Judge Robert B. Broadbelt, Case 19STCV18914 2023-04-21 Tentative Ruling

Judge: Robert B. Broadbelt, Case: 19STCV18914, Date: 2023-04-21 Tentative Ruling

Tentative rulings are sometimes, but not always, posted. The purpose of posting a tentative ruling is to to help focus the argument. The posting of a tentative ruling is not an invitation for the filing of additional papers shortly before the hearing.

The court considered the moving, opposition, and reply papers filed in connection with this motion.

The court grants defendant Nissan North America, Inc.’s request for judicial notice. (Evid. Code, § 452, subd. (d).)

The court overrules plaintiffs Yarely Rodriguez and Luis Ramon Silva Chavez’s evidentiary objections.

Defendant Nissan North America, Inc. (“Defendant”) moves the court for an order (1) compelling plaintiffs Yarely Rodriguez and Luis Ramon Silva Chavez[1] (“Plaintiffs”) to submit the claims alleged in their Complaint to binding arbitration, and (2) staying this action pending completion of arbitration.

A written provision in any contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.¿ (9 U.S.C. § 2.)¿ The Federal Arbitration Act (“FAA”) requires courts to direct parties to proceed to arbitration on issues covered by an arbitration agreement upon a finding that the making of the arbitration agreement is not in issue.¿ (9 U.S.C. § 4; Chiron Corp. v. Ortho Diagnostic Sys. (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.”¿ (Chiron Corp., supra, 207 F.3d at p. 1130.)¿ The FAA reflects “both a ‘liberal federal policy favoring arbitration,’ [citation], and the ‘fundamental principle that arbitration is a matter of contract,’ [citation].”¿ (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.)

“‘ “The party seeking to compel arbitration bears the burden of proving the existence of an arbitration agreement, while the party opposing the petition bears the burden of establishing a defense to the agreement’s enforcement.” ’”¿ (Beco v. Fast Auto Loans (2022) 86 Cal.App.5th 292, 302.)¿ The burden of production as to this finding shifts in a three-step process.¿ (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.)¿ First, the moving party bears the burden of producing prima facie evidence of a written agreement to arbitrate, which can be met by attaching a copy of the arbitration agreement purporting to bear the opponent’s signature.¿ (Ibid.)¿ If the moving party meets this burden, the opposing party bears, in the second step, the burden of producing evidence to challenge its authenticity.¿ (Ibid.)¿ If the opposing party produces evidence sufficient to meet this burden, the third and final step requires the moving party to establish, with admissible evidence, a valid arbitration agreement between the parties.¿ (Ibid.)

A. Defendant Has Produced Evidence of an Arbitration Agreement Between Plaintiff Rodriguez and Puente Hills Nissan

The court finds that Defendant has met its burden of producing prima facie evidence of a written agreement to arbitrate between plaintiff Yarely Rodriguez (“Rodriguez”) and Puente Hills Nissan. (Gamboa, supra, 72 Cal.App.5th at p. 165.)

Defendant submits a copy of the “Retail Installment Sale Contract—Simple Finance Charge (With Arbitration Provision)” (the “RISC”), entered into by and between plaintiff Rodriguez, on the one hand, and Puente Hills Nissan, on the other hand. (Rein Decl., Ex. C, p. 1.) The RISC was not signed by either Defendant or plaintiff Luis Ramon Silva Chavez (“Chavez”).

The RISC includes two provisions that refer to arbitration. On the first side of the RISC, a field entitled “Agreement to Arbitrate” states the following: “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 a court action. See the Arbitration Provision for additional information concerning the agreement to arbitrate.” (Ibid.) Plaintiff Rodriguez’s signature appears below this field. (Ibid.) The reverse side of the RISC has a longer provision entitled “Arbitration Provision” (the “Arbitration Agreement”) which states, in relevant part, 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.” (Rein Decl., Ex. D, p. 6.) The Arbitration Agreement also provides that any arbitration under this provision is to be governed by the FAA. (Ibid.)

i. Defendant May Not Enforce the Arbitration Agreement Pursuant to Doctrine of Equitable Estoppel

The court finds that Defendant has not met its burden to show that it may enforce the Arbitration Agreement against plaintiff Rodriguez under the doctrine of equitable estoppel.

“‘Generally speaking, one must be a party to an arbitration agreement to be bound by it or invoke it.’¿ [Citations.]¿ ‘There are exceptions to the general rule that a nonsignatory to an agreement cannot be compelled to arbitrate and cannot invoke an agreement to arbitrate, without being a party to the arbitration agreement.’”¿ (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1236-1237 [internal citations omitted].)¿ One exception is the doctrine of equitable estoppel.¿ (Id. at p. 1237.)¿ “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.”¿ (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495 (“Felisilda”) [internal quotations omitted].)¿ For the doctrine of equitable estoppel to apply, “‘the claims plaintiff asserts against the nonsignatory must be dependent upon, or founded in and inextricably intertwined with, the underlying contractual obligations of the agreement containing the arbitration clause.’”¿ (JSM Tuscany, LLC, supra, 193 Cal.App.4th at p. 1238.)

