Judge: Robert B. Broadbelt, Case: 21STCV12184, Date: 2022-10-24 Tentative Ruling

Case Number: 21STCV12184    Hearing Date: October 24, 2022    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTIES:             Defendants Ford Motor Company and Santa Monica Ford Lincoln

RESPONDING PARTY:       Plaintiff Curtis Dothard

Motion to Compel Arbitration and Stay Proceedings

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

JUDICIAL NOTICE

The court grants Plaintiff’s request for judicial notice.  (Evid. Code, § 452, subd. (d).)

DISCUSSION

Plaintiff Curtis Dothard (“Plaintiff”) filed this lemon law action against defendants Ford Motor Company (“Ford”) and Santa Monica Ford Lincoln (“Santa Monica Ford”) (collectively, “Defendants”) on March 30, 2021, alleging defects with Plaintiff’s 2015 Ford Fusion vehicle.  Defendants move the court for an order (1) compelling Plaintiff to submit his claims to binding arbitration, and (2) staying this action pending completion of arbitration.

1.     Existence of a Written Agreement to Arbitrate

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.)

A party seeking to compel arbitration bears the burden of proving a written agreement to arbitrate exists.  (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)  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.)

Defendants produce the “Retail Installment Sale Contract—Simple Finance Charge (With Arbitration Provision” (the “RISC”), entered into by and between Plaintiff and nonparty Antelope Valley Mazda (“Antelope”).  (Keithly Decl., Ex. A, RISC, p. 1.)  The RISC contains an arbitration provision, which provides as follows:  “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 employer, agent, successor or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, the 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.”  (Id. at p. 2.)  The arbitration provision further provides that it is to be governed by the FAA.  (Ibid.)

Plaintiff’s signature appears in many locations on the RISC, including a section containing the following language:  “Arbitration Agreement: 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….”[1]  (Keithly Decl., Ex. A, RISC, p. 1.)  In addition, at the bottom of the first page, Plaintiff’s signature appears below a section stating that the signee acknowledged that he had “read both sides of this contract, including the arbitration provision on the reverse side, before signing below.”  (Ibid.)

The court finds that Defendants have met their burden of establishing the existence of a valid written contract between Plaintiff and Antelope.  The court further finds that Defendants have met their burden of establishing that Defendants may invoke the arbitration provision in that contract 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 such 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.)

The court finds that the language in the arbitration provision set forth in the RISC estops Plaintiff from refusing to arbitrate his claims against Defendants.  As set forth above, the arbitration provision provides for arbitration as to “[a]ny claim or dispute…which arises out of or relates to…[the] 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)….”  (Keithly Decl., Ex. A, RISC, p. 2 [emphasis added].)  Here, Plaintiff alleges in his Complaint that (1) in connection with the purchase of his vehicle, Plaintiff received various warranties which defendant Ford breached or failed to comply with (Compl., ¶¶ 10, 12, 22, 27, 34), and (2) defendant Santa Monica Ford failed to properly repair the vehicle (Compl., ¶ 52).  Thus, Plaintiff’s Complaint “arises out of or relates to…[the] condition of [Plaintiff’s] vehicle” and the resulting relationship between (1) Plaintiff and Ford, and (2) Plaintiff and Santa Monica Ford.  (Keithly Decl., Ex. A, RISC, p. 2.) 

The court therefore finds that Defendants have met their burden of establishing that, because Plaintiff agreed to arbitrate his claims relating to the condition of his vehicle and against third parties who did not sign the RISC, Plaintiff cannot refuse to arbitrate his claims against Defendants.  (Felisilda, supra, 53 Cal.App.5th at p. 497.)

The court finds that Plaintiff has not met his burden of establishing that the arbitration provision contained in the RISC is not valid or enforceable.

First, Plaintiff contends that the language in the arbitration provision strictly limits the parties able to invoke arbitration to be only Plaintiff or Antelope, as the clause states that the defined claims “shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.”  (Keithly Decl., Ex. A, RISC, p. 2 [emphasis added].)  The court disagrees with this reading of the RISC, as nonsignatory defendants may still compel a signatory plaintiff to arbitration under certain circumstances (i.e., through the application of equitable estoppel).  (JSM Tuscany, LLC, supra, 193 Cal.App.4th at p. 1238.)

Second, the court finds Plaintiff’s attempts to distinguish Felisilda unpersuasive.  Although the signatory dealer initially moved to compel arbitration before being dismissed by the plaintiffs, the Felisilda Court still concluded that their claims were subject to the arbitration provision, which “provide[d] for arbitration of disputes that include third parties so long as the dispute pertain[ed] to the condition of the vehicle.”  (Felisilda, supra, 53 Cal.App.5th at p. 497.)  Moreover, the arbitration agreement at issue in Felisilda is substantially identical to the one governing the dispute in this action, because both cover claims or disputes 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)….”  (Id. at p. 490; Keithly Decl., Ex. A, RISC, p. 2.)

Third, the court finds that Plaintiff’s reliance on Ford’s Sales and Service Agreement does not bar the application of the equitable estoppel doctrine.  Although contracts between Ford and its dealerships may include provisions stating that dealers shall not be considered agents of Ford, the test for the application of equitable estoppel asks whether the claims asserted by Plaintiff are dependent upon the underlying contractual obligations of the agreement—here, the RISC.  (Law Decl., Ex. 2, Kalis Decl., ¶ 7; JSM Tuscany, LLC, supra, 193 Cal.App.4th at p. 1238.)  As the court has determined above, the claims asserted by Plaintiff are intertwined with the underlying RISC because they arise out of the condition of the vehicle and out of the warranties that Plaintiff alleges accompanied the sale of his vehicle.  (See Compl., ¶ 10.)

