Judge: Mel Red Recana, Case: 23STCV14607, Date: 2024-03-04 Tentative Ruling
Case Number: 23STCV14607 Hearing Date: March 4, 2024 Dept: 45
Hearing
date: March 4, 2024
Moving
Party:
Responding
Party:
Motion
to Compel Arbitration
The Court
considered the moving papers and opposition.
The
motion is DENIED.
Background
On
June 23, 2023, Plaintiffs Patrick England and Dolores England (“Plaintiffs”)
filed the Complaint against Defendant American Honda Motor Co., Inc. (“Defendant
AHM”), and DOES 1 through 10, inclusive for: (1) Violation of Subdivision (d)
of Civil Code Section 1793.2; (2) Violation of Subdivision (b) of Civil Code
Section 1793.2; (3) Violation of Subdivision (a)(3) of Civil Code Section
1793.2; (4) Breach of Express Written Warranty Civil Code Section 1791.2
Subdivision (a), Section 1794; and (5) Breach of Implied Warranty of Merchantability
Civil Code Section 1791.1, Section 1794.
On
December 21, 2023, Defendant AHM filed this instant Motion to Compel
Arbitration. On January 24, 2024, Plaintiffs filed an opposition. The reply was
due on February 26, 2024, none has been filed.
Legal
Standard
The Federal Arbitration Act (the “FAA”) applies in both federal and state
courts to contracts evidencing a transaction involving interstate
commerce. 9 U.S.C. §§ 1–2; Southland
Corp. v. Keating (1984) 465 U.S. 1, 12.
The FAA preempts conflicting state law. Preston v. Ferrer (2008)
552 U.S. 346, 353. The party that contends the FAA applies bears the burden to
demonstrate that the arbitration agreement is in a “‘contract evidencing a
transaction involving commerce’ . . . .”
(Woolls v. Super. Ct. (2005) 127 Cal.App.4th 197, 211.)
Pursuant to Code of Civil Procedure Section 1281.2, “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 such
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, unless it determines that: (a) The right to compel
arbitration has been waived by the petitioner; or (b) Grounds exist for the
revocation of the agreement.” (Code Civ. Proc., § 1281.2.)
Request
for Judicial Notice
In
support of their opposition, Plaintiffs’ request judicial notice of (1) Court
of Appeal’s decision in the matter of Ford Motor Warranty Cases, No.
B312261, 2023 WL 2768484, (Cal. Ct. App. Apr. 4, 2023) attached at Exhibit
1; (2) Court of Appeal’s decision in the matter of Rosana Montemayor v. Ford
Motor Company, No. B320477, (Cal. Ct. App. Jun. 26, 2023) attached as
Exhibit 2; and (3) Court of Appeal’s decision in the
matter of Kielar v. Super. Ct., (Cal. Ct. App. August. 16, 2023)
attached as Exhibit 3.
Plaintiffs’
request for judicial notice is GRANTED pursuant to Evidence Code Section
452, subdivision (d).
Discussion
Defendant American Honda Motor Co., Inc. (“Defendant AHM”) moves to
compel Plaintiffs Patrick England and Dolores England (“Plaintiffs”) to
arbitrate all arbitrable causes of action and claims asserted against Defendant
AHM in this present action.
Applicability of the FAA
Defendant AHM argues the Arbitration Provision is enforceable pursuant to
the federal law. Specifically, Defendant AHM asserts the Arbitration Provision
clearly and explicitly agreed to abide by the FAA. (Dao Decl., ¶ 2, Ex. A – Lease
Agreement, page 6, Item 26.) Although Defendant AHM does not address whether the
Arbitration Provision involves interstate commerce, as required for the FAA to
apply, the nature of the Lease Agreement being for the lease/purchase of a motor
vehicle demonstrates that the Arbitration Provision at issue is a contract
involving interstate commerce.
Prior Demand for Arbitration
A party seeking to compel arbitration under Code of Civil Procedure
Section 1281.2 must “plead and prove a prior demand for arbitration under the
parties’ arbitration agreement and a refusal to arbitrate under the agreement.”
(Mansouri v. Super. Ct. (2010) 181 Cal.App.4th 633, 640; Civ. Proc.
Code, § 1281.2. )
Here, Defendant AHM has not plead that
a prior demand for arbitration had been made to Plaintiffs nor that Plaintiffs’
refused such demand before bringing forth this instant motion. Nonetheless, the
Court will exercise its discretion and review the moving and opposition papers on
the merits.
