Judge: Robert B. Broadbelt, Case: 21STCV30660, Date: 2023-02-14 Tentative Ruling

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Case Number: 21STCV30660    Hearing Date: February 14, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                Defendant Nissan North America, Inc.

RESPONDING PARTY:       Plaintiff Sofyan Meshhal

Motion to Compel Arbitration and Stay Proceedings

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

EVIDENTIARY OBJECTIONS

On January 31, 2023, plaintiff Sofyan Messhal filed “Plaintiff Sofyan Messhal’s Evidentiary Objection to the Declaration of Ryan Marden in Support of Defendant Nissan North America, Inc.’s Motion to Compel Arbitration and Stay Proceedings.”  However, defendant Nissan North America, Inc. did not file a Declaration of Ryan Marden in Support of Defendant Nissan North America, Inc.’s Motion to Compel Arbitration and Stay Proceedings.  Instead, defendant Nissan North America, Inc. filed a Declaration of Nicholas S. Maugeri II in support of its motion on December 5, 2022.  The court will therefore assume that plaintiff Sofyan Messhal’s reference to “Ryan Marden” is a typographical error and will treat plaintiff’s objection to be directed to the Declaration of Nicholas S. Maugeri II.   

The court sustains plaintiff Sofyan Messhal’s objection no. 1 to the statement that “Attached hereto as EXHIBIT 4 is a true and correct copy of what I am informed and believe is the front side of the sales contract (‘Sales Contract’) Plaintiff entered at the time she purchased the Subject Vehicle.”

REQUEST FOR JUDICIAL NOTICE

The court grants defendant Nissan North America, Inc.’s request for judicial notice, filed on December 5, 2022.  (Evid. Code, § 452, subd. (d).)

DISCUSSION

Plaintiff Sofyan Meshhal (“Plaintiff”) filed this lemon law action against defendant Nissan North America, Inc. (“Defendant”) on August 19, 2021, alleging two causes of action for (1) breach of implied warranty under the Song-Beverly Act, and (2) breach of express warranty under the Song-Beverly Act.

Defendant now moves the court for an order (1) compelling Plaintiff to arbitrate this matter, and (2) staying proceedings pending completion of arbitration.

1.     Existence of 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.)

“‘ “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.)

The court finds that Defendant has met its burden of producing prima facie evidence of a written agreement to arbitrate purporting to bear Plaintiff’s signature.  (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, on the one hand, and Cerritos Nissan on the other hand.  (Maugeri Decl., Ex. 4, RISC, p. 1.)  The RISC includes two provisions that refer to arbitration.  First, 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.”  (Maugeri Decl., Ex. 4, RISC, p. 1.)  There appears to be a signature next to the line “Buyer Signs.”  (Ibid.)

Second, the reverse side of the RISC includes the longer arbitration provision referenced by the first field (the “Arbitration Agreement”).  Defendant has not submitted a copy of the reverse side of the RISC signed by Plaintiff, and instead submits “the standardized form used by independent Nissan dealers that contains the Arbitration Provision referenced on the front side of the Sales Contract.”  (Maugeri Decl., ¶ 8; Maugeri Decl., Ex. 5.)  The Arbitration Agreement states, in relevant part, that the parties agree to submit to arbitration “[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)….”  (Maugeri Decl., Ex. 5, Arbitration Agreement.)  The Arbitration Agreement provides that any arbitration under its terms shall be governed by the FAA and not by any state law concerning arbitration.  (Ibid.)

The court therefore finds that Defendant has met its burden of producing an agreement to arbitrate.

The court further finds that Defendant has met its burden of showing that it, as a nonsignatory to the RISC, may enforce the terms of the Arbitration Agreement (1) under the doctrine of equitable estoppel, and (2) as a third party beneficiary.

“‘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.)

As set forth above, the Arbitration Agreement encompasses claims relating to the “purchase or condition of [the subject] vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract)….”  (Maugeri Decl., Ex. 5, Arbitration Agreement [emphasis added].)  The court finds that this action arises out of the condition of the subject vehicle.  Plaintiff has alleged that (1) the purchase of the vehicle was accompanied by written, express, and implied warranties from Defendant; (2) the vehicle had several defects; and (3) Defendant failed to conform the vehicle to the applicable warranties.  (Compl., ¶¶ 7, 11, 13, 16-17.) 

The court therefore finds that Plaintiff’s claims “arise[] out of or relate[] to…[the] condition of” the subject vehicle and estops Plaintiff from refusing to arbitrate these claims against Defendant, even as a third party nonsignatory.  (Maugeri Decl., Ex. 5, Arbitration Agreement; Felisilda, supra, 53 Cal.App.5th at p. 497.)

