Judge: Robert B. Broadbelt, Case: 21STCV34359, Date: 2023-05-22 Tentative Ruling

Case Number: 21STCV34359    Hearing Date: May 22, 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 Walter A. Alvarado

Motion to Compel Arbitration and Stay Proceedings

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

EVIDENTIARY OBJECTIONS

The court overrules plaintiff Walter A. Alvarado’s evidentiary objection to the declaration of Jane M. Chung.

REQUEST FOR JUDICIAL NOTICE

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

The court grants plaintiff Walter A. Alvarado’s request for judicial notice.  (Evid. Code, § 452, subd. (d).)

DISCUSSION

Defendant Nissan North America, Inc. (“Defendant”) moves the court for an order (1) compelling plaintiff Walter A. Alvarado (“Plaintiff”) to submit the claims alleged in his Complaint to binding arbitration, and (2) staying this action 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.)¿ 

First, the court finds that Defendant has met its burden to produce prima facie evidence of a written agreement to arbitrate between Plaintiff and Gardena Nissan, Inc.

Defendant submits the “Retail Installment Sale Contract—Simple Finance Charge (With Arbitration Provision)” (the “RISC”), executed by Plaintiff, on the one hand, and Gardena Nissan, Inc. (“Gardena Nissan”), on the other hand.  (Chung Decl., Ex. 4, RISC.)  The RISC includes two provisions referencing an agreement to arbitrate: (1) a field entitled “Agreement to Arbitrate” on the first page, which states, in relevant part, that “[b]y signing below, you agree that, pursuant to the Arbitration Provision on page 7 of this contract, you or we may elect to resolve any dispute by neutral binding arbitration and not by a court action[,]” and (2) a longer section entitled “Arbitration Provision” on the seventh page.  (Chung Decl., Ex. 4, RISC, pp. 1, 7.)  Plaintiff’s signature appears below the “Agreement to Arbitrate” field.  (Chung Decl., Ex. 4, RISC, p. 1.)

The Arbitration Provision states that the parties agree that “[a]ny 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 be resolved by neutral, binding arbitration.  (Chung Decl., Ex. 4, RISC, p. 7.)

The court therefore finds that Defendant has submitted prima facie evidence of an arbitration agreement between Plaintiff and Gardena Nissan.

Second, the court finds that Defendant has not met its burden of showing that it may enforce the Arbitration Provision pursuant to 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.)¿

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 Provision at issue here.  (Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, 2023 WL 2768484 at *2 [quoting arbitration provision requiring the arbitration of “‘[a]ny claim or dispute . . . which arises out of or relates to . . . [the] purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who did not sign this contract)’”].)  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 similar to the language in this Arbitration Provision.  (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.) 

In reply, Defendant contends that Felisilda is better reasoned and requests the court to follow its reasoning.  The court elects to follow the reasoning set forth in Ford Motor Warranty Cases.

As quoted above, the Arbitration Provision requires the arbitration of “[a]ny claim or dispute . . . which arises out of or relates to [the] 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) . . . .”  (Chung Decl., Ex. 4, RISC, p. 7.)  The court finds that this language shows that Plaintiff and Gardena Nissan agreed to arbitrate “[a]ny claim or dispute . . . between” themselves and any of Gardena Nissan’s “employees, agents, successors or assigns” that arise out of or relate to, inter alia, the purchase or condition of the subject vehicle or any resulting relationship, including those with third parties who did not sign the RISC.  (Ibid.; Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *5.)  Defendant has not presented any evidence showing that (1) it is a signatory to the RISC, or (2) it is an employee, agent, successor or assign of Gardena Nissan.

Moreover, the court finds that Plaintiff’s claims are not “‘intimately founded in and intertwined with’” the RISC.  (Feisilda, supra, 53 Cal.App.5th at p. 495.)

