Judge: Lee W. Tsao, Case: 22NWCV00512, Date: 2023-01-03 Tentative Ruling

Case Number: 22NWCV00512    Hearing Date: January 3, 2023    Dept: SEC

MORA, et al. v. NISSAN NORTH AMERICA, INC.

CASE NO.:  22NWCV00512

HEARING:  1/3/22 @ 10:30 AM

JUDGE:  LEE W. TSAO

#4

TENTATIVE RULING

Defendant Nissan North America, Inc.’s motion to compel arbitration and stay action is GRANTED. The case is STAYED until conclusion of the arbitration.

Moving Party to give NOTICE.

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

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. Plaintiffs Herlinda Jimenez Mora and Ismael Jimenez Mora allege that Nissan is the vehicle manufacturer. (Complaint, ¶ 106.)  The Arbitration Agreement at issue was signed by Plaintiff Herlinda Jimenez Mora and the selling dealership — Downey Nissan.  (Sharp Decl., Ex. B, 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 part 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. 

Relying on Felisilda, Nissan argues that Plaintiffs’ claims arise out of the purchase of the subject vehicle that forms the basis of the RISC, and thus, that it may enforce the Arbitration Agreement in the RISC under the doctrine of equitable estoppel.

In Opposition, Plaintiffs argue that Nissan should not be allowed to enforce the Arbitration Agreement because Nissan is not a signatory to the contract.

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 Plaintiffs’ claims directly relate to the condition of the subject vehicle and the contention that Defendant violated warranties Plaintiffs received as a consequence of the RISC.  

Plaintiff also relies on Ngo v. BMW of North America, LLC (9^th Cir. 2022) 23 F.4th 942, wherein the Ninth Circuit opined, as to the issue of equitable estoppel, that it “ma[de] a critical difference that the Felisildas, unlike Ngo, sued the dealership in addition to the manufacturer” and noted that the signatory dealership in Felisilda was the party that moved to compel arbitration.  However, the decision of federal district and circuit courts are not binding on state courts even as to issues of federal law.  (Alan v. Sup. Ct. (2003) 111 Cal.App.4th 217, 229.)  

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 determines that Nissan may compel arbitration on the basis of equitable estoppel.

Alternatively, Plaintiffs 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.)

Plaintiffs contend that the arbitration agreement is procedurally unconscionable because it was presented as a “take it or leave it” agreement.  However, Plaintiffs offer no evidence that they lacked the ability to negotiate the contract.  Accordingly, Plaintiffs failed to establish any procedural unconscionability.

The court further finds that Plaintiffs failed to establish substantive unconscionability.  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.”  (Sharp Decl., Ex. B, p. 5).  If the parties proceed to arbitration, the arbitrator can award Plaintiffs’ 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.