Judge: Lee W. Tsao, Case: 23NWCV00352, Date: 2023-11-07 Tentative Ruling
Case Number: 23NWCV00352 Hearing Date: November 7, 2023 Dept: C
Vardges Ghukasyan vs BMW Of North
America, LLC
NO.: 23NWCV00352
HEARING:
11/07/23
#4
TENTATIVE
ORDER
The motion to compel arbitration and stay proceedings is DENIED.
Background
Plaintiff Vardges Ghykasyan’s
commenced a lemon law action against BMW of North America, LLC (“BMW NA”) with
allegations of displeasure with the lease, warranty, and condition of a 2018
BMW 640i Convertible, VIN# WBA6F1C52JGT83872 (“Subject Vehicle”) on February 2,
2023. The Complaint asserts two causes of action under the Song-Beverly Act for
(1) breach of express warranty and (2) breach of implied warranty.
Judicial Notice
BMWNA’s requests for judicial
notice of the Lease Agreement is granted because it is not subject to dispute
as it was incorporated in the Complaint. (Evid. Code § 452(h).)
BMWNA’s requests for judicial
notice of the LLC-12 filing of BMW Financial Services NA, LLC (“BMW FS”) with
the California Secretary of State, which indicates that Defendant BMW of North
America, LLC (“BMW NA”) is the sole managing member of BMW FS is Granted.
BMWNA’s requests for judicial
notice of district court rulings listed as Exhibits 5, 7 in the request for
judicial notice are granted. (Evid. Code § 452(d).)
BMWNA’s requests for judicial
notice of superior court rulings listed as Exhibits 2, 3, 4, 6, 8,12, 10, 11,
13, 14, and 15 in the request for judicial notice are denied because “a written
trial court ruling has no precedential value.” (Schachter v. Citigroup, Inc.
(2005) 126 Cal.App.4th 726, 738.)
Discussion
Legal Standard
In
deciding a petition to compel arbitration, trial courts must decide first
whether an enforceable arbitration agreement exists between the parties, and
then determine the second gateway issue whether the claims are covered within
the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118
Cal.App.4th 955, 961.) The opposing party has the burden to establish any
defense to enforcement. (Gatton v. T-Mobile USA, Inc. (2007) 152
Cal.App.4th 571, 579 (“The petitioner, T–Mobile here, bears the burden of
proving the existence of a valid arbitration agreement and the opposing party,
plaintiffs here, bears the burden of proving any fact necessary to its
defense.”); Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US),
LLC (2012) 55 Cal.4th 223, 236 [“The party seeking arbitration bears the
burden of proving the existence of an arbitration agreement, and the party
opposing arbitration bears the burden of proving any defense, such as
unconscionability.”].)
In
California, there is a “strong public policy in favor of arbitration.” (Moncharsh
v. Heily & Blase (1992) 3 Cal.4th 1,
9.) Accordingly, “doubts concerning the scope of arbitrable issues are to
be resolved in favor of arbitration.” (Ericksen, Arbuthnot, McCarthy,
Kearney & Walsh, Inc. v. 100 Oak St. (1983) 35 Cal.3d 312, 323.)
Further, “under both the FAA and California law, ‘arbitration agreements are
valid, irrevocable, and enforceable, save upon such grounds as exist at law or
in equity for the revocation of any contract.’” (Higgins v.
Sup. Ct. (2006) 140 Cal.App.4th 1238, 1247.) This policy, however, is
tempered by the recognition that arbitration must be based on an enforceable
contract, as “[t]here is no public policy favoring arbitration of disputes
which the parties have not agreed to arbitrate.” (Engineers &
Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644,
653.)
Moreover,
the right to arbitration depends upon contract, and “[t]here is no public
policy favoring arbitration of disputes that the parties have not agreed to
arbitrate.” (Lopez v. Charles Schwab & Co., Inc. (2004) 118
Cal. App. 4th 1224, 1229.) There is a “ ‘strong public policy in
favor of arbitration as a speedy and relatively inexpensive means of dispute
resolution.’ “ (Moncharsh
v. Heily & Blase (1992) 3 Cal.4th 1,
8-9) However,
it is essential to the proper operation of that policy that “ ‘[t]he scope of arbitration
is ... a matter of agreement between the parties' [citation], and ‘ “[t]he powers of an
arbitrator are limited and circumscribed by the agreement or stipulation of
submission.” ‘ [Citations.]”
(Ibid.) An agreement that the FAA governs the parties’ dispute is binding
and enforceable, and thus, that the parties’ agreement is to be read and
interpreted under the FAA. (See Gloster v. Sonic Automotive, Inc. (2014)
2016 Cal.App.4th 438, 446-47.)
Analysis
Defendant BMWNA moves to
compel Plaintiff to submit this action to binding arbitration.
