Judge: Lee W. Tsao, Case: 22NWCV00497, Date: 2023-04-04 Tentative Ruling

Case Number: 22NWCV00497    Hearing Date: April 4, 2023    Dept: C

GUERRERO v. NISSAN NORTH AMERICA, INC.

CASE NO.:  22NWCV00497

HEARING:  4/4/23 @ 10:30 AM

 

#5

TENTATIVE RULING

 

Defendant Nissan North America, Inc.’s motion to compel arbitration and stay action is GRANTED.  The action is STAYED pending arbitration.

 

Moving Party to give NOTICE.

 

 

Defendant Nissan North America, Inc. (“Nissan”) moves to compel arbitration pursuant to CCP § 1281.2.

 

Defendant’s Request for Judicial Notice is GRANTED. (Cal. Ev. Code §452.) 

 

Defendant’s Objection No. 1 to the declaration of Powell is sustained.

 

Except for specifically enumerated exceptions, the court must order the petitioner and respondent to arbitrate a controversy if the court finds that a written agreement to arbitrate the controversy exists.  (See CCP §1281.2.)  “In California, [g]eneral principles of contract law determine whether the parties have entered a binding agreement to arbitrate.”  (Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 420.)  “A petition to compel arbitration or stay proceedings pursuant to CCP §§1281.1 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.” (CRC Rule 3.1330.) 

 

The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.  In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.  (Engalia v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951.) 

 

This is a lemon law action.  Plaintiff Guerrero alleges that Nissan is liable based on certain warranty obligations.  (Complaint, ¶ 5.)  The Arbitration Agreement at issue was signed by Plaintiff and the selling dealership — Downey Nissan.  (Salas Decl., Ex. 5, Retail Sales Installment Contract (“RISC”).)  The Agreement states in pertinent part, “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 court actions.”  (Id.)

 

It is undisputed that Nissan is not a signatory to the RISC containing the Agreement. 

 

As a general rule, only a party to an arbitration agreement may enforce the agreement.  (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 613.) However, the equitable estoppel exception may enable a non-signatory party such as the vehicle manufacturer to invoke an agreement to arbitrate.  (JSM Tuscany, LLC v. Sup. Ct. (2011) 193 Cal.App.4th 1222, 1236-37.)  A plaintiff may be equitably estopped from repudiating the arbitration clause contained in a contract where he or she relies on contract terms in acclaim against a non-signatory defendant, and when the causes of action against the non-signatory are “intimately founded in and intertwined” with the underlying contract obligations that are subject to the arbitration clause.  (Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271.)  Applying these principles, the Third District recently affirmed a trial court’s granting of an order compelling SBA plaintiffs to arbitrate their claim against a manufacturer even though the manufacturer was not a party or signatory to the sales contract that contained the arbitration provision.  (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 493.)  In Felisilda, the sales contract provided that “[a]ny claim or dispute, whether in contract, tort, statute or otherwise ... between you and us ... which arises out of or relates to ... [the] condition of this vehicle ... shall ... be resolved by neutral, binding arbitration and not by a court action.” (Italics added.)   There was no dispute that the Felisildas’ refund-or-replace claim against the manufacturer under the SBA related directly to the condition of the vehicle, because the suit alleged the existence of nonconformities covered by the express warranty that the selling dealer did not remedy after a reasonable number of attempts to repair.  

 

Plaintiff’s claim arises out of the purchase of the subject vehicle that forms the basis of the RISC, and thus, the Arbitration Agreement in the RISC may be enforced under the doctrine of equitable estoppel. 

 

In Opposition, Plaintiff requests that the court stay the matter until the Court of Appeal hears the matter of Martha Ochoa v. Ford Motor Company, B312261.  The court declines to stay the matter as the court’s ruling will be based on present law.

 

Plaintiff argues that Nissan should not be allowed to enforce the Arbitration Agreement under equitable estoppel because Plaintiff’s claim is not rooted in the sales contract and the language in the sales contract makes clear that the sales contract is distinct from the express warranties. 

 

However, the instant Arbitration Agreement is identical to that in Felisilda.  “The Felisildas’ claim against FCA directly relates to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract.  Because the Felisildas 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 FCA.”  (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 497.)   A review of the Complaint at issue confirms that Plaintiff’s claim directly relates to the condition of the subject vehicle and the contention that Defendant violated warranties Plaintiff received as a consequence of the RISC.

