Judge: Robert S. Draper, Case: 21STCV47166, Date: 2022-08-17 Tentative Ruling

Case Number: 21STCV47166    Hearing Date: August 17, 2022    Dept: 78

Superior Court of California 

County of Los Angeles 

Department 78 

Defendant Los Angeles-M, Inc’s Motion to Compel Arbitration is GRANTED. All further proceedings are stayed until completion of arbitration.

FACTUAL BACKGROUND   

This is an action for employment discrimination and wrongful termination. The operative First Amended Complaint alleges as follows.

Plaintiff David Cartagena (“Plaintiff”) was employed by Defendant Los Angeles-M (“LAM”) for over half a decade, working at a Mercedes Benz dealership. (FAC. ¶ 10.) Plaintiff’s supervisors, Rahi Moghaddam (“Moghaddam”) and Bryan Radin (“Radin” and together with Moghaddam, “Supervisors”), regularly discriminated against Plaintiff because of his race. (FAC ¶ 12-13.) Plaintiff is Hispanic. (FAC ¶ 13.) Additionally, Plaintiff’s Supervisors required Plaintiff to fraudulently certify vehicles for the dealership’s “certified-pre-owned” program. (FAC ¶ 29.) Finally, Plaintiff did not receive regularly scheduled raises as his coworkers did. (FAC ¶ 35.)

When Plaintiff reported the fraudulent conduct and failure to pay fair raises to the Supervisors, they at first denied it. (FAC ¶ 38.) When Plaintiff threatened to contact an attorney, Supervisors gave him a raise by the end of the day. (FAC ¶ 39.) Shortly thereafter, Radin told Plaintiff that Plaintiff was suspended from work for three days, and that Radin would discuss the reasons with Plaintiff when he returned. (FAC ¶ 40.) Instead, Radin fired Plaintiff upon Plaintiff’s return. (Ibid.) The Supervisors informed Plaintiff’s co-workers that Plaintiff was fired for stealing automotive parts; however, this was not true and was not reflected on Plaintiff’s termination notice. (FAC ¶ 42.)

PROCEDURAL HISTORY 

On December 28, 2022, Plaintiff filed the Complaint asserting seven causes of action:

1.    Wrongful Termination in Violation of Public Policy;

2.    Race Discrimination in Violation of FEHA;

3.    Failure to Prevent Race Discrimination in Violation of FEHA;

4.    Retaliation in Violation of FEHA;

5.    Retaliation for Reporting Racial Harassment;

6.    Retaliation for Reporting Fraud; and

7.    Intentional Infliction of Emotional Distress.

On March 8, 2022, Plaintiff filed the First Amended Complaint asserting the same seven causes of action.

Also on March 8, 2022, Plaintiff dismissed defendants Lithia Motors, Inc., Keyes European, LLC, Rahi Moghaddam, and Bryan Radin.

On May 2, 2022, LAM filed the instant Motion to Compel Arbitration.

On June 13, 2022, Plaintiff filed an Opposition.

On June 17, 2022, LAM filed a Reply.

On June 24, 2022, the Court heard argument on the matter. The Court continued the hearing until August 17, 2022, and allowed both parties to submit supplemental briefing about whether the doctrine of equitable estoppel should apply.

On July 8, 2022, Plaintiff filed a Sur-Reply.

On July 29, 2022, Defendants filed a Sur-Reply.

DISCUSSION 

                         I.     MOTION TO COMPEL ARBITRATION

LAM moves the Court to compel arbitration and to stay proceedings pending completion of arbitration.

California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, California Code of Civil Procedure section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967 [citations omitted]; Code Civ. Proc. § 1281.2.) 

In deciding a motion to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement.  (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The party seeking arbitration has the “burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.) The trial court “sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.”  (Id.) General principles of contract law govern whether parties have entered a binding agreement to arbitrate. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236; see also Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) 

Here, LAM moves the Court to compel arbitration pursuant to a binding arbitration agreement (the “Agreement”) Plaintiff signed when Lithia Motors, Inc. (“LMI”) purchased the dealership where Plaintiff was employed. (Radin Decl., ¶ 4.) The Agreement states that “any claims/dispute that [Plaintiff] may have regarding the terms of [Plaintiff’s] pay plan, [Plaintiff’s] employment, termination from employment (including claims of discrimination and/or harassment), or any other association [Plaintiff has] with the Company. . .shall be submitted exclusively to final and binding individual arbitration. . .”  (Radin Decl., Ex. A.)

A.  Equitable Estoppel

Relevant here is whether the doctrine of equitable estoppel allows LAM, Plaintiff’s employer, to compel arbitration pursuant to an arbitration agreement between Plaintiff and LMI, a holding company that controls LAM.

“[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.” (Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271.) “By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.” (Id. at 272.) “The focus is on the nature of the claims asserted by the plaintiff against the nonsignatory defendant.”  (Id.) “That the claims are cast in tort rather than contract does not avoid the arbitration clause.” (Id.) 

Here, Plaintiff argues that his action “Does not bring a breach of contract claim, nor does [it] bring any claim that relies in any way on any agreement between he and Lithia.” (Sur-Reply at p. 7.)

Plaintiff’s arguments are unavailing. First, contrary to Plaintiff’s assertion, equitable estoppel does not apply only where a plaintiff brings a Breach of Contract cause of action based on the contract containing the arbitration clause. As noted above, the focus is on the nature of the claims asserted against the nonsignatory defendant, whether those claims sound in tort or contract. (See Boucher, supra at p. 272.)

Here, Plaintiff’s causes all are based on Plaintiff’s employment with LAM. The Arbitration Agreement explicitly states that ““any claims/dispute that [Plaintiff] may have regarding the terms of [Plaintiff’s] pay plan, [Plaintiff’s] employment, termination from employment (including claims of discrimination and/or harassment), or any other association [Plaintiff has] with the Company. . .shall be submitted exclusively to final and binding individual arbitration. . .”  (Radin Decl., Ex. A.) Plaintiff’s attempt to circumvent the agreement based on the technicality of whether a holding company or its subsidiary was the named signatory is precisely the instance where equitable estoppel is intended to apply. (See Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4^th 1705, 1714 [“estoppel prevents a party from playing fast and loose with its commitment to arbitrate, honoring it when advantageous and circumventing it to gain undue advantage”].)

Finally, Plaintiff’s reliance on Jarboe v. Hanlees Auto Group, (2020) 53 Cal.App.5^th 539, is unpersuasive. In Jarboe, the Court found that an employee of a car dealership could not be forced to arbitrate claims against twelve affiliated dealerships. The Court, in affirming the trial court’s decision to deny arbitration, found that “while the record shows that the dealerships are subject to ‘common ownership,’ there is no evidence showing the relationship among the separate corporate entities or how they operated with respect to each other’s employees.” (Id. at p. 554.)

Here, on the other hand, LMI is a holding company that has no employees and holds and owns LAM. (Radin Decl. ¶ 5.) This describes a fundamentally different employment relationship than that of Jarboe.

Accordingly, LAM may compel arbitration pursuant to the doctrine of equitable estoppel. Defendants’ Motion to Compel Arbitration is GRANTED. All further proceedings are stayed pending arbitration.

DATED:  August 17, 2022

___________________________

Hon. Robert S. Draper 

Judge of the Superior Court