Judge Lee W. Tsao, Case 22NWCV00628 2023-03-16 Tentative Ruling

Judge: Lee W. Tsao, Case: 22NWCV00628, Date: 2023-03-16 Tentative Ruling

Case Number: 22NWCV00628 Hearing Date: March 16, 2023 Dept: C

MELENDEZ v. NISSAN NORTH AMERICA, INC.

CASE NO.: 22NWCV00628

HEARING: 03/16/23

TENTATIVE ORDER

Defendant NISSAN NORTH AMERICA, INC.’s motion to compel arbitration is GRANTED. The case is STAYED until conclusion of the arbitration.

Moving Party to give notice.

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.” (C.R.C. 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 allege that NISSAN NORTH AMERICA, INC. (“Nissan”) is the vehicle manufacturer. (Complaint ¶107.) The Arbitration Agreement at issue was signed by Plaintiffs and the selling dealership—non-party Cerritos Nissan. (Marden Decl., Ex. B.) 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 Retail Installment Sales Contract (“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.

Relying on Felisilda, Nissan argues that Plaintiffs’ claims arise out the purchase of the subject vehicle that form 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 under equitable estoppel because Plaintiffs’ claims are 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.

The Arbitration Agreement in the RISC here is identical to that in Felisilda. Further, 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 he received as a consequence of the RISC.

To the extent that Plaintiffs rely 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, although entitled to great weight, are not binding on state courts even as to issues of federal law.” (Alan v. Sup. Ct. (2003) 111 Cal.App.4th 217, 229.) Felisilda did not address the situation “where the non-signatory manufacturer attempted to compel arbitration on its own.” (Ngo at 949-950.)

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

Plaintiffs further contend that the Arbitration Agreement is unenforceable because it is unconscionable.

The party seeking the defense of unconscionability bears the burden of proof. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 911. “[T]he doctrine of unconscionability has both a procedural and substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” (Id. at 910.) “Oppression occurs where a contract involves lack of negotiation and meaningful choice, and surprise occurs where the allegedly unconscionable provision is hidden within a prolix printed form.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 247.) “The procedural element of an unconscionable contract generally takes the form of a contract of adhesion, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071.)

“[Procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. [Citation]…. The unconscionability doctrine ensures that contracts [ ] do not impose terms that have been variously described as ‘overly harsh,’ [citation], ‘unduly oppressive,’ [citation], ‘so one-sided as to shock the conscience,’ [citation] or ‘unfairly one-sided.’ [citation]. All of these formulations point to the central idea that unconscionability doctrine is [ ] concerned [ ] with terms that are ‘unreasonably favorable to the more powerful party.’ (Sanchez, supra, 6 Cal.4th at 910-911.) If the Court finds that an agreement to arbitrate or any clause of such an agreement is unconscionable, the Court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (Cal. Civ. Code §1670.5(a).)

Plaintiffs argue that the Agreement is procedurally unconscionable. Indeed, the Agreement appears to be a contract of adhesion in that it is, on its face, a form agreement drafted by the dealership. (See, e.g., Fitz v. NCR Corporation (2004) 118 Cal.App.4th 702, 721-722; Fittante v. Palms Springs Motors Inc. (2003) 105 Cal.App.4th 708, 721; Armendariz v. Found. Health Psychcare Servs. (2000) 24 Cal.4th 83, 114-115.) A finding that an agreement is a contract of adhesion is normally sufficient to establish procedural unconscionability. (See, e.g., Flores v. Transamerica Homefirst (2001) 93 Cal.App.4th 846, 854 [“A finding of a contract of adhesion is essentially a finding of procedural unconscionability. [Citation.]”].)

Notwithstanding, Plaintiffs fail to make any showing that the Agreement is substantively unconscionable. The terms of the Arbitration Agreement appear on its face to be bilateral, reasonable, and not unfairly favorable to either party. As a result, the Court finds that the Arbitration Agreement lacks the “one-sidedness” necessary to be deemed substantively unconscionable. (See e.g., Lhotka v. Geographic Expeditions, Inc. (2010) 181 Cal.App.4th 816, 825-826.) The Court does not find that the Agreement is so one-sided as to shock the conscience or that it “unfairly limits discovery”.

The motion to compel arbitration is GRANTED.