Judge: Melvin D. Sandvig, Case: 22CHCV00609, Date: 2023-02-17 Tentative Ruling
Case Number: 22CHCV00609 Hearing Date: February 17, 2023 Dept: F47
Dept. F47
Date: 2/17/23
Case #22CHCV00609
MOTION TO COMPEL ARBITRATION
Motion filed on 11/14/22.
MOVING PARTY: Defendant BMW of North America, LLC
RESPONDING PARTY: Plaintiffs Raffi Tikidijan and Carin Tikidijan
NOTICE: ok
RULING: The motion is granted.
SUMMARY OF FACTS & PROCEDURAL HISTORY
This action arises out of Plaintiffs Raffi Tikidijan and Carin Tikidijan’s (Plaintiffs) purchase of a used 2018 BMW X5 (the Vehicle) on 11/6/20 from non-party Valencia BMW pursuant to a “BMW Financial Services NA, LLC Motor Vehicle Retail Installment Contract - California)” (the Contract) which contains an arbitration clause. (Grener Decl., Ex.A, §19). Plaintiffs allege that the Vehicle was/is defective and Defendant BMW of North America, LLC (Defendant) has breached the express and implied warranties arising from the sale of the Vehicle by failing to repair the defects after a reasonable number of attempts and/or has failed to issue a refund or replace the vehicle. (See Complaint ¶¶14-21, 27, 38). Plaintiffs allege that “[t]his cause of action arises out of the breach of warranty of the vehicle in question…” and Plaintiffs seek to “revoke acceptance of the vehicle under the [Song-Beverly] Act.” (Complaint ¶¶3, 22). On 8/8/22, Plaintiffs filed this action against Defendant for: (1) Violation of the Song-Beverly Consumer Warranty Act; (2) Violation of the Federal Magnuson-Moss Warrant Act; and (3) Breach of Express Warranty under the California Commercial Code.
On 11/14/22, Defendant filed and served the instant motion seeking an order compelling Plaintiffs to arbitrate all arbitrable causes of action and claims asserted against Defendant in this action and staying this action until the completion of the arbitration or until such earlier time as the Court specifies. On 2/3/23, Plaintiffs filed an opposition to the motion and on 2/9/23, Defendant filed a reply to the opposition.
ANALYSIS
Plaintiffs’ objections (numbers 1-4) to the declaration of Aaron Grener are overruled.
The Contract between Plaintiffs and Valencia BMW provides that the words “I,” “me,” and “my" refer to Plaintiffs and “you,” and “your” refer to Valencia BMW or its assignee. (Grener Decl., Ex.A, p.1). The Contract further provides that the signing of the Contract by BMW Valencia has the effect of: … (5) assigning this Contract to BMW Bank of North America, a wholly owned subsidiary of BMW Financial Services NA, LLC (collectively ‘Assignee’)… .” (Id., p.8, §21).
The arbitration clause in the Contract provides in relevant part:
19. ARBITRATION CLAUSE
PLEASE REVIEW – IMPORTANT – AFFECTS OUR LEGAL RIGHTS [in red]
NOTICE: Either you or I may choose to have any dispute between us decided by arbitration and not in a court or by jury trial. If a dispute is arbitrated, I will give up my right to participate as a class representative or class member on any Claim I may have against you including any right to class arbitration or any consolidation of individual arbitrations. Discovery and rights to appeal in arbitration are generally more limited than in a lawsuit, and other rights you and I would have in court may not be available in arbitration.
"Claim" broadly means any controversy, whether in contract, tort, statute or otherwise, whether preexisting, present or future, between me and you or your employees, officers, directors, affiliates, successors or assigns, or between me and any third parties if I assert a Claim against such third parties in connection with a Claim I assert against you, which arises out of or relates to my 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). Any Claim shall, at your or my election, be resolved by neutral, binding arbitration and not by a court action.
. . .
This Contract involves interstate commerce and this Arbitration Clause and any arbitration hereunder shall be governed by the FAA and not by any state law concerning arbitration.
(Id., pp.6-7, §19)
In determining whether to compel arbitration, the Court must determine: (1) whether there is an agreement to arbitrate between the parties; and (2) whether the agreement covers the dispute. Ashbey (9th Cir. 2015) 785 F.3d 1320, 1323; Howsam (2002) 537 U.S. 79, 84. A party moving to compel arbitration need only provide the Court with a copy of the Arbitration Agreement. See Condee (2001) 88 CA4th 215, 218-219; CRC 3.1300. Here, Defendant has provided a copy of the Arbitration Agreement to the Court. (Grener Decl., Ex.A).
Pursuant to both federal and California law, 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.” (internal quotation marks omitted) JSM Tuscany, LLC (2011) 193 CA4th 1222, 1237.
With regard to the purchase of a vehicle where the plaintiff and the selling dealership entered a retail installment sales contract, this very issue has recently been decided by the Court of Appeal in Felisilda (2020) 53 CA5th 486 wherein the Court held:
“Under the doctrine of equitable estoppel, as applied in both federal and California decisional authority, a non-signatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the non-signatory are ‘intimately founded in and intertwined’ with the underlying contract obligations [i.e., the purchase and condition of the vehicle].” (internal citations omitted).
