Judge: Robert B. Broadbelt, Case: 22STCV14189, Date: 2023-01-24 Tentative Ruling

Case Number: 22STCV14189    Hearing Date: January 24, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                Defendant B&W Automotive, Inc., dba Bravo Chrysler Dodge Jeep Ram of Alhambra, erroneously sued as Bravo Chrysler Dodge Jeep Ram of Alhambra

RESPONDING PARTY:       n/a

(1)   Motion to Compel Arbitration and Stay Action

MOVING PARTY:                Defendant FCA US, LLC

RESPONDING PARTY:       Plaintiff Kermith Navarrete

(2)   Motion to Compel Arbitration and Stay Action

The court considered the moving, opposition, and reply papers filed in connection with the motion to compel arbitration filed by defendant FCA US, LLC.

BACKGROUND

Plaintiff Kermith Navarrete (“Plaintiff”) filed this lemon law action against defendants FCA US, LLC (“FCA”) and Bravo Chrysler Dodge Jeep Ram of Alhambra (“Bravo”) on April 28, 2022, alleging five causes of action for (1) violation of subdivision (d) of Civil Code section 1793.2; (2) violation of subdivision (b) of Civil Code section 1793.2; (3) violation of subdivision (a)(3) of Civil Code section 1793.2; (4) breach of the implied warranty of merchantability; and (5) negligent repair.

Bravo and FCA separately filed motions to compel arbitration and stay action on June 16, 2022, and June 17, 2022, respectively.

EVIDENTIARY OBJECTIONS

The court overrules defendant FCA’s objections to Plaintiff’s request for judicial notice.

REQUEST FOR JUDICIAL NOTICE

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

MOTION TO COMPEL ARBITRATION FILED BY DEFENDANT BRAVO

Defendant Bravo filed a motion to compel arbitration and stay action on June 17, 2022, moving the court for an order compelling Plaintiff to submit all his claims to binding arbitration and staying this action pending completion of arbitration.

On January 10, 2023, Plaintiff filed a Request for Dismissal as to defendant Bravo.  Dismissal was entered on January 12, 2023.

The court therefore takes Bravo’s motion to compel arbitration off calendar.

MOTION TO COMPEL ARBITRATION FILED BY DEFENDANT FCA

Defendant FCA moves 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.)

“‘ “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) 2022 WL 17665377 at *3.)  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 FCA has met its burden of (1) producing a valid agreement to arbitrate the controversy that purports to bear Plaintiff’s signature, and (2) establishing that FCA may, as a nonsignatory to the agreement to arbitrate, compel Plaintiff to arbitration.

FCA 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 dismissed defendant Bravo, on the other hand, for the sale of a new 2018 Jeep Compass.  (Sandhu Decl., Ex. B, RISC, p. 1.)  The RISC includes two provisions that mention arbitration.  First, a box labeled “Agreement to Arbitrate” states that, by signing below, the signatory “agree[s] 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.”  (Sandhu Decl., Ex. B, RISC, p. 2.)  There appears to be a signature following the term “Buyer Signs X,” though the court notes that the copy that has been filed is partially illegible.  (Ibid.) 

Second, there is a larger box entitled “ARBITRATION PROVISION” that details the terms of the agreement.  The Arbitration Provision provides that the parties agree to submit to arbitration “[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)….”  (Sandhu Decl., Ex. B, RISC, p. 4.)  Although there is no signature box beneath this provision, a signature is provided on the reverse side beneath the following statement:  “You acknowledge that you have read both sides of this contract, including the arbitration provision on the reverse side.”  (Sandhu Decl., Ex. B, RISC, p. 3.)

The court therefore finds that FCA has met its burden of producing an agreement to arbitrate purporting to bear Plaintiff’s signature.

The court further finds that FCA has met its burden of establishing that it, as a nonsignatory to the RISC, may enforce the terms of the Arbitration Provision 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.)

