Judge: Robert B. Broadbelt, Case: 22STCV14446, Date: 2023-10-16 Tentative Ruling

Case Number: 22STCV14446    Hearing Date: October 16, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTIES:             Defendants Nissan North America, Inc. and Wish Automotive III, Inc., d/b/a Nissan of Alhambra

RESPONDING PARTY:       Plaintiff Joaquin Alejandro Velazquez f/k/a Shawn Swingler

Motion to Compel Arbitration and Stay Proceedings

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

REQUEST FOR JUDICIAL NOTICE

The court grants defendants Nissan North America, Inc. and Wish Automotive III, Inc., d/b/a Nissan of Alhambra’s requests for judicial notice.  (Evid. Code, § 452, subd. (d).)

The court grants plaintiff Joaquin Alejandro Velazquez’s request for judicial notice as to Exhibit A.  (Evid. Code, § 452, subd. (d).) 

The court denies plaintiff Joaquin Alejandro Velazquez’s request for judicial notice as to Exhibit B because it is not relevant to a material issue presented by this motion.  (Malek Media Group LLC v. AXQG Corp. (2020) 58 Cal.App.5th 817, 825 [“Any matter to be judicially noticed must be relevant to a material issue”].)

DISCUSSION

Defendants Nissan North America, Inc. (“Nissan”) and Wish Automotive III, Inc., d/b/a Nissan of Alhambra (“Wish”) (collectively, “Defendants”) move the court for an order (1) compelling plaintiff Joaquin Alejandro Velazquez (“Plaintiff”) to submit all of the claims alleged in their 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.[1]¿ (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 step requires the moving party to establish, with admissible evidence, a valid arbitration agreement between the parties.¿ (Ibid.)¿¿¿ 

First, the court finds that Defendants have met their burden of producing prima facie evidence of a written agreement to arbitrate between Plaintiff, on the one hand, and Nissan of Torrance, on the other hand.

Defendants have submitted the “Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision)” (the “RISC”), entered into by and between Plaintiff, as the buyer, and Nissan of Torrance, as the seller.  (Richardson Decl., Ex. 1, RISC, p. 1.)  On the first page of the RISC, it states that, by signing the field labeled “Agreement to Arbitrate,” the signee agrees that, pursuant to the arbitration provision on the fifth page of the contract, the signee or the seller may elect to resolve any dispute by binding, neutral arbitration.[2]  (Ibid.)  This field purports to bear Plaintiff’s signature.  (Ibid.)

The Arbitration Provision on the fifth page of the RISC states, in relevant part, that the parties agree to arbitrate “[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) . . . .”  (Richardson Decl., Ex. 1, RISC, p. 5, Arbitration Provision.)

The court therefore finds that Defendants have produced evidence of a written agreement to arbitrate between Plaintiff and Nissan of Torrance.

Second, the court finds that Defendants have not met their burden to show that they may enforce the Arbitration Provision against Plaintiff 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 pertinent exception is based on 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 application of this doctrine as to third party nonsignatories has been addressed in several recent cases.  In Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, 1330, review granted July 19, 2023, S279969, the Court of Appeal evaluated an arbitration provision that includes language substantially identical to the language in the Arbitration Provision at issue here.¿ (Ford Motor Warranty Cases, supra, 89 Cal.App.4th at p. 1330, rev. granted [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.¿ (Id. at p. 1334; 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].)¿¿¿

Similarly, in Montemayor v. Ford Motor Co. (2023) 92 Cal.App.5th 958, 961, review granted September 20, 2023, S281237, the Court of Appeal expressly disagreed with Felisilda and concluded that the manufacturer-defendant could not enforce the arbitration provision in the subject sales contract since the plaintiffs’ claims were “founded on [the manufacturer’s] express warranty for the vehicle, not any obligation imposed on [the manufacturer] by the sales contract,” such that the plaintiffs’ claims were “not inextricably intertwined with any obligations under the sales contract.”¿ Further, in Kielar v. Superior Court (2023) 94 Cal.App.5th 614, 620-621, another court disagreed with Felisilda’s conclusion that the sales contract was the source of the warranties at the heart of that case and held that equitable estoppel did not permit the manufacturer-defendant to compel arbitration of the plaintiff’s claims for violations of the Song-Beverly Act and fraudulent inducement.  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 finds that the reasoning set forth in Ford Motor Warranty Cases and Kielar is persuasive and elects to follow the analysis set forth in those opinions rather than Felisilda.

As set forth above, the Arbitration Provision at issue here provides for the arbitration of any claim or dispute “between [Plaintiff] and [Nissan of Torrance] or [Nissan of Torrance’s] employees, agents, successors or assigns, 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)” at Plaintiff or Nissan of Torrance’s election.  (Richardson Decl., Ex. 1, RISC, p. 5, Arbitration Provision.)  The court finds that this language shows that Plaintiff and Nissan of Torrance agreed to arbitrate any claim or dispute between themselves and Nissan of Torrance’s employees, agents, successors, or assigns, relating to the purchase or condition of the subject vehicle or any resulting transaction or relationship.  (Ibid.; Kielar, supra, 94 Cal.App.5th at p. 621 [the language in the arbitration clause “referring to nonsignatory third parties was a “delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate” ’ and does not bind the purchaser ‘ “to arbitrate with the universe of unnamed third parties” ’”].)  Defendants have neither argued nor presented evidence showing that they are the employees, agents, successors, or assigns of Nissan of Torrance.

