Judge: Robert B. Broadbelt, Case: 22STCV31629, Date: 2023-08-18 Tentative Ruling

Case Number: 22STCV31629    Hearing Date: August 18, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                 Defendant Hyundai Motor America  

RESPONDING PARTY:       Unopposed

Motion to Compel Arbitration

The court considered the moving papers filed in connection with this motion.  No opposition papers were filed.

REQUEST FOR JUDICIAL NOTICE

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

DISCUSSION

Defendant Hyundai Motor America (“Defendant”) moves the court for an order (1) compelling plaintiff Leslie Sarabia Osuna (“Plaintiff”) to submit all of the claims alleged in Plaintiff’s 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 of producing prima facie evidence of a written agreement to arbitrate between Plaintiff, on the one hand, and Gilroy IM 2 LLC (“Gilroy”), on the other hand.

Defendant has submitted the “Retail Installment Sale Contract – Simple Finance Charge (With Arbitration Provision)” (the “RISC”), entered into by and between Plaintiff and Gilroy on August 5, 2022.  (Ameripour Decl., Ex. 2, RISC.)  On the first page of the RISC, it states that the signee, by signing below, “agree[s] that, pursuant to the Arbitration Provision on page 5 of this contract, [the signee] or [the seller] may elect to resolve any dispute by neutral, binding arbitration and not by a court action.”  (Ameripour Decl., Ex. 2, RISC, p. 1.)  This portion purports to bear Plaintiff’s electronic 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, any allegation of waiver of rights under 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)   . . . .”  (Ameripour Decl., Ex. 2, RISC, p. 5, Arbitration Provision.)

The court therefore finds that Defendant has produced prima facie evidence of a written agreement to arbitrate between Plaintiff and Gilroy.

Second, the court finds that Defendant has not met its burden to show that it may enforce the Arbitration Provision against Plaintiff 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].)¿ For example, “‘[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.)¿ “[I]n considering third party beneficiary claims, a court should  ‘carefully 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.’”  (Montemayor v. Ford Motor Company (2023) 92 Cal.App.5th 958, 973, quoting Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830 (“Montemayor”).)

Defendant contends that it is a third-party beneficiary of the RISC because the Arbitration Provision extends to “third parties who do not sign this contract” if the claim or dispute arises out of or relates to, inter alia, the purchase or condition of the subject vehicle.  (Ameripour Decl., Ex. 2, RISC, p. 5, Arbitration Provision.) 

The court disagrees.  The court finds that this language does not establish that a motivating purpose of Plaintiff and Gilroy (i.e., the contracting parties) was to provide a benefit to Defendant or that permitting Defendant to enforce the Arbitration Provision is consistent with the objectives of the RISC and the reasonable expectations of Plaintiff and Gilroy.  (Montemayor, supra, 92 Cal.App.5th at p. 973.)  The RISC at issue here “is generic, without any reference to [Defendant], and there is nothing in the contract language that supports an inference [that Defendant] had an interest in the” RISC.  (Ibid.)  Defendant does not point to any contractual language establishing that the parties intended to benefit Defendant specifically. Moreover, the court finds relevant that the Arbitration Provision “identified several categories of non-parties who [are] subject to the arbitration provision (employees, agents, successors, and assigns)[,]” because such inclusion “undermines the argument [that] the language envisioned that disputes arising from third-party relationships would endow unnamed third parties outside of those categories standing to demand arbitration.”  (Id. at p. 974; Ameripour Decl., Ex. 2, RISC, p. 5, Arbitration Provision [providing for arbitration of any claim or dispute “between you and us or our employees, agents, successors or assigns].)  Instead, the language referencing third parties “refers to the subject matter of covered claims, not the scope of who may enforce the arbitration provision.”  (Montemayor, supra, 92 Cal.App.5th at p. 971; Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, 1334-1335, review granted July 19, 2023, S279969; Kielar v. Superior Court of Place County (2023) 2023 WL 5270559 *4 [“we agree with Montemayor and Ford Motor that the parenthetical language in the arbitration provision 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” ’”].)