The court finds that FCA has met its burden of showing that the language of the Arbitration Provision estops Plaintiff from refusing to arbitrate his claims against FCA.  As set forth above, the Arbitration Provision requires the arbitration of any claim or dispute, whether in contract, tort, statute or otherwise, “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)….”  (Sandhu Decl., Ex. B, RISC, p. 4.)  FCA contends, and the court agrees, that Plaintiff’s allegations “arise[] out of or relate[] to” the condition of the subject vehicle.  (Ibid.)  Plaintiff has alleged that (1) Plaintiff entered into a warranty contract with FCA regarding his 2018 Jeep Compass, which was manufactured and/or distributed by FCA, on September 1, 2018 (i.e., the date the RISC was executed); (2) FCA has been unable to conform the vehicle to the applicable warranties and failed to make available the replacement parts necessary to repair the vehicle; and (3) the vehicle contained one or more latent defects at the time of sale.  (Compl., ¶¶ 10, 26, 32, 38, 42.)  The court finds that these allegations establish that Plaintiff’s claims relate to the condition of the vehicle, and are therefore subject to the Arbitration Provision.  (Felisilda, supra, 53 Cal.App.5th at p. 497 [the plaintiffs’ Song-Beverly claims against the manufacturer related to the condition of the vehicle since the warranties allegedly violated were received as a consequence of the sales contract].)

The court therefore finds that FCA has met its burden of establishing that Plaintiff’s claims against it arise out of (1) the condition of the subject vehicle, and (2) the resulting relationship between Plaintiff on the one hand, and FCA on the other hand, as the manufacturer supplying the warranties to Plaintiff concerning the subject vehicle.  (Felisilda, supra, 53 Cal.App.5th at p. 497 [“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 are estopped from refusing to arbitrate their claim against [the manufacturer-defendant]”].)

The court notes that FCA further argues, in a footnote, that it may also 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.)  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.)  

The court finds that FCA has met its burden of establishing that the Arbitration Provision was made expressly for its benefit as a third-party nonsignatory.  The Arbitration Provision extends to disputes arising out of or relating to “any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract”).  (Sandhu Decl., Ex. B, RISC, p. 4 [emphasis added].)  FCA argues, and the court agrees, that this language demonstrates an intent to include third parties who may have certain obligations under the RISC, including FCA.

The court therefore finds that FCA has met its burden of establishing (1) the existence of a valid arbitration agreement purporting to bear Plaintiff’s signature, and (2) that FCA, as a nonsignatory, may enforce the terms of the agreement to arbitrate against Plaintiff.

The court finds that Plaintiff has not met his burden (1) to challenge the authenticity of the RISC, or (2) to establish that FCA may not enforce the Arbitration Provision as a nonsignatory.

Plaintiff contends that FCA cannot compel him to submit his claims to arbitration because (1) FCA is not a signatory to the RISC; (2) Felisilda is factually and procedurally distinguishable; (3) under federal law, FCA cannot compel Plaintiff to arbitrate his claims; (4) the doctrine of equitable estoppel does not apply; and (5) FCA is not a third-party beneficiary of the RISC.

First, the court notes that Plaintiff does not appear to dispute, or challenge the authenticity of, the signature appearing on the RISC.

Second, the court finds that FCA is not barred from enforcing the Arbitration Provision solely because it is not a signatory to the RISC.  As set forth above, even though the general rule is that one seeking to enforce an arbitration agreement must be a party to the agreement, there are judicially created exceptions that permit a nonsignatory to invoke an arbitration agreement.  (JSM Tuscany, LLC, supra, 193 Cal.App.4th at pp. 1236-1237.)  Thus, although the court acknowledges that the Arbitration Provision includes “you and us” language, FCA is permitted to enforce the terms of the agreement to arbitrate as a nonsignatory, to the extent that FCA makes the requisite showing.

