Judge: Ronald F. Frank, Case: 22TRCV00253, Date: 2023-03-02 Tentative Ruling
Case Number: 22TRCV00253 Hearing Date: March 2, 2023 Dept: 8
Tentative Ruling¿
¿¿
HEARING DATE: March
2, 2023¿
¿¿
CASE NUMBER: 22TRCV00253
¿¿
CASE NAME: Maximo
Marrufo v. Nissan North America, Inc., et al.
¿¿
MOVING PARTY: Defendant, Nissan North America, Inc.
¿¿
RESPONDING PARTY: Plaintiff,
Maximo Marrufo
¿¿
TRIAL DATE: January
23, 2024
¿¿
MOTION:¿ (1) Motion to Compel Arbitration
Tentative Ruling: (1) Defendant’s
Motion to Compel Arbitration is GRANTED
¿
I. BACKGROUND¿¿
¿¿
A. Factual¿¿
¿¿
This is a lemon law action
brought by Plaintiff, Maximo Marrufo (“Plaintiff”) against Defendant, Nissan North America,
Inc. (“Nissan”), and DOES 1 through 10. The case arises out of Plaintiff’s
purchase of a 2019 Nissan Leaf (“Subject Vehicle”) from Gardena Nissan in
Gardena, California. Plaintiff alleges that Nissan breached its warranty
obligations as set forth in the “2019 Leaf Warranty Information Booklet” (the
“warranty”).
B. Procedural¿¿
¿
On January 5, 2023, Defendant Nissan filed
this Motion to Compel Arbitration. On February 16, 2023, Plaintiff filed an
opposition. To date, no reply brief has been filed.
¿II. REQUEST FOR JUDICIAL
NOTICE
Defendant filed a request for
this Court to take judicial notice of the following documents in support of their
Motion to Compel Arbitration and Stay Proceedings: (1) Complaint
for Damages, filed in Los Angeles County Superior Court by Plaintiff on March
30, 2022, in the matter of Maximo Marrufo v. Nissan North America, Inc.
(Case No. 22TRCV00253); and (2) Notice of Entry of Dismissal and Proof of
Service, filed in Sacramento Superior Court by Plaintiffs Dina C. Felisilda and
Pastor O. Felisilda on February 11, 2016 in the matter of Dina C. Felisida,
et al, v. FCA US LLC, et al. (34-2015-00183668).
The Court grants Defendant’s
request and takes judicial notice of these cases.
III. ANALYSIS
A.
Legal Standard
The purpose of
the Federal Arbitration Act (“FAA”) is “to move the parties in an arbitrable
dispute out of court and into arbitration as quickly and easily as possible.”¿
(Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp. (1983) 460 U.S.
1, 23.)¿ California Code of Civil Procedure, Section 1281 provides that
“[a] written agreement to submit to arbitration an existing controversy or a
controversy thereafter arising is valid, enforceable, and irrevocable, save
upon such grounds as exist for the revocation of any contract.”¿ “California
law, like federal law, favors enforcement of valid arbitration agreements.”¿ (Armendariz
v. Foundation Health Psychcare Services,
Inc. (2000) 24 Cal.4th
83, 97.)¿ “On petition of a party to an arbitration agreement alleging the
existence of a written agreement to arbitrate a controversy and that a party to
the agreement refuses to arbitrate that controversy, the court shall order the
petitioner and the respondent to arbitrate the controversy” unless grounds
exist not to compel arbitration.¿ (Code Civ. Proc. § 1281.2.) The
Song-Beverly Act also favors arbitration of Lemon Law disputes with a series of
“carrot and stick” provisions that immunize warrantors from a species of civil
penalty if, like Defendant FCA, they have a certified lemon arbitration program
in place.
B.
Discussion
a. Existence of Arbitration Agreement
Here, the parties agree that there was a
written agreement, the Motor Vehicle Retail Installment Sale Contract (“RISC”),
that included an arbitration agreement. However, as Plaintiff assert in his
opposition, that that agreement is between Plaintiff and Gardena Nissan. The
arbitration agreement is in the sales contract between the Plaintiff and
dealership, Gardena Nissan. Plaintiff also notes in his opposition that he
brought the case based on Nissan’s breach of its warranty obligation as set
forth in the 2019 Leaf Warranty Information Booklet” which did not
contain a binding arbitration provision. Accordingly, while an arbitration
agreement exists, it is not an agreement between Nissan and Plaintiff. Accordingly, Nissan will need to rely on a
different theory for its motion to compel arbitration here.
b. Equitable Estoppel
Generally, only
parties to a contract containing an arbitration agreement may enforce that
arbitration clause. (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 613.)