Defendant contends that Plaintiffs’ claims are founded in and intertwined with the obligations of the underlying RISC, because (1) it provides their standing under the Song-Beverly Act, (2) the express warranty that Plaintiffs allege was breached by Defendant is an additional term of the RISC, and (3) the Court of Appeal’s decision in Felisilda confirms that equitable estoppel applies to arbitration agreements that contain the language included in the Arbitration Agreement that is the subject of this motion.

The Court of Appeal recently addressed, in Ford Motor Warranty Cases, an arbitration provision that includes language substantially identical to the language in the Arbitration Agreement at issue here. (Ford Motor Warranty Cases (2023) 2023 WL 2768484 at *2.) In finding that the manufacturer-defendant could not compel arbitration based on equitable estoppel, the Court of Appeal expressly disagreed with and declined to follow Felisilda, which also addressed language that is present in this Arbitration Agreement. (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *4; Felisilda, supra, 53 Cal.App.5th at p. 490 [quoting provision requiring the arbitration of “[a]ny claim or dispute . . . which arises out of or relates to .... 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)”] [emphasis in original].)

The Ford Motor Warranty Cases Court concluded that (1) the language providing for the arbitration of claims arising out of or relating to any resulting transaction or relationship—“including any such relationship with third parties who do not sign this contract”—does not evidence “consent by the purchaser to arbitrate claims with third party nonsignatories” but instead delineates “the subject matter of claims the purchasers and dealers agreed to arbitrate[,]” and (2) the manufacturer warranty claims were not founded in the sales contracts, but instead were based on the manufacturer’s “statutory obligations” to replace or reimburse consumers if it was unable to conform vehicles to their warranty. (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *5 [emphasis in original].) Thus, the court found that equitable estoppel did not apply. (Id. at *6.) In contrast, the Felisilda Court concluded, based on substantially identical language, that, since the plaintiffs “expressly agreed to arbitrate claims arising out of the condition of the vehicle—even against third party nonsignatories to the sales contract—they [were] estopped from refusing to arbitrate their claim against” the manufacturer-defendant. (Felisilda, supra, 53 Cal.App.5th at p. 497.)

The court elects to follow the reasoning set forth in Ford Motor Warranty Cases and finds it applicable to the evidence and arguments presented here.

As set forth above, the Arbitration Agreement applies to “[a]ny 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 . . . [the] 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) . . . .” (Rein Decl., Ex. D, p. 6 [emphasis added].) The court finds that the language in the Arbitration Agreement demonstrates an agreement between plaintiff Rodriguez and Puente Hills Nissan “to arbitrate disputes ‘between’ themselves” that arise out of the condition of the subject vehicle or any relationship with third parties. (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *5 [emphasis in original].) “The ‘third party’ language in the arbitration clause means that, if a purchaser asserts a claim against the dealer (or its employees, agents, successors or assigns) that relates to one of these third party transactions, the dealer can elect to arbitrate that claim.” (Ibid.)

Thus, the court finds that the language of the Arbitration Agreement does not show that Rodriguez agreed to arbitrate any claims concerning the condition of the subject vehicle against “unnamed third parties” such as Defendant, and instead shows that Rodriguez agreed to arbitrate any claims relating to a resulting third-party transaction with Puente Hills Nissan. (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *5.)

The court further finds that Plaintiffs’ causes of action are not “intimately founded in and intertwined with the underlying [RISC] obligations.” (Felisilda, supra, 53 Cal.App.5th at p. 495 [internal quotations omitted].) Here, Plaintiffs have alleged that (1) Defendant failed to conform the subject vehicle to the express warranties, issue a refund, or issue a replacement vehicle and therefore breached “its obligations under the Song-Beverly Act[,]” and (2) the subject vehicle was not fit for the ordinary purpose for which it was sold and they are therefore entitled to revoke acceptance of the vehicle or receive a replacement or reimbursement pursuant to the Song-Beverly Act. (Compl., ¶¶ 25, 33, 36, 38, 46, 51.) Although Plaintiffs have attached a copy of the RISC to the Complaint, they have not alleged that Defendant violated any provision of the RISC. (Compl., ¶ 7; Compl., Ex. 1.) Plaintiffs have instead based their causes of action against Defendant on its “statutory obligations” under the Song-Beverly Act. (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *5.)

The court notes that Defendant contends that “California law reveals a strong interrelationship between warranties and underlying purchase agreements.” (Mot., p. 15:11-12.) Defendant does not point to any provision in the RISC that includes Defendant’s warranties to Plaintiffs. Instead, the RISC acknowledges that it has no effect on any express warranties provided by the manufacturer. (Rein Decl., Ex. D, p. 4, ¶ 4 [“This provision does not affect any warranties covering the vehicle that the vehicle manufacturer may provide”].) Moreover, “California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract.” (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *5.) Thus, the court finds that the RISC does not confer standing on Plaintiffs to allege these statutory claims since the RISC does not include or incorporate any warranty made by Defendant to Plaintiffs.

