Judge: Nathan Vu, Case: 2022-01261319, Date: 2022-10-10 Tentative Ruling

Please Note: The hearing on this matter has been changed to 8:30 A.M.

Motion to Compel Arbitration

Defendant Nissan North America, Inc.’s motion to compel arbitration is GRANTED.

This action is STAYED pending completion of arbitration.

The Case Management Conference set for 11/03/2022 at 8:30 am in Department N15 is taken OFF CALENDAR.

An Alternative Dispute Resolution (ADR) Review Hearing shall be scheduled for 01/19/2023 at 8:30 am in Department N15.

Defendant Nissan North America, Inc., moves to compel arbitration of Plaintiff Jaqueline Cortes’ claims.

Compelling Arbitration

The right to arbitration depends upon contract, and thus, a motion to compel arbitration is akin to a suit in equity seeking specific performance of that contract. (See Little v. Pullman (2013) 219 Cal.App.4th 558, 565.)

The moving party bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the motion bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. (Ibid.)

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. (Ibid.)

Plaintiff Jacqueline Cortes purchased a vehicle from automobile dealer Surf City Nissan (Seller) pursuant to a retail installment sales contract (RISC). The vehicle was manufactured by Defendant Nissan North America, Inc.

Plaintiff’s Complaint alleges four causes of action against Defendant based on the condition of the vehicle during the warranty period. Nissan asserts that all of Plaintiff’s claims are subject to an arbitration provision contained in the RISC. (See Dizon Decl., Exh. B at p. 1.) However, Defendant concedes that it is not a party to the RISC. (See Mot. at 9:26-28.)

Courts recognize “six theories by which a nonsignatory may [compel or] be bound to arbitrate: ‘(1) incorporation by reference; (2) assumption; (3) agency; (4) veil-piercing or alter ego; (5) estoppel; and (6) third-party beneficiary.’” (Suh v. Superior Ct. (2010) 181 Cal.App.4th 1504, 1513, quoting 2 Oehmke, Commercial Arbitration (3d ed. 2006 update) § 41.57 at pp. 41–195.)

These exceptions to the general rule that one must be a party to invoke or be bound by an arbitration agreement “generally are based on the existence of a relationship between the nonsignatory and the signatory, such as principal and agent or employer and employee, where a sufficient ‘identity of interest’ exists between them.” (Jones v. Jacobson (2011) 195 Cal.App.4th 1, 18 & fn. 9.)

Defendant contends that it may enforce the arbitration agreement under the doctrine of equitable estoppel or as a third-party beneficiary.

Equitable Estoppel

“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. 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.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495–496, citations omitted.)

“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.” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 219, emphasis original; see Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at pp. 495-496.) In determining whether the plaintiff’s claim is founded on or intimately connected with the sales contract, the court examines the facts of the operative complaint. (Goldman v. KPMG, LLP, supra, 173 Cal.App.4th at pp. 229-230.)

Felisilda v. FCA US LLC is on all fours with this case and dictates the result here. Just as in this case, the plaintiffs in Felisilda were buyers of a vehicle who brought claims against the manufacturer under the Song-Beverly Act. (Id. at p. 489.)

In addition, both cases involved the identical arbitration provision that required arbitration of:

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.

(Compare id. at p. 490 to Dizon Decl., Exh. B at p. 7.)

Further, the complaint in Felisilda alleged that there were “express warranties [that] accompanied the sale of the vehicle to [the plaintiffs] by which [the manufacturer] . . . undertook to preserve or maintain the utility or performance of [the plaintiffs’] vehicle or provide compensation if there was a failure in such utility or performance.” (Id. at p. 496.)

Based on the above allegation, the court of appeal ruled that the trial court had properly compelled arbitration because “the sales contract was the source of the warranties at the heart of this case”. (Ibid.) In other words, “the [plaintiffs’] claim against [the manufacturer] directly relates to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract.” (Id. at p. 497.)

The Complaint in this case alleges that:

In connection with the purchase [of the vehicle], Plaintiff received express written warranties in which Defendant undertook to preserve or maintain the utility or performance of Subject Vehicle or to provide compensation if there is a failure in utility or performance for a specified period of time.

(Compl., ¶ 11.) Defendant’s alleged failure to abide by the applicable warranties forms a fundamental part of each of Plaintiff’s claims. (See Compl., ¶¶ 14-15, 19-20, 26, & 30.)

Just as in Felisilda, Plaintiff’s claims directly relate to the violation of “warranties they received as a consequence of the sales contract.” (Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at p. 497.) Thus, the claims are “founded in and inextricably bound up with the obligations imposed by the agreement containing the arbitration clause.” (Goldman v. KPMG, LLP, supra, 173 Cal.App.4th at p. 219.)

The court will compel arbitration pursuant to the doctrine of equitable estoppel and stay the case pending arbitration. In light of this ruling, the court need not consider Defendant’s argument that arbitration should be compelled because Defendant is a third party beneficiary of the RISC.

Defendant shall give notice of this ruling.