There are exceptions to the general rule. Under one such exception, the
doctrine of equitable estoppel, a nonsignatory defendant may
move to enforce an arbitration clause. (JSM Tuscany, LLC v. Superior Court (2011)
193 Cal.App.4th 1222, 1236.) “ ‘In any case applying equitable estoppel to compel
arbitration despite the lack of an agreement to arbitrate, a nonsignatory may compel
arbitration only when the claims against the nonsignatory are founded in
and inextricably bound up with the obligations imposed by the agreement
containing the arbitration clause.’ ” (Felisilda v. FCA US
LLC (2020) 53 Cal.App.5th
486, 498 (Felisilda).)
Felisilda is
particularly instructive. The Felisildas brought a Song-Beverly cause of action against a local
automobile dealership, Elk Grove Dodge Chrysler Jeep (“Elk Grove”), and the
manufacturer, FCA US LLC (“FCA”). The Felisildas and the local dealer were parties to an installment sales
contract that contained an arbitration clause. FCA was not a signatory to the
agreement. Elk Grove moved to compel arbitration. The lower court granted the
motion and ordered all the parties, including FCA to arbitration, whereupon the
Felisildas
dismissed Elk Grove. The action, nevertheless, proceeded to arbitration solely
between the Felisildas and FCA. After the arbitrator found for FCA and the trial
court confirmed the award, the Felisildas appealed the judgment of the court. Among the contentions
on appeal was whether the trial court had authority to “order the Felisildas to arbitrate
their claim against FCA because FCA was a nonsignatory to the sales contract.” (Felisilda, supra., 53 Cal.App.5th at 489.)
The Felisilda panel affirmed the trial court’s order. The Court found
that by signing the sales contract, “the Felisildas expressly agreed to arbitrate claims arising out of the
condition of the vehicle—even against third party nonsignatories to the
sales contract—[and] they are estopped from refusing to arbitrate their claim
against FCA.” (Id. at p. 497.)
The holding in Felisilda was grounded on the express provisions of the sales
contract and the Felisildas’ causes of action. First, upon examining the terms of the
sale contract, the Court noted that the Felisildas agreed 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 … [the] condition of this vehicle.” (Id.
at p. 490.) Second, after reviewing the Felisildas’ complaint where they alleged violations of warranties
they received because of the purchase contract, the Court of Appeal found the Felisildas’ claim
“directly relates to the condition of the vehicle” (Id. at p.
497.)
Turning to this case, this Court sees no relevant difference
between the facts here and Felisilda. First, the arbitration clause provided for in the
Contract here and in Felisilda are word for word exact copies. To be sure both agreements
mandate arbitration whenever a claim “arises out of or relates to . . .[the] purchase condition of this vehicle. . .” (Exhibit
3 (Sales Contract), p. 2; Felisilda,
supra., 53 Cal.App.5th at p. 490.) Second, the pleadings that
the Court of Appeal found demonstrated that the Felisildas’ claim was
based upon the vehicle’s condition, mirror the language of the operative
complaint in this matter. For example, whereas Plaintiffs here allege that “Defendant
issued an express warranty to Plaintiff, which Defendant undertook to preserve
or maintain the utility Performance of the Subject Vehicle.” (Complaint, ¶ 9.) Plaintiff’s complaint further notes that “Defendant’s
express warranty was integral to Plaintiff’s purchase of the Subject Vehicle.” (Complaint, ¶ 10.) Additionally, Plaintiff points to numerous warranties in
the contract. (Complaint, ¶¶ 11, 13, 15-16), the Felisildas complaint states “the express warranties accompanied the
sale of the vehicle.” (Felisilda, supra., 53 Cal.App.5th at p.
496.) Moreover, both pleadings allege that the manufacturer failed to repair
the nonconformity, or make restitution or to replace the Subject Vehicle.
(Complaint, ¶ 18; Felisilda, supra., 53 Cal.App.5th at p.
497.) In sum, it appears to the Court that because Plaintiff explicitly agreed
to arbitrate claims arising from the condition of the vehicle, including with
third parties who did not sign the contract, the holding of Felisilda is
controlling.