Felisilda, supra, at 495.
Because Plaintiffs expressly agreed to arbitrate claims arising out of the condition of the Vehicle (which are all of Plaintiffs’ causes of action against Defendant in this action), including against third party non-signatories to the Contract, Plaintiffs are estopped from refusing to arbitrate their claim against Defendant. See Felisilda, supra at 497. As explained by the Court in Felisilda:
“‘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.’” (internal citations omitted)
Id. at 496.
All of Plaintiffs’ causes of action against Defendant relate alleged “inherent defects” in the Vehicle which Defendant has failed to remedy in violation of the implied and express warranties provided by Defendant. (Complaint ¶¶7-11, 15-18, 27, 31-32, , 38, 44). The Contract is the source of the warranties Plaintiffs’ rely on for their claims. As such, the warranties and their purported breach are “intimately founded in and intertwined” with the Contract.
The Federal Arbitration Act (FAA) applies where: (1) the contract evidences a transaction involving commerce; or (2) where the parties expressly agree that the FAA governs arbitration agreement disputes under the contract. Cronus Investments, Inc. (2005) 35 C4th 376, 383-384; Rodriguez (2006) 136 CA4th 1110, 1122. Here, as noted above, the Arbitration Clause in the Contract specifically states that “[t]his Contract involves interstate commerce and any arbitration hereunder shall be governed by the FAA and not by any state law concerning arbitration.” (Grener Decl., p.7, §19). California law also supports compelling this matter to arbitration under the Contract as there is no evidence that any grounds exist to revoke the agreement to arbitrate. See CCP 1281.2(a), (b); Jenks (2015) 243 CA4th 1, 9 (a non-signatory may enforce an arbitration agreement under the doctrine of equitable estoppel).
Plaintiffs’ reliance on Ngo (9th Cir. 2022) 23 F.4th 942 is misplaced. First, Ngo, a federal case, is not binding on this Court whereas Felisilda, supra, is binding. See Auto Equity Sales, Inc. (1962) 57 C2d 450, 455 (“When deciding matters of California law, the doctrine of Stare Decisis requires the Court of inferior jurisdiction follow the published decisions of California courts of superior jurisdiction.”). Second, Ngo seemingly misinterprets underlying California case law for its proposition that “under California law, warranties from a manufacturer that is not a party to a sales contract ‘are not part of [the] contract of sale.’” Ngo, supra at 949. The California case law relied on by Ngo is factually distinguishable as the cases involved plaintiffs who were not parties to the sales contracts. See Corp. of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v. Cavanaugh (Cavanagh) (1963) 217 CA2d 492, 514; Greenman (1963) 59 C2d 57, 61.
Additionally, the court in Ngo was reviewing a different arbitration clause than the one at issue here. The arbitration clause at issue here is the same as the one in Hajibekyan (2021) 839 F.Appx. 187 which defined arbitrable disputes as those between “me and you or your employees, officers, directors, affiliates, successors, or assigns” and defines “you” and “your” to include the assignee of the contract. See Ngo, supra at 947; Hajibekyan, supra at 188.
The warranties on which Plaintiffs’ base their claims are an essential part of the benefits Plaintiffs received when they decided to enter the Contract. Additionally, the protections provided by the Song-Beverly Act only apply to consumers who purchase vehicles directly from the retail seller within the meaning of the Act. See Dagher (2015) 238 CA4th 905, 926-927. Similarly, the Magnuson-Moss Act provides protections to consumers of consumer products distributed by suppliers as defined by the Act. See 15 U.S.C. 2301. Without the Contract from a Defendant/BMW-authorized dealer, Plaintiffs would have no standing to seek relief under the Acts relied on in their Complaint. As such, Plaintiffs’ claims are inextricably intertwined with the Contract and Defendant may enforce the Arbitration Clause under the doctrine of equitable estoppel.
Defendant may also compel arbitration as a third party-beneficiary to the Arbitration Clause. In order to enforce the arbitration clause as a third party-beneficiary, Defendant need only show that it “is a member of a class of persons for whose benefit [the Contract] was made. See Ronay Family Limited Partnership (2013) 216 CA4th 830, 838-839. As noted above, the Arbitration Clause at issue includes claims related to the condition of the Vehicle against the signatory, its assignees, and affiliates. (Grener Decl., Ex.A). The Contract was assigned to BMW Financial Services (BMW FS) and Defendant is an affiliate of BMW FS. As an affiliate of BMW FS, Defendant falls within the class of persons or entities for whom the arbitration clause was intended to benefit. By expressly including claims against the signatory’s assignees and affiliates within the scope of arbitrable claims, under California contract law, “the arbitration clause was intended to benefit nonparties” such as Defendant. See Ronay, supra at 839. Defendant is one of the third parties contemplated by the agreement. See Ronay, supra; Felisilda, supra at 498-499; Goonewardene (2019) 6 C5th 817.
CONCLUSION
Based on the foregoing, Defendant’s request to compel Plaintiffs to arbitrate this action is granted. The action is stayed pending the resolution of the arbitration. See CCP 1281.4; 9 U.S.C. §3.