The court therefore finds that Defendant has not met its burden to show that it is a third-party beneficiary of the RISC.

Third, the court finds that Defendant has not shown that it may enforce the Arbitration Provision pursuant to the doctrine of equitable estoppel.

As set forth above, the general rule is that a nonsignatory to an agreement cannot (1) be compelled to arbitrate, or (2) invoke an arbitration agreement.  (JSM Tuscany, LLC, supra, 193 Cal.App.4th at p. 1236-1237.)  Another exception to this general rule 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.)¿¿¿ 

Defendant argues that it may enforce the arbitration agreement against Plaintiff pursuant to the doctrine of equitable estoppel because Plaintiff’s Song-Beverly Act claims are founded in and intertwined with the obligations in and arising from the RISC.

This issue was addressed in Ford Motor Warranty Cases, in which 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, 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.”  (Montemayor, supra, 92 Cal.App.5th at p. 961.)  Recently, in Kielar v. Superior Court of Placer County, 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.  (Kieler, supra, 2023 WL 5270559 at *1, 3.)  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 Montemayor, Ford Motor Warranty Cases, and Kielar is persuasive and elects to follow the analysis set forth in those opinions.

As set forth above, the Arbitration Provision at issue here provides for the arbitration of any claim or dispute “between [Plaintiff] and [Gilroy] or [Gilroy’s] employees, agents, successors or assigns, 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)” at Plaintiff or Gilroy’s election.  (Ex. 2, RISC, pp. 1 [defining “You” to be “Buyer,” i.e., Plaintiff, and “we” and “us” to be “Seller-Creditor,” i.e., Gilroy], 5, Arbitration Provision.)  The court finds that this language shows that Plaintiff and Gilroy agreed to arbitrate any claim or dispute between themselves and Gilroy’s employees, agents, successors, or assigns relating to the purchase or condition of the subject vehicle.  (Ibid.)  Defendant has neither argued nor presented evidence showing that it is Gilroy’s employee, agent, successor, or assign.

Further, the court disagrees that Plaintiff’s claims (1) “necessarily rel[y] on [the RISC’s] existence” or (2) are “intimately founded in and intertwined with the underlying contract obligations” of the RISC.  (Mot., p. 7:16-19; Felisilda, supra, 53 Cal.App.5th at p. 495 [internal quotations omitted].)

The court acknowledges that Plaintiff has alleged revocation of Plaintiff’s acceptance of the sales contract and that the warranties “accompanied the sale of the vehicle to Plaintiff[.]”  (Compl., ¶¶ 10, 16, 32, 46.)  However, none of Plaintiff’s four causes of action alleges a breach of the RISC.  Instead, the Complaint alleges that (1) Defendant failed to conform Plaintiff’s vehicle to the applicable warranties; (2) Defendant failed to promptly replace the vehicle or make restitution in violation of its obligations under the Song-Beverly Act, to which Plaintiff is entitled; and (3) Plaintiff is entitled to civil penalties because Defendant willfully failed to comply with its obligations under the Song-Beverly Act.  (Compl., ¶¶ 23-24, 38-39, 56, 60.)

Thus, the court finds that Plaintiff’s claims do not rely on the RISC and instead “are founded on [Defendant’s] express warranty for the vehicle” or Defendant’s statutory obligations under the Song-Beverly Act, and therefore are not “intimately founded in and intertwined with” the obligations of the RISC.  (Montemayor, supra, 92 Cal.App.5th at p. 961; Ford Motor Warranty Cases, supra, 89 Cal.App.5th at p. 1335, rev. granted; Felisilda, supra, 53 Cal.App.5th at p. 495 [internal quotations omitted].)

The court therefore finds that Defendant has not met its burden to show that it is entitled to invoke the Arbitration Provision pursuant to the doctrine of equitable estoppel.

2.     Conclusion

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

The court therefore denies Defendant’s motion to compel arbitration and Defendant’s request that the court stay this action.

ORDER

The court denies defendant Hyundai Motor America’s motion to compel arbitration.

The court orders defendant Hyundai Motor America to give notice of this ruling.

IT IS SO ORDERED.

DATED:  August 18, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court