In opposition, Plaintiff asserts that Felisilda is factually
and procedurally distinguishable from this case. Plaintiff contends that where
the signatory dealership is not a party to the action, as here, Felisilda
is entirely inapplicable. Plaintiff’s opposition attempts to distinguish Felisilda
by alleging that at no point did the Court in Felisilda hold that the
third-party beneficiary had standing to compel arbitration, but instead it was
the dealer who sold Plaintiff the vehicle originally. It is true that in Felisilda, the actual moving party for the motion to compel
arbitration was a signatory. Only after the trial court granted the motion was
the signatory dismissed. Here, by contrast, FCA, a non-signatory is
attempting to compel arbitration while the selling dealership Gardena Nissan, a signatory, was never
named as a party in this case. The
Court of Appeal in Felisilda expressly rebuffed the argument that identity of
the moving party has significance: “We also reject the Felisildas’ contention
that the rule requiring mutual consent to arbitrate is violated for lack of the
Felisildas’
consent to arbitrate their claim against FCA. As explained above, the Felisildas’ agreement to
the sales contract constituted express consent to arbitrate their claims
regarding vehicle condition even against third parties.” (Felisilda, supra., 53 Cal.App.5th at p.
498.) Stated otherwise, it was the identity of the signatory Plaintiffs, and
the terms of the agreement to which they assented, that was critical to the
Court of Appeal’s equitable estoppel analysis. Thus, here, as in Felisilda,
Plaintiff, as a signatory to the Contract, is equitably estopped from
distancing himself from the arbitration agreement he voluntarily entered.
The public policy supporting equitable estoppel further
supports such a finding. “In other words, a signatory to an agreement with an
arbitration clause cannot ‘“
‘have it both ways’ ” ’;
the signatory ‘cannot, on the one hand, seek to hold the non-signatory liable
pursuant to duties imposed by the agreement, which contains an arbitration
provision, but, on the other hand, deny arbitration's applicability because the
defendant is a non-signatory.’ ” (internal citations omitted) (Goldman v. KPMG, LLP (2009) 173
Cal. App. 4th 209, 220.) The Complaint relies on the sale in California of a
new motor vehicle and repair attempts performed by Nissan’s service and repair
facilities, including Gardena Nissan.
This
Court would be acting in excess of its jurisdiction if the Court ignored Felisilda.
As stated in Auto Equity Sales, Inc. v. Superior Court of Santa Clara County
(1962) 57 Cal.2d 450, 455, “all tribunals exercising inferior jurisdiction are
required to follow decisions of courts exercising superior jurisdiction.”.)
While Felisilda is arguably distinguishable because Garenda Nissan was
not a party when FCA’s arbitration in that case occurred, the Court of Appeal
was mindful that plaintiffs in Felisilda had dismissed the selling
dealer before the appeal but still found the buyers to be equitably estopped to
contest the applicability of the arbitration clause against the warrantor /
manufacturer. Stated otherwise, this Court is bound to follow Felisilda.
Thus, the Court tentatively grants Defendant’s motion and order the parties to
arbitrate.
The
Court is mindful of federal district court decisions that have gone the other
way. A few months before Felsilda, a federal district court judge in the
Southern District reached the opposite conclusion, denying a petition to compel
arbitration despite virtually identical language in the dealer’s sales
contract. In Jurosky v. BMW of North America, LLC (S.D. Cal. 2020) 441
F.Supp.3d 963, 970, the District Court applied the “intimately founded and
intertwined” standard and found that none of the Plaintiff's claims there
referenced the purchase agreement that contained the arbitration clause. Jurovsky
relied on the Ninth Circuit case of Kramer v. Toyota Motor Corp. (9th
Cir 2013) 705 F.3d 1122, 1126-27, cert. denied, 571 U.S. 818, a case where the
dealership had not been named as a defendant. The Jurovsky court stated
that “Even if Plaintiff's complaint referenced the purchase agreement, in order
to be intertwined with the purchase agreement, Plaintiff must allege a
violation of a “duty, obligation, term or condition” imposed by the purchase
agreement,” but the gravamen of the suit was breach of duties arising from the
manufacturer’s warranties rather than any dealer warranty. (Jurovsky,
supra, 441 F.Supp. at p. 970.) Jurovsky also applied the second prong of
the Ninth Circuit standard for determining whether a non-signatory party can
compel arbitration: “when the signatory alleges substantially interdependent
and concerted misconduct by the non-signatory and another signatory and the
allegations of interdependent misconduct are founded in or intimately connected
with the obligations of the underlying agreement.” (Kramer, supra, 705
F.3d at 1128-29.) The Jurovksy court found that the Plaintiff did not
allege substantially interdependent and concerted misconduct by the
manufacturer and the dealer, so the motion to compel arbitration failed to meet
the second Ninth Circuit test too. (Jurosky, supra, 441 F.Supp.3d at pp.