Arbitration Agreement
Parties may be compelled to arbitrate a dispute
upon the court finding that: (1) there was a valid agreement to arbitrate between
the parties; and (2) said agreement covers the controversy or controversies in
the parties’ dispute.¿(Omar v. Ralphs Grocery Co. (2004)¿118 Cal.App.4th
955, 961.) A party moving to compel arbitration has the burden of establishing
the existence of a valid agreement to arbitrate and the party opposing the
petition has the burden of proving, by a preponderance of the evidence, any
fact necessary to its defense. (Banner Entertainment, Inc. v. Superior
Court¿(1998) 62 Cal.App.4th 348, 356-357.)
Here, Defendant met its burden of proving a
valid arbitration agreement. Defendant attached a copy of the retail sales
contract. (Sarhad Decl. Exh. A) The contract contains an arbitration provision
(the Arbitration Agreement), which states:
Either you or we may choose to have any dispute
between us decided by arbitration and not in court or by jury trial. . . . Any
claim or dispute, whether in contract, tort, statute or otherwise (including
the interpretation and scope of this Arbitration Provision, and the
arbitrability of the claim or dispute), 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 Lease) shall, at your or our election, be
resolved by neutral, binding arbitration and not by a court action.” (Sarhad
Decl., Exh. A.)
Further, Plaintiff does not dispute that there
is a valid arbitration agreement. Thus, Defendant has met its burden of proving
that there is a valid arbitration agreement by attaching the claimed
Arbitration Agreement in the sales contract to its motion.
Equitable Estoppel
A nonsignatory manufacturer can compel
arbitration under equitable estoppel “when the causes of action against the
nonsignatory are ‘intimately founded in and intertwined’ with the underlying
contract obligations.” (Felisilda v. FCA US LLC (Felisilda) (2020)
53 Cal.App.5th 486, 495.) The causes of actions are intimately founded in and
intertwined even if they do not exclusively rely on the contract terms. “ ‘The
fundamental point’ is that a party is ‘not entitled to make use of [a contract
containing an arbitration clause] as long as it worked to [his or] her
advantage, then attempt to avoid its application in defining the forum in which
[his or] her dispute . . . should be resolved.’ “ (Id. at 496.)
The court in Felisilda, supra, 53
Cal.App.5th 486, 496-497, held that the manufacturer could compel arbitration
because the condition of the vehicle was within the subject matter of the
claims made arbitrable under the sale contract, the sale contract was the
source of the manufacturer’s warranties under which plaintiffs were suing, and
plaintiffs had expressly agreed to arbitrate claims arising out of the
condition of the vehicle, even against third party nonsignatories. The court in
Ford Motor Warranty Cases (Ford) (2023) 89 Cal.App.5th 1324,
disagreed with Felisilda that arbitration could be compelled under an
identical arbitration provision. This Court can now choose to either continue
to follow Felisilda or instead adopt Ford’s reasoning. (Sarti
v. Salt Creek Ltd. (2008) 167 Cal.App.4th 1187, 1193 [“All trial courts are
bound by all published decisions of the Court of Appeal . . . Unlike at least
some federal intermediate appellate courts, though, there is no horizontal
stare decisis in the California Court of Appeal.”].)
The Ford court
disagreed with Felisilda on the grounds that the fact “[t]hat the Felisilda
plaintiffs and the Dealers agreed in their sale contract to arbitrate
disputes between them about the condition of the vehicle does not equitably
estop the plaintiffs from asserting [the manufacturer] has no right to demand
arbitration. Equitable estoppel would apply if the plaintiffs had sued [the
manufacturer] based on the terms of the sale contract yet denied [the
manufacturer] could enforce the arbitration clause in that contract.” (Ford,
supra, 89 Cal.App.5th 1324, 1334.) The Ford court held that the
plaintiffs’ claims did not arise in the sale contracts and instead on the
statutory obligations under the Song-Beverly Consumer Warranty Act, breach of
implied warranty of merchantability, and fraudulent inducement. “Not one of the
plaintiffs sued on any express contractual language in the sale contract.” (Ford,
supra, 89 Cal.App.5th 1324, 1335.) Specifically, the contract
contained provisions that disclaimed any warranty by the Dealers, “while acknowledging
no effect on ‘any warranties covering the vehicle that the vehicle manufacturer
may provide.’ ” (Ibid.) Further, the California Supreme Court
distinguished between warranties from the seller arising out of contract and
warranties from the manufacturer arising “independently of a contract of sale
between the parties.” (Greenman v. Yuba Power Products, Inc. (1963) 59
Cal.2d 57, 60.) Thus, plaintiffs’ claims were not “intimately founded in and
intertwined” with the sale contracts because the sale contracts do not intend
to cover the manufacturer’s warranties. (Ford, supra, 89
Cal.App.5th 1324.) Therefore, equitable estoppel does not apply to compel
plaintiffs to arbitrate their claims because plaintiffs were not making use of
the terms of the sale contracts. (Ibid.)
