Judge: Lee W. Tsao, Case: 22NWCV00783, Date: 2023-03-21 Tentative Ruling
Case Number: 22NWCV00783 Hearing Date: March 21, 2023 Dept: SEC
#2
TENTATIVE RULING
Defendant American Honda Motor Co., Inc.’s motion to compel
arbitration and stay action is GRANTED.
The action is STAYED pending arbitration.
Moving Party to give NOTICE.
Defendant American
Honda Motor Co., Inc. (“Honda”) moves to compel arbitration pursuant to CCP §
1281.2.
Defendant’s
Request for Judicial Notice is GRANTED. (Cal. Ev. Code §452.)
Objections to the Declaration of Alexandra Lototsky are
OVERRULED. Defendant may meet its initial burden to show an agreement to
arbitrate by attaching a copy of the arbitration agreement bearing the opposing
party’s signature. “[A]s a preliminary matter the [trial] court is only
required to make a finding of the agreement’s existence, not an evidentiary
determination of its validity. [Citations Omitted.]” (Espejo v. Southern
California Permanente Medical Group (2016) 246 Cal.App.4th
1047, 1058.)
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 Bryan
Luna alleges that Honda is the vehicle manufacturer. (Complaint, ¶ 11.) The Arbitration Agreement at issue was signed
by Plaintiff and the selling dealership — Norm Reeves Honda Superstore. (Lototsky Decl., Ex. 1, 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 Honda 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.
Relying
on Felisilda, Honda argues that Plaintiff’s
claim arises 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, Plaintiff argues that Honda 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.)
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 Honda 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. Plaintiff argues that the
RISC denies them of a jury trial.
However, Plaintiff waived a jury trial by consenting to arbitration
proceedings to decide Plaintiff’s dispute.
(CCP § 631(f)(2) – waiver by written consent.) If the court were to follow Plaintiff’s
proposition, no arbitration provision could ever
be enforced against a party which sought to escape it. Plaintiff also argues that the RISC does not allow
Plaintiff to recover 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.” (Lototsky
Decl., Ex. 1, p. 6). 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.