The court therefore finds that Defendant cannot rely on the doctrine of equitable estoppel to compel plaintiff Rodriguez to arbitrate the claims alleged in the Complaint.

The court finds that Defendant has not met its burden of showing that it may enforce the Arbitration Agreement against plaintiff Rodriguez as a third-party beneficiary.

“‘A third party beneficiary may enforce a contract expressly made for his benefit.’”¿ (Fuentes v. TMCSF, Inc. (2018) 26 Cal.App.5th 541, 551.)¿ “‘The third party need not be identified by name.¿ It is sufficient if the [third party] claimant belongs to a class of persons for whose benefit it was made.’”¿ (Otay Land Co., LLC v. U.E. Limited, L.P. (2017) 15 Cal.App.5th 806, 855.)¿ Thus, “‘a third party beneficiary of an arbitration agreement may enforce it.’”¿ (Fuentes, supra, 26 Cal.App.5th at p. 552.) “To show the contracting parties intended to benefit it, a third party must show that, under the express terms of the contract at issue and any other relevant circumstances under which the contract was made, (1) ‘the third party would in fact benefit 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 the reasonable expectations of the contracting parties.’” (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *6.)

Defendant contends that the intent to benefit Defendant is demonstrated by the language of the Arbitration Agreement itself, since it expressly extends to third-party nonsignatories such as Defendant by applying to any claim or dispute arising out of or relating to the condition of the subject vehicle or “any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract)….” (Rein Decl., Ex. D, p. 6.) For the same reason, Defendant contends that allowing it to enforce the Arbitration Agreement is consistent with the objectives of the RISC and the reasonable expectations of plaintiff Rodriguez and Puente Hills Nissan.

The court disagrees. This language “concerns what may be arbitrated, not who may arbitrate. . . . The parties’ choice of the subject of the disputes they agree to arbitrate does not evince an intention to benefit nonparties so as to affect who is entitled to compel arbitration.” (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *8.) Defendant has not referred to any other language in the RISC that either expressly identities Defendant or defines a class of persons for whose benefit the RISC was made and to which Defendant belongs. (Otay Land Co., LLC, supra, 15 Cal.App.5th at p. 855.)

The court therefore finds that Defendant has failed to establish that (1) a motivating purpose of the contracting parties (i.e., plaintiff Rodriguez and Puente Hills Nissan) was to benefit Defendant, and (2) permitting Defendant to enforce the Arbitration Agreement is consistent with the objectives of the RISC. (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *6.)

The court finds that Defendant has not met its burden of producing prima facie evidence of a written agreement to arbitrate between any party and plaintiff Chavez. (Gamboa, supra, 72 Cal.App.5th at p. 165.)

The RISC on which Defendant bases this motion was executed by (1) plaintiff Rodriguez and (2) Puente Hills Nissan. Defendant has not provided evidence or authority establishing that it may compel Chavez to arbitration based on this RISC.

Further, even if plaintiff Chavez had signed the RISC, the court has found, for the reasons set forth above, that Defendant has not met its burden to show that it may enforce the Arbitration Agreement therein under the doctrine of equitable estoppel or as a third-party beneficiary.

The court finds that (1) Defendant has not met its burden of showing that it may enforce the Arbitration Agreement against plaintiff Rodriguez either (i) pursuant to the doctrine of equitable estoppel, or (ii) as a third-party beneficiary, and (2) Defendant has not met its burden of showing that a valid agreement to arbitrate exists as to plaintiff Chavez.

The court notes that Plaintiffs have also argued, in opposition, that Defendant has waived any right to arbitrate. The court does not reach the merits of this contention in light of the court’s finding that Defendant may not compel either plaintiff to arbitration.

The court denies defendant Nissan North America, Inc.’s motion to compel arbitration and stay proceedings.

The court orders plaintiffs Yarely Rodriguez and Luis Ramon Silva Chavez to give notice of this ruling.

[1] The court notes that the Complaint identifies the plaintiffs to be Yarely Rodriguez and “Luis Ramon Silva Chavez,” but the opposition identifies the plaintiffs to be Yarely Rodriguez and “Luis Ramon Silva Sanchez.” (Compl., p. 1:11-12; Compl., ¶¶ 1-2; Opp., pp. 1:5, 1:9.) The court has used the names of the plaintiffs identified in the Complaint.

yarely rodriguez , et al.; Plaintiffs, vs. nissan north america, inc. , et al.; Defendants.	Case No.:	19STCV18914

	Hearing Date:	April 21, 2023

	Time:	10:00 a.m.

	[Tentative] Order RE: defendant’s motion to compel arbitration and stay proceedings