Third, the court finds that Felisilda is controlling despite Plaintiff’s dismissal of defendant Bravo.  The arbitration agreement in Felisilda included substantively similar language to the Arbitration Provision at issue here, requiring the arbitration of 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)….”  (Felisilda, supra, 53 Cal.App.5th at p. 490 [emphasis in original].)  Based on that language, the Felisilda Court concluded that the plaintiffs (1) expressly agreed to arbitrate claims arising out of the conditions of the vehicle, (2) including against third party nonsignatories to the sales contract, and (3) were estopped from refusing to arbitrate their claims against the manufacturer because they directly related to the condition of the vehicle.  (Id. at p. 497.)

The circumstances presented here warrant the same result, because (1) the Arbitration Provision includes substantially the same language mandating arbitration of claims or disputes arising out of or relating to the condition of the vehicle or any “resulting transaction or relationship[,]” “including any such relationship with third parties” who did not sign the RISC, and (2) Plaintiff’s claims, as set forth above, are intertwined with the obligations of the RISC, which provide the source of the warranties that FCA allegedly violated.  (Sandhu Decl., Ex. B, RISC, p. 4 [emphasis added].)  Further, the court finds that Plaintiff’s dismissal of the dealer defendant Bravo does not render the reasoning of Felisilda inapposite.  Although the dealership defendant initially moved to compel arbitration in Felisilda, the court nevertheless concluded that the arbitration agreement “provide[d] for arbitration of disputes that include third parties so long as the dispute pertains to the condition of the vehicle[,]” and therefore found that the plaintiffs’ agreement to the contract “constituted express consent to arbitrate their claims regarding vehicle condition even against third parties.”  (Felisilda, supra, 53 Cal.App.5th at pp. 489, 497, 499.)

Fourth, the court finds that it is not required to follow the federal authority cited by Plaintiff in opposition, because whether FCA can compel Plaintiff to arbitration as a nonsignatory is to be determined by California law.  (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 840 [“whether a contract may be enforced by or against a nonsignatory to the contract is determined by principles of state law”].)

Fifth, the court finds that Plaintiff has not met his burden of establishing that the doctrine of equitable estoppel does not apply.  Plaintiff contends that his claims against FCA are based only on the warranties received directly from FCA, and therefore are not dependent on the sales contract.  However, Plaintiff has alleged that he entered into the warranty contract with FCA on September 1, 2018, which is the date on which the RISC was executed, and that the sale of the vehicle was accompanied by FCA’s implied warranty of merchantability.  (Compl., ¶¶ 10, 40.)  The court therefore finds that the RISC is “the source of the warranties at the heart of this case.”  (Felisilda, supra, 53 Cal.App.5th at p. 497.)

Finally, the court finds that Plaintiff has not met his burden of establishing that FCA is not a third-party beneficiary of the RISC.  As set forth above, the Arbitration Provision includes language concerning third parties that establishes that its purpose was to provide a benefit to third party nonsignatories.  Moreover, even if Plaintiff had presented argument and evidence establishing that FCA could not be considered a third-party beneficiary, the court has already concluded, as set forth above, that FCA has shown that it may enforce the Arbitration Provision against Plaintiff under the doctrine of equitable estoppel.

2.     Conclusion

The court finds that FCA has met its burden to show that FCA may enforce the agreement to arbitrate this controversy pursuant to the terms of the Arbitration Provision, as set forth in the RISC executed by and between Plaintiff and Bravo, under the doctrine of equitable estoppel.  The court therefore grants defendant FCA’s motion to compel arbitration.

The court grants FCA’s request that the court stay this action pending completion of arbitration.

ORDER

The court orders that B&W Automotive, Inc., dba Bravo Chrysler Dodge Jeep Ram of Alhambra, erroneously sued as Bravo Chrysler Dodge Jeep Ram of Alhambra’s motion to compel arbitration and stay action is taken off calendar.

The court grants defendant FCA US LLC’s motion to compel arbitration and stay action.

The court orders (1) plaintiff Kermith Navarrete and defendant FCA US, LLC to arbitrate the claims alleged in plaintiff Kermith Navarrete’s Complaint in this action, and (2) this action is stayed until arbitration is completed.

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 FCA US, LLC to give notice of this ruling.

IT IS SO ORDERED.

DATED:  January 24, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court