970–971.) Felisilda explicitly rejected the holdings of Kramer
and Jurosky.
Another
exception to the general rule that non-signatories cannot compel arbitration is
that the manufacturer is a third party beneficiary of the dealer’s sales
contract and its arbitration provision. BMW has sought to compel arbitration as
a third-party beneficiary to its dealers’ contract many times over the past
year, and federal courts in California have decided the issue both ways.
Compare Tseng v. BMW of N. Am., LLC, No. 2:20-cv-00256-VAP-AFMx, 2020 WL
4032305, at *4 (C.D. Cal. Apr. 15, 2020) (BMW was an affiliate and therefore an
intended beneficiary); Phillips-Harris v. BMW of N. Am., LLC, No. CV
20-2466-MWF (AGRx), 2020 WL 2556346, at *10 (C.D. Cal. May 20, 2020) (BMW's
provision of the warranty makes it an intended third-party beneficiary) with
Ngo v. BMW of N. Am., LLC. (2022) 23 F.4th 942 (reversed trial court
granting of motion to compel arbitration when dealer was not the moving party
and manufacturer failed to show that a motivating purpose behind arbitration
provision was to provide a benefit to manufacturer); Schulz v. BMW of N.
Am., LLC, No. 5:20-CV-01697-NC, 2020 WL 4012745, at *5 (N.D. Cal. July 15,
2020) (BMW NA was not a third-party beneficiary because the clause at issue
“refers to the subject matter of the dispute, not to the parties involved in
the dispute”) and Nation v. BMW of North America, LLC (C.D. Cal., Dec.
28, 2020, No. 220CV02709JWHMAAX) 2020 WL 7868103, at *2 (denying the motion to
compel arbitration because the court found the Schulz case to be better
reasoned.) Here, the Court relies on the equitable estoppel exception, not the
third-party beneficiary exception, to the general rule that non-signatories are
not bound by nor can they enforce arbitration agreements.
c. Unconscionability
Plaintiff’s
opposition argues that the arbitration agreement is unconscionable, and
therefore the Court should not enforce and unconscionable contract. California law states that “[o]n petition of
a party to an arbitration agreement alleging the existence of a written
agreement to arbitrate a controversy and that a party to the agreement refuses
to arbitrate that controversy, the court shall order the petitioner and the respondent
to arbitrate the controversy if it determines that an agreement to arbitrate
the controversy exists….” (Code Civ. Proc, § 1281.2.) “The party seeking
arbitration bears the burden of proving the existence of an arbitration
agreement, and the party opposing arbitration bears the burden of proving any
defense, such as unconscionability.” (Pinnacle Museum Tower Assn. v.
Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)
The doctrine of unconscionability
refers to “an absence of meaningful choice on the part of one of the parties
together with contract terms which are unreasonably favorable to the other
party.”¿¿(Sonic-Calabasas A, Inc. v. Moreno (2013)¿57 Cal.4th 1109,
1133.) It consists of procedural and substantive components, “the former
focusing on oppression or surprise due to unequal bargaining power, the latter
on overly harsh or one-sided results.”¿¿(Id.) Although both components
of unconscionability must be present to invalidate an arbitration agreement,
they need not be present in the same degree.¿(Armendariz v. Found.
Health¿Psychcare¿Servs., Inc. (2000)¿24 Cal.4th 83, 114 (abrogated in-part
on other grounds by¿Concepcion, 563 U.S. 333).)¿¿¿“Essentially a sliding
scale is invoked which disregards the regularity of the procedural process of
the contract formation, that creates the terms, in proportion to the greater
harshness or unreasonableness of the substantive terms themselves.¿
[Citations.]¿ In other words, the more substantively unconscionable the
contract term, the less evidence of procedural unconscionability is required to
come to the conclusion that the term is unenforceable, and vice versa.”¿¿(Id.)
1. Requirements
under Armendariz
The Supreme Court of California has
held that, in addition to unconscionability, an arbitration agreement has to
meet five additional minimum requirements: (1) ensuring that the employee does
not bear any costs above that which he or she would have to pay in court; (2)
providing for adequate discovery; (3) providing for all types of relief that
would otherwise be available in a non-arbitration forum; (4) requiring a
written arbitration award and adequate judicial review; and (5) providing for a
neutral arbitrator. (Armendariz, at 103–13.)
