Judge: Kevin C. Brazile, Case: 22STCV27621, Date: 2023-01-26 Tentative Ruling

Hearing Date: January 26, 2023

Case Name: Lopez v. Nissan North America, Inc., et al.

Case No.: 22STCV22040

Matter: Motion to Compel Arbitration 

Moving Party: Defendant Nissan North America, Inc.

Responding Party: Plaintiff Rosario Lopez

Notice: OK

Ruling: The Motion to Compel Arbitration is denied.

Moving party to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic. 

This is a lemon law action.  Defendant Nissan North America, Inc. seeks to compel arbitration based on an arbitration provision found in the purchase agreement between Plaintiff and the dealer, Empire Nissan, Inc.  As a non-signatory, Defendant bases its Motion on equitable estoppel and third-party beneficiary status. 

The subject arbitration provision is as follows:

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. 

(Maugeri Decl., Exhibit 3.)

1. Equitable Estoppel

Defendant argues that equitable estoppel applies because the signatory's claims against a nonsignatory arise out of the underlying contract and the nonsignatory’s conduct is intertwined with a signatory's conduct.  (Mance v. MercedesBenz USA (N.D. Cal. 2012) 901 F.Supp.2d 1147, 1155–56; MS Dealer Service Corp. v. Franklin (11th Cir. 1999) 177 F.3d 942, 947.)

Under the doctrine of equitable estoppel in “both federal and California decisional authority, 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.)  “[I]f a plaintiff relies on the terms of an agreement to assert his or her claims against a nonsignatory defendant, the plaintiff may be equitably estopped from repudiating the arbitration clause of that very agreement. In other words, a signatory to an agreement with an arbitration clause cannot ‘ “ ‘have it both ways’ ” ’; the signatory ‘cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed by the agreement, which contains an arbitration provision, but, on the other hand, deny arbitration's applicability because the defendant is a non-signatory.’ ” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 220.)  

Defendant primarily relies on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486.  Felisilda, however, is distinguishable.  Specifically, in Felisilda, the plaintiffs sued both the signatory dealer and non-signatory manufacturer, and the dealer moved to compel arbitration.

Here, only non-signatories have been sued and have moved to compel arbitration.  Based on the circumstances of this case, the Court finds that Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122, 1134 is applicable and precludes application of equitable estoppel.  (See Ngo v. BMW of N. Am., LLC (9th Cir. 2022) 23 F.4th 942 [“It makes a critical difference that the Felisildas, unlike Ngo, sued the dealership in addition to the manufacturer. In Felisilda, it was the dealership—a signatory to the purchase agreement—that moved to compel arbitration rather than the non-signatory manufacturer. . . . Furthermore, the Felisildas dismissed the dealership only after the court granted the motion to compel arbitration. Accordingly, Felisilda does not address the situation we are confronted with here, where the non-signatory manufacturer attempted to compel arbitration on its own. We therefore decline to affirm on the ground of equitable estoppel.”]; Ruderman v. Rolls Royce Motor Cars LLC (C.D. Cal. Jan. 7, 2021) 2021 WL 141179, at *4 [“But Felisilda is not directly on point, because the Felisildas sued both the manufacturer and the dealer. Ruderman, on the other hand, sued only Rolls-Royce. Felisilda, therefore, does not change state law that directly controls this case. Kramer remains the controlling precedent for this case. Under the Kramer line of cases, Rolls-Royce cannot compel Ruderman to arbitrate his claims against it under the doctrine of equitable estoppel.”]; Nation v. BMW of N. Am., LLC (C.D. Cal. Dec. 28, 2020) 2020 WL 7868103, at *4 [same].)  

Indeed, one court has explained, “[a]s the Felisilda court highlighted, the arbitration provision mentions claims regarding the ‘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).’ (Sales Contract 2.) But that language is only one part of the definition of a covered claim. The arbitration provision first defines claims as those ‘between you and us or our employees, agents, successors or assigns.’ (Sale Contract at 2.) Neither the dealership nor one of its ‘employees, agents, successors, or assigns’ is named in this lawsuit or seeking to enforce the arbitration provision. See supra Part III.A. Thus, the Court similarly finds Felisilda to be distinguishable. The reasoning in Kramer and Jurosky convincingly addresses these circumstances. Consequently, the Court finds Defendant is not entitled to enforce the Sale Contract's arbitration provision under the equitable estoppel doctrine.”  (Safley v. BMW of N. Am., LLC (S.D. Cal. Feb. 5, 2021) 2021 WL 409722, at *8; see also Ellington v. Eclipse Recreational Vehicles, Inc. (C.D. Cal. Dec. 14, 2020) 2020 WL 8073607, at *4.)

     (b) Third-Party Beneficiary

“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.”  (Civ. Code § 1559.)

“The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract. [Citation.] If the terms of the contract necessarily require the promisor to confer a benefit on a third person, then the contract, and hence the parties thereto, contemplate a benefit to the third person. The parties are presumed to intend the consequences of a performance of the contract.”  (Johnson v. Holmes Tuttle Lincoln–Merc. (1958) 160 Cal.App.2d 290, 297.)  In other words, “the doctrine presupposes that the defendant made a promise which, if performed, would have benefited the third party.”  (Souza v. Westlands Water Dist. (2006) 135 Cal.App.4th 879, 891.)

Here, Defendant is not a third-party beneficiary who can enforce arbitration because it is not listed in the group of individuals/entities who must arbitrate; rather, the subject arbitration provision only mentions third-parties when describing the types of claims which are to be arbitrated.  (Schulz v. BMW of N. Am., LLC (N.D. Cal. 2020) 472 F.Supp.3d 632, 641.) 

     (c) Delegation Clause

Defendant argues that the subject arbitration agreement requires an arbitrator to determine arbitrability.

However, non-signatories cannot apparently enforce such a clause.

In sum, because Defendant is a non-signatory—who cannot compel arbitration—the Motion is denied.  The Request for Judicial Notice is granted.  The objections are overruled.

Moving party to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.