Judge: Joseph Lipner, Case: 23STCV06797, Date: 2023-11-07 Tentative Ruling
Case Number: 23STCV06797 Hearing Date: November 7, 2023 Dept: 72
SUPERIOR COURT OF CALIFORNIA
COUNTY OF LOS ANGELES
DEPARTMENT 72
TENTATIVE
RULING
|
ANDREA ALGAZE GUILOFF, et al., Plaintiffs, v. HYUNDAI MOTOR AMERICA, Defendant. |
Case No:
23STCV06797 Hearing Date: November 7, 2023 Calendar Number: 6 |
Defendant Hyundai Motor America (“Defendant”) moves the
Court for an order compelling Plaintiffs Andrea Algaze Guiloff and Gabriel
Bursztyn (collectively, “Plaintiffs”) to arbitrate their claims and staying
this action pending the outcome of arbitration.
Defendants’ motion to compel arbitration and stay this
action is DENIED.
Plaintiffs
purchased a 2017 Hyundai Tucson vehicle (the “Vehicle”) from Keyes Hyundai of
Van Nuys (“Keyes”). (Ameripour Decl., Exh. 2.) (Complaint ¶¶ 5-6.) On that day,
Plaintiffs signed a Retail Installment Sale Contract (“RISC”), which included
an arbitration agreement. (Ameripour Decl., Exh. 2.) Defendant, the Vehicle’s
manufacturer, was not a signatory to the
RISC.
Plaintiffs
allege that the Vehicle had a number of defects, which manufacturer-authorized
service facilities could not repair.
Plaintiffs
filed this action against Defendant on March 28, 2023, alleging (1) breach of
implied warranty of merchantability under the Song-Beverly Act; (2) breach of
express warranty under the Song-Beverly Act; and (3) violation of Civil Code
section 1793.2.
Defendant
moved to compel arbitration on April 6, 2023. Plaintiff filed an opposition and
Defendant filed a reply.
Defendant
requests judicial notice of the complaint in this case. Judicial notice is not
necessary because the complaint is already in the record.
The RISC provides
that “[a]ny arbitration under this Arbitration Clause shall be governed by the
Federal Arbitration Act (9 U.S.C. § 1 et. seq.) and not by any state law
concerning arbitration.” (Ameripour Decl., Exh. 2 at p. 7.)
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.) “With respect to
the moving party's burden to provide evidence of the existence of
an agreement to arbitrate, it is generally sufficient for that party to present
a copy of the contract to the court. (See Condee v. Longwood Management
Corp. (2001) 88 Cal.App.4th 215, 218 (Condee ); see also
Cal. Rules of Court, rule 3.1330 [“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”].)
Once the party
moving to compel arbitration presents proof of the existence of the arbitration
agreement, the burden shifts to the party opposing the motion to compel. The opposing party may present any challenges
to the enforcement of the agreement and evidence in support of those
challenges. [Citation].” (Baker v.
Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)
Although the FAA has
a policy favoring arbitration, this policy “does not authorize federal courts
to invent special, arbitration-preferring procedural rules[;]” rather, the
policy is intended “to overrule the judiciary's longstanding refusal to enforce
agreements to arbitrate and to place such agreements upon the same footing as
other contracts.” (Morgan v. Sundance, Inc. (2022) 596 U.S. 411, 418. “[A]rbitration
is a matter of contract and a party cannot be required to submit to arbitration
any dispute which he has not agreed so to submit.” (AT & T Technologies,
Inc. v. Communications Workers of America (1986) 475 U.S. 643, 648.)
The RISC provides, in relevant part:
“1.
EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY
ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.
2.
IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A
CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US
INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL
ARBITRATIONS.
3.
DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN
IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE
AVAILABLE IN ARBITRATION.
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 ….
Any
arbitration under this Arbitration Clause shall be governed by the Federal
Arbitration Act (9 U.S.C. § 1 et. seq.) and not by any state law concerning
arbitration.”
(Ameripour
Decl., Exh. 2 at p. 7.)
Defendant
argues that it has standing to compel arbitration as a third-party beneficiary
to the RISC. Defendant alternatively argues that it may compel arbitration
despite being a non-signatory to the RISC under the doctrine of equitable
estoppel.
To establish third-party beneficiary status, three factors
must be established: (1) the third party would in fact benefit from the
contract; (2) a motivating purpose of the contracting parties was to provide a
benefit to the third party; and (3) permitting the third party to bring its own
breach of contract action against a contracting party is consistent with the
objectives of the contract and reasonable expectations of the third parties. (Goonewardene
v. ADP, LLC¿(2019) 6 Cal.5th 817, 830.)
Whether the third party is an intended beneficiary or merely
an incidental beneficiary involves construction of the intention of the
parties, gathered from reading the contract as a whole in light of the
circumstances under which it was entered. (Cione v. Foresters Equity
Services, Inc. (1997) 58 Cal.App.4th 625, 636.) It is not necessary that
the beneficiary be named or identified as an individual. (Ronay Family
Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 838.)
Where the language of a contract is clear and explicit, and
does not involve an absurdity, the plain meaning governs. (West Pueblo
Partners, LLC v. Stone Brewing Co., LLC (2023) 90 Cal.App.5th 1179, 1185, citing
Civ. Code, § 1638.)
It is undisputed that Defendant did not sell Plaintiffs the
Vehicle, nor is Defendant explicitly named in the arbitration agreement.
The RISC states:
“1.
EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY
ARBITRATION AND NOT IN COURT OR BY JURY TRIAL ….
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., Exh. 2 at p. 7 [emphasis added].)
Although
Defendant contends that it “is an intended third-party beneficiary of the
arbitration provision because it falls within the class of persons or entities
for whom the arbitration provision was intended,” Defendant has not
asserted or provided evidence that it is an employee, agent, successor, or
assignee of Keyes, as required by the arbitration agreement.
