Judge: Randy Rhodes, Case: 22CHCV01007, Date: 2023-03-14 Tentative Ruling
Case Number: 22CHCV01007 Hearing Date: March 14, 2023 Dept: F51
Dept. F-51
Date: 3/14/23
Case #22CHCV01007
MOTION TO COMPEL ARBITRATION
Motion filed: 1/4/23
MOVING PARTY: Defendants Mercedes-Benz USA, LLC, and
Mercedes-Benz of Valencia (collectively, “Defendants”)
RESPONDING PARTY: Plaintiff Juan Antonio Carrillo
Berumen (“Plaintiff”)
NOTICE: ok
RELIEF REQUESTED: An order: (1) compelling Plaintiff
to submit his claims to arbitration; and (2) staying this action pending the
outcome of the arbitration.
TENTATIVE RULING: The motion is granted.
REQUEST FOR JUDICIAL NOTICE
Defendants’ request for judicial notice is denied.
Plaintiff’s request for judicial notice is granted.
BACKGROUND
Plaintiff brings this action under
the Song-Beverly Consumer Warranty Act (Civil Code § 1790 et seq.) for a used vehicle he purchased on or
around 9/29/20, for which defendant Mercedes-Benz USA, LLC (“MBUSA”) provided
the manufacturing warranty. Defendant Mercedes-Benz of Valencia (“MBV”) is an
authorized repair facility for MBUSA.
Plaintiff alleges that “the Subject
Vehicle was delivered to Plaintiff with serious defects and nonconformities to
warranty and developed other serious defects and nonconformities to warranty including,
but not limited to the engine shutting off while driving, hesitation, airbag
malfunction lights and other serious nonconformities to warranty.” (Compl. ¶ 11.)
On 10/28/22, Plaintiff filed his
complaint against Defendants, alleging the following causes of action: (1) Violation
of Song-Beverly Act – Breach of Express Warranty; (2) Violation of Song-Beverly
Act – Breach of Implied Warranty; (3) Violation of Song-Beverly Act section
1793.2(b); and (4) Negligent Repair.
On 1/4/23 Defendants filed the
instant motion to compel arbitration and request for judicial notice. On 3/1/23,
Plaintiff filed his opposition and request for judicial notice. On 3/7/23,
Defendants filed their reply.
ANALYSIS
Under both the Federal Arbitration
Act 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.)
The party moving to compel
arbitration must establish the existence of a written arbitration agreement
between the parties. (Code of Civ. Proc. § 1281.2.) This is usually done by
presenting a copy of the signed, written agreement to the court. “A petition to
compel arbitration or to stay proceedings pursuant to Code of Civil Procedure
sections 1281.2 and 1281.4 must state, in addition to other required
allegations, the provisions of the written agreement and the paragraph that
provides for arbitration. The provisions must be stated verbatim or a copy must
be physically or electronically attached to the petition and incorporated by
reference.” (Cal. Rules of Court, rule 3.1330.)
The moving party must also
establish the other party’s refusal to arbitrate the controversy. (Code of Civ.
Proc. § 1281.2.) The filing of a lawsuit against the moving party for a
controversy clearly within the scope of the arbitration agreement affirmatively
establishes the other party’s refusal to arbitrate the controversy. (Hyundai
Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 577.)
Here, the issue presented is
whether Defendants, as the manufacturer and authorized repair facility of the
subject vehicle, may invoke the arbitration provision in a contract of sale
entered into between Plaintiff and the dealership, a nonparty to the instant
action.
A.
Retail Installment Sales Contract
Here, the parties do not dispute
the existence of a written agreement containing an arbitration provision. The
subject contract of sale (the “RISC”) itself, a copy of which Defendants have
attached to their moving papers, provides the terms for the financing of the vehicle
purchase, and includes an arbitration clause at the end of the agreement.
The arbitration provision provides
in part: “Any claim or dispute, whether in contract, tort, statute or otherwise
… between you and us or our employees, agents, successors or assigns, which arises
out of or relates to your … 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 the contract) shall … be
resolved by neutral, binding arbitration.” (Ex. 2 to Declaration of Ali
Ameripour [emphasis added].)
Here, Plaintiff alleges, inter
alia, that “These causes of action arise out of the warranty obligations of
MERCEDES-BENZ USA, LLC in connection with a vehicle Purchased by Plaintiff and
for which MERCEDES-BENZ USA, LLC issued a written warranty.” (Compl. ¶ 5.)
