed to show that their claims were founded in or
intertwined with the sales contracts. (Ochoa, supra, 306 Cal.Rptr.3d at pp. 618-619.) The court “disagree[d] with Felisilda
that ‘the sales contract was the source of [FCA’s] warranties at the heart of
this case.’” (Id. at pp. 619-620.) Like in Ochoa, Plaintiff’s
claims here “are based on [FCA’s] statutory obligations to reimburse consumers
or replace their vehicles when unable to repair in accordance with its
warranty,” not based “on any express contractual language in the sale
contracts.” (Id. at p. 620.) Plaintiffs’ claims do not arise directly
out of the Arbitration Agreement, even if Defendant’s warranties accompanied
the sale of the subject vehicle. “The sale contracts include no warranty, nor
any assurance regarding the quality of the vehicle sold, nor any promise of
repairs or other remedies in the event problems arise. To the contrary, the
sale contracts disclaim any warranty on the part of the dealers, while
acknowledging no effect on ‘any warranties covering the vehicle that the
vehicle manufacturer may provide.’ In short, the substantive terms of the sale
contracts relate to sale and financing and nothing more.” (Ibid.)
This Court agrees with Ochoa’s interpretation of this language
and rejects Felisilda’s assumption that the parties agreed to arbitrate
claims “even against third party nonsignatories to the sales contract” and
“disputes that include third parties so long as the dispute pertains to the
condition of the vehicle.” (Felisilda, supra, 53 Cal.App.5th at p. 497.)
Ochoa clearly distinguishes between (1) the parties to the claims or
disputes (here, “you and us or our employees, agents, successors or assigns”),
and (2) the subject matters of the claims or disputes (e.g., arising out of or
relating to “any resulting transaction or relationship (including any such
relationship with third parties who do not sign this contract”). (Mejia Decl.,
Ex. 1.) If there was a dispute between Plaintiffs and the dealership that arose
out of or related to a resulting transaction or relationship with a third
party, then Plaintiffs and the dealership would arbitrate that dispute. But
based on the arbitration provision’s language and Ochoa’s clear
interpretation thereof, there is no agreement requiring Plaintiffs to arbitrate
a claim or dispute between themselves and a non-signatory third-party.
Accordingly, the reasoning and holding of Ochoa
lead to the conclusion that equitable estoppel does not permit Defendant to
compel arbitration.
Third-Party Beneficiary
In order for Defendant’s contention of
enforcing the Arbitration Agreement as a third-party beneficiary to be true,
“the parties to the contract must have intended the third party to benefit.” (Hess
v. Ford Motor Co. (2002) 27 Cal.4th 516, 524, 117 Cal.Rptr.2d 220, 41 P.3d
46.) To do so, Defendant
must show that “(1)…the third party would in fact benefit from the contract,
but also (2)…a motivating purpose of the contracting parties was to provide a
benefit to the third party, and (3)…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. All three elements must be satisfied to permit the third party action
to go forward.” (Goonewardene v. ADP, LLC, 6 Cal.5th 817).
On this theory, Ochoa is also instructive. Analyzing
the Ninth Circuit Court of Appeal's recent decision in Ngo v. BMW of North America (9th Cir. 2022) 23 F.4th 942 (Ngo),
the second district agreed that the sales contracts reflect no intention to
benefit a vehicle manufacturer under Goonewardene – 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, at pp. 623-624.)
Applying this reasoning, Defendant’s
moving papers and reply are silent on whether a motivating purpose of the
contracting parties was to provide a benefit to Defendant. Defendant argues
that it was intended as a third-party beneficiary under the Lease Agreement by
virtue of its broad terms with respect to “any resulting transaction or
relationship”. (Motion, 15:7-8.) However, the court in Ochoa rejected
this argument, finding that similar language was concerned only with what may
be arbitrated, not who may arbitrate. (Ochoa, supra, 306 Cal.Rptr.3d at
p. 623.)
Moreover, Defendant’s arguments do not explain the
motivating purpose of the contracting parties and falls short of California Civil
Code section 1559, which requires that a contract be made expressly for the
benefit of a third person before that third party can enforce it. Permitting
Defendant to enforce arbitration based on the Arbitration Agreement is not
consistent with the objectives of the Retail Installment Sales Contract, which
was to sell the subject vehicle to Plaintiffs. Under Ochoa, permitting Defendant to
enforce an arbitration clause does not effectuate this objective.
Ochoa therefore rejects
Defendant’s third party beneficiary theory. Accordingly, Defendant’s motion to
compel arbitration fails based on the Arbitration Agreement.
The Court declines to address all other arguments raised
in connection with this motion.
Therefore, Defendant’s motion to compel
arbitration is DENIED.