Judge: Michael P. Linfield, Case: 22STCV10614, Date: 2022-08-23 Tentative Ruling
Case Number: 22STCV10614 Hearing Date: August 23, 2022 Dept: 34
SUBJECT: Defendant FCA US LLC’s Motion to
Compel Arbitration and Stay Action
Moving
Party: Defendant FCA US LLC (“FCA”)
Resp.
Party: Plaintiff Jessica Tenorio Lazo
(“Lazo”)
SUBJECT: Defendant Oremor of Ontario JCDR,
LLC dba Jeep Chrysler Dodge Ram Fiat of Ontario’s Motion to Compel Arbitration
and Stay Action
Moving Party: Defendant Oremor of Ontario JCDR, LLC
dba Jeep Chrysler Dodge Ram Fiat of Ontario (“JCDR of Ontario”)
Resp.
Party: Plaintiff Jessica Tenorio Lazo
(“Lazo”)
Defendant FCA US LLC’s Motion to Compel
Arbitration and Stay Action is DENIED.
Defendant Oremor of Ontario JCDR, LLC dba Jeep
Chrysler Dodge Ram Fiat of Ontario’s Motion to Compel Arbitration and Stay
Action is DENIED.
I.
PRELIMINARY COMMENTS
The
Court is denying the motion for the legal reasons set forth below. However, the
Court cannot struthiously ignore the policy implications that would inure
should our Courts grant BMW NA’s motion. Since there are arbitration provisions
in virtually every lease agreement, upholding Defendant’s motion to compel
arbitration would prevent any Lemon Law case from being heard in our State’s
courts. Upholding such a motion would eviscerate these consumer protection
statutes passed by our Legislature.
II.
BACKGROUND
On March 28, 2022, Plaintiff Jessica Tenorio
Lazo filed a complaint against Defendants Oremor of Ontario JCDR, LLC dba Jeep
Chrysler Dodge Ram Fiat of Ontario, and FCA US LLC alleging the following
causes of action:
1.
Violation
of the Song-Beverly Act—Breach of Express Warranty
2.
Violation
of the Song-Beverly Act—Breach of Implied Warranty
3.
Negligent
Repair
On April 25, 2022, FCA moved the Court for an
order compelling arbitration and staying this action.
On April 25, 2022, JDCR of Ontario moved the
Court for an order compelling arbitration and staying this action.
On July 18, 2022, Lazo opposed both FCA and
JDCR of Ontario’s motions to compel arbitration.
On July 21, 2022, FCA and JDCR of Ontario
replied to Lazo’s joint opposition.
III. ANALYSIS
A.
Legal Standard
California law incorporates many of the basic
policy objectives contained in the Federal Arbitration Act, including a
presumption in favor of arbitrability. (Engalla v. Permanente Medical Group,
Inc. (1997) 15 Cal.4th 951, 971-972.) The petitioner bears the burden of
proving the existence of a valid arbitration agreement by the preponderance of
the evidence, the party opposing the petition then bears the burden of proving
by a preponderance of the evidence any fact necessary to demonstrate that there
should be no enforcement of the agreement, and the trial court sits as a trier
of fact to reach a final determination on the issue. (Rosenthal v. Great
Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) The Court
is empowered by Code of Civil Procedure section 1281.2 to compel parties to
arbitrate disputes pursuant to an agreement to do so.
Code of Civil Procedure section 1281.2 states
that:
“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.
(c) A party to the
arbitration agreement is also a party to a pending court action or special
proceeding with a third party, arising out of the same transaction or series of
related transactions and there is a possibility of conflicting rulings on a
common issue of law or fact. For purposes of this section, a pending court
action or special proceeding includes an action or proceeding initiated by the
party refusing to arbitrate after the petition to compel arbitration has been
filed, but on or before the date of the hearing on the petition. This
subdivision shall not be applicable to an agreement to arbitrate disputes as to
the professional negligence of a health care provider made pursuant to Section
1295.” (CCP § 1281.2.)
