Judge: Maurice A. Leiter, Case: 22STCV12860, Date: 2023-01-20 Tentative Ruling

Case Number: 22STCV12860    Hearing Date: January 20, 2023    Dept: 54

Hearing Date: January 20, 2023

Department 54, Judge Maurice A. Leiter

Motion to Compel Arbitration

Moving Party: Defendants Nissan North America, Inc. and Mass Automotive Group LLC Responding Party: Plaintiffs Irma Rangel and Alicia Munoz

T/R:    DEFENDANTS’ MOTION TO COMPEL ARBITRATION IS GRANTED.

THE ACTION IS STAYED.

DEFENDANTS TO NOTICE.  

If the parties wish to submit on the tentative, please email the courtroom at¿SMCdept54@lacourt.org¿with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

The Court considers the moving papers, opposition, and reply.

BACKGROUND

            This is a lemon law action arising out of Plaintiffs’ purchase of a 2018 Nissan Sentra, manufactured and distributed by Defendant Nissan North America, Inc. Plaintiffs filed the complaint on April 18, 2022, asserting causes of action for violations of the Song-Beverly Act and fraud.

ANALYSIS

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate a controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….”  (CCP § 1281.2.)  The right to compel arbitration exists unless the court finds that the right has been waived by a party’s conduct, other grounds exist for revocation of the agreement, or where a pending court action arising out of the same transaction creates the possibility of conflicting rulings on a common issue of law or fact.   (CCP § 1281.2(a)-(c).)  “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.”  (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

A. Existence of Arbitration Agreement

            Defendants move to compel arbitration based on the arbitration provision in the Retail Installment Sale Contract (“RISC”) executed by Plaintiffs on August 1, 2018. (Decl. Hudson, Exh. 1.) The agreement provides, in pertinent part, “[a]ny 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... 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 a court action.” (Id.) This action arises out the purchase and condition of the subject vehicle. Defendants, however, are non-signatories to the agreement.

B. Non-Signatory

            Defendants move to compel arbitration under the doctrine of equitable estoppel, relying on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 489. In Felisilda, the plaintiffs purchased a vehicle and signed a sales contract, which provided in pertinent part, “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 ... 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 a court action.” (Id. at 490, emphasis in original.)

The plaintiffs sued FCA and the dealership; the dealership moved to compel all parties to arbitration based on the sales agreement. The plaintiffs argued they could not be compelled to arbitrate their claims against non-signatory FCA. The Court of Appeal rejected this argument, finding that FCA could compel arbitration under equitable estoppel, which allows a non-signatory to enforce an arbitration agreement when “the causes of action against the non-signatory are ‘intimately founded in and intertwined’ with the underlying contract obligations.” (Id. at 495; quoting JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236-1237.) Citing the arbitration provisions above, the Court explained, “[t]he 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.” (Id. at 497.)

Here, the arbitration agreement executed by Plaintiffs is not materially different from the one in Felisilda. Plaintiff asserts the Court should instead follow the 9th Circuit Court case Ngo v. BMW of N. Am., LLC, No. 20-56027, 2022 WL 109004 (9th Cir. Jan. 12, 2022). Federal cases are not binding on this Court and the Court does not find Ngo persuasive. The court in Felisilda reasoned that the buyers’ claims related to the condition of the subject vehicle and the buyers expressly agreed to arbitrate their claims arising out of the condition of the subject vehicle, including those against third party non-signatories to the sales contract. That reasoning is present here.

C. Enforceability

Plaintiffs also argue that the agreement is both procedurally and substantively unconscionable. As the agreement was presented on a take it or leave it basis, there is a low degree of procedural unconscionability. However, this alone does not render the arbitration agreement unconscionable; to find the agreement unenforceable, the degree of substantive unconscionability must be high. (See Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 981.)

Plaintiffs assert that the agreement is substantively unconscionable because the choice of arbitrator must be approved by the selling dealer, the agreement waives Plaintiffs’ right to a jury trial, the cost-shifting provision is inadequate, and the agreement contains illusory terms that benefit the selling dealer. That the seller must approve of the choice of arbitrator does not render the agreement substantively unconscionable. This provision merely proposes mutual agreement over an arbitrator. It is also not substantively unconscionable to waive the right to a jury trial. This is the essence of an arbitration agreement.

As for the cost shifting provision, the agreement provides that the seller will pay up to $5,000.00 in arbitration costs. Plaintiff asserts that it is unconscionable to require a consumer pay any costs of arbitration. In reply, Defendants assert that Plaintiff has failed to establish that lemon law arbitrations frequently cost more than $5,000.00. Defendants also note that the agreement states it will pay more fees if the law or arbitrator decides they must pay more. The cost provision is not unconscionable.

The allegedly illusory bi-later terms, such as exempting repossession from arbitration, are not so one-sided that they prejudice Plaintiffs. The agreement is enforceable.

Defendants’ motion to compel arbitration is GRANTED.