 

Plaintiff attempts to distinguish Felisilda by relying on Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, for the proposition that a non-signatory may not move to compel arbitration.  Such a distinction is not found in California case law.  Indeed, California cases repeatedly discuss equitable estoppel as a means for a non-signatory to “enforce” an arbitration agreement. (Jarboe v. Hanlees Auto Group (2020) 53 Cal.App.5th 539, 549 – stating when the equitable estoppel doctrine applies “a nonsignatory is allowed to enforce an arbitration clause”; Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 220 - “The rationale for permitting a nonsignatory to enforce an arbitration agreement - that is, compelling arbitration between parties who have not agreed to arbitration - on equitable estoppel grounds has been enunciated in many cases.”)  Thus, California law does not support the conclusion that a non-signatory may not move to compel arbitration under the doctrine of equitable estoppel.

 

Further, and more importantly, the decision of federal district and circuit courts are not binding on state courts.  (Alan v. Sup. Ct. (2003) 111 Cal.App.4th 217, 229.) 

 

Plaintiff argues that Felisida is distinguishable because there, the plaintiff car-buyers had “assert[ed] a single cause of action” against both the dealership that sold them their car and the manufacturer that built it. and the manufacturer.  (Opposition, 9:26-10:1.)  Similarly, here, Plaintiff has alleged claims against both the manufacturer and the dealership, which puts this case on all fours with Felisida.

 

Plaintiff relies on Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708, 1713, but Morgan is distinguishable because it dealt with federal courts from promulgating arbitration-preferring federal procedural rules. (Morgan, supra, 142 S.Ct. at 1713.)  Further, Morgan holds that arbitration clauses be placed “ ‘upon the same footing as other contracts.’ ”  (Ibid.)  This arbitration clause is on the same footing as other contracts.  In California, even outside the lemon law context, equitable estoppel principles may compel a nonsignatory to arbitration.  (See JSM Tuscany, LLC v. Superior Ct. (2011) 193 Cal.App.4th 1222, 1237; Blinco v. Green Tree Servicing, LLC, (5th Cir. 2005) 400 F.3d 1308, 1312; Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 217–18; Jensen v. U-Haul Co. of Cal. (2017) 18 Cal.App.5th 295, 306.)

 

This matter involves an identical arbitration provision as the arbitration provision in the seminal Court of Appeal case of Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486.  The Court finds that Nissan may compel arbitration on the basis of equitable estoppel.

 

Alternatively, Plaintiff argues that the Agreement is unconscionable.

 

Once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement. (Condee v. Longwood Mgt. Corp. (2001) 88 Cal.App.4th 215, 219.)  An adhesion contract in of itself is insufficient to render the arbitration clause unenforceable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.) Instead, the opposing party must demonstrate that the agreement is unconscionable. (Id.) To find an agreement to be unconscionable, there must be a finding of both procedural unconscionability and substantive unconscionability. (Id. at 114.)

 

Procedural unconscionability concerns the manner in which the contract was negotiated and the parties' circumstances at that time, and focuses on the factors of oppression or surprise.  (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 173.)  “Procedural unconscionability focuses on the manner in which the disputed clause is presented to the party in the weaker bargaining position. When the weaker party is presented the clause and told to ‘take it or leave it’ without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present.”  (Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1100.)  “Substantive unconscionability addresses the fairness of the term in dispute. Substantive unconscionability ‘traditionally involves contract terms that are so one-sided as to ‘shock the conscience,’ or that impose harsh or oppressive terms.’”  (Szetela, supra, 97 Cal.App.4th at 1110.)

 

Plaintiff contends that the arbitration agreement is procedurally unconscionable because it was presented as a “take it or leave it” agreement.  However, Plaintiff offers no evidence that Plaintiff lacked the ability to negotiate the contract.  Accordingly, Plaintiff failed to establish any procedural unconscionability.  To find an agreement to be unconscionable, there must be a finding of both procedural unconscionability and substantive unconscionability.  (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)  Since Plaintiff failed to establish the first prong of the test, the court need not address substantive unconscionability. 

 

Notwithstanding such, the court finds that there are no contract terms that are so one-sided that it shocks the conscience of impose harsh or oppressive terms.  Plaintiffs argue that the RISC does not allow them to recover their attorneys’ fees or arbitration costs.  However, the RISC expressly states the parties shall be responsible for their own attorneys’ fees and costs “unless awarded by the arbitrator under applicable law.”  (Salas Decl., Ex. 5, p. 5).  If the parties proceed to arbitration, the arbitrator can award Plaintiff’s attorneys’ fees and costs pursuant to the Song-Beverly Act.

 

Accordingly, the court does not find that the contract is unconscionable.

 

The Motion is GRANTED.