Existence of a Valid Agreement
“[T]he petitioner bears the burden of proving the existence of a valid
arbitration agreement by the preponderance of the evidence . . . .” (Giuliano v. Inland Empire Personnel, Inc.
(2007) 149 Cal.App.4th 1276, 1284 (Giuliano).) “In determining whether
an arbitration agreement applies to a specific dispute, the court may examine
only the agreement itself and the complaint filed by the party refusing
arbitration [citation]. The court should
attempt to give effect to the parties’ intentions, in light of the usual and
ordinary meaning of the contractual language and the circumstances under which
the agreement was made.” (Weeks v.
Crow (1980) 113 Cal.App.3d 350, 353.)
“To determine whether a contractual arbitration clause requires
arbitration of a particular controversy, the controversy is first identified,
and the issue is whether that controversy is within the scope of the
contractual arbitration clause.” (Titolo
v. Cano (2007) 157 Cal.App.4th 310, 316.)
“Doubts as to whether an arbitration clause applies to a particular
dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate
unless it is clear that the arbitration clause cannot be interpreted to cover
the dispute.” (California
Correctional Peace Officers Ass’n v. State (2006) 142 Cal.App.4th 198, 205.)
[A] party opposing the petition bears the burden of proving by a
preponderance of the evidence any fact necessary to its defense. [Citation.] 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.
(Giuliano, supra,
149 Cal.App.4th at p. 1284.)
Defendant AHM argues Plaintiffs’ entered into a Lease Agreement with
Folsom Lake Honda (“FLH”), which includes the Arbitration Provision allowing
its signatories to choose arbitration if a dispute arises relating to the purchase
or condition of the vehicle. Furthermore, Defendant AHM contends although it
was not a signatory of the Lease Agreement, each of the allegations against
Defendant AHM arises directly from the purchase or condition of the Subject
Vehicle. (Compl., ¶¶ 9-11, 20.) Moreover, Defendant AHM argues it does business
as an automobile manufacturer and is unquestionably involved in the selling and
leasing of automobiles in the course of commerce. Additionally, Defendant AHM
asserts it may also compel arbitration under the Doctrine of Equitable Estoppel
because Plaintiffs’ claims are dependent on the Lease Agreement and without the
Lease Agreement there would be no warranty between Defendant AHM and Plaintiffs.
As such, Defendant AHM contends there would be no possibility of a lemon law claim.
Defendant AHM also argues the Lease Agreement delegates the question of
arbitrability of the claims to an arbitrator, thus this present motion should
be granted to allow a neutral arbitrator to determine that issue.
On Page 1 of the Lease Agreement (With Arbitration Provision) its states:
Agreement to Arbitrate: By signing below, you agree that, pursuant to the
Arbitration Provision, Item 26, on page 6 of this Lease, you or we may elect to
resolve any dispute by neutral, binding arbitration and not by a court action.
See the Arbitration Provision for additional information concerning the
agreement to arbitrate.
NOTICE:
THE OTHER SIDE OF THIS LEASE CONTAINS IMPORTANT TERMS AND CONDITIONS, INCLUDING
AN ARBITRATION PROVISION. THE TERMS AND CONDITIONS ON THE REVERSE SIDE ARE PART
OF THIS LEASE.
On Page 6, Item 26 of the Lease Agreement (With Arbitration Provision) it
states:
“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 parents, subsidiaries,
affiliates, employees, officers, agents, representatives, predecessors, successors
or assigns (individually and collectively “us” or “our”) which arises out of or
relates to your credit application, origination or servicing of this Lease, the
manufacture, delivery, condition, or performance of this Vehicle, any
representations, omissions, or warranties, 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. If federal law provides that a
claim or dispute is not subject to binding arbitration, this Arbitration
Provision shall not apply to such claim or dispute.”
Here, Defendant AHM has met its initial burden of proving the existence of
a valid written agreement to arbitrate the claims in this instant action. As discussed
above, Defendant AHM quoted language verbatim from the Lease Agreement between
Plaintiffs and FLH. Also, Defendant AHM provided a copy of the actual Lease Agreement
containing the arbitration agreement attached to Vanessa Dao’s declaration.