The court acknowledges that Plaintiff (1) alleges that this action “arise[s] out of the warranty obligations of [Defendant] in connection with a vehicle purchased by Plaintiff and for which [Defendant] issued a written warranty[,]” (2) alleges that express warranties accompanied the sale of the vehicle to Plaintiff, and (3) prays for the “rescission of the purchase contract” in addition to other requested relief.  (Compl., ¶¶ 4, 8, 16; Compl., Prayer, ¶ 2.)  However, Plaintiff has not based any of his causes of action on a breach of the RISC.  Instead, Plaintiff alleges that (1) Defendant failed to remedy the defects pursuant to its express warranty and in breach of its obligations under the Song-Beverly Act; (2) the subject vehicle was accompanied by implied warranties, which were breached; and (3) Defendant “failed to tender the subject vehicle back to Plaintiff in conformance with its warranties” within the time required by the Song-Beverly Act.  (Compl., ¶¶ 23-25, 31-34, 48.)  Thus, although Plaintiff has mentioned the RISC in his Complaint and seeks rescission thereof, his claims are based on Defendant’s failure to conform the subject vehicle to its applicable warranties, and are not based on any breach of the RISC.

The court therefore finds that Plaintiff’s causes of action “in no way rely” on the RISC and instead “are based on [Defendant’s] statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty[,]” such that Plaintiff’s causes of action are not “‘intimately founded in and intertwined with’” the RISC.  (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *5; Feisilda, supra, 53 Cal.App.5th at p. 495.)

The court also notes that Defendant argues that the RISC “provides [Plaintiff] standing under the [Song-Beverly] Act” because a plaintiff must buy or lease a new motor vehicle from a manufacturer to bring a claim, and because California law “recognizes the close relationship between warranties and underlying purchase agreements that create them.”  (Mot., p. 9:6-12.)  However, “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.)  Defendant has not cited any language in the RISC showing that there is a relationship between the warranties that Plaintiff alleges has been breached by Defendant in the Complaint and any warranties provided to Plaintiff by Defendant in the RISC.

Third, the court finds that Defendant has not met its burden of showing that it may enforce the Arbitration Provision 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 it is demonstrated by the express language of the Arbitration Provision, since it provides for the arbitration of any claim or dispute arising out of or relating to “any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract)” and thus was meant to benefit third-party signatories like Defendant.  (Chung Decl., Ex. 4, RISC, p. 7 [emphasis added].)  However, this language “concerns what may be arbitrated, not who may arbitrate.”  (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *8.)

Defendant also argues that “[t]he fact that [the RISC] is intended to benefit [Defendant] is further confirmed by its provision of a $3,000 manufacturer’s rebate to facilitate the transaction, which rebate is expressly incorporated in the” RISC.  (Mot., p. 12:26-28.)  The court acknowledges that the RISC does provide for a $3,000 manufacturer’s rebate.  (Chung Decl., Ex. 4, RISC, p. 2.)  However, Defendant does not provide sufficient argument explaining how this rebate shows that “a motivating purpose of the contracting parties was to provide a benefit to” Defendant.  (Ford Motor Warranty Cases, supra, 2023 WL 2768484 at *6.)  Moreover, “[a] manufacturer’s rebate to the consumer does not, without more, make the manufacturer a third party beneficiary of the retail sale and financing contract between the dealer and purchaser, nor does it give the manufacturer a right to enforce the arbitration clause.”  (Id. at *8.)

The court therefore finds that Defendant has not met its burden to show that (1) a motivating purpose of Plaintiff and Gardena Nissan was to provide a benefit to Defendant, and (2) permitting Defendant to enforce the Arbitration Provision in the RISC is consistent with the objectives of the RISC and the reasonable expectations of the contracting parties.

Thus, the court finds that Defendant has not met its burden of showing that it may enforce the Arbitration Provision against Plaintiff either (1) pursuant to the doctrine of equitable estoppel, or (2) as a third-party beneficiary.

The court notes that Plaintiff has argued, in his opposition, that Defendant waived any right to compel arbitration by engaging in conduct inconsistent with that right.  The court does not reach this argument in light of the court’s finding that Defendant has not shown that it may enforce the Arbitration Provision.

The court therefore denies Defendant’s motion.

ORDER

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

The court orders plaintiff Walter A. Alvarado to give notice of this ruling.

IT IS SO ORDERED.

DATED:  May 22, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court