Similarly, “‘[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.)¿ In order to invoke the third party exception in this context, the third party must show that the arbitration clause was made expressly for its benefit.¿ (Ibid.)¿¿ 

Defendant points to the express inclusion of nonsignatory parties to contend that the Arbitration Agreement was intended to benefit Defendant.  The court agrees.  The Arbitration Agreement expressly provides for the arbitration of claims relating to the condition of the subject vehicle even as to “third parties who do not sign” the RISC.  (Maugeri Decl., Ex. 5, Arbitration Agreement.)  The court finds that the Arbitration Agreement was “expressly made for [Defendant’s] benefit” and that Defendant may, therefore, enforce its terms.  (Fuentes, supra, 26 Cal.App.5th at p. 551.)

As the opposing party, Plaintiff has the burden of producing evidence to challenge the authenticity of the Arbitration Agreement.  (Gamboa, supra, 72 Cal.App.5th at p. 165.)  The court finds that Plaintiff has not met that burden because Plaintiff has not introduced evidence to challenge (1) the authenticity of the Arbitration Agreement, or (2) Defendant’s ability to enforce its terms, as a nonsignatory, under the doctrine of equitable estoppel or as a third party beneficiary.

First, Plaintiff has not submitted a declaration or other evidence to support any contention that Plaintiff did not sign the RISC, and therefore has not produced evidence to challenge the authenticity of the RISC or the Arbitration Agreement.

Second, the court finds that Felisilda is indistinguishable from the facts presented here.  The court acknowledges that the Felisilda plaintiffs originally included, but later dismissed, the dealership defendant that filed the motion to compel arbitration.  (Felisilda, supra, 53 Cal.App.5th at p. 489.)  However, the Felisilda Court concluded, based on an arbitration agreement containing language encompassing claims arising out of the condition of the vehicle or any resulting relationship, including with nonsignatory third parties, that because 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 claims against the manufacturer defendant.  (Id. at pp. 490 [excerpting arbitration agreement, which applied to “Any 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)”], 497.)  The language at issue before the Felisilda Court is substantially identical to the language included in the Arbitration Agreement at issue here.  The court therefore finds that the reasoning of Felisilda is controlling, regardless of Plaintiff’s decision not to file suit against the signatory dealership.

Third, the court finds that a motivating purpose of the RISC and Arbitration Agreement was for the benefit of Defendant.  As set forth above, the Arbitration Agreement expressly contemplated its application to claims against third parties so long as the claims relate to the condition of the vehicle.  The court finds that the language of the Arbitration Agreement demonstrates that a motivating purpose of the agreement was to benefit third party nonsignatories such as Defendant.

Finally, the court notes that Plaintiff contends that Defendant cannot compel arbitration since it is not a signatory.  (Opp., pp. 8:27-9:2, 10:6-7.)  However, as set forth above, a nonsignatory to an arbitration agreement may still compel arbitration pursuant to various judicially created exceptions.  (JSM Tuscany, LLC, supra, 193 Cal.App.4th at pp. 1236-1237.)

The court therefore finds that Defendant has met its burden of establishing that (1) a valid agreement to arbitrate exists that applies to the claims asserted by Plaintiff in the Complaint, and (2) Defendant can, as a nonsignatory, compel Plaintiff to submit all asserted claims to binding arbitration under the doctrine of equitable estoppel and as a third party beneficiary.

2.     Waiver

Plaintiff contends that Defendant waived its right to arbitrate by acting inconsistently with that right when it engaged in substantial discovery with Plaintiff.

“[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 Defendant waived its right to arbitration, Plaintiff must show (1) Defendant had knowledge of its right to compel arbitration, (2) Defendant acted inconsistently with that right, and (3) Plaintiff suffered prejudice from Defendant’s delay in moving to compel arbitration.  (Ibid.)  The court notes that it, 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.

The court finds that Plaintiff has not presented evidence sufficient to establish that Defendant waived its right to compel arbitration.  The court acknowledges that (1) Plaintiff filed this action on August 19, 2021; (2) Defendant responded to Plaintiff’s written discovery on November 22, 2021; (3) Defendant agreed to the deposition of its person most qualified; and (4) Defendant filed the pending motion to compel arbitration on December 5, 2022.  (Hayes Decl., ¶¶ 3-6.)

However, the court finds that the circumstances do not establish that Defendant had knowledge of its right to compel arbitration and unduly delayed in filing this motion.  Although Plaintiff has presented evidence establishing that Defendant responded to some discovery served on it by Plaintiff, there is no evidence that Defendant was engaged in substantial discovery or was otherwise substantially engaging in the litigation of this action in court, such that the court could find that Defendant had knowledge of its right to compel arbitration and intentionally relinquished or abandoned that right.  (Morgan, supra, 142 S.Ct. at p. 1713 [waiver “is the intentional relinquishment or abandonment of a known right”].)

The court therefore finds that Plaintiff has not shown that Defendant waived its right to compel arbitration.

3.     Unconscionability

Plaintiff contends that the Arbitration Agreement is unconscionable because it strips Plaintiff of statutorily guaranteed rights and remedies available to Plaintiff under the Song-Beverly Act.  (Opp., p. 14:1-7.)