In opposition, Plaintiffs argue facts the challenge whether the Arbitration
Provision can be asserted by Defendant AHM and as to all claims. First,
Plaintiffs contend Defendant AHM is not a party to the Lease Agreement and the Arbitration
Provision only covers disputes involving both parties to the contract, at the
election of the signatories. Further, Plaintiffs’ argue they made no agreement
with Defendant AHM to arbitrate any disputes. Plaintiffs’ also argue the
language of the Lease Agreement excludes this dispute and excludes Defendant
AHM from electing arbitration because warranty claims are not rooted in the Lease
Agreement and Defendant is a nonsignatory. As such, Plaintiffs contend the Doctrine
of Equitable Estoppel cannot apply. Moreover, Plaintiffs assert the Lease
Agreement explicitly distinguishes the manufacturer’s warranties while
disclaiming any and all warranty obligations. (Roshan Decl., ¶ 5, Ex. A.) In
addition, Plaintiffs argue Defendant AHM is not a third-party beneficiary of
the Lease Agreement under Goonewardene factors. Finally, Plaintiffs
argue any benefit Defendant AHM receives is only incidental as Defendant AHM is
not referenced in the Lease Agreement and there is no indication in the
Arbitration Provision or elsewhere that it was intended to benefit Defendant
AHM.
Under Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, the
court held “California law does not treat manufacturer warranties imposed
outside the four corners of a retail sale contract as part of the sale
contract.” (Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, 1335.)
Also, “[t]o 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.’” (Ford Motor Warranty Case, supra, 89 Cal.App.5th at 1337
(citing to Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830).)
Furthermore, the Lease Agreement states in relevant part, “In this Lease,
“you” and “your” mean the lessee and co-lessee. “We,” “us” and “our” mean the
Lessor named above and any assignee of this Lease.” (Dao Decl., ¶ 2, Ex. A,
Page 1 – Lease Agreement (With Arbitration Provision).)
Like in Ford Motor Warranty Cases, the Lease Agreement does not appear
to read as consent by the Lessee, i.e., Plaintiffs in this action to arbitrate
claims with third-party nonsignatories such as Defendant AHM. Additionally, although the Arbitration Provision
of the Lease Agreement provides in relevant 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 parents, subsidiaries, affiliates,
employees, officers, agents, representatives, predecessors, successors or
assigns (individually and collectively “us” or “our”) which arises out of or
relates to your credit application, origination or servicing of this Lease, the
manufacture, delivery, condition, or performance of this Vehicle, any
representations, omissions, or warranties, 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”, it expressly limits arbitration
between Plaintiffs and FLH, parents, subsidiaries, affiliates, employees,
officers, agents, representatives, predecessors, and successors or assigns. (Id.)
As demonstrated above, the language of the Lease Agreement as a whole including
the Arbitration Provision do not name Defendant AHM as a Lessor, parent, subsidiary,
affiliate, employee, officer, agent, representative, predecessor, successor or
assignee of FLH. Similarly, Defendant AHM makes no showing that it is parent, subsidiary,
affiliate, employee, officer, agent, representative, predecessor, successor or
assignee of FLH. Also, California law treats manufacturer vehicle warranties as
independent of the sale contract and Plaintiffs’ claims as explained above
pertain to statutory warranty violations not the Lease Agreement.
Lastly, Defendant AHM fails to address Goonewardene requirements
to establish it is an intended third-party beneficiary. For the first prong,
the express language of the Arbitration Provision of the Lease Agreement indicates
Defendant AHM would not benefit from it because it states the Lessee (“you”), parents,
subsidiaries, affiliates, employees, officers, agents, representatives,
predecessors, and successors or assigns (individually and collectively “us” and
“our”) may compel arbitration, none of which is Defendant AHM. As to the second
prong, the limitations on who could compel arbitration demonstrates neither
Plaintiff nor FLH had a motivating purpose to provide benefit to Defendant AHM.
The use of the language “Any claim or dispute, whether in contract, tort, statute
or otherwise… between you and us or our parents, subsidiaries, affiliates,
employees, officers, agents, representatives, predecessors, successors or
assigns which arises out of or relates to your credit application, origination
or servicing of this Lease, the manufacture, delivery, condition, or
performance of this Vehicle, any representations, omissions, or warranties, or
any resulting transaction or relationship (including any such relationship with
third parties who do not sign this Lease),” seems incidental not intentional. On
the third and final prong, provided the explicit language of the Lease Agreement
including the Arbitration Provision, permitting Defendant AHM to enforce the
arbitration provision would be inconsistent with the objectives of the Lease Agreement
and the reasonable expectations of the contracting parties.
The Court finds that Defendant AHM has not proven the existence of a
valid written arbitration agreement. Thus, the Court does not reach the issue
of enforceability.
Therefore, the motion to compel arbitration is DENIED.
It
is so ordered.
Dated: March 4, 2024
_______________________
ROLF M. TREU
Judge of the
Superior Court