Judge: Monica Bachner, Case: 21STCV45417, Date: 2023-03-06 Tentative Ruling

Case Number: 21STCV45417    Hearing Date: March 6, 2023    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Defendant’s motion to compel arbitration of Plaintiffs’ claims in this action is granted.  The case is stayed as to Defendant pending arbitration.  The matter is set for a status conference regarding arbitration on March 6, 2024, at 8:30 a.m.  The parties are ordered to file a joint status report five court days in advance of the hearing.

Defendant Nissan North America, Inc. (“Nissan”) (“Defendant”) moves for an order compelling arbitration of all claims asserted by Plaintiff Blanca Cabrera (“Cabrera”) (“Plaintiff”) and staying the action pending completion of arbitration pursuant to the Federal Arbitration Act (“FAA”).  (Notice of Motion, pgs. 1-2; 9 U.S.C. §3; C.C.P. §1281.4.)  Defendant moves in the alternative in the event Plaintiff fails to recognize the mandatory stay of proceedings pursuant to C.C.P. §1281.4, for an order staying all proceedings, including all discovery and discovery-related motion practice, until this motion is decided.  (Notice of Motion, pg. 2.)

Requests for Judicial Notice

Defendant’s 11/10/22 request for judicial notice of the Notice of Entry of Dismissal filed by Plaintiffs Dina C. Felisilda and Pastor O. Felisilda on February 11, 2016, in the matter Dina C. Felisilda, et al, v. FCA US LLC, et al., Sacramento Superior Court Case No. 34-2015-00183668, is granted.  (D-RJN, Exh. 2.)

Plaintiff’s 2/21/23 request for judicial notice of Ngo v. BMW of North America, LLC (9th Cir. Jan. 12, 2022) 23 F.4th 942, Morgan v. Sundance, Inc. (U.S. Supreme Court, May 2022) 142 S.Ct. 1708, and Davis v. Shiekh Shoes, LLC (Oct. 31, 2022) 84 Cal.App.5th 956, is granted.  (P-RJN, Exhs. A, B, C.)

Background

On December 14, 2021, Plaintiff filed the instant action for breach of express warranties under the Song Beverly Consumer Warranty Act (“Song-Beverly”), breach of implied warranties under Song-Beverly, and fraudulent inducement- concealment against Defendant in connection with Plaintiff’s November 12, 2019, purchase of a 2019 Nissan Altima (“Subject Vehicle”) from third-party Nissan of Downtown LA.  (Complaint ¶9; Decl. of Polyakov, Exh. 1.)  Defendant filed the instant motion on November 10, 2022.  On February 21, 2023, Plaintiff filed her opposition.  On February 27, 2023, Defendant filed its reply.

Motion to Compel Arbitration

In deciding a motion to compel arbitration, trial courts must first decide whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue of whether the claims are covered within the scope of the agreement.  (See Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.)  “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.  [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.  [Citation] No jury trial is available for a petition to compel arbitration. [Citation]”  (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972; see also Chiron Corp. v. Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130 [“The court’s role under the [FAA] is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue. [Citations]”].)  The party opposing the petition to compel arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.  (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.) 

Accordingly, under both the FAA and California Law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract.  (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) 

A.   Arbitration Agreement

Defendant proved the existence of an arbitration agreement with Plaintiff.  Defendant submitted evidence that on November 12, 2019, Plaintiff signed a Retail Installment Sale Contract (“RISC”) with Nissan of Downtown LA (“Dealer”) that contained a valid and enforceable arbitration clause (“Arbitration Agreement”).  (Decl. of Polyakov ¶2, Exh. 1 at pg. 7.)

The RISC provides that the term “you” refers to the Buyer and that “we” and “us” refer to the Seller-Creditor.  The Sales Contract defines the Buyer as Plaintiff and the Seller-Creditor as Dealer.  (Decl. of Polyakov, Exh. 1 at pg. 1.)  The Arbitration Agreement provides as follows:

EITHER [Plaintiff] OR [Dealer] MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN [Plaintiff and Dealer] DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

. . .

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 [Plaintiff] and [Dealer] or [Dealer’s] employees, agents, successors or assigns, which arises out of or relates to [Plaintiff’s] . . . 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 [Plaintiff’s] or [Dealer’s] election be resolved by neutral, binding arbitration and not by a court action.

. . .

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

(Decl. of Polyakov, Exh. 1 at pg. 7, emphasis added.)