Here, Plaintiff has not met his burden to prove that the arbitration agreement lacks each of the additional requirements under Armendariz. There is no declaration, no attached rules of the arbitration forum, and nothing but the allegations on page 13 in plaintiff’s brief bearing on this issue. Generally, when this Court orders a matter to arbitration, it requires the Defendant not the plaintiff to cover the arbitrator fee and administrative fee as the costs of the arbitration. Second, before the Court conforms an arbitrator’s award, it carefully reviews the arbitrator decision and the briefs and declarations of the parties supporting or opposing a petition to confirm the arbitrator’s award. If, as Plaintiff alleges, the arbitrator finds for Plaintiff but refuses to award reasonable attorneys fees as required by the Song-Beverly Act, the Court can address that issue in a post-arbitration motion.
2. Procedural Unconscionability¿¿ ¿
Procedural unconscionability
“pertains to the making of the agreement.”¿ (Ajamian v. CantorCO2e, L.P.
(2012) 203 Cal.App.4th 771, 795.)¿ Procedural unconscionability “focuses on two
factors: ‘oppression’ and ‘surprise.’ ‘Oppression’ arises from an inequality of
bargaining power which results in no real negotiation and ‘an absence of
meaningful choice.’ ‘Surprise’ involves the extent to which the supposedly
agreed-upon terms of the bargain are hidden in the prolix printed form drafted
by the party seeking to enforce the disputed terms.”¿ (Zullo v. Superior
Court (2011) 197 Cal.App.4th 477, 484.)¿¿ A contract of adhesion
typically denotes a standardized contract imposed and drafted by the party of
superior bargaining strength which relegates to the subscribing party only the
opportunity to adhere to the contract or reject it. (Armendariz, supra,
24 Cal.4th at 113.)¿ The adhesive nature of a contract is one factor that the
courts may consider in determining the degree of procedural unconscionability.¿
(Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74,
84 fn.4.)¿¿
In his opposition brief, Plaintiff
argues that the Arbitration Agreement was unconscionable because it deprived
Plaintiff of a meaningful opportunity to negotiate the Arbitration Agreement as
it was presented as a condition of his purchase of the vehicle in a “take it or
leave it” basis. Nissan did not file a
reply so the Court has no input form the moving party on this issue. Based on the documents attached to the
motion, the Court can draw the reasonable inference that there was no
negotiation of the arbitration provision and no opt-out provision is mentioned. Thus, the Court finds that the arbitration
agreement is procedurally unconscionable but only to a moderate degree.
3. Substantive
Unconscionability¿¿
¿ An agreement is
substantively unconscionable if it imposes terms that are “overly harsh,” “unduly
oppressive,” “unreasonably favorable,” or “so one-sided as to ‘shock the
conscience.’”¿ (Sanchez v. Valencia Holding Co., LLC¿(2015) 61 Cal.4th
899, 910-911¿(Sanchez).)¿ “All of¿these formulations point to the central idea
that unconscionability doctrine is concerned not with ‘a simple old-fashioned
bad bargain’ [citation], but with terms that are ‘unreasonably favorable to the
more powerful party.’ [Citation.]”¿ (Id. at p. 911.)¿ “These include
‘terms that impair the integrity of the bargaining process or otherwise
contravene the public interest or public policy; terms (usually of an adhesion
or boilerplate nature) that attempt to alter in an impermissible manner
fundamental duties otherwise imposed by the law, fine-print terms, or
provisions that seek to negate the reasonable expectations of
the¿nondrafting¿party, or unreasonably and unexpectedly harsh terms having to
do with price or other central aspects of the transaction.’ ”¿ (Id. at
p. 911.)¿¿
Here,
Plaintiff argues that the arbitration agreement is substantively
unconscionable. Plaintiff’s grounds for this argument are that the Defendant’s
agreement contain a number of terms aimed at favoring the defendant, including:
(1) allowing the arbitrator to award costs contrary to Code of Civil Procedure
section 1284.3, and (2) a “suggestion” in the arbitration rules (which were not
attached or quoted) that the arbitrator has discretion to deny attorney’s fees
if Plaintiff prevails. Assuming plaintiff’s allegatison bearing on
substantive unconscionability are correct, the Court has indicated how it
typically addresses such issues and how it would address such issues if they
arise in this case. Based on the
foregoing, the Court finds that the arbitration agreement could exhibit a slight
degree of substantive unconscionability but the arbitration agreement is not
permeated by unconscionability. The moderate degree of procedural
unconscionability and possibly slight degree of substantive unconscionability
are not enough to invalidate the arbitration agreement.
IV. CONCLUSION¿¿
¿¿¿
For the foregoing reasons, Defendant’s Motion to Compel Arbitration is GRANTED.
Moving party is ordered to give notice.¿¿¿¿
¿¿¿
¿¿