The party petitioning to compel arbitration
under written arbitration agreement bears the burden of proving the existence
of a valid arbitration agreement by a preponderance of the evidence, and party
opposing petition must meet the same evidentiary burden to prove any facts
necessary to its defense. The trial court acts as the trier of fact, weighing
all the affidavits, declarations, and other documentary evidence. (CCP §
1281.2; Provencio v. WMA Securities, Inc., 125 Cal.App.4th 1028,
1031.)
B.
Discussion
1.
Nonsignatory
Enforcement of Arbitration Agreements through Equitable Estoppel
As a general rule, only a party to an
arbitration agreement is bound by or may enforce the agreement. (Thomas v.
Westlake (2012) 204 Cal.App.4th 605, 613; CCP § 1281.2.) Nonsignatories of
arbitration agreements may be bound by the agreement under ordinary contract
and agency principles, including 1) incorporation by reference; 2) assumption; 3)
agency; 4) veil-piercing/alter ego; and 5) estoppel. (Comer v. Micor, Inc.
(9th Cir. 2006) 436 F.3d 1098, 1101.) Nonsignatories may also enforce
arbitration agreements as third-party beneficiaries. (Id.) “In the
arbitration context, the doctrine [of estoppel] recognizes that a party may be
estopped from asserting that the lack of his signature on a written contract
precludes enforcement of the contract's arbitration clause when he has
consistently maintained that other provisions of the same contract should be
enforced to benefit him. To allow [a plaintiff] to claim the benefit of the
contract and simultaneously avoid its burdens would both disregard equity and
contravene the purposes underlying enactment of the Arbitration Act.” (Washington
Mut. Finance Group, LLC v. Bailey (5th Cir. 2004) 364 F.3d 260, 268; see
also International Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH
(4th Cir. 2000) 206 F.3d 411, 418.) “Equitable estoppel precludes a party from
claiming the benefits of a contract while simultaneously attempting to avoid
the burdens that contract imposes.” (Kramer v. Toyota Motor Corp. (9th
Cir. 2013) 705 F.3d 1122, 1128, see also Comer, 436 F.3d at 1101.)
“Where a nonsignatory seeks to enforce an
arbitration clause, the doctrine of equitable estoppel applies in two
circumstances: (1) when a signatory must rely on the terms of the written
agreement in asserting its claims against the nonsignatory or the claims are
intimately founded in and intertwined with the underlying contract, and (2) when
the signatory alleges substantially interdependent and concerted misconduct by
the nonsignatory and another signatory and the allegations of interdependent
misconduct [are] founded in or intimately connected with the obligations of the
underlying agreement.” (Kramer, 705 F.3d at 1128–1129 (cleaned up).)
Under the doctrine of equitable estoppel, “as
applied in both federal and California decisional authority, 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.
By relying on contract terms in a claim against a nonsignatory defendant, even
if not exclusively, a plaintiff may be equitably estopped from repudiating the
arbitration clause contained in that agreement. Where the equitable estoppel
doctrine applies, the nonsignatory has a right to enforce the arbitration
agreement. 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. 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. In determining
whether the plaintiffs’ claim is founded on or intimately connected with the
sales contract, we examine the facts of the operative complaint.” (Felisilda
v. FCA US LLC (2020) 53 Cal.App.5th 486, 495–496 (cleaned up).)
Should the Court find that Lazo’s claims
against Defendants FCA and JCDR of Ontario are intimately founded in and intertwined
with the underlying contract, equitable estoppel might apply and the Defendant
nonsignatories might have the right to enforce the arbitration agreement.
2.