Arbitration agreements are subject to all defenses to enforcement that generally apply to contracts, and state contract law is applied to determine the validity of an arbitration agreement.¿ (Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1170; 9 U.S.C. § 2.)¿ “The burden of proving unconscionability rests upon the party asserting it.”¿ (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126 (Kho).)¿ “‘[U]nconscionability has both a “procedural” and a “substantive” element,’ the former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.”¿ (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114 [citations omitted].)¿ “As a matter of general contract law, California courts require both procedural and substantive unconscionability to invalidate a contract.”¿ (Torrecillas v. Fitness International, LLC (2020) 52 Cal.App.5^th 485, 492 (Torrecillas).)¿ California courts “apply a sliding scale, meaning if one of these elements is present to only a lesser degree, then more evidence of the other element is required to establish overall unconscionability.¿ In other words, if there is little of one, there must be a lot of the other.”¿ (Ibid.)¿ 

The court finds that Plaintiff has not met its burden of establishing that the Arbitration Agreement is both procedurally and substantively unconscionable.

First, Plaintiff has not presented any evidence or argument as to procedural unconscionability.

“Procedural unconscionability pertains to the making of the agreement . . . .”¿ (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.)¿ Procedural unconscionability “‘“focuses on two factors: ‘oppression’ and ‘surprise.’¿ [Citations.]¿ ‘Oppression’ arises from an inequality of bargaining power which results in no real negotiation and ‘an absence of meaningful choice.’ [Citations.]¿ ‘Surprise’ involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.”’”¿ (Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 484 [citations omitted].)¿¿¿ 

Plaintiff has not submitted evidence establishing that (1) there was an inequality of bargaining power that resulted in an absence of meaningful choice when Plaintiff signed the RISC, or (2) the Arbitration Agreement was hidden by a prolix printed form drafted by the moving party.  The court therefore finds that Plaintiff has not submitted evidence sufficient to establish procedural unconscionability.

Second, Plaintiff has not submitted any evidence in support of Plaintiff’s arguments relating to substantive unconscionability.

“‘Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided.¿ [Citations.]¿ A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be “so one-sided as to ‘shock the conscience.’”’”¿ (Carmona, supra, 226 Cal.App.4th at p. 85.)¿ “‘“[T]he paramount consideration in assessing [substantive] unconscionability is mutuality.”’”¿ (Ibid.)

It appears that Plaintiff contends that the Arbitration Agreement is substantively unconscionable because it does not provide Plaintiff with the ability to conduct adequate discovery necessary to vindicate Plaintiff’s claims, and, in particular, does not provide Plaintiff with the ability to issue deposition subpoenas.  (Opp., p. 15:1-10.)  However, Plaintiff does not identify any particular provision in the Arbitration Agreement that restricts Plaintiff’s ability to conduct discovery, and instead generally asserts that the parties must be able to engage in discovery.  Further, as noted by Defendant, under the FAA, an arbitrator “may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case.”  (9 U.S.C. § 7.)

Finally, Plaintiff argues that “Defendant refuses to arbitrate with any provider than the AAA, despite the clear-cut language in the arbitration agreement.”  (Opp., p. 15:12-14.)  Plaintiff presents no argument, and cites no authority, to establish that (1) Defendant’s conduct is improper, since the Arbitration Agreement expressly provides that that the parties may choose the American Arbitration Association or any other organization subject to the drafter’s approval, or (2) this term is substantively unconscionable. 

As set forth above, “California courts require both procedural and substantive unconscionability to invalidate a contract.”  (Torrecillas, supra, 52 Cal.App.5th at p. 492.)  The court finds that Plaintiff has not met its burden of producing evidence to establish the existence of both procedural and substantive unconscionability and therefore finds that Plaintiff has not established that the Arbitration Agreement is unenforceable.

4.     Conclusion

The court finds that (1) Defendant has met its burden of producing evidence of a valid, written agreement to arbitrate; (2) Defendant has met its burden of establishing that it may compel arbitration as a nonsignatory; (3) Plaintiff has not established that Defendant waived its right to arbitrate; and (4) Plaintiff has not established that the Arbitration Agreement is unconscionable and therefore unenforceable.

The court therefore grants Defendant’s motion to compel arbitration.  

The court grants Defendant’s request to stay proceedings pending completion of arbitration.  (9 U.S.C. § 3.) 

ORDER

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

The court orders (1) plaintiff Sofyan Meshhal and defendant Nissan North America, Inc. to arbitrate the claims alleged in plaintiff Sofyan Meshhal’s Complaint in this action, and (2) this action is stayed until arbitration is completed.

The court vacates the trial set for March 22, 2023, and the Final Status Conference set for March 10, 2023.

The court vacates the hearings on the motions to compel further discovery, set for hearing on March 1, 2023.

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 defendant Nissan North America, Inc. to give notice of this ruling.

IT IS SO ORDERED.

DATED:  February 14, 2923

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court