The agreement expressly lays out which parties to a dispute
make that dispute arbitrable: the dispute must be “between you and [Keyes] or
our employees, agents, successors or assigns”. The language in the subsequent
clause, “which arises out of or relates to your … purchase or condition of this
vehicle … any resulting … any such relationship with third parties who do not
sign this contract” describes where the disputes must come from but does not
modify the parties who may be beneficiaries.
Similarly, the language that “EITHER YOU OR WE MAY CHOOSE TO
HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION” and “[a]ny claim or dispute
… shall, at your or our election, be resolved by neutral, binding arbitration”
further supports the interpretation that election of arbitration is only
provided for among the actual parties to the contract.
Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486,
497 disagreed with this interpretation when evaluating an identical arbitration
agreement for the purpose of equitable estoppel. There, the court found that
the plaintiffs “expressly agreed to arbitrate claims arising out of the
condition of the vehicle – even against third party nonsignatories to the sales
contract[.]” (Ibid.)
However, California appellate courts are split on this issue. In Ford Motor Warranty Cases (2023) 89
Cal.App.5th 1324, 1334-1335, where the court, again evaluating a nearly
identical arbitration agreement, concluded that the same clause delineated the
subject matter of disputes, and not the parties:
“We
do not read [‘including any such relationship with third parties who do not
sign this contract’] as consent by the purchaser to arbitrate claims with third
party nonsignatories. Rather, we read it as a further delineation of the
subject matter of claims the purchasers and dealers agreed to arbitrate. They
agreed to arbitrate disputes ‘between’ themselves—'you and us’—arising out of
or relating to ‘relationship[s],’ including ‘relationship[s] with third parties
who [did] not sign th[e] [sale] contract[s],’ resulting from the ‘purchase, or
condition of th[e] vehicle, [or] th[e] [sale] contract.’”
(Ibid.)
The California Supreme Court granted a petition for review
of Ford Motor Cases on July 19, 2023, but it may be cited for persuasive
value and to establish a conflict in authority that would allow trial courts to
exercise discretion to choose between sides of any such conflict. (Ford
Motor Warranty Cases (2023) 310 Cal.Rptr.3d 440; see also California Rules
of Court, Rule 8.111, subd. (e)(3).) Because Ford Motor Cases appears to
comport best with the plain meaning of the contract, the Court follows it here,
and finds that Defendant is not an intended third party beneficiary.
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.” (Boucher v. Alliance
Title Co., Inc. (2005) 127 Cal.App.4th 262, 271.) “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.” (Id. at p. 272.) “Where the equitable
estoppel doctrine applies, the nonsignatory has a right to enforce the
arbitration agreement.” (JSM Tuscany, LLC v. Superior Court (2011) 193
Cal.App.4th 1222, 1237 n. 18.)
In Felisilda,
the Court of Appeal found that purchasers of a vehicle were estopped from
refusing to arbitrate Song-Beverly Act claims against the vehicle manufacturer,
based on an agreement between the purchaser and the vehicle dealer. (See
Felisilda, supra, at 496-99.)
Conversely, in Kielar
v. Superior Court of Placer Cnty. (2023) 94 Cal.App.5th 614, the Third
District Court of Appeal expressly repudiated Felisilda. (Id. at p.
616.) The Third District issued a preemptory writ of mandate directing the
trial court in the case to vacate an order compelling arbitration of a
plaintiff’s Song-Beverly Act claims against an automobile manufacturer based on
an arbitration clause in the purchase agreement between the plaintiff and the
dealer from which the plaintiff purchased the automobile. (Ibid.) The trial court order in Keilar was
premised on Felisilda’s view that the doctrine of equitable estoppel
applied in this context. (Ibid.) The Third District in Keilar held that it
does not apply. (Ibid.)
In abandoning Felisilda,
the Third District in Keilar adopted instead the rulings of Division
Eight of the Second District in the Ford Motor Warranty Cases, supra,
89 Cal.App.5th 1324, and Division Seven of the Second District in Montemayor
v. Ford Motor Company (2023) 92 Cal.App.5th 958 (Montemayor).
(See Keilar, supra, 94 Cal.App.5th at pp. 620-621.)
The Courts in Ford
Motor Warranty Cases and Montemayor rejected the reasoning of Felisilda
and held that the claims against a non-signatory automobile manufacturer are
not intimately founded in and intertwined with the obligations in the contract
containing the arbitration clause between the plaintiff and the dealer from
which the plaintiff purchased the automobile at issue, and therefore the
manufacturer could not invoke the doctrine of equitable estoppel to enforce the
arbitration clause. (Ford Motor Warranty Cases, supra, 89
Cal.App.5th at pp. 1333,1335-1336; Montemayor, supra, 92
Cal.App.5th at pp. 969-971.) The Montemayor court emphasized the
fact that the plaintiffs alleged “that Ford's obligations arose out of its
express written warranty, not the sales contract” and that the plaintiffs’
claims were based on the defendant’s statutory obligations, rather than any
language in the sale contract. (Montemayor, 92 Cal.App.5th at p. 970.)
Here, like in Kielar,
Montemayor, and the Ford Warranty Cases, Plaintiffs sue on the
basis of Defendant’s statutory obligations and on the basis of a sales warranty
that no party contends was a part of the contract. Plaintiff is therefore not “relying
on contract terms in a claim against a nonsignatory defendant” in this action.
(See Boucher, supra, 127 Cal.App.4th at p. 272.) The Court
therefore finds that the equitable estoppel doctrine does not apply.
Because Defendant does not have standing to assert the
arbitration clause, the Court DENIES its motion.