           In addition, at the bottom of the first page of the RISC, Plaintiff signed below the following:

By signing below, [Plaintiff] agree[s] that pursuant to the Arbitration Provision on page 7 of this contract, [Plaintiff] or [Dealer] 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.

(Decl. of Polyakov, Exh. 1 at pg. 1.)

Plaintiff does not deny signing the RISC containing the Arbitration Agreement.  (See Opposition.)  Rather, Plaintiff argues Defendant is not entitled to enforce the arbitration agreement against Plaintiff. 

By its terms, the Arbitration Agreement is governed by the FAA.  Moreover, the Arbitration Agreement affects commerce for purposes of FAA applicability since the RISC involves the purchase and sale of a motor vehicle, which is moved in interstate commerce.  (See Comley v. Giant Inland Empire RV Center, Inc. (C.D. Cal. Aug. 7, 2013) 2013 WL 12131180, at *2 (quoting Allied-Bruce Terminix Companies, Inc., v. Dobson (1995) 513 U.S. 265, 273-274) [“This contract plainly concerned a vehicle, which either itself or through its parts moved in interstate commerce.”].)

Under both California and federal case law, “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.”  (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495, review denied (Nov. 24, 2020).)  “Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.”  (Id. at pg. 496.)  Here, Plaintiffs’ claims for Song-Beverly violations against Defendant are related to the purchase and condition of the subject vehicle, and as such they are intertwined with the RISC containing the arbitration provision Defendant seeks to enforce as a non-signatory.  As in Felisilda, given Plaintiffs’ assertion of Song-Beverly allegations against Defendant and given Plaintiffs’ express agreement to arbitrate claims arising out of the condition of the vehicle, even against third-party non-signatories to the sales contract, Plaintiffs are estopped from refusing to arbitrate their claims against Defendant.  Here, Plaintiffs’ causes of action relate to the condition of the subject vehicle and Plaintiffs entering into the RISC with Nissan of Downtown LA.  The Court finds Defendant has established the existence of a valid arbitration agreement between Plaintiff and Dealer, which is enforceable by Defendant, notwithstanding the fact Nissan of Downtown LA is not a party to this action.

The federal authorities cited by Plaintiffs do not change this conclusion. Felisilda remains binding authority on this court, and the reasoning in Ngo v. BMW N.S. LLC (9th Cir. 2022) 23 F.4th 942, 946, and similar federal authorities does not find support in California decisional authority.  To the extent Ngo distinguishes Felisilda on the basis a non-signatory moved to compel arbitration, such a distinction is not found in California case law.  Indeed, California cases repeatedly discuss equitable estoppel as a means for a non-signatory to “enforce” an arbitration agreement.   (See e.g., Jarboe v. Hanlees Auto Group (2020) 53 Cal.App.5th 539, 549 [when the equitable estoppel doctrine applies “a nonsignatory is allowed to enforce an arbitration clause because the claims against the nonsignatory are dependent on, or inextricably intertwined with, the contractual obligations of the agreement containing the arbitration clause”]; Goldman v. KPMG LLP (2009) 173 Cal.App.4th 209, 229-230.)

Defendant is also entitled to enforce the Arbitration Agreement as a third-party beneficiary to the RISC.  (See Epitech, Inc. v. Kann (2012) 204 Cal.App.4th 1365, 1371; see also Ronay Family Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 836.)  A third party is entitled to enforce a contract where: (1) it benefits 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 reasonable expectations of the parties.  (Goonewardene v. ADP, I LC (2019) 6 Cal.5th 817, 830.) 

Here, the Arbitration Agreement specifically applies to “any claim or dispute . . . between [Plaintiff] and [Dealer] or [Dealer’s] employees, agents, successors, or assigns, which arises out of or relates to . . . [Plaintiff’s] purchase or condition of [the subject] vehicle,] this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract).”  (Decl. of Polyakov, Exh. 1 at pg. 7.)  Defendant submitted no evidence that it is embraced in this language as one of Dealer’s “assigns” or otherwise for the Arbitration Agreement to explicitly apply to claims between Plaintiff and Defendant.  However, Defendant is an intended third-party beneficiary, as the Arbitration Agreement expressly states that it governs claims arising out of “resulting relationships or transactions . . . with third parties who do not sign this contract.”  This language contemplates Defendant’s “resulting relationship,” which is based on the subject vehicle’s purchase and condition as well as alleged agency/warranty relationships between Defendant and non-party Nissan of Downtown LA.  Given the Arbitration Agreement explicitly embraces the types of claims Plaintiff asserts against Defendant by applying to claims resulting from relationships arising from the RISC with third parties who did not sign this contract, permitting such a third-party to enforce the Arbitration Agreement is consistent with the objectives of the contract and the parties’ reasonable expectations.  The Court finds Defendant is entitled to enforce arbitration as a third-party beneficiary to the RISC. 