The court further finds that Plaintiff’s claims are not “intimately founded in and intertwined with” the underlying RISC obligations.  (Felisilda, supra, 53 Cal.App.5th at p. 495 [internal quotations omitted].)

The court recognizes, as Defendants note, that Plaintiff requests “rescission of the purchase contract” in their prayer.  (Compl., p. 24, Prayer, ¶ 2.)  However, none of Plaintiff’s five causes of action alleges a breach of the RISC.  Instead, the Complaint alleges that (1) Nissan was unable to conform the subject vehicle to its applicable warranties and therefore breached its obligations under the Song-Beverly Act; (2) the subject vehicle was accompanied by an implied warranty pursuant to Civil Code section 1792, but it was not fit for its ordinary purpose; (3) Nissan made false representations regarding the emergency braking system, or concealed or failed to disclose facts relating to the emergency braking system, in order to deceive Plaintiff or induce Plaintiff to rely on those representations to their detriment; and (4) Wish breached its duty to Plaintiff by failing to properly store and repair the subject vehicle in accordance with industry standards.  (FAC ¶¶ 73, 75, 86, 88, 106-111, 117, 117-118, 123-124, 126-128, 135.) 

Thus, the court finds that Plaintiff’s claims against Defendants do not rely on the RISC and instead (1) are founded on Nissan’s statutory obligations, and (2) are founded on Wish’s duty to use ordinary care and skill in repairing the subject vehicle.  (Kielar, supra, 94 Cal.App.5th at p. 621 [agreeing with Ford Motor Warranty Cases, rev. granted, and Montemayor, rev. granted, that a manufacturer’s express or implied warranties that accompany a vehicle at the time of sale do not constitute obligations arising from the sale contract]; Ford Motor Warranty Cases, supra, 89 Cal.App.5th at p. 1335, rev. granted [“plaintiffs’ claims are based on [the manufacturer defendant’s] statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty”]; Cal. Rules of Ct., rule 8.1115, subd. (e)(1) [“Pending review and filing of the Supreme Court’s opinion . . ., a published opinion of a Court of Appeal in the matter has no binding or precedential effect, and may be cited for potentially persuasive value only”].)  The court therefore finds that Plaintiff’s claims are not “intimately founded and intertwined with” the obligations of the RISC.  (Felisilda, supra, 53 Cal.App.5th at p. 495 [internal quotations omitted].)

Third, the court finds that Nissan has not met its burden to show that it may enforce the Arbitration Provision as a third-party beneficiary.[3]

“‘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 determine whether a party is a third-party beneficiary of a contract, courts “examine[] the express provisions of the contract at issue, as well as all of the relevant circumstances under which the contract was agreed to, in order to determine not only (1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.”  (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.)

Nissan argues that the intent to benefit Nissan “is evident from the plain language of the arbitration provision[,]” since it extends to resulting relationships “with third parties who do not sign this contract[.]”  (Mot., p. 12:18-21; Richardson Decl., Ex. 1, RISC, p. 5, Arbitration Provision.)  The court disagrees.  As set forth above, this language delineates the subject matter of the claims that purchasers and dealers (i.e., Plaintiff and Nissan of Torrance) agreed to arbitrate and do not reflect any intent “to arbitrate with the universe of unnamed third parties.”  (Kielar, supra, 94 Cal.App.5th at p. 621 [internal quotations omitted]; Ford Motor Warranty Cases, supra, 89 Cal.App.5th at p. 1334-1335, rev. granted.)  Nissan has not presented any evidence or other argument establishing the intent to provide a benefit to it.

Thus, the court finds that Nissan has not met its burden to show that (1) a motivating purpose of the contracting parties (Plaintiff and Nissan of Torrance), in entering into the RISC, was to provide a benefit to Nissan, and (2) permitting Nissan to enforce the Arbitration Provision is consistent with the objectives of the RISC and the reasonable expectations of Plaintiff and Nissan of Torrance, as the contracting parties.  (Goonewardene, supra, 6 Cal.5th at p. 830.)

2.     Unconscionability

In opposition, Plaintiff argues that the Arbitration Provision is unconscionable.  In light of the court’s conclusion that Defendants have not met their burden to show that they can enforce the Arbitration Provision against Plaintiff, the court does not reach the merits of this argument.

3.     Conclusion

The court finds that (1) Defendants have not met their burden to show that they may enforce the Arbitration Provision pursuant to the doctrine of equitable estoppel, and (2) Nissan has not met its burden to show that it may enforce the Arbitration Provision as a third-party beneficiary.  The court therefore denies Defendants’ motion to compel arbitration and the request that the court stay this action.

ORDER

The court denies defendants Nissan North America, Inc., and Wish Automotive III, d/b/a Nissan of Alhambra’s motion to compel arbitration and stay proceedings.

The court orders plaintiff Joaquin Alejandro Velazquez to give notice of this ruling.

IT IS SO ORDERED.

DATED:  October 16, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court