Judge Lee W. Tsao, Case 22NWCV00831 2023-02-21 Tentative Ruling

Judge: Lee W. Tsao, Case: 22NWCV00831, Date: 2023-02-21 Tentative Ruling

Case Number: 22NWCV00831 Hearing Date: February 21, 2023 Dept: C

HAYNIE v. AMERICAN HONDA MOTOR CO., INC.

CASE NO.: 22NWCV00831

HEARING: 2/21/23 @ 1:30 PM

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 Jacqueline Lee 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. Plaintiffs Savannah Haynie and Porfirio Hernandez allege that Honda is the vehicle manufacturer. (Complaint, ¶ 11.) The Arbitration Agreement at issue was signed by Plaintiffs and the selling dealership — Norm Reeves Honda Superstore. (Lee 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 Plaintiffs’ 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, Plaintiffs argue that Honda should not be allowed to enforce the Arbitration Agreement under equitable estoppel because Plaintiffs’ 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 Plaintiffs’ claim directly relates to the condition of the subject vehicle and the contention that Defendant violated warranties Plaintiffs received as a consequence of the RISC.

Plaintiff attempts to distinguish Felisilda by relying on Ngo v. BMW of North America, LLC (9^th 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 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 Honda may compel arbitration on the basis of equitable estoppel.

Alternatively, Plaintiffs argue 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. 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 Plaintiffs 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 denies them of a jury trial. However, Plaintiffs waived a jury trial by consenting to arbitration proceedings to decide their dispute. (CCP § 631(f)(2) – waiver by written consent.) If the court were to follow Plaintiffs’ proposition, no arbitration provision could ever be enforced against a party which sought to escape it. Plaintiffs also 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.” (Lee 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.