Based on the foregoing, Defendant proved the existence of a valid Arbitration Agreement between non-party Nissan of Downtown LA and Plaintiff that is enforceable by Defendant. 

B.   Covered Claims

Plaintiff’s claims relate to the condition of the subject vehicle, and the Arbitration Agreement specifically contemplates claims relating to the “condition” of the Subject Vehicle.  In addition, the RISC underlies Plaintiff’s standing to bring the instant action as well as their right to assert a cause of action for breach of express warranties and any claim for remedies.  Based on the foregoing, Defendant met its burden of establishing the Arbitration Agreement covers the causes of action asserted in Plaintiff’s complaint.

C.   Waiver of Right to Arbitrate

The right to arbitrate a dispute can be waived in California courts as a matter of California state procedure. (See C.C.P. §1281.2(a).)  Waiver occurs by the party’s failure to assert the right to arbitrate in a timely fashion.  (Id.; see also Spear v. California State Automobile Association (1992) 2 Cal.4th 1035, 1043; Guess? Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 557.)  “This may happen in a variety of contexts, ranging from situations in which the proponent of arbitration has previously taken steps inconsistent with an intent to invoke arbitration, to instances in which the proponent has unreasonably delayed in undertaking the procedure.”  (Guess?, 79 Cal.App.4th at pg. 557.)  Under California law, the court must also consider any prejudice to the non-moving party.  (Spear, 2 Cal.4th at pg. 1043; St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196, 1203.)  However, when the FAA applies, there is no requirement that the party opposing arbitration suffers prejudice.  (Morgan v. Sundance, Inc. (2022) 142 S. Ct. 1708, 1714.)  No showing of prejudice to the opposing party is required because the FAA's “equal treatment” principle prohibits courts from construing arbitration contracts any differently than other contracts, whether more or less favorably, and prejudice is not an element of common-law waiver.  (Id. at pg. 1713.)

The California Supreme Court has identified six factors that are controlling for the Court’s waiver analysis:

(1) whether a party’s actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.

(St. Agnes Medical Center, 31 Cal.4th at pg. 1196.) 

           Plaintiff’s argument that Defendant waived its right to compel arbitration due to delay based on Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, is unavailing.  The Shiekh Shoes defendant waited one-and-a-half years before moving to compel arbitration, and during that time had actively participated in discovery, acquiesced to the trial schedule, made court appearances, and requested a trial.  (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 967-969.)  The Shiekh Shoes Court held that the “absence of a reasonable explanation for” a delay in demanding arbitration is one “factor” to be considered in determining whether the moving party had waived its right to compel arbitration.  (Id. at pg. 961.)  The Shiekh Shoes Court not only found that the defendant had no reasonable explanation for its delay, but also found that the defendant’s “conduct was inconsistent with its alleged intent to arbitrate.”  (Id. at pg. 969.)  

Here, unlike the defendant in Shiekh Shoes, after Defendant asserted arbitration as an affirmative defense in its answer, neither Plaintiff nor Defendant substantially litigated the instant case: the parties did not engage in motion practice, no depositions took place, parties did not conduct vehicle inspections, Defendant did not propound discovery, and Plaintiff did not propound discovery before Defendant filed the instant motion.  (See Decl. of Polyakov ¶4.)  Defendant’s motion was filed one week after counsel for Defendant substituted in as Defendant’s attorneys of record.  As such, Defendant has not demonstrated undue or unexplained delay in moving to enforce the right to compel arbitration in the instant case and the “litigation machinery” has not been substantially invoked.  (St. Agnes Medical Center, 31 Cal.4th at pg. 1196.)  Accordingly, Defendant has not waived its right to arbitrate the instant case.

D.   Conclusion

           Defendant’s motion to compel arbitration is granted.  The case is stayed pending arbitration. The Court sets a non-appearance case review for March 6, 2024.  The parties are directed to submit a joint statement no later than February 28, 2024, apprising the Court of the status of the arbitration.

Dated:  March _____, 2023

Hon. Monica Bachner

Judge of the Superior Court