The
Arbitration Provision
Lazo executed a “Retail Installment Sale
Contract—Simple Finance Charge (with Arbitration Provision)” (“RISC”) upon her
purchase of a 2017 Chrysler Pacifica, VIN: 2C4RC1EG3HR679466, ("the
Subject Vehicle”) on June 17, 2017. (Complaint, ¶ 15; Sandhu Decl. (Oremor), ¶
3, Ex. B.) The Court finds that Lazo signed this document on the “Buyer Signs”
line next to the printed “X” under the following language:
“Agreement to Arbitrate: By signing below,
you agree that, pursuant to the Arbitration Provision on the reverse side of
this contract, you or we may elect to resolve any dispute by neutral, binding
arbitration and not by court action. See the Arbitration Provision for
additional information, concerning the agreement to arbitrate.” (Sandhu Decl.
(Oremor), ¶ 3, Ex. B, p. 1.)
The Seller-Creditor listed on the RISC who
signed this agreement was West Covina CDJR. Neither of the Defendants in this
case are West Covina CDJR.
The pertinent Arbitration Provision relevant
to the instant motions is the following:
“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 contract) shall, at your
or our election, be resolved by neutral, binding arbitration and not by a court
action.” (Sandhu Decl. (Oremor), ¶ 3, Ex. B, p. 2.)
Lazo argues that “there is no evidence that
any signatories intended to include potential claims against FCA or
Ontario JCDR within the scope of arbitration.” (Opposition, p. 2:23-24,
emphasis in original.) Both FCA and JDCR of Ontario argue that the Felisilda
decision mandates arbitration of Lazo’s claims, given the Arbitration
Provision’s express coverage. (Motion to Compel Arbitration (JDCR of Ontario),
p. 5:11—7:12; Motion to Compel Arbitration (FCA US LLC), p. 5:5—6:25.)
The Court finds
that the facts of Felisilda are distinguishable from the facts of this
current action. The plaintiffs in that case sued both the manufacturer, FCA US
LLC, and the dealership, Elk Grove Dodge, and alleged that FCA US LLC had
breached express warranty accompanying the sale of the vehicle. Here, on the
other hand, Lazo brought this action only against the manufacturer, FCA US LLC,
and the repair company. Plaintiff did not include West Covina CDJR, the selling dealership and party to the
Arbitration Provision, as a named party in this action. Further, the
Arbitration Provision expressly defines claims as those “between you and us or
our employees, agents, successors or assigns.” (Sandhu Decl. (Oremor), ¶
3, Ex. B, p. 2.) Neither the selling
dealership nor one of its “employees, agents, successors, or assigns” is named
in this action or seeks to enforce the arbitration provision. Further, while
the Complaint alleges that a warranty was issued in connection with the vehicle
Plaintiff purchased, the Complaint specifically references the manufacturer’s
warranty, not a warranty derived from or included within the RISC. (See
Complaint, ¶¶ 5, 8.)
Further, the Court
notes that the basis of equitable estoppel – which was relied upon by the Felisilda
court as the basis of its opinion – is not present here. As Felisilda stated,
“ ‘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.’ ” (Felisilda at p. 496,
quoting Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 306,
quoting NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 84.)
But in the case before us, Plaintiffs are not trying to use the arbitration
clause to their advantage against one defendant (or in one forum) but trying to
avoid arbitration against another defendant (or avoid arbitration in another
forum). Colloquially, they do not try to eat their cake and have it too. Hence
there is no policy reason to hold that Plaintiffs are equitably estopped from
preventing AHM from arbitrating.
As stated above, Felisilda
is distinguishable from the current case. If it were not, this Court would
be bound to follow its reasoning since it would be controlling precedent.
However, the Court does note that it finds the reasoning of several cases that
have come to the opposite conclusion of Felisilda to be more convincing,
including Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122 and
Jurosky v. BMW of North America, LLC (S.D. Cal. 2020) 441 F.Supp.3d 963.
IV. CONCLUSION
Defendant FCA US LLC’s Motion to Compel
Arbitration and Stay Action is DENIED.
Defendant Oremor of Ontario JCDR, LLC dba
Jeep Chrysler Dodge Ram Fiat of Ontario’s Motion to Compel Arbitration and Stay
Action is DENIED.