Thus, Defendant may only
compel arbitration if Plaintiff’s claims arise from and are intimately founded
in and intertwined with the sales contract instead of under Song-Beverly.
Defendant may not compel
arbitration because Plaintiff’s claims arise from Defendant’s statutory
obligation and are not based on any express contractual language. Equitable
estoppel is applicable where one party relies on a contract, which includes an
arbitration provision, in asserting its claims against a third party but
attempts to avoid its application to determining the forum in pursuing its
claims. (Felisilda, supra, 53 Cal.App.5th 486, 496.) Here, like
in Ford, Plaintiff’s claims “are based on [Defendant’s] statutory
obligations to reimburse consumers or replace their vehicles when unable to
repair in accordance with its warranty,” not based “on any express contractual
language in the sale contracts.” (Id. at 620.) Plaintiff’s claims do not
arise directly out of the sales contract, even if Defendant’s warranties
accompanied the sale of the subject vehicle. “The sale contracts include no
warranty, nor any assurance regarding the quality of the vehicle sold, nor any
promise of repairs or other remedies in the event problems arise. To the
contrary, the sale contracts disclaim any warranty on the part of the dealers,
while acknowledging no effect on ‘any warranties covering the vehicle that the
vehicle manufacturer may provide.’ In short, the substantive terms of the sale
contracts relate to sale and financing and nothing more.” (Ibid.)
Similarly, here the sales contract includes no warranty, any assurance
regarding the quality of the vehicle, no promise to make repairs, and disclaims
any manufacturer warranty. Thus, like Ford, Plaintiff’s claims arise
from Defendant’s statutory obligation and not from the sales contract.
Therefore, Defendant may not compel arbitration because Plaintiff’s claims are
not intimately found in or intertwined with the RISC.
Nonsignatory to Sales Contract
Defendant argues that it may enforce the
Arbitration Agreement because it contemplates enforcement by and against
nonsignatory third parties.
“A third party beneficiary is someone who may
enforce a contract because the contract is made expressly for his benefit.” (Jensen
v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 301; see also Civ.
Code, § 1559 [“[a] contract, made expressly for the benefit of a third person,
may be enforced by him ....”].) A person “only incidentally or remotely
benefited” from a contract is not a third party beneficiary. (Lucas v. Hamm
(1961) 56 Cal.2d 583, 590.) Thus, “the ‘mere fact that a contract results in
benefits to a third party does not render that party a “third party
beneficiary.” ’ ” (Jensen, supra, 18 Cal.App.5th 295, 302.) Nor does
knowledge that the third party may benefit from the contract suffice. (Goonewardene
v. ADP, LLC (2019) 6 Cal.5th 817, 830.) Rather, the parties to the contract
must have intended the third party to benefit. (Hess v. Ford Motor Co.
(2002) 27 Cal.4th 516, 524.)
To show the contracting parties intended to benefit it, a third party
must show that, under the express terms of the contract at issue and any other
relevant circumstances under which the contract was made, (1) “the third party
would in fact benefit from the contract”; (2) “a motivating purpose of the
contracting parties was to provide a benefit to the third party”; and (3)
permitting the third party to enforce the contract “is consistent with the
objectives of the contract and the reasonable expectations of the contracting
parties.” (Goonewardene, supra,
6 Cal.5th 817, 830.)
Defendant is not a third-party beneficiary as
contemplated by the RISC because there is no motivating purpose between
Plaintiff and the Dealership to provide benefit for Defendant. The Ford
court held that the same language, “[a]ny claim or dispute, . . . which arises
out of or relates to your . . . 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)” did not intend
to include the manufacturer. “Purchasers . . . can elect to buy insurance,
theft protection, extended warranties and the like from third parties, and they
can finance their transactions with those third parties under the sale
contracts. The “third party” language in the arbitration clause means that if a
purchaser asserts a claim against the dealer (or its employees, agents,
successors or assigns) that relates to one of these third party transactions,
the dealer can elect to arbitrate that claim. It says nothing of binding the
purchaser to arbitrate with the universe of unnamed third parties.” (Ford,
supra, 89 Cal.App.5th 1324, 1335.) Similarly, here, the contract evidences
no intent to include Defendant and statutory manufacturer warranties claims,
rather, there is only evidence that it intends to include any purchases from
third parties which were financed under the contract, such as optional service
contract, vehicle insurance, and state fees. Thus, the RISC does not reveal a
motivating purpose to include Defendant as a third-party beneficiary.
Therefore, Defendant cannot enforce the Arbitration Agreement as a third-party
beneficiary.
Conclusion
Accordingly, the motion to compel arbitration and stay proceedings is DENIED.