Judge: Melissa R. Mccormick, Case: "Scheirer v. Toyota Motor Sales, U.S.A., Inc., et al.", Date: 2023-08-03 Tentative Ruling

Defendants Toyota Motor Sales, U.S.A., Inc. and DWWTO’s Motion to Compel Arbitration

Defendants Toyota Motor Sales, U.S.A., Inc. (Toyota) and DWWTO move to compel arbitration of plaintiff Casey Scheirer’s causes of action against them.  For the following reasons, defendants’ motion is granted in part and denied in part.

The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract.  Little v. Pullman (2013) 219 Cal.App.4th 558, 565.  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.  Id.

In a petition to compel arbitration, the trial court must first determine whether an “agreement to arbitrate the controversy exists.”  Civ. Proc. Code § 1281.2.  “Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.”  Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.  The party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the respondent's signature.  Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543-44.

Scheirer’s complaint alleges three causes of action against Toyota:  violation of the Consumers Legal Remedies Act (CLRA); breach of implied warranty under the Song-Beverly Consumer Warranty Act; and conversion.  Scheirer also alleges CLRA and Song-Beverly causes of action against the dealer DWWTO.  Defendants argue Scheirer’s claims are subject to an arbitration provision contained in a Retail Installment Sale Contract Scheirer allegedly executed with DWWTO when purchasing the vehicle.  Defendants concede Toyota is not a signatory to the agreement.  Brief at 7:12. 

As an initial matter, the court is skeptical defendants have met their initial burden.  As noted above, a party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the respondent's signature.  Bannister, 64 Cal.App.5th at 543-44.  In an attempt to carry defendants’ initial burden, defendants’ counsel states in his declaration, based on alleged personal knowledge, that a “true and correct copy of Plaintiff’s Retail Installment Sales Contract . . . for the subject vehicle is attached as Exhibit A.”  Myers Decl. ¶¶ 1, 3.  Some cases hold that a party seeking to compel arbitration need not “follow the normal procedures of document authentication” at the initial step, see, e.g., Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (citing Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218), but counsel nowhere even states that the agreement purportedly contains plaintiff’s signature.  See Myers Decl. ¶¶ 1-8.  Furthermore, the buyer signatures on the document are tiny and illegible.  In short, it is far from clear defendants carried their burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence.

Plaintiff did not object on this ground, however, and does not dispute that he signed an arbitration agreement in connection with the vehicle purchase.  Plaintiff also does not dispute that DWWTO can enforce the arbitration agreement.  With respect to DWWTO, plaintiff asserts without explanation that the arbitration agreement does not encompass plaintiff’s claims against DWWTO.  It does.  The arbitration agreement applies to “[a]ny 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 plaintiff and DWWTO and its 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 . . . .”  Defendants’ motion to compel arbitration of plaintiff’s causes of action against DWWTO is granted.

Even if defendants have demonstrated the existence of valid arbitration agreement, however, defendants’ motion to compel arbitration of plaintiff’s causes of action against Toyota is denied.  The agreement states in relevant part:

“EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE, EXCEPT AS STATED BELOW, BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

. . .

“Except as otherwise stated below, any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this clause 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, lease or condition of this vehicle, this lease agreement 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.

. . .

“Any arbitration under this Arbitration Clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state law concerning arbitration.”                          

Myers Decl. Ex. A (page 7).  The agreement defines “we” and “us” to refer to the dealer DWWTO.  Id. Ex. A (at 1). 

Defendants assert “[t]he Federal Arbitration Act applies here and requires arbitration.”  Brief at 5:5-6.  As noted, the arbitration provision states:  “Any arbitration under this Arbitration Clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state law concerning arbitration.”  Defendants appear to contend this language means the FAA governs both any arbitration under the arbitration agreement and a motion to compel arbitration.  The law is to the contrary.  See Victrola 89, LLC v. Jaman Properties 8, LLC (2020) 46 Cal.App.5th 337, 346-48 (holding phrase “enforcement of this agreement to arbitrate shall be governed by the Federal Arbitration Act” in real estate CAR form requires court to consider a motion to compel arbitration under the FAA, not the CAA).  The provision here does not state that enforcement of the arbitration agreement shall be governed by the FAA; it states that any arbitration that occurs pursuant to the clause shall be governed by the FAA.

