Judge: Robert B. Broadbelt, Case: 22STCV17199, Date: 2023-11-06 Tentative Ruling

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Case Number: 22STCV17199    Hearing Date: November 6, 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 Jessica Ramirez

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

The court grants plaintiff Jessica Ramirez’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 Jessica Ramirez (“Plaintiff”) to submit the claims alleged in their Complaint to binding arbitration, and (2) staying proceedings pending completion of arbitration.

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 Defendant has met its burden of producing prima facie evidence of a written agreement to arbitrate between Plaintiff, on the one hand, and Nissan of Bakersfield, on the other hand.

Defendant submits 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 Bakersfield, as the seller.  (Maugeri Decl., Ex. 4, RISC, p. 1.)  The front side of the RISC includes a field entitled “Agreement to Arbitrate,” which (1) states that, by signing below, the signee “agree[s] that, pursuant to the Arbitration Provision on the reverse side of this contract, [the buyer-signee] or [the seller] may elect to resolve any dispute by neutral, binding arbitration and not by a court action[,]” and (2) purports to bear the signature of Plaintiff.  (Id., p. 2.)  The Arbitration Provision on the reverse side 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     . . . 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) . . . .”  (Maugeri Decl., Ex. 5, Arbitration Provision.)

The court therefore finds that Defendant has produced evidence of a written agreement to arbitrate between Plaintiff and Nissan of Bakersfield.

Second, the court finds that Defendant has not met its burden of showing that it 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, review granted October 25, 2023, S281937, 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 Companies is persuasive and elects to follow the analysis set forth in that opinion, and the subsequent opinions that have adopted its reasoning, rather than Felisilda.

As set forth above, the Arbitration Provision provides for the arbitration of any claim or dispute “between [Plaintiff, as the buyer] and [Nissan of Bakersfield, as the seller] and [Nissan of Bakersfield’s] employees, agents, successors or assigns, which arises out of or relates to[,]” inter alia, the purchase or condition of the subject vehicle and any resulting transaction or relationship, including with third parties who did not sign the RISC.  (Maugeri Dec., Ex. 5, Arbitration Provision.)  The court finds that this language shows that Plaintiff and Nissan of Bakersfield agreed to arbitrate any covered claim or dispute, including those relating to “any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract)” between themselves.  (Ibid.; Ford Motor Warranty Cases, supra, 89 Cal.App.5th at p. 1334-1335, rev. granted [the language extending to resulting transactions or contracts is “a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate”] [emphasis in original].)  Defendant has neither argued nor presented evidence showing that it is an employee, agent, successor, or assign of Nissan of Bakersfield. 

The court also 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 notes, as Defendant points out, that Plaintiff has alleged that Defendant issued, and subsequently breached, its warranty obligations in connection with the subject motor vehicle, and that Plaintiff is entitled to replacement, reimbursement, or rescission of the contract under the Song-Beverly Act and Commercial Code.  (Compl., ¶¶ 13-14, 19.)  However, Plaintiff does not allege a breach of the RISC.  Instead, the Complaint alleges that (1) Defendant failed to comply with Civil Code section 1793.2, subdivision (d) because it was unable to conform the vehicle to its conformities and thereafter failed to promptly replace or provide restitution as required by the Song-Beverly Act; (2) Defendant did not comply with its obligations under Civil Code section 1793.2, subdivision (b), by failing to commence repairs within a reasonable time and to conform the vehicle to the applicable warranties; (3) Defendant willfully violated and did not comply with its obligations under Civil Code section 1793.2 by failing to make available to its service and repair facilities sufficient literature to effect repairs during the warranty period; (4) Defendant failed to comply with its obligations under the implied warranty of merchantability; and (5) Defendant fraudulently concealed from Plaintiff that the subject vehicle was defective.  (Compl., ¶¶ 25,  31-32, 36-37, 39-40, 45.) 

Thus, the court finds that Plaintiff’s claims against Defendant do not rely on the RISC and are not based on any express contractual language therein, but instead are based on              (1) Defendant’s statutory obligations under the Song-Beverly Act; (2) Defendant’s alleged breach of the implied warranty of merchantability; and (3) Defendant’s alleged fraudulent concealment.  (Felisilda, supra, 53 Cal.App.5th at p. 495; Ford Motor Warranty Cases, supra, 89 Cal.App.5th at p. 1335, rev. granted [“plaintiffs’ claims [were] based on [the manufacturer-defendant’s] statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty” or other theories for breach of the implied warranty and fraudulent inducement, and “[n]ot one of the plaintiffs sued on any express contractual language in the sale contracts”].)

Third, the court finds that Defendant has not met its burden to show that it may enforce the Arbitration Provision as a third-party beneficiary of the RISC.[2]

“‘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.)  

Defendant contends that the intent to benefit it “is evident from the plain language of the arbitration provision of the” RISC, in that Plaintiff “agreed to arbitrate any claim related to the Sales Contract, including ‘[a]ny claim or dispute . . . which arises out of or relates to . . . any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract[.]’”  (Mot., p. 12:8-11 [emphasis omitted].)  The court disagrees.  As explained above, the quoted provision relating to third parties “concerns what may be arbitrated, not who may arbitrate.”  (Ford Motor Warranty Cases, supra, 89 Cal.App.5th at p. 1338, rev. granted [emphasis in original].)  Thus, the court finds that this language is insufficient to support a finding that either (1) a motivating purpose of Plaintiff and Nissan of Bakersfield, as the contracting parties, was to provide a benefit to Defendant, or (2) permitting Defendant to enforce the Arbitration Provision against Plaintiff is consistent with the objectives of the RISC and the reasonable expectations of Plaintiff and Nissan of Bakersfield.  (Goonewardene, supra, 6 Cal.5th at p. 830.)

Thus, the court finds that Defendant has not met its burden to show that it may enforce the Arbitration Provision against Plaintiff pursuant to the doctrine of equitable estoppel or as a third-party beneficiary of the RISC.  The court therefore denies Defendant’s motion to compel arbitration and stay proceedings.

ORDER

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

The court orders plaintiff Jessica Ramirez to give notice of this ruling.

IT IS SO ORDERED.

DATED:  November 6, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court