Finally, the court finds Plaintiff’s arguments asserting that Defendants are not third-party beneficiaries of the RISC are inapposite, since Defendants do not rely on this theory in their motion.

The court therefore finds that Plaintiff has not met his burden of establishing that a written agreement to arbitrate does not exist and may not be enforced by Defendants.

The court denies Plaintiff’s alternative request to conduct arbitration-related discovery.

2.     Waiver

“A written provision in any…contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction. . . , or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, . . . shall be valid, irrevocable, and enforceable, save upon such ground as exist at law or in equity for the revocation of any contract….”  (9 U.S.C. § 2.)  “Arbitration agreements, accordingly, are subject to all defenses to enforcement that apply to contracts generally.”  (Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1170.)  

Plaintiff contends that Defendants have waived their right to arbitrate by “failing to take any meaningful action towards arbitration” following the filing of their answer on May 20, 2021.  (Opp., p. 3:3-4.)  The court finds that Plaintiff has not met his burden of establishing that Defendants waived their right to compel arbitration.

“[W]aiver of the right to compel arbitration is a rule for arbitration, such that the FAA controls.”  (Sovak v. Chugai Pharm Co. (9th Cir. 2002) 280 F.3d 1266, 1270.)  To prove that Defendants waived their right to arbitration, Plaintiff must show (1) Defendants had knowledge of their right to compel arbitration, (2) Defendants acted inconsistently with that right, and (3) Plaintiff suffered prejudice from their delay in moving to compel arbitration.  (Ibid.)  Plaintiff “bears a ‘heavy burden of proof’ in showing these elements.”  (Ibid.)  Courts, however, may not “condition a waiver of the right to arbitrate on a showing of prejudice[,]” and must instead “focus[] on the actions of the person who held the right” to arbitrate.  (Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708, 1712-1713.)  Thus, the primary inquiry focuses on whether a party acted inconsistently with the right to arbitrate.

Plaintiff argues that, although Defendants asserted arbitration as their primary defense in their May 20, 2021 answer, Defendants (1) did not take meaningful steps to obtain a copy of the RISC until February 7, 2022, and (2) did not file this motion until March 3, 2022, months after their answer was filed, such that their actions can be construed to constitute a wavier of any right to arbitration.  In reply, Defendants argue that they did not waive their right to arbitration, and that they took all appropriate steps to obtain the RISC, on which their motion is based.

The court finds that Plaintiff has not established that Defendants acted inconsistently with their right to arbitrate.  In support of his opposition, Plaintiff submits the declaration of Defendants’ counsel, filed by Defendants in support of their ex parte application for an order staying the action on March 7, 2022.  (Law Decl., Ex. 3, March 7, 2022 Keithly Decl.)  Keithly stated the following: (1) Defendants served their Request for Production of Documents on Plaintiff on June 7, 2021, requesting a copy of the RISC; (2) Plaintiff served objections to the request, and did not produce the RISC; and (3) therefore, on February 7, 2022, Defendants subpoenaed Ford Motor Credit Company in order to produce a copy of the RISC, which was received on February 13, 2022.  (Id., ¶¶ 2-7.)

The court finds that, even though Defendants did not immediately subpoena Ford Motor Credit Company upon receiving Plaintiff’s objections, the facts do not establish that Defendants acted inconsistently with their right to arbitrate.  Instead, Defendants attempted to obtain a copy of the RISC from Plaintiff, and after their efforts were unsuccessful, moved to obtain the RISC from Ford Motor Credit Company.  Once Defendants received the RISC, they filed the pending motion to compel arbitration shortly thereafter, on March 3, 2022.  (See Law Decl., Ex. 3, March 7, 2022 Keithly Decl., ¶ 7 [Defendants received a copy of the RISC on February 13, 2022].)  Moreover, as noted by Plaintiff, Defendants had expressed their intent to compel the claims to arbitration as early as the filing of their answer.  (Answer, p. 2:7-12.)

3.     Conclusion

Because (1) Defendants have met their burden to establish the existence of a valid agreement to arbitrate the claims alleged by Plaintiff in his Complaint, and (2) Plaintiff has not met his burden to establish that Defendants waived their right to arbitration, the court grants defendants Ford Motor Company and Santa Monica Ford Lincoln’s motion to compel arbitration.  (9 U.S.C. § 4.)

ORDER

The court grants defendants Ford Motor Company and Santa Monica Ford Lincoln’s motion to compel arbitration.

The court orders (1) plaintiff Curtis Dothard and defendants Ford Motor Company and Santa Monica Ford Lincoln to arbitrate the claims alleged in Plaintiff’s complaint in this action, and (2) this action is stayed until arbitration is completed.

The court vacates the trial set for August 2, 2023, the final status conference set for July 21, 2023, and all other future hearing dates scheduled in this action.

The court sets an Order to Show Cause re completion of arbitration for hearing on ____________________, 2023, at 11:00 a.m., in Department 53.

The court orders defendants Ford Motor Company and Santa Monica Ford to give notice of this order.

IT IS SO ORDERED.

DATED: October 24, 2022

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court