Defendants assert that all of
Plaintiff’s claims fall within the scope of the arbitration clause contained in
the RISC, as “Plaintiff’s Claims on their face arise directly out of the
relationship between Plaintiff as purchaser/consumer and MBUSA as the
manufacturer/retailer/warrantor.” (Defs.’ Mot. 14:9–11.) “Similarly,
Plaintiff’s claim for negligent repair against Mercedes-Benz of Valencia not
only arises out of the condition of the vehicle, but also authorized repair
facility relationship that only exists upon execution of the RISC.” (Id. at
14:20–22.)
Based on the foregoing, the Court
finds that Defendants have met their initial burden to establish the existence
of a written agreement that provides for the arbitration of Plaintiff’s asserted
claims.
B.
Enforceability
“The party seeking to compel
arbitration has the burden of showing the existence of a valid agreement, while
the opposing party has the burden of proof with respect to any defense to
enforcement.” (Woodside Homes of Cal., Inc. v. Superior Court (2003) 107
Cal.App.4th 723, 728.)
As a preliminary matter, Plaintiff
attacks the enforceability of the RISC based on a clause giving the seller the
unilateral ability to cancel the sale, as well as a warranty disclaimer clause.
However, as Defendants observe, the provision giving the seller the right to
cancel the agreement is premised on the financing for the vehicle’s purchase. (Ex.
2 to Ameripour Decl. “If Seller is unable to assign the contract to any one of
the financial institutions with whom Seller regularly does business under an
assignment acceptable to seller, Seller may cancel the contract.”) To the
extent that Plaintiff purports to argue that this provision renders the
agreement unconscionable, he has not met his burden of showing both procedural
and substantive unconscionability. (Crippen v. Central Valley RV Outlet.
Inc. (2004) 124 Cal.App.4th 1159, 1165).
At a minimum, every vehicle sale
comes with an implied warranty of merchantability barring a disclaimer. (Civ.
Code § 1792.) The warranty disclaimer cited by Plaintiff is likewise
inapplicable here, as it explicitly reads, “if you do not get a written
warranty … the Seller makes no warranties, express or implied, on the
vehicle, and there will be no implied warranties of merchantability or of fitness
for a particular purpose.” (Id. at ¶ 4 [emphasis added].) Here, Plaintiff himself
alleged that MBUSA “issued a written warranty” in connection with his purchase
of the subject vehicle. (Compl. ¶
5.) Accordingly, the disclaimer provision cited to by Plaintiff is
inapplicable.
Based on the foregoing, the Court
finds that Plaintiff has not met his responsive burden to show a defense to
enforcement of the RISC and the arbitration agreement therein.
C.
Non-signatory Standing
Here, the agreement is executed solely
between Plaintiffs and nonparty Keyes European in Van Nuys, CA. Arbitration
agreements may generally only be compelled by parties to the agreement. (Code
of Civ. Proc. § 1281.2.) Here, Defendants argue that they may nevertheless enforce
the agreement to arbitrate as third party beneficiaries, as well as through
equitable estoppel. (Defs.’ Mot. 5:20–21.)
Third-Party Beneficiary
“A contract, made expressly for the
benefit of a third person, may be enforced by him at any time before the
parties thereto rescind it.” (Civ. Code §
1559.) “Third parties may enforce a contract with an arbitration provision … where
they are intended third party beneficiaries or are assigned rights under the
contract.” (Cohen v TNP 2008 Participating Notes Program, LLC (2019) 31
Cal.App.5th 840, 856.)
Here, Defendants argue that the
RISC explicitly provides for third-party beneficiaries by its terms, and “requires
Plaintiff to arbitrate the claims against non-signatories such as Defendants,
if Plaintiff asserts a claim that ‘arises out of or relates’ to Plaintiff’s ‘purchase
or condition of this vehicle’ or ‘any resulting transaction or relationship (including
any such relationship with third parties who do not sign this contract).’”
(Defs.’ Mot. 6:5–9, quoting Ex. 2 to Ameripour Decl. [emphasis added].)
Defendants argue that they are
third-party beneficiaries to the RISC because Plaintiff’s claims against them
as third parties to the agreement “explicitly arise out of and relate to the
condition of the Vehicle and the ‘resulting’ warranty relationship that arose
out the execution of the RISC.” (Defs.’ Mot. 6:12–14.) “MBUSA is an intended
third-party beneficiary of the arbitration provision because it falls within
the class of persons or entities for whom the arbitration provision was
intended.” (Defs.’ Reply, 7:26–28.)
Defendants observe, and the Court
takes note, that Plaintiff does not address the issue of third-party
beneficiary standing in his opposition papers. Therefore, the Court finds that
Defendants have sufficiently asserted that they are intended third-party
beneficiaries to the RISC, based on Plaintiff’s substantive claims against them
in the instant action.
