Judge: Monica Bachner, Case: 22STCV14224, Date: 2022-12-20 Tentative Ruling

Department 71: Attorneys who elect to submit on these published tentative rulings, without making an appearance at the hearing, may so notify the Court by communicating this to the Department's staff at (213) 830-0771 before the set hearing time.  See, e.g., CRC Rule 324(b).   All parties are otherwise encouraged to appear by Court Call for all matters.

Case Number: 22STCV14224    Hearing Date: December 20, 2022    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Defendants’ motion to compel arbitration of Plaintiff’s claims in this action is granted.  The case is stayed pending arbitration. 

The Court sets a non-appearance case review for June 20, 2023 at 8:30 a.m.  The parties are directed to submit a joint statement five court days in advance, apprising the Court of the status of the arbitration.

Defendants Mercedes-Benz US, LLC (“Mercedes-Benz”) and Silver Star A.G. Ltd. (“Silver Star”) (collectively “Defendants”) move for an order compelling arbitration of all claims asserted by Plaintiff Mir Rafiq (“Rafiq”) (“Plaintiff”) and staying the action pending completion of arbitration.  (Notice of Motion, pgs. 1-2; 9 U.S.C. §§1 et seq.; C.C.P. §§1281.2, 1281.4.) 

Requests for Judicial Notice

Defendant Mercedes-Benz’s 7/21/22 request for judicial notice of Plaintiff’s complaint is denied is denied, as there is no need to take judicial notice since the Court can review the records of the case at hand.

Background

On April 28, 2022, Plaintiff filed the instant action for breach of warranty claims under the Song Beverly Consumer Warranty Act (“Song-Beverly”) against Defendant Mercedes-Benz and Negligent Repair against Defendant Silver Star in connection with entering into a warranty contract with Defendant Mercedes-Benz on March 15, 2020, regarding a 2019 Mercedes GLE 63.  (Complaint ¶10.)  Defendant Silver Star filed an answer on July 13, 2022, in which the forty-third affirmative defense is made on the grounds the Plaintiff agreed to arbitrate claims alleged in this action.  Defendant Mercedes-Benz filed the instant motion on July 21, 2022.  Defendant Silver Star filed its joinder to Defendant Mercedes-Benz’s motion on August 12, 2022.  Plaintiff filed his consolidated opposition on December 7, 2022.  Defendants filed their reply on December 13, 2022.

Plaintiff opposes the motion to compel arbitration on the following grounds: (1) Defendant Silver Star is the repairing facility and extending arbitration to Defendant would extend arbitration to Jiffy Lube and McDonalds; (2) the arbitration agreement specifically limits who can invoke it to the Lessee, the Lessor, and the designated successors and assigns; (c) the arbitration agreement is missing the key terms from Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (“Felisilda”) for claims relating to the condition of the vehicle and claims against nonsignatory third parties; (d) Defendant Mercedes-Benz’s but-for analysis of equitable estoppel has been rejected by California appellate authority and the single federal court holding is distinguishable; (e) Defendant MBUSA is not a third-party beneficiary because there is no intent to benefit them in the contract; and (f) if this Court applies Felisilda, it should also apply C.C.P. §1281.2(c) to deny arbitration to prevent inconsistent rulings and promote judicial economy.  (See Opposition.)  

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

Defendants proved the existence of an arbitration agreement with Plaintiff.  Defendants submitted evidence that on or about March 15, 2020, Plaintiff signed a lease (“Lease”) with Keyes European (“Lessor”) that contained a valid and enforceable arbitration clause (“Arbitration Agreement”).  (Decl. of Ameripour, Exh. 2.)

The Lease provides that the term “you” refers to the Lessee and that “we” and “us” refer to the Lessor and, after the lease is assigned, to Daimler Trust, or its successors and assigns.  (Decl. of Ameripour, Exh. 2, pg. 1.)  The Arbitration Agreement provides as follows:

If either [Plaintiff] or [Lessor] choose, any dispute between [Plaintiff and Lessor] will be decided by arbitration and not in court.

If any such dispute is arbitrated, [Plaintiff and Lessor] will give up the right to a trial by a court or a jury trial.

. . .

Any claim or dispute, whether in contract, tort, or otherwise (including any dispute over the interpretation, scope, or validity of this lease, arbitration section, or arbitrability of any issue), between [Plaintiff] and [Lessor] or any of [Lessor’s] employees, agents, successors or assigns, which arises out of or relates to . . . this lease, or any resulting transaction or relationship arising out of this lease shall, at the election of either [Plaintiff] or [Lessor], or [Lessor’s] successors or assigns, be resolved by neutral, binding arbitration and not by a court action. . . .

. . .

. . . Any arbitration under this lease shall be governed by the Federal Arbitration Act (9 USC 1 et seq.) [(“FAA”)](Emphasis added).

(Decl. of Ameripour, Exh. 2, pg. 2.)

          In addition, above the Lessee’s signature line of the Lease, Plaintiff signed below the following:

By signing below, you acknowledge that:

This lease is completely filled out;

You have read this entire lease carefully and agreed to all of its terms, INCLUDING THE IMPORTANT ARBITRATION DISCLOSURES ABOVE;

You have received a completed copy of this lease; and the Lessor may assign all right, title, and interest in this lease, vehicle, and Guaranty to anyone.

(Decl. of Ameripour, Exh. 2, pg. 3.)