Scheirer did not agree to arbitrate his claims against Toyota, and Toyota cannot enforce the arbitration clause as a purported third party beneficiary.  The arbitration agreement requires Scheirer and DWWTO to resolve any claim or dispute “between you and us or our employees, agents, successors or assigns” in arbitration.  The provision also states that “either you or we may choose to have any dispute . . . between us” decided in arbitration.  Toyota is not a party to the agreement, and the arbitration provision does not state Scheirer agreed to arbitrate his claims against Toyota.  Contrary to defendants’ contention, Scheirer did not agree to arbitrate any claim or dispute that arises out of or relates to any resulting transaction or relationship, including any relationship with third parties who do not sign the lease.  Brief at 7:10-12.  The agreement states Scheirer agreed to arbitrate “any claim or dispute . . . between you and us or our employees, agents, successors or assigns,” which arises out of or relates to Scheirer’s credit application, purchase or condition of the vehicle, the purchase agreement or any resulting transaction or relationship (including any such relationship with third parties who did not sign the contract).  The agreement states that to be arbitrable, a dispute must be between Scheirer and DWWTO or DWWTO’s employees, agents, successors or assigns.  See Ford Motor Warranty Cases (Ochoa v. Ford Motor Co.) (2023) 89 Cal.App.5th 1324, review granted Ford Motor Warranty Cases, No. S279969 (Jul. 19, 2023); Montemayor v. Ford Motor Company (2023) 92 Cal.App.5th 958; Ngo v. BMW of North America, Inc. (9th Cir. 2022) 23 F.4th 942, 946-48; see also Cal. R. Ct. 8.115(e)(1).

Nor can Toyota enforce the arbitration clause through equitable estoppel.  As a general rule, only a party to an arbitration agreement may enforce the agreement.  Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495.  There are several exceptions, however, that allow a nonsignatory to invoke an arbitration agreement, including the doctrine of equitable estoppel.  Id.  Under the doctrine of equitable estoppel, a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are intimately founded in and intertwined with the underlying contract obligations.  Id.  In any case applying equitable estoppel to compel arbitration despite the lack of an agreement to arbitrate, a nonsignatory may compel arbitration only when the claims against the nonsignatory are founded in and inextricably bound up with the obligations imposed by the agreement containing the arbitration clause.  Id.

Neither the language of the agreement nor Scheirer’s complaint supports compelling arbitration of Scheirer’s claims against Toyota.  Scheirer’s complaint demonstrates that the crux of his claims against Toyota are Toyota’s alleged advertising statements about the vehicle’s mileage and the vehicle’s alleged nonconformity with its advertised use, not any terms in the purchase agreement.  Felisilda accordingly does not govern the outcome of defendants’ motion.  See, e.g., Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 217-218 (“[T]he sine qua non for application of equitable estoppel as the basis for allowing a nonsignatory to enforce an arbitration clause is that the claims the plaintiff asserts against the nonsignatory must be dependent upon, or founded in and inextricably intertwined with, the underlying contractual obligations of the agreement containing the arbitration clause.”); Ngo, 23 F.4th at 948-50.  Moreover, Felisilda has been criticized.  See Ford Motor Warranty Cases (Ochoa v. Ford Motor Co.) (2023) 89 Cal.App.5th 1324, review granted Ford Motor Warranty Cases, No. S279969 (Jul. 19, 2023); Montemayor v. Ford Motor Company (2023) 92 Cal.App.5th 958; see also Cal. R. Ct. 8.115(e)(1).  Defendants’ motion to compel arbitration of plaintiff’s claims against Toyota is denied.

The case is stayed against defendant Toyota Motor Sales, U.S.A., Inc. pending completion of the arbitration against defendant DWWTO.  Civ. Proc. Code § 1281.2.  

The July 1, 2024 trial date is vacated.  An ADR Review Hearing is scheduled for March 7, 2024 at 9:00 a.m. in Department C13.

Plaintiff to give notice.