Equitable Estoppel
The doctrine of equitable estoppel
allows for a non-signatory party to compel arbitration “when the causes of
action against the non-signatory are ‘intimately founded in and intertwined’
with the underlying contract obligations.” (Felisilda v. FCA US LLC¿(2020)
53 Cal.App.5th 486, 495–496; JSM Tuscany, LLC v. Superior Court¿(2011)
193 Cal.App.4th 1222, 1237; Goldman¿v. KPMG, LLP¿(2009) 173 Cal.App.4th
209, 217–218; Crowley Maritime Corp. v. Boston Old Colony Ins. Co.¿(2008)
158 Cal.App.4th 1061, 1070 [Under equitable estoppel, a party cannot avoid
participation in arbitration, where the party received “a¿direct¿benefit
under¿the contract containing an arbitration clause…”]; Boucher¿v. Alliance
Title Co, Inc.¿(2005) 127 Cal.App.4th 262, 271.)
Here, Defendants argue that
equitable estoppel applies because “Plaintiff’s Claims are necessarily based on
the same facts and are inherently inseparable from the ‘underlying contract
obligations,’ as Plaintiff’s Claims all arise out of the condition or sale of
the Vehicle, which the arbitration provision in the RISC provides must be
arbitrated.” (Defs.’ Mot. 8:13–16.) Moreover, the arbitration provision in the
instant action is identical to that in Felisilda. (Defs.’ Mot.,
9:19–22.) The Felisilda court concluded that the plaintiffs’ agreement
to a sales contract between themselves and a nonparty dealership constituted
express consent to arbitrate their claims regarding the vehicle condition, even
against third parties, as the agreement unambiguously stated included ‘an
express extension of arbitration to claims involving third parties that relate
to the vehicle's condition.’” (53 Cal.App.5th at 498.)
Plaintiff, in opposition, seeks to
distinguish Felisilda and the number of cases enforcing an arbitration
clause by a third party based on the lack of any established third-party
beneficiary. Plaintiff contends that in Felisilda, the signatory
dealership moved to compel the arbitration, whereas here, the non-signatories
are invoking the arbitration agreement. (Pl.’s Opp. 8:18–27.) However, as
Defendants note, the Felisilda court’s scope of review did not concern
the involvement of the dealership, only “the question of whether a non-signatory
to the agreement has a right to compel arbitration under that agreement.”
(Defs.’ Reply, 5:18–19.)
Plaintiff argues that the Court
should instead apply the Ninth Circuit’s finding in Ngo v. BMW of North
America, LLC¿(9th Cir. 2022) 23 F.4th 942. The Ngo case involved BMW
of North America seeking to compel arbitration over a dispute regarding the
financing agreement, and the Ninth Circuit found BMW of North America lacked
any basis to compel arbitration as a third-party beneficiary, due to the
failure to establish any third party beneficiary status. (Ngo, 23 F.4th
at 948.)
However, unlike Ngo, the
subject action involves both an equitable estoppel basis to compel arbitration as
well as a claim against the warranties provided by MBUSA as the manufacturer of
the vehicle. The Ngo court itself in fact distinguished claims between a
credit financing agreement and warranty claims in finding the distinction
between the claims. (Id. at 948–950.)
Here, Plaintiff’s complaint seeks
relief under express and implied warranties offered and required by the
manufacturer of the vehicle. (Compl. ¶
5 “These causes of action arise out of the warranty obligations of
MERCEDES-BENZ USA, LLC in connection with a vehicle Purchased by Plaintiff and
for which MERCEDES-BENZ USA, LLC issued a written warranty.”) No other parties are
alleged as responsible for adherence to the warranty. The claims against
Defendants are therefore clearly “intertwined” with the terms of the contract
regarding claims under the contract, statute and/or tort.
The Court finds that Plaintiff is equitably
estopped from seeking to enforce the warranties owed by the manufacturer, while
also denying the existence of contractual rights connected via the contract of
sale, thereby allowing acquisition of the vehicle and conveyance of warranty
rights. The Court therefore rejects the extensive arguments to apply Ngo
on grounds that equitable estoppel compels arbitration of the warranty claims. Accordingly,
Plaintiff is ordered to arbitrate his claims against Defendants in compliance
with the terms of the RISC.
D.
Stay of Proceedings
California Code of Civil Procedure
section 1281.4 states that the court shall stay the action or proceeding if the
court has ordered arbitration. (Code Civ. Proc. § 1281.4.) Here, as the Court
grants Defendants’ motion to compel arbitration, the case is therefore stayed
pending completion of the arbitration. The court will set an OSC re:
Status of Arbitration and Stay at the time of the hearing.
CONCLUSION
The motion is granted.