Plaintiff does not deny signing the Sales Contract containing the Arbitration Agreement.  (See Opposition.)  Nor does Plaintiff address whether the contract is unconscionable.  Rather, Plaintiff argues Defendants are 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 Lease involves the lease a motor vehicle, which is moved in interstate commerce.  (United States v. Oliver (9th Cir. 1995) 60 F.3d 547, 550; see also Sanchez v. Valencia Holding Co. (2015) 61 Cal.4th 899, 906 [applying FAA to similar automotive sales contract].)

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.)  “Whether the third party is an intended beneficiary or merely an incidental beneficiary involves construction of the intention of the parties, gathered from reading the contract as a whole in light of the circumstances under which it was entered.[Citations.]”  (Cione v. Foresters Equity Services, Inc. (1997) 58 Cal.App.4th 625, 636.)  “It is ‘not necessary that the beneficiary be named or identified as an individual. A third party may enforce a contract where he shows that he is a member of a class of persons for whose benefit it was made.’ [Citations.]”  (Ronay Family Limited Partnership v. Tweed  (2013) 216 Cal. App 4^th 830, 838-39.) 

Here, the Arbitration Agreement specifically applies to “[a]ny claim or dispute, whether in contract, tort, or otherwise (including any dispute over the interpretation, scope, or validity of this lease, arbitration section, or arbitrability of any issue), between [Plaintiff] and [Lessor] or any of [Lessor’s] employees, agents, successors or assigns, which arises out of or relates to . . . this lease, or any resulting transaction or relationship arising out of this lease.”  (Decl. of Ameripour, Exh. 2, pg. 2.)  Defendants submitted no evidence that Defendants are embraced in this language as one of Dealer’s “assigns” or otherwise for the Arbitration Agreement to explicitly apply to claims between Plaintiff and Defendants.  However, Defendants are intended third-party beneficiaries as the Arbitration Agreement’s expressly states that it governs claims arising out of the Lease “or any resulting transaction or relationship arising out of this lease.”  (Decl. of Ameripour, Exh. 2, pg. 2.)  This language contemplates Defendants’ “resulting relationship,” which is based on the subject vehicle’s purchase and condition as well as alleged agency/warranty relationships between Defendants and Lessor.  Given the Arbitration Agreement explicitly embraces the types of claims Plaintiff asserts against Defendants by applying to claims resulting from relationships arising from the Lease 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 Defendants are entitled to enforce arbitration as a third-party beneficiaries to the Lease. 

Defendants are also entitled to enforce the Arbitration Agreement under the doctrine of equitable estoppel.  (Felisilda, 53 Cal.App.5th at pg. 486.) Under California 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, 53 Cal.App.5th at pg. 495.)  “Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.”  (Felisilda, 53 Cal.App.5th at pg. 496.)  While Plaintiff claims the causes of action brought forth in Plaintiff’s Complaint do not allege a violation of the Lease itself, case law is clear that the actual test is on the nature of the claims asserted by the plaintiff against the nonsignatory defendant.  (Boucher v. Alliance Title Co. (2005) 127 Cal. App. 4th 262, 271-272; see Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1717.)

Case law reveals a strong interrelationship between warranties and underlying purchase agreements. “A warranty is a contractual term concerning some aspect of the sale, such as title to the goods, or their quality or quantity.”  (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1200.)  “A warranty is as much one of the elements of sale and as much a part of the contract of sale as any other portion of the contract and is not a mere collateral undertaking.”  (A. A. Baxter Corp. v. Colt Industries, Inc. (1970) 10 Cal.App.3d 144, 153.)  The California Supreme Court has noted that “the Legislature apparently conceived of an express warranty as being part of the purchase of a consumer product.”  (Gavaldon v. DaimlerChrysler Corp. (2004) 32 Cal.4th 1246, 1258; see also Felisilda, 53 Cal.App.5th at 496 [“[T]he sales contract was the source of the warranties at the heart of this case.”].) 

Here, Plaintiff’s claims for Song-Beverly violations against Defendants arises out of or relates to “any resulting transaction or relationship arising out of this lease,” and as such they are intertwined with the Lease containing the arbitration provision Defendants seek to enforce as a nonsignatories.  (Decl. of Ameripour, Exh. 2, pg. 2.)  As in Felisilda, given Plaintiff’s assertion of Song-Beverly allegations against Defendants and given Plaintiff’s express agreement to arbitrate claims arising out of the lease, even against third-party nonsignatories to the lease, Plaintiff is estopped from refusing to arbitrate his claims against Defendants.  Here, Plaintiff’s causes of action relate to resulting transactions and relationships arising out of the lease. The Court finds Defendants have established the existence of a valid arbitration agreement between Plaintiff and Lessor, which is enforceable by Defendants, notwithstanding the fact Lessor is not a named defendant in the instant action and, as such, has not moved to compel arbitration.

The federal authorities cited by Plaintiff 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 nonsignatory 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.)

Based on the foregoing, Defendants proved the existence of a valid Arbitration Agreement between Lessor and Plaintiff that is enforceable by Defendants. 

          Defendants’ motion to compel arbitration is granted.  The case is stayed pending arbitration. The Court sets a non-appearance case review for June 20, 2023 at 8:30 a.m.  The parties are directed to submit a joint statement five court days in advance, apprising the Court of the status of the arbitration.

Dated:  December _____, 2022

Hon. Monica Bachner

Judge of the Superior Court